<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 31, 1996
REGISTRATION NO. 333-2926
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
--------------
TREX MEDICAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
DELAWARE 3844 06-1439632
(STATE OR OTHER (PREIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFIATION CODE NUMBER IDENTIFICATION NUMBER
INCORPORATION OR
ORGANIZATION)
36 APPLE RIDGE ROAD, DANBURY, CONNECTICUT 06810
(203) 790-1188
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
SANDRA L. LAMBERT, SECRETARY
TREX MEDICAL CORPORATION
C/O THERMO ELECTRON CORPORATION
81 WYMAN STREET
POST OFFICE BOX 9046
WALTHAM, MASSACHUSETTS 02254-9046
(617) 622-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
SETH H. HOOGASIAN, DAVID E. REDLICK, ESQUIRE EDWIN L. MILLER, JR.,
ESQUIRE HALE AND DORR ESQUIRE
GENERAL COUNSEL 60 STATE STREET TESTA, HURWITZ &
TREX MEDICAL CORPORATION BOSTON, MASSACHUSETTS 02109 THIBEAULT, LLP
C/O THERMO ELECTRON (617) 526-6000 125 HIGH STREET
CORPORATION BOSTON, MASSACHUSETTS 02110
81 WYMAN STREET (617) 248-7000
POST OFFICE BOX 9046
WALTHAM, MASSACHUSETTS
02254-9046
(617) 622-1000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement has become effective.
--------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
TREX MEDICAL CORPORATION
CROSS REFERENCE SHEET
BETWEEN ITEMS OF FORM S-1 AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM LOCATION IN PROSPECTUS
---- ----------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus............................ Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus................... Inside Front Cover Page; Outside
Back Cover Page; Additional
Information; Reports to Security
Holders
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges.... Prospectus Summary; Risk Factors;
The Company
4. Use of Proceeds........................ Prospectus Summary; Use of
Proceeds
5. Determination of Offering Price........ Outside Front Cover Page; The
Rights Offering; Underwriting
6. Dilution............................... Dilution
7. Selling Security Holders............... Not Applicable
8. Plan of Distribution................... Outside Front Cover Page; The
Rights Offering; Underwriting
9. Description of Securities to be
Registered............................ Outside Front Cover Page;
Capitalization; Description of
Capital Stock
10. Interests of Named Experts and
Counsel............................... Experts; Legal Opinions
11. Information With Respect to the
Registrant:
(a) Description of Business............ Business; Management's Discussion
and Analysis of Financial
Condition and Results of
Operations
(b) Description of Property............ Business--Facilities
(c) Legal Proceedings.................. Risk Factors--Risks Associated
With Pending and Threatened
Patent Litigation; Business--
Patents and Proprietary
Technology; Business--Legal
Proceedings
(d) Market Price of and Dividends on
the Registrant's Common Equity and
Related Stockholder Matters........ Outside Front Cover Page;
Dividend Policy; Executive
Compensation; Description of
Capital Stock; Shares Eligible
for Future Sale
(e) Financial Statements............... Consolidated Financial
Statements; Capitalization
(f) Selected Financial Data............ Selected Financial Information
(g) Supplementary Financial
Information........................ Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM LOCATION IN PROSPECTUS
---- ----------------------
<C> <S> <C>
(h) Management's Discussion and
Analysis of Financial Condition and
Results of Operations.............. Management's Discussion and
Analysis of Financial Condition
and Results of Operations
(i) Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............... Not Applicable
(j) Directors, Executive Officers,
Promoters and Control Persons...... Relationship and Potential
Conflicts of Interest with Thermo
Electron and ThermoTrex;
Management
(k) Executive Compensation............. Executive Compensation
(l) Security Ownership of Certain
Beneficial Owners and
Management......................... Security Ownership of Certain
Beneficial Owners and Management
(m) Certain Relationships and Related Relationship and Potential
Transactions....................... Conflicts of Interest with
Thermo Electron and ThermoTrex;
Management--Certain Transactions
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................... Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--DATED MAY 31, 1996
PROSPECTUS
2,400,000 Shares
[LOGO OF TREX MEDICAL APPEARS HERE]
Common Stock
All of the shares of Common Stock offered hereby are being sold by Trex
Medical Corporation (the "Company"), a majority-owned subsidiary of ThermoTrex
Corporation ("ThermoTrex"), which is a majority-owned subsidiary of Thermo
Electron Corporation ("Thermo Electron"). Following this offering, ThermoTrex
will own approximately 80% of the outstanding shares of Common Stock of the
Company (assuming no exercise of the Underwriters' over-allotment option).
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $12.00 and $14.00 per share. See "Underwriting" for
information relating to the factors to be considered in determining the initial
public offering price. The Company has applied to have the Common Stock
approved for listing on the American Stock Exchange.
Concurrently with the offering of Common Stock hereby, the Company is
offering approximately 1,250,000 shares of Common Stock (excluding shares
issuable upon exercise of subscription rights distributed by ThermoTrex to
Thermo Electron, which by their terms cannot be exercised by Thermo Electron,
and subscription rights retained by ThermoTrex, but with respect to which
ThermoTrex has made an irrevocable election not to exercise and will therefore
expire unexercised) in a rights offering to holders of record of its Common
Stock as of May 22, 1996 (the "Rights Offering"). A total of approximately
3,650,000 shares of Common Stock (or up to a total of 4,010,000 shares if the
Underwriters' over-allotment option is exercised in full) will be offered
hereby and in the Rights Offering. As of , 1996, subscription rights had been
exercised for the purchase of shares of Common Stock. The effective
subscription price per share in the Rights Offering will be the initial public
offering price specified below. However, if the initial public offering price
is greater than $16.00 per share, the Rights Offering will be terminated. The
closing of the offering made hereby is a condition to the closing of the Rights
Offering. See "The Rights Offering."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
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<S> <C> <C> <C>
Per Share................................. $ $ $
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Total (3)................................. $ $ $
</TABLE>
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(1) The Company, ThermoTrex and Thermo Electron have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $700,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 360,000 shares of Common Stock solely to cover over-
allotments, if any. If this option is fully exercised, the total price to
the public would be $ , the total underwriting discounts and commissions
would be $ and the total proceeds to the Company before estimated
expenses would be $ . See "Underwriting."
-----------
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the shares
will be made in New York, New York on or about , 1996.
NatWest Securities Limited
Lehman Brothers
Oppenheimer & Co., Inc.
The date of this Prospectus is , 1996.
<PAGE>
The picture at the upper left-hand side of the page illustrates the
Company's Lorad M-IV Mammography System, which consists of a rectangular base
or platform standing upright on its side (for wall mounting) with an attached
arm which may be moved vertically up and down, and attached to the arm is a
rotatable X-ray system.
The picture at the upper right-hand side of the page illustrates a
laboratory technician taking a mammographic image of a patient using the
Company's Console Mammography System. The patient's image is being taken by the
system's C-arm, which consists of a rotatable C-shape apparatus with X-ray
equipment mounted on both ends of the "C", and which apparatus is shown titled
toward the patient.
The pictures are accompanied by the following caption:
The Company's LORAD M-IV mammography system, which the Company expects to
begin shipping in mid-1996, features enhanced image quality as well as modular
upgrades. The Contour mammography system offers a patented tilt C-arm, which
permits the system to tilt toward or away from the patient for imaging of a
greater area of breast tissue.
----------------
IN CONNECTION WITH THE UNDERWRITTEN PUBLIC OFFERING, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
FOR UNITED KINGDOM PURCHASERS: THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER
TO THE PUBLIC (AS DEFINED IN THE COMPANIES ACT 1985) AND NO PROSPECTUS HAS
BEEN OR WILL BE REGISTERED OR ISSUED IN THE UNITED KINGDOM IN RESPECT OF THE
COMMON STOCK. CONSEQUENTLY, THE COMMON STOCK MUST NOT BE OFFERED FOR SALE OR
SOLD IN THE UNITED KINGDOM EXCEPT TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE
THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS (AS PRINCIPAL
OR AGENT) FOR THE PURPOSES OF THEIR BUSINESSES OR TO PERSONS WHO IT IS
REASONABLE TO EXPECT WILL ACQUIRE, HOLD, MANAGE OR DISPOSE OF INVESTMENTS (AS
PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESS OR ARE OTHERWISE
OFFERED TO PERSONS IN THE CONTEXT OF THEIR TRADES, PROFESSIONS OR OCCUPATIONS.
THIS MEMORANDUM MAY ONLY BE ISSUED OR PASSED ON TO ANY PERSON IN THE UNITED
KINGDOM IF THAT PERSON IS OF A KIND DESCRIBED IN ARTICLE II(3) OF THE
FINANCIAL SERVICES ACT 1986 (INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) ORDER
1995 OR WITHIN ARTICLE 8(1) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT
ADVERTISEMENTS) (EXEMPTIONS) (NO. 2) ORDER 1995.
----------------
LORAD, LORAD DSM, StereoLoc, StereoGuide, Contour and XRE are registered
trademarks, and Bennett, Angiographic Devices, Unicath, DVFX and PolyCx are
trademarks, of Trex Medical Corporation. All other trademarks or trademarks
referred to in this Prospectus are the property of their respective owners.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Except as otherwise indicated, all
information contained in this Prospectus (i) assumes the exercise of all
subscription rights distributed in the Rights Offering (other than subscription
rights distributed to Thermo Electron or to be retained by ThermoTrex), and
(ii) assumes no exercise of the Underwriters' over-allotment option. Investors
should carefully consider the information set forth under the heading "Risk
Factors."
THE COMPANY
The Company is a worldwide leader in the design, manufacture and marketing of
mammography equipment and minimally invasive stereotactic needle biopsy systems
used for the detection of breast cancer, as well as a leading designer and
manufacturer of general radiography (X-ray) equipment. A mammography system is
a dedicated radiographic system designed specifically to image breast tissue.
Stereotactic needle biopsy systems, which use a guided hollow needle to extract
a sample of tissues from the breast, offer a cost-effective, less invasive
alternative to open surgery for the biopsy of suspicious breast lesions. The
Company recently broadened its product base by acquiring Bennett X-Ray
Corporation ("Bennett"), a leading producer of specialty and general purpose
radiographic systems, including mammography systems, and XRE Corporation
("XRE"), a manufacturer of X-ray imaging systems used for cardiac
catheterization and angiography.
The Company's mammography and stereotactic needle biopsy systems are used by
radiologists and physicians in offices, hospitals and dedicated breast-care
centers, and its general radiography systems are used by physicians and
radiologists, both in office and hospital settings, as well as by veterinarians
and chiropractors. The Company sells its systems worldwide principally through
a network of independent dealers. In addition, the Company manufactures
mammography and radiography systems and components as an original equipment
manufacturer for other medical equipment companies such as United States
Surgical Corporation ("U.S. Surgical"), the GE Medical Systems division of
General Electric Company, Inc. ("GE"), and the Philips Medical Systems North
America Company subsidiary of Philips N.V. ("Philips").
The Company's strategy includes maintaining its market position and expanding
into complementary markets through continued technological innovation and
strategic acquisitions. The Company recently introduced a proprietary High
Transmission Cellular ("HTC") grid for use with its mammography systems that
provides better image contrast than existing grids at lower radiation doses,
and a patented autoexposure tomography option to its general radiography
systems that reduces the need for multiple exposures during tomography
procedures, thereby reducing the radiation exposure to the patient. The Company
believes the most promising technological advances in the radiography field
will be derived from the substitution of electronic detectors for the film
currently used in substantially all radiographic systems. This digital imaging
technology is expected to be capable of higher image quality, permit the
enhancement of an X-ray image through software and allow near-real-time, off-
site analysis of the X-ray image by radiologists. The Company is currently
developing a full-view digital imaging mammography system and has working
prototypes at two clinical sites. The Company believes that the digital imaging
technology being developed for this system may be adaptable to general
radiography and cardiac diagnostic imaging systems, and the Company will seek
to develop applications in these markets.
The Company also intends to expand or augment its product line through the
acquisition of one or more additional companies or technologies. The Company's
strategy includes making acquisitions of companies that can benefit from the
Company's distribution channels and technology. In May 1996, the Company
acquired XRE, which designs, manufactures and markets X-ray imaging systems
used for cardiac catheterization and angiography. XRE manufactures systems and
system components as an original equipment manufacturer for other medical
equipment companies such as Philips and the Picker International, Inc.
subsidiary of GEC, Inc. ("Picker International"). It also sells its systems in
the United States directly and through distributors. In April 1996, the Company
signed a non-binding letter of intent to acquire Continental X-Ray Corporation
and certain of its affiliates (collectively, "Continental"). Continental
designs, manufactures and markets radiographic/fluoroscopic products, general
radiography systems, electrophysiology products used in cardiac laboratories
and dedicated mammography systems. There can be no assurance that the
Continental transaction will be successfully completed.
3
<PAGE>
THE RIGHTS OFFERING
Concurrently with the offering of the shares of Common Stock hereby (the
"Underwritten Public Offering"), the Company is distributing to holders of its
Common Stock of record on May 22, 1996 (the "Record Date"), including
ThermoTrex, subscription rights (the "Rights") to subscribe for and purchase
additional shares of Common Stock (the "Rights Offering" and, together with the
Underwritten Public Offering, the "Offerings"). The purpose of the Rights
Offering is to provide existing stockholders of the Company and ThermoTrex with
an opportunity to participate in the initial public offering of the Company's
Common Stock and to provide the Company with the ability to raise additional
capital in a cost-effective manner. The Rights are generally non-transferable,
except that ThermoTrex may distribute Rights to holders of its Common Stock.
Of the Rights received by ThermoTrex, it will distribute to each holder of
ThermoTrex common stock on the Record Date, including Thermo Electron, one
Right for every ten shares of ThermoTrex common stock held by them and will
retain the remaining Rights. ThermoTrex has irrevocably elected not to exercise
the Rights which it does not distribute to its shareholders and such Rights
will expire unexercised. The terms of the Rights provide that they may not be
exercised by any person holding a majority of the outstanding shares of
ThermoTrex common stock. As holder of a majority of the outstanding shares of
ThermoTrex common stock, Thermo Electron will have no right to exercise the
Rights it receives from ThermoTrex and such Rights will therefore expire
unexercised. Accordingly, there will be a total of approximately 1,250,000
shares of Common Stock which may be issued upon the exercise of all Rights
which may be exercised in the Rights Offering.
The purchase price per share to subscribers in the Rights Offering will be
the initial public offering price per share of Common Stock set forth on the
cover page of this Prospectus up to a maximum of $16.00 per share. If the
initial public offering price is greater than $16.00 the Rights Offering will
be terminated because the Company intends to issue the shares in the
Underwritten Public Offering and the Rights Offering at the same price and
because participants in the Rights Offering are only being asked to commit
funds based upon a maximum public offering price of $16.00 per share. As of
, 1996 a total of Rights had been exercised. The closing of the
Rights Offering is conditioned upon the closing of the Underwritten Public
Offering.
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock Offered by the Company in
the Underwritten Public Offering...... 2,400,000 shares
Common Stock Offered by the Company in
the Rights Offering................... 1,250,000 shares
Common Stock to be Outstanding after
the Offerings (1)..................... 25,866,452 shares
Proposed AMEX Symbol................... TXM
Use of Proceeds........................ For acquisitions, to fund research and
development and for general
corporate purposes
</TABLE>
- --------
(1) Does not include 1,925,000 shares of Common Stock reserved for issuance
under the Company's stock-based compensation plans and 3,307,888 shares of
Common Stock reserved for issuance upon the conversion of $39,000,000
principal amount of the Company's 4.2% Subordinated Convertible Note, due
to ThermoTrex (the "Convertible Note"). Options to purchase 1,401,000
shares of Common Stock had been granted and were outstanding under the
Company's stock-based compensation plans as of May 30, 1996. See
"Capitalization," "Dilution," "Management--Compensation of Directors,"
"Executive Compensation," "Relationship and Potential Conflicts of Interest
with Thermo Electron and ThermoTrex" and Note 9 of Notes to Consolidated
Financial Statements.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA COMBINED (6)
------------------------
SIX MONTHS
FISCAL YEAR (1)(2) NINE MONTHS ENDED (1)(2) ENDED (1)(4) NINE MONTHS SIX MONTHS
------------------------------------ ------------------------ ------------------ ENDED ENDED
OCTOBER 1, SEPTEMBER 30, APRIL 1, MARCH 30, SEPTEMBER 30, MARCH 30,
1991 (4) 1992 (3)(4) 1993 1994 1994 (4) 1995 (5) 1995 1996 1995 1996
-------- ----------- ------ ------- ---------- ------------- -------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
INCOME DATA:
Revenues........ $ -- $ 4,128 $37,519 $54,410 $39,196 $55,291 $31,315 $66,829 $126,185 $92,959
Gross Profit.... -- 1,964 18,930 26,616 19,542 27,111 15,190 29,237 47,783 38,622
Research and
Development
Expenses........ 313 1,683 7,182 10,662 7,320 8,595 6,270 8,170 13,918 10,825
Operating Income
(Loss).......... (313) (746) 1,960 2,682 2,428 6,342 1,803 7,372 4,277 7,952
Net Income
(Loss).......... (190) (544) 827 1,194 1,085 3,483 966 3,734 598 3,678
Earnings (Loss)
per Share (7)... (.01) (.03) .04 .06 .05 .17 .05 .17 .02 .15
Weighted Average
Shares (7).... 20,151 20,151 20,151 20,151 20,151 20,151 20,151 21,547 24,667 24,700
</TABLE>
<TABLE>
<CAPTION>
MARCH 30, 1996
----------------------------------------------
AS ADJUSTED,
PRO FORMA AS INCLUDING
COMBINED (8) ADJUSTED (9) RIGHTS OFFERING (10)
------------ ------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital................................ $ 10,626 $ 39,068 $ 55,318
Total Assets................................... 161,295 189,737 205,987
Long-term Obligations.......................... 39,236 39,236 39,236
Shareholders' Investment ...................... 63,432 91,874 108,124
</TABLE>
- ----
(1) All periods presented include ThermoTrex Corporation's ("ThermoTrex")
research and development business pertaining to its Sonic CT system.
(2) The Company's 1991, 1992, 1993 and 1994 fiscal years, set forth in this
table and referred to elsewhere in this Prospectus, ended on December 28,
1991, January 2, 1993, January 1, 1994, and December 31, 1994,
respectively. In September 1995, the Company changed its fiscal year-end
from the Saturday nearest December 31 to the Saturday nearest September
30. Accordingly, the Company's transition period from January 1, 1995 to
September 30, 1995 ("fiscal 1995") is presented. The unaudited data for
the nine months ended October 1, 1994 is presented for comparative
purposes only.
(3) Includes the results of Lorad Corporation ("Lorad") since its acquisition
by ThermoTrex on November 17, 1992.
(4) Derived from unaudited financial statements.
(5) Includes the results of Bennett X-Ray Corporation ("Bennett") since its
acquisition by ThermoTrex on September 15, 1995.
(6) The pro forma combined statement of income data was derived from the pro
forma combined condensed statements of income included elsewhere in this
Prospectus. The pro forma combined statement of income data sets forth the
results of operations for the nine months ended September 30, 1995 and the
six months ended March 30, 1996, as if the acquisitions of Bennett, XRE
Corporation ("XRE") and Continental X-Ray Corporation and certain of its
affiliates ("Continental") had occurred on January 1, 1995.
(7) Pursuant to Securities and Exchange Commission requirements, earnings
(loss) per share have been presented for all periods. Weighted average
shares for all periods include the 20,000,000 shares issued to ThermoTrex
in connection with the initial capitalization of the Company and the
effect of the assumed exercise of stock options issued within one year
prior to the Company's proposed initial public offering.
(8) The pro forma combined balance sheet data as of March 30, 1996 sets forth
the financial position of the Company as if the acquisitions of XRE and
Continental had occurred on March 30, 1996. See the pro forma combined
condensed balance sheet included elsewhere in this Prospectus.
(9) Adjusted to reflect the sale by the Company of 2,400,000 shares of Common
Stock offered in the Underwritten Public Offering at an assumed initial
public offering price of $13.00, after deducting estimated underwriting
discounts and commissions and offering expenses payable by the Company.
(10) Adjusted to reflect the sale by the Company of 2,400,000 shares of Common
Stock offered in the Underwritten Public Offering and 1,250,000 shares
offered in the Rights Offering at an assumed initial public offering
price of $13.00, after deducting estimated underwriting discounts and
commissions and offering expenses payable by the Company.
5
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Accordingly, the following factors should be considered
carefully in evaluating the Company and its business before purchasing any of
such shares.
Technological Change and New Products. The market for the Company's products
is characterized by rapid and significant technological change, evolving
industry standards and new product introductions. Many of the Company's
products are technologically innovative, and require significant planning,
design, development and testing at the technological, product and
manufacturing process levels. These activities require significant capital
commitments and investment by the Company. The high cost of technological
innovation is matched by the rapid and significant change in the technologies
governing the products that are competitive in the Company's market, by
industry standards that may change on short notice and by the introduction of
new products and technologies such as magnetic resonance imaging and
ultrasound which may render existing products and technologies uncompetitive
or obsolete. There can be no assurance that the Company's products or
proprietary technologies will not become uncompetitive or obsolete.
Dependence on Patents and Proprietary Rights. The Company places
considerable importance 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
and regulatory approval process and to the marketplace. The Company's success
depends in part on whether it can develop patentable products and obtain and
enforce patent protection for its products both in the United States and in
other countries. The Company has filed and intends to file applications as
appropriate for patents covering both its products and manufacturing
processes. No assurance can be given that patents will issue from any pending
or future patent applications owned by or licensed to the Company or that the
claims allowed under any issued patents will be sufficiently broad to protect
the Company's technology. In addition, no assurance can be given that any
issued patents owned by or licensed to the Company will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will
provide competitive advantages to the Company. The Company could incur
substantial costs in defending itself in suits brought against it or in suits
in which the Company may assert its patent rights against others. If the
outcome of any such litigation is unfavorable to the Company, the Company's
business and results of operations could be materially adversely affected.
The Company relies on trade secrets and proprietary know-how which it seeks
to protect, in part, by confidentiality agreements with its collaborators,
employees and consultants. There can be no assurance that these agreements
will not be breached, that the Company would have adequate remedies for any
breach or that the Company's trade secrets will not otherwise become known or
be independently developed by competitors. See "Business--Patents and
Proprietary Technology."
Risks Associated With Pending and Threatened Patent Litigation. In April
1992, Fischer Imaging Corporation ("Fischer") commenced a lawsuit in the
United States District Court, District of Colorado, against the Company's
Lorad division, alleging that the Lorad StereoGuide prone breast biopsy system
infringes a Fischer patent on a precision mammographic needle biopsy system.
As of September 30, 1995, the Company had sold 351 StereoGuide systems for
aggregate revenues of approximately $34.4 million. The suit requests a
permanent injunction, treble damages and attorneys' fees and expenses. If the
Company is unsuccessful in defending this lawsuit, it may be enjoined from
manufacturing and selling its StereoGuide system without a license from
Fischer. No assurance can be given that the Company will be able to obtain
such a license, if required, on commercially reasonable terms, if at all. In
addition, the Company may be subject to damages for past infringement. No
assurance can be given as to whether the Company will be subject to such
damages or, if so, the amount of damages which the Company may be required to
pay. The outcome of patent litigation, particularly in jury trials, is
inherently uncertain, and an unfavorable outcome in the Fischer litigation
could have a material adverse effect on the Company's business and results of
operations.
6
<PAGE>
The Company also is aware of a U.S. patent held by Nicola E. Yanaki which
has been asserted by him against certain automatic exposure control features
included in most of the Company's current mammography systems. The Company has
been informed by the holder of this patent that a competitor of the Company
has obtained a license for use of this patent. If Mr. Yanaki were successful
in enforcing such patent, the Company could be subject to damages for past
infringement and enjoined from manufacturing and selling imaging equipment
utilizing certain automatic exposure control features, which would have a
material adverse effect on the Company's business and results of operations.
The Company is also aware of an issued European patent with counterparts in
other non-U.S. countries applicable to imaging equipment utilizing certain
automatic exposure control features. The European patent is the subject of an
opposition proceeding before the European Patent Office. There can be no
assurance as to the outcome of such opposition.
In connection with the organization of the Company, ThermoTrex agreed to
indemnify the Company for any and all cash damages in connection with the
Fischer lawsuit and any potential claims by Mr. Yanaki with respect to sales
of the Company's products occurring prior to October 1995, when the businesses
of Lorad and Bennett were transferred to the Company. Notwithstanding this
indemnification, the Company would be required to report as an expense the
full amount, including any reimbursable amount, of any damages in excess of
the amount accrued ($2.3 million as of March 30, 1996), with any
indemnification payment it receives from ThermoTrex being treated as a
contribution to shareholders' investment. An unsuccessful outcome in any of
these matters may have a material adverse effect on the business of the
Company and on its results of operations for the period in which such outcome
occurs. See "Business--Patents and Proprietary Technology."
The Company is aware of two U.S. patents owned by a former employee which
have been asserted against the Company relating to its HTC grid to be used
with the Company's mammography systems. If the former employee were successful
in enforcing such patents, the Company could be subject to damages and
enjoined from manufacturing and selling the HTC grid.
The Company's competitors and other parties hold various patents and patent
applications in the fields in which the Company operates. There can be no
assurance that the Company will not be found to have infringed third-party
patents and, in the event of such infringement, the Company could be required
to alter its products or processes, pay licensing fees or cease making and
selling any infringing products and pay damages for past infringement.
No Assurance of Development and Commercialization of Products Under
Development. A number of the Company's potential products are currently under
development. There are a number of technological challenges that the Company
must successfully address to complete any of its development efforts. Product
development involves a high degree of risk, and returns to investors are
dependent upon successful development and commercialization of such products.
Proposed products based on the Company's technologies will require significant
additional research and development. There can be no assurance that any of the
products currently being developed by the Company, or those to be developed in
the future by the Company, will be technologically feasible or accepted by the
marketplace, or that any such development will be completed in any particular
timeframe.
Risks Associated with Acquisition Strategy. The Company's strategy includes
the acquisition of businesses and technologies that complement or augment the
Company's existing product lines. For example, in September 1995, the Company
acquired its Bennett subsidiary, in May 1996, the Company acquired
substantially all of the assets of XRE, a manufacturer of X-ray imaging
systems for cardiac catheterization and angiography, and in April 1996, the
Company signed a non-binding letter of intent to acquire Continental, a
manufacturer of radiographic/fluoroscopic products, general radiography
systems, electrophysiology products and dedicated mammography systems.
Promising acquisitions are difficult to identify and complete for a number of
reasons, including competition among prospective buyers and the need for
regulatory approvals, including antitrust approvals. There can be no assurance
that the Company will be able to complete future acquisitions or that the
7
<PAGE>
Company will be able to successfully integrate any acquired businesses. In
order to finance such acquisitions, it may be necessary for the Company to
raise additional funds through public or private financings. Any equity or
debt financing, if available at all, may be on terms which are not favorable
to the Company and, in the case of equity financing, may result in dilution to
the Company's stockholders.
Intense Competition. The Company encounters and expects to continue to
encounter intense competition in the sale of its products. The Company
believes that the principal competitive factors effecting the market for its
products include product features, product performance and reputation, price,
and service. The Company's competitors include large multinational
corporations and their operating units, including GE, Philips, the Siemens
Corporation subsidiary of Siemens AG ("Siemens"), Toshiba American Medical
Systems, Inc. and Toshiba America MRI, Inc. (collectively, "Toshiba"),
Shimadzu, and Picker International. These companies and certain of the
Company's other competitors have substantially greater financial, marketing
and other resources than the Company. As a result, they may be able to adapt
more quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the promotion and sale of
their products than the Company. Moreover, a significant portion of the
Company's sales are to GE and Philips through original equipment manufacturer
("OEM") arrangements. The products sold by such OEMs compete with products
offered by the Company and its independent dealers. Competition could increase
if new companies enter the market or if existing competitors expand their
product lines or intensify efforts within existing product lines. There can be
no assurance that the Company's current products, products under development
or ability to discover new technologies will be sufficient to enable it to
compete effectively with its competitors. See "Business--Competition."
Government Regulation; No Assurance of Regulatory Approval. The Company's
products are subject to regulation by the U.S. Food and Drug Administration
(the "FDA") and equivalent agencies in foreign countries. Failure to comply
with applicable regulatory requirements can result in, among other things,
civil and criminal fines, suspensions of approvals, recalls of products,
seizures, injunctions and criminal prosecutions.
To date, all of the Company's products have been classified by the FDA as
Class II medical devices and have been eligible for FDA marketing clearance
pursuant to the FDA's 510(k) premarket notification process, which is
generally shorter than the more involved premarket approval ("PMA") process.
The Company believes that most of its currently anticipated future products
and substantial modifications to existing products will be eligible for the
510(k) premarket notification process. However, the FDA has not yet classified
full-view digital imaging mammography systems like the one being developed by
the Company. If such systems are classified as Class III devices, the Company
would be required to file for FDA marketing clearance for its full-view
digital imaging mammography system under the PMA process, which would require
substantial additional clinical trials and would take a number of years. While
not classifying such systems, the FDA recently issued a preliminary protocol
for marketing clearance of full-view digital imaging mammography systems
suggesting that clearance may be obtained through an enhanced 510(k)
application with more extensive clinical trials. The preliminary protocol
calls for clinical trials on 400 subjects prior to applying to the FDA for
clearance to commercially market such a system and a multi-year, follow-up
study including comparative film and digital images on 12,000 subjects
following commercial introduction. If the preliminary protocol is adopted as
currently drafted, the Company believes this follow-up study will be
burdensome and may limit the commercialization of full-view digital imaging
mammography systems. The period for submitting comments to the preliminary
protocol has expired, and the Company can make no prediction as to when a
final protocol will be issued or if one will be issued at all. There can be no
assurance that the necessary clearances for any of the Company's products will
be obtained on a timely basis, if at all.
FDA regulations also require manufacturers of medical devices to adhere to
certain "Good Manufacturing Practices" ("GMP"), which include testing, quality
control and documentation procedures. The Company's manufacturing facilities
are subject to periodic inspection by the FDA. No assurances can be given that
the FDA
8
<PAGE>
will not in the future find the Company to be in violation of one or more such
regulations, which violation may adversely impact the operations of the
Company. See "Business--Government Regulation."
Healthcare Reform; Uncertainty of Patient Reimbursement. The Federal
government has in the past and may in the future consider, and certain state
and local as well as a number of foreign governments are considering or have
adopted, healthcare policies intended to curb rising healthcare costs. Such
policies include rationing of government-funded reimbursement for healthcare
services and imposing price controls upon providers of medical products and
services. The Company cannot predict what healthcare reform legislation or
regulation, if any, will be enacted in the United States or elsewhere.
Significant changes in the healthcare systems in the United States or
elsewhere are likely to have a significant impact over time on the manner in
which the Company conducts its business. Such changes could have a material
adverse effect on the Company. In addition, the Federal government regulates
reimbursement of fees for certain diagnostic examinations and capital
equipment acquisition costs connected with services to Medicare beneficiaries.
Recent legislation has limited Medicare reimbursement for diagnostic
examinations. These policies may have the effect of limiting the availability
or reimbursement for procedures, and as a result may inhibit or reduce demand
by healthcare providers for products in the markets in which the Company
competes. While the Company cannot predict what effect the policies of
government entities and other third party payors will have on future sales of
the Company's products, there can be no assurance that such policies would not
have an adverse impact on the operations of the Company. See "Business--
Reimbursement."
Dependence Upon Significant OEM Relationships. A significant portion of the
Company's sales are to GE and Philips through OEM arrangements. In fiscal
1995, sales to Philips accounted for 18% of the Company's net sales. Sales to
Philips accounted for 45% of XRE's sales in the 12 months ended December 31,
1995. The Company's sales depend, in part, on the continuation of these OEM
arrangements and the level of end-user sales by such OEMs. There can be no
assurance that the Company will be able to maintain its existing, or establish
new, OEM relationships and any failure to do so could have a material adverse
effect on its business. See "Business--Sales and Marketing--OEM Agreements."
Potential Product Liability. The Company's business exposes it to potential
product liability claims which are inherent in the manufacturing, marketing
and sale of medical devices, and as such the Company may face substantial
liability to patients for damages resulting from the faulty design or
manufacture of products. The Company currently maintains product liability
insurance, but there can be no assurance that this insurance will provide
sufficient coverage in the event of a claim, that the Company will be able to
maintain such coverage on acceptable terms, if at all, or that a product
liability claim would not materially adversely affect the business or
financial condition of the Company.
Dependence on Key Personnel. The Company is highly dependent on the members
of its senior management, research and engineering, manufacturing, marketing
and sales staff, the loss of one or more of whom could have a material adverse
effect on the Company. In particular, the Company's future performance is
dependent in part on the continued services of Anthony J. Pellegrino, the
Company's Vice Chairman, and Hal Kirshner, the Company's President and Chief
Executive Officer. The Company has no written employment agreements with
either Mr. Pellegrino or Mr. Kirshner. In addition, the Company believes that
its future success will depend in part on whether it can attract and retain
highly qualified engineering, management, manufacturing, marketing and sales
personnel, particularly as the Company expands its business activities. The
Company faces significant competition for the services of such personnel from
other companies. There can be no assurance that the Company will be able to
continue to attract and retain the personnel it requires for continued growth.
The failure to hire and retain such personnel could materially adversely
affect the Company.
Risks Associated With International Operations. International sales
accounted for 21% and 14% of the Company's revenues in fiscal 1995 and 1994,
respectively. The Company intends to continue to expand its presence in
international markets. International revenues are subject to a number of
risks, including the following: agreements may be difficult to enforce and
receivables difficult to collect through a foreign country's legal system;
foreign customers may have longer payment cycles; foreign countries may impose
additional
9
<PAGE>
withholding taxes or otherwise tax the Company's foreign income, impose
tariffs or adopt other restrictions on foreign trade; U.S. export licenses may
be difficult to obtain; and the protection of intellectual property in foreign
countries may be more difficult to enforce. There can be no assurance that any
of these factors will not have a material adverse impact on the Company's
business and results of operations.
Control by ThermoTrex. The Company's stockholders do not have the right to
cumulate votes for the election of directors. ThermoTrex, which will own
approximately 80% of the outstanding Common Stock of the Company after the
Offerings, has the power to elect the entire Board of Directors of the Company
and to approve or disapprove any corporate actions submitted to a vote of the
Company's stockholders. See "Relationship and Potential Conflicts of Interest
with Thermo Electron and ThermoTrex" and "Security Ownership of Certain
Beneficial Owners and Management."
Potential Conflicts of Interest. The Company may be subject to potential
conflicts of interest from time to time as a result of its relationship with
Thermo Electron and ThermoTrex. For example, conflicts may arise in the
development and licensing of digital detector technology by ThermoTrex to the
Company, the manufacture of digital detectors by ThermoTrex for sale to the
Company and the Company's manufacturing of lasers for sale to ThermoLase
Corporation. See "Relationship and Potential Conflicts of Interest with Thermo
Electron and ThermoTrex." Certain officers of the Company are also officers of
ThermoTrex, Thermo Electron and/or other subsidiaries of Thermo Electron, and
are full-time employees of ThermoTrex or Thermo Electron. Such officers will
devote only a portion of their working time to the affairs of the Company. For
financial reporting purposes, the Company's financial results are included in
the consolidated financial statements of ThermoTrex and Thermo Electron. The
members of the Board of Directors of the Company who are also affiliated with
Thermo Electron or ThermoTrex will consider not only the short-term and the
long-term impact of operating decisions on the Company, but also the impact of
such decisions on the consolidated financial results of ThermoTrex and Thermo
Electron. In some instances the impact of such decisions could be
disadvantageous to the Company while advantageous to ThermoTrex or Thermo
Electron, or vice versa. The Company is a party to various agreements with
Thermo Electron that may limit the Company's operating flexibility. See
"Relationship and Potential Conflicts of Interest with Thermo Electron and
ThermoTrex."
Significant Additional Shares Eligible for Sale After the Offerings. At the
conclusion of the 120-day period following the closing of the Offerings, the
Company will file a registration statement pursuant to the Securities Act
covering the resale of 1,962,000 shares of Common Stock held by existing
investors other than ThermoTrex. The 20,254,452 shares of Common Stock owned
by ThermoTrex will become eligible for resale under Rule 144 in October 1997.
In addition, subject to certain limitations described below under "Shares
Eligible For Future Sale," as long as ThermoTrex is able to elect a majority
of the Company's Board of Directors, it will have the ability to cause the
Company at any time to register for resale all or a portion of the Common
Stock owned by ThermoTrex.
Additional shares of Common Stock issuable upon exercise of options granted
under the Company's stock-based compensation plans will become available for
future sale in the public market at prescribed times. Sales of a significant
number of shares of Common Stock in the public market following the Offerings
could adversely affect the market price of the Common Stock. See "Relationship
and Potential Conflicts of Interest with Thermo Electron and ThermoTrex,"
"Shares Eligible for Future Sale" and "Underwriting."
Immediate and Substantial Dilution. Purchasers of the Common Stock in the
Offerings will incur an immediate and substantial dilution in the net tangible
book value per share of the Common Stock from the initial public offering
price of $12.47 per share, assuming the sale of no shares in the Rights
Offering, or $11.87 per share, assuming the maximum proceeds to the Company
from the Rights Offering. Additional dilution is likely to occur upon the
exercise of outstanding stock options. See "Dilution."
No Prior Public Market; Potential Volatility of Stock Price. Prior to the
Offerings, there has been no public market for the Common Stock, and there can
be no assurance that an active trading market will develop or be sustained
after the Offerings or that the market price of the Common Stock will not
decline below the
10
<PAGE>
initial public offering price. The initial public offering price will be
determined by negotiations among the Company and the Representatives of the
Underwriters. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. Factors such as
fluctuations in the Company's operating results, announcements of
technological innovations or new contracts or products by the Company or its
competitors, government regulation and approvals, developments in patent or
other proprietary rights and market conditions for stocks of companies similar
to the Company could have a significant impact on the market price of the
Common Stock.
Lack of Dividends. The Company anticipates that for the foreseeable future
the Company's earnings, if any, will be retained for use in the business and
that no cash dividends will be paid on the Common Stock. Declaration of
dividends on the Common Stock will depend upon, among other things, future
earnings, the operating and financial condition of the Company, its capital
requirements and general business conditions. See "Dividend Policy."
Uncertainty as to Uses of Net Proceeds. Depending upon whether shares are
issued in the Rights Offering, whether the acquisition of Continental is
consummated, or both, there is substantial uncertainty as to the amount of net
proceeds from the Offerings which will be allocated to working capital and
general corporate purposes without identified specific uses. For example, if
all 1,250,000 shares are issued in the Rights Offering and the acquisition of
Continental is not consummated, there will be approximately $40,000,000 of net
proceeds for which specific uses have not been identified (approximately 90%
of the net proceeds of the Offerings). Conversely, if no shares are issued in
the Rights Offering and the Continental transaction is consummated, there will
be approximately $5,542,000 of net proceeds allocated to working capital and
general corporate purposes (approximately 19% of the net proceeds of the
Offerings). The Company will have discretion over the use and investment of
any such proceeds allocated to working capital and general corporate purposes.
See "Use of Proceeds."
11
<PAGE>
THE COMPANY
The Company was incorporated in Delaware in September 1995 as a wholly-owned
subsidiary of ThermoTrex. ThermoTrex acquired all of the outstanding shares of
capital stock of Bennett in September 1995 for approximately $42,000,000 in
cash. On October 2, 1995, the Company acquired all of the outstanding shares
of capital stock of Bennett from ThermoTrex in exchange for a $42,000,000
principal amount subordinated convertible note due 2000 (the "Convertible
Note"). The Convertible Note bears interest at a rate of 4.2% per annum and is
convertible into shares of Common Stock at a conversion price of $11.79 per
share. Subsequently, on October 16, 1995, ThermoTrex contributed all of the
assets and liabilities relating to its Lorad division ("Lorad") and the
development of its Sonic CT system to the Company in exchange for 20,000,000
shares of Common Stock of the Company. On May 29, 1996, the Company acquired
substantially all of the assets of XRE for approximately $17,000,000 in cash
and the repayment of approximately $1,800,000 of XRE's debt.
Unless the context otherwise requires, references in this Prospectus to the
Company or Trex Medical Corporation refer to Trex Medical Corporation and its
subsidiaries. As of March 27, 1996, ThermoTrex beneficially owned 91% of the
Company's outstanding Common Stock, excluding the shares of Common Stock
issuable upon the conversion of the outstanding principal amount of the
Convertible Note. The Company's principal executive offices are located at 36
Apple Ridge Road, Danbury, Connecticut, and its telephone number is (203) 790-
1188.
