Thermo Fisher Scientific Inc. 168 Third Avenue Waltham, Massachusetts 02451, U.S.A.
THERMO FISHER SCIENTIFIC INC. 2007 EMPLOYEES' STOCK PURCHASE PLAN AS AMENDED AND RESTATED (THE "ESPP")
Prospectus for the employees of certain European Economic Area ("EEA") subsidiaries of Thermo Fisher Scientific Inc., subject to the applicable legislation in each country
Pursuant to articles L. 412-1 and L. 621-8 of the Code monétaire et financier and its General Regulation, in particular articles 211-1 to 216-1 thereof, the Autorité des marchés financiers ("AMF") has attached visa number 17-618 dated November 29, 2017, onto this prospectus. This prospectus was established by the issuer and incurs the responsibility of its signatories. The visa, pursuant to the provisions of Article L. 621-8-1-I of the Code monétaire et financier, was granted after the AMF verified that the document is complete and comprehensible, and that the information it contains is consistent. The visa represents neither the approval of the worthiness of the operation nor the authentication of the financial and accounting information presented.
This prospectus will be made available in printed form to employees of the EEA subsidiaries of Thermo Fisher Scientific Inc. based in countries in which an offering under the ESPP is considered a public offering, subject to the applicable legislation in each country, at the respective head offices of their employers. In addition, this prospectus along with summary translations (as applicable) will be posted on Thermo Fisher Scientific Inc.’s intranet and free copies will be available to the employees upon request by contacting the human resources departments of their employers. This prospectus, together with the French translation of its summary, will also be available on the website of the AMF, www.amf-france.org.
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NOTE TO THE PROSPECTUS
This prospectus contains material information concerning Thermo Fisher Scientific Inc. and was established pursuant to articles 211-1 to 216-1 of the AMF General Regulation. Pursuant to Article 25 of Commission Regulation (EC) No 809/2004 of 29 April 2004, as amended (the "Prospectus Regulation"), this prospectus is composed of the following parts in the following order:
(1) a table of contents,
(2) the summary provided for in Article 5(2) of Directive 2003/71/EC of the European Parliament and of the European Council of 4 November 2003, as amended (the "Prospectus Directive") (Part I constitutes the prospectus summary),
(3) the risk factors linked to the issuer and the type of security covered by the issue, and
(4) excerpts from Annexes I and III of the Prospectus Regulation which, by application of Articles 3, 4, and 6 of the Prospectus Regulation and question 71 of the European Securities and Markets Authority ("ESMA") Q&A1 are required for this offering of equity securities to employees of Thermo Fisher Scientific Inc. and its affiliates.
This prospectus also contains supplemental information concerning Thermo Fisher Scientific Inc. and the ESPP (Part II - Section B) as well as the following document (Exhibit):
- Thermo Fisher Scientific Inc. 2007 Employees' Stock Purchase Plan as Amended and Restated.
In this prospectus, the terms "the Company," "we," "us," or "our" mean Thermo Fisher Scientific Inc. and its subsidiaries.
All references to "$" in this prospectus refer to U.S. dollars.
1 Questions and Answers, Prospectuses: 27th updated version – October 2017 (20 October 2017| ESMA-31-62-780).
2 4030664-v10\CHIDMS1 TABLE OF CONTENTS
Part I Constitutes the Prospectus Summary
Page PART I — PROSPECTUS SUMMARY ...... 5 SECTION A — INTRODUCTION AND WARNINGS ...... 5 SECTION B — ISSUER ...... 5 SECTION C — SECURITIES ...... 11 SECTION D — RISKS ...... 12 SECTION E — OFFER ...... 14 PART II — PROSPECTUS ...... 18 SECTION A — RISK FACTORS ...... 18 I. RISKS RELATED TO THERMO FISHER'S BUSINESS ...... 18 II. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...... 25 SECTION B — SUPPLEMENTAL INFORMATION CONCERNING THERMO FISHER AND THE ESPP ...... 26 I. THE OUTLINE ...... 26 II. ELIGIBILITY ...... 28 III. DELIVERY AND SALE OF THE SHARES ...... 29 IV. RIGHTS RELATED TO THE SHARES ...... 29 V. STATEMENT OF CAPITALIZATION AND INDEBTEDNESS AS OF SEPTEMBER 30, 2017 ...... 34 VI. MAXIMUM DILUTION AND NET PROCEEDS ...... 38 VII. DIRECTORS AND EXECUTIVE OFFICERS...... 39 VIII. EMPLOYEES ...... 50 IX. WORKING CAPITAL STATEMENT ...... 52 X. SELECTED FINANCIAL INFORMATION ...... 53 XI. DOCUMENTS ON DISPLAY ...... 54 XII. TAX CONSEQUENCES ...... 55 EXHIBIT ...... 68 EXHIBIT I THERMO FISHER SCIENTIFIC INC. 2007 EMPLOYEES' STOCK PURCHASE PLAN AS AMENDED AND RESTATED...... I CROSS-REFERENCE LISTS ...... I ANNEX I MINIMUM DISCLOSURE REQUIREMENTS FOR THE SHARE REGISTRATION DOCUMENT (SCHEDULE) ...... i ANNEX III MINIMUM DISCLOSURE REQUIREMENTS FOR THE SHARE SECURITIES NOTE (SCHEDULE) ...... v
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COMPANY REPRESENTATIVE FOR PROSPECTUS
1.1 Stephen Williamson, Senior Vice President and Chief Financial Officer, acting for and on behalf of Thermo Fisher Scientific Inc.
1.2 To my knowledge, and after having taken all reasonable measures for this purpose, the information contained in this prospectus fairly reflects the current situation, and no material omission has been made.
1.3 Thermo Fisher Scientific Inc. has obtained a letter from its independent registered public accounting firm in relation to this prospectus. The independent registered public accounting firm has, in accordance with the professional standards and interpretations applicable to it in the United States of America in PCAOB Auditing Standard 2710, Other Information in Documents Containing Audited Financial Statements, for the purpose of identifying material inconsistencies with the audited financial statements or a material misstatement of fact, read the prospectus, including the financial information concerning Thermo Fisher Scientific Inc. for the fiscal years ended December 31, 2016, 2015 and 2014 and for the periods ended September 30, 2017 and October 1, 2016 in Part I - Element B.7 and the Selected Financial Data contained in Part II - Section B.10.1 of this prospectus.
/s/ Stephen Williamson Stephen Williamson Senior Vice President and Chief Financial Officer Thermo Fisher Scientific Inc. Waltham, Massachusetts, United States of America November 28, 2017
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PART I — PROSPECTUS SUMMARY
VISA NUMBER 17-618 DATED NOVEMBER 29, 2017 OF THE AMF
Summaries are made up of disclosure requirements known as "Elements." These Elements are numbered in Sections A – E (A.1 – E.7).
This summary contains all the Elements required to be included in a summary for this type of securities and Issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements.
Even though an Element may be required to be inserted in the summary because of the type of securities and Issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of "not applicable."
SECTION A — INTRODUCTION AND WARNINGS
A.1 Warning to the This summary should be read as an introduction to the prospectus. Any reader decision to invest in the securities should be based on consideration of the prospectus as a whole by the investor. Where a claim relating to the information contained in the prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the prospectus before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the prospectus or it does not provide, when read together with the other parts of the prospectus, key information in order to aid investors when considering whether to invest in such securities.
A.2 Consent to use of Not applicable. There is no subsequent resale or final placement of the prospectus securities by financial intermediaries.
SECTION B — ISSUER
B.1 Legal and Thermo Fisher Scientific Inc. ("Thermo Fisher" or the "Company") commercial name of the issuer
B.2 Domicile and legal Thermo Fisher’s principal executive offices are located at 168 Third form of Thermo Avenue, Waltham, Massachusetts 02451, U.S.A. Fisher, the legislation under The Company is a corporation incorporated under the laws of Delaware, which it operates U.S.A. and its country of incorporation
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B.3 Description of the Thermo Fisher enables customers to make the world healthier, cleaner nature of Thermo and safer by providing analytical instruments, equipment, reagents and Fisher’s current consumables, software and services for research, manufacturing, operations and its analysis, discovery and diagnostics. Markets served include principal activities pharmaceutical and biotech, academic and government, industrial and applied, as well as healthcare and diagnostics.
The Company develops, manufactures and sells a broad range of products that are sold worldwide. The Company expands the product lines and services it offers by developing and commercializing its own technologies and by making strategic acquisitions of complementary businesses. The Company’s continuing operations fall into four business segments:
1. Life Sciences Solutions: provides an extensive portfolio of reagents, instruments and consumables used in biological and medical research, discovery and production of new drugs and vaccines as well as diagnosis of disease. These products and services are used by customers in pharmaceutical, biotechnology, agricultural, clinical, academic, and government markets.
2. Analytical Instruments: provides a broad offering of instruments, consumables, software and services that are used for a range of applications in the laboratory, on the production line and in the field. These products and services are used by customers in pharmaceutical, biotechnology, academic, government, environmental and other research and industrial markets, as well as the clinical laboratory.
3. Specialty Diagnostics: provides a wide range of diagnostic test kits, reagents, culture media, instruments and associated products used to increase the speed and accuracy of diagnoses. These products are used by customers in healthcare, clinical, pharmaceutical, industrial and food safety laboratories.
4. Laboratory Products and Services: provides virtually everything needed for the laboratory, including a combination of self- manufactured and sourced products for customers in research, academic and government settings. The segment also includes a comprehensive offering of outsourced services used by the pharmaceutical and biotech industries for drug development, clinical trials logistics and commercial drug manufacturing.
The table below presents revenues of the Company's business segments for the fiscal years ended December 31, 2016, 2015 and 2014:
(In millions) 2016 2015 2014
Revenues Life Sciences Solutions $ 5,317.2 $ 4,774.3 $ 4,532.7 Analytical Instruments 3,668.2 3,208.2 3,252.2 Specialty Diagnostics 3,339.2 3,243.9 3,343.6 Laboratory Products and Services 6,723.6 6,371.7 6,311.6
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Eliminations (774.1 ) (632.7 ) (550.5 )
Consolidated revenues 18,274.1 16,965.4 16,889.6
In January 2017, in connection with a change in management responsibility for certain product lines, the Company transferred its plastics for cell culture and vaccines/biologics; sample preparation and analysis; and production chemicals product lines to the Life Sciences Solutions segment from the Laboratory Products and Services segment and transferred its biochemical product line from the Life Sciences Solutions segment to the Laboratory Products and Services segment. These moves are consistent with the Company’s historical practice of moving a product line between segments when a shift in strategic focus of either the product line or a segment more closely aligns the product line with a segment different than that in which it had previously been reported. Prior period segment information has been reclassified to reflect these transfers.
The table below presents revenues of the Company's business segments for the periods ended September 30, 2017 and October 1, 2016:
Three Months Ended Nine Months Ended September October September October 30, 1, 30, 1, (In millions) 2017 2016 2017 2016
Revenues Life Sciences Solutions $ 1,382.0 $ 1,312.3 $ 4,150.1 $ 3,897.9 Analytical Instruments 1,189.6 898.0 3,407.4 2,451.2 Specialty Diagnostics 843.7 798.9 2,571.9 2,504.8 Laboratory Products and Services 1,933.0 1,674.5 5,424.5 5,043.0 Eliminations (232.1 ) (192.8 ) (682.7 ) (576.0 )
Consolidated revenues 5,116.2 4,490.9 14,871.2 13,320.9
B.4a Recent trends Financial Results
On October 25, 2017, Thermo Fisher reported its financial results for the third quarter ended September 30, 2017. Revenue for the quarter grew 14% to $5.1 billion in 2017, versus $4.5 billion in the third quarter of 2016. Organic revenue growth was 5%; acquisitions increased revenue by 8% and currency translation increased revenue by 1%.
On a Generally Accepted Accounting Principles in the United States of America ("U.S. GAAP") basis, diluted earnings per Share2 in the third quarter increased 13% to $1.34, versus $1.19 in the same quarter last year. U.S. GAAP operating income for the third quarter of 2017 grew to $636 million, compared with $541 million in the third quarter of 2016. U.S. GAAP operating margin was 12.4%, compared with 12.0% in the third quarter last year.
2 Thermo Fisher’s shares of common stock, having a par value of $1 (the "Shares").
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Thermo Fisher is raising its 2017 revenue guidance to reflect the acquisition of Patheon N.V. ("Patheon") (see below), strong operational performance and a more favorable foreign exchange environment. The Company is raising its revenue guidance to a new range of $20.50 to $20.66 billion versus its previous guidance of $19.71 to $19.89 billion. This would result in 12 to 13% revenue growth over the previous year.
The information set forth above related to Thermo Fisher’s 2017 revenue guidance reflected estimates based on information available to Thermo Fisher at the time it was made. Thermo Fisher does not undertake any obligation to update such forward-looking statements and neither reaffirms nor denies such targets at this time.
On November 3, 2017, Thermo Fisher filed with the U.S. Securities and Exchange Commission (the "SEC") its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 ("Thermo Fisher's Form 10-Q").
Acquisitions
On February 14, 2017, the Company acquired, within the Life Sciences Solutions segment, Finesse Solutions, Inc. ("Finesse Solutions"), a North America-based developer of scalable control automation systems and software for bioproduction, for a total purchase price of $221 million, net of cash acquired. The acquisition expanded the Company's bioproduction offerings. Revenues of Finesse Solutions were approximately $50 million in 2016.
On March 2, 2017, the Company acquired, within the Analytical Instruments segment, Core Informatics, a North America-based provider of cloud-based platforms supporting scientific data management, for a total purchase price of $94 million, net of cash acquired. The acquisition enhanced the Company's existing informatics solutions. Revenues of Core Informatics were approximately $10 million in 2016.
On August 28, 2017, the Company acquired, within the Laboratory Products and Services segment, substantially all of the issued and outstanding shares of Patheon, a leading global provider of high-quality drug development and delivery solutions to the pharmaceutical and biopharma sectors, for $35.00 per share in cash, or $7.36 billion, including the assumption of net debt. The Company financed the purchase price, including the repayment of indebtedness of Patheon, with issuances of debt and equity. Patheon's revenues totaled $1.87 billion for the year ended October 31, 2016.
In addition, in 2017 the Company acquired, within the Specialty Diagnostics segment, a North America-based molecular diagnostics company offering qPCR tests to the transplant community, for an aggregate purchase price of $43 million.
Unaudited Pro Forma Information
The following unaudited pro forma information provides the effect of the Company's acquisition of Patheon as if the acquisition had occurred on January 1, 2016, and the effects of the Company's 2016 acquisitions of FEI Company and Affymetrix, Inc. as if the acquisitions had occurred on
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January 1, 2015:
Three Months Ended Nine Months Ended September October September October 30, 1, 30, 1, (In millions) 2017 2016 2017 2016
Revenues $ 5,392.9 $ 5,113.1 $ 16,075.9 $ 15,379.4
Net Income $ 522.0 $ 446.6 $ 1,671.1 $ 1,133.4 The unaudited pro forma information presented above are based on information available at the time and are intended for information purposes and are not intended to represent what Thermo Fisher's revenues and net income actually would have been had these acquisitions occurred on the dates indicated. In addition, the unaudited pro forma information are not necessarily indicative of revenues or net income for any future period.
B.5 Organizational The Company operates its businesses through its parent company, structure Thermo Fisher, and multiple direct and indirect subsidiaries. As of September 30, 2017, the Company had approximately 1,050 subsidiaries.
B.6 Interests in Not applicable. Pursuant to its Q&A, ESMA considers that Item 18 of Thermo Fisher’s Annex I of the Prospectus Regulation is generally not pertinent for offers capital or voting of shares to employees and can thus be omitted from the prospectus in rights accordance with Article 23.4 of the Prospectus Regulation.
B.7 Financial information concerning Thermo Fisher for the fiscal years ended December 31, 2016, 2015 and 2014 and for the periods ended September 30, 2017 and October 1, 2016
SELECTED THREE-YEAR CONSOLIDATED FINANCIAL DATA (in millions, except per share amounts)
The consolidated statement of income and the consolidated balance sheet data of Thermo Fisher for the fiscal years ended December 31, 2016, 2015 and 2014, set out in this prospectus have been derived from Thermo Fisher's audited consolidated financial statements prepared in accordance with U.S. GAAP. 2016 (a) 2015 (b) 2014 (c)
Statement of Income Data Revenues $ 18,274.1 $ 16,965.4 $ 16,889.6 Operating Income 2,449.2 2,336.2 2,503.0 Income from Continuing Operations 2,025.3 1,980.3 1,895.5 Net Income 2,021.8 1,975.4 1,894.4 Earnings per Share from Continuing Operations: Basic 5.13 4.97 4.76 Diluted 5.10 4.93 4.71 Earnings per Share: Basic 5.12 4.96 4.76 Diluted 5.09 4.92 4.71
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Cash Dividends Declared per Share 0.60 0.60 0.60
Balance Sheet Data Working Capital $ 2,155.2 $ 1,594.9 $ 1,190.0 Total Assets 45,907.5 40,834.3 42,852.1 Long-term Obligations 15,372.4 11,420.2 12,351.6 Shareholders' Equity 21,539.3 21,350.2 20,548.1
The caption "restructuring and other costs/income" in the notes below includes amounts charged to cost of revenues, primarily for the sale of inventories revalued at the date of acquisition, and charges/credits to selling, general and administrative expense primarily for significant acquisition transaction costs. (a) Reflects $395 million of pre-tax charges for restructuring and other costs and the repurchase of $1.25 billion of the Shares. Also reflects the acquisitions of Affymetrix, Inc. in March 2016 and FEI Company in September 2016.
(b) Reflects $171 million of pre-tax charges for restructuring and other costs and the repurchase of $500 million of the Shares.
(c) Reflects $140 million of pre-tax income from gains on sale of businesses, net of restructuring and other costs. Also reflects the acquisition of Life Technologies Corporation in February 2014.
SELECTED QUARTERLY FINANCIAL DATA) (in millions, except per share amounts)
The consolidated statements of income of Thermo Fisher for the periods ended September 30, 2017 and October 1, 2016 and the consolidated balance sheet data of Thermo Fisher as of September 30, 2017 and December 31, 2016, set out in this prospectus have been derived from Thermo Fisher's unaudited consolidated financial statements prepared in accordance with U.S. GAAP.
Consolidated Statement of Income Data:
Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, 2017 2016 2017 2016 Revenue $ 5,116.2 $ 4,490.9 $ 14,871.2 $ 13,320.9 Income from continuing operations 533.9 473.5 1,697.5 1,392.6 Loss from discontinued operations — — (0.6 ) (0.3 ) Net income 533.9 473.5 1,696.9 1,392.3 Earnings per Share from continuing operations Basic $ 1.35 $ 1.20 $ 4.33 $ 3.53 Diluted $ 1.34 $ 1.19 $ 4.29 $ 3.50 Earnings per Share Basic $ 1.35 $ 1.20 $ 4.32 $ 3.53 Diluted $ 1.34 $ 1.19 $ 4.29 $ 3.50 Weighted average Shares Basic 396.2 394.7 392.4 394.8 Diluted 399.6 397.4 395.6 397.6 Cash Dividends Declared per Share $ 0.15 $ 0.15 $ 0.45 $ 0.45
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Consolidated Balance Sheets Data: September 30, December 31 2017 2016 Cash and cash equivalents $ 741.1 $ 786.2 Total assets 55,985.3 45,907.5 Long-term Obligations 19,230.4 15,372.4
Shareholders’ equity 24,701.8 21,539.3 B.8 Pro forma financial Not applicable. Pursuant to its Q&A, ESMA considers that Item 20.2 of information Annex I of the Prospectus Regulation is generally not pertinent for offers of shares to employees and can thus be omitted from the prospectus in accordance with Article 23.4 of the Prospectus Regulation.
B.9 Profit forecast or Not applicable. This prospectus does not contain any profit forecast or estimate estimate.
B.10 Qualifications in Not applicable. There are no such qualifications in the auditors' reports the audit report on for fiscal years 2016, 2015 or 2014. the historical financial information
B.11 Working capital Not applicable. Thermo Fisher’s working capital is sufficient for its statement present requirements.
SECTION C — SECURITIES
C.1 Type and class of The Shares offered pursuant to this prospectus may be authorized but the securities unissued Shares or reacquired Shares, in the sole discretion of the being offered, Board of Directors of Thermo Fisher (the "Board"). Such Shares will bear including the the same rights as the outstanding Shares already issued by Thermo security Fisher. identification code The Shares are or will be, after their issuance, listed on the New York Stock Exchange (the "NYSE") under the symbol "TMO." The CUSIP number for the Shares is 883556102.
C.2 Currency of the The United States Dollar is the currency of the securities issue. securities issue
C.3 Number of shares As of September 30, 2017, Thermo Fisher was authorized to issue issued 1,200,000,000 Shares and 50,000 shares of preferred stock, par value $100 per share. As of September 30, 2017, there were 400,995,357 Shares outstanding and no shares of preferred stock issued or outstanding.
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C.4 Rights attached to No Participant (as defined in Element E.3 below) shall have any voting, the securities dividend, or other stockholder rights with respect to any offering under the ESPP until the Shares have been purchased and delivered to the Participant. Following such purchase and delivery, the Participant shall be entitled to the rights attached to the Shares, as further described below:
Dividend Rights. The holders of the Shares, after any preferences of holders of any preferred stock, are entitled to receive dividends when and if declared by the Board out of legally available funds.
Voting Rights. Each holder of the Shares is entitled to one vote for each Share held on all matters to be voted upon by stockholders.
Right to Receive Liquidation Distributions. If Thermo Fisher is liquidated or dissolved, the holders of the Shares will be entitled to share in the Company's assets available for distribution to stockholders in proportion to the amount of Shares they own. The amount available for common stockholders is calculated after payment of liabilities. Holders of any preferred stock will receive a preferential share of the Company's assets before the holders of the Shares receive any assets.
No Preemptive, Redemptive or Conversion Provisions. Holders of the Shares have no preemptive, subscription, redemption or conversion rights.
C.5 Transferability Not applicable. The Shares in this offering are registered on Form S-8 restrictions with the SEC and are generally freely transferable.
C.6 Admission to Not applicable. As noted in Element C.1 above, the Shares are listed on trading on a the NYSE. regulated market
C.7 Dividend policy Thermo Fisher pays dividends on its Shares. Refer to Element B.7 above. The payment of dividends in the future will be determined by the Board and will depend upon Thermo Fisher's earnings, financial condition and other factors.
SECTION D — RISKS
D.1 Key risks related to Set forth below are summaries of the key risks, uncertainties and other Thermo Fisher or factors that may affect Thermo Fisher’s future results. The risks and its industry uncertainties described below are not the only ones facing Thermo Fisher.
• Thermo Fisher must develop new products, adapt to rapid and significant technological change and respond to introductions of new products by competitors to remain competitive.
• As a multinational corporation, Thermo Fisher is exposed to fluctuations in currency exchange rates, which could adversely
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affect its cash flows and results of operations.
• Significant developments stemming from the recent U.S. presidential election or the U.K.’s referendum on membership in the European Union ("EU") could have an adverse effect on Thermo Fisher.
• Thermo Fisher's inability to protect its intellectual property could have a material adverse effect on its business. In addition, third parties may claim that Thermo Fisher infringes their intellectual property, and the Company could suffer significant litigation or licensing expense as a result.
• Thermo Fisher's pharma services offerings are highly complex, and if the Company is unable to provide quality and timely offerings to its customers, its business could suffer.
• Thermo Fisher is subject to product and other liability risks for which it may not have adequate insurance coverage.
• Thermo Fisher's inability to complete pending acquisitions or to successfully integrate any new or previous acquisitions could have a material adverse effect on its business.
• Because Thermo Fisher competes directly with certain of its larger customers and product suppliers, its results of operations could be adversely affected in the short term if these customers or suppliers abruptly discontinue or significantly modify their relationship with the Company.
• Thermo Fisher is required to comply with a wide variety of laws and regulations, and is subject to regulation by various federal, state and foreign agencies.
• A significant disruption in, or breach in security of, Thermo Fisher's information technology systems could adversely affect its business.
• Thermo Fisher's debt may restrict its investment opportunities or limit its activities.
D.3 Key risks related to Participants assume the risk of any currency and /or market fluctuations the shares at the time of (i) their contribution to the ESPP by payroll deductions and (ii) the selling of their Shares.
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SECTION E — OFFER
E.1 Net proceeds Assuming that (i) 818,970 Shares (the number of Shares available for issuance under the ESPP on a worldwide basis as of September 30, 2017) were purchased by the 12,191 eligible employees3 in Austria, Belgium, Czech Republic, Finland, France, Italy, Lithuania, the Netherlands, Norway, Spain, Sweden and the United Kingdom, (ii) such purchases were made at $184.02 (95% of a hypothetical Purchase Price (as defined below) of $193.71 per Share which was the closing price of the Shares on November 3, 2017), and (iii) the Shares offered under the ESPP would all be newly issued, then the gross proceeds to Thermo Fisher in connection with the offer under the ESPP pursuant to this prospectus would be $150,706,859.40. After deducting approximately $125,000 in legal and accounting expenses in connection with the offer, the net proceeds would be approximately $150,581,859.40.
E.2a Reasons for the The purpose of the ESPP is to encourage eligible employees of the offer and use of Company and its participating subsidiaries ("Participating Employers") to proceeds become stockholders and to provide additional incentive for such employees to promote the success of the business of the Company.
The net proceeds will be used for general corporate purposes.
E.3 Description of the The offering of the ESPP may be considered a public offering of terms and securities pursuant to the Prospectus Directive in the following EEA conditions of the countries, subject to applicable legislation in each country: Austria, offer Belgium, Czech Republic, Finland, France, Italy, Lithuania, the Netherlands, Norway, Spain, Sweden and the United Kingdom. The offering of the ESPP also may be made in the following EEA countries: Croatia, Ireland, Poland, Portugal and Slovakia. However, such offering is not considered a public offering of securities and/or the obligation to publish a prospectus does not apply to the offering of securities under the legislation implementing the Prospectus Directive in such countries. The total amount of the offering of the ESPP in the EEA is more than €5 million over a 12-month period.
This prospectus will be made available in printed form to employees at the respective head offices of the Company’s subsidiaries in Austria, Belgium, Czech Republic, Finland, France, Italy, Lithuania, the Netherlands, Norway, Spain, Sweden and the United Kingdom, where the offering of the ESPP may be considered a public offering of securities.
Under the ESPP, eligible employees are offered a right to purchase Shares (a "Purchase Right") at a five (5) percent discount. The ESPP is administered by the Board and a committee designated by the Board (the "Committee") to administer the ESPP. The ESPP will continue until terminated in accordance with the terms of the ESPP.
3 As of October 24, 2017, there were 216 eligible employees in Austria, 306 eligible employees in Belgium, 964 eligible employees in the Czech Republic, 832 eligible employees in Finland, 1,415 eligible employees in France, 427 eligible employees in Italy, 739 eligible employees in Lithuania, 1,282 eligible employees in the Netherlands, 225 eligible employees in Norway, 374 eligible employees in Spain, 836 eligible employees in Sweden and 4,575 eligible employees in the United Kingdom.
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To be eligible to participate in the ESPP, an employee must (i) be employed by Thermo Fisher or a Participating Employer on the first trading day of an Offering Period (as defined below) (the "Grant Date"), and (ii) satisfy certain minimum service requirements.
The ESPP has successive offering periods of approximately six (6) months (each, an "Offering Period"). As currently implemented, each Offering Period begins on the first trading day on or after January 1 and July 1 and terminates on the last trading day on or before June 30 and December 31, respectively. In 2018, the first Offering Period will begin on the first trading day on or after January 1, 2018 and will terminate on the last trading day on or before June 30, 2018, the second Offering Period in 2018 will begin on the first trading day on or before July 1, 2018 and will terminate on the last trading day on or before November 15, 2018 and the third Offering Period in 2018 will begin on the first trading day on or before November 16, 2018 and will terminate on the last trading day on or before May 15, 2019. Thereafter, each Offering Period begins on the first trading day on or after May 16 and November 16 and will terminate on the last trading day on or before November 15 and May 15, respectively. Eligible employees may elect to become "Participants" in the ESPP by completing and executing a form approved by the Company (the "Authorization") during an enrollment period. The enrollment periods are from December 1 - December 22 (for the Offering Period beginning on the first trading day on or after January 1), from June 1 - June 22 (for the Offering Period beginning on the first trading day on or after July 1) and from October 15 - November 5 (for the Offering Period beginning on the first trading day on or after November 16).
Each Authorization will give notice of such Participant’s election to participate in the ESPP and will indicate the whole percentage of eligible compensation that will be deducted from such Participant’s paycheck to be used for the purchase of Shares under the ESPP. Payroll deductions used for the purchase of Shares cannot be less than one (1) percent and not more than ten (10) percent.
A Participant’s participation in the ESPP and the percentage of eligible compensation to be deducted from each paycheck will continue for subsequent Offering Periods, unless a Participant submits a new Authorization, withdraws from the ESPP, suspends contributions, ceases to be an eligible employee or terminates employment. The ESPP permits Participants to decrease their percentage of eligible compensation to be deducted each paycheck during any Offering Period once during an Offering Period. Participants also have the option of suspending their contributions. In such event, any accumulated contributions will be used to purchase Shares on the Exercise Date unless the Participant elects to withdraw his or her funds prior to such date and the Participant must re- enroll in order to participate in any future Offering Periods. If a Participant suspends his or her contribution during an Offering Period, the accumulated funds may either be withdrawn, at the normal withdrawal time, or be used to purchase stock at the end of the Offering Period. A Participant may only increase the percentage of contributions to be deducted from each paycheck for the next Offering Period by delivering a new Authorization to the Company during the applicable enrollment period.
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Each Participant’s payroll deductions, which are accumulated during the applicable Offering Period,4 will be used to purchase Shares on the last trading day of an Offering Period (the "Exercise Date"). The purchase price per Share will be 95% of the Fair Market Value of a Share on the Exercise Date (the "Purchase Price").The "Fair Market Value" of a Share for purposes of the ESPP is the closing sale price of a Share on the NYSE on the applicable date.
Participants in the ESPP may not purchase more than twenty-five thousand U.S. dollars ($25,000) worth of Shares in any calendar year (based on the Fair Market Value of such Shares determined at the time the Purchase Right is granted).5 In addition, the ESPP does not permit Purchase Rights to be granted to any otherwise eligible employee if such individual would, immediately following participation in the ESPP, own Shares or hold outstanding Purchase Rights representing 5% or more of the total combined voting power or value of all classes of stock of Thermo Fisher or any of its affiliates.
A Participant may withdraw from participation in an Offering Period within a withdrawal window as determined and communicated to Participants by Thermo Fisher. A Participant electing to withdraw from the ESPP must contact the applicable broker directly or by such other procedure approved by the Company. Upon withdrawal, the Participant will receive a refund of any contributions previously deducted, without interest.
No Participant has any voting, dividend or other shareholder rights with respect to Shares subject to any offering under the ESPP until the Shares have been purchased and delivered to the Participant. Purchase Rights under the ESPP may not be transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or by an enforceable beneficiary designation) by Participant.
There is no charge to Participants for the acquisition or holding of Shares under the ESPP.
On September 7, 2017, the Committee approved amendments to the ESPP, none of which required stockholder approval. The main amendments were made to facilitate ESPP offerings to employees and subsidiaries outside the U.S.
The total number of Shares authorized and reserved for issuance under the ESPP is 2,000,000 Shares. As of September 30, 2017, there were 818,970 Shares available for issuance under the ESPP on a worldwide basis.
E.4 Description of Not applicable. There are no such interests. material interest to the offer including conflict of interests
4 The payroll deductions will accumulate in a local account in the home country currency of the Participant. At the close of the Offering Period, the accumulated funds will be converted into US dollars and the Shares will be purchased. Please also refer to Element D.3 above regarding the risk related to currency fluctuations. 5 Because of the five (5) percent discount, the actual contribution limit is not more than $23,750 ($25,000 x 95%).
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E.5 Name of the entity Thermo Fisher Scientific Inc. offering to sell the security
E.6 Maximum dilution Assuming that the Participants purchased the maximum of 818,970 Shares offered under the ESPP pursuant to this prospectus to the 12,191 eligible employees in Austria, Belgium, Czech Republic, Finland, France, Italy, Lithuania, the Netherlands, Norway, Spain, Sweden and the United Kingdom, all of which would be newly issued, the holdings of a stockholder of Thermo Fisher currently holding 1% of the total outstanding share capital of Thermo Fisher as of September 30, 2017 (i.e., 4,009,953 Shares) and who is not an eligible employee participating in the offer, would be diluted as indicated in the following table:
Percentage of the Total number of total outstanding outstanding Shares Shares
Before the issuance of Shares under the ESPP (as 1.00% 400,995,357 of September 30, 2017)
After issuance of 818,970 0.999% 401,814,327 Shares under the ESPP
E.7 Estimated Not applicable. There are no such expenses. expenses charged to the investor
4030664-v10\CHIDMS1 17 PART II — PROSPECTUS
PART II — PROSPECTUS
SECTION A — RISK FACTORS
Set forth below are the risks that we believe are material to our investors.
I. RISKS RELATED TO THERMO FISHER'S BUSINESS
We must develop new products, adapt to rapid and significant technological change and respond to introductions of new products by competitors to remain competitive. Our growth strategy includes significant investment in and expenditures for product development. We sell our products in several industries that are characterized by rapid and significant technological changes, frequent new product and service introductions and enhancements and evolving industry standards. Competitive factors include technological innovation, price, service and delivery, breadth of product line, customer support, e-business capabilities and the ability to meet the special requirements of customers. Our competitors may adapt more quickly to new technologies and changes in customers’ requirements than we can. Without the timely introduction of new products, services and enhancements, our products and services will likely become technologically obsolete over time, in which case our revenue and operating results would suffer.
Many of our existing products and those under development are technologically innovative and require significant planning, design, development and testing at the technological, product and manufacturing- process levels. Our customers use many of our products to develop, test and manufacture their own products. As a result, we must anticipate industry trends and develop products in advance of the commercialization of our customers’ products. If we fail to adequately predict our customers’ needs and future activities, we may invest heavily in research and development of products and services that do not lead to significant revenue.
It may be difficult for us to implement our strategies for improving internal growth. Some of the markets in which we compete have been flat or declining over the past several years. To address this issue, we are pursuing a number of strategies to improve our internal growth, including:
• strengthening our presence in selected geographic markets;
• allocating research and development funding to products with higher growth prospects;
• developing new applications for our technologies;
• expanding our service offerings;
• continuing key customer initiatives;
• combining sales and marketing operations in appropriate markets to compete more effectively;
• finding new markets for our products; and
• continuing the development of commercial tools and infrastructure to increase and support cross- selling opportunities of products and services to take advantage of our depth in product offerings.
We may not be able to successfully implement these strategies, and these strategies may not result in the expected growth of our business.
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Our business is affected by general economic conditions and related uncertainties affecting markets in which we operate. Our business is affected by general economic conditions, both inside and outside the U.S. If the global economy and financial markets, or economic conditions in Europe, the U.S. or other key markets, are unstable, it could adversely affect the business, results of operations and financial condition of the Company and its customers, distributors, and suppliers, having the effect of
• reducing demand for some of our products;
• increasing the rate of order cancellations or delays;
• increasing the risk of excess and obsolete inventories;
• increasing pressure on the prices for our products and services; and
• creating longer sales cycles and greater difficulty in collecting sales proceeds.
Demand for some of our products depends on capital spending policies of our customers and on government funding policies. Our customers include pharmaceutical and chemical companies, laboratories, universities, healthcare providers, government agencies and public and private research institutions. Many factors, including public policy spending priorities, available resources and product and economic cycles, have a significant effect on the capital spending policies of these entities.
Spending by some of these customers fluctuates based on budget allocations and the timely passage of the annual federal budget. An impasse in federal government budget decisions could lead to substantial delays or reductions in federal spending.
As a multinational corporation, we are exposed to fluctuations in currency exchange rates, which could adversely affect our cash flows and results of operations. International markets contribute a substantial portion of our revenues, and we intend to continue expanding our presence in these regions. The exposure to fluctuations in currency exchange rates takes on different forms. International revenues and costs are subject to the risk that fluctuations in exchange rates could adversely affect our reported revenues and profitability when translated into U.S. dollars for financial reporting purposes. These fluctuations could also adversely affect the demand for products and services provided by us. As a multinational corporation, our businesses occasionally invoice third-party customers in currencies other than the one in which they primarily do business (the "functional currency"). Movements in the invoiced currency relative to the functional currency could adversely impact our cash flows and our results of operations. Should our international sales grow, exposure to fluctuations in currency exchange rates could have a larger effect on our financial results. In the first nine months of 2017, currency translation had an unfavorable effect of $65 million on revenues due to the strengthening of the U.S. dollar relative to other currencies in which the Company sells products and services.
Significant developments stemming from the recent U.S. presidential election or the U.K.’s referendum on membership in the EU could have an adverse effect on us. The new U.S. administration has called for substantial changes to trade agreements, such as the North American Free Trade Agreement (NAFTA), and has raised the possibility of imposing significant increases on tariffs on goods imported into the United States, particularly from China and Mexico. The new administration has also indicated an intention to request Congress to make significant changes, replacement or elimination of the Patient Protection and Affordable Care Act, and government negotiation/regulation of drug prices paid by government programs. Changes in U.S. social, political, regulatory and economic conditions or laws and policies governing the health care system and drug prices, foreign trade, manufacturing, and development and investment in the territories and countries where we or our customers operate could adversely affect our operating results and our business.
Additionally, on June 23, 2016, the United Kingdom held a referendum and voted in favor of leaving the European Union, or EU. This referendum has created political and economic uncertainty, particularly in the United Kingdom and the EU, and this uncertainty may last for years. Our business could be affected
4030664-v10\CHIDMS1 19 PART II — PROSPECTUS during this period of uncertainty, and perhaps longer, by the impact of the United Kingdom’s referendum. In addition, our business could be negatively affected by new trade agreements between the United Kingdom and other countries, including the United States, and by the possible imposition of trade or other regulatory barriers in the United Kingdom. These possible negative impacts, and others resulting from the United Kingdom’s actual or threatened withdrawal from the EU, may adversely affect our operating results and our customers’ businesses.
Our inability to protect our intellectual property could have a material adverse effect on our business. In addition, third parties may claim that we infringe their intellectual property, and we could suffer significant litigation or licensing expense as a result. We place considerable emphasis on obtaining patent and trade secret protection for significant new technologies, products and processes because of the length of time and expense associated with bringing new products through the development process and into the marketplace. Our success depends in part on our ability to develop patentable products and obtain and enforce patent protection for our products both in the United States and in other countries. We own numerous U.S. and foreign patents, and we intend to file additional applications, as appropriate, for patents covering our products. Patents may not be issued for any pending or future patent applications owned by or licensed to us, and the claims allowed under any issued patents may not be sufficiently broad to protect our technology. Any issued patents owned by or licensed to us may be challenged, invalidated or circumvented, and the rights under these patents may not provide us with competitive advantages. In addition, competitors may design around our technology or develop competing technologies. Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture increased market position. We could incur substantial costs to defend ourselves in suits brought against us or in suits in which we may assert our patent rights against others. An unfavorable outcome of any such litigation could materially adversely affect our business and results of operations.
We also rely on trade secrets and proprietary know-how with which we seek to protect our products, in part, by confidentiality agreements with our collaborators, employees and consultants. These agreements may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently developed by our competitors.
Third parties may assert claims against us to the effect that we are infringing on their intellectual property rights. Our Life Technologies subsidiary is party to several lawsuits in which plaintiffs claim we infringe their intellectual property (see Part II - Section B.5.3 of this prospectus). We could incur substantial costs and diversion of management resources in defending these claims, which could have a material adverse effect on our business, financial condition and results of operations. In addition, parties making these claims could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief, which could effectively block our ability to make, use, sell, distribute, or market our products and services in the United States or abroad. In the event that a claim relating to intellectual property is asserted against us, or third parties not affiliated with us hold pending or issued patents that relate to our products or technology, we may seek licenses to such intellectual property or challenge those patents. However, we may be unable to obtain these licenses on commercially reasonable terms, if at all, and our challenge of the patents may be unsuccessful. Our failure to obtain the necessary licenses or other rights could prevent the sale, manufacture, or distribution of our products and, therefore, could have a material adverse effect on our business, financial condition and results of operations.
Changes in governmental regulations may reduce demand for our products or increase our expenses. We compete in many markets in which we and our customers must comply with federal, state, local and international regulations, such as environmental, health and safety and food and drug regulations. We develop, configure and market our products to meet customer needs created by those regulations. Any significant change in regulations could reduce demand for our products or increase our expenses. For example, many of our instruments are marketed to the pharmaceutical industry for use in discovering and developing drugs. Changes in the U.S. Food and Drug Administration’s regulation of the drug discovery and development process could have an adverse effect on the demand for these products.
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Our pharma services offerings are highly complex, and if we are unable to provide quality and timely offerings to our customers, our business could suffer. Our pharma services offerings are highly exacting and complex, due in part to strict quality and regulatory requirements. Our operating results in this business depend on our ability to execute and, when necessary, improve our quality management strategy and systems, and our ability to effectively train and maintain our employee base with respect to quality management. A failure of our quality control systems could result in problems with facility operations or preparation or provision of products. In each case, such problems could arise for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials or environmental factors and damage to, or loss of, manufacturing operations. Such problems could affect production of a particular batch or series of batches of products, requiring the destruction of such products or a halt of facility production altogether.
In addition, our failure to meet required quality standards may result in our failure to timely deliver products to our customers, which in turn could damage our reputation for quality and service. Any such failure could, among other things, lead to increased costs, lost revenue, reimbursement to customers for lost drug product, registered intermediates, registered starting materials, and active pharmaceutical ingredients, other customer claims, damage to and possibly termination of existing customer relationships, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products. Production problems in our drug and biologic manufacturing operations could be particularly significant because the cost of raw materials for such manufacturing is often high. If problems in preparation or manufacture of a product or failures to meet required quality standards for that product are not discovered before such product is released to the market, we may be subject to adverse regulatory actions, including product recalls, product seizures, injunctions to halt manufacture and distribution, restrictions on our operations, civil sanctions, including monetary sanctions, and criminal actions. In addition, such problems or failures could subject us to litigation claims, including claims from our customers for reimbursement for the cost of lost or damaged active pharmaceutical ingredients, the cost of which could be significant.
We are subject to product and other liability risks for which we may not have adequate insurance coverage. We may be named as a defendant in product liability lawsuits, which may allege that products or services we have provided from our pharma services offerings have resulted or could result in an unsafe condition or injury to consumers. Additionally, products currently or previously sold by our environmental and process instruments and radiation measurement and security instruments businesses include fixed and portable instruments used for chemical, radiation and trace explosives detection. These products are used in airports, embassies, cargo facilities, border crossings and other high-threat facilities for the detection and prevention of terrorist acts. If any of these products were to malfunction, it is possible that explosive or radioactive material could fail to be detected by our product, which could lead to product liability claims. There are also many other factors beyond our control that could lead to liability claims, such as the reliability and competence of the customers’ operators and the training of such operators.
Any such product liability claims brought against us could be significant and any adverse determination may result in liabilities in excess of our insurance coverage. Although we carry product liability insurance, we cannot be certain that our current insurance will be sufficient to cover these claims or that it can be maintained on acceptable terms, if at all.
Our inability to complete pending acquisitions or to successfully integrate any new or previous acquisitions could have a material adverse effect on our business. Our business strategy includes the acquisition of technologies and businesses that complement or augment our existing products and services. Certain acquisitions may be difficult to complete for a number of reasons, including the need for antitrust and/or other regulatory approvals. Any acquisition we may complete may be made at a substantial premium over the fair value of the net identifiable assets of the acquired company. Further, we may not be able to integrate acquired businesses successfully into our existing businesses, make such businesses profitable, or realize anticipated cost savings or synergies, if any, from these acquisitions, which could adversely affect our business.
4030664-v10\CHIDMS1 21 PART II — PROSPECTUS
Moreover, we have acquired many companies and businesses. As a result of these acquisitions, we recorded significant goodwill and indefinite-lived intangible assets (primarily tradenames) on our balance sheet, which amount to approximately $25.13 billion and $1.28 billion, respectively, as of September 30, 2017. In addition, we have definite-lived intangible assets totaling $15.75 billion as of September 30, 2017. We assess the realizability of goodwill and indefinite-lived intangible assets annually as well as whenever events or changes in circumstances indicate that these assets may be impaired. We assess the realizability of definite-lived intangible assets whenever events or changes in circumstances indicate that these assets may be impaired. These events or circumstances would generally include operating losses or a significant decline in earnings associated with the acquired business or asset. Our ability to realize the value of the goodwill and intangible assets will depend on the future cash flows of these businesses. These cash flows in turn depend in part on how well we have integrated these businesses. If we are not able to realize the value of the goodwill and intangible assets, we may be required to incur material charges relating to the impairment of those assets.
We are subject to laws and regulations governing government contracts, and failure to address these laws and regulations or comply with government contracts could harm our business by leading to a reduction in revenue associated with these customers. We have agreements relating to the sale of our products to government entities and, as a result, we are subject to various statutes and regulations that apply to companies doing business with the government. The laws governing government contracts differ from the laws governing private contracts and government contracts may contain pricing terms and conditions that are not applicable to private contracts. We are also subject to investigation for compliance with the regulations governing government contracts. A failure to comply with these regulations could result in suspension of these contracts, criminal, civil and administrative penalties or debarment.
Because we compete directly with certain of our larger customers and product suppliers, our results of operations could be adversely affected in the short term if these customers or suppliers abruptly discontinue or significantly modify their relationship with us. Our largest customer in the laboratory products business is also a significant competitor. Our business may be harmed in the short term if our competitive relationship in the marketplace with certain of our large customers results in a discontinuation of their purchases from us. In addition, we manufacture products that compete directly with products that we source from third-party suppliers. We also source competitive products from multiple suppliers. Our business could be adversely affected in the short term if any of our large third- party suppliers abruptly discontinues selling products to us.
Because we rely heavily on third-party package-delivery services, a significant disruption in these services or significant increases in prices may disrupt our ability to ship products, increase our costs and lower our profitability. We ship a significant portion of our products to our customers through independent package delivery companies, such as Federal Express in the U.S. and DHL in Europe. We also maintain a small fleet of vehicles dedicated to the delivery of our products and ship our products through other carriers, including national and regional trucking firms, overnight carrier services and the U.S. Postal Service. If one or more of these third-party package-delivery providers were to experience a major work stoppage, preventing our products from being delivered in a timely fashion or causing us to incur additional shipping costs we could not pass on to our customers, our costs could increase and our relationships with certain of our customers could be adversely affected. In addition, if one or more of these third-party package-delivery providers were to increase prices, and we were not able to find comparable alternatives or make adjustments in our delivery network, our profitability could be adversely affected.
We are required to comply with a wide variety of laws and regulations, and are subject to regulation by various federal, state and foreign agencies. We are subject to various local, state, federal, foreign and transnational laws and regulations, which include the operating and security standards of the U.S. Federal Drug Administration (the "FDA"), the U.S. Drug Enforcement Agency (the "DEA"), various state boards of pharmacy, state health departments, the U.S. Department of Health and Human Services (the "DHHS"), the European Medicines Agency (the "EMA"), in Europe, the EU member states and other comparable agencies and, in the future, any changes to such laws and regulations could
4030664-v10\CHIDMS1 22 PART II — PROSPECTUS
adversely affect us. In particular, we are subject to laws and regulations concerning current good manufacturing practices and drug safety. Our subsidiaries may be required to register for permits and/or licenses with, and may be required to comply with the laws and regulations of the DEA, the FDA, the DHHS, foreign agencies including the EMA, and other various state boards of pharmacy, state health departments and/or comparable state agencies as well as certain accrediting bodies depending upon the type of operations and location of product distribution, manufacturing and sale.
The manufacture, distribution and marketing of many of our products and services, including medical devices and pharma services, are subject to extensive ongoing regulation by the FDA, the DEA, the EMA, and other equivalent local, state, federal and non-U.S. regulatory authorities. In addition, we are subject to inspections by these regulatory authorities. Failure by us or by our customers to comply with the requirements of these regulatory authorities, including without limitation, remediating any inspectional observations to the satisfaction of these regulatory authorities, could result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal of existing or denial of pending approvals, including those relating to products or facilities. In addition, such a failure could expose us to contractual or product liability claims, contractual claims from our customers, including claims for reimbursement for lost or damaged active pharmaceutical ingredients, as well as ongoing remediation and increased compliance costs, any or all of which could be significant.
We are also subject to a variety of federal, state, local and international laws and regulations that govern, among other things, the importation and exportation of products, the handling, transportation and manufacture of substances that could be classified as hazardous, and our business practices in the U.S. and abroad such as anti-corruption and anti-competition laws. Any noncompliance by us with applicable laws and regulations or the failure to maintain, renew or obtain necessary permits and licenses could result in criminal, civil and administrative penalties and could have an adverse effect on our results of operations.
Our business could be adversely affected by disruptions at our sites. We rely upon our manufacturing operations to produce many of the products we sell and our warehouse facilities to store products, pending sale. Any significant disruption of those operations for any reason, such as strikes or other labor unrest, power interruptions, fire, or other events beyond our control could adversely affect our sales and customer relationships and therefore adversely affect our business. We have significant operations in California, near major earthquake faults, which make us susceptible to earthquake risk. Although most of our raw materials are available from a number of potential suppliers, our operations also depend upon our ability to obtain raw materials at reasonable prices. If we are unable to obtain the materials we need at a reasonable price, we may not be able to produce certain of our products or we may not be able to produce certain of these products at a marketable price, which could have an adverse effect on our results of operations.
Fluctuations in our effective tax rate may adversely affect our results of operations and cash flows. As a global company, we are subject to taxation in numerous countries, states and other jurisdictions. In preparing our financial statements, we record the amount of tax that is payable in each of the countries, states and other jurisdictions in which we operate. Our future effective tax rate, however, may be lower or higher than experienced in the past due to numerous factors, including a change in the mix of our profitability from country to country, changes in accounting for income taxes and recently enacted and future changes in tax laws in jurisdictions in which we operate. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations, which could have an adverse effect on our business, results of operations and cash flows.
We may incur unexpected costs from increases in fuel and raw material prices, which could reduce our earnings and cash flow. Our primary commodity exposures are for fuel, petroleum-based resins and steel. While we may seek to minimize the impact of price increases through higher prices to customers and various cost-saving measures, our earnings and cash flows could be adversely affected in the event these measures are insufficient to cover our costs.
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A significant disruption in, or breach in security of, our information technology systems could adversely affect our business. As a part of our ongoing effort to upgrade our current information systems, we periodically implement new enterprise resource planning software and other software applications to manage certain of our business operations. As we implement and add functionality, problems could arise that we have not foreseen. Such problems could disrupt our ability to provide quotes, take customer orders and otherwise run our business in a timely manner. When we upgrade or change systems, we may suffer interruptions in service, loss of data or reduced functionality. In addition, if our new systems fail to provide accurate pricing and cost data our results of operations and cash flows could be adversely affected.