THE RIGHTS OFFERING
Concurrently with the offering of shares of Common Stock hereby, the Company
is distributing Rights to holders of its Common Stock of record on the Record
Date, including ThermoTrex. The Rights are generally non-transferable, except
that ThermoTrex may distribute Rights to holders of its Common Stock. Of the
Rights received by ThermoTrex, it will distribute to each holder of ThermoTrex
Common Stock on the Record Date, including Thermo Electron, one Right for
every ten shares of ThermoTrex Common Stock held by them and will retain the
remaining Rights. ThermoTrex has irrevocably elected not to exercise the
Rights which it does not distribute to its shareholders and such Rights will
expire unexercised. The terms of the Rights provide that they may not be
exercised by any person holding a majority of the outstanding shares of
ThermoTrex Common Stock. As holder of a majority of the outstanding shares of
ThermoTrex Common Stock, Thermo Electron will have no right to exercise the
Rights it receives from ThermoTrex and such Rights will therefore expire
unexercised. Accordingly, there will be a total of approximately 1,250,000
shares of Common Stock which may be issued upon the exercise of all Rights
which may be exercised in the Rights Offering.
The purpose of the Rights Offering is to provide existing stockholders of
the Company and ThermoTrex with an opportunity to participate in the initial
public offering of the Company's Common Stock and to provide the Company with
the ability to raise additional capital in a cost-effective manner.
The purchase price per share to subscribers in the Rights Offering will be
the initial public offering price per share of Common Stock set forth on the
cover page of this Prospectus up to a maximum of $16.00 per share. If the
initial public offering price is greater than $16.00, the Rights Offering will
be terminated because the Company intends to issue the shares in the
Underwritten Public Offering and the Rights Offering at the same price and
because participants in the Rights Offering are only being asked to commit
funds based upon a maximum public offering price of $16.00 per share. As of
, 1996 a total of Rights had been exercised. The closing of the Rights
Offering is conditioned upon the closing of the Underwritten Public Offering.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
in the Offerings are estimated to be $28,442,000 ($32,817,800 if the
Underwriters' over-allotment option is exercised in full) assuming no shares
are issued in the Rights Offering, and $44,692,000 ($49,067,800 if the
Underwriters' over-allotment option is exercised in full) if all 1,250,000
shares are issued in the Rights Offering, in each case assuming an initial
public offering price of $13.00 per share and after deducting estimated
underwriting discounts and commissions and offering expenses. The principal
purposes of the Offerings are to increase the Company's equity capital, to
create a public market for the Common Stock and to facilitate future access by
the Company to public equity markets.
The Company expects to use the net proceeds from the Offerings for the
acquisition of Continental, the purchase price of which is currently expected
to be approximately $18,200,000. The Company expects to use any excess
proceeds (approximately $10,242,000, assuming no shares are issued in the
Rights Offering, and approximately $26,492,000 ($30,867,800 if the
Underwriters' over-allotment option is exercised in full), assuming all
1,250,000 shares are issued in the Rights Offering) to fund research and
development of future products, including the development of full-view digital
imaging mammography systems (currently estimated to be approximately
$4,700,000 in fiscal 1996), and for working capital and other general
corporate purposes, ($5,542,000, assuming no shares are issued in the Rights
Offering, and approximately $21,792,000 ($26,167,800 if the Underwriters'
over-allotment option is exercised in full), assuming all 1,250,000 shares are
issued in the Rights Offering), including the possible acquisition of one or
more businesses whose products are complementary with those offered by the
Company. However, except for Continental, the Company has no specific
agreements, commitments or understandings with respect to any acquisition that
would be material to the Company. There can be no assurance that the
Continental acquisition will be consummated on the proposed terms, if at all.
See "Risk Factors--Uncertainty as to Uses of Net Proceeds."
Pending these uses, the Company expects to invest the net proceeds from the
Offerings primarily in investment grade interest bearing or dividend bearing
instruments, either directly by the Company or pursuant to a repurchase
agreement with Thermo Electron. See "Relationship and Potential Conflicts of
Interest with Thermo Electron and ThermoTrex--Miscellaneous."
DIVIDEND POLICY
The Company anticipates that for the foreseeable future the Company's
earnings, if any, will be retained for use in the business and that no cash
dividends will be paid on the Common Stock.
13
<PAGE>
CAPITALIZATION
The following table sets forth as of March 30, 1996 the capitalization of
the Company (i) stated on a pro forma basis to reflect the May 1996
acquisition of XRE and the proposed acquisition of Continental, and assumed
short-term borrowings from Thermo Electron of $18.2 million, (ii) as adjusted
to reflect the issuance and sale by the Company of the 2,400,000 shares of
Common Stock offered in the Underwritten Public Offering and assuming no
shares of Common Stock are sold in the Rights Offering, and (iii) as adjusted
to reflect the issuance and sale of 3,650,000 shares of Common Stock in both
the Underwritten Public Offering and the Rights Offering, in each case at an
assumed initial public offering price of $13.00 per share and after deducting
estimated underwriting discounts and commissions and offering expenses payable
by the Company.
<TABLE>
<CAPTION>
MARCH 30, 1996
------------------------------------------
AS ADJUSTED,
INCLUDING
PRO FORMA RIGHTS
COMBINED AS ADJUSTED OFFERING
------------ ------------ -------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
Short-term Obligations:
Note Payable to Thermo Electron.... $ 18,200 $ -- $ --
============ ============ ============
Long-term Obligations:
Subordinated Convertible Note, Due
to Parent Company................. $ 39,000 $ 39,000 $ 39,000
Other.............................. 236 236 236
------------ ------------ ------------
39,236 39,236 39,236
------------ ------------ ------------
Shareholders' Investment:
Common stock, $.01 par value,
50,000,000 shares authorized;
22,216,452 shares issued and
outstanding, 24,616,452 shares, as
adjusted and 25,866,452 shares, as
adjusted for the Rights Offering
(1)............................... 222 246 259
Capital in excess of par value..... 59,476 87,894 104,131
Retained earnings.................. 3,734 3,734 3,734
------------ ------------ ------------
Total Shareholders' Investment.... 63,432 91,874 108,124
------------ ------------ ------------
Total Capitalization (Long-term
Obligations and Shareholders'
Investment)..................... $102,668 $131,110 $147,360
============ ============ ============
</TABLE>
- --------
(1) Does not include 1,925,000 shares of Common Stock reserved for issuance
under the Company's stock-based compensation plans and 3,307,888 shares of
Common Stock reserved for issuance upon conversion of the outstanding
principal amount of the Convertible Note. Options to purchase 1,401,000
shares of Common Stock had been granted and were outstanding under the
Company's stock-based compensation plans as of May 30, 1996. See
"Management--Compensation of Directors" and "Executive Compensation" and
Note 9 of Notes to Consolidated Financial Statements.
14
<PAGE>
DILUTION
As of March 30, 1996, the Company had negative net tangible book value of
$15,337,000, or $.69 per share, stated on a pro forma basis to reflect the May
1996 acquisition of XRE and the proposed acquisition of Continental (see the
pro forma combined condensed balance sheet included elsewhere in this
Prospectus). Negative net tangible book value per share is determined by
dividing negative net tangible book value (total tangible assets less total
liabilities) by the number of shares of Common Stock outstanding. After giving
effect to the sale by the Company of 2,400,000 shares of Common Stock in the
Underwritten Public Offering (after deducting the estimated underwriting
discounts and commissions and offering expenses), and assuming no shares are
sold in the Rights Offering, the pro forma net tangible book value of the
Company as of March 30, 1996 would have been $13,105,000 or $.53 per share.
This represents an immediate increase in pro forma net tangible book value of
$1.22 per share to existing shareholders and an immediate dilution in pro
forma net tangible book value of $12.47 per share to new investors purchasing
Common Stock in the Underwritten Public Offering. See "Risk Factors--Immediate
and Substantial Dilution." The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed price to public....................................... $13.00
------
Pro forma negative net tangible book value per share as of
March 30, 1996, before the Underwritten Public Offering.... $(.69)
Increase in net tangible book value per share attributable
to the Underwritten Public Offering........................ 1.22
-----
Pro forma net tangible book value per share as of March 30,
1996, after the Underwritten Public Offering (1)(2).......... .53
------
Dilution per share to new investors (1)(2).................... $12.47
======
</TABLE>
- --------
(1) If the Underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after the Underwritten Public
Offering would be $.70, resulting in an immediate dilution of $12.30 per
share to investors purchasing shares in the Underwritten Public Offering.
See "Underwriting."
(2) If all options outstanding as of May 30, 1996 to purchase an aggregate of
1,401,000 shares of Common Stock were exercised in full, and the
$39,000,000 principal amount Convertible Note which was outstanding as of
May 30, 1996 was converted by ThermoTrex into 3,307,888 shares of the
Company's Common Stock, in addition to the Underwriters' exercise of the
over-allotment option, the pro forma net tangible book value per share
after the Underwritten Public Offering would be $2.43, resulting in an
immediate dilution of $10.57 per share to investors purchasing shares in
the Underwritten Public Offering.
The following table sets forth on a pro forma basis as of March 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price paid per share by
existing shareholders and by the investors purchasing shares of Common Stock
in the Underwritten Public Offering, assuming no shares are sold in the Rights
Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
ThermoTrex (1)............ 20,254,452 82.3% $41,010,000 44.4% $ 2.02
Other existing investors
(2)...................... 1,962,000 8.0 20,161,000 21.8 10.28
New investors............. 2,400,000 9.7 31,200,000 33.8 13.00
---------- ----- ----------- -----
Total................... 24,616,452 100.0% $92,371,000 100.0%
========== ===== =========== =====
</TABLE>
- --------
(1) Calculated on the basis of (i) the book value of net assets transferred by
ThermoTrex to the Company in exchange for 20,000,000 shares of the
Company's Common Stock and (ii) the conversion price of the shares issued
to ThermoTrex upon conversion of $3,000,000 principal amount of the
Convertible Note.
(2) Represents the price paid for shares of the Company's Common Stock
purchased for cash.
15
<PAGE>
After giving effect to the Rights Offering, which assumes the sale of
1,250,000 shares upon the exercise of Rights, the pro forma net tangible book
value of the Company as of March 30, 1996 would have been $29,355,000 or $1.13
per share. This represents an immediate increase in pro forma net tangible
book value of $1.82 per share to existing shareholders and an immediate
dilution in pro forma net tangible book value of $11.87 per share to new
investors purchasing Common Stock in the Offerings. See "Risk Factors--
Immediate and Substantial Dilution." The following table illustrates per share
dilution:
<TABLE>
<S> <C> <C>
Assumed price to public...................................... $13.00
------
Pro forma negative net tangible book value per share as of
March 30, 1996, before the Offerings...................... $(.69)
Increase in net tangible book value per share attributable
to the Offerings.......................................... 1.82
-----
Pro forma net tangible book value per share as of March 30,
1996, after the Offerings (1)(2)............................ 1.13
------
Dilution per share to new investors (1)(2)................... $11.87
======
</TABLE>
- --------
(1) If the Underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after the Offerings would be
$1.29, resulting in an immediate dilution of $11.71 per share to investors
purchasing shares in the Offerings. See "Underwriting."
(2) If all options outstanding as of May 30, 1996 to purchase an aggregate of
1,401,000 shares of Common Stock were exercised in full, and the
$39,000,000 principal amount Convertible Note which was outstanding as of
May 30, 1996 was converted by ThermoTrex into 3,307,888 shares of the
Company's Common Stock, in addition to the Underwriters' exercise of the
over-allotment option, the pro forma net tangible book value per share
after the Offerings would be $2.86, resulting in an immediate dilution of
$10.14 per share to investors purchasing shares in the Offerings.
The following table sets forth on a pro forma basis as of March 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price paid per share by
existing shareholders and by the investors purchasing shares of Common Stock
in the Offerings, assuming the maximum proceeds to the Company from the Rights
Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
ThermoTrex (1).............. 20,254,452 78.3% $ 41,010,000 37.8% $ 2.02
Other existing investors
(2)........................ 1,962,000 7.6 20,161,000 18.5 10.28
New investors............... 3,650,000 14.1 47,450,000 43.7 13.00
---------- ----- ------------ -----
Total....................... 25,866,452 100.0% $108,621,000 100.0%
========== ===== ============ =====
</TABLE>
- --------
(1) Calculated on the basis of (i) the book value of net assets transferred by
ThermoTrex to the Company in exchange for 20,000,000 shares of the
Company's Common Stock and (ii) the conversion price of the shares issued
to ThermoTrex upon conversion of $3,000,000 principal amount of the
Convertible Note.
(2) Represents the price paid for shares of Common Stock purchased for cash.
16
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected financial information below as of and for the years ended
January 1, 1994 and December 31, 1994, and the nine months ended September 30,
1995 has been derived from the Company's Consolidated Financial Statements,
which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report included elsewhere in this
Prospectus. The selected financial information for the fiscal years ended
December 28, 1991 and January 2, 1993, the nine months ended October 1, 1994
and the six month periods ended April 1, 1995 and March 30, 1996 has not been
audited but, in the opinion of the Company, includes all adjustments
(consisting only of normal, recurring adjustments) necessary to present fairly
such information in accordance with generally accepted accounting principles
applied on a consistent basis. The results of operations for the six months
ended March 30, 1996 are not necessarily indicative of results for the entire
year.
<TABLE>
<CAPTION>
PRO FORMA COMBINED (5)
------------------------
FISCAL YEAR (1) NINE MONTHS ENDED (1)(2) SIX MONTHS ENDED (1) NINE MONTHS SIX MONTHS
---------------------------------- ------------------------ ---------------------- ENDED ENDED
OCTOBER 1, SEPTEMBER 30, APRIL 1, MARCH 30, SEPTEMBER 30, MARCH 30,
1991 1992 (3) 1993 1994 1994 1995 (4) 1995 1996 (4) 1995 1996
------ -------- ------- ------- ---------- ------------- --------- ---------- ------------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
INCOME DATA:
Revenues......... $ -- $ 4,128 $37,519 $54,410 $39,196 $ 55,291 $ 31,315 $ 66,829 $126,185 $ 92,959
------ ------- ------- ------- ------- -------- --------- ---------- -------- --------
Costs and
Operating
Expenses:
Cost of
revenues........ -- 2,164 18,589 27,794 19,654 28,180 16,125 37,592 78,402 54,337
Selling, general
and
administrative
expenses........ -- 1,027 9,788 13,272 9,794 12,174 7,117 13,695 29,588 19,845
Research and
development
expenses........ 313 1,683 7,182 10,662 7,320 8,595 6,270 8,170 13,918 10,825
------ ------- ------- ------- ------- -------- --------- ---------- -------- --------
313 4,874 35,559 51,728 36,768 48,949 29,512 59,457 121,908 85,007
------ ------- ------- ------- ------- -------- --------- ---------- -------- --------
Operating Income
(Loss)........... (313) (746) 1,960 2,682 2,428 6,342 1,803 7,372 4,277 7,952
Interest and
Other Income
(Expense), Net... -- -- (158) (22) (11) 22 (2) (397) (1,809) (1,127)
------ ------- ------- ------- ------- -------- --------- ---------- -------- --------
Income (Loss)
Before Income
Taxes............ (313) (746) 1,802 2,660 2,417 6,364 1,801 6,975 2,468 6,825
Income Tax
Provision
(Benefit)........ (123) (202) 975 1,466 1,332 2,881 835 3,241 1,870 3,147
------ ------- ------- ------- ------- -------- --------- ---------- -------- --------
Net Income
(Loss)........... $ (190) $ (544) $ 827 $ 1,194 $ 1,085 $ 3,483 $ 966 $ 3,734 $ 598 $ 3,678
====== ======= ======= ======= ======= ======== ========= ========== ======== ========
Earnings (Loss)
per Share (6).... $ (.01) $ (.03) $ .04 $ .06 $ .05 $ .17 $ .05 $ .17 $ .02 $ .15
====== ======= ======= ======= ======= ======== ========= ========== ======== ========
Weighted Average
Shares (6)....... 20,151 20,151 20,151 20,151 20,151 20,151 20,151 21,547 24,667 24,700
====== ======= ======= ======= ======= ======== ========= ========== ======== ========
BALANCE SHEET
DATA (AT END OF
PERIOD):
Working Capital.. $ -- $ 4,410 $ 6,148 $ 8,584 $ 7,333 $ 13,171 $ 35,555 $ 10,626
Total Assets..... -- 35,004 44,553 48,000 47,465 102,374 129,575 161,295
Long-term
Obligations...... -- -- -- -- -- -- 39,000 39,236
Shareholders'
Investment....... (28) 28,636 36,694 37,033 37,471 80,010 63,432 63,432
</TABLE>
- ----
(1) All periods presented include ThermoTrex's research and development
business pertaining to its Sonic CT system.
(2) In September 1995, the Company changed its fiscal year-end from the
Saturday nearest December 31 to the Saturday nearest September 30.
Accordingly, the Company's transition period from January 1, 1995 to
September 30, 1995 ("fiscal 1995") is presented. The unaudited data for
the nine months ended October 1, 1994 is presented for comparative
purposes only.
(3) Includes the results of Lorad since its acquisition by ThermoTrex on
November 17, 1992.
(4) Includes the results of Bennett since its acquisition by ThermoTrex on
September 15, 1995.
(5) The pro forma combined statement of income data was derived from the pro
forma combined condensed statements of income included elsewhere in this
Prospectus. The pro forma combined statement of income data sets forth the
results of operations for the nine months ended September 30, 1995 and six
months ended March 30, 1996, as if the acquisitions of Bennett, XRE and
Continental had occurred on January 1, 1995. The pro forma combined
balance sheet data is derived from the pro forma combined condensed
balance sheet included elsewhere in this Prospectus, which was prepared as
if the acquisitions of XRE and Continental had occurred on March 30, 1996.
(6) Pursuant to Securities and Exchange Commission requirements, earnings
(loss) per share have been presented for all periods. Weighted average
shares for all periods include the 20,000,000 shares issued to ThermoTrex
in connection with the initial capitalization of the Company and the
effect of the assumed exercise of stock options issued within one year
prior to the Company's proposed initial public offering.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company designs, manufactures and markets mammography equipment and
minimally invasive stereotactic needle biopsy systems used for the detection
of breast cancer, and also designs, manufactures and markets general
radiography (X-ray) equipment. The Company sells its systems worldwide
principally through a network of independent dealers. In addition, the Company
manufactures mammography and radiography systems as an original equipment
manufacturer for other medical equipment companies such as U.S. Surgical, GE
and Philips. The Company has two operating units, Lorad, a manufacturer of
mammography and stereotactic biopsy systems, and Bennett, a manufacturer of
general radiography and mammography equipment.
The Company conducts all of its manufacturing operations in the United
States and sells its products on a worldwide basis. The Company anticipates
that an increasing percentage of its revenues will be from export sales. The
Company denominates its export sales in U.S. dollars and therefore, neither
its revenue nor earnings are significantly affected by exchange rate
fluctuations.
RESULTS OF OPERATIONS
In September 1995, the Company changed its fiscal year-end from the Saturday
nearest December 31 to the Saturday nearest September 30. Accordingly, the
results of operations for 1995 compares the nine months ended September 30,
1995 ("fiscal 1995") with the unaudited nine months ended October 1, 1994
("fiscal 1994").
Six Months Ended March 30, 1996 Compared With Six Months Ended April 1, 1995
Revenues increased 113% to $66.8 million in the six months ended March 30,
1996, from $31.3 million in the six months ended April 1, 1995, due primarily
to the inclusion of $23.3 million in revenues from Bennett, which was acquired
in September 1995. Revenues at Lorad increased 39% to $43.5 million in the six
months ended March 30, 1996 from $31.3 million in the six months ended April
1, 1995 as a result of increased demand for mammography and biopsy systems.
Under an OEM agreement with Philips, Lorad will receive minimum orders for two
models of imaging systems totaling $40 million over a five-year period that
began in January 1994, subject to certain conditions. As of March 30, 1996,
the Company had recognized cumulative revenue of $21.3 million under this
contract. Revenues from Philips were $7.4 million in the six months ended
March 30, 1996, compared with $4.7 million in the six months ended April 1,
1995. Export sales accounted for 28% of the Company's revenues in the six
months ended March 30, 1996, compared with 26% in the six months ended April
1, 1995.
The gross profit margin declined to 44% in the six months ended March 30,
1996, from 49% in the six months ended April 1, 1995, due to the inclusion of
lower-margin revenues at Bennett.
Selling, general and administrative expenses as a percentage of revenues
decreased to 20% in the six months ended March 30, 1996 from 23% in the six
months ended April 1, 1995, due to increased revenues at Lorad. Research and
development expenses increased to $8.2 million in the six months ended March
30, 1996 from $6.3 million in the six months ended April 1, 1995, reflecting
the Company's continued efforts to develop and commercialize new products
including the Company's M-IV mammography system, full-breast digital
mammography system, and direct-detection X-ray sensor, as well as enhancements
of existing systems. Under a license agreement between the Company and
ThermoTrex, the Company may elect to expend approximately $2 million each year
during fiscal 1996, 1997 and 1998 in order to expand the field of use in which
it is entitled to use the digital imaging detection technology. See
"Relationship and Potential Conflicts of Interest with Thermo Electron and
ThermoTrex."
Interest income in the six months ended March 30, 1996 represents interest
on the proceeds of the Company's private placements of Common Stock in
November 1995 and January 1996. Interest expense in the six months ended March
30, 1996 represents interest associated with the $42 million principal amount
Convertible Note issued to ThermoTrex in October 1995 in connection with the
Bennett acquisition.
18
<PAGE>
The effective tax rate was 46% in both periods. This tax rate differs from
the statutory federal income tax rate due to the impact of state income taxes
and nondeductible amortization of cost in excess of net assets of acquired
companies.
The Company is involved with certain patent litigation that arose at Lorad
prior to its acquisition by ThermoTrex. See Note 2 of Notes to Consolidated
Financial Statements. In addition, a third party has alleged that the
Company's mammography systems infringe a patent held by the third party. See
Note 8 of Notes to Consolidated Financial Statements. In another matter, a
former employee of the Company has asserted that a component of a newly
introduced product infringes two U.S. patents owned by the former employee.
See "Risk Factors--Risks Associated with Pending and Threatened Patent
Litigation" for a discussion of these matters.
Nine Months Ended September 30, 1995 ("Fiscal 1995") Compared With Nine
Months Ended October 1, 1994 ("Fiscal 1994")
Revenues increased 41% to $55.3 million in fiscal 1995 from $39.2 million in
fiscal 1994. The increase resulted from higher demand across all product
lines, with significant growth coming from international sales through the
Company's OEM agreement with Philips. Revenues from Philips were $9.8 million
in fiscal 1995, compared with $4.1 million in fiscal 1994. Export sales
accounted for 21% of the Company's revenues in fiscal 1995, compared with 11%
in fiscal 1994.
The gross profit margin declined to 49% in fiscal 1995 from 50% in fiscal
1994, due to an adjustment to expense of $0.3 million for inventory revalued
at the time of Bennett's acquisition.
Selling, general and administrative expenses as a percentage of revenues
decreased to 22% in fiscal 1995 from 25% in fiscal 1994, due primarily to
increased revenues. Research and development expenses increased to $8.6
million in fiscal 1995 from $7.3 million in fiscal 1994, reflecting the
Company's continued efforts to develop and commercialize the full-view digital
imaging mammography system, as well as efforts to enhance existing systems.
The effective tax rate was 45% in fiscal 1995, compared with 55% in fiscal
1994. These tax rates exceed the federal statutory federal income tax rate due
primarily to state income taxes and nondeductible amortization of cost in
excess of net assets of acquired companies. The decrease in the effective tax
rate in 1995 resulted from the lower relative impact of nondeductible
amortization of cost in excess of net assets of acquired companies and state
income taxes.
Twelve Months Ended December 31, 1994 Compared With Twelve Months Ended
January 1, 1994
Revenues increased 45% to $54.4 million in 1994 from $37.5 million in 1993.
The increase resulted from the initiation of OEM sales under the Philips
agreement, an increase in digital spot mammography sales and increased demand
for StereoGuide needle-biopsy, mammography and industrial imaging equipment
due to increased demand. Revenues from Philips were $5.8 million in 1994.
Export sales accounted for 14% of the Company's revenues in 1994, compared
with 10% of revenues in 1993.
The gross profit margin declined to 49% in 1994 from 50% in 1993, due to a
change in sales mix.
Selling, general and administrative expenses as a percentage of revenues
declined to 24% in 1994 from 26% in 1993, due primarily to an increase in
total revenues. Research and development expenses increased to $10.7 million
in 1994 from $7.2 million in 1993, reflecting the Company's continued efforts
to develop and commercialize the full-view digital imaging mammography system
and the Sonic CT system, and the development of the Philips OEM product.
The effective tax rate during 1994 was 55%, compared with 54% in 1993. These
rates exceed the statutory federal income tax rate due to nondeductible
amortization of cost in excess of net assets of acquired companies and the
impact of state income taxes.
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $35.6 million at March 30, 1996, compared
with $13.2 million at September 30, 1995. Included in working capital are cash
and cash equivalents of $19.2 million at March 30, 1996 and $0.2 million at
September 30, 1995. Cash provided by operating activities was $1.8 million in
the six months ended March 30, 1996. The Company used cash of $4.1 million and
$1.9 million to fund increases in accounts receivable and inventories,
respectively, during the first six months of fiscal 1996. The increase in
receivables resulted from higher sales while the inventory increase resulted
from business growth and a new product that will be shipped in the third
fiscal quarter. The Company expended $1.5 million on purchases of property,
plant and equipment during the first half of fiscal 1996. The Company expects
to expend approximately $1.4 million for additional purchases of property,
plant and equipment during the remainder of fiscal 1996.
In connection with the transfer of the outstanding shares of capital stock
of Bennett, the Company issued to ThermoTrex the $42,000,000 principal amount
Convertible Note. In March 1996, ThermoTrex converted $3,000,000 principal
amount of the Convertible Note into 254,452 shares of Common Stock. In
November 1995, the Company completed a private placement of 1,862,000 shares
of its Common Stock for net proceeds of approximately $17.6 million. In
January 1996, the Company sold 100,000 shares of its Common Stock in a private
placement for net proceeds of $1.1 million.
In April 1996, the Company signed a non-binding letter of intent to acquire
Continental, an Illinois company that designs, manufactures and markets
general purpose and specialty X-ray systems for approximately $18.2 million in
cash, including the repayment of $5.7 million in debt. The purchase price is
subject to a post-closing adjustment based on the net asset value of
Continental as of the closing date. If the acquisition is completed, the
Company intends to finance the acquisition through the proceeds of the
Offerings.
In May 1996, the Company acquired substantially all of the assets of XRE, a
Massachusetts company that designs, manufactures and markets X-ray imaging
systems used for cardiac catheterization and angiographs, for approximately
$17.0 million in cash. In addition, the Company repaid approximately $1.8
million of XRE's debt. The purchase price is subject to a post-closing
adjustment based on the net asset value of XRE as of the closing date. The
Company financed the acquisition through its existing cash balances.
Working capital at March 30, 1996, on a pro forma basis assuming the
acquisitions of XRE and Continental, which are assumed to have been financed
through cash on hand and borrowings from Thermo Electron, had occurred on that
date, would have been $10.6 million. (See the pro forma combined condensed
balance sheet included elsewhere in this Prospectus.)
Although the Company expects to have positive cash flow from its existing
operations, the Company anticipates it will require significant amounts of
cash to pursue the acquisition of complementary businesses and technologies.
The Company expects that it will finance these acquisitions through a
combination of internal funds, the net proceeds of the Offerings, additional
debt or equity financing and/or short-term borrowings from ThermoTrex or
Thermo Electron, although it has no agreement with these companies to ensure
that funds will be available on acceptable terms or at all. The Company
believes that its existing resources are sufficient to meet the capital
requirements of its existing businesses for the foreseeable future, including
at least the next 24 months.
20
<PAGE>
BUSINESS
The Company is a worldwide leader in the design, manufacture and marketing
of mammography equipment and minimally invasive stereotactic needle biopsy
systems used for the detection of breast cancer, as well as a leading designer
and manufacturer of general radiography (X-ray) equipment. A mammography
system is a dedicated radiographic system designed specifically to image
breast tissue. Stereotactic needle biopsy systems, which use a guided hollow
needle to extract a sample of tissues from the breast, offer a cost-effective,
less invasive alternative to open surgery for the biopsy of suspicious breast
lesions. The Company recently broadened its product base by acquiring Bennett
X-Ray Corporation ("Bennett"), a leading producer of specialty and general
purpose radiographic systems, including mammography systems, and XRE
Corporation ("XRE"), a manufacturer of X-ray imaging systems used for cardiac
catheterization and angiography.
The Company believes the introduction of technologically innovative products
has made a significant contribution to the achievement of its leadership
position. In 1984, the Company introduced the first mammography system with a
high frequency generator, which improved image quality while reducing
radiation dosage. The Company's Bennett Contour mammography system is designed
with a patented tilt C-arm which permits imaging of breast tissue closer to
the chest wall and greater flexibility in the positioning of patients. The
Company's Lorad StereoGuide stereotactic needle biopsy system is one of two
dedicated prone systems sold in the world, and its LORAD DSM digital spot
mammography option was one of the first digital imaging systems available for
use with stereotactic needle biopsy. The Bennett high frequency generator,
introduced in 1989, was the first generator to offer 100 kHz high frequency
power for general radiographic systems, resulting in improved image quality
while reducing radiation dosage.
The Company's mammography and stereotactic needle biopsy systems are used by
radiologists and physicians in offices, hospitals and dedicated breast-care
centers, and its general radiography systems are used by physicians and
radiologists, both in office and hospital settings, as well as by
veterinarians and chiropractors. The Company sells its systems worldwide
principally through a network of independent dealers. In addition, the Company
manufactures mammography and radiography systems and components as an original
equipment manufacturer for other medical equipment companies such as United
States Surgical Corporation ("U.S. Surgical"), the GE Medical Systems division
of General Electric Company, Inc. ("GE") and the Philips Medical Systems North
America Company subsidiary of Philips N.V. ("Philips").
The Company believes that sales of mammography systems will be driven by
acceptance of mammography as an effective cancer screening tool and
improvements in performance through technological innovation such as full-view
digital imaging. The Company believes that growth in the market for
stereotactic needle biopsy systems will be driven by increasing recognition in
the medical community of the effectiveness of this procedure as an alternative
to more invasive procedures, as well as by general health-care cost-
containment trends. The Company believes that sales in the market for general
radiographic systems are driven primarily by replacement of older systems.
The Company's strategy includes maintaining its market position and
expanding into complementary markets through continued technological
innovation and strategic acquisitions. The Company recently introduced a
proprietary High Transmission Cellular ("HTC") grid for use with its
mammography systems that provides better image contrast than existing grids at
lower radiation doses, and a patented autoexposure tomography option to its
general radiography systems that reduces the need for multiple exposures in
tomography procedures, thereby reducing the radiation exposure to the patient.
The Company believes the most promising technological advances in the
radiography field will be derived from the substitution of electronic
detectors for the film currently used in substantially all radiographic
systems. This digital imaging technology is expected to be capable of higher
image quality, to permit the enhancement of an X-ray image through software
and to allow near-real-time, off-site analysis of the X-ray image by
radiologists. The Company is currently developing a full-view digital imaging
mammography system and has working prototypes at two clinical sites. The
Company believes
21
<PAGE>
that the digital imaging technology being developed for this system may be
adaptable to general radiography and cardiac diagnostic imaging systems and
the Company will seek to develop applications in these markets.
The Company also intends to expand or to augment its product line through
the acquisition of one or more additional companies or technologies. The
Company's strategy includes making acquisitions of companies that can benefit
from the Company's distribution channels and technology. In May 1996, the
Company acquired XRE, which designs, manufactures and markets X-ray imaging
systems used for cardiac catheterization and angiography. XRE manufactures
systems and system components as an original equipment manufacturer for other
medical equipment companies such as Philips and the Picker International, Inc.
subsidiary of GEC, Inc. ("Picker International"). It also sells its systems in
the United States directly and through distributors. In April 1996, the
Company signed a non-binding letter of intent to acquire Continental X-Ray
Corporation and certain of its affiliates (collectively, "Continental").
Continental designs, manufactures and markets radiographic/fluoroscopic
products, general radiography systems, electrophysiology products used in
cardiac laboratories and dedicated mammography systems. There can be no
assurance that the Continental transaction will be successfully completed.
INTRODUCTION TO RADIOGRAPHY
Radiography involves the use of X-rays to produce images of matter beneath
an opaque surface. Radiography has been used as a medical diagnostic tool
since the turn of the century. A radiographic imaging system principally
consists of a generator, an X-ray tube and an image recording system, which is
usually film. The object to be imaged is placed between the X-ray tube and the
film. Typically, filters or grids are placed between the X-ray tube and the
object, or the object and the film, to reduce extraneous X-rays. Some
radiographic systems include a bucky, or moving grid, to increase image
contrast by reducing scattering X-rays.
X-rays, which are not reflected by opaque surfaces, pass through the object
and expose the film. However, if the object is comprised of areas of varying
densities or chemical compositions, X-rays will be absorbed by the denser
areas or areas of certain chemical compositions in proportion to the density
or chemical composition of the matter. As a result, the film will be exposed
to a varying degree, thereby producing an image of the density or chemical
variation within the object. For example, since bone has a greater density
than the surrounding tissue in the body, X-rays can be used to produce an
image of a skeleton.
Radiographic imaging systems are differentiated on the basis of the power
and frequency of the generator, the configuration of the X-ray tube relative
to the film and the software that controls the operation of the system. In
certain areas, the specialized requirements of the imaging procedure have
resulted in the development of dedicated systems. For example, mammography
systems, which are designed exclusively to image breast tissue, have the
ability to compress the breast, adjust X-ray power levels and use automated
software controls programmed to provide the best image of breast tissue.
BREAST CANCER DETECTION
Breast cancer is the second leading cause of cancer fatalities in women. The
incidence of breast cancer in American women has grown from one in 20 in 1940
to one in 11 in 1980 to one in eight in 1994. The American Cancer Society
("ACS") estimates that in 1996 over 184,000 new cases of breast cancer in
American women will be reported and approximately 44,000 American women will
die from the disease.
Successful treatment of breast cancer depends in large part on the early
detection of malignant lesions in the breast. Current detection procedures
typically include clinical and self examination, screening mammography and, if
necessary, a biopsy. Physical examination is only useful for detecting lesions
that can be felt, while mammography has the ability to reveal lesions that
have not advanced to that stage. If a suspicious lesion is discovered in a
screening mammogram, the woman typically will undergo a biopsy, which is a
procedure to physically remove cells from the lesion for testing in a
laboratory. If the cells are cancerous, the woman generally
22
<PAGE>
undergoes some form of cancer treatment. The Company designs, manufactures and
markets both mammography and biopsy systems.
Mammography Systems
Most experts agree that mammography is the best method for detecting breast
cancer. The ACS and eighteen other health organizations, including the
American Medical Association, recommend that women aged 40 to 49 undergo a
screening mammogram every one to two years and that women over the age of 50
undergo an annual screening mammogram. However, only approximately 40% of
women in the United States comply with the ACS guidelines. The National Cancer
Institute and the American College of Physicians currently only recommend
screening mammography for women over the age of 50.
Current mammography systems are limited in their ability to image dense
breast tissue, typically found in women under the age of 50. This is
significant since approximately one-quarter of the women diagnosed with breast
cancer are under the age of 50. In addition, women with a family history of
breast cancer are at a higher risk of getting the disease and are therefore
encouraged to start undergoing screening mammography at a younger age.
Successful imaging of dense breast tissue requires high contrast images. The
Company recently introduced a new proprietary HTC grid that, compared to
existing grids, reduces scattering X-rays, while blocking fewer primary X-
rays, resulting in higher contrast images with lower radiation doses. In
addition, the Company is developing a full-view digital imaging mammography
system designed to substantially increase image contrast without a significant
decrease in image resolution.
Demand in the market for mammography systems is driven primarily by
technological innovation that produces better image quality. Although growth
of the installed base has slowed, demand for new systems continues as older
models are replaced with ones offering new technological innovations. In
addition, the Company believes that the market outside the United States will
grow as more countries adopt mammography quality standards similar to those
recently adopted in the United States.
The Company currently markets six different mammography systems. The
Company's systems are generally differentiated on the basis of price and
performance. The Company's high-end models are the recently introduced Lorad
M-IV and the Bennett Contour, which have retail list prices of approximately
$96,000 and $89,000, respectively. The Lorad M-IV offers enhanced image
quality and system features over the Lorad M-III, which has been Lorad's high-
end model for the last five years. Many of the Lorad M-IV's features were
developed in response to user demands, including upgradability and modular
systems. The Bennett Contour offers a patented tilt C-arm which permits the
system to tilt toward or away from the patient to aid in imaging breast
tissue. The Company's lower-priced models are the Lorad M-III and the Bennett
MF-150, which have retail list prices of approximately $82,500 and $48,000,
respectively. These models do not offer all of the features of the high-end
models and are marketed to more cost-conscious customers. In addition, the
Company offers the Lorad T-350 and the Bennett MD-5 mobile mammography
systems.
The Company is also developing a next generation mammography system which
replaces the film with a solid-state detector capable of directly recording
the X-ray image in an electronic format. The Company anticipates that this
digital imaging system will be able to record 4,000 different shades of grey
compared to only 200 shades of grey in conventional film-recorded images,
resulting in significantly greater image contrast. In addition, since the
image is recorded in electronic format, it can be enhanced and manipulated,
transmitted over telephone lines to remote locations, and stored on magnetic
or optical media.
The Company currently offers a DSM digital spot mammography option for use
primarily with stereotactic needle biopsy. However, this system is capable of
imaging only a small area of the breast. The Company currently has prototype
full-view digital imaging mammography systems in operation at Good Samaritan
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Hospital in New York and the University of Virginia. At the Radiology Society
of North America Conventions in 1994 and 1995, the Company displayed superior
images from its prototypes to radiologists. The Company expects to submit a
modified design of this prototype to the United States Food and Drug
Administration ("FDA") for clearance, which is required before the Company can
commercially market its full-view digital imaging mammography system. There
can be no assurance that the Company will receive all necessary FDA
clearances. See "Risk Factors--Government Regulation" and "Business--
Government Regulation."
Stereotactic Needle Biopsy Systems
Mammography is only one of the first steps in the diagnosis of breast
cancer. If a mammogram reveals a suspicious lesion that cannot be identified
as benign or malignant, the next step typically is to perform a biopsy to
remove cells from the suspicious lesion to determine whether or not they are
cancerous. Studies indicate that between 1% and 2% of women undergoing their
first screening mammography in the United States will have a biopsy. However,
only 20% to 40% of women biopsied will be diagnosed with breast cancer.
Traditionally, biopsies have been performed in open surgery under general
anesthetic. Surgical biopsies can be painful procedures, and surgeons
generally remove a large area of breast tissue, about the size of a golf ball,
to ensure the collection of tissue from the suspicious lesion. These surgeries
can leave visible scarring on the breast and scar tissue in the breast that
can make detecting cancers in future mammograms more difficult.
The Company offers a variety of needle biopsy systems that provide an
alternative to surgical biopsy. Stereotactic needle biopsy systems were
introduced to address the disadvantages of surgical biopsy. Stereotactic
needle biopsy procedures can be performed on an out-patient basis under local
anesthetic. These procedures generally remove only a small tissue sample,
resulting in minimal scarring both on and in the breast. Recent studies
indicate that stereotactic needle biopsy is equally effective compared to
surgical biopsy in determining whether a suspicious lesion is malignant. The
typical cost of a stereotactic needle biopsy procedure is approximately $1,000
compared to approximately $3,000 for a surgical biopsy. However, because this
procedure was only recently introduced and is still gaining acceptance by the
medical community, less than 10% of breast tissue biopsies performed in 1994
used a stereotactic needle biopsy procedure.
The basic principle of a stereotactic needle biopsy system is that a hollow
needle is inserted into the breast to remove cells from the suspicious lesion.
The needle is guided to the suspicious lesion by use of stereotactic images of
the breast. Stereotactic images are two images of the same fixed breast, one
taken at a 15 degree angle off true vertical in one direction and the other
taken at a 15 degree angle off true vertical in the other direction. The
stereotactic images are input into a computer and then used to plot the
coordinates of the lesion to aim a computer-controlled needle gun.