We also rely on our technology infrastructure, among other functions, to interact with suppliers, sell our products and services, fulfill orders and bill, collect and make payments, ship products, provide services and support to customers, track customers, fulfill contractual obligations and otherwise conduct business. Our systems may be vulnerable to damage or interruption from natural disasters, power loss, telecommunication failures, terrorist attacks, computer viruses, computer denial-of-service attacks, unauthorized access to customer or employee data or company trade secrets, and other attempts to harm our systems. Certain of our systems are not redundant, and our disaster recovery planning is not sufficient for every eventuality. Despite any precautions we may take, such problems could result in, among other consequences, interruptions in our services, which could harm our reputation and financial results. Any of the cyber-attacks, breaches or other disruptions or damage described above could interrupt our operations, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer and business partner relationships and our reputation or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws and increased cost for security and remediation, each of which could adversely affect our business and financial results.
Our debt may restrict our investment opportunities or limit our activities. As of September 30, 2017, we had approximately $21.99 billion in outstanding indebtedness. In addition, we have availability to borrow under a revolving credit facility that provides for up to $2.50 billion of unsecured multi-currency revolving credit. We may also obtain additional long-term debt and lines of credit to meet future financing needs, which would have the effect of increasing our total leverage.
Our leverage could have negative consequences, including increasing our vulnerability to adverse economic and industry conditions, limiting our ability to obtain additional financing and limiting our ability to acquire new products and technologies through strategic acquisitions.
Our ability to make scheduled payments, refinance our obligations or obtain additional financing will depend on our future operating performance and on economic, financial, competitive and other factors beyond our control. Our business may not generate sufficient cash flow to meet our obligations. If we are unable to service our debt, refinance our existing debt or obtain additional financing, we may be forced to delay strategic acquisitions, capital expenditures or research and development expenditures.
Additionally, the agreements governing our debt require that we maintain certain financial ratios, and contain affirmative and negative covenants that restrict our activities by, among other limitations, limiting our ability to incur additional indebtedness, merge or consolidate with other entities, make investments, create liens, sell assets and enter into transactions with affiliates. The covenants in our revolving credit facility (the "Facility") include a Consolidated Leverage Ratio (total debt-to-Consolidated EBITDA) and a Consolidated Interest Coverage ratio (Consolidated EBITDA to Consolidated Interest Expense), as such terms are defined in the Facility. Specifically, the Company has agreed that, so long as any lender has any commitment under the Facility, any letter of credit is outstanding under the Facility, or any loan or other obligation is outstanding under the Facility, it will maintain a maximum Consolidated Leverage Ratio of 4.5:1.0 for the third and fourth quarter of 2017, with such maximum ratio stepping down to 4.0:1.0 for the first and second quarters of 2018 and then stepping down to 3.5:1.0 for the third quarter of 2018 and thereafter. The Company has also agreed that so long as any lender has any commitment under the Facility or any letter of credit is outstanding under the Facility, or any loan or other obligation is
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outstanding under the Facility, it will maintain a minimum Consolidated Interest Coverage Ratio of 3.0:1.0 as of the last day of any fiscal quarter.
Our ability to comply with these financial restrictions and covenants is dependent on our future performance, which is subject to prevailing economic conditions and other factors, including factors that are beyond our control such as foreign exchange rates and interest rates. Our failure to comply with any of these restrictions or covenants may result in an event of default under the applicable debt instrument, which could permit acceleration of the debt under that instrument and require us to prepay that debt before its scheduled due date. Also, an acceleration of the debt under certain of our debt instruments would trigger an event of default under other of our debt instruments.
II. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates and currency exchange rates, which could affect its future results of operations and financial condition. The Company manages its exposure to these risks through its regular operating and financing activities. The Company has periodically hedged interest rate risks of fixed-rate instruments with offsetting interest rate swaps. Additionally, the Company uses short-term forward and option contracts primarily to hedge certain balance sheet and operational exposures resulting from changes in currency exchange rates. Such exposures result from purchases, sales, cash and intercompany loans that are denominated in currencies other than the functional currencies of the respective operations. The currency-exchange contracts principally hedge transactions denominated in euro, British pounds sterling, Swiss franc, Japanese yen, Norwegian kroner, and Swedish kronor. Income and losses arising from these derivative contracts are recognized as offsets to losses and income resulting from the underlying exposure being hedged. The Company does not enter into speculative derivative agreements.
2.1 Interest Rates
The Company is exposed to changes in interest rates while conducting normal business operations as a result of ongoing investing and financing activities, which affect the Company’s debt as well as cash and cash equivalents. As of December 31, 2016, the Company’s debt portfolio was comprised primarily of fixed rate borrowings. The fair market value of the Company’s fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The total estimated fair value of the Company’s debt at December 31, 2016 was $16.98 billion (see Note 12 in Exhibit 99.1 of Thermo Fisher's Current Report on Form 8-K filed with the SEC on May 5, 20176 ("Thermo Fisher's Form 8-K") and Note 11 of Thermo Fisher's Form 10-Q). Fair values were determined from available market prices using current interest rates and terms to maturity. If interest rates were to decrease by 100 basis points, the fair value of the Company’s debt at December 31, 2016 would increase by approximately $840 million. If interest rates were to increase by 100 basis points, the fair value of the Company’s debt at December 31, 2016 would decrease by approximately $802 million.
In addition, interest rate changes would result in a change in the Company’s interest expense due to variable-rate debt instruments including swap arrangements. In 2016, a 100 basis point increase in interest rates on the swap arrangements and variable-rate debt would have increased the Company’s annual pre-tax interest expense by approximately $42 million.
2.2 Currency Exchange Rates
The Company views its investment in international subsidiaries with a functional currency other than the U.S. dollar as permanent. The Company’s investment in international subsidiaries is sensitive to fluctuations in currency exchange rates. The functional currencies of the Company’s international
6 Certain Items (Items 7, 8 and 15(a)) of Thermo Fisher's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on February 28, 2017 ("Thermo Fisher's Form 10-K") were updated in Thermo Fisher's Form 8-K.
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subsidiaries are principally denominated in British pounds sterling, Swedish kronor, euro, Danish kroner, Canadian dollars and Swiss franc. The effect of a change in the period ending currency exchange rates on the Company’s net investment in international subsidiaries is reflected in the "accumulated other comprehensive items" component of shareholders’ equity. The Company also uses foreign currency- denominated debt to partially hedge its net investments in foreign operations against adverse movements in exchange rates. A 10% depreciation in year-end 2016 functional currencies, relative to the U.S. dollar, would result in a reduction of shareholders’ equity of $1.19 billion.
The fair value of forward currency-exchange contracts is sensitive to changes in currency exchange rates. The fair value of forward currency-exchange contracts is the estimated amount that the Company would pay or receive upon termination of the contract, taking into account the change in currency exchange rates. A 10% depreciation in year-end 2016 non-functional currency exchange rates related to the Company’s contracts would result in an unrealized gain on forward currency-exchange contracts of $126 million. A 10% appreciation in year-end 2016 non-functional currency exchange rates related to the Company’s contracts would result in an increase in the unrealized loss on forward currency-exchange contracts of $117 million. The unrealized gains or losses on forward currency-exchange contracts resulting from changes in currency exchange rates are expected to approximately offset losses or gains on the exposures being hedged.
Certain of the Company’s cash and cash equivalents are denominated in currencies other than the functional currency of the depositor and are sensitive to changes in currency exchange rates. A 10% depreciation in the related year-end 2016 non-functional currency exchange rates applied to such cash balances would result in a negative impact of $36 million on the Company’s net income.
SECTION B — SUPPLEMENTAL INFORMATION CONCERNING THERMO FISHER AND THE ESPP
I. THE OUTLINE
1.1 Purpose of the ESPP
The purpose of the ESPP is to encourage eligible employees of the Company and its Participating Employers to become stockholders and to provide additional incentive for such employees to promote the success of the business of the Company.
1.2 Shares Offered Under the ESPP
The total amount of Shares reserved and available for issuance under the ESPP in the aggregate shall not exceed 2,000,000 Shares, representing approximately 0.49% of the 400,995,357 Shares outstanding as of September 30, 2017. Such number is subject to adjustments effected in accordance with the terms of the ESPP.
As of September 30, 2017, there were 818,970 Shares available for issuance under the ESPP, on a worldwide basis. Such Shares either can be authorized but unissued Shares or reacquired Shares, in the sole discretion of the Board. The decision of the Board on the type of Shares made available for issuance under the ESPP does not impact the Purchase Price (defined below) of the Shares paid by the Participants.
Notwithstanding any other provision of the ESPP to the contrary, no Participant in the ESPP shall be granted a right to purchase Shares under the ESPP at a rate which exceeds $25,000 of the Fair Market Value of such Shares (determined at the time such right to purchase is granted). The maximum number of Shares that a Participant shall be permitted to purchase under any Purchase Right shall be fixed by the Board at the time of grant. In the absence of affirmative action by the Board, the maximum number of Shares that may be purchased during any Offering Period (defined below) shall be that whole number of
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Shares determined by dividing $50,000 by the Fair Market Value of a share on the first trading day of an Offering Period (the "Grant Date") of such Offering Period.
In the event of a stock split or stock dividend, the number of Shares reserved under the ESPP will be adjusted proportionately in the event of a stock split or stock dividend. In the event of any other change affecting the Shares, the Board will make any necessary adjustments. In the event of a merger or consolidation involving the Company, a transaction in which the Company becomes a subsidiary of another entity, a sale or other disposition of all or substantially all of the assets of the Company (including a liquidation of the Company) or any other transaction which the Board determines to be a similar transaction (any of the foregoing, a "Covered Transaction"), the Board may (i) terminate all then outstanding rights to purchase stock under the ESPP, in which event amounts contributed for the purchase of Shares will be refunded as soon as practicable, (ii) modify or adjust the terms of the outstanding Purchase Rights, (iii) if there is a survivor or acquiror entity, provide for the assumption, modification, or adjustment to the terms of outstanding Purchase Rights by the survivor or acquiror or an affiliate thereof or for the grant of replacement rights by the survivor or acquiror or an affiliate thereof, in each case on whatever terms the Board may determine, (iv) accelerate the Exercise Date for outstanding rights or (v) provide for any combination of the foregoing. In the case of a spin-off or similar transaction, the Board may take actions including shortening an Offering Period.
1.3 Offering Period
The ESPP typically operates on consecutive six-month Offering Periods. In 2018, the first Offering Period will begin on the first trading day on or after January 1 and will terminate on the last trading day on or before June 30, the second Offering Period in 2018 will begin on the first trading day on or before July 1, 2018 and will terminate on the last trading day on or before November 15, 2018 and the third Offering Period in 2018 will begin on the first trading day on or before November 16, 2018 and will terminate on the last trading day on or before May 15, 2019. Thereafter, each Offering Period begins on the first trading day on or after May 16 and November 16 and will terminate on the last trading day on or before November 15 and May 15, respectively. A "Trading Day" is a day on which the NYSE is open for trading.
1.4 Purchase Price
The Purchase Price to be paid by a Participant during an Offering Period shall be 95% of the Fair Market Value of a Share on the last Trading Day (i.e., the "Exercise Date") of the Offering Period.
For purposes of the ESPP, the term "Fair Market Value" shall be the closing price of a Share on the NYSE on the applicable date (or, if Shares are not traded on such date, then on the Trading Day immediately prior to such date during which a sale occurs).
1.5 Purchase of Stock
Each Participant will automatically exercise their Purchase Right on the Exercise Date to the extent that there are sufficient contributions to purchase, at the Purchase Price, Shares subject to the Purchase Right. No fractional Shares will be purchases and any contributions that are insufficient to purchase Shares at the Purchase Price will be carried over to the next Offering Period and will remain credited to the Participant.
1.6 Term of the ESPP
The ESPP will continue in effect until its termination by the Board in accordance with the terms of the ESPP.
1.7 Amendment or Discontinuance of the ESPP
The Board may terminate or amend the ESPP at any time; provided, however, that no amendment, unless approved by the stockholders of the Company, shall effect any change for which stockholder
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approval would be required under that regulation, nor shall any termination or amendment adversely affect the rights of a Participant with respect to any Purchase Right held by the Participant as of the date of such termination or amendment, without his or her consent, unless such change is appropriate for purposes of complying with applicable laws. For the avoidance of doubt, rather than the foregoing sentence, the ability to terminate or amend the ESPP as described in Section 1.2 above, shall apply to Board actions taken in connection with Covered Transactions.
II. ELIGIBILITY
2.1 Eligible Employees
Employees of Thermo Fisher or any Participating Employer are eligible to participate if (a) such employee is employed by Thermo Fisher or any Participating Employer on the Grant Date; (b) such employee’s customary employment with Thermo Fisher or any Participating Employer is twenty (20) hours or less per week and/or less than five (5) months per calendar year; (c) such employee is a "highly compensated employee" of Thermo Fisher or any Participating Employer (within the meaning of Section 414(q) of the Code;(d) local law requires participation in the ESPP to be extended to such employee, as determined by the Company; or (e) such employee is a citizen or resident of a jurisdiction where the grant of a Purchase Right under the ESPP is prohibited under local law of such jurisdiction.
Further, no employee will be granted a Purchase Right under the ESPP if immediately after the grant, such employee (or any other person whose Shares would be attributed to such employee pursuant to Section 424(d) of the Code) would own Shares and/or hold outstanding Purchase Rights possessing five (5) percent or more of the total combined voting power or value of all classes of stock of the Thermo Fisher or any of its subsidiaries.
2.2 Participation of Eligible Employees
Eligible employees may elect to become "Participants" in the ESPP by completing and executing a form approved by the Company (the "Authorization") during an enrollment period. Each Authorization will give notice of such Participant’s election to participate in the ESPP and will indicate the whole percentage eligible compensation that will be deducted from such Participant’s paycheck to be used for the purchase of Shares under the ESPP.
In order to participate in an Offering Period, a Participant must submit an Authorization during the enrollment periods. The enrollment periods are from December 1 - December 22 (for the Offering Period beginning on the first trading day on or after January 1), from June 1 - June 22 (for the Offering Period beginning on the first trading day on or after July 1) and from October 15 - November 5 (for the Offering Period beginning on the first trading day on or after November 16).
2.3 Payroll Deductions
Employees may authorize payroll deductions in an amount between one (1) percent and ten (10) percent of their compensation for participation in the ESPP. The Participant must specify in the Authorization the percentage (in whole percentages) which he/she authorizes for deductions from his/her compensation for the ESPP. A Participant’s participation in the ESPP and the percentage of eligible compensation to be deducted each paycheck will continue for subsequent Offering Periods, unless a Participant submits a new Authorization, withdraws from the ESPP, suspends contributions, ceases to be an eligible employee or terminates employment. The ESPP permits Participants to decrease their percentage of eligible compensation to be deducted each paycheck during any Offering Period once during an Offering Period. Participants also have the option of suspending their contributions. In such event, any accumulated contributions will be used to purchase Shares on the Exercise Date unless the Participant elects to withdraw his or her funds prior to such date and the Participant must re-enroll in order to participate in any future Offering Periods. If a Participant suspends his or her contribution during an Offering Period, the accumulated funds may either be withdrawn, at the normal withdrawal time, or be used to purchase stock
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at the end of the Offering Period. A Participant may only increase the percentage of contributions to be deducted from each paycheck for the next Offering Period by delivering a new Authorization to the Company during the applicable enrollment period.
All payroll deductions made for a Participant will be credited to his/her account under the ESPP. No interest will be paid or credited to the account of any Participant with respect to such payroll deductions (except to the extent payment of interest on such amount is required by the laws of any applicable jurisdiction).
2.4 Discontinuance of Participation of Participants
A Participant may withdraw from participation in an Offering Period within a withdrawal window as determined and communicated to Participants by Thermo Fisher. A Participant electing to withdraw from the ESPP must contact the applicable broker directly or by such other procedure approved by the Company. Upon withdrawal, the Participant will receive a refund of any contributions previously deducted, without interest. A Participant which withdraws funds does not suspend future contributions unless specifically indicated.
A Participant who withdraws from the ESPP with respect to an Offering Period, and who is still an eligible employee, may elect to participate in the ESPP for any subsequent Offering Period.
2.5 Termination of Employment of Eligible Employees
Upon termination of employment for any reason whatsoever, including but not limited to death, the balance in the account of a Participant will be paid to the Participant in his or her final paycheck. If Participant retires during the Offering Period, Participant may purchase Shares on the Exercise Date to the extent that he or she has accumulated contributions as of his or her retirement date. Alternatively, Participant may withdraw his or her contributions at the normal withdrawal time.
III. DELIVERY AND SALE OF THE SHARES
Following the end of each Offering Period, the number of Shares purchased by each Participant will be deposited into an account established in the Participant’s name at the ESPP broker. Within a reasonable time after the Exercise Date, the Company shall deliver or cause to be delivered to the Participant a certificate or certificates for the Shares purchased by the Participant. Certificates for Shares may be issued only in the name of the Participant.
No Participant is permitted to sell, assign, transfer, pledge or otherwise dispose of or encumber either the payroll deductions credited to his/her account or any rights with regards to the Purchase Rights or rights to receive Shares under the ESPP other than by will or the laws of descent and distribution.
IV. RIGHTS RELATED TO THE SHARES
4.1 Type and the Class of the Securities Being Offered, Including the Security Identification Code
As of September 30, 2017, Thermo Fisher was authorized to issue 1,200,000,000 Shares and 50,000 shares of preferred stock, par value $100 per share. As of September 30, 2017, there were 400,995,357 Shares outstanding and no shares of preferred stock issued or outstanding.
The Shares are or will be, after their issuance, listed on the NYSE under the symbol "TMO." The CUSIP number for the Shares is 883556102.
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4.2 Legislation Under Which the Securities Have Been Created
The Shares were created under Delaware General Corporation Law of the State of Delaware (U.S.A.) ("DGCL"). Except as otherwise expressly required under the laws of a country, the ESPP and all rights thereunder shall be governed by and construed in accordance with the laws of the State of Delaware, United States of America.
4.3 Form of Securities, Name and Address of the Entity in Charge of Keeping the Records
In general, stockholders may hold Shares, at their choosing, either registered in their name or street name form. Shares that are registered in their name are kept by American Stock Transfer & Trust Company, Thermo Fisher’s transfer agent. American Stock Transfer & Trust Company can be contacted by phone at 1-800-937-5449 within the US or 1-718-921-8124 outside of the US, on the Web at www.astfinancial.com or in writing at Operations Center, 6201 15th Avenue, Brooklyn, NY 11219, U.S.A.
Thermo Fisher’s designated ESPP broker is Fidelity Stock Plan Services ("Fidelity").7 Fidelity can be contacted through the web at www.netbenefits.fidelity.com. Fidelity can also be contacted by telephone at +1-800-544-9354, (domestic) or 1-800-544-0275, (international).
Commission
The commission charged by Fidelity for sales of Shares purchased under the ESPP is, if done online, $4.95. In addition, the SEC imposes a fee on the transfer of Shares. This fee is paid to the SEC at the time of sale and is required for all equity trades. Upon selling the Shares, the Participant will be charged a fee currently equal to $0.0000231 multiplied by the total principal amount of the sale proceeds. The SEC may announce new fee rates at its discretion.
4.4 Currency of the Securities Issue
The United States Dollar is the currency of the securities issue. Participants assume the risk of any currency fluctuations from the time their contributions to the ESPP are used to purchase Shares through the selling of such Shares.
4.5 Rights Attached to the Securities
No Participant shall have any voting, dividend, or other stockholder rights with respect to any Offering Period under the ESPP until the Shares have been purchased and delivered to the Participant. Following such purchase and delivery, the Participant shall be entitled to the rights attached to the Shares, as further described below:
Dividend Rights. The holders of the Shares, after any preferences of holders of any preferred stock, are entitled to receive dividends when and if declared by the Board out of legally available funds.
Under the DGCL and subject to any restrictions contained in the Certificate of Incorporation, the holders of outstanding Shares are entitled to receive dividends either (1) out of the surplus, or (2) in case there shall be no such surplus, out of Thermo Fisher’s net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year (see Section 170 DGCL).
Thermo Fisher pays dividends on its Shares. Refer to Element B.7 above. The payment of dividends in the future will be determined by the Board and will depend upon Thermo Fisher's earnings, financial condition and other factors.
Voting Rights. Each holder of the Shares is entitled to one vote for each Share held on all matters to be voted upon by stockholders.
7 Thermo Fisher may, in its sole discretion, decide to change its designated broker at any time.
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Annual meetings of the Company's stockholders are held on the date designated in accordance with its bylaws. Written notice must be mailed to each stockholder entitled to vote not less than ten nor more than 60 days before the date of the meeting. The presence in person or by proxy of the holders of record of a majority of the Company's issued and outstanding Shares entitled to vote at such meeting constitutes a quorum for the transaction of business at meetings of the stockholders, unless or except to the extent that the presence of a larger number may be required by the Company's certificate of incorporation or the DGCL. Special meetings of the stockholders may only be called by the Board, the chairman of the Board or the chief executive officer. Except as may be otherwise provided by applicable law, the Company's certificate of incorporation or its bylaws, all matters shall be decided by a majority of the votes cast by stockholders entitled to vote thereon at a duly held meeting of stockholders at which a quorum is present. Except as may be otherwise provided by the Company's certificate of incorporation, a nominee shall be elected to the Board if the votes cast for such nominee’s election exceed the votes cast against, provided that if, on the tenth business day before the Company mails its notice of meeting to the stockholders, the number of nominees exceeds the number of directors to be elected, the election shall be decided by a plurality.
Pursuant to Section 242 of the DGCL, after a corporation has received payment for any of its capital stock, it may amend its certificate of incorporation, from time to time, in any and as many respects as may be desired, so long as its certificate of incorporation as amended would contain only such provisions as it would be lawful and proper to insert in an original certificate of incorporation filed at the time of the filing of the amendment; and, if a change in stock or the rights of stockholders, or an exchange, reclassification, subdivision, combination or cancellation of stock or rights of stockholders is to be made, such provisions as may be necessary to effect such change, exchange, reclassification, subdivision, combination or cancellation. In particular, and without limitation upon such general power of amendment, a corporation may amend its certificate of incorporation, from time to time, so as:
(1) To change its corporate name; or
(2) To change, substitute, enlarge or diminish the nature of its business or its corporate powers and purposes; or
(3) To increase or decrease its authorized capital stock or to reclassify the same, by changing the number, par value, designations, preferences, or relative, participating, optional, or other special rights of the shares, or the qualifications, limitations or restrictions of such rights, or by changing shares with par value into shares without par value, or shares without par value into shares with par value either with or without increasing or decreasing the number of shares, or by subdividing or combining the outstanding shares of any class or series of a class of shares into a greater or lesser number of outstanding shares; or
(4) To cancel or otherwise affect the right of the holders of the shares of any class to receive dividends which have accrued but have not been declared; or
(5) To create new classes of stock having rights and preferences either prior and superior or subordinate and inferior to the stock of any class then authorized, whether issued or unissued; or
(6) To change the period of its duration.
(7) To delete:
a. Such provisions of the original certificate of incorporation which named the incorporator or incorporators, the initial board of directors and the original subscribers for shares; and
b. Such provisions contained in any amendment to the certificate of incorporation as were necessary to effect a change, exchange, reclassification, subdivision, combination or cancellation of stock, if such change, exchange, reclassification, subdivision, combination or cancellation has become effective.
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Any or all such changes or alterations may be effected by one certificate of amendment.
The Board shall adopt a resolution setting forth the amendment proposed, declaring its advisability, and either calling a special meeting of the stockholders entitled to vote in respect thereof for the consideration of such amendment or directing that the amendment proposed be considered at the next annual meeting of the stockholders; provided, however, that unless otherwise expressly required by the certificate of incorporation, no meeting or vote of the stockholders shall be required to adopt an amendment that only changes the name of the corporation. Such special or annual meeting shall be called and held upon written notice given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting. The notice shall set forth such amendment in full or a brief summary of the changes to be effected thereby, as the directors shall deem advisable. At the meeting a vote of the stockholders entitled to vote thereon shall be taken for and against the proposed amendment. If a majority of the outstanding stock entitled to vote thereon, and a majority of the outstanding stock of each class entitled to vote thereon as a class has been voted in favor of the amendment, a certificate setting forth the amendment and certifying that such amendment has been duly adopted in accordance with Section 242 of the DGCL shall be executed, acknowledged and filed and shall become effective.
Right to Receive Liquidation Distributions. If Thermo Fisher is liquidated or dissolved, the holders of the Shares will be entitled to share in the Company's assets available for distribution to stockholders in proportion to the amount of Shares they own. The amount available for common stockholders is calculated after payment of liabilities. Holders of any preferred stock will receive a preferential share of the Company's assets before the holders of the Shares receive any assets.
No Preemptive, Redemptive or Conversion Provisions. Holders of the Shares have no preemptive, subscription, redemption or conversion rights.
4.6 Transferability
The Shares offered under the ESPP are registered on a registration statement on Form S-8 with the SEC and are generally freely transferable.
The ESPP is intended to provide Shares for investment and not for resale. The Company does not, however, intend to restrict or influence any Participant in the conduct of his or her own affairs. A Participant, therefore, may sell Shares purchased under the ESPP at any time he or she chooses, subject to compliance with any applicable securities laws and related policies of the Company. Participants assume the risk of any market fluctuations in the price of the Shares.
4.7 General Provisions Applying to Business Combinations
The Company is subject to Section 203 of the DGCL, which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any "business combination" with an "interested stockholder" for a period of three (3) years following the time that such stockholder became an interested stockholder, unless:
• the board of directors of the corporation approves either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder, prior to the time the interested stockholder attained that status;
• upon the closing of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least eighty-five (85%) of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (but not the outstanding voting stock owned by the interested stockholder), those shares owned (i) by persons who are directors and also officers and (ii) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or
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exchange offer; or
• at or subsequent to such time, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.