The Company offers upright, add-on systems, the StereoLoc II and MF-CYTO,
that can be attached to most of its mammography systems. Add-on systems are
principally comprised of a needle gun attachment that fits onto the
mammography system in place of the breast compression paddle. The stereotactic
images required to plot the location of the lesion are taken by the
mammography system. These systems enhance the functionality of a mammography
system and are beneficial to customers which have only periodic demand for
stereotactic needle biopsy procedures.
The Company also offers a dedicated prone table, the StereoGuide, for
customers with greater demand for biopsy procedures. With the dedicated prone
table, the patient lies down with her breast suspended through an aperture in
the table. The X-ray imaging equipment and needle gun are mounted below the
table. Patients on the prone table are more comfortable, increasing the
likelihood they will remain still during the procedure, and cannot see the
needle being inserted in their breast, reducing the chance of fainting. The
Company's Stereoguide system is the subject of a lawsuit by Fischer alleging
infringement of a Fischer patent. See "Risk Factors--Risks Associated With
Pending and Threatened Patent Litigation" and "Business--Patents and
Proprietary Technology."
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The Company offers a digital spot imaging option with all of its
stereotactic needle biopsy systems. Although not capable of imaging the entire
breast, digital spot imagers are capable of capturing an area large enough to
cover a suspicious lesion. The Company's digital spot imaging systems can
record and display an X-ray image in approximately ten seconds. Since the
image is recorded directly in electronic format, a computer can quickly plot
the location of the lesion and aim the needle gun once the lesion has been
located with a cursor on the computer screen. A stereotactic needle biopsy
procedure using digital spot imaging can be performed in as short a time as
ten minutes compared with a typical time of 45 minutes using a film-based
system. The retail list price for the StereoGuide table with the digital spot
imaging option is $234,000 and for the add-on system with the digital spot
imaging option ranges from $135,000 to $140,000.
The Company believes that the stereotactic needle biopsy system market will
grow as the procedure becomes more widely accepted by the medical community
and as pressures to contain health-care costs increase.
GENERAL RADIOGRAPHY
The Company is a leading designer and manufacturer of office-based
radiographic systems, which are basic systems generally used in medical
outpatient facilities, such as doctors' offices and surgi-care centers, as
well as by chiropractors and veterinarians. The Company has focused on this
segment of the market and achieved its leadership position by providing low-
cost, reliable systems. In 1993, the Company broadened its focus by offering
the more sophisticated and expensive radiographic systems typically used in
hospitals.
The Company entered the hospital market with systems based on its high
frequency generator, which permits shorter exposure times, resulting in lower
radiation doses and greater image contrast and resolution. The Company
believes this generator currently provides it with a technological advantage
over its competitors. In addition to this generator, the Company has also
developed an overhead tube crane and table targeted to the hospital market.
The United States market for general radiographic systems is stable and
consists primarily of replacement sales as customers upgrade older equipment.
The Company believes that the international market is substantially larger
than the United States market and that the installed base of systems is still
growing, particularly in developing countries. The Company has recently been
expanding its international sales efforts.
The Company recently introduced the first, and currently only, general
radiographic system to receive the World Health Organization ("WHO") World
Health Imaging System--Radiographic ("WHIS-RAD") certificate of approval. The
Company's WHIS-RAD system is a flexible and easy to use general purpose
radiographic system. WHO will subsidize purchases of WHIS-RAD-approved systems
by qualifying health care organizations in developing countries.
The Company's radiographic systems typically include a generator, a tube
stand and a table or bucky structure. For each of these components the Company
offers a variety of options and features that can be configured to create
systems with different price and performance characteristics. A high-end,
hospital-based system, which has a retail list price of approximately $80,000,
may be comprised of a 60 kilowatt, high frequency generator; a ceiling-mounted
overhead tube crane; a four-way floating, elevating table; and an upright
bucky stand. An office-based system, which has a retail list price of
approximately $30,000, may be comprised of a 25 kilowatt, high frequency
generator; a floor-mounted, free standing tube stand and an upright bucky
stand.
The Company recently introduced a tomography unit with a patented automatic
exposure option for use with its general radiographic systems. In a tomography
system, during the exposure the X-ray tube sweeps over the subject with the
film tray sweeping under the subject in the opposite direction. The resulting
image provides an
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unobstructed view at a desired plane within the subject's body. Prior to the
introduction of the Company's automatic exposure option, multiple exposures
were generally required to obtain a correctly exposed image. The Company
believes that for a number of applications its $80,000-$110,000 tomography
system may be a cost-effective alternative to CT scanners which can cost up to
$800,000.
The Company believes digital imaging will have significant application in
the general radiographic and radiographic/flouroscopy markets and that the
technology it develops for its full-view digital imaging mammography system
may be adaptable to these applications. In general radiographic applications,
the Company believes digital imaging will produce better quality images and
reduce operating costs by eliminating the need for film and processing
equipment and chemicals. In addition, digital imaging will permit the
electronic storage of images on magnetic or optical media, as well as the
transmission of images to multiple locations. Furthermore, the Company
believes digital imaging in radiographic/fluoroscopy systems will be able to
replace the image intensifier and spot film device, which are both large and
expensive components.
CARDIAC CATHETERIZATION AND ANGIOGRAPHY
The Company, through its XRE subsidiary, designs, manufactures and markets
complete cardiac catheterization laboratories and positioners for
cardiovascular imaging systems. XRE systems consist of a mechanical positioner
which is used to position an X-ray source and, an image intensifier around a
patient who lies prone on an angiographic table. The entire system is designed
to provide real time images of the heart and coronary arteries for physicians
performing interventional procedures, such as a diagnostic angiogram or
balloon angioplasty.
Coronary artery disease is the leading cause of death in the United States
and represents an increasing health risk throughout the world. According to an
industry source, between 20 and 25 million individuals in the United States
suffer from some form of coronary artery disease, with an estimated cost to
the United States health care system of approximately $120 billion annually.
One of the most common forms of cardiovascular disease is atherosclerosis
which can lead to atheroma, or a narrowing of the arteries. In addition to the
coronary arteries, atherosclerosis can effect blood vessels in the brain, legs
and arteries throughout the body.
Traditionally, cardiac catheterization has been the tool of choice for
diagnosing atherosclerosis and certain other cardiovascular diseases because
it provides the clearest and most accurate depiction of the coronary arteries.
Cardiac catheterization involves X-ray imaging of the heart and large blood
vessels following the injection of a radio-opaque solution into the patient.
Historically, the primary form of treatment for coronary artery disease has
been open-heart bypass surgery. However, in recent years significant advances
have been made in the treatment of atherosclerosis and other coronary artery
diseases without extensive surgery. A common alternative treatment is
angioplasty, a procedure in which a segment of a narrowed coronary artery is
stretched by the inflation of a balloon introduced into the affected artery. A
more recent development involves the permanent implantation of devices such as
a stent into the blood vessel in order to keep the restricted vessel open.
Angioplasty is less invasive than surgery and generally does not require a
lengthy hospitalization (typically no more than two days). The Company
believes vascular and cardiovascular surgeons will increasingly use balloon
angioplasty and these other less invasive techniques to treat vascular
diseases in a non-surgical setting. Each of these procedures is performed
under the guidance of X-ray imaging.
The Company's cardiac catheterization and angiography products are sold
worldwide under the Angiographic Devices tradename through its own direct
sales force and a network of independent dealers. The Company's products
include the Unicath C cardiovascular imaging system, and the Unicath LP
biplane cardiovascular imaging system. The Company recently introduced the
Unicath SP, its top of the line single plane and cardiovascular system with
enhanced features such as a larger X-ray tube and advanced image intensifier.
The Company also recently introduced the Poly Cx, a lower-cost alternative it
believes is ideally suited for suburban and smaller hospitals, as well as the
export market. The Company also designs, manufactures and sells other
specialized X-ray systems, such as the Unicath EP electrophysiology
laboratory.
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The Company also offers a complete line of digital imaging products. The
Company has developed and introduced a high speed digital imaging system,
DVFX, which is capable of acquiring images which may be stored on a variety of
media. This system is capable of providing high resolution real-time digital
images at 30 frames per second. DVFX employs a proprietary digital filtering
system developed expressly for use in interventional imaging. Its open system
architecture facilitates image transfer and storage using industry standard,
high speed networks.
Many of the Company's positioners are based on its parallelogram-based
design. This design permits multi-angular views of the heart and coronary
arteries while the patient remains stationary on the table. As of December 31,
1995, over 4,000 cardiac catheterization and angiographic positioners and
systems manufactured by XRE had been installed throughout the world.
The Company's strategy is to increase sales of XRE products by marketing
them through the Company's dealer network and to incorporate the Company's
digital imaging technology into XRE's product offerings. In addition, the XRE
acquisition will permit the Company to broaden its product offerings and
leverage its sales and service organizations.
OTHER PRODUCTS
The Company uses its technological and manufacturing expertise to produce a
number of other products.
The Company's LPX-160 portable imaging system is based on the Company's
medical imaging technology. This system is designed to produce high-resolution
images of metals, composites and plastics. Customers for this system include
the United States Air Force and several commercial airlines, which use the
system to test for stress fractures and other defects in aircraft, and
Canadian and American utilities, which use the system to inspect pipelines and
turbines. The Company was recently awarded a $9.7 million contract for these
systems from the United States Air Force. Sales to the United States Air Force
were approximately $1.1 million or 2.1% of the Company's revenues for the nine
months ended September 30, 1995 and approximately $3.2 million or 4.8% of the
Company's revenues for the six months ended March 30, 1996.
The Company manufactures an X-ray source that is used as a component to a
fill-measuring device sold by Thermedics Inc., a publicly-traded majority-
owned subsidiary of Thermo Electron. Through February 1996, the Company has
sold approximately 98 such devices under this arrangement.
The Company also manufactures the laser used in ThermoLase Corporation's
hair removal process. ThermoLase Corporaton is a publicly-traded, majority-
owned subsidiary of ThermoTrex. The Company has sold 54 lasers to ThermoLase
under this arrangement and has committed to deliver 126 additional lasers.
RADIOGRAPHIC/FLUOROSCOPY
In April 1996, the Company entered into a non-binding letter of intent to
acquire all of the assets of Continental. Continental designs, manufactures
and markets radiographic/fluoroscopic products, general radiography systems,
electrophysiology products used in cardiac laboratories and dedicated
mammography systems.
A radiographic/fluoroscopic ("R/F") system is able to record dynamic events
by capturing a series of images in a short period of time. For example, R/F
systems are used for various gastrointestinal procedures which image in real
time the progress of a radio-opaque ingested solution (typically barium)
throughout the body. According to an industry source, end-user sales of R/F
equipment in the United States in 1994 were approximately $440 million.
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Founded more than 60 years ago, Continental produces R/F systems using
advanced high frequency generators that provide pulsed power, resulting in
substantially reduced radiation exposure to the patient. Continental's R/F
products include the DigiSpot 2000, a high speed digital imaging system that
directly records the image in electronic format, permitting the electronic
storage of images on magnetic or optical media and the transmission of images
to multiple locations with image quality comparable with film-based systems.
Continental also manufactures a line of general radiographic products
targeted to hospital and clinical customers. Its general radiography product
line features high frequency generators with anatomical programming and other
operator selected features. Continental recently introduced its PMT
radiographic/tomographic line of products, which has the flexibility both to
image particular isolated organs, such as kidneys, and to function as a
general purpose radiographic suite, permitting hospitals to contain costs by
reducing the amount of space occupied by radiographic equipment.
Continental's electrophysiology product line is used by hospitals in the
treatment of cardioarrythmia, which is characterized by the sudden wild
beating of the heart that can result in death. The EP 2000 system consists of
a positioner, an elevating/tilting table and a high frequency X-ray generator.
The system features variable pulsed power with high performance digital
imaging.
Continental also manufactures the MAM CP System, an advanced mammography
system using high frequency generators, a biased focused X-ray tube and
automatic exposure control.
Continental's products are sold worldwide through a network of independent
dealers. In addition, Continental sells electrophysiology products to GE,
Toshiba and Shimadzu through OEM arrangements. Continental recently entered
into a two-year agreement with Columbia/HCA Healthcare Corporation to be one
of its two exclusive providers of general radiographic imaging equipment.
Continental also has group purchasing agreements with AmeriNet and Health
Services Corporation of America which extend through late 1997. Continental
manufactures its products at its 150,000 square-foot manufacturing plant in
Broadview, Illinois.
The Company's strategy is to increase sales by merging the Company's and
Continental's products into a full line of X-ray imaging systems, thereby
enhancing their desirability to dealer networks and OEM customers. The Company
also believes that the ability to offer a full line of products will enable it
to compete more effectively for contracts with national hospital chains and
international customers. In addition, the Company believes that the companies'
respective digital technologies may have application to each others' products.
The terms relating to the proposed acquisition of Continental by the Company
are set forth in a non-binding letter of intent between the parties. However,
the Company and Continental have yet to enter into a definitive purchase
agreement, and there can be no assurance that the final arrangements between
the parties will be as set forth in the letter of intent or that the parties
will consummate the transactions contemplated therein.
SALES AND MARKETING
Sales by Dealers and Distributors
The Company's products are sold worldwide under the Lorad, Bennett and
Angiographic Devices names through separate networks of independent dealers.
Lorad systems are sold domestically through a network of approximately 50
dealers managed by six regional offices. Bennett systems are sold domestically
to physicians, clinics and hospitals through a network of approximately 50
dealers supported by three Bennett regional sales managers and six direct
sales people focused on mammography. Overseas, Lorad systems are sold by
approximately 40 distributors covering 50 countries and Bennett systems are
sold by approximately 100 distributors covering more than 75 countries. The
Company and its network of independent dealers maintain a staff of factory-
trained service technicians to support the Lorad and Bennett systems. The
Company's XRE subsidiary sells its cardiac catheterization and angiography
products through a six person direct sales force and a network of
approximately twenty-five independent dealers covering primarily North
America, Eastern Europe, Western Europe and the Pacific Rim.
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OEM Agreements
In addition to manufacturing and marketing its own systems, the Company
manufactures systems and system components as an original equipment
manufacturer ("OEM") for other medical equipment companies. In general, under
the Company's OEM agreements, which could expire between 1996 and 1998, the
manufacturers are obligated to purchase from the Company certain minimum
quantities of systems, system components and subsystems manufactured by the
Company. There can be no assurance that upon the expiration of these
agreements they will be renewed or that new OEM customers can be identified.
The Company is party to several agreements with Philips pursuant to which
the Company's Lorad division manufactures mammography systems based on Philips
and Lorad design criteria and a mobile general purpose X-ray system, both for
sale by Philips under the Philips nameplate. The agreement for the purchase of
the Lorad mammography systems has an initial term of five years expiring in
1998, and is renewable for successive 12-month terms. The agreement requires
Philips to purchase a minimum of 800 units over the term of the agreement, in
gradually increasing increments of between 76 and 190 per year. The agreement
for the purchase of mobile general purpose X-ray systems is renewable for
successive 12-month terms. The agreement requires Philips to purchase a
minimum of 300 units over the term of the agreement, although this agreement
is cancellable by either party if Philips fails to purchase at least 200 units
in any calendar year beginning after December 31, 1995. Sales to Philips
accounted for 18% of the Company's total revenues in fiscal 1995. Sales to
Philips accounted for 45% of XRE's sales in the twelve months ended December
31, 1995.
The Company is party to an agreement with GE pursuant to which the Company's
Bennett subsidiary manufactures radiographic systems utilizing Bennett's high
frequency generators for sale by GE under the GE nameplate. The agreement with
GE is for an initial term of three years expiring December 31, 1997.
The Company is a party to an agreement with Philips Medizin Systeme
Unternehmensbereich der Philips GmbH ("Philips Germany") pursuant to which the
Company's Bennett subsidiary manufactures radiographic systems for sale by
Philips Germany outside of the United States and Canada under the Smit Rontgen
nameplate. The agreement is renewable for successive 12-month terms. The
agreement does not require Philips Germany to purchase any minimum quantity of
products, but Philips Germany is required to provide Bennett with a 12-month
non-binding rolling forecast of its purchasing requirements.
In October 1995, the Company entered into an agreement with U.S. Surgical
pursuant to which the Company's Lorad division is manufacturing its
StereoGuide prone stereotactic biopsy table modified to accept a U.S. Surgical
biopsy device for sale by U.S. Surgical under the U.S. Surgical nameplate.
U.S. Surgical has agreed
to purchase a minimum of 60 tables during the first year of this agreement and
certain minimum purchase requirements to maintain exclusivity thereafter.
The Company's XRE subsidiary manufactures gantries or "positioners" for
Philips' PolyDiagnost C2 cardiovascular system and Picker International's
Cardicon-L and Omnicon-L cardiovascular systems. Sales to OEM's represented
approximately 50% of XRE's total revenues in 1995.
RESEARCH AND DEVELOPMENT
The Company maintains active programs for the development of new mammography
and X-ray imaging systems. The Company's current development efforts are
focused on the development of a full-view digital imaging mammography system,
direct detection X-ray sensors and the enhancement of existing mammography
products. The Company believes that the digital imaging technology developed
for this system also will be readily adaptable to general radiographic and
cardiac diagnostic imaging systems. No assurance can be given that the
Company's development programs will be successfully completed.
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One of the Company's long-term research and development programs is the
development of a Sonic CT (Computed Tomography) system that uses acoustic
waves to form high-resolution images of breast tissue. Sonic CT uses no
ionizing radiation, provides near real-time images and has the potential to
detect some of the masses that are undetectable using conventional X-ray
mammography. The Company is collecting patient data with a clinical test unit
in conjunction with radiologists at the University of California, San Diego.
The Company is developing products based upon digital imaging technology
developed by scientists at ThermoTrex. ThermoTrex has granted the Company a
fully-paid, exclusive, worldwide, perpetual license to use and sell such
technology in the fields of mammography and general radiography. Under the
terms of the license agreement with ThermoTrex, if the Company elects to fund
approximately $6 million of ThermoTrex's research and development over the
next three years, the Company's license will be extended to cover the fields
of radiographic/fluoroscopy, mobile C-arm fluoroscopy and
cardiology/angiography. The Company will purchase digital imaging detectors
from ThermoTrex. See "Relationship and Potential Conflicts of Interest with
Thermo Electron and ThermoTrex."
Research and development expenses of the Company were $7.2 million, $10.7
million and $8.6 million for 1993, 1994 and the nine months ended September
30, 1995, respectively.
COMPETITION
The health care industry in general, and the market for imaging products in
particular, is highly competitive. The Company competes with a number of
companies, many of which have substantially greater financial, marketing and
other resources than the Company. The Company's competitors include large
companies such as GE, Philips, the Siemens Corporation subsidiary of Siemens
AG, Toshiba American Medical Systems, Inc. and Toshiba America MRI, Inc.
(collectively, "Toshiba"), Shimadzu and Picker International, which compete in
most diagnostic imaging modalities, including X-ray imaging. In addition, a
significant portion of the Company's sales are to GE and Philips through OEM
arrangements. The products sold by such OEMs compete with those offered by the
Company and its independent dealers. The Company's StereoLoc II, MF-CYTO and
StereoGuide stereotactic needle biopsy systems compete with products offered
by GE, Fischer Imaging Corporation and Philips and with conventional surgical
biopsy procedures.
The Company competes primarily on the basis of product features, product
performance and reputation as well as price and service. Although the Company
believes that its products currently compete favorably with respect to such
factors, there can be no assurance that the Company can maintain its
competitive position against current and potential competitors, especially
those with greater financial, manufacturing, marketing, service, support,
technical and other competitive resources. Competition could increase if new
companies enter the market or if existing competitors expand their product
lines. See "Risk Factors--Intense Competition" and "--Technological Change and
New Products."
PATENTS AND PROPRIETARY TECHNOLOGY
The Company's policy is to protect its intellectual property rights and to
apply for patent protection when appropriate. The Company currently holds 48
issued United States patents expiring at various dates ranging from 1996 to
2014. The Company also has 10 applications pending for additional United
States patents and a number of foreign counterparts for its patents in various
foreign countries. In addition, the Company has registered or other
trademarks. Patent protection provides the Company with competitive advantages
with respect to certain systems. The Company believes, however, that technical
know-how and trade secrets are more important to its business than patent
protection.
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Competitors of the Company and other third-parties hold issued patents and
pending patent applications relating to imaging and other related
technologies, and it is uncertain whether these patents and patent
applications will require the Company to alter its products or processes, pay
licensing fees or cease certain activities. See "Risk Factors--Dependence on
Patents and Proprietary Rights" and "--Risks Associated With Pending and
Threatened Patent Litigation."
In April 1992, Fischer Imaging Corporation ("Fischer") commenced a lawsuit
in the United States District Court, District of Colorado, against the
Company's Lorad division, alleging that the Lorad StereoGuide prone breast
biopsy system infringes a Fischer patent on a precision mammographic needle
biopsy system. As of September 30, 1995 the Company had sold 351 StereoGuide
systems, for aggregate revenues of approximately $34.4 million. The suit
requests a permanent injunction, treble damages and attorneys' fees and
expenses. If the Company is unsuccessful in defending this lawsuit it may be
enjoined from manufacturing and selling its StereoGuide system without a
license from Fischer. No assurance can be given that the Company will be able
to obtain such a license, if required, on commercially reasonable terms, if at
all. In addition, the Company may be subject to damages for past infringement.
No assurance can be given as to the amount which the Company may eventually be
required to pay in expenses or in such damages. The outcome of patent
litigation, particularly in jury trials, is inherently uncertain, and an
unfavorable outcome in the Fischer litigation could have a material adverse
effect on the Company's business and results of operations.
The Company also is aware of a U.S. patent held by Nicola E. Yanaki which
has been asserted by him against certain automatic exposure control features
included in most of the Company's current mammography systems. The Company has
been informed by Mr. Yanaki that a competitor of the Company has obtained a
license for use of this patent. Although the Company believes that the
validity of this patent may be questionable and subject to a successful
challenge, if the patent holder were successful in enforcing such patent the
Company could be subject to damages for past infringement and enjoined from
manufacturing and selling imaging equipment utilizing certain automatic
exposure control features, which would have a material adverse effect on the
Company's financial condition and results of operations.
The Company is also aware of an issued European patent with counterparts in
other non-U.S. countries relating to imaging equipment utilizing certain
automatic exposure control features. The European patent is the subject of an
opposition proceeding before the European Patent Office. There can be no
assurance as to the outcome of such opposition.
In connection with the organization of the Company, ThermoTrex agreed to
indemnify the Company for any and all cash damages in connection with the
Fischer lawsuit and any potential claims by the holder of the automatic
exposure control patent described above, with respect to sales of the
Company's products occurring prior to October 1995, when the businesses of
Lorad and Bennett were transferred to the Company. Notwithstanding this
indemnification, the Company would be required to report as an expense in its
results of operations the full amount, including any reimbursable amount, of
any damages in excess of the amount accrued ($2.3 million as of March 30,
1996), with any indemnification payment it receives from ThermoTrex being
treated as a contribution to shareholders' investment. An unsuccessful outcome
of this litigation may have a material adverse effect on the business of the
Company and on the results of operations of the Company for the period in
which such outcome occurs.
The Company is aware of two U.S. patents owned by a former employee which
have been asserted against the Company relating to its HTC grid to be used
with the Company's mammography systems. Although the Company believes that the
HTC grid does not infringe either of these patents, if the holder of the
patents were successful in enforcing such patents, the Company could be
subject to damages and enjoined from manufacturing and selling the HTC grid.
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GOVERNMENT REGULATION
The Company's products and its research, development and manufacturing
activities are subject to regulation by numerous governmental authorities in
the United States and other countries. In the United States, medical devices
are subject to rigorous FDA review. The federal Food, Drug and Cosmetic Act,
the Public Health Services Act and other federal statutes and regulations
govern or influence the testing, manufacture, safety, labeling, storage,
record keeping, reporting, approval, advertising and promotion of products
such as those offered by the Company. Noncompliance with applicable
requirements can result in fines, recalls or seizures of products, total or
partial suspension of production and criminal prosecution.
Pursuant to the Medical Device Amendments of 1976 (the "1976 Amendments") to
the Federal Food, Drug and Cosmetic Act, and regulations promulgated
thereunder, medical devices intended for human use are classified into three
categories, Classes I, II and III, depending upon the degree of regulatory
control to which they will be subject. The Company believes its current
systems are classified as Class II devices.
If a new medical device, irrespective of whether it is a Class II or III
device, is substantially equivalent to an existing device that has been
continuously marketed since the effective date of the 1976 Amendments (May 28,
1976) (a "Substantially Equivalent Device"), FDA requirements may be satisfied
through a procedure known as a "510(k) Submission," under which the applicant
provides product information supporting its claim of substantial equivalence.
In a 510(k) Submission, the FDA may also require that it be provided with
clinical test results demonstrating the safety and efficacy of the device.
In connection with new product development, the Company from time to time
files 510(k) Submissions. While there can be no assurance in this regard, all
of the Company's X-ray components and products previously included in 510(k)
Submissions have received findings of substantial equivalence.
Class III medical devices (which consist of life support/life sustaining
devices, diagnostic or implanted devices) that are not Substantially
Equivalent Devices are subject to a more stringent and time-consuming FDA
approval process.
The Safe Medical Devices Act of 1990 substantially changed certain aspects
of the regulation of the sale of medical devices and, depending on how it is
interpreted and enforced, could make it substantially more difficult and time-
consuming to comply with pre-marketing clearance and approval processes.
Pursuant to this Act, the FDA is required to adopt implementing regulations,
which will require among other things that clinical test results supporting
the safety and efficacy of a medical device be included with a 510(k)
Submission. The regulations also provide that manufacturers of high-risk
medical devices (implantable devices, life sustaining/life support devices and
such other devices as the FDA may designate) must establish post-market
surveillance programs for devices that are first marketed after January 1,
1991.
The FDA has not yet classified full-view digital imaging mammography systems
like the one being developed by the Company. If such systems are classified as
Class III devices, the Company would be required to file for FDA marketing
clearance for its full-view digital imaging mammography system under the PMA
process, which would require substantial clinical trials and would take a
number of years. While not classifying such systems, the FDA recently issued a
preliminary protocol for marketing clearance of full-view digital imaging
mammography systems suggesting that clearance may be obtained through an
enhanced 510(k) application with more extensive clinical trials. The
preliminary protocol calls for clinical trials on 400 subjects prior to
applying to the FDA for clearance to commercially market such a system and a
multi-year, follow-up study including comparative film and digital images on
12,000 subjects following commercial introduction. If the preliminary protocol
is adopted as currently drafted, the Company believes this follow-up study
will be overburdensome and may limit the commercialization of full-view
digital imaging mammography systems. The period for submitting comments to the
preliminary protocol has expired and the Company can make no prediction as to
when the FDA will issue a final protocol or if one will be issued at all.
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The Company is also subject to periodic inspections by the FDA whose primary
purpose is to audit the Company's compliance with Good Manufacturing Practices
("GMP"). Enforcement of GMP regulations has increased significantly in the
last several years, and the FDA has publicly stated that compliance will be
more strictly scrutinized. In the event that the Company or any of its
facilities was determined to be in noncompliance, and to the extent that the
Company or such facility was unable to convince the FDA of the adequacy of its
compliance, the FDA has the power to assert penalties or remedies, including a
recall or temporary suspension of product shipment until compliance is
achieved. Such penalties or remedies could have a material adverse effect on
the Company's business and results of operations.
The Company is also regulated by the FDA under the Radiation Control for
Health and Safety Act of 1968 (Public Law 90-602) which specifically addresses
radiation emitting products. Under this law, the Company is responsible for
submitting initial reports on all new X-ray systems that require certification
to FDA performance standards. The Company must also submit a quality assurance
and test program for FDA review to ensure continued compliance with X-ray
performance standards.
Historically, the Company has been subject to recalls of certain of its
products from time to time under Public Law 90-602. Under this law, any
product which is not in compliance with the relevant performance standard must
be repaired, refurbished or returned at the manufacturer's expense.
The Company is also subject to regulation under the Occupational Safety and
Health Act, the Environmental Protection Act, the Toxic Substances Act, the
Federal Water Pollution Control Act, the National Environmental Policy Act and
other federal, state or local statutes and regulations. The Company believes
that it is in material compliance with these and other applicable federal,
state and foreign legal and regulatory requirements under which it operates.
However, there can be no assurance that such legal or regulatory requirements
will not be amended or that new legal or regulatory requirements will not be
adopted, any one of which could have a material adverse effect on the
Company's business or results of operations.
REIMBURSEMENT
Suppliers of health care products and services are affected by Medicare,
Medicaid and other government insurance programs, as well as by private
insurance reimbursement programs. Third party payors (Medicare, Medicaid,
private health insurance, health administration authorities in foreign
countries and other organizations) may affect the pricing or relative
attractiveness of the Company's products by regulating the maximum amount of
reimbursement provided for by such payors to the physicians, hospitals and
clinics utilizing the Company's products or by taking the position that such
reimbursement is not available at all.
Since 1983, Medicare reimbursement has been based on a fixed amount for
admitting a patient with a specific diagnosis. Hospital profit margins have
been reduced significantly since the introduction of Diagnosis Related Groups
("DRGs"). As DRG reimbursement is a fixed amount based on a specific
diagnosis, hospitals have incentives to use less costly treatment methods. If
a new technology is considered to be more cost effective, hospitals will
frequently make capital expenditures to provide cost savings. Frequently DRG
reimbursement is reduced to reflect the adoption of a new procedure or
technique, and as a result hospitals are generally willing to implement new
cost saving technologies before these downward adjustments in DRG rates take
effect.
The diagnostic procedures for which the Company's products are intended to
be used generally have been approved for Medicare reimbursement. Many of the
therapeutic procedures for which the Company's systems can be used have also
been approved for Medicare reimbursement. In addition, prior to 1991,
hospitals received Medicare reimbursement for the cost of capital equipment
such as the Company's products as a "capital pass through," which provided for
an 85% reimbursement of the Medicare utilization portion of the equipment
cost, pro rated over the depreciable life of the equipment.
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In 1991, the Health Care Financing Administration of the U.S. Department of
Health and Human Services published rules to change the method of capital
reimbursement for hospitals. The rules changed capital reimbursement from a
system based on costs to one based on prospective payment. The rules provide
for a ten year transition and permit hospitals with unusually low or high
capital reimbursement methods to be reimbursed fairly. The Company believes
that the new capital reimbursement rules have impacted facilities expansion
more heavily than medical equipment purchases.
In early 1992, Medicare also began to phase in over a five-year period a new
system whereby reimbursement to physicians will be based on the lower of their
actual charges or a fee schedule amount based on "resource-based" relative
value "scale". This replaced a "charge-based" fee schedule, and is anticipated
to generally lower the reimbursements received by radiologists from the
previous method.
The Company believes, however, that since minimally invasive surgical
techniques are generally less expensive than open or conventional surgery,
stereotactic breast biopsy and other systems offered by the Company provide
hospitals the opportunity to save costs and, therefore, possibly benefit from
a revised reimbursement system.
BACKLOG
At both December 30, 1995 and March 30, 1996, the Company's backlog of firm
orders on a pro forma basis assuming the acquisition of XRE had been completed
was approximately $64 million. The Company includes in backlog only those
orders for which it has received completed purchase orders and for which
delivery has been specified within twelve months. Most orders are subject to
cancellation by the customer. Because of the possibility of customer changes
in delivery schedules, cancellation of orders and potential delays in product
shipments, the Company's backlog as of any particular date may not be
representative of actual sales for any succeeding period.
FACILITIES
The Company operates from three facilities: a 63,500 square foot office and
manufacturing facility in Danbury, Connecticut owned by the Company, a 120,000
square foot office and manufacturing facility in Copiague, New York leased by
the Company pursuant to a lease expiring in 2005 and a 156,000 square foot
office and manufacturing facility in Littleton, Massachusetts leased by the
Company pursuant to a lease expiring in 2012. As of May 30, 1996, the annual
base rent for the Company's Copiague, New York and Littleton, Massachusetts
facilities were approximately $600,000 and $858,000, respectively. The Company
has entered into a lease for a new 60,000 square foot building to be
constructed adjacent to its existing facility in Danbury, Connecticut. The
lease will commence upon completion of the building, which is expected to
occur in late 1996, and has a term of ten years with an initial annual base
rent of $771,600.
PERSONNEL
As of May 30, 1996, the Company had 810 employees, of which 19 were engaged
in senior management, 62 were engaged in administration and accounting, 147 in
research and development, 66 in sales and marketing, 62 in product support and
454 in manufacturing. None of the Company's employees are represented by a
labor union, and the Company considers its relations with its employees to be
good.
LEGAL PROCEEDINGS
Except as described above under "Business--Patents and Proprietary
Technology," "Risk Factors--Dependence on Patents and Proprietary Rights" and
"--Risks Associated With Pending and Threatened Patent Litigation," the
Company is not a party to any litigation that it believes could reasonably be
expected to have a material adverse effect on the Company or its business.
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RELATIONSHIP AND POTENTIAL CONFLICTS OF INTEREST WITH THERMO ELECTRON AND
THERMOTREX
The Company was incorporated in September 1995 as a wholly-owned subsidiary
of ThermoTrex. ThermoTrex acquired all of the outstanding capital stock of
Bennett in September 1995 for approximately $42,000,000 in cash. On October 2,
1995, the Company acquired all of the outstanding shares of capital stock of
Bennett from ThermoTrex in exchange for the $42,000,000 principal amount
Convertible Note. Subsequently, on October 16, 1995, ThermoTrex contributed
all of the assets and liabilities relating to its Lorad division and the
development of its Sonic CT system to the Company in exchange for 20,000,000
shares of Common Stock of the Company.
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Electron and certain of its
subsidiaries have created publicly and/or privately held majority-owned
subsidiaries. The Company and the other Thermo Electron subsidiaries are
referred to herein as the "Thermo Subsidiaries."
In October 1995, ThermoTrex granted to the Company an exclusive, paid-up,
royalty-free license for the use of certain technology relating to digital
imaging detectors in the fields of mammography and general radiography. Under
the license agreement, if the Company funds approximately $6 million of
ThermoTrex's research and development of the digital imaging technology in the
fields of radiographic/fluoroscopy, mobile C-arm fluoroscopy and
cardiology/angiography over the next three years, then ThermoTrex will be
obligated to grant the Company a fully-paid, exclusive, worldwide, perpetual
license to use and sell the digital imaging technology in these fields. The
license agreement provides that ThermoTrex will manufacture products based on
the digital imaging technology for the Company in the applicable fields.
ThermoTrex will sell the products to the Company at ThermoTrex's cost until
the Company has received an amount of Net Profit (as defined below) from the
resale of such products equal to amounts paid by the Company for research and
development as set forth above less any additional research and development
costs incurred by ThermoTrex with the prior written approval of the Company,
and thereafter at ThermoTrex's cost plus one-half of Net Profit. For purposes
of the preceding sentence, "Net Profit" means the difference between the
prices the Company receives upon resale of such products and the aggregate
costs of the Company and ThermoTrex relating to such sales. The Company has
paid approximately $900,000 to ThermoTrex under this arrangement for the six
months ended March 30, 1996.
The Company has an arrangement with ThermoTrex whereby ThermoTrex provides
certain research and development services to the Company and the Company pays
ThermoTrex its fully burdened cost of providing such services. For the nine
months ended September 30, 1995, the Company paid ThermoTrex approximately
$1,536,000 under this arrangement. This arrangement has been superseded by the
license agreement described above.
The Company has an arrangement with the Tecomet division of Thermo Electron
for the manufacture of the Company's proprietary HTC grid. Under this
arrangement Tecomet manufactures the grid for the Company pursuant to written
purchase orders. The Company owns the intellectual property rights to the
grid. For the nine months ended September 30, 1995 and the six months ended
March 30, 1996, the Company paid Tecomet $250,000 and $118,000, respectively,
under this arrangement.
Under an arrangement with ThermoLase Corporation, a publicly-traded,
majority-owned subsidiary of ThermoTrex, the Company manufactures the laser
used in ThermoLase's hair-removal process. The Company manufactures these
lasers for ThermoLase pursuant to written purchase orders. The Company has
sold 54 lasers to ThermoLase under this arrangement for an aggregate purchase
price of approximately $3.8 million and has committed to deliver 126
additional lasers for an aggregate purchase price of approximately $6.7
million.
Under an arrangement with Thermedics Detection Inc., a subsidiary of
Thermedics, a publicly-traded, majority-owned subsidiary of Thermo Electron,
the Company manufactures an X- ray source that is used as a component to a
fill-measuring device produced by Thermedics Detection. The Company
manufactures these X-ray sources for Thermedics Detection pursuant to written
purchase orders. For the nine months ended September 30, 1995 and the six
months ended March 30, 1996, Thermedics Detection paid the Company $120,000
and $292,000, respectively, under this arrangement.
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The Company believes that the arrangements set forth above are on terms
comparable to those the Company would receive from unaffiliated parties.
On October 2, 1995, in exchange for all of the outstanding shares of capital
stock of Bennett, the Company issued the $42,000,000 principal amount
Convertible Note to ThermoTrex. The Convertible Note has an interest rate of
4.2% per annum and is convertible into shares of the Company's Common Stock at
a conversion price of $11.79 per share. In March 1996, ThermoTrex converted
$3,000,000 principal amount of the Convertible Note into 254,452 shares of
Common Stock.
ThermoTrex develops advanced technologies, which it is incorporating into
commercial products for the personal-care and avionics industries. For the
nine months ended September 30, 1995, ThermoTrex had consolidated revenues of
$86,531,000 and consolidated net income of $36,341,000, including a gain on
the issuance of stock by a subsidiary of $34,721,000.
Thermo Electron and its subsidiaries develop, manufacture and market
environmental monitoring and analysis instruments, biomedical products
including heart-assist systems and respiratory care products, papermaking and
paper-recycling equipment, alternative-energy systems, industrial process
equipment and other specialized products. Thermo Electron and its subsidiaries
also provide environmental and metallurgical services and conduct advanced
technology research and development. For its fiscal year ended December 30,
1995, Thermo Electron had consolidated revenues of $2,207,417,000 and
consolidated net income of $140,080,000. See "Risk Factors--Potential
Conflicts of Interest" and "--Significant Additional Shares Eligible for Sale
After the Offerings."
THE THERMO ELECTRON CORPORATE CHARTER
Thermo Electron and the Thermo Subsidiaries, including the Company,
recognize that the benefits and support that derive from their affiliation are
essential elements of their individual performance. Accordingly, Thermo
Electron and each of the Thermo Subsidiaries, including the Company, have
adopted the Thermo Electron Corporate Charter (the "Charter") to define the
relationships and delineate the nature of such cooperation among themselves.
The purpose of the Charter is to ensure that (1) all of the companies and
their shareholders are treated consistently and fairly, (2) the scope and
nature of the cooperation among the companies, and each company's
responsibilities, are adequately defined, (3) each company has access to the
combined resources and financial, managerial and technological strengths of
the others, and (4) Thermo Electron and the Thermo Subsidiaries, in the
aggregate, are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members,
coordinating the access of Thermo Electron and the Thermo Subsidiaries (the
"Thermo Group") to external financing sources, ensuring compliance with
external financial covenants and internal financial policies, assisting in the
formulation of long-range planning and providing other banking and credit
services. Pursuant to the Charter, Thermo Electron may also provide guarantees
of debt obligations of the Thermo Subsidiaries or may obtain external
financing at the parent level for the benefit of the Thermo Subsidiaries. In
certain instances, the Thermo Subsidiaries may provide credit support to, or
on behalf of, the consolidated entity or may obtain financing directly from
external financing sources. Under the Charter, Thermo Electron is responsible
for ensuring that the Thermo Group remains in compliance with all covenants
imposed by external financing sources, including covenants related to
borrowings of Thermo Electron or other members of the Thermo Group, and for
apportioning such constraints within the Thermo Group. In addition, Thermo
Electron establishes certain internal policies and procedures applicable to
members of the Thermo Group. The cost of the services provided by Thermo
Electron to the Thermo Subsidiaries is covered under existing corporate
services agreements between Thermo Electron and each of the Thermo
Subsidiaries.
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The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter
may be amended at any time by agreement of the participants. Any Thermo
Subsidiary, including the Company, may withdraw from participation in the
Charter upon 30 days' prior notice. In addition, Thermo Electron may terminate
a subsidiary's participation in the Charter in the event the subsidiary ceases
to be controlled by Thermo Electron or ceases to comply with the Charter or
the policies and procedures applicable to the Thermo Group. A withdrawal from
the Charter automatically terminates the corporate services agreement in
effect between the withdrawing company and Thermo Electron. The withdrawal
from participation does not terminate outstanding commitments to third parties
made by the withdrawing company, or by Thermo Electron or other members of the
Thermo Group, prior to the withdrawal. However, a withdrawing company is
required to continue to comply with all policies and procedures applicable to
the Thermo Group and to provide certain administrative functions mandated by
Thermo Electron so long as the withdrawing company is controlled by or
affiliated with Thermo Electron.
CORPORATE SERVICES AGREEMENT
As provided in the Charter, Thermo Electron and the Company have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including certain legal advice and services, risk management, certain employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and certain financial and other services to the Company. In
1994 and 1995, Thermo Electron assessed the Company an annual fee for these
services equal to 1.25% and 1.20%, respectively, of the Company's total
revenues. Effective January 1, 1996, the fee was reduced to 1.0% of the
Company's total revenues. The fee may be changed by mutual agreement of the
Company and Thermo Electron. During the nine months ended September 30, 1995,
Thermo Electron assessed the Company $663,000 in fees under the Services
Agreement. The Company believes that the charges under the Services Agreement
are representative of the expenses the Company would have incurred on a stand-
alone basis and that the terms of the Services Agreement are reasonable. For
additional items such as employee benefit plans, insurance coverage and other
identifiable costs, Thermo Electron charges the Company based upon costs
attributable to the Company. The Services Agreement automatically renews for
successive one-year terms, unless canceled by the Company upon 30 days' prior
notice. In addition, the Services Agreement terminates automatically in the
event the Company ceases to be a member of the Thermo Group or ceases to be a
participant in the Charter. In the event of a termination of the Services
Agreement, the Company will be required to pay a termination fee equal to the
fee that was paid by the Company for services under the Services Agreement for
the nine-month period prior to termination. Following termination, Thermo
Electron may provide certain administrative services on an as-requested basis
by the Company or as required in order to meet the Company's obligations under
Thermo Electron's policies and procedures. Thermo Electron will charge the
Company a fee equal to the market rate for comparable services if such
services are provided to the Company following termination.
TAX ALLOCATION AGREEMENT
The Tax Allocation Agreement between ThermoTrex and the Company outlines the
terms under which the Company is to be included in ThermoTrex's consolidated
federal and state income tax returns. Under current law, the Company will be
included in such tax returns so long as ThermoTrex owns at least 80% of the
outstanding Common Stock of the Company. In years in which the Company has
taxable income, it will pay to ThermoTrex amounts comparable to the taxes it
would have paid if it had filed its own separate corporate tax returns. If
ThermoTrex's equity ownership of the Company were to drop below 80%, then the
Company would file its own income tax returns.
MASTER GUARANTEE REIMBURSEMENT AGREEMENTS
The Company has entered into a Master Guarantee Reimbursement Agreement with
Thermo Electron which provides that the Company will reimburse Thermo Electron
for any costs it incurs in the event it is required to pay third parties
pursuant to any guarantees it issues on the Company's behalf. ThermoTrex has
entered into a
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similar agreement with Thermo Electron with regard to the Company's
obligations which are guaranteed by Thermo Electron. The Company has also
entered into a Master Guarantee Reimbursement Agreement with ThermoTrex which
provides that the Company will reimburse ThermoTrex for any costs it incurs in
the event that ThermoTrex is required to pay Thermo Electron or any other
party pursuant to any guarantees it issues on the Company's behalf.
MISCELLANEOUS
Currently, ThermoTrex beneficially owns 91% of the outstanding shares of
Common Stock (excluding shares of Common Stock issuable upon the conversion of
the Convertible Note). ThermoTrex presently intends to maintain at least an
80% interest in the Company. This may require ThermoTrex to convert additional
principal amounts of the Convertible Note or to purchase additional shares of
Common Stock from time to time as the number of outstanding shares issued by
the Company increases. These purchases may be made either in the open market
or directly from the Company. See "Risk Factors--Control by ThermoTrex."
The Company's cash equivalents may be invested from time to time pursuant to
a repurchase agreement with Thermo Electron. Under this agreement, the Company
in effect lends excess cash to Thermo Electron, which Thermo Electron
collateralizes with investments principally consisting of corporate notes,
United States government agency securities, money market funds, commercial
paper and other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement will be
readily convertible into cash by the Company and have an original maturity of
three months or less. The repurchase agreement earns a rate based on the
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter.
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MANAGEMENT
The directors and executive officers of the Company and their ages as of May
6, 1996 are as follows:
<TABLE>
<CAPTION>
AGE POSITION
NAME --- --------
<S> <C> <C>
Gary S. Weinstein.................... 38 Chairman of the Board and Director
Anthony J. Pellegrino................ 55 Vice Chairman of the Board and
Director
Hal Kirshner......................... 55 Chief Executive Officer, President and
Director
John N. Hatsopoulos.................. 61 Vice President, Chief Financial
Officer and Director
Paul F. Kelleher..................... 53 Chief Accounting Officer
Steven J. Kemper..................... 41 Vice President, Finance
Elias P. Gyftopoulos (2)............. 68 Director
Robert C. Howard..................... 65 Director
Earl R. Lewis........................ 52 Director
James W. May, Jr. (1)(2)............. 53 Director
Hutham S. Olayan (1)(2).............. 42 Director
Firooz Rufeh......................... 58 Director
Kenneth Y. Tang...................... 48 Director
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Human Resources Committee.
All of the Company's directors are elected annually by the shareholders and
hold office until their respective successors are duly elected and qualified.
Executive officers are elected annually by the Board of Directors and serve at
its discretion. Mr. Weinstein, Mr. Hatsopoulos, Mr. Kelleher, Mr. Kemper, Mr.
Howard, Mr. Lewis, Mr. Rufeh and Dr. Tang are full-time employees of Thermo
Electron, ThermoTrex or other subsidiaries of Thermo Electron, but these
individuals devote such time to the affairs of the Company as the Company's
needs reasonably require from time to time. Because each of these individuals
owes duties to each of the entities for which he serves as an officer or
director, there may be circumstances in which such individual has a conflict
of interest. See "Risk Factors--Potential Conflicts of Interest" and
"Relationship and Potential Conflicts of Interest with Thermo Electron and
ThermoTrex."
Mr. Weinstein has been Chairman of the Board and a Director of the
Corporation since February 1996. Mr. Weinstein has also been Chairman and
Chief Executive Officer of ThermoTrex and a Vice President of Thermo Electron
since February 1996. Mr. Weinstein was a Managing Director of Lehman Brothers
Inc. from 1992 until February 1996, serving most recently as Managing
Director, head of Global Syndicate and Equity Capital Markets since March
1995. Prior to that appointment, Mr. Weinstein served in various positions at
Lehman Brothers since joining the firm in 1988, including head of Equities in
Europe, head of Equity New Issues in North and South America and head of
Global Convertible Securities. Mr. Weinstein is also a Director of ThermoTrex
and ThermoLase Corporation.
Mr. Pellegrino has been Vice Chairman of the Board and a Director of the
Company since its inception in October 1995. Mr. Pellegrino has been a Senior
Vice President of ThermoTrex since July 1995 and was Chairman of Lorad for
more than five years prior to that time. Mr. Pellegrino is also a Director of
ThermoQuest Corporation and ThermoLase Corporation.
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Mr. Kirshner has been Chief Executive Officer, President and a Director of
the Company since its inception in October 1995. Mr. Kirshner has been
President of Lorad since February 1991. Prior to that time, he served as Chief
Operating Officer and President of Electrolux Water Systems, Inc.
Mr. Hatsopoulos has been Vice President, Chief Financial Officer and a
Director of the Company since its inception in October 1995. Mr. Hatsopoulos
has been a Vice President and Chief Financial Officer of ThermoTrex since
1990, the Chief Financial Officer of Thermo Electron since 1988 and an
Executive Vice President of Thermo Electron since 1986. He is also a director
of Thermo Ecotek Corporation, Thermo Fibertek Inc., Thermo Instrument Systems
Inc., Thermo Power Corporation, Thermo TerraTech Inc., ThermoQuest
Corporation, Thermo Sentron Inc., ThermoTrex and Lehman Brothers Funds, Inc.,
an open-end investment management company.
Mr. Kelleher has been the Chief Accounting Officer of the Company since its
inception in October 1995. Mr. Kelleher has been Vice President, Finance of
Thermo Electron since 1987 and served as its Controller from 1982 to January
1996. He is a director of ThermoLase Corporation.
Mr. Kemper has been Vice President, Finance of the Company since its
inception in October 1995. Mr. Kemper has also been Vice President, Finance of
ThermoTrex since July 1995. Prior to joining ThermoTrex, Mr. Kemper was
controller for the Satellite Business unit of the communications division of
General Instrument Corporation, a cable television equipment manufacturer, for
more than five years.
Dr. Gyftopoulos has been a Director of the Company since its inception in
October 1995. Dr. Gyftopoulos has been the Ford Professor of Mechanical
Engineering and of Nuclear Engineering at the Massachusetts Institute of
Technology for more than five years. Dr. Gyftopoulos is also a director of
Thermo Cardiosystems Inc., Thermo Electron, ThermoLase Corporation, Thermo
Instrument Systems Inc., Thermo Remediation Inc., ThermoSpectra Corporation
and Thermo Voltek Corp.
Mr. Howard has been a Director of the Company since its inception in October
1995. Mr. Howard has been an Executive Vice President of Thermo Electron since
1986. He is also a Director of Thermedics Inc., Thermo Cardiosystems Inc.,
ThermoLase Corporation, Thermo Power Corporation, Thermo Instrument Systems
Inc. and ThermoTrex.
Mr. Lewis has been a Director of the Company since its inception in October
1995. Mr. Lewis has been Executive Vice President and Chief Operating Officer
of Thermo Instrument Systems Inc. since December 1995 and served as a Vice
President of that company from 1990 to 1995. He has also served as Chief
Executive Officer, President and a Director of Thermo Optek Corporation since
August 1995, and President of Thermo Jarrell Ash Corporation for more than
five years. Mr. Lewis is also Chairman of the Board and a Director of
ThermoSpectra Corporation.
Dr. May has been a Director of the Company since February 1996. He has been
Professor of Surgery at Harvard Medical School since 1994 and was Associate
Clinical Professor of Surgery for more than five years prior to that time.
Ms. Olayan has been a Director of the Company since February 1996. She has
served as President and a director of Olayan America Corporation since 1995
and Competrol Real Estate Limited since 1986, which are members of the Olayan
Group engaged in advisory services and private real estate investments,
respectively. Ms. Olayan also served as President and a director of Crescent
Diversified Limited, another member of the Olayan Group engaged in private
investments, from 1985 until 1994. Ms. Olayan is also a Director of Thermo
Electron.
Mr. Rufeh has been a Director of the Company since its inception in October
1995 and was its Chairman of the Board from October 1995 to February 1996. Mr.
Rufeh has been the President of ThermoTrex since 1988 and a Vice President of
Thermo Electron since January 1986. From 1985 to 1990, he was Chairman of the
Board of Thermo Power Corporation. He is also a Director of ThermoTrex.
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Dr. Tang has been a Director of the Company since its inception in October
1995. Dr. Tang has been Senior Vice President of ThermoTrex for more than five
years and was President of ThermoLase Corporation from December 1992 to May
1995. He is also a director of ThermoLase Corporation.
The Vice President and General Manager of Bennett since January 1996 has
been Mr. Walter F. Schneider, who has been an employee of Bennett since 1986
and had previously served as its Vice President of Operations. He replaced Mr.
Calvin Kleinman, who left the Company.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company, Thermo Electron or any other
companies affiliated with Thermo Electron (also referred to as "outside
directors") receive an annual retainer of $2,000 and a fee of $1,000 per day
for attending regular meetings of the Board of Directors and $500 per day for
participating in meetings of the Board of Directors held by means of
conference telephone and for participating in certain meetings of committees
of the Board of Directors. Payment of director fees is made quarterly. Messrs.
Weinstein, Pellegrino, Kirshner, Hatsopoulos, Howard, Lewis and Rufeh and Dr.
Tang are employees of members of the Thermo Electron companies and do not
receive any cash compensation from the Company for their services as
directors. Directors are also reimbursed for reasonable out-of-pocket expenses
incurred in attending such meetings.
Directors Deferred Compensation Plan. Under the Company's Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan"), a director
has the right to defer receipt of his or her fees until he or she ceases to
serve as a director, dies or retires from his or her principal occupation. In
the event of a change in control or proposed change in control of the Company
that is not approved by the Board of Directors, deferred amounts become
payable immediately. For purposes of the Deferred Compensation Plan, a change
of control is defined as: (a) the occurrence, without the prior approval of
the Board of Directors, of the acquisition, directly or indirectly, by any
person of 50% or more of the outstanding Common Stock or the outstanding
common stock of ThermoTrex or 25% or more of the outstanding common stock of
Thermo Electron or (b) the failure of the persons serving on the Board of
Directors immediately prior to any contested election of directors or any
exchange offer or tender offer for the Common Stock or the common stock of
ThermoTrex or Thermo Electron to constitute a majority of the Board of
Directors at any time within two years following any such event. Amounts
deferred pursuant to the Deferred Compensation Plan are valued at the end of
each quarter as units of Common Stock. When payable, amounts deferred may be
disbursed solely in shares of Common Stock accumulated under the Deferred
Compensation Plan. The Company has reserved 25,000 shares under this Plan. The
Deferred Compensation Plan will not become effective until completion of the
Offerings. As of the date of this Prospectus, no units had been accumulated
under the Deferred Compensation Plan.
Directors Stock Option Plan. The Company has adopted a directors stock
option plan (the "Plan") providing for the grant of stock options to purchase
shares of Common Stock to outside directors as additional compensation for
their service as directors. The Plan provides for the grant of stock options
upon a Director's initial appointment and, beginning in 2000, awards options
to purchase 1,000 shares annually to eligible directors, provided the Common
Stock is then publicly traded. A total of 200,000 shares of Common Stock have
been reserved for issuance under the Plan.
Under the Plan, each eligible director and each new outside director
initially joining the Board of Directors in 1996 will be granted an option to
purchase 40,000 shares of Common Stock upon the later of the adoption of the
plan or the director's appointment or election. The size of the award to new
directors appointed to the Board of Directors after 1996 will be reduced by
10,000 shares in each subsequent year. Directors initially joining the Board
of Directors after 1999 would not receive an option grant upon their
appointment or election to the Board of Directors, but would be eligible to
participate in the annual option awards described below. Options evidencing
initial grants to directors vest and are exercisable upon the fourth
anniversary of the date of grant, unless the Common Stock underlying the
option grant is registered under Section 12 ("Section 12 Registration") of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), prior to the
fourth anniversary of such grant. In the event that the effective date of
Section 12 Registration occurs prior to the fourth anniversary
41
<PAGE>
of the date of grant, then the option becomes exercisable (on the later of 90
days after Section 12 Registration or six months after the date of grant) and
the shares acquired upon exercise will be subject to restrictions on transfer
and the right of the Company to repurchase such shares at the exercise price
in the event the director ceases to serve as a director of the Company or any
other Thermo Electron company. In such event, the restrictions and repurchase
rights shall lapse or be deemed to have lapsed in annual installments of
10,000 shares per year, starting with the first anniversary of the date of
grant, provided the director has continuously served as a director of the
Company, Thermo Electron or any subsidiary of Thermo Electron since the grant
date. These options expire on the fifth anniversary of the grant date, unless
the director dies, ceases to be an eligible director or otherwise ceases to
serve as a director of the Company, Thermo Electron or any subsidiary of
Thermo Electron prior to that date.
Commencing in 2000, eligible directors will also receive an annual grant of
options to purchase 1,000 shares of Common Stock, provided the Common Stock is
then publicly traded. The annual grant would be made at the close of business
on the date of each annual meeting of shareholders of the Company to each
outside director then holding office, commencing with the annual meeting to be
held in 2000. Options evidencing annual grants may be exercised at any time
from and after the six-month anniversary of the date of grant and prior to the
expiration of the option on the third anniversary of the date of grant. Shares
acquired upon exercise of the options would be subject to repurchase by the
Company at the exercise price if the recipient ceased to serve as a director
of the Company or any other Thermo Electron company prior to the first
anniversary of the date of grant for any reason other than death.
The exercise price for options granted under the Plan will be determined by
the average of the closing prices reported by the American Stock Exchange (or
such other principal exchange on which the Common Stock is then traded) for
the five trading days immediately preceding and including the date the option
is granted or, if the shares underlying the option are not so traded, at the
last price paid per share by independent investors in an arms' length
transaction with the Company prior to the date of grant.
Grants of stock options to outside directors have consisted of 40,000 shares
granted in November 1995 at an exercise price of $10.25 per share and 80,000
shares granted in February 1996 at an exercise price of $10.75 per share.
CERTAIN TRANSACTIONS
On November 22, 1995, November 30, 1995 and January 31, 1996, the Company
completed private placements primarily to outside investors of minority
investments in its Common Stock at purchase prices of $10.25 per share in the
November 1995 private placements and $10.75 per share in the January 1996
private placement. Crescent Holding GmbH purchased an aggregate of 200,000
shares of the Common Stock of the Company in such private placements. Crescent
Holding GmbH is indirectly controlled by Suliman S. Olayan, the father of
Hutham S. Olayan, a Director of the Company. In addition, the following
directors and officers purchased the number of shares of the Company's Common
Stock set forth below in such private placements: Anthony J. Pellegrino, Vice
Chairman and Director, 20,000 shares; Hal Kirshner, Chief Executive Officer,
President and Director, 100,000 shares; Robert C. Howard, Director, 2,500
shares; Firooz Rufeh, Director, 19,600 shares; and Kenneth Y. Tang, Director,
1,200 shares.
42
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table summarizes compensation for services to the Company in
all capacities awarded to, earned by or paid to the Company's Chief Executive
Officer for the last full fiscal year ("fiscal 1994") and for the nine-month
period from January 1, 1995 to September 30, 1995 ("fiscal 1995"), reflecting
a change in the Corporation's fiscal year end to September 30. No other
executive officer of the Company met the definition of "highly compensated"
within the meaning of the Securities and Exchange Commission's executive
compensation disclosure rules during these periods.
The Company is required to appoint certain executive officers and full-time
employees of Thermo Electron as executive officers of the Company in
accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron.
The time and effort devoted by these individuals to the Company's affairs is
provided to the Company under the Services Agreement between the Company and
Thermo Electron. Accordingly, the compensation for these individuals is not
reported in the following table. See "Relationship and Potential Conflicts of
Interest with Thermo Electron and ThermoTrex."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
-------------------- ---------------------
FISCAL SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS(2) COMPENSATION(3)
- --------------------------- ------ -------- -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Hal Kirshner
Chief Executive Officer
and President.......... 1995 $150,000(1) $200,000 150,000(TXM) $7,005
1994 200,000 180,000 15,000(TMO) 6,750
</TABLE>
- --------
(1) Compensation for executive officers is reviewed and determined annually at
the end of each calendar year. However, the salary data for fiscal 1995
reflects salary paid during the nine-month period from January 1, 1995 to
September 30, 1995, as a result of the change in the Company's fiscal
year-end.
(2) All options to purchase shares of the Company's Common Stock shown in the
table were granted after the end of fiscal 1995 but are included in the
table for clarity of presentation. In addition to receiving options to
purchase Common Stock (designated in the table as TXM), Mr. Kirshner was
granted options to purchase shares of the common stock of Thermo Electron
(designated in the table as TMO). Information with respect to options to
purchase the common stock of Thermo Electron reflect a three-for-two split
effected in May 1995.
(3) Represents the amount of matching contributions made by the individual's
employer on behalf of the Chief Executive Officer under the Thermo
Electron 401(k) plan.
43
<PAGE>
Stock Options Granted During Fiscal 1995
The following table sets forth certain information concerning grants of
stock options made during fiscal 1995 to the Chief Executive Officer. It has
not been the Company's policy in the past to grant stock appreciation rights,
and no such rights were granted during fiscal 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ---------------------
NAME GRANTED(1) IN FISCAL YEAR SHARE DATE 5% 10%
---- ----------- -------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Hal Kirshner............ 150,000(TXM) 14.4% $11.00 3/26/08 $1,312,500 $3,528,000
</TABLE>
- --------
(l) All options to purchase shares of the Common Stock of the Company
(designated in the table as TXM) were granted after the end of fiscal 1995
to the Chief Executive Officer but are included in the table for clarity
of presentation. No other options to purchase Common Stock of Thermo
Electron or its subsidiaries were granted in fiscal 1995 to the Chief
Executive Officer. The options to purchase shares of the Common Stock of
the Company are not exercisable until the earlier of (i) 90 days after the
effective date of the registration of the Common Stock under Section 12 of
the Exchange Act and (ii) nine years after the grant date. In all cases,
the shares acquired upon exercise are subject to repurchase by the
granting corporation at the exercise price if the optionee ceases to be
employed by the granting corporation or another Thermo Electron company.
The granting corporation may exercise its repurchase rights within six
months after the termination of the optionee's employment. The repurchase
rights lapse in their entirety on the ninth anniversary of the grant date,
unless the company's common stock becomes publicly-traded before that
date, in which event the repurchase rights are deemed to have lapsed 20%
per year commencing on the fifth anniversary of the grant date. The
granting corporation may permit the holders of all options to exercise
options and satisfy tax withholding obligations by surrendering shares
equal in fair market value to the exercise price or withholding
obligation.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Stock, the
optionholders' continued employment through the option period and the date
on which the options are exercised.
44
<PAGE>
Stock Options Exercised During Fiscal Year 1995 and Fiscal Year-End Option
Values
The following table sets forth certain information concerning each exercise
of a stock option during fiscal 1995 and outstanding stock options held at the
end of fiscal 1995 by the Chief Executive Officer. No stock appreciation
rights were exercised or outstanding during fiscal 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END YEAR-END
----------------- -----------------
NUMBER OF
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME COMPANY EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE
---- ------- ----------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Hal Kirshner............ Trex Medical Corporation -- -- 0/150,000 $ --/300,000(2)
ThermoTrex 94,376 $1,953,583 149,500/0 3,541,613/--
ThermoLase -- -- 36,400/0 677,950/--
Thermo Electron -- -- 77,250/0(3) 1,857,192/--
</TABLE>
- --------
(l) Options to purchase shares of the Common Stock of the Company were granted
after the end of fiscal 1995 but are included in the table for clarity of
presentation. All of the options reported outstanding at the end of the
fiscal year were immediately exercisable, except the options to purchase
shares of the Company's Common Stock which are not exercisable until the
earlier of (i) 90 days after the effective date of the registration of
such company's Common Stock under Section 12 of the Exchange Act and (ii)
nine years after the grant date. In all cases, the shares acquired upon
exercise of the options reported in the table are subject to repurchase by
the granting corporation at the exercise price if the optionee ceases to
be employed by such corporation or another Thermo Electron company. The
granting corporation may exercise its repurchase rights within six months
after the termination of the optionee's employment. For companies whose
shares are not publicly traded, the repurchase rights lapse in their
entirety on the ninth anniversary of the grant date. For publicly traded
companies, the repurchase rights generally lapse ratably over a five to
ten year period, depending on the option term, which may vary from seven
to twelve years, provided that the optionee continues to be employed by
the granting corporation or another Thermo Electron company.
(2) No public market existed for the shares underlying the options as of
December 31, 1995. Accordingly, this value has been calculated on the
basis of an assumed market value of $13.00 per share, which is the mid-
point of the estimated public offering price range.
(3) Options to purchase 15,000 shares of the common stock of Thermo Electron
granted to Mr. Kirshner are subject to the same terms described in
footnote (1), except that the repurchase rights of the granting
corporation generally do not lapse until the tenth anniversary of the
grant date. In the event of the employee's death or involuntary
termination prior to the tenth anniversary of the grant date, the
repurchase rights of the granting corporation shall be deemed to have
lapsed ratably over a five-year period commencing with the fifth
anniversary of the grant date.
EMPLOYMENT AGREEMENTS
In connection with the acquisition of the LORAD Corporation ("LORAD") in
November 1992, the Company entered into an employment agreement with Mr. Hal
Kirshner. Mr. Kirshner's agreement called for Mr. Kirshner to serve as
President and Chief Operating Officer of LORAD until December 31, 1995, at a
base salary of $200,000 per year plus bonus.
45
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of May 30, 1996, and as
adjusted to reflect the sale of the shares of Common Stock offered in the
Offerings, by ThermoTrex, which is the only person or entity that owns
beneficially more than 5% of the outstanding shares of Common Stock. See "Risk
Factors--Control by ThermoTrex."
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS NUMBER OF SHARES OUTSTANDING SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------- ------------------ ------------------
<S> <C> <C>
ThermoTrex Corporation(1)................. 23,562,340(2) 92.3%
10455 Pacific Center Court
San Diego, CA 92121
</TABLE>
- --------
(l) ThermoTrex is a majority-owned subsidiary of Thermo Electron and,
therefore, Thermo Electron may be deemed a beneficial owner of the shares
of Common Stock beneficially owned by ThermoTrex. Thermo Electron
disclaims beneficial ownership of these shares. After the sale of the
Common Stock in the Offerings, ThermoTrex will beneficially own
approximately 80% of the outstanding Common Stock.
(2) Includes 3,307,888 shares of Common Stock issuable upon conversion of the
Convertible Note.
ThermoTrex has adopted a stock option plan with respect to the Common Stock
that it beneficially owns. Under this plan, options to purchase up to 400,000
shares of such stock may be granted to any person within the discretion of the
human resources committee of the Board of Directors of ThermoTrex, including
officers and key employees of ThermoTrex.
MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of January 1, 1996 as well as
information regarding the beneficial ownership of the common stock of
ThermoTrex and Thermo Electron, as of January 1, 1996, with respect to (i)
each of the Company's directors, (ii) the Chief Executive Officer, and (iii)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
TREX MEDICAL THERMOTREX THERMO ELECTRON
NAME(1) CORPORATION(2) CORPORATION(3) CORPORATION(4)
- ------- -------------- -------------- ---------------
<S> <C> <C> <C>
Gary S. Weinstein............... 0 0 225
Anthony J. Pellegrino........... 20,000 1,179,621 77,250
Hal Kirshner.................... 100,000 151,177 77,973
Elias P. Gyftopoulos............ 0 4,500 46,380
John N. Hatsopoulos............. 0 33,194 478,355
Robert C. Howard................ 2,500 35,554 134,593
Earl L. Lewis................... 0 0 106,273
James W. May, Jr................ 0 0 0
Hutham S. Olayan................ 0 4,500 14,420
Firooz Rufeh.................... 19,600 101,788 88,076
Kenneth Y. Tang................. 1,200 79,203 30,399
All directors and executive
officers as a group (12
persons)....................... 143,300 1,589,537 942,314
</TABLE>
- --------
(l) Except as reflected in the footnotes to this table, shares of Common Stock
and common stock of ThermoTrex and Thermo Electron beneficially owned
consist of shares owned by the indicated person or by that person for the
benefit of minor children, and all share ownership involves sole voting
and investment power.
(2) Certain officers and directors have been granted options to purchase
496,000 shares of Common Stock; however, these options will not become
exercisable until 90 days after the Offerings. Shares beneficially owned
by Ms. Olayan do not include 100,000 shares owned by Crescent Holding
GmbH, a member of the
46
<PAGE>
Olayan Group. Crescent Holding GmbH is indirectly controlled by Suliman S.
Olayan, Ms. Olayan's father. Mr. Olayan disclaims beneficial ownership of
the shares owned by Crescent Holding GmbH. No director or executive officer
beneficially owned more than 1% of the Common Stock outstanding as of such
date, and all directors and executive officers as a group beneficially
owned less than 1% of the Common Stock outstanding as of such date.
(3) Shares of the common stock of ThermoTrex beneficially owned by Mr.
Pellegrino, Mr. Kirshner, Dr. Gyftopoulos, Mr. Hatsopoulos, Mr. Howard,
Ms. Olayan, Mr. Rufeh, Dr. Tang and by all directors and executive
officers as a group include 134,500, 149,500, 4,500, 24,000, 31,320,
4,500, 66,000, 63,318 and 477,638 shares, respectively, that such person
or group has the right to acquire within 60 days of March 1, 1996, through
the exercise of stock options. Shares beneficially owned by Mr. Pellegrino
include 10,408 shares held in a trust of which Mr. Pellegrino's spouse is
the trustee. No director or executive officer beneficially owned more than
1% of the common stock of ThermoTrex outstanding as of January 1, 1996,
other than Mr. Pellegrino, who beneficially owned approximately 6.2% of
such common stock; all directors and executive officers as a group
beneficially owned 8.1% of such common stock outstanding as of such date.
(4) The shares of common stock of Thermo Electron have been adjusted to
reflect a three-for-two stock split effected in May 1995, but do not
reflect a proposed three-for-two split of such stock to be effected in the
form of a 50% stock dividend on June 5, 1996 to stockholders of record on
May 22, 1996. Shares of the common stock of Thermo Electron beneficially
owned by Mr. Pellegrino, Mr. Kirshner, Dr. Gyftopoulos, Mr. Hatsopoulos,
Mr. Howard, Mr. Lewis, Ms. Olayan, Mr. Rufeh, Dr. Tang and by all
directors and executive officers as a group include 77,250, 77,250, 5,250,
297,880, 40,185, 103,750, 5,250, 57,975, 28,650 and 693,440 shares,
respectively, that such person or group has the right to acquire within 60
days of January 1, 1996, through the exercise of stock options. Shares
beneficially owned by Mr. Hatsopoulos, Mr. Howard, Mr. Lewis, Mr. Rufeh,
Dr. Tang and by all directors and executive officers as a group include
1,225, 1,963, 617, 1,142, 538 and 5,485 full shares, respectively,
allocated through January 1, 1996 to their respective accounts maintained
pursuant to Thermo Electron's Employee Stock Purchase Plan of which the
trustees who have investment power over its assets are executive officers
of Thermo Electron. Shares beneficially owned by Mr. Hatsopoulos include
112,500 shares held by a QTIP trust of which Mr. Hatsopoulos is a trustee.
Shares beneficially owned by Ms. Olayan do not include 3,266,400 shares
owned by Crescent Holding GmbH, a member of the Olayan Group. Crescent
Holding GmbH is indirectly controlled by Suliman S. Olayan, Ms. Olayan's
father. Ms. Olayan disclaims beneficial ownership of the shares owned by
Crescent Holding GmbH. No director or executive officer beneficially owned
more than 1% of the common stock of Thermo Electron outstanding as of
January 1, 1996; all directors and executive officers as a group
beneficially owned 1.1% of the common stock of Thermo Electron outstanding
as of January 1, 1996.
47
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of May 30, 1996, the Company had 50,000,000 shares of Common Stock
authorized for issuance, of which 22,216,452 were issued and outstanding. Each
share of Common Stock is entitled to pro rata participation in distributions
upon liquidation and to one vote on all matters submitted to a vote of
shareholders. Dividends may be paid to the holders of Common Stock when and if
declared by the Board of Directors out of funds legally available therefor.
Holders of Common Stock have no preemptive, subscription, redemption,
conversion or similar rights. The outstanding shares of Common Stock are, and
the shares offered hereby when issued will be, legally issued, fully paid and
nonassessable.
The shares of Common Stock have noncumulative voting rights. As a result,
the holders of more than 50% of the shares voting can elect all the directors
if they so choose, and in such event, the holders of the remaining shares
cannot elect any directors. Upon completion of the Offerings, ThermoTrex will
continue to beneficially own at least a majority of the outstanding Common
Stock, and will have the power to elect all of the members of the Company's
Board of Directors. ThermoTrex is a majority-owned subsidiary of Thermo
Electron and, therefore, Thermo Electron may be deemed a beneficial owner of
the shares of Common Stock beneficially owned by ThermoTrex. Thermo Electron
disclaims beneficial ownership of these shares.
The Company's Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of directors. These provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain
circumstances involving wrongful acts, such as the breach of a director's duty
of loyalty or acts or omissions which involve intentional misconduct or a
knowing violation of law. The Company's By-Laws also contains provisions to
indemnify the directors and officers of the Company to the fullest extent
permitted by the General Corporation Law of Delaware. The Company believes
that these provisions will assist the Company in attracting and retaining
qualified individuals to serve as directors and officers.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, there will be 25,866,452 shares of Common
Stock of the Company outstanding (assuming no exercise of the Underwriters'
over-allotment option and the exercise of all Rights other than those
distributed to Thermo Electron). The shares issued in the Offerings will be
freely tradable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), except that any
shares purchased in the Offerings by affiliates of the Company, as that term
is defined in Rule 144 under the Securities Act (an "Affiliate"), may
generally only be resold in compliance with applicable provisions of Rule 144.
The Company has agreed, pursuant to a Stock Purchase Agreement with the
shareholders of the Company other than ThermoTrex, to file a registration
statement under the Securities Act covering the sale of the 1,962,000 shares
of Common Stock owned by them (the "Registrable Shares") within 120 days of
the closing of the Underwritten Public Offering. All fees, costs and expenses
of the registration of the Registrable Shares will be paid by the Company. See
"Risk Factors--Significant Additional Shares Eligible for Sale After the
Offerings."
As of May 30, 1996, ThermoTrex owned 20,254,452 of the outstanding shares of
Common Stock. Thermo Electron, ThermoTrex and the Company have agreed, without
the prior written consent of the Representatives of Underwriters, not to
offer, sell or otherwise dispose of any shares of Common Stock within a 180-
day period after the date of this Prospectus, other than (i) shares of Common
Stock to be sold to Underwriters in the Offerings, (ii) the issuance of
options to purchase Common Stock pursuant to existing stock-based compensation
plans, (iii) shares of Common Stock which may be sold to ThermoTrex, (iv) the
issuances of shares of Common Stock in consideration for the acquisition of
one or more businesses (provided that such Common Stock may not
48
<PAGE>
be resold prior to the expiration of the 180-day period referenced above), and
(v) shares issued upon the closing of the Rights Offering. So long as
ThermoTrex is able to elect a majority of the Board of Directors it will be
able to cause the Company at any time to register under the Securities Act all
or a portion of the Common Stock owned by ThermoTrex or its affiliates, in
which case it would be able to sell such shares without restriction upon
effectiveness of the registration statement.
In general, under Rule 144 as currently in effect, beginning approximately
90 days after the effective date of the Registration Statement of which this
Prospectus is a part, a stockholder, including an Affiliate, who has
beneficially owned his or her restricted securities (as that term is defined
in Rule 144) for at least two years from the later of the date such securities
were acquired from the Company or (if applicable) the date they were acquired
from an Affiliate is entitled to sell, within any three-month period, a number
of such shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock (approximately 258,664 after the Offerings)
or (ii) the average weekly trading volume in the Common Stock during the four
calendar weeks preceding the date on which notice of such sale was filed
pursuant to Rule 144 provided certain requirements concerning availability of
public information, manner of sale and notice of sale are satisfied. In
addition, under Rule 144(k), if a period of at least three years has elapsed
between the later of the date restricted securities were acquired from the
Company or (if applicable) the date they were acquired from an Affiliate of
the Company, a stockholder who is not an Affiliate of the Company at the time
of sale and has not been an Affiliate of the Company for at least three months
prior to the sale is entitled to sell the shares immediately without
compliance with the foregoing requirements under Rule 144. The Securities and
Exchange Commission has proposed an amendment to Rule 144 which would reduce
the holding period required for shares subject to Rule 144 to become eligible
for sale in the public market from two years to one year, and from three years
to two years in the case of Rule 144(k).
The Company has reserved 1,925,000 shares of Common Stock for grants under
its existing stock-based compensation plans. As of May 30, 1996 the Company
had options outstanding to purchase up to 1,401,000 shares of Common Stock to
certain of its employees, officers and directors at a weighted average
exercise price of $11.14 per share. Ninety days after the completion of the
Company's initial public offering such options will become immediately
exercisable, subject to the right of the Company to repurchase shares at the
exercise price if the optionee ceases to be employed by the Company. This
repurchase right lapses ratably (on an annual basis) over a five to ten year
period depending upon the term of the option. As of May 30, 1996, the
repurchase right had lapsed as to no shares issuable upon exercise of
outstanding options. The Company has reserved 524,000 shares for future grant
under plans. The Company intends to file registration statements under the
Securities Act to register all shares of Common Stock issuable under such
plans. Shares covered by these registration statements that are not subject to
transferability restrictions will be eligible for sale in the public market
immediately upon the filing of such registration statements, subject to Rule
144 limitations applicable to Affiliates as noted above.
Prior to the Offerings, there has been no public market for the Common Stock
of the Company, and no prediction can be made as to the effect, if any, that
market sales of shares of Common Stock or the availability of shares for sale
will have on the market price of the Common Stock prevailing from time to
time. Nevertheless, sales of significant numbers of shares of the Common Stock
in the public market could adversely affect the market price of the Common
Stock and could impair the Company's future ability to raise capital through
an offering of its equity securities. See "Risk Factors--Significant
Additional Shares Eligible for Sale After the Offerings."
49
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
each of the Underwriters named below, for whom NatWest Securities Limited,
Lehman Brothers Inc. and Oppenheimer & Co., Inc. are acting as Representatives
(the "Representatives"), has severally agreed to purchase from the Company the
following respective number of shares of Common Stock at the public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
NatWest Securities Limited..................................
Lehman Brothers Inc. .......................................
Oppenheimer & Co., Inc. ....................................
---------
Total..................................................... 2,400,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent. The nature of the Underwriters'
obligations is that they are committed to purchase all shares of Common Stock
offered in the Underwritten Public Offering if any such shares are purchased.
The closing of the Rights Offering is conditioned upon the closing of the
Underwritten Public Offering.
The Company has been advised by the Representatives that the Underwriters
propose to offer shares of Common Stock directly to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
selected dealers (who may include the Underwriters) at such price less a
selling concession not in excess of $ per share. The Underwriters may allow
and such dealers may re-allow a concession not in excess of $ per share to
certain other dealers (who may include the Underwriters). After commencement of
the offering to the public, the public offering price and other selling terms
may be changed by the Representatives. The Representatives have informed the
Company that the Underwriters do not intend to confirm sales of shares of
Common Stock to any accounts over which they exercise discretionary authority.
The Company has granted to the several Underwriters an option, exercisable
not later than 30 days after the date of this Prospectus, to purchase up to
360,000 additional shares of Common Stock at the public offering price, less
the aggregate underwriting discounts and commissions, set forth on the cover
page of this Prospectus, solely to cover over-allotments. To the extent that
the Underwriters exercise such option, each of the Underwriters will be
committed, subject to certain conditions, to purchase a number of option shares
proportionate to such Underwriter's initial commitment.
The Underwriters have reserved for sale at the initial public offering price
up to 240,000 shares which may be sold to employees of the Company or
ThermoTrex, persons associated with the Company or ThermoTrex and persons
affiliated with any director, officer or employee of the Company or ThermoTrex.
Such reserved shares will be sold to such purchasers on the condition that each
purchaser will agree not to sell or otherwise dispose of the shares purchased
for a period of one year from the date of purchase. The number of shares
available for sale to the general public will be reduced to the extent any
reserved shares are so purchased. Any reserved shares not so purchased will be
offered to the public by the Underwriters on the same basis as the other shares
offered hereby.
The Underwriting Agreement provides that the Company, ThermoTrex and Thermo
Electron will indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act, and to contribute to payments that the
Underwriters may be required to make in respect thereof.
50
<PAGE>
Thermo Electron, ThermoTrex and the Company have also agreed that they will
not, without the Representatives' prior written consent, sell or otherwise
dispose of any shares of Common Stock within a 180-day period after the date
of this Prospectus, other than (i) shares of Common Stock to be sold to the
Underwriters in the Offerings, (ii) the grant of options to purchase Common
Stock pursuant to currently existing stock-based compensation plans, (iii)
shares of Common Stock which may be sold to ThermoTrex, (iv) the issuance of
shares of Common Stock as in consideration for the acquisition of one or more
businesses (provided that such Common Stock may not be resold prior to the
expiration of the 180-day period referenced above), and (v) shares issued upon
the closing of the Rights Offering. See "Risk Factors--Significant Additional
Shares Eligible for Sale After the Offerings" and "Shares Eligible for Future
Sale."
Certain of the Underwriters from time to time have performed, and expect to
provide in the future, various investment banking services for Thermo Electron
and its subsidiaries.
NatWest Securities Limited, a United Kingdom broker-dealer and a member of
the Securities and Futures Authority Limited, has agreed that, as part of the
distribution of the shares of Common Stock offered hereby and subject to
certain exceptions, it will not offer or sell any shares of Common Stock
within the United States, its territories or possessions or to persons who are
citizens thereof or residents therein. The Underwriting Agreement does not
limit sales of shares of Common Stock offered hereby outside of the United
States.