With certain exceptions, an "interested stockholder" under Section 203 of the DGCL is a person or group who or which owns fifteen percent (15%) or more of the corporation’s outstanding voting stock (including any rights to acquire stock pursuant to an option, warrant, agreement, arrangement or understanding, or upon the exercise of conversion or exchange rights, and stock with respect to which the person has voting rights only), or is an affiliate or associate of the corporation and was the owner of fifteen percent (15%) or more of such voting stock at any time within the previous three (3) years.
In general, Section 203 of the DGCL defines a business combination to include:
• any merger or consolidation involving the corporation or any of its subsidiaries with the interested stockholder;
• any sale, transfer, pledge or other disposition of ten percent (10%) or more of the assets of the corporation involving the interested stockholder;
• subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation or any of its subsidiaries to the interested stockholder;
• any transaction involving the corporation or any of its subsidiaries that has the effect of increasing the proportionate share of the stock or any class or series of the corporation or of any such subsidiary beneficially owned by the interested stockholder; or
• the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation or any of its subsidiaries.
A Delaware corporation, such as the Company, may "opt out" of this provision with an express provision in its original certificate of incorporation or an express provision in its certificate of incorporation or bylaws resulting from a stockholders’ amendment approved by at least a majority of the outstanding voting shares. However, the Company has not "opted out" of this provision. Section 203 could prohibit or delay mergers or other takeover or change-in-control attempts and, accordingly, may discourage attempts to acquire the Company.
Section 253 of the DGCL authorizes the board of directors of a Delaware corporation that owns ninety percent (90%) or more of each of the outstanding classes of stock of a subsidiary that are entitled to vote on a merger to merge the subsidiary into itself without any requirement for action to be taken by the board of directors of the subsidiary.
Section 251(h) of the DGCL, subject to certain exceptions, permits parties entering into a merger agreement to "opt in" to eliminate a target stockholder vote on a back-end merger following a tender or exchange offer in which the acquirer accumulates sufficient shares to approve the merger agreement (a majority unless the target has adopted a higher vote requirement) but less than the 90% necessary to effect a short-form merger. Section 251(h) of the DGCL applies only to target corporations that have a class or series of stock that is listed on a national securities exchange or held of record by more than 2,000 holders, such as the Company.
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V. STATEMENT OF CAPITALIZATION AND INDEBTEDNESS AS OF SEPTEMBER 30, 2017
5.1 Capitalization and Indebtedness (in millions - unaudited)
Total Current debt $ 2,762.3 - Guaranteed 2,007.0 - Secured 3.0 - Unguaranteed / Unsecured 752.3
Total Non-Current debt (excluding current portion of long-term debt) $ 19,230.4 - Guaranteed ̶ - Secured 11.8 - Unguaranteed / Unsecured 19,218.6
Stockholders’ equity $ a. Share Capital and Additional Paid-in Capital 14,540.0 b. Legal Reserve c. Total Other Reserves 10,161.8 - Retained earnings 15,445.8 - Treasury stock at cost (3,101.1) - Accumulated other comprehensive loss (2,182.9) Total shareholders’ equity $ 24,701.8
5.2 Net Indebtedness (in millions - unaudited)
A.+B. Cash and cash equivalents $ 741.1 C. Short-term investments $ 2.0 D. Liquidity (A) + (B) + (C) $ 743.1
E. Current Financial Receivable ̶ F. Current Bank debt $ 750.0 G. Current portion of non-current debt $ 713.2 H. Other current financial debt $ 1,299.1 I. Other Financial Debt (F) + (G) + (H) $ 2,762.3
J. Net Current Financial Indebtedness (I) – (E) – (D) $ 2,019.2
K. Non-current Bank loans ̶ L. Bonds Issued $ 19,215.0 M. Other non-current loans $ 15.4
N. Non-current Financial Indebtedness (K) + (L) + (M) $ 19,230.4
O. Net Financial Indebtedness (J) + (N) $ 21,249.6
5.3 Indirect and Contingent Indebtedness
Operating Leases
The Company leases certain logistics, office, and manufacturing facilities. Income from continuing operations includes expense from operating leases of $182 million, $181 million and $181 million in 2016, 2015 and 2014, respectively. The following is a summary of annual future minimum lease and rental commitments under noncancelable operating leases as of December 31, 2016:
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(In millions)
2017 $ 163.7 2018 132.6 2019 103.0 2020 79.5 2021 60.2 2022 and Thereafter 176.5
$ 715.5
Purchase Obligations
The Company has entered into unconditional purchase obligations, in the ordinary course of business, that include agreements to purchase goods, services or fixed assets and to pay royalties that are enforceable and legally binding and that specify all significant terms including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable at any time without penalty. The aggregate amount of the Company’s unconditional purchase obligations totaled $378 million at December 31, 2016 and the majority of these obligations are expected to be settled during 2017.
Letters of Credit, Guarantees and Other Commitments
Outstanding letters of credit and bank guarantees totaled $179 million at December 31, 2016. Substantially all of these letters of credit and guarantees expire before 2022.
Outstanding surety bonds and other guarantees totaled $24 million at December 31, 2016. The expiration of these bonds and guarantees ranges through 2018.
The letters of credit, bank guarantees and surety bonds principally secure performance obligations, and allow the holder to draw funds up to the face amount of the letter of credit, bank guarantee or surety bond if the applicable business unit does not perform as contractually required.
The Company is a guarantor of pension plan obligations of a divested business. The purchaser of the divested business has agreed to pay for the pension benefits, however the Company was required to guarantee payment of these pension benefits should the purchaser fail to do so. The amount of the guarantee at December 31, 2016 was $40 million.
In connection with the sale of businesses of the Company, the buyers have assumed certain contractual obligations of such businesses and have agreed to indemnify the Company with respect to those assumed liabilities. In the event a third-party to a transferred contract does not recognize the transfer of obligations or a buyer defaults on its obligations under the transferred contract, the Company could be liable to the third-party for such obligations. However, in such event, the Company would be entitled to seek indemnification from the buyer.
In 2016, the Company entered into an off-balance sheet build-to-suit financing arrangement with a financial institution to fund construction of an operating facility in the U.S. Upon completion of construction in 2017, a five-year lease will commence with options to purchase the facility or renew the lease for up to three 5-year terms. The Company has agreed with the lessor to comply with certain financial covenants consistent with its other debt arrangements (Note 9 of Thermo Fisher's Form 8-K), and has guaranteed the facility's residual value at the end of the lease. The Company has also guaranteed the residual value of two other leased operating facilities with initial lease terms ending in 2019 and 2020. The aggregate maximum guarantee under these three lease arrangements is $155 million.
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Indemnifications
In conjunction with certain transactions, primarily divestitures, the Company has agreed to indemnify the other parties with respect to certain liabilities related to the businesses that were sold or leased properties that were abandoned (e.g., retention of certain environmental, tax, employee and product liabilities). The scope and duration of such indemnity obligations vary from transaction to transaction. Where appropriate, an obligation for such indemnifications is recorded as a liability. Generally, a maximum obligation cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, historically the Company has not made significant payments for these indemnifications.
In connection with the Company’s efforts to reduce the number of facilities that it occupies, the Company has vacated some of its leased facilities or sublet them to third parties. When the Company sublets a facility to a third-party, it remains the primary obligor under the master lease agreement with the owner of the facility. As a result, if a third-party vacates the sublet facility, the Company would be obligated to make lease or other payments under the master lease agreement. The Company believes that the financial risk of default by sublessors is individually and in the aggregate not material to the Company’s financial position or results of operations.
In connection with the sale of products in the ordinary course of business, the Company often makes representations affirming, among other things, that its products do not infringe on the intellectual property rights of others and agrees to indemnify customers against third-party claims for such infringement. The Company has not been required to make material payments under such provisions.
Environmental Matters
The Company is currently involved in various stages of investigation and remediation related to environmental matters. The Company cannot predict all potential costs related to environmental remediation matters and the possible impact on future operations 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. Expenses for environmental remediation matters related to the costs of installing, operating and maintaining groundwater-treatment systems and other remedial activities related to historical environmental contamination at the Company’s domestic and international facilities were not material in any period presented. The Company records accruals for environmental remediation liabilities, 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. The Company calculates estimates based upon several factors, including reports prepared by environmental specialists and management’s knowledge of and experience with these environmental matters. The Company includes in these estimates potential costs for investigation, remediation and operation and maintenance of cleanup sites. At September 30, 2017, the Company’s total environmental liability was approximately $46 million. While management believes the accruals for environmental remediation are adequate based on current estimates of remediation costs, the Company may be subject to additional remedial or compliance costs due to future events such as changes in existing laws and regulations, changes in agency direction or enforcement policies, developments in remediation technologies or changes in the conduct of the Company’s operations, which could have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Litigation and Related Contingencies
There are various lawsuits and claims pending against the Company including matters involving product liability, intellectual property, employment and commercial issues. The Company determines the probability and range of possible loss based on the current status of each of these matters. A liability is recorded in the financial statements if it is believed to be probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company establishes a liability that is an estimate of amounts expected to be paid in the future for events that have already occurred. The Company accrues the most likely amount or at least the minimum of the range of probable loss when a range of
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probable loss can be estimated. The accrued liabilities are based on management’s judgment as to the probability of losses for asserted and unasserted claims and, where applicable, actuarially determined estimates. Accrual estimates are adjusted as additional information becomes known or payments are made. The amount of ultimate loss may differ from these estimates. Due to the inherent uncertainties associated with pending litigation or claims, the Company cannot predict the outcome, nor, with respect to certain pending litigation or claims where no liability has been accrued, make a meaningful estimate of the reasonably possible loss or range of loss that could result from an unfavorable outcome. The Company has no material accruals for pending litigation or claims for which accrual amounts are not disclosed below or in the Company's 2016 financial statements and notes included in the Thermo Fisher's Current Report on Form 8-K filed with the SEC on May 5, 2017, nor are material losses deemed probable for such matters. It is reasonably possible, however, that an unfavorable outcome that exceeds the Company’s current accrual estimate, if any, for one or more of the matters described below could have a material adverse effect on the Company’s results of operations, financial position and cash flows.
Product Liability, Workers Compensation and Other Personal Injury Matters
For product liability, workers compensation and other personal injury matters, the Company accrues the most likely amount or at least the minimum of the range of possible loss when a range of possible loss can be estimated. The Company records estimated amounts due from insurers related to certain product liabilities as an asset. Although the Company believes that the amounts accrued and estimated recoveries are probable and appropriate based on available information, including actuarial studies of loss estimates, the process of estimating losses and insurance recoveries involves a considerable degree of judgment by management and the ultimate amounts could vary materially. Insurance contracts do not relieve the Company of its primary obligation with respect to any losses incurred. The collectability of amounts due from its insurers is subject to the solvency and willingness of the insurer to pay, as well as the legal sufficiency of the insurance claims. Management monitors the payment history as well as the financial condition and ratings of its insurers on an ongoing basis.
Intellectual Property Matters
On June 6, 2004, Enzo Biochem, Enzo Life Sciences and Yale University filed a complaint against Life Technologies in United States District Court for the District of Connecticut. The plaintiffs allege patent infringement by Applera’s labeled DNA terminator products used in DNA sequencing and fragment analysis. The plaintiff sought damages for alleged willful infringement, attorneys’ fees, costs, prejudgment interest, and injunctive relief. In November 2012, the jury awarded damages of $49 million. Prejudgment interest of $12 million was also granted. The $61 million judgment and interest was accrued by Life Technologies and the liability was assumed by the Company as of the date of the acquisition. In March 2015 the United States Court of Appeals for the Federal Circuit vacated the judgment and returned the case to the District Court for further proceedings. In February 2016, the District Court granted the Company’s motion for summary judgment of non-infringement and entered judgment in its favor. Enzo appealed that decision to the Federal Circuit in March 2016. In August 2017, the Federal Circuit affirmed the District Court’s judgment that the Company’s products at issue in the litigation do not infringe Enzo’s patent. Enzo may seek rehearing at the Federal Circuit or petition to the United States Supreme Court. The Company has maintained the $61 million accrual, pending appeals.
On May 26, 2010, Promega Corp. & Max-Planck-Gesellschaft Zur Forderung Der Wissenschaften EV filed a complaint against Life Technologies in the United States District Court for the Western District of Wisconsin. The plaintiffs allege patent infringement by sales and uses of Applied Biosystems’ short tandem repeat DNA identification products outside the scope of a 2006 license agreement. The plaintiff sought damages for alleged willful infringement, attorneys’ fees, costs, prejudgment interest, and injunctive relief. Although a jury initially found willful infringement and assessed damages at $52 million the District Court subsequently overturned the verdict on the grounds that the plaintiff had failed to prove infringement. The District Court entered judgment in favor of Life Technologies; and plaintiffs and Life Technologies filed cross-appeals with the United States Court of Appeals for the Federal Circuit. The $52 million award was accrued by Life Technologies and the liability was assumed by the Company as of the date of the acquisition. On December 15, 2014, the Court of Appeals issued a decision invalidating four of
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the plaintiffs’ patents, but finding infringement by Life Technologies of the remaining fifth patent. The Court of Appeals also ordered a new trial on damages in the District Court. Life Technologies' petition to the U.S. Supreme Court seeking review of the Court of Appeals’ judgment was granted on June 27, 2016, and the case was stayed in the District Court pending the outcome of the Supreme Court’s review. On February 22, 2017, the Supreme Court issued a decision reversing the Court of Appeals’ judgment and remanding the case to the Court of Appeals for further proceedings in view of the Supreme Court’s legal interpretation of the patent law statute in question. The Company has maintained the $52 million accrual, pending conclusion of this matter.
On June 3, 2013, Unisone Strategic IP filed a complaint against Life Technologies in the United States District Court for the Southern District of California alleging patent infringement by Life Technologies’ supply chain management system software, which operates with product "supply centers" installed at customer sites. Plaintiff seeks damages for alleged willful infringement, attorneys’ fees, costs, and injunctive relief. On August 24, 2017, Unisone filed an appeal from a decision by the Patent Trial and Appeal Board that found the challenged patent claims invalid.
Commercial Matters
On May 5, 2015, and February 12, 2016, the Academy of Allergy & Asthma in Primary Care and United Biologics, LLC d/b/a United Allergy Services, a provider of on-site services to physicians in the delivery of testing and treatment of allergies, filed a complaint against Phadia U.S. Inc. (a subsidiary of the Company) and Thermo Fisher Scientific Inc., respectively, in the United States District Court for the Western District of Texas. The plaintiffs allege various claims of anticompetitive activities in violation of antitrust laws, tortious interference with contracts and existing and prospective business relations, and civil conspiracy. The plaintiffs seek damages, attorneys’ fees, costs, and injunctive relief. The case is scheduled for trial on March 5, 2018.
VI. MAXIMUM DILUTION AND NET PROCEEDS
6.1 Maximum Dilution
The 818,970 Shares available for issuance under the ESPP (as of September 30, 2017) are offered pursuant to this prospectus to 12,191 eligible employees (as of October 24, 2017) in Austria, Belgium, Czech Republic, Finland, France, Italy, Lithuania, the Netherlands, Norway, Spain, Sweden and the United Kingdom. As indicated in Section 1.2 above, the maximum rate at which employees may purchase Shares may not exceed $25,000 of the Fair Market Value of Shares (determined at the time the right to purchase Shares is granted) in each calendar year in which the right is outstanding. However, as noted above, there are other limitations on Share purchases (such as no more than 10% of eligible compensation may be contributed to ESPP purchases) which may result in employees not being able to purchase $25,000 worth of Shares in a calendar year.
Assuming that Participants purchased the maximum of 818,970 Shares, the holdings of a shareholder of Thermo Fisher currently holding 1% of the total outstanding share capital of Thermo Fisher as of September 30, 2017 (i.e., 4,009,953 Shares) and who is not an eligible employee participating in the offer, would be diluted as indicated in the following table:
Percentage of the total Total number of outstanding outstanding Shares Shares Before the issuance of Shares under the ESPP (as of 1.00% 400,995,357 September 30, 2017) After issuance of 818,970 Shares 0.999% 401,814,327 under the ESPP
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6.2 Net Proceeds
Assuming, using the example in Section 6.1 above, that 818,970 Shares were purchased, and that such purchases were made at $184.02 (95% of a hypothetical Purchase Price of $193.71 which was the closing price of the Shares on November 3, 2017), then the gross proceeds to Thermo Fisher in connection with the offer under the ESPP pursuant to this prospectus would be $150,706,859.40. After deducting approximately $125,000 in legal and accounting expenses in connection with the offer, the net proceeds would be approximately $150,581,859.40. The net proceeds will be used for general corporate purposes.
VII. DIRECTORS AND EXECUTIVE OFFICERS
7.1 Board of Directors as of October 20, 2017
Name Age Position Jim P. Manzi 65 Chairman of the Board Marc N. Casper 49 Director Nelson J. Chai 52 Independent Director C. Martin Harris, MD 61 Independent Director Tyler Jacks, PhD 56 Director Judy C. Lewent 68 Independent Director Thomas J. Lynch 62 Independent Director William G. Parrett 72 Independent Director Lars R. Sørensen 63 Independent Director Scott M. Sperling 59 Independent Director Elaine S. Ullian 69 Independent Director Dion J. Weisler 50 Independent Director
Jim P. Manzi
Mr. Manzi has been a director of the Company since May 2000 and Chairman of the Board since May 2007. He was also Chairman of the Board from January 2004 to November 2006. He has been the Chairman of Stonegate Capital, a firm he formed to manage private equity investment activities in technology startup ventures, primarily related to the Internet, since 1995. From 1984 until 1995, he served as the Chairman, President and Chief Executive Officer of Lotus Development Corporation, a software manufacturer that was acquired by IBM Corporation in 1995. We believe that Mr. Manzi is well suited to serve on our Board due to his senior management experience leading Lotus and overall business acumen.
Marc N. Casper
Mr. Casper has been a director of the Company since October 2009. He joined the Company in November 2001 and has been its President and Chief Executive Officer since October 2009. He served as the Company’s Chief Operating Officer from May 2008 to October 2009 and was Executive Vice President from November 2006 to October 2009. Prior to being named Executive Vice President, he was Senior Vice President from December 2003 to November 2006. Prior to joining the Company, Mr. Casper served as president, chief executive officer and a director of Kendro Laboratory Products. Mr. Casper is also a director of U.S. Bancorp. Within the last five years, Mr. Casper was a director of Zimmer Holdings,
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Inc. We believe that Mr. Casper is well suited to serve on our Board due to his position as Chief Executive Officer of the Company as well as his 20 years in the life sciences/healthcare equipment industry.
Nelson J. Chai
Mr. Chai has been a director of the Company since December 2010. In January 2017, he was appointed President and Chief Executive Officer of The Warranty Group, which delivers warranty solutions and related benefits to some of the world’s leading manufacturers, distributors, and retailers, as well as specialty insurance products and services for financial institutions. He previously was President of CIT Group Inc., a bank holding company, from August 2011 to December 2015. He joined CIT Group in June 2010 as Executive Vice President, Chief Administrative Officer and head of strategy. Prior to CIT Group, he was President, Asia-Pacific for Bank of America Corporation beginning in December 2008, and Executive Vice President and Chief Financial Officer of Merrill Lynch & Co., a financial services firm, from December 2007 to December 2008. Mr. Chai is currently a director of The Warranty Group. We believe that Mr. Chai is well suited to serve on our Board due to his many years of experience in finance and accounting.
C. Martin Harris
Dr. Harris has been a director of the Company since March 2012. In December 2016, he was appointed Associate Vice President of the Health Enterprise and Chief Business Officer at the Dell Medical School at The University of Texas at Austin. Dr. Harris previously served since 2009 as the Chief Strategy Officer of The Cleveland Clinic Foundation, a multi-specialty academic medical center, and from June 1996 to December 2016, he had been the Chief Information Officer and Chairman of the Information Technology Division of and a Staff Physician for The Cleveland Clinic Hospital and The Cleveland Clinic Foundation Department of General Internal Medicine. Dr. Harris is also a director of Invacare Corporation, HealthStream Inc. and Colgate-Palmolive Company. We believe that Dr. Harris is well suited to serve on our Board due to his experience in the healthcare industry as a physician and leader of healthcare organizations and also his expertise in the use of information technology in the healthcare industry.
Tyler Jacks
Dr. Jacks has been a director of the Company since May 2009. He is the David H. Koch Professor of Biology at the Massachusetts Institute of Technology (MIT) and director of the David H. Koch Institute for Integrative Cancer Research. He joined the MIT faculty in 1992 and was director of its Center for Cancer Research from 2001 to 2008. Since 2002, Dr. Jacks has been an investigator with the Howard Hughes Medical Institute. Dr. Jacks is also a director of Amgen Inc. We believe that Dr. Jacks is well suited to serve on our Board due to his experience as a cancer researcher and member of multiple scientific advisory boards in biotechnology companies, pharmaceutical companies and academic institutions.
Judy C. Lewent
Ms. Lewent has been a director of the Company since May 2008. She was Chief Financial Officer of Merck & Co., Inc., a global pharmaceutical company, from 1990 until her retirement in 2007. She was also Executive Vice President of Merck from February 2001 through her retirement and had additional responsibilities as President, Human Health Asia from January 2003 until July 2005, when she assumed strategic planning responsibilities for Merck. Ms. Lewent is also a director of Motorola Solutions, Inc. and GlaxoSmithKline plc. We believe that Ms. Lewent is well suited to serve on our Board due to her many years of global experience in finance and the pharmaceutical industry.
Thomas J. Lynch
Mr. Lynch has been a director of the Company since May 2009. In March 2017, he was appointed Executive Chairman of the Board of Directors of TE Connectivity Ltd. (formerly Tyco Electronics Ltd.), a global provider of engineered electronic components, network solutions, undersea telecommunication systems and specialty products. He previously was Chairman and Chief Executive Officer of TE
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Connectivity Ltd. He joined Tyco International in 2004 as President of Tyco Engineered Products and Services and was appointed Chief Executive Officer in January 2006, when Tyco Electronics was formed and later became an independent, separately traded entity and was appointed Chairman in January 2013. Mr. Lynch is also a director of Cummins Inc. We believe that Mr. Lynch is well suited to serve on our Board due to his experience as Chief Executive Officer of a comparably-sized global company.
William G. Parrett
Mr. Parrett has been a director of the Company since June 2008. Until his retirement in November 2007, he served as Chief Executive Officer of Deloitte Touche Tohmatsu, a global accounting firm. Mr. Parrett joined Deloitte in 1967, and served in a series of roles of increasing responsibility. Mr. Parrett serves as a director of the Blackstone Group LP, Eastman Kodak Company and UBS AG, and is chairman of their Audit Committees. He also serves as a director of Conduent Inc. and, within the last five years, Mr. Parrett was a director of iGate Corporation. We believe that Mr. Parrett is well suited to serve on our Board due to his experience as Chief Executive Officer of Deloitte Touche Tohmatsu, which demonstrates his leadership capability and extensive knowledge of complex financial and operational issues.
Lars R. Sørensen
Mr. Sørensen has been a director of the Company since May 2016 and previously served as a director of the Company from July 2011 to July 2015. He was President and Chief Executive Officer of Novo Nordisk A/S, a global healthcare company with a leading position in diabetes care from November 2000 to January 2017. He held various senior management roles at Novo Nordisk after he joined the company in 1982. Mr. Sørensen also currently serves as a member of the supervisory board of Bertelsmann AG, a worldwide media company based in Germany, and Carlsberg A/S, an international brewing company. Within the last five years, he was a director of Dong Energy A/S, Danmarks Nationalbank and Svenska Cellulosa Aktiebolaget A/B. We believe that Mr. Sørensen is well suited to serve on our Board due to his experience as a Chief Executive Officer of a global healthcare company.
Scott M. Sperling
Mr. Sperling has been a director of the Company since November 2006. Prior to the merger of Thermo Electron Corporation and Fisher Scientific International Inc., he was a director of Fisher Scientific from January 1998 to November 2006. He has been employed by Thomas H. Lee Partners, L.P., a leveraged buyout firm, and its predecessor, Thomas H. Lee Company, since 1994. Mr. Sperling currently serves as Co-President of Thomas H. Lee Partners, L.P. Mr. Sperling is also a director of iHeartMedia, Inc. and The Madison Square Garden Company. We believe that Mr. Sperling is well suited to serve on our Board due to his experience in acquisitions and finance.
Elaine S. Ullian
Ms. Ullian has been a director of the Company since July 2001. She was the President and Chief Executive Officer of Boston Medical Center, a 550-bed academic medical center affiliated with Boston University, from July 1996 to her retirement in January 2010. Ms. Ullian is also a director of Vertex Pharmaceuticals, Inc. and Hologic Inc. We believe that Ms. Ullian is well suited to serve on our Board due to her experience as Chief Executive Officer of Boston Medical Center, a healthcare provider similar to many of the Company’s customers.
Dion J. Weisler
Mr. Weisler has been a director of the Company since March 2017. He has been President and Chief Executive Officer of HP Inc., a business that includes personal computers, mobility devices, technical workstations, printers, graphics solutions, managed-print services and internet services, since November 2015, following the separation of Hewlett-Packard Company ("Hewlett-Packard") into two independent companies. He joined Hewlett-Packard in January 2012 as Senior Vice President, Printing and Personal
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Systems and was appointed Executive Vice President, Printing and Personal Systems in June 2013. Mr. Weisler is also a director of HP Inc. We believe that Mr. Weisler is well suited to serve on our Board due to his senior management experience at a global company.
7.2 Executive Officers as of October 20, 2017
Name Age Present Title (Fiscal Year First Became Executive Officer) Marc N. Casper 49 President and Chief Executive Officer (2001) Mark P. Stevenson 54 Executive Vice President and Chief Operating Officer (2014) Patrick M. Durbin 51 Senior Vice President (2015) Gregory J. Herrema 51 Senior Vice President (2017) Seth H. Hoogasian 63 Senior Vice President and General Counsel (2001) Michel Lagarde 43 Senior Vice President (2017) Stephen Williamson 50 Senior Vice President and Chief Financial Officer (2015) Peter E. Hornstra 58 Vice President and Chief Accounting Officer (2001)
Marc N. Casper - For information about Mr. Casper, please refer to Section 7.1 above.
Mark P. Stevenson
Mr. Stevenson joined the company as Executive Vice President and President, Life Sciences Solutions, in 2014 through the acquisition of Life Technologies. In August 2017, he was promoted to Chief Operating Officer, with responsibility for all of Thermo Fisher’s life sciences-related businesses as well as our R&D and digital strategies. Mr. Stevenson previously served as President and Chief Operating Officer of Life Technologies, and President and Chief Operating Officer of Applied Biosystems prior to its merger with Invitrogen Corporation in 2008.
At Applied Biosystems, Mr. Stevenson held roles of increasing responsibility in Europe and Japan. He moved to the U.S. in 2004 to establish the Applied Markets Division and, in 2006, was named President of the Molecular and Cellular Biology Division. He has more than 20 years of experience in sales, marketing and international executive management.
Mr. Stevenson received his MBA from Henley Management School in the U.K. and his bachelor’s degree in chemistry from the University of Reading, also in the U.K. He serves as an executive committee board member of the life science association, BIOCOM.
Patrick M. Durbin
Mr. Durbin joined the company in 2006 as General Manager, North America, for the Clinical Services business and assumed global leadership of that business in 2008. In 2010, he became President of BioPharma Services, and in October 2015, Mr. Durbin was named Senior Vice President and President, Specialty Diagnostics.
Prior to joining Thermo Fisher, Mr. Durbin worked for 16 years at Covance, where he held a number of general management, operational, sales and corporate roles. Patrick served on the corporate team that launched Covance as a public company when it spun off from Corning, Inc.
Mr. Durbin received his MBA and a bachelor’s degree in biology from St. Joseph’s University in Philadelphia, Pennsylvania.
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Gregory J. Herrema
Mr. Herrema joined the Company in January 2002 as President, Environmental Instruments. He was named President, Scientific Instruments, in May 2006 and became Senior Vice President and President, Analytical Instruments, two years later. In 2012, Mr. Herrema was named President, Biosciences, and in January 2014, he became Senior Vice President and President of the Company’s Customer Channels business.
Prior to joining Thermo Fisher, Mr. Herrema spent 14 years at General Electric, including two years at Borg Warner Chemicals (acquired by GE Plastics). While at GE, his career progressed through multiple sales, marketing and general management roles within the Plastics and Transportation Systems divisions.
Mr. Herrema holds an MBA from Harvard Business School and bachelor’s degrees in chemical engineering from Virginia Tech and the University of Exeter. Mr. Herrema is past Chairman and current member of the Board of Advisors of ALDA (Analytical, Life Science & Diagnostics Association).
Seth H. Hoogasian
Mr. Hoogasian was appointed Senior Vice President in November 2006, Secretary from 2001 to March 2017 and General Counsel in 1992. He was Vice President from 1996 to November 2006.
Prior to joining Thermo Fisher, Mr. Hoogasian served as a partner in the Baltimore, Maryland-based law firm of Weinberg and Green, and as an associate at Shaw, Pittman, Potts & Trowbridge in Washington, D.C. Seth is a graduate of Duke University School of Law with a juris doctorate with distinction, and received his Bachelor of Science degree with distinction in mechanical engineering from Cornell University.
Michel Lagarde
Mr. Lagarde joined the Company in August 2017 through the acquisition of Patheon, where he had served as President and Chief Operating Officer.
Prior to joining Patheon in 2016, Mr. Lagarde was Managing Director at JLL Partners ("JLL"), a leading middle-market private equity firm focused on healthcare. At JLL, Mr. Lagarde worked with several of the organization’s portfolio companies, including Patheon, where he helped the executive committee transform the company into a global provider of biopharma development and commercial manufacturing services.
Prior to joining JLL, Mr. Lagarde was Chief Executive Officer and Chief Financial Officer of the Domestic Appliances and Personal Care division of Philips Electronics North America. He also previously served as Chief Financial Officer of Philips Electronics in Indonesia and Financial Controller of Philips Electronics Hong Kong, where he was responsible for a $1 billion industrial footprint.
Mr. Lagarde earned a bachelor’s degree in business administration from European University in Antwerp and an executive master’s degree in finance and control from the University of Maastricht and University of Amsterdam.
Stephen Williamson
In August 2015, Mr. Williamson was named Senior Vice President and Chief Financial Officer, responsible for the company’s tax, treasury, financial reporting and investor relations functions. He joined the company in 2001 as Vice President, European Financial Operations, based in the U.K., and oversaw the company’s integration activities across Europe. In 2004, Mr. Williamson moved to the U.S. and held finance leadership roles for a number of the company’s operating businesses. In 2008, he became Vice
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President of Financial Operations for Thermo Fisher Scientific and led the finance support function for all of the company’s businesses.
Mr. Williamson joined Thermo Fisher from Honeywell International (formerly AlliedSignal), where he served as Vice President and Chief Financial Officer, Asia-Pacific, in Singapore and held other finance roles in corporate development and operational finance. He began his career with Price Waterhouse in the transaction support group and the audit practice, working in both London and New York.
Mr. Williamson holds a bachelor's degree in accounting and finance from the University of Wales and is a member of the Institute of Chartered Accountants of England and Wales.
Peter E. Hornstra
Mr. Hornstra joined the Company in 1990 and had various finance roles through 1995. In January 1996, he was appointed Corporate Controller. In January 2001, Mr. Hornstra was promoted to Chief Accounting Officer and in February 2007, was also appointed Vice President.
Prior to joining Thermo Fisher, Mr. Hornstra was a senior manager with the international accounting firm Arthur Andersen LLP where he performed audits of high growth technology companies.
Mr. Hornstra received his bachelor’s degree in accountancy from Bentley University. He is a certified public accountant.
7.3 Fraudulent Offences and Bankruptcy, Etc.
For at least the previous five (5) years, none of the directors or executive officers of Thermo Fisher has:
(a) been convicted in relation to fraudulent offenses;
(b) been associated with any bankruptcies, receiverships or liquidations when acting in their capacity of directors or executive officers of Thermo Fisher; or
(c) been subject to any official public incrimination and/or sanctions by statutory or regulatory authorities (including designated professional bodies) or ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer.
There is no family relationship between any of the executive officers and directors listed above.
7.4 Conflicts of Interest
Director Independence
The Company’s Corporate Governance Guidelines require a majority of our Board to be "independent" within the meaning of the NYSE listing requirements including, in the judgment of the Board, the requirement that such directors have no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). The Board has adopted the following standards to assist it in determining whether a director has a material relationship with the Company, which can be found in the Company’s Corporate Governance Guidelines, on the Company’s website at www.thermofisher.com. Under these standards, a director will not be considered to have a material relationship with the Company if he or she is not:
• A director who is (or was within the last three years) an employee, or whose immediate family member is (or was within the last three years) an executive officer, of the Company;
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• A director who is a current employee or greater than 10% equity owner, or whose immediate family member is a current executive officer or greater than 10% equity owner, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues;
• A director who has received, or whose immediate family member has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);
• A director who is, or whose immediate family member is, a current partner of a firm that is the Company’s internal or external auditor; (B) a director who is a current employee of a firm that is the Company’s internal or external auditor; (C) a director whose immediate family member is a current employee of a firm that is the Company’s internal or external auditor and personally works on the Company’s audit; or (D) a director who was, or whose immediate family member was, within the last three years (but is no longer) a partner or employee of a firm that is the Company’s internal or external auditor and personally worked on the Company’s audit within that time;
• A director who is (or was within the last three years), or whose immediate family member is (or was within the last three years), an executive officer of another company where any of the Company’s current executive officers at the same time serve or served on the other company’s compensation committee;
• A director who is (or was within the last three years) an executive officer or greater than 10% equity owner of another company that is indebted to the Company, or to which the Company is indebted, in an amount that exceeds one percent (1%) of the total consolidated assets of the other company; and
• A director who is a current executive officer of a tax exempt organization that, within the last three years, received discretionary contributions from the Company in an amount that, in any single fiscal year, exceeded the greater of $1 million or 2% of such tax exempt organization’s consolidated gross revenues. (Any automatic matching by the Company of employee charitable contributions will not be included in the amount of the Company’s contributions for this purpose.)
Ownership of a significant amount of the Company’s stock, by itself, does not constitute a material relationship. For relationships or amounts not covered by these standards, the determination of whether a material relationship exists shall be made by the other members of the Board who are independent (as defined above).
The Board has determined that each of Mses. Lewent and Ullian, Messrs. Chai, Lynch, Manzi, Parrett, Sørensen, Sperling and Weisler, and Dr. Harris is "independent" in accordance with the Company’s Corporate Governance Guidelines and Section 303A.02 of the listing standards of the NYSE. Each of Mses. Lewent and Ullian, Messrs. Chai, Lynch, Manzi, Parrett, Sørensen, Sperling and Weisler, and Dr. Harris has no relationship with the Company, other than any relationship that is categorically not material under the guidelines shown above and other than compensation for services as a director as disclosed in Thermo Fisher's Definitive Proxy Statement filed with the SEC on April 4, 2017 ("Thermo Fisher's Proxy Statement) under "DIRECTOR COMPENSATION."
In determining the independence of the Company’s directors, the Board considered that in 2016 the Company sold products, in the ordinary course of business, to: (i) the Massachusetts Institute of Technology ("MIT"), where Dr. Jacks is a professor and the director of the David H. Koch Institute for Integrative Cancer Research, and the Howard Hughes Medical Institute ("HHMI"), where Dr. Jacks is an employee and investigator; (ii) TE Connectivity, where Mr. Lynch is Executive Chairman; (iii) the University of Texas, where Dr. Harris is an executive; and (iv) HP Inc., the information technology
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company formed following the separation of Hewlett-Packard into two independent companies ("HP"), where Mr. Weisler is CEO.
With respect to MIT, TE Connectivity, the University of Texas and HP the amount of the sales to each entity in 2016 were less than 2% of the 2016 revenues of such other entity and less than 0.3% of Thermo Fisher’s 2016 revenues. With respect to HHMI, the Company’s 2016 sales to the organization represented approximately 4% of HHMI’s 2016 consolidated gross revenues, and accordingly Dr. Jacks is not deemed independent under the Company’s Corporate Governance Guidelines.
Agreements with Named Executive Officers; Potential Payments Upon Termination or Change in Control
Employment, Retention and Severance Agreements
Executive Change in Control Retention Agreements
Thermo Fisher has entered into executive change in control retention agreements with its named executive officers and other key employees that provide cash and other severance benefits if there is a change in control of the Company and their employment is terminated by the Company without "cause" or by the individual for "good reason," as those terms are defined therein, in each case within 18 months thereafter. For purposes of these agreements, a change in control exists upon (i) the acquisition by any person of 50% or more of the outstanding Shares or voting securities of Thermo Fisher; (ii) the failure of the Board to include a majority of directors who are "continuing directors," which term is defined to include directors who were members of the Board on the date of the agreement or who subsequent to the date of the agreement were nominated or elected by a majority of directors who were "continuing directors" at the time of such nomination or election; (iii) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving Thermo Fisher or the sale or other disposition of all or substantially all of the assets of Thermo Fisher unless immediately after such transaction: (a) all holders of Shares immediately prior to such transaction own more than 50% of the outstanding voting securities of the resulting or acquiring corporation in substantially the same proportions as their ownership immediately prior to such transaction and (b) no person after the transaction owns 50% or more of the outstanding voting securities of the resulting or acquiring corporation; or (iv) approval by stockholders of a complete liquidation or dissolution of Thermo Fisher.
The executive change in control retention agreements with executive officers other than Mr. Casper provide that, upon a qualifying termination, the executive would be entitled to (A) a lump sum payment equal to (1) two multiplied by (2) the sum of (x) the higher of the executive’s annual base salary as in effect immediately prior to the "measurement date" or the "termination date," as those terms are defined therein, and (y) the higher of the executive’s target bonus as in effect immediately prior to the measurement date or the termination date, and (B) a pro rata bonus for the year of termination, based on the higher of the executive’s target bonus as in effect immediately prior to the measurement date or the termination date. In addition, the executive would be provided continuing medical, dental and life insurance benefits for a period of two years, after such termination. The Company would also provide outplacement services through an outside firm to the executive up to an aggregate of $20,000.
Mr. Casper’s executive change in control agreement provides that, upon a qualifying termination, he would be entitled to (A) a lump sum payment equal to (1) two multiplied by (2) the sum of (x) the higher of Mr. Casper’s annual base salary as in effect immediately prior to the "change in control date" or the "date of termination," as those terms are defined therein, and (y) the higher of Mr. Casper’s target bonus as in effect immediately prior to the change in control date or the date of termination, and (B) a pro rata bonus for the year of termination, based on the higher of Mr. Casper’s target bonus as in effect immediately prior to the change in control date or the date of termination. In addition, Mr. Casper would be provided continuing medical, dental and life insurance benefits for a period of two years, after such termination. The Company would also provide outplacement services through an outside firm to Mr. Casper up to an aggregate of $20,000.
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None of the change in control agreements in effect on the date of Thermo Fisher's Proxy Statement between the Company and the named executive officers provide for a tax gross-up.
Executive Severance Policy
The Company maintains an executive severance policy for executive officers and certain other key employees that provides that, in the event an executive officer’s employment is terminated by the Company without "cause" (as such term is defined therein), he would be entitled to a lump sum severance payment equal to the sum of (A) 1.5 times his annual base salary then in effect for an executive officer (and 1.0 times his annual base salary then in effect for other executives), and (B) 1.5 times his target bonus for the year in which the date of termination occurs, for an executive officer (and 1.0 times his target bonus for other executives), except that if the executive receives benefits under the executive change in control retention agreement described above, he would not be entitled to also receive benefits under the executive severance policy. In addition, the executive would be entitled to a pro rata bonus for that year, based on his target bonus (which would not be paid until March of the following year, when the other executive officer bonuses would be paid, and only if the performance goals established under the annual incentive award plan applicable to the other executive officers were met), and for 18 months after the date of termination, he would be provided medical, dental and life insurance benefits at least equal to those he would have received had his employment not been terminated, or if more favorable, to those in effect generally during such period with respect to peer executives of the Company. Finally, the executive would be entitled to up to $20,000 of outplacement services until the earlier of 12 months following his termination or the date he secures full-time employment. Executive officers other than Mr. Casper are eligible to receive benefits under the Company’s executive severance policy. In order to receive the benefits described above, the executive must have entered into a noncompetition agreement with the Company.
Executive Severance Agreement for Marc Casper
Mr. Casper’s executive severance agreement provides that, in the event his employment is terminated by the Company without "cause" or by him for "good reason" (as such terms are defined therein), he would be entitled to a lump sum severance payment equal to the sum of (A) two (2) times his annual base salary then in effect, and (B) two (2) times his target bonus for the year in which the date of termination occurs, except that if Mr. Casper receives benefits under his executive change in control retention agreement described above, he would not be entitled to also receive benefits under his executive severance agreement. In addition, Mr. Casper would be entitled to a pro rata bonus for that year (which would not be paid until March of the following year, when the other executive officer bonuses would be paid, and only if the performance goals established under the annual incentive award plan applicable to the other executive officers were met), and for two years after the date of termination, he would be provided medical, dental and life insurance benefits at least equal to those he would have received had his employment not been terminated, or if more favorable, to those in effect generally during such period with respect to peer executives of the Company. Finally, Mr. Casper would be entitled to up to $20,000 of outplacement services until the earlier of 12 months following his termination or the date he secures full- time employment.
Treatment of Equity
Upon death, disability, or a qualifying retirement of an executive officer other than Mr. Casper, certain outstanding stock options and certain restricted stock unit ("RSU") awards will vest. In the event that any of these individuals is terminated by the Company without "cause" or by the individual for "good reason," as those terms are defined in the executive change in control agreements within eighteen (18) months following a qualifying change in control, each outstanding stock option and time-based RSU award granted to an executive officer will vest.
In the case of Mr. Casper, in the event he is (i) terminated without "cause" or he leaves voluntarily for "good reason," as those terms are defined in his severance agreement, or (ii) terminated without "cause" or he leaves voluntarily for "good reason" within 18 months of a qualifying change in control, as those
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terms are defined in his executive change in control agreement, certain portions of his unvested equity grants will vest.
Noncompetition Agreements
The Company has entered into noncompetition agreements with its named executive officers and certain of its key employees. The terms of the noncompetition agreement provide that during the term of the employee’s employment with the Company, and for a period of eighteen (18) months in the case of executive officers other than Messrs. Casper and Stevenson, and twenty-four (24) months in the case of Mr. Casper, thereafter, the employee will not compete with the Company. The agreement also contains provisions that restrict the employee’s ability during the term of the employee’s employment with the Company and for a period of eighteen (18) months after termination (or twenty-four (24) months in the case of Mr. Casper), to solicit or hire employees of the Company or to solicit customers of the Company. The Company has entered into a noncompetition agreement with Mr. Stevenson that provides that during the term of his employment with the Company, and for a period of twelve (12) months thereafter, Mr. Stevenson will not compete with the Company’s Life Sciences Solutions group, which consists of primarily the former Life Technologies businesses. The agreement also contains provisions that restrict Mr. Stevenson’s ability during the term of his employment with the Company and for a period of twelve (12) months after termination, to solicit for hire employees of the Company or to solicit customers of the Company.
Tables
The tables on pages 37 - 41 of Thermo Fisher's Proxy Statement reflect the amount of compensation payable to each of the named executive officers of the Company in the event of termination of such executive’s employment or a change in control of the Company. The amount of compensation payable to each named executive officer upon voluntary resignation, involuntary termination for cause, involuntary termination without cause, or voluntarily for good reason (in the case of Mr. Casper only), involuntary termination without cause or voluntarily for good reason following a change in control, upon a change in control without termination, and in the event of disability or death of the executive is shown below. The amounts shown assume that such termination was effective as of December 31, 2016, and thus include amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon such event. The actual amounts to be paid out can only be determined at the time of such event. In all termination scenarios, the named executive officer retains vested amounts in the Company’s deferred compensation plan and pension plan. These amounts are described under "Pension Benefits," and in the "Aggregate Balance at Last FYE" column of the Nonqualified Deferred Compensation table on pages 31 and 32 of Thermo Fisher's Proxy Statement, respectively.
Transactions with Related Persons, Promoters and Certain Control Persons
Review, Approval or Ratification of Transactions with Related Persons
The Board has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which the Company is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of whom we refer to as a "related person," has a direct or indirect material interest.
If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a "related person transaction," the related person must report the proposed related person transaction to our General Counsel. The policy calls for the proposed related person transaction to be directed to, for review by, one of the Audit, Nominating and Corporate Governance or Compensation Committees, as designated by the General Counsel. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of the committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the committee at its
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next meeting. A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the committee will review and consider:
• the related person’s interest in the related person transaction;
• the approximate dollar value of the amount involved in the related person transaction;
• the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
• whether the transaction was undertaken in the ordinary course of our business;
• whether the terms of the transaction are no less favorable to the Company than terms that could have been reached with an unrelated third party;
• the purpose of, and the potential benefits to the Company of, the transaction; and
• any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.
The committee may approve or ratify the transaction only if the committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, the Company’s best interests. The committee may impose any conditions on the related person transaction that it deems appropriate.
The policy exempts from the definition of related person transactions those transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, as well as the following: interests arising solely from the related person’s position as an executive officer of another entity (whether or not the person is also a director of such entity), that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, (c) the amount involved in the transaction equals less than the greater of $1 million dollars or 2% of the annual consolidated gross revenues of the other entity that is a party to the transaction, and (d) the amount involved in the transaction equals less than 2% of the Company’s annual consolidated gross revenues.
The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the Compensation Committee in the manner specified in its charter.
Transactions with Related Persons
As part of the Life Technologies Acquisition, pursuant to the Acquisition Agreement, the vesting of certain options to purchase shares of the common stock of Life Technologies, and certain Life Technologies RSUs, was accelerated, and certain RSUs held by former employees of Life Technologies were converted into the right to receive cash from the Company in accordance with their original vesting schedule. Mark P. Stevenson, a named executive officer of the Company, held 143,178 RSUs and 312,944 unvested options to purchase shares of Life Technologies common stock prior to the closing of the Life Technologies Acquisition. The vesting of 80,808 of the RSUs, and all of the stock options, accelerated at the closing, and at that time Mr. Stevenson received a cash payment for these equity instruments. The remainder of his RSUs were converted into the right to receive cash (the "Restricted Cash"), which would vest in equal installments in April 2015, 2016 and 2017, so long as Mr. Stevenson is employed by the Company on each such date (subject to certain exceptions). During 2016, Mr. Stevenson received $1,372,493 upon the vesting of the 2016 tranche of this Restricted Cash. In addition, for the year ended December 31, 2016, he received the compensation reflected in the Summary
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Compensation Table on page 25 of Thermo Fisher's Proxy Statement. This transaction was not subject to the Company’s related person transaction policy described above because it was negotiated as part of the Acquisition Agreement and was provided to all former Life Technologies employees who held RSUs at the time of the closing of the Life Technologies Acquisition that were scheduled to vest after January 1, 2015.
VIII. EMPLOYEES
8.1 Directors’ and Executive Officers’ Holdings of Shares and Options
The following table sets forth, as of September 30, 2017, the beneficial ownership of the Shares by (a) each director, (b) each of the named executive officers, and (c) all directors and executive officers as a group.
Amount and Nature of Beneficial Percent of Name and Address of Beneficial Owner(1) Ownership Shares Beneficially Owned Marc N. Casper(2) 1,026,641 * Nelson J. Chai 9,587 * C. Martin Harris 4,288 * Tyler Jacks 10,147 * Judy C. Lewent(3) 16,376 * Thomas J. Lynch 12,096 * Jim P. Manzi 27,415 * William G. Parrett 12,636 * Lars R. Sørensen 6,211 * Scott M. Sperling(4) 95,950 * Mark P. Stevenson(5) 140,350 * Elaine S. Ullian(6) 14,086 * Dion J. Weisler(7) 619 * Stephen Williamson(8) 51,193 * All directors and executive officers as a group (19 individuals)(9) 1,713,319 *
* Less than one percent (1) The address of each of the Company’s executive officers and directors is c/o Thermo Fisher Scientific Inc., 168 Third Avenue, Waltham, MA 02451, U.S.A. Except as reflected in the footnotes to this table, Shares beneficially owned by executive officers and directors consist of Shares owned by the indicated person or by that person for the benefit of minor children, and all share ownership includes sole voting and investment power. Generally, stock options granted to the Company’s officers and directors may be transferred by them to an immediate family member, a family trust or family partnership. (2) Includes 69,330 Shares held indirectly, by the Marc N. Casper 2012 Irrevocable Trust, for the primary benefit of Mr. Casper’s minor children, over which Mr. Casper shares dispositive power with the trustee and as to which the trustee has sole voting power; and 791,883 Shares underlying stock options that are exercisable within 60 days of September 30, 2017. (3) Includes 740 stock-based units accrued under the Directors Deferred Compensation Plan that are payable in Shares at the time of distribution (See "DIRECTOR COMPENSATION — Deferred Compensation Plan for Directors" in Thermo Fisher's Proxy Statement). These units may not be voted or transferred until they become Shares. (4) Includes 14,510 stock-based units accrued under the Directors Deferred Compensation Plan that are payable in Shares at the time of distribution (See "DIRECTOR COMPENSATION — Deferred Compensation Plan for Directors" in Thermo Fisher's Proxy Statement). These units may not be voted or transferred until they become Shares. (5) Includes 108,912 Shares underlying stock options that are exercisable within 60 days of September 30, 2017, and 441 Shares held in the Company’s 401(k) plan by Mr. Stevenson. (6) Includes 7,435 stock-based units accrued under the Directors Deferred Compensation Plan that are payable in Shares at the time of distribution (See "DIRECTOR COMPENSATION — Deferred Compensation Plan for Directors" in Thermo Fisher's Proxy Statement). These units may not be voted or transferred until they become Shares.
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(7) Represents 619 stock-based units accrued under the Directors Deferred Compensation Plan that are payable in Shares at the time of distribution. These units may not be voted or transferred until they become Shares. Mr. Weisler became a director on March 1, 2017. (8) Includes 31,562 Shares underlying stock options that are exercisable within 60 days of September 30, 2017. (9) Includes, in addition to the items described above for the named executive officers and directors, 941 Shares held in the Company’s 401(k) Plan by executive officers other than the named executive officers, and 215,979 Shares underlying stock options held by executive officers other than the named executive officers that are exercisable within 60 days of September 30, 2017 (or immediately if certain eligible executive officers retire).
8.2 Employee Stock Benefit Plans
The Company has stock-based compensation plans for its key employees, directors and others. These plans permit the grant of a variety of stock and stock-based awards, including RSUs, stock options or performance-based shares, as determined by the compensation committee of the Board or, for certain non-officer grants, by the Company’s employee equity committee, which consists of its chief executive officer. The Company generally issues new Shares to satisfy option exercises and restricted unit vestings. Grants of stock options and restricted units generally provide that in the event of both a change in control of the Company and a qualifying termination of an option or unit holder’s employment, all options and service-based restricted unit awards held by the recipient become immediately vested (unless an employment or other agreement with the employee provides for different treatment).