NatWest Securities Limited has also represented and agreed that (i) it has
not offered or sold and will not offer or sell any Common Stock to persons in
the United Kingdom prior to admission of the Common Stock to listing in
accordance with Part IV of the Financial Services Act 1986 (the "Act") except
to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purpose
of their businesses or otherwise in circumstances which have not resulted and
will not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995 or the Act, (ii)
it has complied and will comply with all applicable provisions of the Act with
respect to anything done by it in relation to the Common Stock in, from or
otherwise involving the United Kingdom, and (iii) it has only issued or passed
on, and will only issue or pass on, in the United Kingdom any document
received by it in connection with the issue of the Common Stock, other than
any document which consists of or any part of listing particulars,
supplementary listing particulars or any other document required or permitted
to be published by listing rules under Part IV of the Act, to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom the
document may otherwise lawfully be issued or passed on.
Prior to the Offerings there has been no public market for the Common Stock.
The initial public offering price for the Common Stock will be determined by
negotiation among the Company and the Representatives. Among the factors to be
considered in determining the initial public offering price will be prevailing
market and economic conditions, estimates of the business potential and
prospects of the Company, the state of the Company's business operations, an
assessment of the Company's management, the consideration of the above factors
in relation to market valuations of companies in related businesses and other
factors deemed relevant. The estimated initial public offering price range set
forth on the cover page of this preliminary prospectus is subject to change as
a result of market conditions and other factors.
LEGAL OPINIONS
The validity of the issuance of the Common Stock offered in the Offerings
will be passed upon for the Company by Seth H. Hoogasian, Esq., General
Counsel of Thermo Electron, ThermoTrex and the Company, and certain legal
matters in connection with the Underwritten Public Offering will be passed
upon for the Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston,
Massachusetts. Mr. Hoogasian owns or has the right to acquire 6,000 shares of
Common Stock, 7,800 shares of common stock of ThermoTrex and 78,385 shares of
common stock of Thermo Electron.
51
<PAGE>
EXPERTS
The Consolidated Financial Statements of the Company, Bennett and XRE
included in this Prospectus and the financial statement schedule included in
the Registration Statement of which this Prospectus forms a part have been
audited by Arthur Andersen LLP, independent public accountants, to the extent
and for the periods as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
The Consolidated Financial Statements of Continental included in this
Prospectus have been audited by Topel Forman L.L.C., independent public
accountants, to the extent and for the periods as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall include all
amendments, exhibits and schedules thereto) on Form S-1 under the Securities
Act with respect to the shares of Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission, to which Registration Statement reference is
hereby made. Although statements made in this Prospectus as to the contents of
any contract, agreement or other document referred to set forth all material
elements of such documents, such statements are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement, although
setting forth all material elements of such documents, shall be deemed
qualified by such reference. The Registration Statement and the exhibits
thereto may be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at Seven World Trade Center, 13th Floor, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
REPORTS TO SECURITY HOLDERS
The Company intends to furnish holders of the Common Stock offered hereby
with annual reports containing financial statements audited by an independent
public accounting firm and with quarterly reports containing unaudited summary
financial statements for each of the first three quarters of each fiscal year.
52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
TREX MEDICAL CORPORATION
Report of Independent Public Accountants................................ F-2
Consolidated Statement of Income for the years ended January 1, 1994 and
December 31, 1994, for the nine months ended October 1, 1994 and Sep-
tember 30, 1995 and for the six months ended April 1, 1995 and March
30, 1996............................................................... F-3
Consolidated Balance Sheet as of December 31, 1994, September 30, 1995
and
March 30, 1996......................................................... F-4
Consolidated Statement of Cash Flows for the years ended January 1, 1994
and December 31, 1994, for the nine months ended October 1, 1994 and
September 30, 1995 and for the six months ended April 1, 1995 and March
30, 1996............................................................... F-5
Consolidated Statement of Shareholders' Investment for the years ended
January 1, 1994 and December 31, 1994, for the nine months ended
September 30, 1995 and for the six months ended March 30, 1996......... F-6
Notes to Consolidated Financial Statements.............................. F-7
BENNETT X-RAY CORPORATION
Report of Independent Public Accountants................................ F-15
Consolidated Statement of Operations for the fiscal years ended February
28, 1993, 1994 and 1995, for the six months ended August 31, 1994 and
for the period from March 1, 1995 through September 14, 1995........... F-16
Consolidated Balance Sheet as of February 28, 1994 and 1995 ............ F-17
Consolidated Statement of Cash Flows for the fiscal years ended February
28, 1993, 1994 and 1995, for the six months ended August 31, 1994 and
for the period from March 1, 1995 through September 14, 1995........... F-18
Consolidated Statement of Shareholders' Investment for the fiscal years
ended February 28, 1993, 1994 and 1995 and for the period from March 1,
1995 through September 14, 1995........................................ F-19
Notes to Consolidated Financial Statements.............................. F-20
XRE CORPORATION
Report of Independent Public Accountants................................ F-23
Consolidated Statement of Income for the year ended December 31, 1995
and for the three months ended April 1, 1995 and March 30, 1996........ F-24
Consolidated Balance Sheet as of December 31, 1995 and March 30, 1996... F-25
Consolidated Statement of Cash Flows for the year ended December 31,
1995 and for the three months ended April 1, 1995 and March 30, 1996... F-26
Consolidated Statement of Stockholders' Investment for the year ended
December 31, 1995 and for the three months ended March 30, 1996........ F-27
Notes to Consolidated Financial Statements.............................. F-28
CONTINENTAL GROUP
Report of Independent Public Accountants................................ F-32
Combined Statement of Income for the years ended December 31, 1994 and
1995 and for the three months ended March 31, 1995 and 1996............ F-33
Combined Balance Sheet as of December 31, 1994 and 1995 and March 31,
1996................................................................... F-34
Combined Statement of Cash Flows for the years ended December 31, 1994
and 1995 and for the three months ended March 31, 1995 and 1996........ F-35
Combined Statement of Stockholders' Equity for the years ended December
31, 1994 and 1995 and for the three months ended March 31, 1996........ F-36
Notes to Combined Financial Statements.................................. F-37
</TABLE>
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION OF TREX MEDICAL CORPORATION,
BENNETT X-RAY CORPORATION, XRE CORPORATION AND CONTINENTAL GROUP (UNAUDITED)
<TABLE>
<S> <C>
Pro Forma Combined Condensed Statement of Income for the nine months
ended
September 30, 1995..................................................... F-41
Pro Forma Combined Condensed Statement of Income for the six months
ended
March 30, 1996......................................................... F-42
Pro Forma Combined Condensed Balance Sheet as of March 30, 1996......... F-43
Notes to Pro Forma Combined Condensed Financial Statements.............. F-44
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trex Medical Corporation:
We have audited the accompanying consolidated balance sheet of Trex Medical
Corporation (a Delaware corporation and 100%-owned subsidiary of ThermoTrex
Corporation) and subsidiaries as of December 31, 1994 and September 30, 1995,
and the related consolidated statements of income, cash flows and
shareholders' investment for the years ended January 1, 1994 and December 31,
1994 and for the nine months ended September 30, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Trex
Medical Corporation and subsidiaries as of December 31, 1994 and September 30,
1995 and the results of their operations and their cash flows for the years
ended January 1, 1994 and December 31, 1994 and for the nine months ended
September 30, 1995, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Boston, Massachusetts
March 26, 1996 (except with respect
to certain matters discussed in Note
9, as to which the date is May 30,
1996)
F-2
<PAGE>
TREX MEDICAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SIX MONTHS ENDED
------------------------- -------------------
OCTOBER 1, SEPTEMBER 30, APRIL 1, MARCH 30,
1993 1994 1994 1995 1995 1996
------- ------- ----------- ------------- -------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues (includes $350
and $2,240 to an af-
filiated company in
the nine months ended
September 30, 1995 and
the six months ended
March 30, 1996)
(Note 7).............. $37,519 $54,410 $39,196 $55,291 $31,315 $66,829
------- ------- ------- ------- ------- -------
Costs and Operating Ex-
penses:
Cost of revenues
(includes $175 and
$1,120 for
affiliated company
revenues in the nine
months ended
September 30, 1995
and the six months
ended March 30,
1996)............... 18,589 27,794 19,654 28,180 16,125 37,592
Selling, general and
administrative
expenses (Note 6)... 9,788 13,272 9,794 12,174 7,117 13,695
Research and develop-
ment
expenses (Note 6)... 7,182 10,662 7,320 8,595 6,270 8,170
------- ------- ------- ------- ------- -------
35,559 51,728 36,768 48,949 29,512 59,457
------- ------- ------- ------- ------- -------
Operating Income....... 1,960 2,682 2,428 6,342 1,803 7,372
Interest Income........ -- -- -- -- -- 440
Interest Expense, Re-
lated Party
(Note 1).............. -- -- -- -- -- (872)
Other Income (Expense),
Net................... (158) (22) (11) 22 (2) 35
------- ------- ------- ------- ------- -------
Income Before Provision
for
Income Taxes.......... 1,802 2,660 2,417 6,364 1,801 6,975
Provision for Income
Taxes (Note 4)........ 975 1,466 1,332 2,881 835 3,241
------- ------- ------- ------- ------- -------
Net Income............. $ 827 $ 1,194 $ 1,085 $ 3,483 $ 966 $ 3,734
======= ======= ======= ======= ======= =======
Earnings per Share..... $ .04 $ .06 $ .05 $ .17 $ .05 $ .17
======= ======= ======= ======= ======= =======
Weighted Average
Shares................ 20,151 20,151 20,151 20,151 20,151 21,547
======= ======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
TREX MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, MARCH 30,
1994 1995 1996
------------ ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............. $ -- $ 202 $ 19,245
Accounts receivable, less allowances
of $525, $870, and $921.............. 9,909 14,937 18,936
Inventories........................... 6,722 16,667 18,615
Prepaid expenses...................... 158 113 938
Due from Thermo Electron Corporation
and affiliated companies............. -- -- 1,401
Prepaid income taxes (Note 4)......... 2,649 3,474 3,474
-------- -------- --------
19,438 35,393 62,609
-------- -------- --------
Property, Plant and Equipment, at Cost,
Net.................................... 6,310 7,811 8,628
-------- -------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2)..................... 22,252 59,170 58,338
-------- -------- --------
$ 48,000 $102,374 $129,575
======== ======== ========
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Current Liabilities:
Accounts payable...................... $ 3,742 $ 7,381 $ 7,671
Accrued payroll and employee bene-
fits................................. 991 2,338 2,078
Accrued warranty costs................ 1,126 2,991 3,434
Customer deposits..................... 742 771 1,496
Accrued income taxes.................. -- -- 2,723
Other accrued expenses (Note 2)....... 4,210 8,245 9,652
Due to Thermo Electron Corporation and
affiliated companies................. 43 496 --
-------- -------- --------
10,854 22,222 27,054
-------- -------- --------
Deferred Income Taxes (Note 4).......... 113 142 89
-------- -------- --------
Subordinated Convertible Note, Due to
Parent Company (Notes 1 and 9)......... -- -- 39,000
-------- -------- --------
Commitments and Contingencies (Notes 2,
5, 6 and 8)
Shareholders' Investment:
Net parent company investment......... 37,033 80,010 --
Common stock, $.01 par value,
50,000,000 shares authorized;
22,216,452 shares issued and
outstanding.......................... -- -- 222
Capital in excess of par value........ -- -- 59,476
Retained earnings..................... -- -- 3,734
-------- -------- --------
37,033 80,010 63,432
-------- -------- --------
$ 48,000 $102,374 $129,575
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
TREX MEDICAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SIX MONTHS ENDED
------------------------- ------------------
OCTOBER 1, SEPTEMBER 30, APRIL 1, MARCH 30,
1993 1994 1994 1995 1995 1996
------- ------- ----------- ------------- -------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............. $ 827 $ 1,194 $ 1,085 $ 3,483 $ 966 $ 3,734
Adjustments to
reconcile net income
to net cash provided
by (used in) operating
activities:
Depreciation and
amortization......... 1,207 1,491 1,104 1,315 809 1,463
Provision for losses
on accounts
receivable........... -- 175 125 25 50 51
Increase (decrease)
in deferred income
taxes................ (22) 32 -- 29 32 (53)
Other noncash items... 3 -- -- (15) -- (29)
Changes in current
accounts, excluding
the effects of
acquisition:
Accounts
receivable......... (2,132) (3,316) (2,704) (693) (1,793) (4,050)
Inventories......... (792) 153 (790) (1,476) (799) (1,948)
Other current as-
sets............... (150) 125 49 (82) (756) (771)
Accounts payable.... (802) 1,861 140 621 885 290
Other current lia-
bilities........... 85 411 1,994 444 (964) 3,138
------- ------- ------- ------- ------ -------
Net cash provided by
(used in)
operating
activities.......... (1,776) 2,126 1,003 3,651 (1,570) 1,825
------- ------- ------- ------- ------ -------
INVESTING ACTIVITIES:
Purchases of property,
plant and equipment... (1,754) (1,300) (724) (957) (893) (1,505)
Proceeds from sale of
property, plant and
equipment............. 27 29 29 14 31 35
------- ------- ------- ------- ------ -------
Net cash used in
investing
activities.......... (1,727) (1,271) (695) (943) (862) (1,470)
------- ------- ------- ------- ------ -------
FINANCING ACTIVITIES:
Net proceeds from
private placements of
Company common stock
(Note 9).............. -- -- -- -- -- 18,688
Net transfers (to) from
parent company ....... 3,503 (855) (308) (2,506) 2,432 --
------- ------- ------- ------- ------ -------
Net cash provided by
(used in)
financing
activities.......... 3,503 (855) (308) (2,506) 2,432 18,688
------- ------- ------- ------- ------ -------
Increase in Cash and
Cash Equivalents....... -- -- -- 202 -- 19,043
Cash and Cash 202
Equivalents at
Beginning of Period.... -- -- -- -- --
------- ------- ------- ------- ------ -------
Cash and Cash
Equivalents at End of
Period................. $ -- $ -- $ -- $ 202 $ -- $19,245
======= ======= ======= ======= ====== =======
CASH PAID FOR:
Interest............... $ -- $ -- $ -- $ -- $ -- $ 882
======= ======= ======= ======= ====== =======
Income taxes........... $ -- $ -- $ -- $ -- $ -- $ 279
======= ======= ======= ======= ====== =======
NONCASH ACTIVITIES:
Contribution of land
and building from
parent company........ $ 3,728 $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= ====== =======
Transfer of acquired
business from parent
company, net of cash
(Note 2).............. $ -- $ -- $ -- $42,000 $ -- $ --
======= ======= ======= ======= ====== =======
Issuance of subordi-
nated convertible note
to parent
company (Note 1)...... $ -- $ -- $ -- $ -- $ -- $42,000
======= ======= ======= ======= ====== =======
Conversion of subordi-
nated convertible note
by parent company
(Note 9)................ $ -- $ -- $ -- $ -- $ -- $ 3,000
======= ======= ======= ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
TREX MEDICAL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET PARENT COMMON CAPITAL IN
COMPANY STOCK, $.01 EXCESS OF RETAINED
INVESTMENT PAR VALUE PAR VALUE EARNINGS
---------- ----------- ---------- --------
<S> <C> <C> <C> <C>
BALANCE JANUARY 2, 1993............ $ 28,636 $ -- $ -- $ --
Net income......................... 827 -- -- --
Contribution of land and building
from parent company............... 3,728 -- -- --
Net transfers from parent company.. 3,503 -- -- --
-------- ----- -------- ------
BALANCE JANUARY 1, 1994............ 36,694 -- -- --
Net income......................... 1,194 -- -- --
Net transfers to parent company.... (855) -- -- --
-------- ----- -------- ------
BALANCE DECEMBER 31, 1994.......... 37,033 -- -- --
Net income......................... 3,483 -- -- --
Net transfers to parent company.... (2,506) -- -- --
Transfer of acquired business from
parent company, net of cash (Note
2)................................ 42,000 -- -- --
-------- ----- -------- ------
BALANCE SEPTEMBER 30, 1995......... 80,010 -- -- --
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
Issuance of subordinated
convertible note to parent company
(Note 1).......................... -- -- (42,000) --
Capitalization of Company.......... (80,010) 200 79,810 --
Net income......................... -- -- -- 3,734
Net proceeds from private
placements of Company common stock
(Note 9).......................... -- 19 18,669 --
Conversion of subordinated
convertible note by parent company
(Note 9).......................... -- 3 2,997 --
-------- ----- -------- ------
BALANCE MARCH 30, 1996............. $ -- $ 222 $ 59,476 $3,734
======== ===== ======== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Trex Medical Corporation (the "Company") designs, manufactures and markets
mammography equipment and minimally invasive stereotactic needle biopsy
systems used in the detection of breast cancer. The Company also designs and
manufactures general X-ray equipment. The Company's mammography and
stereotactic needle biopsy systems are used by radiologists and physicians in
offices, hospitals and dedicated breast-care centers, and its general
radiography systems are used by physicians and radiologists, both in office
and hospital settings, as well as by veterinarians and chiropractors.
Relationship with ThermoTrex Corporation and Thermo Electron Corporation
The Company was incorporated in September 1995 as a wholly owned subsidiary
of ThermoTrex Corporation ("ThermoTrex"). On October 2, 1995, ThermoTrex
transferred to the Company all of the outstanding capital stock of Bennett X-
Ray Corporation ("Bennett"), in exchange for a $42,000,000 principal amount
4.2% subordinated convertible note, due 2000, convertible into shares of the
Company's common stock at $11.79 per share. On October 16, 1995, ThermoTrex
transferred to the Company the assets, liabilities and businesses of
ThermoTrex's Lorad division ("Lorad") and ThermoTrex's research and
development activities pertaining to its Sonic CT system, in exchange for
20,000,000 shares of the Company's common stock. ThermoTrex acquired Lorad and
Bennett in November 1992 and September 1995, respectively. As of September 30,
1995, ThermoTrex was a 51%-owned subsidiary of Thermo Electron Corporation
("Thermo Electron").
The accompanying financial statements include the assets, liabilities,
income and expenses of the Company as included in ThermoTrex's consolidated
financial statements.
Principles of Consolidation
The accompanying financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated.
Fiscal Year
In September 1995, the Company changed its fiscal year-end from the Saturday
nearest December 31 to the Saturday nearest September 30. Accordingly, the
Company's transition period, which ended on September 30, 1995, is the 39-week
period from January 1, 1995 through September 30, 1995 (fiscal 1995), and
fiscal 1996 will be the 52-week period ending September 28, 1996. References
to 1993 and 1994 are for the fiscal years ended January 1, 1994 and December
31, 1994, respectively. Fiscal years 1993 and 1994 each included 52 weeks. The
unaudited statements of income and cash flows for the nine months ended
October 1, 1994 are presented for comparative purposes only and include 39
weeks.
Revenue Recognition
The Company recognizes revenues upon shipment of its products. The Company
provides a reserve for its estimate of warranty costs at the time of shipment.
Income Taxes
The Company and ThermoTrex have a tax allocation agreement under which the
Company is included in the consolidated income tax returns filed by
ThermoTrex. The agreement provides that in years in which the Company has
taxable income, it will pay to ThermoTrex amounts comparable to the taxes the
Company would have paid upon filing separate tax returns. If ThermoTrex's
equity ownership of the Company were to decrease below 80%, the Company would
file its own income tax returns.
F-7
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," the Company recognizes deferred income
taxes based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in which the
differences are expected to be reflected in the tax return.
Earnings per Share
Pursuant to Securities and Exchange Commission requirements, earnings per
share have been presented for all periods. Weighted average shares for all
periods include the 20,000,000 shares issued to ThermoTrex in connection with
the initial capitalization of the Company and the effect of the assumed
exercise of stock options issued within one year prior to the Company's
proposed initial public offering. Fully-diluted earnings per share have not
been presented as they do not materially differ from primary earnings per
share.
Cash and Cash Equivalents
Prior to its incorporation in September 1995, the Company's cash receipts
and disbursements were combined with other ThermoTrex corporate cash
transactions and balances. Therefore, cash is not included in the accompanying
balance sheet as of December 31, 1994.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out basis)
or market value and include materials, labor and manufacturing overhead. The
components of inventories are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies.................................. $ 3,576 $ 9,414
Work in process............................................. 1,472 5,195
Finished goods.............................................. 1,674 2,058
------- -------
$ 6,722 $16,667
======= =======
</TABLE>
Property, Plant and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization principally using the straight-line method over
the estimated useful lives of the property as follows: building, 30 years;
machinery and equipment, 3 to 7 years; and leasehold improvements, the shorter
of the term of the lease or the life of the asset. Property, plant and
equipment consist of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land......................................................... $1,000 $1,000
Building..................................................... 2,728 2,728
Machinery, equipment and leasehold improvements.............. 4,000 6,211
------- -------
7,728 9,939
Less: Accumulated depreciation and amortization.............. 1,418 2,128
------- -------
$6,310 $7,811
======= =======
</TABLE>
F-8
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired companies
is amortized using the straight-line method over 40 years. Accumulated
amortization was $1,357,000 and $1,935,000 as of December 31, 1994 and
September 30, 1995, respectively. The Company assesses the future useful life
of this asset whenever events or changes in circumstances indicate that the
current useful life has diminished. The Company considers the future
undiscounted cash flows of the acquired businesses in assessing the
recoverability of this asset.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Statements
The financial statements as of March 30, 1996, for the six-month periods
ended April 1, 1995 and March 30, 1996 and for the nine-month period ended
October 1, 1994, are unaudited but, in the opinion of management, reflect all
adjustments of a normal recurring nature necessary for a fair presentation of
results for these interim periods. The results of operations for the six-month
period ended March 30, 1996 are not necessarily indicative of the results to
be expected for the entire year.
2. ACQUISITIONS
In September 1995, ThermoTrex acquired all of the outstanding capital stock
of Bennett for $42,865,000 in cash. Bennett is a manufacturer of high
frequency specialty and general purpose radiographic systems. This acquisition
has been accounted for using the purchase method of accounting, and Bennett's
results of operations have been included in the accompanying financial
statements from the date of acquisition. The cost of the acquisition exceeded
the estimated fair value of the acquired net assets by $37,496,000, which is
being amortized over 40 years. Allocation of the purchase price was based on
estimates of the fair value of the net assets acquired and is subject to
adjustment upon finalization of the purchase price allocation. To date, no
information has been gathered that would cause the Company to believe that the
final allocation of the purchase price will be materially different than the
preliminary estimate.
Based on unaudited data, the following table presents selected financial
information for the Company and Bennett on a pro forma basis, assuming the
companies had been combined since the beginning of 1994.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -----------------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Revenues...................................... $96,943 $85,749
Net income (loss)............................. (1,236) 2,224
Earnings (loss) per share..................... (.06) .11
</TABLE>
F-9
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The pro forma results are not necessarily indicative of future operations or
the actual results that would have occurred had the acquisition of Bennett
been made at the beginning of 1994. Additional pro forma information for the
Company and Bennett is included elsewhere in this Prospectus.
In November 1992, ThermoTrex acquired Lorad for $5.3 million in cash,
assumption of $6.7 million of pre-existing debt of Lorad, and shares of
ThermoTrex common stock and stock options valued at $12.3 million. In
addition, in March 1995, ThermoTrex made a cash payment of $2.3 million to the
holders of approximately 9.2% of Lorad's common stock who had earlier voted
against the acquisition, in exchange for their interest in Lorad.
Other accrued expenses in the accompanying balance sheet include $3.0
million as of December 31, 1994 and $4.0 million as of September 30, 1995, for
estimated reserves associated with acquisitions, including a reserve of $2.3
million at December 31, 1994 and September 30, 1995 for legal fees and other
costs associated with a patent infringement suit that existed prior to
ThermoTrex's acquisition of Lorad. This suit was brought by Fischer Imaging
Corporation ("Fischer"), which alleges that Lorad infringed a Fischer patent
on a precision mammographic needle-biopsy system. In connection with the
organization of the Company, ThermoTrex agreed to indemnify the Company for
any and all cash damages under this lawsuit, with respect to sales occurring
prior to October 16, 1995, the date Lorad was transferred to the Company. Any
payments received under such indemnity would be recorded as capital
contributions. While the Company believes that it has meritorious legal
defenses to the allegation, due to the inherent uncertainties of litigation,
the Company is unable to predict the outcome of this matter. Although an
unsuccessful resolution could have a material adverse effect on the Company's
results of operations, in the opinion of management any resolution will not
have a material adverse effect on the Company's financial position.
3. EMPLOYEE BENEFIT PLANS
Employee Stock Purchase Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in an employee stock purchase plan sponsored by ThermoTrex. Prior
to the November 1995 plan year, shares of ThermoTrex's and Thermo Electron's
common stock could be purchased at the end of a 12-month plan year at 85% of
the fair market value at the beginning of the plan year, and the shares
purchased were subject to a one-year resale restriction. Effective November 1,
1995, the applicable shares of common stock may be purchased at 95% of the
fair market value at the beginning of the plan year, and the shares purchased
are subject to a six-month resale restriction. Shares are purchased through
payroll deductions of up to 10% of each participating employee's gross wages.
401(k) Savings Plan
The majority of the Company's full-time employees are eligible to
participate in Thermo Electron's 401(k) savings plan. Prior to 1994, the
Company's Lorad division participated in its own 401(k) savings plan.
Contributions to the Thermo Electron and the Lorad 401(k) savings plans are
made by both the employee and the Company. Company contributions are based
upon the level of employee contributions. The Company contributed and charged
to expense for these plans $111,000, $313,000 and $242,000 in 1993, 1994 and
fiscal 1995, respectively.
F-10
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal............................................. $ 426 $1,119 $2,474
State............................................... 99 547 808
------ ------ ------
525 1,666 3,282
------ ------ ------
Net deferred (prepaid):
Federal............................................. 329 (146) (228)
State............................................... 121 (54) (173)
------ ------ ------
450 (200) (401)
------ ------ ------
$ 975 $1,466 $2,881
====== ====== ======
</TABLE>
The provision for income taxes in the accompanying statement of income
differs from the provision calculated by applying the statutory federal income
tax rate of 34% to income before provision for income taxes due to the
following:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory rate............ $ 613 $ 904 $2,164
Increases resulting from:
State income taxes, net of federal tax................ 145 325 419
Amortization of cost in excess of net assets of
acquired companies................................... 209 228 197
Nondeductible expenses................................ 8 9 101
------ ------ ------
$ 975 $1,466 $2,881
====== ====== ======
</TABLE>
Prepaid income taxes and deferred income taxes in the accompanying balance
sheet consist of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
Reserves and accruals..................................... $1,777 $1,725
Allowance for doubtful accounts........................... 215 348
Inventory basis difference................................ 576 918
Accrued compensation...................................... 60 463
Other, net................................................ 21 20
------- -------
$2,649 $3,474
======= =======
Deferred income taxes:
Depreciation.............................................. $ 113 $ 142
======= =======
</TABLE>
F-11
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. COMMITMENTS
The Company leases portions of its office and operating facilities under
various noncancelable operating lease arrangements expiring between fiscal
1997 and fiscal 2005. The accompanying statement of income includes expenses
from operating leases of $132,000, $40,000 and $44,000 in 1993, 1994 and
fiscal 1995, respectively. Future minimum payments due under noncancelable
operating leases at September 30, 1995, are $625,000 in fiscal 1996; $627,000
in fiscal 1997; $600,000 in each of fiscal 1998, 1999 and 2000; and $2,975,000
in fiscal 2001 and thereafter. Total future minimum lease payments are
$6,027,000.
6. RELATED PARTY TRANSACTIONS
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management,
certain employee benefit administration, tax advice and preparation of tax
returns, centralized cash management, and certain financial and other
services, for which the Company pays Thermo Electron annually an amount equal
to 1.20% of the Company's revenues. Prior to January 1, 1995, the Company paid
an annual fee equal to 1.25% of the Company's revenues. Effective December 31,
1995, the Company will pay an annual fee equal to 1.0% of the Company's
revenues. For these services, the Company was charged $469,000, $680,000 and
$663,000 in 1993, 1994 and fiscal 1995, respectively. The annual fee is
reviewed and adjusted annually by mutual agreement of the parties. Management
believes that the service fee charged by Thermo Electron is reasonable and
that such fees are representative of the expenses the Company would have
incurred on a stand-alone basis. The corporate services agreement is renewed
annually but can be terminated upon 30 days' prior notice by the Company or
upon the Company's withdrawal from the Thermo Electron Corporate Charter (the
Thermo Electron Corporate Charter defines the relationship among Thermo
Electron and its majority-owned subsidiaries). For additional items such as
employee benefit plans, insurance coverage and other identifiable costs,
Thermo Electron charges the Company based upon costs attributable to the
Company.
Other Related Party Services
ThermoTrex provides certain research and development contract services to
the Company, which are charged to the Company based on actual cost and usage.
For these services, the Company was charged $1,470,000, $2,816,000 and
$1,536,000 in 1993, 1994 and fiscal 1995, respectively.
Laser Manufacturing Agreement
ThermoLase Corporation ("ThermoLase"), a majority-owned subsidiary of
ThermoTrex, has engaged the Company to design and manufacture a laser to be
used in ThermoLase's laser-based hair-removal system. During fiscal 1995, the
Company recorded $350,000 of revenue under this agreement.
Vendor Agreement
During fiscal 1995, the Company placed an order for $2,500,000 for the
design and production of high-transmission cellular grids from the Tecomet
division of Thermo Electron, which will be received in fiscal 1996 and 1997.
In addition, the Company recorded expense of $250,000 during fiscal 1995
related to research and development funding provided to Tecomet.
F-12
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. SIGNIFICANT CUSTOMER, EXPORT SALES AND CONCENTRATION OF CREDIT RISK
Sales to one customer accounted for 11%, 11% and 18% of the Company's total
revenues in 1993, 1994 and fiscal 1995, respectively. Export sales to Germany
accounted for 1%, 3% and 11% of the Company's total revenues in 1993, 1994 and
fiscal 1995, respectively. Other export sales accounted for 9%, 11% and 10% of
the Company's total revenues in 1993, 1994 and fiscal 1995, respectively. In
general, export sales are denominated in U.S. dollars. The Company sells its
products primarily to customers in the healthcare industry. The Company does
not normally require collateral or other security to support its accounts
receivable. Management does not believe that this concentration of credit risk
has or will have a significant negative impact on the Company.
8. CONTINGENCY
The owner of a U.S. patent related to automatic exposure control has claimed
that the Company's mammography systems infringe such patent. The patent owner
has offered a nonexclusive license under the patent on terms not acceptable to
the Company. Although the Company believes that the validity of the patent may
be questionable and subject to a successful challenge, if the patent holder
were successful in enforcing such patent the Company could be enjoined from
manufacturing and selling mammography systems. The Company will be indemnified
by ThermoTrex for any cash damages relating to sales of such systems occurring
prior to the dates on which ThermoTrex transferred certain businesses to the
Company, although any payments under such indemnity would be recorded as
capital contributions. Due to the inherent uncertainty of litigation,
management cannot predict the outcome of this matter. While an unfavorable
outcome could have a material adverse effect on the Company's results of
operations, in the opinion of management any resolution will not have a
material effect on the Company's financial position.
See Note 2 for a discussion of certain litigation.
9. SUBSEQUENT EVENTS
Private Placements of Common Stock
In November 1995, the Company issued 1,862,000 shares of its common stock in
a private placement at $10.25 per share for net proceeds of $17,618,000. In
January 1996, the Company issued 100,000 shares of its common stock in a
private placement at $10.75 per share for net proceeds of $1,070,000. Certain
officers and directors of the Company and a corporation affiliated with a
director of the Company purchased an aggregate of 343,300 shares of the
Company's common stock issued in these private placements.
Stock-based Compensation Plans
On November 1, 1995, the Company adopted a stock-based compensation plan for
its key employees, directors and others, which permits the grant of a variety
of stock and stock-based awards as determined by the human resources committee
of the Company's Board of Directors (the Board Committee), including
restricted stock, stock options, stock bonus shares or performance-based
shares. In March 1996, the Board Committee granted options to purchase
1,041,000 shares of the Company's common stock at $11.00 per share, which was
the fair market value on the date of grant. In May 1996, the Board Committee
granted options to purchase 240,000 shares of the Company's common stock at
$12.00 per share, which was the fair market value on the date of grant. The
option recipients and the terms of options granted under this plan are
determined by the Board Committee. Options granted to date generally vest and
become immediately exercisable on the ninth anniversary of the grant date,
unless the Company's common stock becomes publicly traded prior to such date.
In such an event, options become exercisable 90 days after the Company becomes
subject to the Securities Exchange Act of 1934, but will be subject to certain
transfer restrictions and the right of the Company to repurchase shares issued
upon exercise of the options at the exercise price, upon certain events. The
restrictions and repurchase rights generally will be deemed to have lapsed
ratably over periods ranging from five to ten years after the first
anniversary of the grant date, depending on the term of the option, which will
generally range from ten to twelve years. Nonqualified stock options may be
granted at any price determined by the Board Committee, although incentive
stock options must be granted at not less than the fair market value of the
Company's common stock on the date of grant.
F-13
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
The Company also has a directors' stock option plan, adopted on November 1,
1995, that provides for the grant of stock options, at fair market value, to
outside directors pursuant to a formula approved by the Company's
shareholders. Options granted under this plan will generally vest and become
immediately exercisable on the fourth anniversary of the grant date, unless
the Company's common stock becomes publicly traded prior to such date. In such
an event, options granted under this plan will have the same general terms as
options granted under the stock-based compensation plan described above,
except that the restrictions and repurchase rights generally will be deemed to
have lapsed ratably over a four-year period and the option term is five years.
In November 1995, pursuant to this plan, the Company granted options to
purchase 40,000 shares of the Company's common stock at $10.25 per share. In
February 1996, the Company granted options to purchase 80,000 shares of the
Company's common stock at $10.75 per share.
In addition to the Company's stock-based compensation plans, certain
officers and key employees may also participate in the stock-based
compensation plans of Thermo Electron or its majority-owned subsidiaries.
No accounting recognition is given to options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity.
Reserved Shares
As of May 6, 1996, the Company had reserved 5,232,888 unissued shares of its
common stock for possible issuance under stock-based compensation plans and
conversion of the Company's 4.2% subordinated convertible note.
Acquisition and Proposed Acquisition
In May 1996, the Company acquired XRE Corporation ("XRE"), a Massachusetts
company that designs, manufactures and markets X-ray imaging systems used for
cardiac catheterization and angiography, for approximately $17,000,000 in
cash. In addition, the Company repaid approximately $1,800,000 of XRE's debt.
In April 1996, the Company signed a non-binding letter of intent to acquire
Continental X-Ray Corporation and affiliates ("Continental"), an Illinois
company that designs, manufactures, and markets general purpose and specialty
X-ray systems for approximately $18,200,000 in cash, including the repayment
of approximately $5,700,000 in debt. The completion of this acquisition is
subject to the satisfaction of certain closing conditions, including
negotiation of definitive agreements; receipt of regulatory approvals,
including clearance from the Federal Trade Commission; due diligence; and
approval of the boards of directors of the Company, ThermoTrex, and
Continental.
The purchase price for both XRE and Continental will be subject to post-
closing adjustments based on the net asset value of the respective companies
as of the closing dates. These acquisitions will be accounted for using the
purchase method of accounting. Pro forma information for the Company, XRE and
Continental is available elsewhere in this Prospectus.
Conversion of Subordinated Convertible Note
In March 1996, ThermoTrex converted $3,000,000 principal amount of the
Company's subordinated convertible note into 254,452 shares of the Company's
common stock. Subsequent to the conversion, ThermoTrex owned 91% of the
Company's outstanding common stock.
F-14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bennett X-Ray Corporation:
We have audited the accompanying consolidated balance sheet of Bennett X-Ray
Corporation (a New York corporation) and subsidiaries as of February 28, 1994
and 1995, and the related consolidated statements of operations, cash flows
and shareholders' investment for each of the three years in the period ended
February 28, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bennett X-
Ray Corporation and subsidiaries as of February 28, 1994 and 1995 and the
results of their operations and their cash flows for each of the three years
in the period ended February 28, 1995, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
November 3, 1995
F-15
<PAGE>
BENNETT X-RAY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS MARCH 1, 1995
FEBRUARY 28, ENDED THROUGH
---------------------------- AUGUST 31, SEPTEMBER 14,
1993 1994 1995 1994 1995
-------- --------- -------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 28,618 $ 32,501 $ 42,533 $ 21,267 $ 23,369
-------- --------- -------- -------- --------
Costs and Operating
Expenses:
Cost of revenues....... 17,919 21,760 26,622 13,311 14,941
Selling, general and
administrative
expenses.............. 7,678 8,271 11,913 5,957 6,653
Research and
development expenses.. 1,951 2,711 3,346 1,673 1,505
-------- --------- -------- -------- --------
27,548 32,742 41,881 20,941 23,099
-------- --------- -------- -------- --------
Operating Income
(Loss)................. 1,070 (241) 652 326 270
Other Income............ 321 74 93 47 74
-------- --------- -------- -------- --------
Income (Loss) Before In-
come Tax
Provision.............. 1,391 (167) 745 373 344
Income Tax Provision
(Note 3)............... 493 48 388 194 170
-------- --------- -------- -------- --------
Net Income (Loss)....... $ 898 $ (215) $ 357 $ 179 $ 174
======== ========= ======== ======== ========
Earnings (Loss) per
Share.................. $ 893.53 $ (213.93) $ 355.22 $ 178.11 $ 173.13
======== ========= ======== ======== ========
Shares Outstanding...... 1,005 1,005 1,005 1,005 1,005
======== ========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-16
<PAGE>
BENNETT X-RAY CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FEBRUARY 28,
---------------
1994 1995
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................................... $ 785 $ 397
Available-for-sale investments, at quoted market value (Note
2)........................................................... 812 844
Accounts receivable, less allowances of $231 and $464......... 3,494 3,101
Inventories................................................... 4,791 6,426
Prepaid expenses.............................................. 68 71
Prepaid income taxes (Note 3)................................. 208 422
------- -------
10,158 11,261
------- -------
Property and Equipment, at Cost, Net........................... 1,442 1,350
------- -------
$11,600 $12,611
======= =======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable.............................................. $ 1,564 $ 2,173
Accrued payroll and employee benefits......................... 993 1,058
Accrued warranty costs........................................ 1,195 1,370
Other accrued expenses........................................ 2,008 1,851
------- -------
5,760 6,452
------- -------
Deferred Income Taxes (Note 3)................................. 143 145
------- -------
Commitments and Contingency (Note 5)
Shareholders' Investment:
Common stock, no par value; 2,500 shares authorized;
1,005 shares issued and outstanding.......................... 21 21
Retained earnings............................................. 5,676 5,993
------- -------
5,697 6,014
------- -------
$11,600 $12,611
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-17
<PAGE>
BENNETT X-RAY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS MARCH 1, 1995
FEBRUARY 28, ENDED THROUGH
------------------------- AUGUST 31, SEPTEMBER 14,
1993 1994 1995 1994 1995
------- ------- ------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss)...... $ 898 $ (215) $ 357 $ 179 $ 174
Adjustments to
reconcile net income
(loss) to net cash
used in operating
activities:
Depreciation and
amortization........ 166 299 257 108 67
Increase (decrease)
in deferred
income taxes........ 186 (43) 2 (9) 855
Changes in current
accounts:
Accounts
receivable......... (466) (791) 393 254 (1,259)
Inventories......... (712) (608) (1,635) (983) (1,256)
Other current
assets............. (95) (52) (217) (111) 845
Accounts payable.... (1,091) 585 609 (180) 845
Other current
liabilities........ 552 647 83 517 (649)
------- ------- ------- ----- -------
Net cash used in
operating
activities......... (562) (178) (151) (225) (378)
------- ------- ------- ----- -------
Investing Activities:
Purchases of available-
for-sale investments.. -- (812) (32) -- --
Proceeds from sale and
maturities of
available-for-sale
investments........... -- -- -- -- 844
Purchases of property
and equipment......... (1,405) (151) (165) (67) --
------- ------- ------- ----- -------
Net cash provided by
(used in) investing
activities......... (1,405) (963) (197) (67) 844
------- ------- ------- ----- -------
Financing Activities:
Cash dividends paid.... (40) (40) (40) -- --
------- ------- ------- ----- -------
Increase (Decrease) in
Cash and Cash
Equivalents............ (2,007) (1,181) (388) (292) 466
Cash and Cash
Equivalents at
Beginning of Period.... 3,973 1,966 785 785 397
------- ------- ------- ----- -------
Cash and Cash
Equivalents at End of
Period................. $ 1,966 $ 785 $ 397 $ 493 $ 863
======= ======= ======= ===== =======
Supplemental Cash Flow
Information:
Cash paid during the
period for
income taxes......... $ 354 $ 76 $ 472 $ 232 $ 149
======= ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-18
<PAGE>
BENNETT X-RAY CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON
STOCK,
NO PAR RETAINED
VALUE EARNINGS
------ --------
<S> <C> <C>
BALANCE, FEBRUARY 28, 1992.................................. $ 21 $5,073
Net income................................................. -- 898
Payment of $40 per share cash dividend..................... -- (40)
---- ------
BALANCE, FEBRUARY 28, 1993.................................. 21 5,931
Net loss................................................... -- (215)
Payment of $40 per share cash dividend..................... -- (40)
---- ------
BALANCE, FEBRUARY 28, 1994.................................. 21 5,676
Net income................................................. -- 357
Payment of $40 per share cash dividend..................... -- (40)
---- ------
BALANCE, FEBRUARY 28, 1995.................................. 21 5,993
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Net income................................................. -- 174
---- ------
BALANCE, SEPTEMBER 14, 1995................................. $ 21 $6,167
==== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE>
BENNETT X-RAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bennett X-Ray Corporation was incorporated in 1967 and is engaged in the
manufacture of high frequency diagnostic radiographic (X-ray) equipment with a
focus on health care imaging products in the private office, clinic and
hospital markets.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Bennett X-Ray Corporation and its wholly owned subsidiaries, Bennett
International Corporation and Island X-Ray Incorporated (collectively referred
to as the "Company"). All significant intercompany accounts and transactions
have been eliminated in consolidation.
Fiscal Year
The Company has adopted a fiscal year ending February 28. References to
1993, 1994 and 1995 are for the fiscal years ended February 28, 1993, 1994 and
1995, respectively.
Revenue Recognition
The Company recognizes product revenues upon shipment of its products. The
Company provides a reserve for its estimate of warranty costs at the time of
shipment.
Cash and Cash Equivalents
The Company considers liquid investments with an original maturity of three
months or less when purchased to be cash equivalents.
Available-for-sale Investments
Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," the
Company's debt and marketable equity securities are accounted for at market
value (Note 2).
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out basis)
or market value and include material, labor and manufacturing overhead. The
components of inventories are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw material and supplies.................................... $2,511 $3,876
Work in process and finished goods........................... 2,280 2,550
------- -------
$4,791 $6,426
======= =======
</TABLE>
F-20
<PAGE>
BENNETT X-RAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the
estimated useful lives of the property as follows: machinery and equipment--3
to 7 years; automobiles--3 years; and leasehold improvements--the shorter of
the term of the lease or the life of the asset. Property and equipment consist
of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Leasehold
improvements...... $1,319 $ 1,447
Machinery and
equipment......... 648 535
Automobiles........ 211 156
------- -------
2,178 2,138
Less: Accumulated
depreciation and
amortization...... 736 788
------- -------
$ 1,442 $1,350
======= =======
</TABLE>
Income Taxes
In accordance with SFAS No. 109, "Accounting for Income Taxes," the Company
recognizes deferred income taxes based on the expected future tax consequences
of differences between the financial statement basis and the tax basis of
assets and liabilities calculated using enacted tax rates in effect for the
year in which the differences are expected to be reflected in the tax return.
Interim Financial Statements
The financial statements for the six-month period ended August 31, 1994 and
for the period from March 1, 1995 through September 14, 1995 are unaudited
but, in the opinion of management, reflect all adjustments of a normal
recurring nature necessary for a fair presentation of results for these
interim periods. The results of operations for the period from March 1, 1995
through September 14, 1995 are not necessarily indicative of the results to be
expected for the entire year.
2. AVAILABLE-FOR-SALE INVESTMENTS
In accordance with SFAS No. 115, the Company's debt and marketable equity
securities are considered available-for-sale investments in the accompanying
balance sheet and are carried at market value, with the difference between
cost and market value, net of related tax effects, recorded currently as a
component of shareholders' investment. Available-for-sale investments in the
accompanying 1994 and 1995 balance sheets represent investments in U.S.
Government securities with maturities of one year or less. There was no
difference between the market value and the cost basis of available-for-sale
investments at February 28, 1994 and 1995.
3. INCOME TAXES
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
(IN THOUSANDS)
Currently payable:
Federal.................................................... $291 $190 $527
State...................................................... 35 37 73
---- ---- ----
326 227 600
---- ---- ----
Net deferred (prepaid):
Federal.................................................... 77 (142) (224)
State...................................................... 90 (37) 12
---- ---- ----
167 (179) (212)
---- ---- ----
$493 $ 48 $388
==== ==== ====
</TABLE>
F-21
<PAGE>
BENNETT X-RAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
The income tax provision in the accompanying statement of operations differs
from the amounts calculated by applying the statutory federal income tax rate
of 34% to income (loss) before income tax provision due to the following:
<TABLE>
<CAPTION>
1993 1994 1995
----- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax provision
(benefit) at statutory
rate..................... $ 473 $ (57) $ 253
Differences resulting
from:
State income taxes, net
of federal tax......... 82 -- 56
Foreign sales corpora-
tion benefit........... (66) (43) (25)
Research and development
tax credit............. (171) -- --
Nondeductible expenses
and other.............. 175 148 104
----- ------- -------
$ 493 $ 48 $ 388
===== ======= =======
Prepaid income taxes and deferred income taxes in the accompanying balance
sheet consist of the following:
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
Reserves and accruals......... $ 208 $ 422
======= =======
Deferred income taxes:
Depreciation.................. $ 143 $ 145
======= =======
</TABLE>
4. EMPLOYEE BENEFIT PLAN
The Company has a noncontributory discretionary profit sharing plan covering
substantially all employees. Profit sharing expense amounted to $105,000,
$110,000 and $120,000 in fiscal 1993, 1994 and 1995, respectively.
5. RELATED PARTY LEASE AND CONTINGENCY
Facility Lease
The Company leases its main operating facility under a short-term operating
lease with a real estate trust, controlled by certain officers/shareholders of
the Company. The accompanying statement of operations includes expense from
this operating lease of $1,148,000, $1,224,000 and $1,318,000 in fiscal 1993,
1994 and 1995, respectively.
Guaranty
The Company guarantees a mortgage of its lessor. The amount outstanding
under this mortgage was $658,000 at February 28, 1995. This mortgage is also
secured by the underlying building and improvements.
6. SUBSEQUENT EVENT
In September 1995, all of the outstanding capital stock of the Company was
acquired by ThermoTrex Corporation, a majority-owned subsidiary of Thermo
Electron Corporation, for $42,865,000 in cash.
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To XRE Corporation:
We have audited the accompanying consolidated balance sheet of XRE
Corporation (a Massachusetts corporation) and subsidiary as of December 31,
1995 and the related consolidated statements of income, stockholders'
investment and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of XRE
Corporation and subsidiary as of December 31, 1995 and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts February 20, 1996 (except with respect to
the matter discussed
in Note 9, as to which
the date is May 29, 1996)
F-23
<PAGE>
XRE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
1995 APRIL 1, 1995 MARCH 30, 1996
------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues (Note 6):
Product revenues...................... $25,099 $7,247 $4,780
Service revenues...................... 4,207 854 813
------- ------ ------
29,306 8,101 5,593
------- ------ ------
Costs and Operating Expenses:
Cost of product revenues.............. 16,908 4,725 2,723
Cost of service revenues.............. 3,449 789 803
General and administrative expenses... 2,787 798 630
Research and development expenses..... 3,578 880 1,063
Selling and marketing expenses........ 2,029 706 845
------- ------ ------
28,751 7,898 6,064
------- ------ ------
Operating Income (Loss)................. 555 203 (471)
Interest Income......................... -- -- 5
Interest Expense........................ (132) (24) (10)
Other Income............................ -- -- 8
Minority Interest Income................ 31 -- --
------- ------ ------
Income Before Benefit for State Income
Taxes (Note 3)......................... 454 179 (468)
Provision (Benefit) for State Income
Taxes.................................. (80) 25 7
------- ------ ------
Net Income (Loss)....................... $ 534 $ 154 $ (475)
======= ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE>
XRE CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................... $ 320 $ 51
Accounts receivable, less allowance of $37 and $55.. 2,705 2,698
Inventories......................................... 6,600 8,511
Prepaid expenses.................................... 223 361
Deferred tax asset (Note 3) ........................ 156 156
------- -------
10,004 11,777
------- -------
Property and Equipment, at Cost, Net.................. 1,790 2,376
------- -------
Other Assets.......................................... 410 414
------- -------
$12,204 $14,567
======= =======
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current maturities of long-term obligations......... $ 108 $ 108
Due to affiliate (Note 8)........................... 442 32
Accounts and drafts payable......................... 1,389 3,227
Accrued expenses.................................... 2,412 2,622
Deferred revenue ................................... 2,415 3,805
------- -------
6,766 9,794
------- -------
Long-term Obligations (Note 2)........................ 266 236
------- -------
Minority Interest..................................... 21 21
------- -------
Commitment (Note 8)
Stockholders' Investment:
Common stock, no par value, 500 shares authorized;
240 shares issued.................................. 608 608
Capital in excess of par value...................... 3,783 3,783
Retained earnings................................... 1,126 491
Treasury stock at cost, 17 shares................... (366) (366)
------- -------
5,151 4,516
------- -------
$12,204 $14,567
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-25
<PAGE>
XRE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
1995 APRIL 1, 1995 MARCH 30, 1996
------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.............................. $ 534 $ 154 $ (475)
Adjustments to reconcile net income to
net cash
provided by operating activities:
Depreciation and amortization......... 546 123 109
Minority interest income.............. (31) -- --
Deferred tax benefit.................. (156) -- --
Provision for doubtful accounts....... 37 -- 18
Compensation expense.................. 76 58 (43)
Changes in current accounts:
Accounts receivable.................. 1,994 (190) (11)
Inventories.......................... 1,071 (637) (1,911)
Other current assets................. 8 (127) (137)
Accounts and drafts payable.......... (579) 618 1,839
Accrued expenses..................... 88 986 252
Deferred revenue..................... (345) (540) 1,390
------- ------- -------
Net cash provided by operating ac-
tivities........................... 3,243 445 1,031
------- ------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment..... (977) (39) (695)
Increase in other assets................ (32) (8) (4)
------- ------- -------
Net cash used in investing
activities......................... (1,009) (47) (699)
------- ------- -------
FINANCING ACTIVITIES:
Net borrowing (repayments) under note
payable to a bank...................... (560) 827 --
Borrowings from affiliate............... 903 80 255
Repayment of borrowings from affiliate.. (2,616) (1,830) (665)
Borrowings under an equipment line of
credit................................. 205 -- --
Capital contribution by stockholders.... 600 600 --
S corporation cash distributions........ (407) (60) (160)
Repayment of long-term obligations...... (94) (24) (31)
------- ------- -------
Net cash used in financing activi-
ties............................... (1,969) (407) (601)
------- ------- -------
Increase (Decrease) in Cash and Cash
Equivalents............................. 265 (9) (269)
Cash and Cash Equivalents at Beginning of
Period.................................. 55 55 320
------- ------- -------
Cash and Cash Equivalents at End of Peri-
od...................................... $ 320 $ 46 $ 51
======= ======= =======
CASH PAID FOR:
Interest................................ $ 138 $ 16 $ 8
======= ======= =======
Income taxes............................ $ 18 $ 18 $ 36
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-26
<PAGE>
XRE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
---------------- ----------------
CAPITAL IN
NUMBER OF EXCESS OF RETAINED NUMBER OF
SHARES AMOUNT PAR VALUE EARNINGS SHARES AMOUNT
--------- ------ ---------- -------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31,
1994................... 240 $608 $3,183 $ 999 17 $(366)
S corporation cash dis-
tributions............. -- -- -- (407) -- --
Capital contribution by
stockholders........... -- -- 600 -- -- --
Net income.............. -- -- -- 534 -- --
--- ---- ------ ------ --- -----
BALANCE DECEMBER 31,
1995................... 240 $608 $3,783 $1,126 17 $(366)
=== ==== ====== ====== === =====
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
S corporation cash
distributions.......... -- -- -- (160) -- --
Net loss................ -- -- -- (475) -- --
--- ---- ------ ------ --- -----
BALANCE MARCH 30, 1996.. 240 $608 $3,783 $ 491 17 $(366)
=== ==== ====== ====== === =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-27
<PAGE>
XRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
XRE Corporation (the "Company") designs, manufactures and sells specialized
X-ray systems used in the diagnosis and treatment of coronary artery disease
and other vascular conditions to OEM customers and hospitals.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The Company owns 51% of Angiographic Devices Corp. Ohio ("ADCO"), a
Massachusetts corporation which sells and services the Company's equipment.
The accompanying consolidated financial statements reflect the consolidation
of ADCO after elimination of all significant intercompany transactions. The
amount in minority interest at December 31, 1995 represents the 49% ownership
of ADCO's net book value held by the minority stockholders of ADCO. On April
30, 1996, the Company sold its 51% ownership in ADCO. This transaction had an
immaterial effect on the financial position of the Company. The estimated fair
value of the Company's financial instruments, which include cash equivalents,
accounts receivable and long-term debt, approximates their carrying value.
A real estate partnership of the principal officers/stockholders of the
Company owns the land and building in which the Company operates, as further
discussed in Note 8. The partnership's financial position and results of
operations are not included in these consolidated financial statements.
Interim Financial Statements
In the opinion of management, the unaudited interim consolidated financial
statements have been prepared on the same basis as the audited financial
statements and include all adjustments (consisting of normal recurring
adjustments) which management considers necessary for a fair presentation of
the results for such periods. The results of operations for the period ended
March 30, 1996 are not necessarily indicative of the results of operations for
the full year.
Revenue Recognition
The Company recognizes product revenues upon shipment and recognizes service
revenues upon completion of services rendered. Warranty costs related to
products are accrued at the date of shipment. The Company has recognized
approximately $313,000 of revenue in 1995 for a system that was completed and
ready to ship but which was physically being stored at the Company's facility
at the customer's request. This system will be shipped in 1996.
Cash and Cash Equivalents
The Company considers liquid investments with original maturities of three
months or less when purchased to be cash equivalents.
F-28
<PAGE>
XRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Inventories
Inventories, which include material, labor and manufacturing overhead, are
stated at the lower of cost (on a last-in, first-out ("LIFO") basis) or
market. Inventories consist of the following at December 31, 1995 (In
thousands):
<TABLE>
<S> <C>
Raw materials...................................................... $4,378
Work-in-process and finished goods................................. 2,222
------
$6,600
======
</TABLE>
If the first-in, first-out ("FIFO") method of inventory costing had been
used instead of LIFO, inventory would have been reported as follows (In
thousands):
<TABLE>
<S> <C>
Inventory on FIFO basis............................................ $6,861
Less: LIFO reserve................................................. 261
------
Inventory on a LIFO basis........................................ $6,600
======
</TABLE>
Property and Equipment
The Company provides for depreciation and amortization using the straight-
line method to allocate the cost of property and equipment over their
estimated useful lives as follows (In thousands):
<TABLE>
<CAPTION>
ESTIMATED
CLASSIFICATION USEFUL LIFE
-------------- -----------
<S> <C> <C>
Equipment.............................................. 3-8 Years $8,326
Motor vehicles......................................... 3 Years 275
Leasehold improvements................................. 5 Years 565
------
9,166
Less: Accumulated depreciation and amortization........ 7,376
------
$1,790
======
</TABLE>
Accrued Expenses
At December 31, 1995, accrued expenses consist of the following (In
thousands):
<TABLE>
<S> <C>
Accrued warranty................................................... $1,115
Accrued payroll costs.............................................. 371
Accrued professional fees.......................................... 350
Accrued other...................................................... 576
------
$2,412
======
</TABLE>
2. LONG-TERM OBLIGATIONS AND OTHER FINANCING ARRANGEMENTS
In May 1995, the Company entered into a $1,000,000 equipment line of credit
agreement (the "Agreement") with a bank. Under the terms of the Agreement, the
Company may make borrowings from time to time for the sole purpose of
purchasing equipment. Each borrowing will be evidenced by a secured term note.
Borrowings bear interest at the prime rate (8.5% at December 31, 1995) plus 50
basis points. Principal is payable in 36 equal monthly installments.
Borrowings may not exceed 75% of the purchase price of the equipment. The
Company's ability to make additional borrowings under this equipment line of
credit expires on June 30, 1996. The Company had $176,000 outstanding under
the Agreement at December 31, 1995.
During 1994, the Company entered into three capital leases for the purchase
of certain equipment. Monthly payments are $5,879 including interest at
varying rates from 9.4% to 10.2%. There was approximately $192,000 outstanding
on these leases as of December 31, 1995. The leases are secured by the
equipment and expire through August 1999.
F-29
<PAGE>
XRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum payments, as of December 31, 1995, under the equipment line
of credit and capital leases are as follows (In thousands):
<TABLE>
<CAPTION>
<S> <C>
1996................................................................... $ 145
1997................................................................... 139
1998................................................................... 110
1999................................................................... 31
-----
425
Less: Amount representing interest..................................... 51
-----
Long-term obligations and present value of minimum lease payments...... 374
Less: Current maturities of long-term obligations ..................... 108
-----
$ 266
=====
</TABLE>
The Company has a $5,000,000 revolving line of credit with a bank.
Borrowings are permitted up to 80% of qualified accounts receivable, as
defined, plus the lesser of $1,500,000 or 20% of the value of qualified
inventory, as defined, plus $899,000. The line bears interest at the prime
rate (8.5% at December 31, 1995) for borrowings up to $2,000,000, and prime
plus 50 basis points for borrowings in excess of $2,000,000. Borrowings are
secured by substantially all of the Company's assets and mature on June 30,
1996. In addition, the Company has approximately $450,000 outstanding under
letters of credit as of December 31, 1995. The revolving line of credit
contains certain covenants that, among other things, require certain financial
ratios and balances, limit the annual purchases of capital equipment and limit
additional indebtedness. As of December 31, 1995 and March 30, 1996 the
Company had received waivers or was in compliance with all covenants.
3. INCOME TAXES
The Company has elected to be taxed as an S corporation for federal and
state income tax purposes. As an S corporation, taxable income of the Company
is reported on the individual income tax returns of its stockholders, although
certain states require a corporate-level tax. The Company provides for state
income taxes in accordance with Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes."
Under SFAS No. 109, deferred tax assets or liabilities are computed based on
the differences between the financial reporting basis and income tax basis of
assets and liabilities as measured by the enacted tax laws and rates expected
to be applicable when the differences reverse.
The principal differences between assets and liabilities for financial
reporting and tax return purposes result primarily from depreciation and
expenses not currently deductible for tax return purposes.
The components of the benefit for state income taxes at December 31, 1995
are as follows (In thousands):
<TABLE>
<CAPTION>
<S> <C>
Current............................................................... $ 76
Deferred.............................................................. (156)
-----
$ (80)
=====
</TABLE>
Due to the uncertainty surrounding the timing of realizing the benefits of
its favorable tax attributes in future income tax returns, the Company had
placed a valuation allowance against its otherwise recognizable deferred tax
asset prior to 1995. During 1995, the management of the Company evaluated its
deferred tax asset in conjunction with its historical and projected operating
performance and determined that the deferred tax asset was fully realizable.
Accordingly, the Company reversed its tax valuation allowance during 1995.
4. STOCK REPURCHASE AGREEMENTS
Under the terms of an agreement with its stockholders, the Company must
purchase all of the shares owned by either stockholder upon the occurrence of
certain events, with payments to be made over a 10-year period.
F-30
<PAGE>
XRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
The price to be paid under the agreement is book value per share, as defined.
To partially fund its obligations under this agreement, the Company has
purchased two life insurance policies, each in the amount of $1,000,000, on
the lives of each of the stockholders of the Company. The cash surrender
values of these life insurance policies, which total approximately $406,000 at
December 31, 1995, are included in other assets in the accompanying
consolidated balance sheet.
5. PROFIT SHARING PLAN
The Company has a qualified profit sharing plan that covers all employees
who meet certain employment requirements. The Company's contribution is
determined each year by the Board of Directors. In 1995, the Company
contributed and charged to expense $100,000 for the profit sharing plan.
6. SIGNIFICANT CUSTOMER
One customer, under an exclusive distributorship agreement with the Company,
accounted for approximately 45% of revenues in 1995. The Company's exclusive
distribution agreement expired at the end of 1995. The Company and this
customer are presently in negotiations to extend this contract.
7. PHANTOM STOCK PLAN
In November 1994, the Company adopted a Phantom Stock Plan (the "Plan") for
a key officer/employee of the Company. Under the terms of the Plan, this
officer/employee earns compensation equal to 5.26% of certain corporate
distributions, as well as for increases in the net book value of the Company.
Upon the occurrence of certain events, including the sale of the Company, the
Plan will be terminated and the officer/employee shall receive a final Plan
payment. The Company is accounting for the Plan in accordance with Financial
Accounting Standards Board Interpretation No. 28, "Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans."
Accordingly, compensation is measured based on the increase in value as
determined under the Agreement. During 1995, approximately $76,000 in
compensation expense was recorded under this Plan based upon the increase in
the value due to the officer/employee.
8. RELATED PARTY TRANSACTION
On February 28, 1995, the Company entered into a 17-year facility lease with
an affiliated real estate partnership, Concord Associates ("Concord"), which
expires on February 28, 2012. Future minimum lease payments under this lease
are as follows (In thousands):
<TABLE>
<S> <C>
1996.............................................................. $ 631
1997.............................................................. 631
1998.............................................................. 631
1999.............................................................. 631
2000.............................................................. 631
2001 and thereafter............................................... 7,046
-------
$10,201
=======
</TABLE>
Rental expense paid to Concord was approximately $792,000 in 1995. Due to
affiliate in the accompanying consolidated balance sheet represents non-
interest-bearing advances from Concord.
9. SALE OF THE COMPANY
On May 29, 1996, the Company was acquired by Trex Medical Corporation.
F-31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Continental Group Broadview, Illinois
We have audited the accompanying combined balance sheet of the Continental
Group as of December 31, 1994 and 1995, and the related combined statements of
income, cash flows and stockholders' equity for the years then ended. These
combined financial statements are the responsibility of the Group's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Continental Group
as of December 31, 1994 and 1995 and the results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles.
Topel Forman L.L.C.
Chicago, Illinois March 15, 1996
F-32
<PAGE>
CONTINENTAL GROUP
COMBINED STATEMENT OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------
MARCH 31, MARCH 31,
1994 1995 1995 1996
------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Sales................................... $21,699 $25,037 $6,595 $6,630
------- ------- ------ ------
Costs and Operating Expenses:
Cost of sales......................... 15,558 17,913 4,453 4,375
Operating expenses.................... 5,621 5,670 1,647 1,798
------- ------- ------ ------
21,179 23,583 6,100 6,173
------- ------- ------ ------
Operating Income........................ 520 1,454 495 457
Interest Expense........................ (432) (513) (123) (128)
Other Income (Expense), Net............. 7 (302) (76) (76)
------- ------- ------ ------
Income Before Provision for Income
Taxes.................................. 95 639 296 253
Provision for Income Taxes.............. 4 11 7 6
------- ------- ------ ------
Net Income.............................. $ 91 $ 628 $ 289 $ 247
======= ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-33
<PAGE>
CONTINENTAL GROUP
COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 MARCH 31, 1996
------- ------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash.......................................... $ 163 $ 23 $ 36
Accounts receivable, less allowance of $36,
$36 and $36.................................. 3,265 4,378 4,335
Inventories................................... 5,353 5,974 5,910
Prepaid expenses.............................. 89 91 59
------- ------- -------
8,870 10,466 10,340
------- ------- -------
Property, Plant and Equipment, at Cost, Net..... 2,054 1,922 1,905
------- ------- -------
Other Assets.................................... 78 64 60
------- ------- -------
$11,002 $12,452 $12,305
======= ======= =======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable................................. $ 3,122 $ 3,991 $ 3,637
Current maturities of long-term obligations... 255 254 263
Accounts payable.............................. 2,655 2,878 2,838
Accrued expenses.............................. 518 625 631
------- ------- -------
6,550 7,748 7,369
------- ------- -------
Long-term Obligations, Net of Current
Maturities..................................... 2,029 1,780 1,773
------- ------- -------
Contingencies
Stockholders' Equity:
Common stock.................................. 416 1,093 1,093
Additional paid-in capital.................... 64 64 64
Retained earnings............................. 1,943 1,767 2,006
------- ------- -------
2,423 2,924 3,163
------- ------- -------
$11,002 $12,452 $12,305
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-34
<PAGE>
CONTINENTAL GROUP
COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------
MARCH 31, MARCH 31,
1994 1995 1995 1996
------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.............................. $ 91 $ 628 $ 289 $ 247
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization.......... 316 298 78 71
Provision for losses on accounts
receivable............................ 4 -- -- --
Loss on sale of property, plant and
equipment............................. -- 12 -- --
Changes in current accounts:
Accounts receivable................... (2,663) (1,113) (564) 43
Inventories........................... (442) (621) (325) 64
Prepaid expenses...................... 98 (2) 56 32
Accounts payable...................... 2,525 223 226 (40)
Other current liabilities............. 85 107 125 6
------- ------- ----- -----
Net cash provided by (used in)
operating activities................ 14 (468) (115) 423
------- ------- ----- -----
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment.............................. (149) (164) (24) (50)
------- ------- ----- -----
Net cash used in investing
activities.......................... (149) (164) (24) (50)
------- ------- ----- -----
FINANCING ACTIVITIES:
Net cash received (paid) under line of
credit................................. 249 705 42 (381)
Net cash received (paid) on notes
payable................................ (184) 164 16 27
Payments of long-term obligations....... (214) (250) (64) (62)
Proceeds from long-term obligations..... 400 -- -- 64
Dividends paid.......................... (29) (128) -- (8)
Decrease in cash overdraft.............. (86) -- -- --
Payment of loan fees.................... (9) -- -- --
Net proceeds from issuance of common
stock.................................. -- 1 -- --
------- ------- ----- -----
Net cash provided by (used in)
financing activities................ 127 492 (6) (360)
------- ------- ----- -----
Increase (Decrease) in Cash.............. (8) (140) (145) 13
Cash at Beginning of Period.............. 171 163 163 23
------- ------- ----- -----
Cash at End of Period.................... $ 163 $ 23 $ 18 $ 36
======= ======= ===== =====
CASH PAID FOR:
Interest................................ $ 446 $ 513 $ 115 $ 128
======= ======= ===== =====
Income taxes............................ $ 1 $ 5 $ 5 $ 10
======= ======= ===== =====
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-35
<PAGE>
CONTINENTAL GROUP
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
------ ---------- --------
<S> <C> <C> <C>
BALANCE DECEMBER 31, 1993.......................... $ 416 $64 $1,881
Net income......................................... -- -- 91
Dividends paid..................................... -- -- (29)
------ --- ------
BALANCE DECEMBER 31, 1994.......................... 416 64 1,943
Net income......................................... -- -- 628
Issuance of common stock........................... 1 -- --
Dividends paid..................................... -- -- (128)
Reclass of retained earnings upon merger of Allied
Fabrication Corporation into Continental X-Ray
Corporation....................................... 676 -- (676)
------ --- ------
BALANCE DECEMBER 31, 1995.......................... 1,093 64 1,767
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
Net income......................................... -- -- 247
Dividends paid..................................... -- -- (8)
------ --- ------
BALANCE MARCH 31, 1996............................. $1,093 $64 $2,006
====== === ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-36
<PAGE>
CONTINENTAL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The combined financial statements include the accounts of Continental X-Ray
Corporation ("Continental"), Allied Fabrication Corporation ("Allied"),
Alphatek Corporation ("Alphatek"), Broadview Manufacturing Corporation
("Broadview"), Haymarket Square Associates ("Haymarket"), Advanced Medical
Imaging, Inc. ("AMI") and Trans-Continental X-Ray Corporation ("Trans-
Continental"). The companies share common management. Certain stockholders of
Continental own 100% of the stock of Trans-Continental and AMI, 66.67% of the
stock of Alphatek, and 60% of the stock of Broadview. Haymarket is owned
66.67% by Continental and 33.33% by Alphatek.
Continental merged with Allied on March 31, 1995. The stockholders of
Continental owned 100% of the issued and outstanding stock of Allied.
Continental issued 1,727 shares of common stock for the net assets of Allied.
The net assets were recorded at historical book value at the date of the
merger. The accompanying financial statements are based on the assumption that
the companies were merged for the full year.
All intercompany transactions have been eliminated in combination.
Revenue Recognition
The Company recognizes revenues upon shipment of its products.
Income Taxes
The stockholders of Continental, Allied, Broadview, Alphatek and AMI have
elected to be treated as "S" Corporations under provisions of the Internal
Revenue Code. In addition, Haymarket is a partnership. Accordingly, each
stockholder and partner will report his pro-rata share of the taxable income
or loss of the companies and partnership on their respective individual or
corporate income tax returns. Income taxes represent Illinois Replacement Tax.
Advertising Costs
Advertising costs are charged to operations when incurred (when the
advertising first takes place). Advertising costs during the year ended
December 31, 1995 amounted to $124,000.
Inventories
Inventories are valued at the lower of cost (on a first-in, first-out basis)
or market.
Property, Plant and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line and accelerated methods
over the estimated useful lives of the property as follows: building and
building improvements, 19 years; office furniture and equipment, 5 years; and
equipment, 7 years.
F-37
<PAGE>
CONTINENTAL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 194 $ 194
Building and building improvements.......................... 2,343 2,343
Office furniture and fixtures............................... 493 518
Equipment................................................... 2,572 2,683
------- -------
5,602 5,738
Less: Accumulated depreciation ............................. 3,548 3,816
------- -------
$ 2,054 $ 1,922
======= =======
</TABLE>
Depreciation expense was $302,000 and $284,000 for 1994 and 1995,
respectively.
Fair Value of Financial Instruments
Based upon the borrowing rates currently available for bank loans with
similar terms and average maturities, the fair value of the Company's notes
payable and long-term debt, inclusive of current maturities, approximated its
carrying value at December 31, 1994 and 1995.
Use of Estimates
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
Interim Financial Statements
The financial statements as of and for the three-month periods ended March
31, 1995 and 1996 are unaudited but, in the opinion of management, reflect all
adjustments of a normal recurring nature necessary for a fair presentation of
results for these interim periods. The results of operations for the three-
month period ended March 31, 1996 are not necessarily indicative of the
results to be expected for the entire year.
2. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Borrowings under lines of credit............................ $ 2,621 $ 3,326
Notes payable to officers and related individuals........... 501 665
------- -------
$ 3,122 $ 3,991
======= =======
</TABLE>
F-38
<PAGE>
CONTINENTAL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Continental and Alphatek have established lines of credit providing for
borrowings of up to $3,250,000 and $350,000, respectively, with interest
computed at the prime rate plus 3/4%. At December 31, 1994, Continental and
Alphatek had borrowings outstanding of $2,541,000 and $80,000 respectively,
under these lines of credit. At December 31, 1995, Continental and Alphatek
had borrowings outstanding of $3,246,000 and $80,000 respectively, under these
lines of credit. Borrowings under the lines of credit are secured by
substantially all assets of the companies and are guaranteed by certain
officers of the companies.
Notes payable to officers and related individuals bear interest at the prime
rate plus 2%.
3. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Note payable to bank, payable in monthly installments of
$1,933 plus interest at the prime rate plus 3/4%. (9.25% at
December 31, 1995). Final payment is due in December 1998.
The note is secured by substantially all assets of
Continental and is guaranteed by certain officers of
Continental.................................................. $ 93 $ 70
Note payable to bank, payable in monthly installments of
$3,333 plus interest at the prime rate plus 3/4%. Final pay-
ment is due in April 1997. The note is secured by substan-
tially all assets of Continental and is guaranteed by certain
officers of Continental...................................... 93 53
Note payable due October 2007, with interest payable monthly
at the rate of 12%........................................... 120 120
Note payable to bank, payable in monthly installments of
$3,833 plus interest at the prime rate plus 3/4%. Final pay-
ment is due in April 1997. The note is secured by substan-
tially all assets of Continental and is guaranteed by certain
officers of Continental...................................... 107 62
Note payable to bank, payable in monthly installments of
$5,000 plus interest at the prime rate plus 3/4%. Final pay-
ment is due in August 1999. The note is secured by substan-
tially all assets of Continental and is guaranteed by certain
officers of Continental...................................... 280 220
Mortgage payable in monthly payments of $6,667 plus interest
at 7.85%. Final payment in the amount of $1,280,000 is due in
December 1998. The mortgage is secured by real estate and is
guaranteed by Continental, Alphatek and certain officers of
the companies................................................ 1,520 1,440
Note payable in monthly installments of $463 including inter-
est at 10.5%. Final payment is due in March 1995. The note is
secured by the related automobile............................ 2 --
Present value of settlement agreement with former employee due
in monthly payments of $800 for remaining life expectancy.
Discounted at 10%............................................ 69 69
------- -------
2,284 2,034
Less: Current maturities...................................... 255 254
------- -------
$ 2,029 $ 1,780
======= =======
</TABLE>
F-39
<PAGE>
CONTINENTAL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONCLUDED)
Maturities of long-term obligations, as of December 31, 1995, are as follows
(In thousands):
<TABLE>
<S> <C>
1996.................................................................. $ 254
1997.................................................................. 197
1998.................................................................. 1,369
1999.................................................................. 46
2000.................................................................. 6
Thereafter............................................................ 162
------
$2,034
======
</TABLE>
4. CONTINGENCIES
Continental Group is a party to various claims, legal actions and complaints
arising out of the normal course of business. Management is of the opinion that
the resolution of these matters will not have a significant effect on the
Group's financial position or results of operations.
F-40
<PAGE>
TREX MEDICAL CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
On September 15, 1995, ThermoTrex Corporation ("ThermoTrex") acquired all of
the outstanding capital stock of Bennett X-Ray Corporation ("Bennett") for
$42.9 million in cash. On October 2, 1995, ThermoTrex transferred to the
Company all of the outstanding capital stock of Bennett in exchange for a
$42.0 million principal amount 4.2% subordinated convertible note, due 2000,
convertible into shares of the Company's common stock at $11.79 per share.
This acquisition has been accounted for using the purchase method of
accounting. Subsequent to September 30, 1995, ThermoTrex converted $3.0
million principal amount of the subordinated convertible note into 254,452
shares of the Company's common stock. On October 16, 1995, ThermoTrex
transferred to the Company the assets, liabilities and businesses of
ThermoTrex's Lorad division ("Lorad") and ThermoTrex's research and
development activities pertaining to its Sonic CT system, in exchange for
20,000,000 shares of the Company's common stock.
In May 1996, the Company acquired XRE Corporation ("XRE") for approximately
$17.0 million in cash. In addition, the Company repaid approximately $1.8
million of XRE's debt. Both the purchase price and the debt repayment were
funded from cash on hand. The Company will account for this acquisition using
the purchase method of accounting.
In April 1996, the Company signed a letter of intent to acquire Continental
X-Ray Corporation and affiliates ("Continental") for approximately $18.2
million in cash, including the repayment of $5.7 million in debt. If the
acquisition of Continental is completed, the Company assumes that the purchase
price will be funded with borrowings from Thermo Electron Corporaton ("Thermo
Electron") which are assumed to be repaid with the proceeds of the Company's
proposed Underwritten Public Offering. The Company will account for this
acquisition using the purchase method of accounting.
F-41
<PAGE>
TREX MEDICAL CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
The following unaudited pro forma combined condensed statement of income sets
forth the results of operations for the nine months ended September 30, 1995,
as if the issuance of 1,862,000 shares of the Company's common stock in its
November 1995 private placement, the acquisition of XRE, which is assumed to be
financed by the private placement proceeds, the acquisition of Continental,
which is assumed to be financed through borrowings of $18.2 million from Thermo
Electron, which are assumed to be repaid with the proceeds of the Company's
proposed Underwritten Public Offering, and the acquisition of Bennett had
occurred on January 1, 1995. Bennett, XRE and Continental have fiscal years
which differ from the Company's fiscal year-end. The historical results of
operations for Bennett, XRE and Continental presented below have been adjusted
to conform to the Company's fiscal year-end for purposes of the pro forma
combined condensed statement of income. The pro forma historical results of
operations for Bennett presented below include compensation expense and related
party rent expense in excess of amounts that will be paid in the future,
pursuant to agreements executed in connection with the acquisition, totaling
$2.5 million for the nine months ended September 30, 1995. The pro forma
results of operations are not necessarily indicative of future operations or
the actual results that would have occurred had the acquisitions of Bennett,
XRE and Continental been made on January 1, 1995. This statement should be read
in conjunction with the accompanying notes, the pro forma combined condensed
balance sheet and the respective historical financial statements and related
notes of the Company, Bennett, XRE and Continental appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------------------------- --------------------
TREX MEDICAL BENNETT XRE CONTINENTAL ADJUSTMENTS COMBINED
------------ ------- ------- ----------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $55,291 $30,458 $21,900 $18,536 $ -- $126,185
------- ------- ------- ------- ------- --------
Costs and Operating Ex-
penses:
Cost of revenues....... 28,180 19,379 15,365 13,582 1,896 78,402
Selling, general and
administrative
expenses.............. 12,174 8,638 3,390 3,488 1,898 29,588
Research and
development expenses.. 8,595 2,062 2,519 742 -- 13,918
------- ------- ------- ------- ------- --------
48,949 30,079 21,274 17,812 3,794 121,908
------- ------- ------- ------- ------- --------
Operating Income........ 6,342 379 626 724 (3,794) 4,277
Interest Income......... -- -- -- -- -- --
Interest Expense........ -- -- (116) (368) (1,228) (1,712)
Other Income (Expense),
Net.................... 22 90 -- (209) -- (97)
------- ------- ------- ------- ------- --------
Income Before Income
Taxes.................. 6,364 469 510 147 (5,022) 2,468
Income Tax Provision
(Benefit).............. 2,881 236 76 4 (1,327) 1,870
------- ------- ------- ------- ------- --------
Net Income.............. $ 3,483 $ 233 $ 434 $ 143 $(3,695) $ 598
======= ======= ======= ======= ======= ========
Earnings per Share...... $ .17 $ .02
======= ========
Weighted Average Shares
....................... 20,151 4,516 24,667
======= ======= ========
</TABLE>
F-42
<PAGE>
TREX MEDICAL CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
SIX MONTHS ENDED MARCH 30, 1996
(UNAUDITED)
The following unaudited pro forma combined condensed statement of income
sets forth the results of operations for the six months ended March 30, 1996,
as if the issuance of 1,862,000 shares of the Company's common stock in its
November 1995 private placement, the acquisition of XRE, which is assumed to
be financed by the private placement proceeds, the acquisition of Continental,
which is assumed to be financed through borrowings from Thermo Electron, which
borrowings are assumed to be repaid with the proceeds of the Company's
proposed Underwritten Public Offering, and the acquisition of Bennett had
occurred on January 1, 1995. XRE and Continental have fiscal years which
differ from the Company's fiscal year-end. The historical results of
operations for XRE and Continental presented below have been adjusted to
conform to the Company's fiscal year-end for purposes of the pro forma
combined condensed statement of income. The pro forma results of operations
are not necessarily indicative of future operations or the actual results that
would have occurred had the acquisitions of Bennett, XRE and Continental been
made on January 1, 1995. This statement should be read in conjunction with the
accompanying notes, the pro forma combined condensed balance sheet and the
respective historical financial statements and related notes of the Company,
XRE, and Continental appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------- --------------------
TREX MEDICAL XRE CONTINENTAL ADJUSTMENTS COMBINED
------------ ------- ----------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues................ $66,829 $12,999 $13,131 $ -- $92,959
------- ------- ------- ------ -------
Costs and Operating Ex-
penses:
Cost of revenues....... 37,592 8,518 8,706 (479) 54,337
Selling, general and
administrative ex-
penses................ 13,695 2,901 2,705 544 19,845
Research and develop-
ment expenses......... 8,170 2,122 533 -- 10,825
------- ------- ------- ------ -------
59,457 13,541 11,944 65 85,007
------- ------- ------- ------ -------
Operating Income
(Loss)................. 7,372 (542) 1,187 (65) 7,952
Interest Income......... 440 5 -- (369) 76
Interest Expense........ (872) (26) (273) 63 (1,108)
Other Income (Expense),
Net.................... 35 39 (169) -- (95)
------- ------- ------- ------ -------
Income (Loss) Before In-
come Taxes............. 6,975 (524) 745 (371) 6,825
Income Tax Provision
(Benefit) ............. 3,241 (149) 13 42 3,147
------- ------- ------- ------ -------
Net Income (Loss)....... $ 3,734 $ (375) $ 732 $ (413) $ 3,678
======= ======= ======= ====== =======
Earnings per Share...... $ .17 $ .15
======= =======
Weighted Average
Shares................. 21,547 3,153 24,700
======= ====== =======
</TABLE>
F-43
<PAGE>
TREX MEDICAL CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 30, 1996
(UNAUDITED)
The following unaudited pro forma combined condensed balance sheet sets
forth the financial position as of March 30, 1996, to reflect the acquisitions
of XRE and Continental as if the acquisitions had occurred on March 30, 1996.