Stock Options
A summary of the Company’s option activity for the year ended December 31, 2016 is presented below:
Weighted Average Remaining Aggregate Weighted Contractual Intrinsic Shares Average Term Value (a) (in millions) Exercise Price (in years) (in millions)
Outstanding at December 31, 2015 9.6 $ 85.30 Granted 1.8 131.22 Exercised (2.2 ) 62.55 Canceled/Expired (0.4 ) 119.52
Outstanding at December 31, 2016 8.8 $ 98.69 3.9
Vested and Unvested Expected to Vest at December 31, 2016 8.5 $ 97.50 3.8 $ 371.7
Exercisable at December 31, 2016 4.6 $ 75.05 2.7 $ 307.1
(a) Market price per Share on December 31, 2016 was $141.10. The intrinsic value is zero for options with exercise prices above the market price.
As of December 31, 2016, there was $66 million of total unrecognized compensation cost related to unvested stock options granted. The cost is expected to be recognized through 2020 with a weighted average amortization period of 2.2 years.
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Restricted Share/Unit Awards
Awards of restricted units convert into an equivalent number of Shares. The awards generally vest over 3- 4 years, assuming continued employment, with some exceptions. Vesting of the awards is contingent upon meeting certain service conditions and may also be contingent upon meeting certain performance and/or market conditions. The Fair Market Value of the award at the time of the grant is amortized to expense over the requisite service period of the award, which is generally the vesting period. Recipients of restricted units have no voting rights but are entitled to accrue dividend equivalents. The fair value of service- and performance-based restricted unit awards is determined based on the number of units granted and the market value of the Shares on the grant date. For awards with market-based vesting conditions, the Company uses a lattice model to estimate the grant-date fair value of the award.
A summary of the Company’s restricted unit activity for the year ended December 31, 2016 is presented below:
Weighted Average Units Grant-Date (in thousands) Fair Value
Unvested at December 31, 2015 1,561 $ 113.64 Granted 786 131.01 Vested (885 ) 102.97 Forfeited (125 ) 125.52
Unvested at December 31, 2016 1,337 $ 129.80
The total fair value of Shares vested during 2016, 2015 and 2014 was $91 million, $80 million and $61 million, respectively.
As of December 31, 2016, there was $112 million of total unrecognized compensation cost related to unvested RSU awards. The cost is expected to be recognized through 2020 with a weighted average amortization period of 1.9 years.
Employee Stock Purchase Plans
Qualifying employees are eligible to participate in an ESPP sponsored by the company. Shares may be purchased under the program at 95% of the Fair Market Value at the end of the purchase period and the Shares purchased are not subject to a holding period. Shares are purchased through payroll deductions of up to 10% of each participating employee’s gross wages. The Company issued 152,000, 151,000 and 119,000 Shares, respectively, for the 2016, 2015 and 2014 plan years, which ended on December 31.
IX. WORKING CAPITAL STATEMENT
As of the date of this prospectus, the Company believes that its existing cash and cash equivalents of $741 million as of September 30, 2017 and its future cash flow from operations together with available borrowing capacity under its revolving credit agreement will be sufficient to meet the cash requirements of its existing businesses for the foreseeable future, including at least the next 12 months.
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X. SELECTED FINANCIAL INFORMATION
10.1 Selected Financial Data
SELECTED THREE-YEAR CONSOLIDATED FINANCIAL DATA (in millions, except per share amounts)
The consolidated statement of income and the consolidated balance sheet data of Thermo Fisher for the fiscal years ended December 31, 2016, 2015 and 2014, set out in this prospectus have been derived from Thermo Fisher's audited consolidated financial statements prepared in accordance with U.S. GAAP. They should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and Thermo Fisher's audited consolidated financial statements and notes thereto appearing respectively on pages 1 – 18 and F-3 – F-54 of Exhibit 99.1 of Thermo Fisher's Current Report on Form 8-K filed with the SEC on May 5, 2017.
2016 (a) 2015 (b) 2014 (c)
Statement of Income Data Revenues $ 18,274.1 $ 16,965.4 $ 16,889.6 Operating Income 2,449.2 2,336.2 2,503.0 Income from Continuing Operations 2,025.3 1,980.3 1,895.5 Net Income 2,021.8 1,975.4 1,894.4 Earnings per Share from Continuing Operations: Basic 5.13 4.97 4.76 Diluted 5.10 4.93 4.71 Earnings per Share: Basic 5.12 4.96 4.76 Diluted 5.09 4.92 4.71
Cash Dividends Declared per Share 0.60 0.60 0.60
Balance Sheet Data Working Capital $ 2,155.2 $ 1,594.9 $ 1,190.0 Total Assets 45,907.5 40,834.3 42,852.1 Long-term Obligations 15,372.4 11,420.2 12,351.6 Shareholders' Equity 21,539.3 21,350.2 20,548.1
The caption "restructuring and other costs/income" in the notes below includes amounts charged to cost of revenues, primarily for the sale of inventories revalued at the date of acquisition, and charges/credits to selling, general and administrative expense primarily for significant acquisition transaction costs. (a) Reflects $395 million of pre-tax charges for restructuring and other costs and the repurchase of $1.25 billion of the Shares. Also reflects the acquisitions of Affymetrix, Inc. in March 2016 and FEI Company in September 2016.
(b) Reflects $171 million of pre-tax charges for restructuring and other costs and the repurchase of $500 million of the Shares.
(c) Reflects $140 million of pre-tax income from gains on sale of businesses, net of restructuring and other costs. Also reflects the acquisition of Life Technologies Corporation in February 2014.
SELECTED QUARTERLY FINANCIAL DATA (in millions, except per share amounts)
The consolidated statements of income of Thermo Fisher for the periods ended September 30, 2017 and October 1, 2016 and the consolidated balance sheet data of Thermo Fisher as of September 30, 2017
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and December 31, 2016, set out in this prospectus have been derived from Thermo Fisher's unaudited consolidated financial statements prepared in accordance with U.S. GAAP. They should be read in conjunction with Thermo Fisher's unaudited consolidated financial statements and related notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing respectively on pages 3 –30 and 31 – 43 of Thermo Fisher's Form 10-Q. Consolidated Statement of Income Data:
Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, 2017 2016 2017 2016 Revenue $ 5,116.2 $ 4,490.9 $ 14,871.2 $ 13,320.9 Income from continuing operations 533.9 473.5 1,697.5 1,392.6 Loss from discontinued operations — — (0.6 ) (0.3 ) Net income 533.9 473.5 1,696.9 1,392.3 Earnings per Share from continuing operations Basic $ 1.35 $ 1.20 $ 4.33 $ 3.53 Diluted $ 1.34 $ 1.19 $ 4.29 $ 3.50 Earnings per Share Basic $ 1.35 $ 1.20 $ 4.32 $ 3.53 Diluted $ 1.34 $ 1.19 $ 4.29 $ 3.50 Weighted average Shares Basic 396.2 394.7 392.4 394.8 Diluted 399.6 397.4 395.6 397.6 Cash Dividends Declared per Share $ 0.15 $ 0.15 $ 0.45 $ 0.45
Consolidated Balance Sheets Data: September 30, December 31 2017 2016 Cash and cash equivalents $ 741.1 $ 786.2 Total assets 55,985.3 45,907.5 Long-term Obligations 19,230.4 15,372.4 Shareholders’ equity 24,701.8 21,539.3
10.2 Independent Registered Public Accounting Firm
The independent registered public accounting firm of Thermo Fisher is PricewaterhouseCoopers LLP, Boston, Massachusetts, U.S.A. PricewaterhouseCoopers LLP is registered with the Public Company Accounting Oversight Board (United States) and a member of the American Institute of Certified Public Accountants.
XI. DOCUMENTS ON DISPLAY
The Company files annual, quarterly and current reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act"). The SEC maintains a website that contains reports, proxy and information statements and other information that issuers, including the company, file electronically with the SEC. The public can obtain any documents that Thermo Fisher files with the SEC at www.sec.gov. Thermo Fisher also makes available free of charge on or through its own website at www.thermofisher.com its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
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Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the SEC.
Thermo Fisher's Form 10-K, Thermo Fisher's Form 8-K, Thermo Fisher's Form 10-Q and Thermo Fisher's Proxy Statement, referred to in this prospectus, may be obtained free of charge upon request by an employee.
Thermo Fisher expects to issue its earnings release for the fourth quarter and full year ending December 31, 2017 by the end of January 2018. The annual report on Form 10-K for such quarter and full year will be filed with the SEC no later than March 1, 2018. These documents will be available on the websites of Thermo Fisher and the SEC, indicated above.
XII. TAX CONSEQUENCES
12.1 Austrian Tax Consequences
The following summary is based on the income and social tax laws in effect in Austria as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who are Austrian tax residents. If the Participant is a citizen or resident of another country for local law purposes or transfers employment to another country after a Offering Period begins, the income and social tax information below may not be applicable. Furthermore, this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to each Participant’s particular tax or financial situation, and Thermo Fisher is not in a position to assure them of any particular tax result.
The Participants should address any particular questions to a specialized advisor.
Enrollment in the ESPP
The Participant is not subject to tax when he/she enrolls in the ESPP or a new Offering Period begins.
Purchase of Shares
When Shares are purchased under the ESPP, the Participant will be subject to income tax on the difference between the Fair Market Value of the Shares on the Exercise Date and the Purchase Price. The Participant also will be subject to social insurance contributions on this amount, provided the Participant has not already exceeded his/her applicable contribution ceiling. The Participant may be entitled to a tax exemption and/or reduced tax rate if certain requirements are met.
Dividends
Where Shares are acquired under the ESPP, dividends may be paid with respect to these Shares if Thermo Fisher, in its discretion, declares a dividend. The Participant will be subject to tax in Austria on any dividends received, provided the Participant exceeds the tax exemption available for dividends and other forms of income not subject to wage tax withholding. The Participant also will be subject to U.S. federal tax withheld at source. The Participant may be entitled to a tax credit for the U.S. federal tax withheld.
Sale of Shares
When the Participant subsequently sells the Shares acquired under the ESPP, the Participant will be subject to capital gains tax at a flat rate or, upon application, at the Participant’s marginal income tax rate,
4030664-v10\CHIDMS1 55 PART II — PROSPECTUS on the difference between the sale proceeds and the Fair Market Value of the Shares on the Exercise Date .
Withholding and Reporting
The Participant’s employer is required to withhold and report income tax and social insurance contributions (to the extent the Participant has not already exceeded his/her applicable contribution ceiling) at the time he/she purchases Shares, unless a tax exemption (which also applies to social insurance contributions) applies. It is the Participant’s responsibility to report and pay any taxes resulting from the sale of the Shares or the receipt of any dividends.
12.2 Belgian Tax Consequences
The following summary is based on the income and social tax laws in effect in Belgium as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who are Belgian tax residents. If the Participant is a citizen or resident of another country for local law purposes or transfers employment to another country after a Offering Period begins, the income and social tax information below may not be applicable. Furthermore, this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to each Participant’s particular tax or financial situation, and Thermo Fisher is not in a position to assure them of any particular tax result.
The Participants should address any particular questions to a specialized advisor.
Enrollment in the ESPP
The Participant is not subject to tax when he/she enrolls in the ESPP or a new Offering Period begins.
Purchase of Shares
When Shares are purchased under the ESPP, the Participant generally will be subject to income tax (at the normal progressive income tax rates) on the difference between the Fair Market Value of the Shares on the Exercise Date and the Purchase Price. As Thermo Fisher currently does not directly or indirectly charge the costs related to the ESPP to the Participant’s local employer and because the Participant has no recourse against his/her local employer in case he/she does not receive the benefit, the Participant normally should not be subject to social security contributions.
An undertaking not to sell Shares for at least two years from the exercise date (the "Undertaking") may be included with the Participant’s enrollment materials. If the Participant signs the Undertaking, the amount of the benefit required to pay tax on may be reduced. The Participant should consult his/her personal tax advisor to determine how the Undertaking would apply to his/her personal circumstances, if applicable.
Dividends
If Shares are acquired under the ESPP, dividends may be paid with respect to those Shares if Thermo Fisher, in its discretion, declares a dividend. Any dividends paid will be subject to tax in Belgium and to U.S. federal tax withheld at source. The U.S. federal tax withheld is deductible from the basis on which Belgian tax is calculated but cannot be credited against the Belgian tax.
Sale of Shares
When the Participant subsequently sells the Shares acquired under the ESPP, the Participant typically should not be subject to tax.
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The Participant will be responsible for filing a stock exchange tax return and paying the tax due by the end of the second month following the month of sale, except in the unlikely event that the financial intermediary involved in the sale of Shares arranges to pay and/or remit the stock exchange tax on the Participant's behalf via a Belgian representative.
Withholding and Reporting
Because the grant is made by Thermo Fisher and not by the Participant’s local employer (the latter thus not being involved in the grant), and provided Thermo Fisher does not charge the costs related to the ESPP to the Participant’s local employer, the local employer should not be obliged to withhold tax when Shares are purchased under the ESPP and should not be obliged to report the remuneration on the Participant’s salary forms relating to the year of purchase. The Participant will be solely responsible for reporting the employment income personally and directly in his/her personal income tax return and for paying any taxes due upon purchase of the Shares, the sale of Shares or the receipt of any dividends.
Further, Belgian residents must report any securities accounts (including those relating to Shares) or bank accounts (including brokerage accounts) maintained outside of Belgium on their annual tax return. The first time a foreign account is reported in the annual income tax return, certain details regarding that account must be provided to the National Bank of Belgium on a separate form. The form and instructions on completing the form are available at the National Bank of Belgium website.
12.3 Czech Republic Tax Consequences
The following summary is based on the income and social tax laws in effect in the Czech Republic as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who are Czech tax residents. If the Participant is a citizen or resident of another country for local law purposes or transfers employment to another country after a Offering Period begins, the income and social tax information below may not be applicable. Furthermore, this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to each Participant’s particular tax or financial situation, and Thermo Fisher is not in a position to assure them of any particular tax result.
The Participants should address any particular questions to a specialized advisor.
Enrollment in the ESPP
The Participant is not subject to tax when he/she enrolls in the ESPP or a new Offering Period begins.
Purchase of Shares
When Shares are purchased under the ESPP, the Participant will be subject to income tax (and solidarity surcharge, if applicable) on the difference between the Fair Market Value of the Shares on the Exercise Date and the Purchase Price. The Participant likely will not be subject to social insurance or health insurance contributions on this amount.
Dividends
If Shares are acquired under the ESPP, dividends may be paid with respect to those Shares if Thermo Fisher, in its discretion, declares a dividend. Any dividends paid will be subject to tax in the Czech Republic and to U.S. federal tax withheld at source. The Participant may be entitled to a tax credit for the U.S. federal tax withheld.
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Sale of Shares
When the Participant subsequently sells the Shares acquired under the ESPP, the Participant will not be subject to tax provided the Participant has held the Shares for more than three (3) years or the gross annual income from the sale of shares does not exceed a certain amount. If the Participant holds the Shares for three (3) years or less (and does not exceed the annual income threshold), the Participant will be taxed on the difference between the sale price of the Shares and the Fair Market Value of the Shares on the Exercise Date.
Withholding and Reporting
The Participant’s employer is not required to withhold or report income tax when the Shares are purchased under the ESPP. It is the Participant’s responsibility to report in his/her annual tax return and pay taxes resulting from the purchase of Shares, the subsequent sale of Shares or the receipt of any dividends.
12.4 Finnish Tax Consequences
The following summary is based on the income and social tax laws in effect in Finland as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who are Finnish tax residents. If the Participant is a citizen or resident of another country for local law purposes or transfers employment to another country after a Offering Period begins, the income and social tax information below may not be applicable. Furthermore, this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to each Participant’s particular tax or financial situation, and Thermo Fisher is not in a position to assure them of any particular tax result.
The Participants should address any particular questions to a specialized advisor.
Enrollment in the ESPP
The Participant is not subject to tax when he/she enrolls in the ESPP or a new Offering Period begins.
Purchase of Shares
When Shares are purchased under the ESPP, the Participant will be subject to income tax, health insurance contributions, municipal income tax (if applicable), and church tax (if applicable) on the difference between the Fair Market Value of the Shares on the Exercise Date and the Purchase Price.
Dividends
If Shares are acquired under the ESPP, dividends may be paid with respect to those Shares if Thermo Fisher, in its discretion, declares a dividend. Any dividends paid will be subject to tax in Finland and to U.S. federal tax withheld at source. The Participant may be entitled to a tax credit for the U.S. federal tax withheld.
Sale of Shares
When the Participant subsequently sells the Shares acquired under the ESPP, the Participant will be subject to capital gains tax on the difference between the sale price and the Fair Market Value of the Shares on the Exercise Date. When determining the taxable gain, the Participant may deduct from the sale price of the Shares sold either: (A) the acquisition cost of the Shares (i.e., the Purchase Price plus the discount on the Exercise Date) plus any costs the Participant incurs in connection with the gain, or (B) a deemed acquisition cost of 20% of the sales price. If method (B) is used, no other costs relating to
4030664-v10\CHIDMS1 58 PART II — PROSPECTUS acquiring or selling the Shares can be deducted. If the Shares are held for at least 10 years, a deemed acquisition cost of 40% of the sales price is used for method (B).
Withholding and Reporting
The Participant’s employer is required to report and withhold income tax, health insurance contributions municipal income tax (if applicable), and church tax (if applicable) due on the taxable amount. It is the Participant’s responsibility to report and pay any taxes resulting from the sale of the Shares or receipt of any dividends.
12.5 French Tax and Social Security Consequences
The following summary is based on the income tax and social security laws in effect in France as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who qualify as French tax residents and are subject to the French social security regime. If the Participant is a citizen or resident of another country for local law purposes or is not subject to the French social security regime or transfers employment to another country after a Offering Period begins, the income tax and social security information below may not be applicable. Furthermore, this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. This may not apply to each Participant’s particular tax or financial situation and Thermo Fisher is not in a position to assure them of any particular tax results.
The Participants should address any particular questions to a specialized advisor.
Enrollment in the ESPP
The Participant is not subject to tax or social security contributions when he/she enrolls in the ESPP or in new Offering Period begins.
Payroll Deductions
Payroll deductions are after-tax contributions and, as such, they remain subject to social security contributions (including general insurance contribution, "CSG" and contribution for the reimbursement of social insurance debt, "CRDS") and are not deductible from the total taxable salary subject to personal income tax.
Purchase of Shares
When Shares are purchased under the ESPP, the Participant will be subject to income tax (and additional surtax, if applicable) on the difference between the Fair Market Value of the Shares on the Exercise Date and the Purchase Price. The Participant also will be subject to social security contributions (paid by the employer and the employee), including CSG and CRDS.
The Shares acquired under the ESPP have to be included in the Participant’s personal estate for wealth tax purposes, unless a full or partial wealth tax exemption applies.
Dividends
If Shares are acquired under the ESPP, dividends may be paid with respect to those Shares if Thermo Fisher, in its discretion, declares a dividend. Any dividends paid will be subject to tax in France, to additional social taxes in France and to U.S. federal tax withheld at source. The Participant may be entitled to a tax credit for the U.S. federal tax withheld, provided formalities are fulfilled.
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Taxation of dividends in France is complicated and the Participant is strongly advised to consult with his/her personal tax advisor regarding the tax consequences of the Participant’s receipt of dividends.
Sale of Shares
When the Participant subsequently sells the Shares acquired under the ESPP, the net sale gain calculated as the difference between the net sale price and the Fair Market Value of the Shares on the Exercise Date, will be subject to personal income tax at progressive rates (and additional surtax, if applicable), and will be subject to additional social taxes. Further, the capital gain basis for personal income tax purposes (but not additional social taxes) may be reduced if the Participant holds the shares for certain periods of time prior to sale.
Withholding and Reporting
The Participant’s employer is not required to withhold personal income tax (or additional surtax) when Shares are purchased under the ESPP, provided the Participant is a French resident for tax purposes. However, because the income realized upon the purchase of Shares qualifies as additional salary under French law, the Participant’s employer is required to report this income on its annual declaration of salaries which is filed with the tax and social security authorities and on the Participant’s monthly pay slip. Also, the Participant’s employer will withhold the employee’s portion of social security contributions due at purchase. It is the Participant’s responsibility to report and pay any taxes (including any wealth tax or additional surtax, if applicable) resulting from the purchase of the Shares, the sale of Shares or the receipt of any dividends. If the Participant is subject to the additional surtax, he/she should contact his/her own personal advisor or tax office regarding the availability of a surtax reduction.
French residents must declare any foreign bank, investment and brokerage accounts opened, used or closed during the applicable fiscal year to the French tax authorities on their personal tax return.
12.6 Italian Tax Consequences
The following summary is based on the income and social tax laws in effect in Italy as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who are Italian tax residents. If the Participant is a citizen or resident of another country for local law purposes or transfers employment to another country after a Offering Period begins, the income and social tax information below may not be applicable. Furthermore, this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to each Participant’s particular tax or financial situation, and Thermo Fisher is not in a position to assure them of any particular tax result.
The Participants should address any particular questions to a specialized advisor.
Enrollment in the ESPP
The Participant is not subject to tax when he/she enrolls in the ESPP or a new Offering Period begins.
Purchase of Shares
The Participant will be subject to income tax, social insurance contributions, municipal and regional surcharge (in certain circumstances) when Shares are purchased under the ESPP on the difference between the Purchase Price and the average price of the Shares in the month preceding and including the Exercise Date. Tax will be due on this amount unless a tax exemption applies.
The Participant also may be subject to a foreign financial assets tax if the value of his/her financial assets held outside of Italy (including any Shares acquired under the ESPP) exceeds a certain threshold. The
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taxable amount will be the Fair Market Value of the financial assets, assessed at the end of the calendar year in the place where the financial assets are held, using documentation issued by the local broker. The Participant is solely responsible for paying any foreign financial assets tax for the year concerned.
Dividends
If Shares are acquired under the ESPP, dividends may be paid with respect to those Shares if Thermo Fisher, in its discretion, declares a dividend. Any dividends paid will be subject to tax in Italy and to U.S. federal tax withheld at source. The Participant may be entitled to a tax credit for the U.S. federal tax withheld.
Sale of Shares
When the Participant subsequently sells the Shares acquired under the ESPP, the Participant will be subject to capital gains tax. The gain will be calculated as the difference between the sale price and the Purchase Price, or if the Shares have already been subject to tax as employment income, the difference between the sale price and the sum of the Purchase Price and the amount already subject to taxation at purchase. Capital gains tax will be due at a flat rate, provided (as is likely the case) that the Shares sold represent 2% or less of the voting rights or 5% or less of Thermo Fisher’s outstanding common stock (i.e., a "non-qualified shareholding")
Alternatively, the Participant may be able to elect to be subject to capital gains tax under one of two alternative capital gains tax regimes, both of which require the Participant to deposit the shares acquired under the ESPP with a broker authorized by the Ministry of Finance.
Withholding and Reporting
The Participant’s employer is required to withhold and report income tax and social insurance contributions (including applicable surcharges) when the Shares are purchased, unless a tax exemption applies. It is the Participant’s responsibility to report and pay any taxes resulting from the sale of Shares or receipt of any dividends.
12.7 Lithuanian Tax Consequences
The following summary is based on the income and social tax laws in effect in the Netherlands as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who are Lithuanian tax residents. If the Participant is a citizen or resident of another country for local law purposes or transfers employment to another country after a Offering Period begins, the income and social tax information below may not be applicable. Furthermore, this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to each Participant’s particular tax or financial situation, and Thermo Fisher is not in a position to assure them of any particular tax result.
The Participants should address any particular questions to a specialized advisor.
Enrollment in the ESPP
The Participant is not subject to tax when he/she enrolls in the ESPP or a new Offering Period begins.
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Purchase of Shares
When Shares are purchased under the ESPP, the Participant will be subject to income tax on the difference between the Fair Market Value of the Shares on the Exercise Date and the Purchase Price. The Participant will not be subject to a social insurance contributions on this amount.
Dividends
If Shares are acquired under the ESPP, dividends may be paid with respect to those Shares if Thermo Fisher, in its discretion, declares a dividend. Any dividends paid will be subject to tax in Lithuania and to U.S. federal tax withheld at source. The Participant may be entitled to a tax credit for the U.S. federal tax withheld.
Sale of Shares
When the Participant subsequently sells the Shares purchased under the ESPP, the Participant will be subject to capital gains tax at a flat rate provided that his/her total capital gains received from the sale of securities during the year exceeds his/her annual exempt amount. The taxable gain will be the difference between the sale price and the Fair Market Value of the Shares on the Exercise Date.
However, any capital gains received from the sale of securities (including Shares acquired under the ESPP) during the calendar year below a specified threshold will be exempt from personal income tax. This tax relief will not apply if the Participant sells his/her Shares back to Thermo Fisher.
Withholding and Reporting
The Participant’s employer is not required to withhold or report income tax when the Shares are purchased under the ESPP. It is the Participant’s responsibility to report in his/her annual tax return and pay taxes resulting from the purchase of Shares, the subsequent sale of Shares or the receipt of any dividends.
12.8 Dutch Tax Consequences
The following summary is based on the income and social tax laws in effect in the Netherlands as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who are Dutch tax residents. If the Participant is a citizen or resident of another country for local law purposes or transfers employment to another country after a Offering Period begins, the income and social tax information below may not be applicable. Furthermore, this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to each Participant’s particular tax or financial situation, and Thermo Fisher is not in a position to assure them of any particular tax result.
The Participants should address any particular questions to a specialized advisor.
Enrollment in the ESPP
The Participant is not subject to tax when he/she enrolls in the ESPP or a new Offering Period begins.