This statement should be read in conjunction with the accompanying notes, the
pro forma combined condensed statements of income and the respective
historical financial statements and related notes of the Company, XRE and
Continental appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------- --------------------
TREX MEDICAL XRE CONTINENTAL ADJUSTMENTS COMBINED
------------ ------- ----------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equiva-
lents................. $ 19,245 $ 51 $ 36 $(17,000) $ 2,332
Accounts receivable,
net................... 18,936 2,698 4,335 -- 25,969
Inventories............ 18,615 8,511 5,910 1,417 34,453
Other current assets... 5,813 517 59 -- 6,389
-------- ------- ------- -------- --------
62,609 11,777 10,340 (15,583) 69,143
-------- ------- ------- -------- --------
Property, Plant and
Equipment, at Cost,
Net.................... 8,628 2,376 1,905 -- 12,909
-------- ------- ------- -------- --------
Other Assets............ -- 414 60 -- 474
-------- ------- ------- -------- --------
Cost in Excess of Net
Assets of Acquired
Companies.............. 58,338 -- -- 20,431 78,769
-------- ------- ------- -------- --------
$129,575 $14,567 $12,305 $ 4,848 $161,295
======== ======= ======= ======== ========
LIABILITIES AND SHAREHOLDERS' INVEST-
MENT
Current Liabilities:
Notes payable.......... $ -- $ -- $ 3,637 $ (3,637) $ --
Note payable to Thermo
Electron Corpora-
tion ................. -- -- -- 18,200 18,200
Current maturities of
long-term obliga-
tions................. -- 108 263 (263) 108
Accounts payable....... 7,671 3,227 2,838 -- 13,736
Other accrued ex-
penses................ 19,383 2,622 631 -- 22,636
Due to affiliates...... -- 32 -- -- 32
Deferred revenue....... -- 3,805 -- -- 3,805
-------- ------- ------- -------- --------
27,054 9,794 7,369 14,300 58,517
-------- ------- ------- -------- --------
Deferred Income Taxes... 89 -- -- -- 89
-------- ------- ------- -------- --------
Long-term Obligations:
Subordinated
convertible note, due
to parent company..... 39,000 -- -- -- 39,000
Other.................. -- 236 1,773 (1,773) 236
-------- ------- ------- -------- --------
39,000 236 1,773 (1,773) 39,236
-------- ------- ------- -------- --------
Minority Interest....... -- 21 -- -- 21
-------- ------- ------- -------- --------
Shareholders' Invest-
ment:
Common stock........... 222 608 1,093 (1,701) 222
Capital in excess of
par value............. 59,476 3,783 64 (3,847) 59,476
Retained earnings...... 3,734 491 2,006 (2,497) 3,734
Treasury stock......... -- (366) -- 366 --
-------- ------- ------- -------- --------
63,432 4,516 3,163 (7,679) 63,432
-------- ------- ------- -------- --------
$129,575 $14,567 $12,305 $ 4,848 $161,295
======== ======= ======= ======== ========
</TABLE>
F-44
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1--PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (IN THOUSANDS, EXCEPT
IN TEXT)
<TABLE>
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
COST OF REVENUES
Increase of $479,000, $1,150,000 and $267,000 in the work in
process and finished goods inventories of Bennett, XRE and
Continental, respectively, to the estimated selling price,
less the sum of the costs of disposal and a reasonable profit
allowance for the Company's selling efforts................... $ 1,896
-------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Service fee of 1.20% of the revenues of Bennett, XRE and Conti-
nental for services provided under a services agreement be-
tween the Company and Thermo Electron......................... 851
Amortization over 40 years of $37,496,000, $11,334,000 and
$9,097,000 of cost in excess of net assets of acquired compa-
nies created by the acquisitions of Bennett, XRE and Continen-
tal, respectively............................................. 1,047
-------
1,898
-------
INTEREST EXPENSE
Record interest expense on the $42,000,000 principal amount
4.2% subordinated convertible note issued to ThermoTrex, net
of $3,000,000 principal amount converted into common stock by
ThermoTrex.................................................... 1,228
-------
INCOME TAX PROVISION (BENEFIT)
Income tax benefit associated with the adjustments above
(excluding amortization of cost in excess of net assets of
acquired companies), calculated at the Company's statutory
income tax rate of 40%........................................ (1,590)
Income tax provision associated with XRE's and Continental's
earnings, calculated at the Company's statutory income tax
rate of 40%................................................... 263
-------
(1,327)
-------
WEIGHTED AVERAGE SHARES
Increase in weighted average shares outstanding due to the
assumed issuance on January 1, 1995 of 1,862,000, 2,400,000
and 254,452 shares of the Company's common stock from its
November 1995 private placement, its proposed Underwritten
Public Offering and the assumed conversion of $3,000,000
principal amount of the 4.2% subordinated convertible note by
ThermoTrex, respectively
</TABLE>
F-45
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
NOTE 2--PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
INCOME FOR THE SIX MONTHS ENDED MARCH 30, 1996 (IN THOUSANDS, EXCEPT IN
TEXT)
<TABLE>
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
COST OF REVENUES
Reversal of the adjustment to record Bennett's inventory at
estimated selling price, less the sum of the costs of disposal
and a reasonable profit allowance for the Company's selling
efforts....................................................... $(479)
-----
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Service fee of 1.20% for the three month period ended December
30, 1995 and 1.0% for the three month period ended March 30,
1996 of the revenues of XRE and Continental for services
provided under a services agreement between the Company and
Thermo Electron............................................... 289
Amortization over 40 years of cost in excess of net assets of
acquired companies created by the acquisitions of XRE and
Continental................................................... 255
-----
544
-----
INTEREST INCOME
Decrease in interest income due to the $17,000,000 cash payment
to acquire XRE, calculated at an average interest rate of
5.94%......................................................... 369
-----
INTEREST EXPENSE
Decrease in interest expense on the $42,000,000 principal
amount 4.2% subordinated convertible note issued to
ThermoTrex, due to the assumed conversion by ThermoTrex on
January 1, 1995 of $3,000,000 principal amount into common
stock......................................................... (63)
-----
INCOME TAX PROVISION (BENEFIT)
Income tax benefit associated with the adjustments above
(excluding amortization of cost in excess of net assets of
acquired companies), calculated at the Company's statutory
income tax rate of 40%........................................ (46)
Net income tax provision associated with XRE's loss and
Continental's earnings, calculated at the Company's statutory
income tax rate of 40%........................................ 88
-----
42
-----
WEIGHTED AVERAGE SHARES
Increase in weighted average shares outstanding due to the
assumed issuance on January 1,
1995 of 1,862,000, 2,400,000, and 254,452 shares of the
Company's common stock from
its November 1995 private placement, its proposed Underwritten
Public Offering and the
assumed conversion of $3,000,000 principal amount of the 4.2%
subordinated convertible
note by ThermoTrex, respectively
</TABLE>
F-46
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS--(CONCLUDED)
(UNAUDITED)
NOTE 3--PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED BALANCE SHEET (IN
THOUSANDS, EXCEPT IN TEXT)
<TABLE>
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
CASH AND CASH EQUIVALENTS
Cash payments to acquire XRE and Continental.................... $(35,200)
Proceeds from the issuance of note payable to Thermo Electron
Corporation.................................................... 18,200
--------
(17,000)
--------
INVENTORIES
Increase of $1,150,000 and $267,000 in the work in process and
finished goods inventories of XRE and Continental,
respectively, to the estimated selling price, less the sum of
the costs of disposal and a reasonable profit allowance for the
Company's selling efforts...................................... 1,417
--------
COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES
Excess of $11,334,000 and $9,097,000 of cost over the fair value
of the net assets acquired of XRE and Continental, respective-
ly............................................................. 20,431
--------
NOTES PAYABLE
Decrease in notes payable due to the repayment of Continental
debt by the Company............................................ 3,637
--------
NOTE PAYABLE TO THERMO ELECTRON CORPORATION
Record note payable to Thermo Electron Corporation to finance
the acquisition of Continental................................. (18,200)
--------
CURRENT MATURITIES OF LONG-TERM OBLIGATIONS
Decrease in current maturities of long-term obligations due to
the repayment of Continental debt by the Company............... 263
--------
LONG-TERM OBLIGATIONS
Decrease in other long-term obligations due to the repayment of
Continental debt by the Company................................ 1,773
--------
SHAREHOLDERS' INVESTMENT
Elimination of XRE's and Continental's equity accounts.......... 7,679
--------
</TABLE>
F-47
<PAGE>
The picture at the upper right-hand side of the page illustrates two seated
laboratory technicians with their hands at the controls of the Company's Lorad
Sterotactic Needle Biopsy System, which consists of a vertical floor-mounted
platform supporting the rotatable needle-biopsy apparatus, as well as
a horizontal platform which sits above the apparatus, upon which a patient lays
in a prone position.
To the left of this picture is the following caption:
The Company offers a variety of needle- biopsy systems that provide an
alternative to sur-gical biopsy. These procedures generally remove only a small
tissue sample, resulting in minimal scarring. In addition, the procedure is done
on an outpatient basis which results in significant cost savings.
The picture at the middle left-hand side of the page illustrates two X-ray
systems that are attached to certical, floor-mounted bases. A patient is
standing up against the X-ray apparatus on the left-hand side of the
photograph, and a patient table with the Bennett logo is shown in the
foreground in front of the X-ray apparatus on the right-hand side of the page.
To the right of this picture is the following caption:
The Company offers both general-purpose and specialized X-ray systems. For
example, the Company's recently introduced BT-300 tomography system offers a
patented automatic exposure option for use with its general radiographic
systems. Prior to the introduction of the Company's automatic exposure option,
multiple exposures were required to obtain a correctly exposed image.
The picture at the lower right-hand side of the page illustrates a patient
table, above which is a moveable, rotatable X-ray apparatus suspended from a
platform which is mounted to the ceiling. Two large, flexible tubes are shown
running from the X-ray apparatus toward the wall, and another system component
is shown between the patient table and the wall.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OF-
FER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURIS-
DICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS COR-
RECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
The Company.............................................................. 12
The Rights Offering...................................................... 12
Use of Proceeds.......................................................... 13
Dividend Policy.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Consolidated Financial Information.............................. 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 21
Relationship and Potential Conflicts of Interest with Thermo Electron and
ThermoTrex.............................................................. 35
Management............................................................... 39
Executive Compensation................................................... 43
Security Ownership of Certain Beneficial Owners and Management........... 46
Description of Capital Stock............................................. 48
Shares Eligible for Future Sale.......................................... 48
Underwriting............................................................. 50
Legal Opinions........................................................... 51
Experts.................................................................. 52
Additional Information................................................... 52
Reports to Security Holders.............................................. 52
Index to Consolidated Financial Statements............................... F-1
</TABLE>
----------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICI-
PATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,400,000 Shares
[LOGO OF TREX MEDICAL APPEARS HERE]
Common Stock
----------------
PROSPECTUS
, 1996
----------------
NatWest Securities Limited
Lehman Brothers
Oppenheimer & Co., Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
for the Securities and Exchange Commission (the "Commission") registration
fee, the NASD filing fee and the American Stock Exchange listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 15,989
NASD filing fee.................................................... 5,137
American Stock Exchange listing fee................................ 50,000
Legal fees and expenses............................................ 150,000
Accounting fees and expenses....................................... 140,000
Blue Sky fees and expenses (including legal fees).................. 10,000
Printing and engraving expenses.................................... 200,000
Transfer agent fees................................................ 5,000
Miscellaneous...................................................... 123,874
--------
Total............................................................ $700,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and the Registrant's Certificate of
Incorporation and By-Laws limit the monetary liability of directors to the
Registrant and to its shareholders and provide for indemnification of the
Registrant's officers and directors for liabilities and expenses that they may
incur in such capacities. In general, officers and directors are indemnified
with respect to actions taken in good faith in a manner reasonably believed to
be in, or not opposed to, the best interests of the Registrant and, with
respect to any criminal action or proceeding, actions that the indemnitee had
no reasonable cause to believe were unlawful. The Registrant also has
indemnification agreements with its directors and officers that provide for
the maximum indemnification allowed by law. Reference is made to the
Registrant's Certificate of Incorporation, By-Laws and form of Indemnification
Agreement for Officers and Directors incorporated by reference as Exhibits
3.1, 3.2 and 10.18 hereto, respectively.
Thermo Electron has an insurance policy which insures the directors and
officers of Thermo Electron and its subsidiaries, including the Registrant,
against certain liabilities which might be incurred in connection with the
performance of their duties.
Under Section 6 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). Reference is made
to the form of Underwriting Agreement filed as Exhibit 1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On October 2, 1995, ThermoTrex transferred to the Registrant all outstanding
capital stock of its Bennett X-Ray Corporation subsidiary in exchange for a
$42,000,000 principal amount subordinated convertible note due 2000. Exemption
from registration for this transaction is claimed under Section 4(2) of the
Securities Act.
On October 16, 1995, ThermoTrex contributed all of the assets and
liabilities relating to its Lorad division and its Sonic CT system to the
Registrant in exchange for 20,000,000 shares of Common Stock. Exemption for
registration for this transaction is claimed under Section 4(2) of the
Securities Act.
II-1
<PAGE>
On November 22, 1995 and November 30, 1995 the Registrant sold an aggregate
of 1,862,000 shares of Common Stock to 159 accredited investors pursuant to
Regulation D of the Commission promulgated under the Securities Act.
On January 31, 1996, the Registrant sold 100,000 shares of Common Stock to
an accredited investor pursuant to Regulation D of the Commission promulgated
under the Securities Act.
From September 27, 1995 (the date of the Registrant's incorporation) through
May 30, 1996, the Registrant granted options under its stock-based
compensation plans to purchase an aggregate of 1,401,000 shares of Common
Stock at a weighted average exercise price of $11.14 per share. None of these
options have been exercised. Exemption from registration for these grants is
claimed under Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
*1 Form of Underwriting Agreement.
*3.1 Certificate of Incorporation, as amended, of the Registrant.
*3.2 By-Laws of the Registrant.
*4.1 Specimen Common Stock Certificate.
*4.2 $42,000,000 Subordinated Convertible Note due 2000 of the
Registrant issued to ThermoTrex.
*5 Opinion of Seth H. Hoogasian, Esq. with respect to the validity of
the securities being offered.
*10.1 Corporate Services Agreement dated as of September 27, 1995
between Thermo Electron Corporation ("Thermo Electron") and the
Registrant.
10.2 Thermo Electron Corporate Charter, as amended and restated
effective January 3, 1993 (incorporated by reference herein form
Exhibit 10.1 to Thermo Electron's Annual Report on form 10-K for
the fiscal year ended January 2, 1993 (File No. 1-8002)).
*10.3 Tax Allocation Agreement dated as of September 27, 1995 between
Thermo Electron and the Registrant.
*10.4 Master Repurchase Agreement dated as of September 27, 1995 between
Thermo Electron and the Registrant.
*10.5 Master Guarantee Reimbursement Agreement dated as of September 27,
1995 between Thermo Electron and the Registrant.
*10.6 Master Guarantee Reimbursement Agreement dated as of September 27,
1995 between ThermoTrex and the Registrant.
+10.7 OEM Agreement between Philips Medical Systems North American
Company and Lorad dated as of November 2, 1993.
+10.8 OEM Agreement between Philips Medical Systems North American
Company and Lorad dated November 17, 1993.
*+10.9 Purchase Agreement between General Electric Company and Bennett
dated November 17, 1994.
*+10.10 Agreement between Philips Medizin Systeme Unternehmensbereich der
Philips GmbH and Bennett dated February 12, 1992.
*+10.11 Distributor Agreement between ThermoTrex and US Surgical
Corporation dated October 20, 1995, as amended.
* 10.12 Note Purchase and Sale Agreement dated as of October 2, 1995
between ThermoTrex and the Registrant.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.13 Lease dated as of September 15, 1995, by and among ThermoTrex and
BK Realty Associates, L.P. and Calrob Realty Associates (filed as
Exhibit 10.26 to ThermoTrex's Annual Report on Form
10-K for the fiscal year ended September 30, 1995 [File No. 1-
10791] and incorporated herein by reference).
*10.14 Lease dated as of December 20, 1995, between Melvyn J. Powers and
Mary P. Powers D/B/A M&M Realty and Lorad, as amended.
*10.15 Equity Incentive Plan of the Registrant.
*10.16 Deferred Compensation Plan for Directors of the Registrant.
*10.17 Directors Stock Option Plan of the Registrant.
*10.18 Form of Indemnification Agreement for Officers and Directors.
In addition to the stock-based compensation plans of the
Registrant, the executive officers of the Registrant may be
granted awards under stock-based compensation plans of the
Registrant's parent, Thermo Electron Corporation, and its
subsidiaries, for services rendered to the Registrant or to such
affiliated corporations. Such plans are listed under Exhibits
10.19-10.74.
10.19 Thermo Electron Corporation Incentive Stock Option Plan (filed as
Exhibit 4(d) to Thermo Electron's Registration Statement on Form
S-8 [Reg. No. 33-8993] and incorporated herein by reference).
(Maximum number of shares issuable in the aggregate under this
plan and the Thermo Electron Nonqualified Stock Option Plan is
9,035,156 shares, after adjustment to reflect share increases
approved in 1984 and 1986, share decrease approved in 1989, and 3-
for-2 stock splits effected in October 1986, October 1993 and May
1995).
10.20 Thermo Electron Corporation Nonqualified Stock Option Plan (filed
as Exhibit 4(e) to Thermo Electron's Registration Statement on
Form S-8 [Reg. No. 33-8993] and incorporated herein by reference).
(Plan amended in 1984 to extend expiration date to December 14,
1994; maximum number of shares issuable in the aggregate under
this plan and the Thermo Electron Incentive Stock Option Plan is
9,035,156 shares, after adjustment to reflect share increases
approved in 1984 and 1986, share decrease approved in 1989, and 3-
for-2 stock splits effected in October 1986, October 1993 and May
1995).
10.21 Thermo Electron Corporation Equity Incentive Plan (filed as
Exhibit 10.1 to Thermo Electron's Quarterly Report on Form 10-Q
for the quarter ended July 2, 1994 [File No. 1-8002] and
incorporated herein by reference). (Plan amended in 1989 to
restrict exercise price for SEC reporting persons to not less than
50% of fair market value or par value; maximum number of shares
issuable is 7,050,000 shares, after adjustment to reflect 3-for-2
stock splits effected in October 1993 and May 1995 and share
increase approved in 1994).
10.22 Thermo Electron Corporation--Thermedics Inc. Nonqualified Stock
Option Plan (filed as Exhibit 4 to a Registration Statement on
Form S-8 of Thermedics [Reg. No. 2-93747] and incorporated herein
by reference). (Maximum number of shares issuable is 450,000
shares, after adjustment to reflect share increase approved in
1988, 5-for-4 stock split effected in January 1985, 4-for-3 stock
split effected in September 1985, and 3-for-2 stock splits
effected in October 1986 and November 1993).
10.23 Thermo Electron Corporation--Thermo Instrument Systems Inc.
(formerly Thermo Environmental Corporation) Nonqualified Stock
Option Plan (filed as Exhibit 4(c) to a Registration Statement on
Form S-8 of Thermo Instrument [Reg. No. 33-8034] and incorporated
herein by reference). (Maximum number of shares issuable is
421,875 shares, after adjustment to reflect 3-for-2 stock splits
effected in July 1993 and April 1995 and a 5-for-4 stock split
effected in December 1995).
10.24 Thermo Electron Corporation--Thermo Instrument Systems Inc.
(formerly Thermo Environmental Corporation) Nonqualified Stock
Option Plan (filed as Exhibit 10.12 to Thermo Electron's Annual
Report on Form 10-K for the fiscal year ended January 3, 1987
[File No. 1-8002] and incorporated herein by reference). (Maximum
number of shares issuable is 600,285 shares, after adjustment to
reflect share increase approved in 1988 and 3-for-2 stock splits
effected in January 1988, July 1993 and April 1995 and a 5-for-4
stock split effected in December 1995).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.25 Thermo Electron Corporation--Thermo Terra Tech Inc. (formerly
Thermo Process Systems Inc.) Nonqualified Stock Option Plan (filed
as Exhibit 10.13 to Thermo Electron's Annual Report on Form 10-K
for the fiscal year ended January 3, 1987 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of shares
issuable is 108,000 shares, after adjustment to reflect 6-for-5
stock splits effected in July 1988 and March 1989, and 3-for-2
stock split effected in September 1989).
10.26 Thermo Electron Corporation--Thermo Power Corporation (formerly
Tecogen Inc.) Nonqualified Stock Option Plan (filed as Exhibit
10.14 to Thermo Electron's Annual Report on Form 10-K for the
fiscal year ended January 3, 1987 [File No. 1-8002] and
incorporated herein by reference). (Amended in September 1995 to
extend the plan expiration date to December 31, 2005).
10.27 Thermo Electron Corporation--Thermo Cardiosystems Inc.
Nonqualified Stock Option Plan (filed as Exhibit 10.11 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990 [File No. 1-8002] and incorporated herein by
reference). (Maximum number of shares issuable is 130,500 shares,
after adjustment to reflect share increases approved in 1990 and
1992, 3-for-2 stock split effected in January 1990, 5-for-4 stock
split effected in May 1990 and 2-for-1 stock split effected in
November 1993).
10.28 Thermo Electron Corporation--Thermo Ecotek Corporation (formerly
Thermo Energy Systems Corporation) Nonqualified Stock Option Plan
(filed as Exhibit 10.12 to Thermo Electron's Annual Report on Form
10-K for the fiscal year ended December 29, 1990 [File No. 1-8002]
and incorporated hereby by reference).
10.29 Thermo Electron Corporation--ThermoTrex Corporation (formerly
Thermo Electron Technologies Corporation) Nonqualified Stock
Option Plan (filed as Exhibit 10.13 to Thermo Electron's Annual
Report on Form 10-K for the fiscal year ended December 29, 1990
[File No. 1-8002] and incorporated herein by reference). (Maximum
number of shares issuable is 180,000 shares, after adjustment to
reflect 3-for-2 stock split effected in October 1993).
10.30 Thermo Electron Corporation--Thermo Fibertek Inc. Nonqualified
Stock Option Plan (filed as Exhibit 10.14 to Thermo Electron's
Annual Report on Form 10-K for the fiscal year ended December 28,
1991 [File No. 1-8002] and incorporated herein by reference).
(Maximum number of shares issuable is 600,000 shares, after
adjustment to reflect 2-for-1 stock split effected in September
1992 and 3-for-2 stock split effected in September 1995).
10.31 Thermo Electron Corporation--Thermo Voltek Corp. (formerly
Universal Voltronics Corp.) Nonqualified Stock Option Plan (filed
as Exhibit 10.17 to Thermo Electron's Annual Report on Form 10-K
for the fiscal year ended January 2, 1993 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of shares
issuable is 57,500 shares after adjustment to reflect 3-for-2
stock split effected in November 1993 and share increase approved
in September 1995).
10.32 Thermo Electron Corporation--Thermo BioAnalysis Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.31 to Thermo
Power's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995 [File No. 1-10573] incorporated herein by
reference).
10.33 Thermo Electron Corporation--ThermoLyte Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10.32 to Thermo Power's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995
[File No. 1-10573] and incorporated herein by reference).
10.34 Thermo Electron Corporation--Thermo Remediation Inc. Nonqualified
Stock Option Plan (filed as Exhibit 10.33 to Thermo Power's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995
[File No. 1-10573] and incorporated herein by reference).
10.35 Thermo Electron Corporation--ThermoSpectra Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.34 to Thermo
Power's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995 [File No. 1-10573] and incorporated herein by
reference).
10.36 Thermo Electron Corporation--ThermoLase Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10.35 to Thermo Power's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995
[File No. 1-10573] and incorporated herein by reference).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.37 Thermo Electron Corporation--ThermoQuest Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10.41 to Thermo Cardiosystems'
Annual Report on Form 10-K for the fiscal year ended December 30,
1995 [File No. 1-10114] and incorporated herein by reference).
10.38 Thermo Electron Corporation--Thermo Optek Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10.42 to Thermo Cardiosystems'
Annual Report on Form 10-K for the fiscal year ended December 30,
1995 [File No. 1-10114] and incorporated herein by reference).
10.39 Thermo Electron Corporation--Thermo Sentron Inc. Nonqualified
Stock Option Plan (filed as Exhibit 10.43 to Thermo Cardiosystems'
Annual Report on Form 10-K for the fiscal year ended December 30,
1995 [File No. 1-10114] and incorporated herein by reference).
10.40 Thermo Electron Corporation--Trex Medical Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10.44 to Thermo Cardiosystems'
Annual Report on Form 10-K for the fiscal year ended December 30,
1995 [File No. 1-10114] and incorporated herein by reference).
10.41 Thermo Ecotek Corporation (formerly Thermo Energy Systems
Corporation) Incentive Stock Option Plan (filed as Exhibit 10.18
to Thermo Electron's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993 [File No. 1-8002] and incorporated
herein by reference). (Maximum number of shares issuable in the
aggregate under this plan and the Thermo Ecotek Nonqualified Stock
Option Plan is 900,000 shares, after adjustment to reflect share
increase approved in December 1993).
10.42 Thermo Ecotek Corporation (formerly Thermo Energy Systems
Corporation) Nonqualified Stock Option Plan (filed as Exhibit
10.19 to Thermo Electron's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993 [File No. 1-8001] and
incorporated herein by reference). (Maximum number of shares
issuable in the aggregate under this plan and the Thermo Ecotek
Incentive Stock Option Plan is 900,000 shares, after adjustment to
reflect share increase approved in December 1993).
10.43 Thermo Ecotek Corporation (formerly Thermo Energy Systems
Corporation) Equity Incentive Plan (filed as Exhibit 10.39 to
Thermo Instrument's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 [File No. 1-9786] and incorporated herein
by reference).
10.44 Thermedics Inc. Incentive Stock Option Plan (filed as Exhibit
10(d) to Thermedics' Registration Statement on Form S-1 [Reg. No.
33-84380) and incorporated herein by reference). (Maximum number
of shares issuable in the aggregate under this plan and the
Thermedics Nonqualified Stock Option Plan is 1,931,923 shares,
after adjustment to reflect share increases approved in 1986 and
1992, 5-for-4 stock split effected in January 1985, 4-for-3 stock
split effected in September 1985, and 3-for-2 stock splits
effected in October 1986 and November 1993).
10.45 Thermedics Inc. Nonqualified Stock Option Plan (filed as Exhibit
10(e) to Thermedics' Registration Statement on Form S-1 [Reg. No.
33-84380) and incorporated herein by reference). (Maximum number
of shares issuable in the aggregate under this plan and the
Thermedics Incentive Stock Option Plan is 1,931,923 shares, after
adjustment to reflect share increases approved in 1986 and 1992,
5-for-4 stock split effected in January 1985, 4-for-3 stock split
effected in September 1985, and 3-for-2 stock splits effected in
October 1986 and November 1993).
10.46 Thermedics Inc. Equity Incentive Plan (filed as Appendix A to the
Proxy Statement dated May 10, 1993 of Thermedics [File No. 1-9567]
and incorporated herein by reference). (Maximum number of shares
issuable is 1,500,000, after adjustment to reflect 3-for-2 stock
split effected in November 1993).
10.47 Thermedics Inc.--Thermo Sentron Inc. Nonqualified Stock Option
Plan (filed as Exhibit 10.51 to Thermo Cardiosystems Annual Report
on Form 10-K for the fiscal year ended December 30, 1995 [File No.
1-10114] and incorporated herein by reference).
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.48 Thermedics Inc.--Thermedics Detection Inc. Nonqualified Stock
Option Plan (filed as Exhibit 10.20 to Thermo Electron's Annual
Report on Form 10-K for the fiscal year ended January 2, 1993
[File No. 1-8002] and incorporated herein by reference).
10.49 Thermedics Detection Inc.--Equity Incentive Plan (fiuled as
Exhibit 10.69 to Thermo Instrument's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 [File No. 1-9786] and
incorporated herein by reference).
10.50 Thermo Cardiosystems Inc. Incentive Stock Option Plan (filed as
Exhibit 10(f) to Thermo Cardiosystems' Registration Statement on
Form S-1 [Reg. No. 33-25144] and incorporated herein by
reference). (Maximum number of shares issuable in the aggregate
under this plan and the Thermo Cardiosystems Nonqualified Stock
Option Plan is 1,143,750 shares, after adjustment to reflect share
increase approved in 1992, 3-for-2 stock split effected in January
1990, 5-for-4 stock split effected in May 1990 and 2-for-1 stock
split effected in November 1993).
10.51 Thermo Cardiosystems Inc. Nonqualified Stock Option Plan (filed as
Exhibit 10(g) to Thermo Cardiosystems' Registration Statement on
Form S-1 [Reg. No. 33-25144] and incorporated herein by
reference). (Maximum number of shares issuable in the aggregate
under this plan and the Thermo Cardiosystems Incentive Stock
Option Plan is 1,143,750 shares, after adjustment to reflect share
increase approved in 1992, 3-for-2 stock split effected in January
1990, 5-for-4 stock split effected in May 1990 and 2-for-1 stock
split effected in November 1993).
10.52 Thermo Cardiosystems Inc. Equity Incentive Plan (filed as Exhibit
10.46 to Thermo Instrument's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 [File No. 1-9786] and
incorporated herein by reference).
10.53 Thermo Voltek Corp. (formerly Universal Voltronics Corp.) 1985
Stock Option Plan (filed as Exhibit 10.14 to Thermo Voltek's
Annual Report on Form 10-K for the fiscal year ended June 30, 1985
[File No. 0-8245] and incorporated herein by reference). (Maximum
number of shares issuable is 200,000 shares, after adjustment to
reflect 1-for-3 reverse stock split effected in November 1992 and
3-for-2 stock split effected in November 1993).
10.54 Thermo Voltek Corp. (formerly Universal Voltronics Corp.) 1990
Stock Option Plan (filed as Exhibit 10.2 to Thermo Voltek's Annual
Report on Form 10-K for the fiscal year ended June 30, 1990 [File
No. 1-10574] and incorporated herein by reference). (Maximum
number of shares issuable is 400,000 shares, after adjustment to
reflect share increases in 1993 and 1994. 1-for-3 reverse stock
split effected in November 1992, and 3-for-2 stock split effected
in November 1993).
10.55 Thermo Voltek Corp. Equity Incentive Plan (filed as Exhibit 10.49
to Thermo Instrument's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 [File No. 1-9786] and incorporated
herein by reference).
10.56 Thermo Instrument Systems Inc. Incentive Stock Option Plan (filed
as Exhibit 10(c) to Thermo Instrument's Registration Statement on
Form S-1 [Reg. No. 33-6762] and incorporated herein by reference).
(Maximum number of shares issuable in the aggregate under this
plan and the Thermo Instrument Nonqualified Stock Option Plan is
2,812,500 shares, after adjustment to reflect share increase
approved in 1990 and 3-for-2 stock splits effected in January
1988, July 1993 and April 1995 and 5-for-4 stock split effected in
December 1995).
10.57 Thermo Instrument Systems Inc. Nonqualified Stock Option Plan
(filed as Exhibit 10(d) to Thermo Instrument's Registration
Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein
by reference). (Maximum number of shares issuable in the aggregate
under this plan and the Thermo Instrument Incentive Stock Option
Plan is 2,812,500 shares, after adjustment to reflect share
increase approved in 1990 and 3-for-2 stock splits effected in
January 1988, July 1993 and April 1995 and 5-for-4 stock split
effected in December 1995).
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.58 Thermo Instrument Systems Inc. Equity Incentive Plan (filed as
Appendix A to the Proxy Statement dated April 27, 1993 of Thermo
Instrument [File No. 1-9786] and incorporated herein by
reference). (Maximum number of shares issuable is 4,031,250
shares, after adjustment to reflect share increase approved in
December 1993 and 3-for-2 stock split effected in July 1993 and
April 1995 and 5-for-4 stock split effected in December 1995).
10.59 Thermo Instrument Systems Inc. (formerly Thermo Environmental
Corporation) Incentive Stock Option Plan (filed as Exhibit 10(d)
to Thermo Environmental's Registration Statement on Form S-1 [Reg.
No. 33-329] and incorporated herein by reference). (Maximum number
of shares issuable in the aggregate under this plan and the Thermo
Instrument (formerly Thermo Environmental Corporation)
Nonqualified Stock Option Plan is 1,160,156 shares, after
adjustment to reflect share increase approved in 1987 and 3-for-2
stock splits effected in July 1993 and April 1995 and 5-for-4
stock split effected in December 1995).
10.60 Thermo Instrument Systems Inc. (formerly Thermo Environmental
Corporation) Nonqualified Stock Option Plan (filed as Exhibit
10(e) to Thermo Environmental's Registration Statement on Form S-1
[Reg. No. 33-329] and incorporated herein by reference). (Maximum
number of shares issuable in the aggregate under this plan and the
Thermo Instrument (formerly Thermo Environmental Corporation)
Incentive Stock Option Plan is 1,160,156 shares, after adjustment
to reflect share increase approved in 1987 and 3-for-2 splits
effected in July 1993 and April 1995 and 5-for-4 stock split
effected in December 1995).
10.61 Thermo Instrument Systems Inc.--ThermoSpectra Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.51 to Thermo
Instrument's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 [File No. 1-9786] and incorporated herein by
reference).
10.62 Thermo Instrument Systems Inc.--Thermo BioAnalysis Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.64 to Thermo
Cardiosystems' Annual Report on Form 10-K for the fiscal year
ended December 30, 1995 [File No. 1-10114] and incorporated herein
by reference).
10.63 Thermo Instrument Systems Inc.--ThermoQuest Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.65 to Thermo
Cardiosystems' Annual Report on Form 10-K for the fiscal year
ended December 30, 1995 [File No. 1-10114] and incorporated herein
by reference).
10.64 ThermoSpectra Corporation Equity Incentive Plan (filed as Exhibit
10.52 to Thermo Instrument's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 [File No. 1-9786] and
incorporated herein by reference).
10.65 Thermo BioAnalysis Corporation Equity Incentive Plan (filed as
Exhibit 10.67 to Thermo Cardiosystems' Annual Report on Form 10-K
for the fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
10.66 Thermo Optek Corporation Equity Incentive Plan (filed as Exhibit
10.68 to Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
10.67 ThermoQuest Corporation Equity Incentive Plan (filed as Exhibit
10.69 to Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
10.68 ThermoTrex Corporation (formerly Thermo Electron Technologies
Corporation) Incentive Stock Option Plan (filed as Exhibit 10(h)
to ThermoTrex's Registration Statement on Form S-1 [Reg. No. 33-
40972] and incorporated herein by reference) (Maximum number of
shares issuable in the aggregate under this plan and the
ThermoTrex Nonqualified Stock Option Plan is 1,945,000 shares,
after adjustment to reflect share increases approved in 1992 and
1993 and 3-for-2 stock split effected in October 1993).
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.69 ThermoTrex Corporation (formerly Thermo Electron Technologies
Corporation) Nonqualified Stock Option Plan (filed as Exhibit
10(i) to ThermoTrex's Registration Statement on Form S-1 [Reg. No.
33-40972] and incorporated herein by reference) (Maximum number of
shares issuable in the aggregate under this plan and the
ThermoTrex Nonqualified Stock Option Plan is 1,945,000 shares,
after adjustment to reflect share increases approved in 1992 and
1993 and 3-for-2 stock split effected in October 1993).
10.70 ThermoTrex Corporation-ThermoLase Corporation (formerly ThermoLase
Inc.) Nonqualified Stock Option Plan (filed on Exhibit 10.53 to
ThermoTrex Corporation's Annual Report on Form 10-K for the fiscal
year ended January 1, 1994 [File No. 1-10791] and incorporated
herein by reference.
10.71 ThermoTrex Corporation--Trex Medical Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10.73 to Thermo Cardiosystems'
Annual Report on Form 10-K for the fiscal year ended December 30,
1995 [File No. 1-10114] and incorporated herein by reference).
10.72 ThermoLase Corporation (formerly ThermoLase Inc.) Nonqualified
Stock Option Plan (filed as Exhibit 10.54 to ThermoTrex's Annual
Report on Form 10-K for the fiscal year ended January 1, 1994
[File No. 1-10791] and incorporated herein by reference). (Maximum
number of shares issuable in the aggregate under this plan and the
ThermoLase Incentive Stock Option Plan is 2,800,000 shares, after
adjustment to reflect share increase approved in 1993 and 2-for-1
stock splits effected in March 1994 and June 1995).
10.73 ThermoLase Corporation (formerly ThermoLase Inc.) Incentive Stock
Option Plan (filed as Exhibit 10.55 to ThermoTrex Corporation's
Annual Report on Form 10-K for the fiscal year ended January 1,
1994 [File No. 1-10791] and incorporated herein by reference).
(Maximum number of shares issuable in the aggregate under this
plan and the ThermoLase Nonqualified Stock Option Plan is
2,800,000 shares, after adjustment to reflect share increase
approved in 1993 and 2-for-1 stock splits effected in March 1994
and June 1995).
10.74 ThermoLase Corporation Equity Incentive Plan (filed as Exhibit
10.81 to Thermo TerraTech's Annual Report on Form 10-K for the
fiscal year ended April 1, 1995 [File No. 1-9549] and incorporated
herein by reference).
10.75 Thermo Fibertek Inc. Incentive Stock Option Plan (filed as Exhibit
10(k) to Thermo Fibertek's Registration Statement on Form S-1
[Reg. No. 33-51172] and incorporated herein by reference.
10.76 Thermo Fibertek Inc. Nonqualified Stock Option Plan (filed as
Exhibit 10(l) to Thermo Fibertek's Registration Statement on Form
S-1 [Reg. No. 33-51172] and incorporated herein by reference.
10.77 Thermo Fibertek Inc. Equity Incentive Plan (filed as Exhibit 10.60
to Thermo Instrument's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 [File No. 1-9786] and incorporated
herein by reference.
10.78 Thermo Power Corporation (formerly Tecogen Inc.) Incentive Stock
Option Plan (filed as Exhibit 10(h) to Thermo Power's Quarterly
Report on Form 10-Q for the quarter ended April 3, 1993 [Reg. No.
33-10573] and incorporated herein by reference). (Maximum number
of shares issuable in the aggregate under this plan and the Thermo
Power Nonqualified Stock Option Plan is 950,000 shares, after
adjustment to reflect share increases approved in 1990, 1992 and
1993).
10.79 Thermo Power Corporation (formerly Tecogen Inc.) Nonqualified
Stock Option Plan (filed as Exhibit 10(i) to Thermo Power's
Quarterly Report on Form 10-Q for the quarter ended April 3, 1993
[Reg. No. 33-10573] and incorporated herein by reference).
(Maximum number of shares issuable in the aggregate under this
plan and the Thermo Power Incentive Stock Option Plan is 950,000
shares, after adjustment to reflect share increases approved in
1990, 1992 and 1993).
10.80 Thermo Power Corporation Equity Incentive Plan (filed as Exhibit
10.63 to Thermo Instrument's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 [File No. 1-9786] and
incorporated herein by reference).
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.81 Thermo Power Corporation--ThermoLyte Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10.84 to Thermo Cardiosystems'
Annual Report on Form 10-K for the fiscal year ended December 30,
1995 [File No. 1-10114] and incorporated herein by reference).
10.82 ThermoLyte Corporation Equity Incentive Plan (filed as Exhibit
10.71 to Thermo Power's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 [File No. 1-10573] and incorporated
herein by reference).
10.83 Thermo TerraTech Inc. (formerly Thermo Process Systems Inc.)
Incentive Stock Option Plan (filed as Exhibit 10(h) to Thermo
Process' Registration Statement on Form S-1 [Reg. No. 33-6763] and
incorporated herein by reference). (Maximum number of shares
issuable in the aggregate under this plan and the Thermo TerraTech
Nonqualified Stock Option Plan is 1,850,000 shares, after
adjustment to reflect share increases approved in 1987, 1989 and
1992, 6-for-5 stock splits effected in July 1988 and March 1989
and 3-for-2 stock split effected in September 1989).