Purchase of Shares
The Participant will be subject to tax when the right to purchase Shares under the ESPP becomes unconditional. This likely will occur at the time of purchase. The Participant will be subject to income tax/wage withholding tax and social insurance contributions (to the extent the Participant has not already
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exceeded the applicable ceiling) on the difference between the Fair Market Value of the Shares on the Exercise Date and the Purchase Price.
The Participant will also be subject to an investment yield tax based on the value of all of taxable assets (including Shares acquired under the ESPP) held by the Participant on January 1 of each year, to the extent the value of such assets exceeds the annual exempt amount.
The Participant is solely responsible for paying any investment yield tax due on his/her annual tax return for the year concerned.
Dividends
If Shares are acquired under the ESPP, dividends may be paid with respect to those shares if Thermo Fisher, in its discretion, declares a dividend. Any dividends paid will be subject to U.S. federal tax withheld at source. Dividends generally are exempt from taxation in the Netherlands. The Participant may be entitled to a tax credit for the U.S. federal tax withheld.
Sale of Shares
When the Participant subsequently sells the Shares purchased under the ESPP, he/she will not be subject to any capital gains tax, provided he/she holds less than 5% of Thermo Fisher’s outstanding Shares.
Withholding and Reporting
The Participant’s employer is required to withhold and report any wage tax and social insurance contributions on the taxable amount at purchase. For Participants whose annual income is above a certain threshold, the local employer should also withhold an additional amount which represents the partial repayment of a standard tax credit (so-called heffingskortingen). The Participant must report any taxable benefit derived from the ESPP on his/her personal income tax return.
12.9 Norwegian Tax Consequences
The following summary is based on the income and social tax laws in effect in Norway as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who are Norwegian tax residents. If the Participant is a citizen or resident of another country for local law purposes or transfers employment to another country after a Offering Period begins, the income and social tax information below may not be applicable. Furthermore, this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to each Participant’s particular tax or financial situation, and Thermo Fisher is not in a position to assure them of any particular tax result.
The Participants should address any particular questions to a specialized advisor.
Enrollment in the ESPP
The Participant is not subject to tax when he/she enrolls in the ESPP or a new Offering Period begins.
Purchase of Shares
The Participant will be subject to income tax and social insurance contributions when Shares are purchased under the ESPP on the difference between the Fair Market Value of the Shares on the Exercise Date and the Purchase Price, unless an exemption applies.
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The Participant may be able to exclude up to 20% of the Fair Market Value of the Shares at purchase up to a certain threshold per year from their taxable income.
Any Shares that the Participant acquires under the ESPP are considered assets and therefore, subject to wealth tax. Wealth tax is assessed at the end of each tax year and the tax is based on the value of the assets held on January 1 in the year following the relevant tax year. The Participant is solely responsible for paying any wealth tax due for the year concerned.
Dividends
If Shares are acquired under the ESPP, dividends may be paid with respect to those Shares if Thermo Fisher, in its discretion, declares a dividend. Any dividends paid will be subject to tax in Norway and to U.S. federal tax withheld at source. The Participant may be entitled to a tax credit for the U.S. federal tax withheld.
Sale of Shares
When the Participant subsequently sells the Shares purchased under the ESPP, he/she will be subject to tax on the difference between the sale price and the Fair Market Value of the Shares on the Exercise Date. Certain adjustments may be available that will reduce the capital gain.
Withholding and Reporting
The Participant’s employer will withhold and report income tax and social insurance contributions on the taxable amount at purchase. The Participant must report any taxable benefit derived from the ESPP on his/her personal income tax return. It is also the Participant’s responsibility to report and pay any taxes resulting from the sale of the Shares or receipt of any dividends.
Further, if the Participant emigrate from Norway, he/she may be subject to income tax and/or capital gain tax on the purchase rights and/or Shares held at the time of emigration. The Participant should consult with his/her personal tax advisor regarding his/her tax obligations if the Participant is emigrating from Norway.
12.10 Spanish Tax Consequences
The following summary is based on the income and social tax laws in effect in Spain as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who are Spanish tax residents. If the Participant is a citizen or resident of another country for local law purposes or transfers employment to another country after a Offering Period begins, the income and social tax information below may not be applicable. Furthermore, this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to each Participant’s particular tax or financial situation, and Thermo Fisher is not in a position to assure them of any particular tax result.
The Participants should address any particular questions to a specialized advisor.
Enrollment in the ESPP
The Participant is not subject to tax when he/she enrolls in the ESPP or a new Offering Period begins.
Purchase of Shares
When Shares are purchased under the ESPP, the Participant will be subject to income tax on the difference between the Fair Market Value of the Shares on the Exercise Date and the Purchase Price. In
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addition, the Participant will be subject to social insurance contributions on this amount (to the extent he or she has not already exceeded his or her applicable contribution ceiling).
However, the first €12,000 of income the Participant realizes each calendar year in connection with the purchase of Shares under the ESPP will not be subject to income tax if: (i) the Participant holds the Shares for at least three (3) years before sale; and (ii) the Participant, together, with his or her spouse and close relatives, do not collectively hold more than 5% of Thermo Fisher’s stated capital. This exemption is not available for social insurance contribution purposes, and the entire taxable amount will be subject to applicable social insurance contributions.
In addition, a wealth tax may apply to any Shares acquired under the ESPP, subject to certain exemptions and other applicable thresholds.
Dividends
If Shares are acquired under the ESPP, dividends may be paid with respect to those Shares if Thermo Fisher, in its discretion, declares a dividend. Any dividends paid will be subject to tax in Spain, depending on the amount of capital income the Participant realizes during the tax year, and to U.S. federal tax withheld at source. The Participant may be entitled to a tax credit for the U.S. federal tax withheld.
Sale of Shares
When the Participant subsequently sells the Shares purchased under the ESPP, he/she will be subject to tax on the difference between the net sale price and Fair Market Value of the Shares on the Exercise Date. The tax applicable to the gain at sale will depend upon the amount of capital income the Participant realizes during the tax year, regardless of how long the Participant holds the Shares.
If the Participant’s Shares were exempt from tax at purchase, and he or she sells the Shares before the applicable holding period expires, the Participant will be subject to ordinary income tax on the portion of the discount that was exempted from income tax at the time of purchase. The Participant will be required to file a supplementary tax return for the year in which the Shares were purchased and pay income tax (plus legal interest) on such income.
Withholding and Reporting
The Participant’s employer is required to report the taxable amount at purchase. Subject to the €12,000 exemption, the taxable amount at purchase will be considered compensation in-kind subject to payment on account and the Participant’s employer will charge the payment on account to the Participant. The Participant is entitled to deduct the payment on account and obtain a tax credit from his or her income tax obligation. The Participant’s employer also is required to withhold social insurance contributions (if applicable) on the entire taxable amount when the Shares are purchased.
It is the Participant’s responsibility to report any income realized and pay any difference between the Participant’s actual tax liability and the amount withheld from the purchase of Shares under the ESPP, and any tax due resulting from the sale of Shares or receipt of any dividends. The Participant also is responsible for reporting and paying wealth tax (if applicable).
12.11 Swedish Tax Consequences
The following summary is based on the income and social tax laws in effect in Sweden as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who are Swedish tax residents. If the Participant is a citizen or resident of another country for local law purposes or transfers employment to another country after a Offering Period begins, the income and social tax information below may not be applicable. Furthermore,
4030664-v10\CHIDMS1 65 PART II — PROSPECTUS this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to each Participant’s particular tax or financial situation, and Thermo Fisher is not in a position to assure them of any particular tax result.
The Participants should address any particular questions to a specialized advisor.
Enrollment in the ESPP
The Participant is not subject to tax when he/she enrolls in the ESPP or a new Offering Period begins.
Purchase of Shares
When Shares are purchased under the ESPP, the Participant likely will be subject to income tax on the difference between the Fair Market Value of the Shares on the Exercise Date and the Purchase Price. Additionally, the taxable amount will be subject to social insurance contributions payable by the Participant’s employer (including a general pension contribution withheld at year-end by the employer as part of the Participant’s income tax withholding to the extent the annual contribution maximum has not already been exceeded).
Dividends
If Shares are acquired under the ESPP, dividends may be paid with respect to those Shares if Thermo Fisher, in its discretion, declares a dividend. Any dividends paid will be subject to tax in Sweden and to U.S. federal tax withheld at source. The Participant may be entitled to a tax credit for the U.S. federal tax withheld.
Sale of Shares
The Participant will be subject to tax when he/she subsequently sells the Shares acquired under the ESPP at a gain. The gain is calculated as the difference between the sale price and the Fair Market Value of the Shares on the Exercise Date. As an alternative, the Participant may choose to be taxed on a certain percentage of the sale proceeds since Shares are listed on the New York Stock Exchange.
Withholding and Reporting
The Participant’s employer is required to report and withhold income tax (including the general pension contribution) on the taxable amount when the Shares are purchased. The Participant must report the taxable income in his/her annual income tax return. It is the Participant’s responsibility to report and pay any taxes resulting from the sale of Shares or receipt of any dividends.
12.12 United Kingdom Tax Consequences
The following summary is based on the income and social tax laws in effect in the United Kingdom as of the date of this prospectus. Tax laws are complex and can change frequently. As a result, the information below may be out of date at the time the Participant purchases Shares, sells Shares or receives dividends.
The following applies only to Participants who are and will remain resident and ordinarily resident in the United Kingdom and are not subject to the remittance basis of taxation. If the Participant is a citizen or resident of another country for local law purposes or transfers employment to another country after a Offering Period begins, the income and social tax information below may not be applicable. Furthermore, this information is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to each Participant’s particular tax or financial situation, and Thermo Fisher is not in a position to assure them of any particular tax result.
The Participants should address any particular questions to a specialized advisor.
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Enrollment in the ESPP
The Participant is not subject to tax when he/she enrolls in the ESPP or a new Offering Period begins.
Purchase of Shares
When Shares are purchased under the ESPP, the Participant will be subject to income tax on the difference between the Fair Market Value of the Shares on the Exercise Date and the Purchase Price. In addition, the Participant will be subject to employee’s national insurance contributions ("NICs")8 on this amount. Effective April 6, 2017, the Participant may also be subject to an Apprenticeship Levy.
The Participant’s employer will calculate the income tax and employee’s NICs due when Shares are purchased under the ESPP and will account for these amounts to Her Majesty’s Revenue and Customs ("HMRC"). The Participant is required to reimburse the employer for the amounts accounted by it to HMRC.
The Participant must reimburse the employer for the income tax due (in excess of the amount withheld from the Participant’s salary or covered by the sale of shares, if any) within 90 days of the end of the tax year following the Exercise Date or such other period specified in the U.K. Income Tax (Earnings and Pensions) Act 2003 to avoid further tax consequences. If the Participant fails to pay this amount to the employer within that time limit, the Participant may be treated as having received a deemed benefit in kind (depending on the Participant’s circumstances) equal to the amount of tax not paid to the employer and the Participant will have to pay further tax on this benefit. The employer is not required to withhold income tax on the benefit in kind, and the Participant must include this in his/her self-assessment tax return for the tax year in which the purchase occurs and reimburse the employer or Thermo Fisher, as applicable, for the value of any NICs due on the benefit in kind.
Dividends
If Shares are acquired under the ESPP, dividends may be paid with respect to those Shares if Thermo Fisher, in its discretion, declares a dividend. Any dividends paid will be subject to tax in the U.K. and to U.S. federal tax withheld at source. The Participant may be entitled to a tax credit for the U.S. federal tax withheld.
Sale of Shares
When the Participant subsequently sells the Shares acquired under the ESPP, any capital gain (i.e., the difference between the sale price and the Fair Market Value of the Shares on the Exercise Date) will be subject to capital gains tax. However, capital gains is payable only if the total capital gain exceeds the annual exemption amount.
Withholding and Reporting
As mentioned above, the Participant’s employer will withhold and report income tax and NICs on the taxable amount when Shares are purchased under the ESPP. It is the Participant‘s responsibility to pay and report any taxes due when he/she sells the Shares or receives any dividends.
8 Participants over the state pension age which currently is 65 but will be gradually increasing to 67 are not required to pay NICs.
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EXHIBIT
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EXHIBIT I
THERMO FISHER SCIENTIFIC INC. 2007 EMPLOYEES' STOCK PURCHASE PLAN AS AMENDED AND RESTATED
I 4030664-v10\CHIDMS1
THERMO FISHER SCIENTIFIC INC.
2007 EMPLOYEES' STOCK PURCHASE PLAN AS AMENDED AND RESTATED
1. Definitions. As used in this Employees' Stock Purchase Plan of Thermo Fisher Scientific Inc., the following terms shall have the meanings respectively assigned to them below:
1.1. Base Compensation means annual or annualized wages and salary, exclusive of overtime, bonuses, contributions to employee benefit plans, or other fringe benefits, sales commissions, moving expense reimbursements or other special payments. The Board shall have the discretion to determine the application of this definition to Participants in the Non-423 Component or on payrolls outside the United States.
1.2. Board means the board of directors of the Company.
1.3. Code means the U.S. Internal Revenue Code of 1986, as amended.
1.4. Company means Thermo Fisher Scientific Inc., a Delaware corporation.
1.5. Company Stock means the common stock, $1.00 par value, of the Company.
1.6. Covered Transaction shall have the meaning set forth in Section 8.8 hereof.
1.7. Eligible Employee means a person who is eligible under the provisions of Section 6 to enroll in the Plan and receive an Option as of a particular Grant Date.
1.8. Enrollment/Change Agreement means an agreement whereby a Participant authorizes the Company to withhold payroll deductions from his or her Gross Compensation, or requests withdrawal, discontinuation, or a change in the withholding percentage of such payroll deductions, as contemplated by Section 8.9.
1.9. Exchange Act means the U.S. Securities Exchange Act of 1934, as amended, from time to time, or any successor law thereto, and the regulations promulgated thereunder.
1.10. Exercise Date means a date not more than one year after a Grant Date, as determined by the Board, on which Options must be exercised by Eligible Employees.
1.11. Grant Date means a date designated by the Board on which Options are to be granted to Eligible Employees.
1.12. Gross Compensation means Base Compensation plus sales commissions, overtime pay and cash bonuses. The Board shall have the discretion to determine the application of this definition to Participants in Offerings under the Non-423 Component or on payrolls outside the United States.
1.13. Market Value means, as of a particular date, (i) the last sale price of the Company Stock if such stock is traded on a national stock exchange, or if no such price is reported for such date, the first trading day immediately prior to such date during which a sale occurred, or (ii) if the Company Stock is not traded on a national stock exchange but is regularly quoted by a recognized securities dealer, the average of bid and asked prices of the Company Stock last quoted in the over-the-counter market on such date, or if no bid and asked prices are quoted in the over-the-counter market on such date, the average of the bid and asked prices last quoted in the over-the-counter market before such date; or (iii) in the absence of an established market for
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the Company Stock of the type described in (i) or (ii) of this definition, the fair market value established by the Board acting in good faith.
1.14. Offering means the offer of an Option under the Plan during an Offering Period. Unless otherwise specified by the Board, each Offering to the Eligible Employees of a Participating Employer shall be deemed a separate Offering, even if the dates and other terms of the applicable Offering Periods of each such Offering are identical, and the provisions of the Plan will separately apply to each such Offering. With respect to Offerings under the 423 Component, the terms of each separate Offering need not be identical provided that the terms of the Plan and an Offering together satisfy Section 423 of the Code and the United States Treasury Regulations thereunder; an Offering under the Non-423 Component need not satisfy such regulations.
1.15. Offering Period means the period between the Grant Date and one or more Exercise Dates of the Option. The duration and timing of an Offering Period may be changed by the Board, but the maximum duration of an Offering Period shall not exceed one year.
1.16. Option means an option to purchase shares of Company Stock granted under the Plan.
1.17. Option Shares means shares of Company Stock purchasable under an Option.
1.18. Participant means an Eligible Employee to whom an Option is granted and who authorizes the Company to withhold payroll deductions by completing an Enrollment/Change Agreement.
1.19. Participating Employer means the Company or any Related Corporation which is designated by the Board as a corporation whose Eligible Employees are to receive Options as of a particular Grant Date.
1.20. Plan means this Employees' Stock Purchase Plan of the Company, as Amended and Restated, and as may be further amended from time to time.
1.21. Related Corporation means any corporation which is a parent corporation or a subsidiary corporation with respect to the Company, as determined under Section 424(e) and Section 424(f) of the Code.
1.22. Section 423 means Section 423 of the Code.
1.23. Tax-Related Items means any income tax, social insurance, payroll tax, payment on account or other tax-related items arising in relation to the Participant’s participation in the Plan.
2. Purpose of the Plan. The Plan is intended to encourage ownership of Company Stock by Eligible Employees and to provide additional incentive for them to promote the success of the business of the Company. The Company intends for the Plan to have two components: a Code Section 423 component (the "423 Component") and a non-Code Section 423 component (the "Non-423 Component"). It is intended that the 423 Component qualify as an "employee stock purchase plan" within the meaning of Section 423, and the provisions of the 423 Component shall be so construed. In addition, this Plan authorizes the grant of Options to purchase shares of Company Stock under the Non-423 Component, which does not qualify as an "employee stock purchase plan" under Section 423; such Options may be granted pursuant to rules, procedures or sub-plans adopted by the Board and designed to achieve tax, securities or other objectives for Participants and the Company, as further set forth in Section 9 of the Plan. Except as otherwise provided herein, the Non-423 Component will operate and be administered in the same manner as the 423 Component.
3. Administration of the Plan. The Plan shall be administered by the Board, which annually shall determine (i) whether to grant Options and, if Options are to be granted, (ii) the Grant Dates and Exercise
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Dates for such Options and all other terms relating to such Options, including the terms under which Gross Compensation may be withheld to purchase shares of Company Stock under such Options; provided, that the maximum aggregate percentage of each Participant's Gross Compensation which may be withheld in any calendar year for the purpose of purchasing shares of stock under this Plan and all other employee stock purchase plans (as defined in Section 423) administered by a Related Corporation and in which the Participant may participate shall not exceed ten percent (10%) of the Participant's Gross Compensation. The Board shall have authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine which Participating Employers will participate in an Offering under the 423 Component and which Participating Employers will participate in an Offering under the Non-423 Component, to determine the terms of Options granted under the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The Board may appoint a committee, consisting of members of the Board, to administer the Plan and may, in its sole and absolute discretion, delegate any or all of the functions specified herein regarding administration of the Plan to such committee (the "Committee"). Further, to the extent not prohibited by applicable law, the Board or the Committee may, from time to time, delegate some or all of its authority under the Plan to a subcommittee or subcommittees of the Committee or to other persons or groups of persons as it deems necessary, appropriate or advisable under conditions or limitations that it may set at or after the time of the delegation. For purposes of the Plan, reference to the Board shall be deemed to refer to the Committee or any subcommittee, subcommittees, or other persons or groups of persons to whom the Board or the Committee duly delegates authority pursuant to this Section 3. All determinations by the Board (or its delegate) in carrying out and administering the Plan and in construing and interpreting the Plan and any Enrollment/Change Agreement or other instrument or agreement relating to the Plan shall be made in the Board’s sole discretion and shall be final, binding and conclusive for all purposes and upon all interested persons.
4. Termination and Amendment of Plan. The Board may terminate or amend the Plan at any time; provided, however, that no amendment, unless approved by the stockholders of the Company as required under Treasury Regulations §1.423-2(c), shall effect any change for which stockholder approval would be required under that regulation, nor shall any termination or amendment adversely affect the rights of a Participant with respect to any Option held by the Participant as of the date of such termination or amendment, without his or her consent, unless such change is appropriate for purposes of complying with applicable laws. For the avoidance of doubt, Section 8.8, rather than the foregoing sentence, shall apply to Board actions taken in connection with Covered Transactions.
5. Shares of Stock Subject to the Plan. No more than an aggregate of two million shares of Company Stock may be issued or delivered pursuant to the exercise of Options granted under the Plan, subject to adjustments made in accordance with Section 8.8. Option Shares may be either shares of Company Stock which are authorized but unissued or shares of Company Stock held by the Company in its treasury. If an Option expires or terminates for any reason without having been exercised in full, the unpurchased Option Shares shall become available for other Options granted under the Plan. The Company shall, at all times during which Options are outstanding, reserve and keep available shares of Company Stock sufficient to satisfy such Options, and shall pay all fees and expenses incurred by the Company in connection therewith. For avoidance of doubt, up to the maximum number of shares of Company Stock reserved under this Section 5 may be used to satisfy exercises of Options under the Section 423 Component of the Plan and any remaining portion of such maximum number of shares of Company Stock may be used to satisfy exercises of Options under the Non-423 Component.
6. Persons Eligible to Receive Options.
6.1. Subject to Section 6.2 below, if the Board determines to grant Options as of any Grant Date, each Eligible Employee of the Company or a Participating Employer who:
(i) is employed on the Grant Date;
(ii) is customarily employed by the Company or a Participating Employer more than twenty (20) hours per week and at least five (5) months per calendar year; and
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(iii) will not, after the grant of the Option, own (or be deemed to own after application of the constructive ownership rules of Section 424(d) of the Code) stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Related Corporation,
shall be entitled to participate in such Option grant as of such Grant Date.
6.2. Notwithstanding Section 6.1 (ii) above, for Options granted under the Non-423 Component or under a separate Offering under the 423 Component, Eligible Employee shall include any other employee of a Participating Employer to the extent that local law requires participation in the Plan to be extended to such employee, as determined by the Company. Additionally, notwithstanding Section 6.1 (i) or (ii) above, the Board, in its discretion, from time to time may, prior to a Grant Date for all Options to be granted in one or more separate Offerings, determine on a uniform and nondiscriminatory basis that the definition of Eligible Employee will not include an individual if he or she: (i) has not completed at least two years of service since his or her last hire date (or such lesser period of time as may be determined by the Board in its discretion), (ii) is a highly compensated employee within the meaning of Section 414(q) of the Code, or (iii) is a highly compensated employee within the meaning of Section 414(q) of the Code with compensation above a certain level or is an officer or subject to the disclosure requirements of Section 16(a) of the Exchange Act, provided the exclusion is applied with respect to each separate Offering in an identical manner to all highly compensated individuals of the Participating Employer whose Eligible Employees are participating in that Offering. Further, notwithstanding Section 6.1, in the case of an Offering under the Non-423 Component, an Eligible Employee (or group of Eligible Employees) may be excluded from participation in the Plan or an Offering if the Board has determined, in its sole discretion, that participation of such Eligible Employee(s) is not advisable or practicable for any reason.
6.3. For purposes of this Section 6, employment shall include any leave of absence for military service, illness or other bona fide purpose which does not exceed the longer of ninety (90) days or other period during which the absent employee's reemployment rights are guaranteed by statute or contract.
7. Dates for Granting Options. Options shall be granted on such date or dates as are designated by the Board.
8. Terms and Conditions of Options.
8.1. General. All Options granted on a particular Grant Date shall comply with the terms and conditions set forth in Sections 8.3 through 8.12, and all Options granted on a particular Grant Date in an Offering under the 423 Component shall be identical except as to the number of shares of Company Stock purchasable under the Option, which shall be determined in accordance with Section 8.2. Option Shares may only be purchased with accumulated payroll deductions unless prohibited under applicable law.
8.2. Number of Shares. Except as hereinafter provided, the maximum number of shares of Company Stock that a Participant shall be permitted to purchase under any Option shall be fixed by the Board at the time of grant. In the absence of affirmative action by the Board, the maximum number of shares of Company Stock that may be purchased during any Offering Period shall be that whole number of shares determined by dividing $50,000 by the Market Value of a share on the Grant Date of such Offering Period. The number of shares which a Participant is permitted to purchase may be further limited by the amount of payroll deductions actually withheld as of the Exercise Date. Notwithstanding any other provision of the Plan, in no event shall a Participant's rights to purchase stock under all employee stock purchase plans (as defined in Section 423(b) of the Code) of the Company and its Related Corporations, including this Plan, accrue at a rate which exceeds $25,000 of the Market Value of such stock (determined as of the date(s) of grant of the related option(s)) for each calendar year in which any such option is outstanding at any
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time. The preceding sentence shall be construed in accordance with Section 423(b)(8) of the Code and Treasury Regulations §1.423-2(i). The Company may reduce or refund Participants' payroll deductions if the Company determines in its reasonable discretion that there is a material risk that the limits described in this Section 8.2 would otherwise be exceeded.
8.3. Purchase Price. The per-share purchase price of Option Shares shall be ninety-five percent (95%) of the per-share Market Value of the Company Stock as of the Exercise Date.
8.4. Restrictions on Transfer. Options may not be sold, assigned, transferred, pledged or otherwise encumbered other than by will or under the laws of descent and distribution. An Option may not be exercised by anyone other than the Participant during the lifetime of the Participant. The Board may, in its sole discretion, impose the requirement that Option Shares may not be sold, assigned, pledged, encumbered or otherwise transferred by the Participant for a period of up to one year after the Exercise Date. The Company shall have the right to place a legend on all stock certificates representing Option Shares setting forth the restriction on transferability of such shares, and by exercising an Option the person exercising such Option shall be deemed to have agreed to such restrictions on transferability of Option Shares.
8.5. Expiration. Each Option shall expire at the close of business on the Exercise Date or on such earlier date as may result from the operation of Section 8.6 or Section 8.8.
8.6. Termination of Employment of Participant; Transfer of Employment. If a Participant ceases for any reason, voluntary or involuntary (other than death or retirement), to be continuously employed by the Company or a Related Corporation, his or her Option shall immediately expire and the Participant's accumulated payroll deductions shall be returned to him or her by the Company pursuant to Section 8.12. For purposes of this Section 8.6, a Participant shall be deemed to be employed throughout any leave of absence for military service, illness or other bona fide purpose which does not exceed the longer of ninety (90) days or the period during which the Participant's reemployment rights are guaranteed by statute or by contract. If the Participant does not return to active employment prior to the termination of such period, his or her employment shall be deemed to have ended on the ninety-first (91st) day of such leave of absence. If the employee is employed by a Participating Employer that ceases to be a Related Corporation, or if the employee is transferred to a subsidiary of the Company that is not a Participating Employer, the employee shall be deemed to have terminated employment for the purposes of this Plan as of the date of such divestiture or transfer. The Board may establish other rules to govern transfers of employment among any Participating Employers or Related Corporations, including from a Participating Employer in the 423 Component to a Participating Employer in the Non-423 Component (and vice versa), consistent with any applicable requirements of Section 423 and the terms of the Plan. In addition, the Board may establish rules to govern transfers of employment among any Participating Employers where such employers are participating in separate Offerings under the Plan.
8.7. Retirement or Death of Participant. If a Participant retires, the Participant shall be entitled to withdraw his or her accumulated payroll deductions with interest, if any, pursuant to Section 8.12 or to purchase shares on the next Exercise Date to the same extent as the Participant would have been entitled to purchase such shares had he or she continued to be employed by the Company or a Related Corporation. The number of shares of Company Stock purchasable shall be limited by the amount of the Participant's accumulated payroll deductions as of the date of his or her retirement. Accumulated payroll deductions shall be applied by the Company toward the purchase of shares of Company Stock unless the Participant withdraws such funds prior to the Exercise Date in accordance with Section 8.10(v). In the event of a Participant’s death, the Participant’s accumulated contributions to the Plan will be returned and processed in the Participant’s final paycheck.
8.8. Capital Changes Affecting the Stock; Transactions Involving the Company. In the event of a stock split, stock dividend or similar change in the Company's capital structure, the
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number of shares available to be issued under the Plan, the maximum number of shares purchasable under Options then outstanding, and other Plan and Option terms shall be appropriately adjusted by the Board. In the event of a merger or consolidation involving the Company, a transaction in which the Company becomes a subsidiary of another entity, a sale or other disposition of all or substantially all of the assets of the Company (including a liquidation of the Company) or any other transaction which the Board of Directors determines to be a similar transaction (any of the foregoing, a "Covered Transaction"), the Board may (i) terminate all then outstanding rights to purchase stock under the Plan, in which event amounts contributed for the purchase of shares will be refunded as soon as practicable, (ii) modify or adjust the terms of the outstanding Options, (iii) if there is a survivor or acquiror entity, provide for the assumption, modification, or adjustment to the terms of outstanding Options by the survivor or acquiror or an affiliate thereof or for the grant of replacement rights by the survivor or acquiror or an affiliate thereof, in each case on whatever terms the Board may determine, (iv) accelerate the stock purchase date for outstanding rights or (v) provide for any combination of the foregoing. In the case of a spin-off or similar transaction, the Board may take actions including shortening an Offering Period.
8.9. Payroll Deductions. Any Eligible Employee who wishes to authorize payroll deductions for the purchase of Option Shares under the Plan, must complete and return to the administrator of the Plan prior to the Grant Date an Enrollment/Change Agreement indicating the total percentage (which shall be a full integer not less than one (1) and not greater than the maximum determined by the Board in accordance with Section 3 hereof) of his or her Gross Compensation which is to be withheld each pay period. In accordance with Section 9, the Company may allow Participants to make other contributions under the Plan via cash, check or other means instead of payroll deductions if payroll deductions are not permitted under applicable law and, only for Offerings in the 423 Component, the Company determines that such other contributions are permissible under Section 423 of the Code.
After the Grant Date and prior to the Exercise Date, and subject to such reasonable administrative requirements as the Company may impose, the Participant shall be permitted to (a) request a withdrawal of accumulated payroll deductions (only one withdrawal during each Offering Period is permitted, subject to Section 8.10(v)), (b) discontinue payroll deductions, or (c) decrease, but not increase, the percentage of Gross Compensation withheld. A Participant shall make a change contemplated in the foregoing sentence by completing and returning an Enrollment/Change Agreement to the human resources department of the Company. The effective date of such changes shall be subject to reasonable administrative requirements. A Participant who suspends payroll deductions may not recommence payroll deductions at any time prior to the Exercise Date; provided, that the foregoing limitation shall not prevent the suspension or adjustment of payroll deductions to the extent such suspension or adjustment is required by applicable law. If a Participant elects to discontinue his or her payroll deductions but does not elect to withdraw his or her funds, funds deducted prior to his or her election to discontinue will be applied to the purchase of Company Stock on the Exercise Date.
8.10. Exercise of Options. On the Exercise Date the Participant shall be deemed to have exercised his or her Option to purchase the maximum number of Option Shares purchasable by his or her accumulated payroll deductions; provided, that:
(i) The number of Option Shares of Company Stock purchasable shall not exceed the number of shares the Participant is entitled to purchase pursuant to Section 8.2.
(ii) If the total number of Option Shares of Company Stock which all Participants elect to purchase, together with any Option Shares of Company Stock already purchased under the Plan, exceeds the total number of shares of Company Stock which may be purchased under the Plan pursuant to Section 5, the number
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of shares of Company Stock which each Participant is permitted to purchase shall be proportionately reduced.
(iii) If the number of Option Shares purchasable by a Participant includes a fraction, such number shall be adjusted to the next smaller whole number and the total purchase price for the Option Shares purchasable by the Participant shall be reduced accordingly.
(iv) If a Participant is unable to use all of his or her accumulated payroll deductions to purchase Option Shares under Section 8.10(iii) hereof because the number of purchasable Option Shares includes a fraction, the remaining balance of the Participant's accumulated payroll deductions attributable to such fractional shares will be added to the Participant's future payroll deductions for the next Plan Offering Period unless the Participant does not participate in the Plan for the next Plan Offering Period, in which case such balance will be returned to the Participant. For the avoidance of doubt, Participants may not apply withheld sums to purchase Company Stock in future Offering Periods except to the extent permitted by the foregoing sentence.
(v) A Participant may notify the administrator of the Plan prior to an Exercise Date, subject to such reasonable administrative requirements as the Company may impose, by completing and delivering an Enrollment/Change Agreement, that he or she elects not to exercise his or her Option and desires to withdraw all of his or her accumulated payroll deductions withheld under the Plan, as provided in Section 8.9. A Participant may elect this withdrawal at the end of the Plan Offering Period even if he or she has previously received a withdrawal during the Plan Offering Period.
8.11. Delivery of Stock. Within a reasonable time after the Exercise Date, the Company shall deliver or cause to be delivered to the Participant a certificate or certificates for the Option Shares purchased by the Participant. Certificates for Option Shares may be issued only in the name of the Participant. The Company may, in its sole discretion and in compliance with applicable laws, authorize the use of book entry registration of shares in lieu of issuing stock certificates. If any law or applicable regulation of the U.S. Securities and Exchange Commission or other body shall require that the Company or the Participant take any action in connection with the purchase of Option Shares, delivery of the certificate or certificates for such Option Shares shall be postponed until the necessary action shall have been completed. If the Company is required to take such action, such action shall be taken by the Company at its own expense, without unreasonable delay. The Participant shall have no rights as a stockholder in respect of shares for which he or she has not received a certificate.
8.12. Return of Accumulated Payroll Deductions. In the event that a Participant is entitled to the return of accumulated payroll deductions, whether by reason of voluntary withdrawal, termination of employment, retirement or death or in the event that accumulated payroll deductions exceed the price of Option Shares purchased and are not added to the Participant's future payroll deductions pursuant to Section 8.10(iv) hereof, such amount, shall be returned within a reasonable time by the Company.
8.13. Equal Rights and Privileges. In connection with any grant of Options under the 423 Component, all Eligible Employees awarded Options as part of such grant shall have the same rights and privileges with respect thereto, subject only to such differences as may be permissible under Section 423(b)(5) and related regulations.
9. Non-U.S. Participants. Notwithstanding any provision to the contrary in the Plan, the Board may adopt rules or procedures relating to the operation and administration of the Plan to accommodate the specific requirements of laws and procedures for jurisdictions outside of the United States. Without
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limiting the generality of the foregoing, the Board specifically is authorized to adopt rules, procedures and sub-plans, which, for purposes of an Offering under the Non-423 Component, may be outside the scope of Section 423, regarding, without limitation, eligibility to participate, the definition of Base Compensation and Gross Compensation, handling of payroll deductions, making of contributions to the Plan (including, without limitation, in forms other than payroll deductions), establishment of bank or trust accounts to hold payroll deductions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary-designation requirements, withholding procedures and handling of issuances of Company Stock, which may vary according to applicable law.
10. Miscellaneous
10.1. Participants Not Stockholders. Neither the granting of an Option to a Participant nor the deductions from his or her pay shall constitute such Participant a stockholder of the Company Stock covered by an Option under this Plan until such shares have been purchased by and issued to him or her.
10.2. Application of Funds. All funds received or held by the Company under this Plan may be combined with other corporate funds and may be used for any corporate purpose, except if funds must be segregated into a separate bank or trust account to comply with applicable law.
10.3. Governmental Regulations. The Company’s obligation to sell and deliver Company Stock under this Plan is subject to listing on a national stock exchange or quotation on the Nasdaq National Market (to the extent the Company Stock is then so listed or quoted) and the approval of all governmental authorities required in connection with the authorization, issuance or sale of such stock. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary for the lawful issuance and sale of any shares of Company Stock under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained.
10.4. Tax Withholding. The Participant shall make adequate provision to satisfy the Tax- Related Items withholding obligations, if any, of the Company and/or Participating Employer which arise with respect to Participant's participation in the Plan or upon the disposition of the shares of the Company Stock, respectively. The Company and/or the Participating Employer may, but shall not be obligated to, withhold from the Participant’s compensation or any other payments due the Participant the amount necessary to meet such withholding obligations or withhold from the proceeds of the sale of shares of Company Stock or any other method of withholding the Company and/or the Participating Employer deems appropriate. The Company and/or the Participating Employer shall have the right to take such other action as may be necessary in the opinion of the Company or a Participating Employer to satisfy withholding and/or reporting obligations for such taxes.
10.5. No Employment Rights. Nothing in the Plan shall confer upon the Participant any right to continue in the employ of the Company or any Related Corporation for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or any Related Corporation or of the Participant, which rights are hereby expressly reserved by each, to terminate such person’s employment at any time for any reason, with or without cause.
10.6. Code Section 409A. The 423 Component of the Plan is exempt from the application of Section 409A of the Code. The Non-423 Component of the Plan is intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. Except as provided in Section 10.7 below, in the case of a Participant who would otherwise be subject to Section 409A of the Code, to the extent the Board determines that an Option or the exercise, payment, settlement or deferral thereof is subject to Section 409A of the Code, the Option shall be granted, exercised, paid, settled or deferred in a manner that will comply with Section 409A of the Code,
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including Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding anything in the foregoing to the contrary, the Company shall have no liability to a Participant or any other party if an Option that is intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for any action taken by the Board with respect thereto.
10.7. No Representations Regarding Tax Treatment. Although the Company may endeavor to (i) qualify an Option for favorable tax treatment under the laws of the United States or jurisdictions outside of the United States or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Section 10.6. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants under the Plan.
10.8. Governing Law. The Plan shall be governed by Delaware law without regard to that State’s conflict-of-laws rules, except to the extent that such law is preempted by U.S. federal law.
10.9. Notification upon Sale of Option Shares. Each Participant agrees, by entering the Plan, to promptly give the Company notice of any disposition of Option Shares purchased under the Plan in an Offering under the 423 Component where such disposition occurs within two years after the date of grant of the Option pursuant to which such shares were purchased.
10.10. Severability. If any provision of this Plan is held by a court to be unenforceable or is deemed invalid for any reason, then such provision shall be deemed inapplicable and omitted, but all other provisions of this Plan shall be deemed valid and enforceable to the full extent possible under applicable law.
4030664-v10\CHIDMS1 CROSS-REFERENCE LISTS
CROSS-REFERENCE LISTS
ANNEX I
MINIMUM DISCLOSURE REQUIREMENTS FOR THE SHARE REGISTRATION DOCUMENT (SCHEDULE)
(Page numbering refers to the page contained in the relevant document)
Item # Item contents Chapter/Exhibit Page/Section
1. PERSONS RESPONSIBLE
4 (Company All persons responsible for the information given in 1.1. Prospectus Representative the prospectus. for Prospectus)
4 (Company A declaration by those responsible for the 1.2. Prospectus Representative prospectus. for Prospectus)
2. STATUTORY AUDITORS
54 (10.2 Independent 2.1. Name and address of the issuer’s auditors. Part II - Section B Registered Public Accounting Firm)
If auditors have resigned, been removed or not been re-appointed during the period covered by the 2.2. Not applicable Not applicable historical financial information, indicate details if material.
3. SELECTED FINANCIAL INFORMATION
53 - 54 (10.1 3.1. Selected historical financial information. Part II - Section B Selected Financial Data)
53 - 54 (10.1 3.2. Interim periods. Part II - Section B Selected Financial Data)
18 - 26 (Risk 4. RISK FACTORS Part II - Section A Factors)
5. INFORMATION ABOUT THE ISSUER
5.1. History and Development of the Issuer
5.1.1. The legal and commercial name of the Issuer Part I - Section B 5 (B.1 Legal and Commercial i 4030664-v10\CHIDMS1 CROSS-REFERENCE LISTS
Item # Item contents Chapter/Exhibit Page/Section Name of the Issuer)
12. TREND INFORMATION
Significant trends that affected production, sales and inventory, and costs and selling prices since the end 7- 9 (B.4 Recent 12.1. Part I - Section B of the last financial year to the date of the Trends) prospectus.
7- 9 (B.4 Recent Part I - Section B Trends) Trends, uncertainties or events that are likely to 12.2. affect the issuer for at least the current financial year. 18 - 26 (Risk Part II - Section A Factors)
13. PROFIT FORECASTS OR ESTIMATES Not applicable Not applicable
ADMINISTRATIVE, MANAGEMENT, 14. SUPERVISORY BODIES AND SENIOR MANAGEMENT
Names, business addresses and functions in the 39 - 42 (7.1 issuer of the following persons and an indication of Board of the principal activities performed by them outside the Directors as of issuer where these are significant with respect to that October 20, issuer: 2017) and Part II - Section B a) members of the administrative, management or 50 - 51 (8.1 supervisory bodies; Directors’ and Executive Officers’ Holdings of Shares and Options)
b) partners with unlimited liability, in the case of a limited partnership with a Share capital; (not Not applicable Not applicable 14.1 applicable);
c) founders, if the issuer has been established for Not applicable Not applicable fewer than five years; and (not applicable);
42 - 44 (7.2 Executive Officers as of d) any senior manager who is relevant to establishing October 20, that the issuer has the appropriate expertise and 2017) and Part II - Section B experience for the management of the issuer’s business. 50 - 51 (8.1 Directors’ and Executive Officers’ Holdings of Shares and ii 4030664-v10\CHIDMS1 CROSS-REFERENCE LISTS
Item # Item contents Chapter/Exhibit Page/Section Options)
The nature of any family relationship between any of 44 (7.3 those persons. Fraudulent Part II - Section B Offences and Bankruptcy, Etc.)
In the case of each member of the administrative, management or supervisory bodies of the issuer and each person mentioned in points (b) and (d) of the first subparagraph, details of that person’s relevant management expertise and experience and the 39 - 42 (7.1 following information: Board of Directors as of (a) the names of all companies and partnerships of October 20, which such person has been a member of the 2017) and administrative, management and supervisory bodies Part II - Section B or partner at any time in the previous five years, 42 - 44 (7.2 indicating whether or not the individual is still a Executive member of the administrative, management or Officers as of supervisory bodies or partner. It is not necessary to October 20, list all the subsidiaries of an issuer of which the 2017) person is also a member of the administrative, management or supervisory bodies or partner. It is not necessary to list all the subsidiaries of an issuer of which the person is also a member of the administrative, management or supervisory bodies;
(b) any convictions in relation to fraudulent offenses for at least the previous five years;
(c) details of any bankruptcies, receiverships or liquidations with which a person described in (a) and (d) of the first subparagraph who was acting in the capacity of any of the positions set out in (a) and (d) of the first subparagraph was associated for at least the previous five years; 44 (7.3 (d) details of any official public incrimination and/or Fraudulent Part II - Section B sanctions of such person by statutory or regulatory Offences and authorities (including designated professional bodies) Bankruptcy, Etc.) and whether such person has ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer for at least the previous five years.
If there is no such information to be disclosed, a statement to that effect is to be made.
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Item # Item contents Chapter/Exhibit Page/Section
44 - 50 (7.4 Administrative, management, and supervisory bodies 14.2. Part II - Section B Conflicts of and senior management conflicts of interests. Interest)
17. EMPLOYEES
50 - 51 (8.1 Directors’ and Shareholdings and stock options with respect to each Executive 17.2. person referred to in points (a) and (d) of the first Part II - Section B Officers’ Holdings subparagraph of item 14.1. of Shares and Options)
Exhibit I All sections Description of any arrangements for involving the 17.3 51 - 52 (8.2 employees in the capital of the issuer. Part II - Section B Employee Stock Benefit Plans)
20.7. Dividend policy
The amount of the dividend per Share for each 53 - 54 (10.1 20.7.1 financial year for the period covered by the historical Part II - Section B Selected financial information. Financial Data)
34 - 38 (5.3 Indirect and 20.8. Legal and arbitration proceedings. Part II - Section B Contingent Indebtedness)
Significant change in the issuer’s financial or trading 20.9. Not applicable Not applicable position since the end of the last financial period.
THIRD PARTY INFORMATION AND STATEMENT 23. BY EXPERTS AND DECLARATIONS OF ANY INTEREST
Where a statement or report attributed to a person as an expert is included in the Registration Document, 23.1. provide such person’s name, business address, Not applicable Not applicable qualifications and material interest if any in the issuer.
Where information has been sourced from a third 23.2. party, provide a confirmation that this information has Not applicable Not applicable been accurately reproduced.
54 - 55 (XI. 24. DOCUMENTS ON DISPLAY Part II - Section B Documents on Display)
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ANNEX III
MINIMUM DISCLOSURE REQUIREMENTS FOR THE SHARE SECURITIES NOTE (SCHEDULE)
(Page numbering refers to the page contained in the relevant document)
Item # Item contents Chapter/Exhibit Page/Section
1. PERSONS RESPONSIBLE
4 (Company All persons responsible for the information given in 1.1. Prospectus Representative the prospectus. for Prospectus)
4 (Company 1.2. A declaration by those responsible for the prospectus. Prospectus Representative for Prospectus)
18 - 26 (Risk Part II - Section A Factors)
30 (4.4. Currency of the Securities Issue, sentence beginning "Participants assume the 2. RISK FACTORS risk (… )") and Part II - Section B 32 (4.6 Transferability, sentence beginning "Participants assume the risk (… )")
3. KEY INFORMATION
52 (IX. Working 3.1 Working capital statement Part II - Section B Capital Statement)
34 - 38 (V. Statement of Capitalization 3.2 Capitalization and indebtedness Part II - Section B and Indebtedness as of September 30, 2017)
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Item # Item contents Chapter/Exhibit Page/Section
26 (1.1 Purpose of the ESPP) and Part II - Section B 39 (6.2 Net 3.4 Reasons for the offer and use of proceeds Proceeds)
(ESPP Sections Exhibit I 2 and 8.10)
INFORMATION CONCERNING THE SECURITIES 4. TO BE OFFERED/ ADMITTED TO TRADING
29 (4.1 Type and the Class of the Securities Being Part II - Section B Offered, Including the Security Type and the class of the securities being offered, 4.1 Identification including the security identification code. Code)
(ESPP Sections Exhibit I 1.5, 1.17 and 8.11)
30 (4.2 Legislation Under Legislation under which the securities have been 4.2 Part II - Section B Which the created. Securities Have Been Created )
29 (4.3 Form of Securities, Name and Address of Form of securities, name and address of the entity in 4.3 Part II - Section B the Entity in charge of keeping the records. Charge of Keeping the Records)
30 (4.4 Currency 4.4 Currency of the securities issue. Part II - Section B of the Securities Issue)
30 - 32 (4.5 4.5 Rights attached to the securities Part II - Section B Rights attached to the Securities)
26 - 27 (1.2 Statement of the resolutions, authorizations and Part II - Section B Shares Offered 4.6 approvals by virtue of which the securities have been under the ESPP) or will be created and/or issued. Exhibit I (ESPP Sections
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Item # Item contents Chapter/Exhibit Page/Section
8.2 and 8.8)
27 (1.3 Offering Period) and 4.7 Expected issue date of the securities. Part II - Section B 29 (III. Delivery and Sale of the Shares)
32 (4.6 Part II - Section B Description of any restrictions on the free Transferability) 4.8 transferability of the securities. Exhibit I Section 7
32 - 33 (4.7 General Mandatory takeover bids and/or squeeze-out and sell- Provisions 4.9 Part II - Section B out rules in relation to the securities. Applying to Business Combinations)
Information on taxes on the income from the 55 - 67 (XII. Tax 4.11 Part II - Section B securities withheld at source Consequences)
5. TERMS AND CONDITIONS OF THE OFFER
Conditions, offer statistics, expected timetable 5.1 and action required to apply for the offer
26 - 29 (I. The Outline, II. Part II - Section B Eligibility and III. 5.1.1 Conditions to which the offer is subject. Delivery and Sale of the Shares)
Exhibit I All sections
26 - 27 (1.2 Shares Offered under the ESPP) Part II - Section B and 5.1.2 Total amount of the issue/offer. 39 (6.2 Net Proceeds)
(ESPP Section Exhibit I 8.2)
27 (1.3 Offering Time period during which the offer will be open and 5.1.3 Part II - Section B Period) and description of the application process. 28 (2.2 vii 4030664-v10\CHIDMS1 CROSS-REFERENCE LISTS
Item # Item contents Chapter/Exhibit Page/Section
Participation of Eligible Employees)
(ESPP Section Exhibit I 8.9 and 8.10)
27 - 28 (1.7 Termination or Part II - Section B Circumstances under which the offer may be revoked Amendment of 5.1.4 or suspended and whether revocation can occur after the ESPP) dealing has begun. Exhibit I (ESPP Section 4)
29 (2.4 Discontinuance Part II - Section B of Participation of Possibility to reduce subscriptions and the manner for 5.1.5 Participants) refunding excess amount paid by applicants. (ESPP Section Exhibit I 8.9)
28 - 29 (2.3 Part II - Section B Payroll Deductions) 5.1.6 Minimum and /or maximum amount of application. (ESPP Sections Exhibit I 8.2 and 8.10)
29 (2.4 Discontinuance 5.1.7 Period during which an application may be withdrawn. Part II - Section B of Participation of Participants)
26 - 27 (1.2 Shares Offered Part II - Section B Under the ESPP Method and time limits for paying up the securities to 1.5 Purchase 5.1.8 and for delivery of the securities. of Shares)
(ESPP Section Exhibit I 8.11)
5.3 Pricing
27 (1.4 Purchase Part II - Section B Price) An indication of the price at which the securities will 5.3.1. be offered. (ESPP Section Exhibit I 8.3)
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Item # Item contents Chapter/Exhibit Page/Section
29 (III. Delivery and Sale of the Shares) and
30 (4.3 Form of Part II - Section B Securities, Name and Address of 5.3.2. Process for the disclosure of the offer price. the Entity in Charge of Keeping the Records )
(ESPP Sections Exhibit I 1.13 and 8.3)
32 (No If the issuer’s equity holders have pre-emptive Preemptive, 5.3.3. purchase rights and this right is restricted or Part II - Section B Redemptive or withdrawn. Conversion Provisions)
Where there is or could be a material disparity between the public offer price and the effective cash cost to members of the administrative, management 5.3.4 Not applicable Not applicable or supervisory bodies or senior management, or affiliated persons, of securities acquired by them in transactions during the past year.
5.4. Placing and Underwriting
30 (4.3 Form of Securities, Name and Address of Name and address of any paying agents and 5.4.2 Part II - Section B the Entity in depository agents in each country. Charge of Keeping the Records)
ADMISSION TO TRADING AND DEALING 6. ARRANGEMENTS
29 (4.1 Type and the Class of the Securities Being Whether the securities offered are or will be the object 6.1 Part II - Section B Offered, Including of an application for admission to trading. the Security Identification Code)
6.2 Regulated markets or equivalent markets on which Part II - Section B 29 (4.1 Type and securities of the same class of the securities to be the Class of the
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Item # Item contents Chapter/Exhibit Page/Section
offered or admitted to trading are already admitted to Securities Being trading. Offered, Including the Security Identification Code)
8. EXPENSE OF THE ISSUE/OFFER
The total net proceeds and an estimate of the total 39 (6.2 Net 8.1. Part II - Section B expenses of the issue/offer. Proceeds)
9. DILUTION
The amount and percentage of immediate dilution 38 (6.1 Maximum 9.1. Part II - Section B resulting from the offer. Dilution)
In the case of a subscription offer to existing equity 9.2. holders, the amount and percentage of immediate Not applicable Not applicable dilution if they do not subscribe to the new offer.
10. ADDITIONAL INFORMATION
If advisors connected with an issue are mentioned in 10.1. the Securities Note, a statement of the capacity in Not applicable Not applicable which the advisors have acted.
Where a statement or report attributed to a person as an expert is included in the Securities Note, provide 10.3. Not applicable Not applicable such persons’ name, business address, qualifications and material interest if any in the issuer.
Where information has been sourced from a third 10.4. Not applicable Not applicable party.
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