10.84 Thermo TerraTech Inc. (formerly Thermo Process Systems Inc.)
Nonqualified Stock Option Plan (filed as Exhibit 10(i) to Thermo
Process' Registration Statement on Form S-1 [Reg. No. 33-6763] and
incorporated herein by reference). (Maximum number of shares
issuable in the aggregate under this plan and the Thermo TerraTech
Incentive Stock Option Plan is 1,850,000 shares, after adjustment
to reflect share increases approved in 1987, 1989 and 1992, 6-for-
5 stock splits effected in July 1988 and March 1989 and 3-for-2
stock split effected in September 1989).
10.85 Thermo TerraTech Inc. (formerly Thermo Process Systems Inc.)
Equity Incentive Plan (filed as Exhibit 10.63 to Thermedics'
Annual Report on Form 10-K for the fiscal year ended January 1,
1994 [File No. 1-9567] and incorporated herein by reference).
(Maximum number of shares issuable is 1,750,000 shares, after
adjustment to reflect share increase approved in 1994).
10.86 Thermo TerraTech Inc. (formerly Thermo Process Systems Inc.)--
Thermo Remediation Inc. Nonqualified Stock Option Plan (filed as
Exhibit 10(l) to Thermo Process' Quarterly Report on Form 10-Q for
the fiscal quarter ended January 1, 1994 [File No. 1-9549] and
incorporated herein by reference).
10.87 Thermo Remediation Inc. Equity Incentive Plan (filed as Exhibit
10.7 to Thermo Remediation's Registration Statement on Form S-1
[Reg. No. 33-70544] and incorporated herein by reference).
*10.88 License Agreement between the Registrant and ThermoTrex dated as
of October 16, 1995.
10.89 Lease dated May 29, 1996, between John K. Grady, Trustee of
Concord Associates Foster Street Trust, and XRE Acquisition Corp.
*11 Computation of Earnings per Share
*21 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Topel Forman L.L.C.
*23.5 Consent of Seth H. Hoogasian, Esq. (included in Exhibit 5)
*24 Power of Attorney
*27 Financial Data Schedule
</TABLE>
- --------
* Previously Filed.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
(B) FINANCIAL STATEMENT SCHEDULE
The financial Statement Schedule as of September 30, 1995 and the Report of
Independent Public Accountants on such schedule are included in this
Registration Statement. All other schedules are omitted because they are not
applicable or are not required under Regulation S-X.
II-9
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Certificate of
Incorporation and By-Laws of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Danbury, Connecticut, on this 31st day of May, 1996.
TREX MEDICAL CORPORATION
/s/ Jonathan W. Painter
By:_________________________________
Jonathan W. Painter
Treasurer
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
Chief Executive
* Officer, President May 31, 1996
____________________________________ and Director
HAL KIRSHNER (Principal
Executive Officer)
* Vice President, Chief
____________________________________ Accounting Officer May 31, 1996
JOHN N. HATSOPOULOS and Director
(Principal
Financial Officer)
* Chief Accounting
____________________________________ Officer (Principal May 31, 1996
PAUL F. KELLEHER Accounting
Officer)
* Director
____________________________________ May 31, 1996
DR. ELIAS P. GYFTOPOULOS
* Director
____________________________________ May 31, 1996
ROBERT C. HOWARD
II-11
<PAGE>
SIGNATURE TITLE DATE
* Director
____________________________________ May 31, 1996
EARL R. LEWIS
* Director
____________________________________ May 31, 1996
DR. JAMES W. MAY JR.
* Director
____________________________________ May 31, 1996
HUTHAM S. OLAYAN
* Director
____________________________________ May 31, 1996
ANTHONY J. PELLEGRINO
* Director
____________________________________ May 31, 1996
FIROOZ RUFEH
* Director
____________________________________ May 31, 1996
KENNETH Y. TANG
* Director and
____________________________________ Chairman of the May 31, 1996
GARY S. WEINSTEIN Board
/s/ Jonathan W. Painter
*By: _______________________________
JONATHAN W. PAINTER ATTORNEY-IN-
FACT
II-12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trex Medical Corporation:
We have audited in accordance with generally accepted auditing standards the
consolidated balance sheet of Trex Medical Corporation and subsidiaries as of
December 31, 1994 and September 30, 1995, and the related consolidated
statements of income, cash flows and shareholders' investment for the years
ended January 1, 1994 and December 31, 1994 and for the nine months ended
September 30, 1995. These financial statements have been included in Trex
Medical Corporation's Form S-1 and we have issued our report thereon dated
March 26, 1996 (except with respect to certain matters discussed in Note 9, as
to which the date is May 30, 1996.) Our audits were made for the purpose of
forming an opinion on the basic consolidated financial statements taken as a
whole. Trex Medical Corporation's schedule of Valuation and Qualifying
Accounts, included in Schedule II on page S-2, is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
March 26, 1996
S-1
<PAGE>
SCHEDULE II
TREX MEDICAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGES TO BALANCE
BEGINNING COSTS AND AT END
OF PERIOD EXPENSES OTHER (A) OF PERIOD
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1995
Allowance for Doubtful Accounts.... $525 $ 25 $320 $870
YEAR ENDED DECEMBER 31, 1994
Allowance for Doubtful Accounts.... $350 $175 $-- $525
YEAR ENDED JANUARY 1, 1994
Allowance for Doubtful Accounts.... $350 $-- $-- $350
</TABLE>
- --------
(a) Allowance of business acquired during the year as described in Note 2 to
Consolidated Financial Statements of the Company.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
----------- ---------------------- ----
<C> <S> <C>
*1 Form of Underwriting Agreement ............................
*3.1 Certificate of Incorporation, as amended, of the
Registrant.................................................
*3.2 By-Laws of the Registrant..................................
*4.1 Specimen Common Stock Certificate..........................
*4.2 $42,000,000 Subordinated Convertible Note due 2000 of the
Registrant issued to ThermoTrex............................
*5 Opinion of Seth H. Hoogasian, Esq. with respect to the
validity of the securities being offered...................
*10.1 Corporate Services Agreement dated as of September 27, 1995
between Thermo Electron Corporation ("Thermo Electron") and
the Registrant.............................................
10.2 Thermo Electron Corporate Charter, as amended and restated
effective January 3, 1993 (incorporated by reference herein
form Exhibit 10.1 to Thermo Electron's Annual Report on
form 10-K for the fiscal year ended January 2, 1993 (File
No. 1-8002))...............................................
*10.3 Tax Allocation Agreement dated as of September 27, 1995
between Thermo Electron and the Registrant.................
*10.4 Master Repurchase Agreement dated as of September 27, 1995
between Thermo Electron and the Registrant.................
*10.5 Master Guarantee Reimbursement Agreement dated as of
September 27, 1995 between Thermo Electron and the
Registrant.................................................
*10.6 Master Guarantee Reimbursement Agreement dated as of
September 27, 1995 between ThermoTrex and the Registrant...
+10.7 OEM Agreement between Philips Medical Systems North
American Company and Lorad dated as of November 2, 1993....
+10.8 OEM Agreement between Philips Medical Systems North
American Company and Lorad dated November 17, 1993.........
*+10.9 Purchase Agreement between General Electric Company and
Bennett dated November 17, 1994............................
*+10.10 Agreement between Philips Medizin Systeme
Unternehmensbereich der Philips GmbH and Bennett dated
February 12, 1992..........................................
*+10.11 Distributor Agreement between ThermoTrex and US Surgical
Corporation dated October 20, 1995, as amended.............
*10.12 Note Purchase and Sale Agreement dated as of October 2,
1995 between ThermoTrex and the Registrant.................
10.13 Lease dated as of September 15, 1995, by and among
ThermoTrex and BK Realty Associates, L.P. and Calrob Realty
Associates (filed as Exhibit 10.26 to ThermoTrex's Annual
Report on Form 10-K for the fiscal year ended September 30,
1995 [File No. 1-10791] and incorporated herein by
reference).................................................
*10.14 Lease dated as of December 20, 1995, between Melvyn J.
Powers and Mary P. Powers D/B/A M&M Realty and Lorad, as
amended....................................................
*10.15 Equity Incentive Plan of the Registrant....................
*10.16 Deferred Compensation Plan for Directors of the
Registrant.................................................
*10.17 Directors Stock Option Plan of the Registrant..............
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
----------- ---------------------- ----
<C> <S> <C>
*10.18 Form of Indemnification Agreement for Officers and
Directors.
In addition to the stock-based compensation plans of the
Registrant, the executive officers of the Registrant may be
granted awards under stock-based compensation plans of the
Registrant's parent, Thermo Electron Corporation, and its
subsidiaries, for services rendered to the Registrant or to
such affiliated corporations. Such plans are listed under
Exhibits 10.19-10.74 ......................................
10.19 Thermo Electron Corporation Incentive Stock Option Plan
(filed as Exhibit 4(d) to Thermo Electron's Registration
Statement on Form S-8 [Reg. No. 33-8993] and incorporated
herein by reference). (Maximum number of shares issuable in
the aggregate under this plan and the Thermo Electron
Nonqualified Stock Option Plan is 9,035,156 shares, after
adjustment to reflect share increases approved in 1984 and
1986, share decrease approved in 1989, and 3-for-2 stock
splits effected in October 1986, October 1993 and May
1995) .....................................................
10.20 Thermo Electron Corporation Nonqualified Stock Option Plan
(filed as Exhibit 4(e) to Thermo Electron's Registration
Statement on Form S-8 [Reg. No. 33-8993] and incorporated
herein by reference). (Plan amended in 1984 to extend
expiration date to December 14, 1994; maximum number of
shares issuable in the aggregate under this plan and the
Thermo Electron Incentive Stock Option Plan is 9,035,156
shares, after adjustment to reflect share increases
approved in 1984 and 1986, share decrease approved in 1989,
and 3-for-2 stock splits effected in October 1986, October
1993 and May 1995) ........................................
10.21 Thermo Electron Corporation Equity Incentive Plan (filed as
Exhibit 10.1 to Thermo Electron's Quarterly Report on Form
10-Q for the quarter ended July 2, 1994 [File No. 1-8002]
and incorporated herein by reference). (Plan amended in
1989 to restrict exercise price for SEC reporting persons
to not less than 50% of fair market value or par value;
maximum number of shares issuable is 7,050,000 shares,
after adjustment to reflect 3-for-2 stock splits effected
in October 1993 and May 1995 and share increase approved in
1994) .....................................................
10.22 Thermo Electron Corporation--Thermedics Inc. Nonqualified
Stock Option Plan (filed as Exhibit 4 to a Registration
Statement on Form S-8 of Thermedics [Reg. No. 2-93747] and
incorporated herein by reference). (Maximum number of
shares issuable is 450,000 shares, after adjustment to
reflect share increase approved in 1988, 5-for-4 stock
split effected in January 1985, 4-for-3 stock split
effected in September 1985, and 3-for-2 stock splits
effected in October 1986 and November 1993) ...............
10.23 Thermo Electron Corporation--Thermo Instrument Systems Inc.
(formerly Thermo Environmental Corporation) Nonqualified
Stock Option Plan (filed as Exhibit 4(c) to a Registration
Statement on Form S-8 of Thermo Instrument [Reg. No. 33-
8034] and incorporated herein by reference). (Maximum
number of shares issuable is 421,875 shares, after
adjustment to reflect 3-for-2 stock splits effected in July
1993 and April 1995 and a 5-for-4 stock split effected in
December 1995) ............................................
10.24 Thermo Electron Corporation--Thermo Instrument Systems Inc.
(formerly Thermo Environmental Corporation) Nonqualified
Stock Option Plan (filed as Exhibit 10.12 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year
ended January 3, 1987 [File No. 1-8002] and incorporated
herein by reference). (Maximum number of shares issuable is
600,285 shares, after adjustment to reflect share increase
approved in 1988 and -for-2 stock splits effected in
January 1988, July 1993 and April 1995 and a 5-for-4 stock
split effected in December 1995)...........................
10.25 Thermo Electron Corporation--Thermo Terra Tech Inc.
(formerly Thermo Process Systems Inc.) Nonqualified Stock
Option Plan (filed as Exhibit 10.13 to Thermo Electron's
Annual Report on Form 10-K for the fiscal year ended
January 3, 1987 [File No. 1-8002] and incorporated herein
by reference). (Maximum number of shares issuable is
108,000 shares, after adjustment to reflect 6-for-5 stock
splits effected in July 1988 and March 1989, and 3-for-2
stock split effected in September 1989) ...................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
----------- ---------------------- ----
<C> <S> <C>
10.26 Thermo Electron Corporation--Thermo Power Corporation
(formerly Tecogen Inc.) Nonqualified Stock Option Plan
(filed as Exhibit 10.14 to Thermo Electron's Annual Report
on Form 10-K for the fiscal year ended January 3, 1987
[File No. 1-8002] and incorporated herein by reference).
(Amended in September 1995 to extend the plan expiration
date to December 31, 2005) ................................
10.27 Thermo Electron Corporation--Thermo Cardiosystems Inc.
Nonqualified Stock Option Plan (filed as Exhibit 10.11 to
Thermo Electron's Annual Report on Form 10-K for the fiscal
year ended December 29, 1990 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of
shares issuable is 130,500 shares, after adjustment to
reflect share increases approved in 1990 and 1992, 3-for-2
stock split effected in January 1990, 5-for-4 stock split
effected in May 1990 and 2-for-1 stock split effected in
November 1993).............................................
10.28 Thermo Electron Corporation--Thermo Ecotek Corporation
(formerly Thermo Energy Systems Corporation) Nonqualified
Stock Option Plan (filed as Exhibit 10.12 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year
ended December 29, 1990 [File No. 1-8002] and incorporated
hereby by reference) ......................................
10.29 Thermo Electron Corporation--ThermoTrex Corporation
(formerly Thermo Electron Technologies Corporation)
Nonqualified Stock Option Plan (filed as Exhibit 10.13 to
Thermo Electron's Annual Report on Form 10-K for the fiscal
year ended December 29, 1990 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of
shares issuable is 180,000 shares, after adjustment to
reflect 3-for-2 stock split effected in October 1993) .....
10.30 Thermo Electron Corporation--Thermo Fibertek Inc.
Nonqualified Stock Option Plan (filed as Exhibit 10.14 to
Thermo Electron's Annual Report on Form 10-K for the fiscal
year ended December 28, 1991 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of
shares issuable is 600,000 shares, after adjustment to
reflect 2-for-1 stock split effected in September 1992 and
3-for-2 stock split effected in September 1995) ...........
10.31 Thermo Electron Corporation--Thermo Voltek Corp. (formerly
Universal Voltronics Corp.) Nonqualified Stock Option Plan
(filed as Exhibit 10.17 to Thermo Electron's Annual Report
on Form 10-K for the fiscal year ended January 2, 1993
[File No. 1-8002] and incorporated herein by reference).
(Maximum number of shares issuable is 57,500 shares after
adjustment to reflect 3-for-2 stock split effected in
November 1993 and share increase approved in September
1995) .....................................................
10.32 Thermo Electron Corporation--Thermo BioAnalysis Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.31 to
Thermo Power's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 [File No. 1-10573]
incorporated herein by reference) .........................
10.33 Thermo Electron Corporation--ThermoLyte Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.32 to
Thermo Power's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference) .........................
10.34 Thermo Electron Corporation--Thermo Remediation Inc.
Nonqualified Stock Option Plan (filed as Exhibit 10.33 to
Thermo Power's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference) .........................
10.35 Thermo Electron Corporation--ThermoSpectra Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.34 to
Thermo Power's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference) .........................
10.36 Thermo Electron Corporation--ThermoLase Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.35 to
Thermo Power's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference) .........................
10.37 Thermo Electron Corporation--ThermoQuest Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.41 to
Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference) .........................
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10.38 Thermo Electron Corporation--Thermo Optek Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.42 to
Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference) .........................
10.39 Thermo Electron Corporation--Thermo Sentron Inc.
Nonqualified Stock Option Plan (filed as Exhibit 10.43 to
Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference) .........................
10.40 Thermo Electron Corporation--Trex Medical Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.44 to
Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference) .........................
10.41 Thermo Ecotek Corporation (formerly Thermo Energy Systems
Corporation) Incentive Stock Option Plan (filed as Exhibit
10.18 to Thermo Electron's Annual Report on Form 10-K for
the fiscal year ended January 2, 1993 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of
shares issuable in the aggregate under this plan and the
Thermo Ecotek Nonqualified Stock Option Plan is 900,000
shares, after adjustment to reflect share increase approved
in December 1993) .........................................
10.42 Thermo Ecotek Corporation (formerly Thermo Energy Systems
Corporation) Nonqualified Stock Option Plan (filed as
Exhibit 10.19 to Thermo Electron's Annual Report on Form
10-K for the fiscal year ended January 2, 1993 [File No. 1-
8001] and incorporated herein by reference). (Maximum
number of shares issuable in the aggregate under this plan
and the Thermo Ecotek Incentive Stock Option Plan is
900,000 shares, after adjustment to reflect share increase
approved in December 1993) ................................
10.43 Thermo Ecotek Corporation (formerly Thermo Energy Systems
Corporation) Equity Incentive Plan (filed as Exhibit 10.39
to Thermo Instrument's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 [File No. 1-9786] and
incorporated herein by reference) .........................
10.44 Thermedics Inc. Incentive Stock Option Plan (filed as
Exhibit 10(d) to Thermedics' Registration Statement on Form
S-1 [Reg. No. 33-84380) and incorporated herein by
reference). (Maximum number of shares issuable in the
aggregate under this plan and the Thermedics Nonqualified
Stock Option Plan is 1,931,923 shares, after adjustment to
reflect share increases approved in 1986 and 1992, 5-for-4
stock split effected in January 1985, 4-for-3 stock split
effected in September 1985, and 3-for-2 stock splits
effected in October 1986 and November 1993) ...............
10.45 Thermedics Inc. Nonqualified Stock Option Plan (filed as
Exhibit 10(e) to Thermedics' Registration Statement on Form
S-1 [Reg. No. 33-84380) and incorporated herein by
reference). (Maximum number of shares issuable in the
aggregate under this plan and the Thermedics Incentive
Stock Option Plan is 1,931,923 shares, after adjustment to
reflect share increases approved in 1986 and 1992, 5-for-4
stock split effected in January 1985, 4-for-3 stock split
effected in September 1985, and 3-for-2 stock splits
effected in October 1986 and November 1993) ...............
10.46 Thermedics Inc. Equity Incentive Plan (filed as Appendix A
to the Proxy Statement dated May 10, 1993 of Thermedics
[File No. 1-9567] and incorporated herein by reference).
(Maximum number of shares issuable is 1,500,000, after
adjustment to reflect 3-for-2 stock split effected in
November 1993) ............................................
10.47 Thermedics Inc.--Thermo Sentron Inc. Nonqualified Stock
Option Plan (filed as Exhibit 10.51 to Thermo Cardiosystems
Annual Report on Form 10-K for the fiscal year ended
December 30, 1995 [File No. 1-10114] and incorporated
herein by reference) ......................................
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10.48 Thermedics Inc.--Thermedics Detection Inc. Nonqualified
Stock Option Plan (filed as Exhibit 10.20 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year
ended January 2, 1993 [File No. 1-8002] and incorporated
herein by reference) ......................................
10.49 Thermedics Detection Inc.--Equity Incentive Plan (fiuled as
Exhibit 10.69 to Thermo Instrument's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 [File No.
1-9786] and incorporated herein by reference) .............
10.50 Thermo Cardiosystems Inc. Incentive Stock Option Plan
(filed as Exhibit 10(f) to Thermo Cardiosystems'
Registration Statement on Form S-1 [Reg. No. 33-25144] and
incorporated herein by reference). (Maximum number of
shares issuable in the aggregate under this plan and the
Thermo Cardiosystems Nonqualified Stock Option Plan is
1,143,750 shares, after adjustment to reflect share
increase approved in 1992, 3-for-2 stock split effected in
January 1990, 5-for-4 stock split effected in May 1990 and
2-for-1 stock split effected in November 1993) ............
10.51 Thermo Cardiosystems Inc. Nonqualified Stock Option Plan
(filed as Exhibit 10(g) to Thermo Cardiosystems'
Registration Statement on Form S-1 [Reg. No. 33-25144] and
incorporated herein by reference). (Maximum number of
shares issuable in the aggregate under this plan and the
Thermo Cardiosystems Incentive Stock Option Plan is
1,143,750 shares, after adjustment to reflect share
increase approved in 1992, 3-for-2 stock split effected in
January 1990, 5-for-4 stock split effected in May 1990 and
2-for-1 stock split effected in November 1993) ............
10.52 Thermo Cardiosystems Inc. Equity Incentive Plan (filed as
Exhibit 10.46 to Thermo Instrument's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 [File No.
1-9786] and incorporated herein by reference) .............
10.53 Thermo Voltek Corp. (formerly Universal Voltronics Corp.)
1985 Stock Option Plan (filed as Exhibit 10.14 to Thermo
Voltek's Annual Report on Form 10-K for the fiscal year
ended June 30, 1985 [File No. 0-8245] and incorporated
herein by reference). (Maximum number of shares issuable is
200,000 shares, after adjustment to reflect 1-for-3 reverse
stock split effected in November 1992 and 3-for-2 stock
split effected in November 1993) ..........................
10.54 Thermo Voltek Corp. (formerly Universal Voltronics Corp.)
1990 Stock Option Plan (filed as Exhibit 10.2 to Thermo
Voltek's Annual Report on Form 10-K for the fiscal year
ended June 30, 1990 [File No. 1-10574] and incorporated
herein by reference). (Maximum number of shares issuable is
400,000 shares, after adjustment to reflect share increases
in 1993 and 1994. 1-for-3 reverse stock split effected in
November 1992, and 3-for-2 stock split effected in November
1993) .....................................................
10.55 Thermo Voltek Corp. Equity Incentive Plan (filed as Exhibit
10.49 to Thermo Instrument's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 [File No. 1-9786]
and incorporated herein by reference) .....................
10.56 Thermo Instrument Systems Inc. Incentive Stock Option Plan
(filed as Exhibit 10(c) to Thermo Instrument's Registration
Statement on Form S-1 [Reg. No. 33-6762] and incorporated
herein by reference). (Maximum number of shares issuable in
the aggregate under this plan and the Thermo Instrument
Nonqualified Stock Option Plan is 2,812,500 shares, after
adjustment to reflect share increase approved in 1990 and
3-for-2 stock splits effected in January 1988, July 1993
and April 1995 and 5-for-4 stock split effected in December
1995) .....................................................
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10.57 Thermo Instrument Systems Inc. Nonqualified Stock Option
Plan (filed as Exhibit 10(d) to Thermo Instrument's
Registration Statement on Form S-1 [Reg. No. 33-6762] and
incorporated herein by reference). (Maximum number of
shares issuable in the aggregate under this plan and the
Thermo Instrument Incentive Stock Option Plan is 2,812,500
shares, after adjustment to reflect share increase approved
in 1990 and 3-for-2 stock splits effected in January 1988,
July 1993 and April 1995 and 5-for-4 stock split effected
in December 1995) .........................................
10.58 Thermo Instrument Systems Inc. Equity Incentive Plan (filed
as Appendix A to the Proxy Statement dated April 27, 1993
of Thermo Instrument [File No. 1-9786] and incorporated
herein by reference). (Maximum number of shares issuable is
4,031,250 shares, after adjustment to reflect share
increase approved in December 1993 and 3-for-2 stock split
effected in July 1993 and April 1995 and 5-for-4 stock
split effected in December 1995) ..........................
10.59 Thermo Instrument Systems Inc. (formerly Thermo
Environmental Corporation) Incentive Stock Option Plan
(filed as Exhibit 10(d) to Thermo Environmental's
Registration Statement on Form S-1 [Reg. No. 33-329] and
incorporated herein by reference). (Maximum number of
shares issuable in the aggregate under this plan and the
Thermo Instrument (formerly Thermo Environmental
Corporation) Nonqualified Stock Option Plan is 1,160,156
shares, after adjustment to reflect share increase approved
in 1987 and 3-for-2 stock splits effected in July 1993 and
April 1995 and 5-for-4 stock split effected in December
1995) .....................................................
10.60 Thermo Instrument Systems Inc. (formerly Thermo
Environmental Corporation) Nonqualified Stock Option Plan
(filed as Exhibit 10(e) to Thermo Environmental's
Registration Statement on Form S-1 [Reg. No. 33-329] and
incorporated herein by reference). (Maximum number of
shares issuable in the aggregate under this plan and the
Thermo Instrument (formerly Thermo Environmental
Corporation) Incentive Stock Option Plan is 1,160,156
shares, after adjustment to reflect share increase approved
in 1987 and 3-for-2 splits effected in July 1993 and April
1995 and 5-for-4 stock split effected in December 1995) ...
10.61 Thermo Instrument Systems Inc.--ThermoSpectra Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.51 to
Thermo Instrument's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 [File No. 1-9786] and
incorporated herein by reference) .........................
10.62 Thermo Instrument Systems Inc.--Thermo BioAnalysis
Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.64 to Thermo Cardiosystems' Annual Report on
Form 10-K for the fiscal year ended December 30, 1995 [File
No. 1-10114] and incorporated herein by reference) ........
10.63 Thermo Instrument Systems Inc.--ThermoQuest Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.65 to
Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference) .........................
10.64 ThermoSpectra Corporation Equity Incentive Plan (filed as
Exhibit 10.52 to Thermo Instrument's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 [File No.
1-9786] and incorporated herein by reference) .............
10.65 Thermo BioAnalysis Corporation Equity Incentive Plan (filed
as Exhibit 10.67 to Thermo Cardiosystems' Annual Report on
Form 10-K for the fiscal year ended December 30, 1995 [File
No. 1-10114] and incorporated herein by reference) ........
10.66 Thermo Optek Corporation Equity Incentive Plan (filed as
Exhibit 10.68 to Thermo Cardiosystems' Annual Report on
Form 10-K for the fiscal year ended December 30, 1995 [File
No. 1-10114] and incorporated herein by reference) ........
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10.67 ThermoQuest Corporation Equity Incentive Plan (filed as
Exhibit 10.69 to Thermo Cardiosystems' Annual Report on
Form 10-K for the fiscal year ended December 30, 1995 [File
No. 1-10114] and incorporated herein by reference) ........
10.68 ThermoTrex Corporation (formerly Thermo Electron
Technologies Corporation) Incentive Stock Option Plan
(filed as Exhibit 10(h) to ThermoTrex's Registration
Statement on Form S-1 [Reg. No. 33-40972] and incorporated
herein by reference) (Maximum number of shares issuable in
the aggregate under this plan and the ThermoTrex
Nonqualified Stock Option Plan is 1,945,000 shares, after
adjustment to reflect share increases approved in 1992 and
1993 and 3-for-2 stock split effected in October 1993) ....
10.69 ThermoTrex Corporation (formerly Thermo Electron
Technologies Corporation) Nonqualified Stock Option Plan
(filed as Exhibit 10(i) to ThermoTrex's Registration
Statement on Form S-1 [Reg. No. 33-40972] and incorporated
herein by reference) (Maximum number of shares issuable in
the aggregate under this plan and the ThermoTrex
Nonqualified Stock Option Plan is 1,945,000 shares, after
adjustment to reflect share increases approved in 1992 and
1993 and 3-for-2 stock split effected in October 1993) ....
10.70 ThermoTrex Corporation-ThermoLase Corporation (formerly
ThermoLase Inc.) Nonqualified Stock Option Plan (filed on
Exhibit 10.53 to ThermoTrex Corporation's Annual Report on
Form 10-K for the fiscal year ended January 1, 1994 [File
No. 1-10791] and incorporated herein by reference .........
10.71 ThermoTrex Corporation--Trex Medical Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.73 to
Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference) .........................
10.72 ThermoLase Corporation (formerly ThermoLase Inc.)
Nonqualified Stock Option Plan (filed as Exhibit 10.54 to
ThermoTrex's Annual Report on Form 10-K for the fiscal year
ended January 1, 1994 [File No. 1-10791] and incorporated
herein by reference). (Maximum number of shares issuable in
the aggregate under this plan and the ThermoLase Incentive
Stock Option Plan is 2,800,000 shares, after adjustment to
reflect share increase approved in 1993 and 2-for-1 stock
splits effected in March 1994 and June 1995) ..............
10.73 ThermoLase Corporation (formerly ThermoLase Inc.) Incentive
Stock Option Plan (filed as Exhibit 10.55 to ThermoTrex
Corporation's Annual Report on Form 10-K for the fiscal
year ended January 1, 1994 [File No. 1-10791] and
incorporated herein by reference). (Maximum number of
shares issuable in the aggregate under this plan and the
ThermoLase Nonqualified Stock Option Plan is 2,800,000
shares, after adjustment to reflect share increase approved
in 1993 and 2-for-1 stock splits effected in March 1994 and
June 1995) ................................................
10.74 ThermoLase Corporation Equity Incentive Plan (filed as
Exhibit 10.81 to Thermo TerraTech's Annual Report on Form
10-K for the fiscal year ended April 1, 1995 [File No. 1-
9549] and incorporated herein by reference) ...............
10.75 Thermo Fibertek Inc. Incentive Stock Option Plan (filed as
Exhibit 10(k) to Thermo Fibertek's Registration Statement
on Form S-1 [Reg. No. 33-51172] and incorporated herein by
reference .................................................
10.76 Thermo Fibertek Inc. Nonqualified Stock Option Plan (filed
as Exhibit 10(l) to Thermo Fibertek's Registration
Statement on Form S-1 [Reg. No. 33-51172] and incorporated
herein by reference .......................................
10.77 Thermo Fibertek Inc. Equity Incentive Plan (filed as
Exhibit 10.60 to Thermo Instrument's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 [File No.
1-9786] and incorporated herein by reference ..............
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10.78 Thermo Power Corporation (formerly Tecogen Inc.) Incentive
Stock Option Plan (filed as Exhibit 10(h) to Thermo
Power's Quarterly Report on Form 10-Q for the quarter ended
April 3, 1993 [Reg. No. 33-10573] and incorporated herein
by reference). (Maximum number of shares issuable in the
aggregate under this plan and the Thermo Power Nonqualified
Stock Option Plan is 950,000 shares, after adjustment to
reflect share increases approved in 1990, 1992 and 1993) ..
10.79 Thermo Power Corporation (formerly Tecogen Inc.)
Nonqualified Stock Option Plan (filed as Exhibit 10(i) to
Thermo Power's Quarterly Report on Form 10-Q for the
quarter ended April 3, 1993 [Reg. No. 33-10573] and
incorporated herein by reference). (Maximum number of
shares issuable in the aggregate under this plan and the
Thermo Power Incentive Stock Option Plan is 950,000 shares,
after adjustment to reflect share increases approved in
1990, 1992 and 1993) ......................................
10.80 Thermo Power Corporation Equity Incentive Plan (filed as
Exhibit 10.63 to Thermo Instrument's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 [File No.
1-9786] and incorporated herein by reference) .............
10.81 Thermo Power Corporation--ThermoLyte Corporation
Nonqualified Stock Option Plan (filed as Exhibit 10.84 to
Thermo Cardiosystems' Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference) .........................
10.82 ThermoLyte Corporation Equity Incentive Plan (filed as
Exhibit 10.71 to Thermo Power's Annual Report on Form 10-K
for the fiscal year ended September 30, 1995 [File No. 1-
10573] and incorporated herein by reference) ..............
10.83 Thermo TerraTech Inc. (formerly Thermo Process Systems
Inc.) Incentive Stock Option Plan (filed as Exhibit 10(h)
to Thermo Process' Registration Statement on Form S-1 [Reg.
No. 33-6763] and incorporated herein by reference).
(Maximum number of shares issuable in the aggregate under
this plan and the Thermo TerraTech Nonqualified Stock
Option Plan is 1,850,000 shares, after adjustment to
reflect share increases approved in 1987, 1989 and 1992, 6-
for-5 stock splits effected in July 1988 and March 1989 and
3-for-2 stock split effected in September 1989) ...........
10.84 Thermo TerraTech Inc. (formerly Thermo Process Systems
Inc.) Nonqualified Stock Option Plan (filed as Exhibit
10(i) to Thermo Process' Registration Statement on Form S-1
[Reg. No. 33-6763] and incorporated herein by reference).
(Maximum number of shares issuable in the aggregate under
this plan and the Thermo TerraTech Incentive Stock Option
Plan is 1,850,000 shares, after adjustment to reflect share
increases approved in 1987, 1989 and 1992, 6-for-5 stock
splits effected in July 1988 and March 1989 and 3-for-2
stock split effected in September 1989) ...................
10.85 Thermo TerraTech Inc. (formerly Thermo Process Systems
Inc.) Equity Incentive Plan (filed as Exhibit 10.63 to
Thermedics' Annual Report on Form 10-K for the fiscal year
ended January 1, 1994 [File No. 1-9567] and incorporated
herein by reference). (Maximum number of shares issuable is
1,750,000 shares, after adjustment to reflect share
increase approved in 1994) ................................
10.86 Thermo TerraTech Inc. (formerly Thermo Process Systems
Inc.)--Thermo Remediation Inc. Nonqualified Stock Option
Plan (filed as Exhibit 10(l) to Thermo Process' Quarterly
Report on Form 10-Q for the fiscal quarter ended January 1,
1994 [File No. 1-9549] and incorporated herein by
reference) ................................................
10.87 Thermo Remediation Inc. Equity Incentive Plan (filed as
Exhibit 10.7 to Thermo Remediation's Registration Statement
on Form S-1 [Reg. No. 33-70544] and incorporated herein by
reference) ................................................
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*10.88 License Agreement between the Registrant and ThermoTrex
dated as of October 16, 1995................................
10.89 Lease dated May 29, 1996, between John K. Grady, Trustee of
Concord Associates Foster Street Trust, and XRE Acquisition
Corp. ......................................................
*11 Computation of Earnings per Share...........................
*21 Subsidiaries of the Registrant..............................
23.1 Consent of Arthur Andersen LLP..............................
23.2 Consent of Arthur Andersen LLP..............................
23.3 Consent of Arthur Andersen LLP..............................
23.4 Consent of Topel Forman L.L.C. .............................
*23.5 Consent of Seth H. Hoogasian, Esq. (included in Exhibit 5)..
*24 Power of Attorney...........................................
*27 Financial Data Schedule.....................................
</TABLE>
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* Previously filed.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
EXHIBIT 10.7
CONFIDENTIAL TREATMENT
TREX MEDICAL CORPORATION HAS
REQUESTED THAT THE MARKED PORTIONS OF
THIS DOCUMENT BE ACCORDED CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
OEM AGREEMENT
between
LORAD Corporation,
A subsidiary of Thermo Trex Corporation
36 Apple Ridge Road
Danbury, Connecticut 06810
hereinafter referred to as "LORAD"
and
Philips Medical Systems North America Company
Division of Philips Electronics North America Corporation
P. O. Box 860
710 Bridgeport Avenue
Shelton, Connecticut 06484
hereinafter referred to as "PMSNA"
Subject:
Supply of Mobile Radiographic X-Ray Systems
1. Introduction and Definitions
1.1 Introduction
Whereas, LORAD is a company engaged in the marketing and
distribution of, among other things, mobile radiographic x-ray systems;
Whereas, LORAD has designed and developed a mobile radiographic x-
ray system, its Model RT 125 Mobile Radiographic Unit, is willing to
modify it according to legal requirements and certain PMSNA
specifications and is interested meeting PMSNA's requirements for such
modified product as an OEM for PMSNA, on an exclusive and long-term
basis;
Whereas, PMSNA desires to purchase from LORAD a minimum quantity
of said product, modified for PMSNA as further specified in this OEM
Agreement and the Exhibits hereto, for resale either directly and/or
through any of the Philips Associated Companies, its/their distributors,
agents and dealers;
Whereas, LORAD and PMSNA want to establish the terms and conditions
under which during the term of this Agreement LORAD shall supply the
modified Model RT 125 Mobile Radiographic Unit to PMSNA for
subsequent resale.
<PAGE>
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES
AND PREMISES HEREINAFTER SET FORTH, THE PARTIES HERETO
HAVE AGREED AS FOLLOWS:
1.2 Definitions
1.2.1 "Agreement"
means this present document and all the Exhibits and other
documents incorporated by reference herein or attached hereto and
signed or initialed by the parties hereto, all of which Exhibits or other
documents are an integral part hereof.
1.2.2 "Batteries"
means the batteries which power the Product, the battery
charging system and associated housings, containers, etc. as more fully
described in Exhibit I hereto.
1.2.3 "Confidential Information"
means any and all information whether obtained or given
orally or in writing concerning either party not generally known to
persons not associated with the disclosing party, including, without
limitation, information about product discovery and development,
manufacturing processes and techniques, samples, drawings, customer
marketing and new product data, trade secrets, computer programming
techniques and business strategy, financial data and all other
proprietary or trade secret information of whatever description.
1.2.4 "Documentation"
shall mean the technical documentation by type or subpart
for Product(s) including, without limitation, electrical diagrams and parts
lists, necessary to incorporate the Product in or connect to other PMSNA
systems, respectively to service and sustain the Product in the field, all
as further specified in Article 3, and Exhibits I and II hereto.
1.2.5 "First Commercial Delivery"
means the earliest date on which Product which conforms to the
Specifications and which has successfully completed testing as set forth in
Section 3.2 below, for which a Release for Delivery Certificate is issued and
for which all legal and regulatory requirements for distribution and marketing
in ****************************have been met, is delivered to a customer of
PMSNA in the ordinary course of PMSNA's business. Delivery of Product to a
clinical site as an investigational device or for evaluation for marketing
purposes or to serve as a "show" or "seed" site for demonstration of the Product
to prospective customers shall not be considered to be a delivery in the
ordinary course of PMSNA's business.
1.2.6 "Form, Fit or Function"
means items, components, or processes that are sufficient to
enable physical and functional interchangeability, in particular as to
source, size, configuration, mating, and attachment characteristics,
functional characteristics, and performance requirements.
2
<PAGE>
1.2.7 "OEM"
means original equipment manufacturer.
1.2.8 "Option(s)"
means all those parts or accessories for Product(s) which can
be ordered from LORAD and be shipped on request. They will be specified,
as necessary, in close consultation between LORAD and PMSNA. They
are listed or may later be added to Exhibit I hereto and identified by a
special PMSNA code number.
1.2.9 "Philips Associated Companies"
shall mean any and all companies, firms and legal entities
with respect to which now or hereafter Philips Electronics N.V. directly or
indirectly holds 50% or more of the nominal value of the issued share
capital or has 50% or more of the voting power at general meetings or
has the power to appoint a majority of the directors or otherwise directs
the activities of such company, firm or legal entity but any such company
firm or legal entity shall be deemed a Philips Associated Company only as
long as such liaison exists.
1.2.10 "Product(s)"
jointly and severally shall mean the PMSNA versions of
LORAD's Model RT 125 Mobile Radiographic Unit including Options and
Accessories, as further set forth in the Specifications, including any
changes thereto, as well as such new models and options and
accessories as the parties hereto may agree to include under this
Agreement by amendment to this Agreement and Exhibits I and III
hereto.
1.2.11 "Purchase Order(s)"
shall mean the purchase order(s) for Products which will be
placed by the Purchasing Department of PMSNA with reference to this
Agreement.
1.2.12 "Software/Firmware"
shall mean all computer programs either on disk, diskettes
or embedded in other carriers (e.g. PROMS etc.) consisting of the set of
logical instructions and tables of the information which guide the
functioning of the processors, such programs include all necessary
operating system software, application software, related documentation
useful with Software/Firmware such as functional descriptions, design
documentation, program description and listings as well as the source
code versions itself on disk, all as specified in Exhibits I and II hereto.
1.2.13 "Spare Part(s)"
shall mean those items listed as such in Exhibit II (Spare
Parts, Prices and other Service Aspects) hereto and any and all other
components or items necessary to allow PMSNA or its customers to keep
the Product in good repair throughout its useful life.
1.2.14 "Specification(s)"
shall mean the final functional requirements, technical
specifications, drawings, documentation and other requirements of the
Product(s) all as set forth in this Agreement and in Exhibit I hereto and
3
<PAGE>
such amendments thereto as the parties hereto may agree upon from
time to time, in writing.
1.2.15 "Term"
means the time period set forth in Section 13.1 below and
any extensions thereof.
1.2.16 "Territory"
shall mean **************************.
1.2.17 "Time Schedule"
shall mean the time schedule attached hereto as Exhibit IV.
2. Scope of Agreement
2.1 Delivery and Purchases
Subject to the terms of this Agreement, LORAD agrees to manufacture
and to supply and deliver Product(s) and Spare Parts (such manufacture,
supply and delivery of Product(s) in PMSNA's trade dress and of any
Option(s) and Spare Parts which are unique to Product(s), being
exclusively to PMSNA) and
PMSNA agrees to purchase and take delivery of Product(s), Option(s) and
Spare Parts from LORAD for marketing, subsequent resale, installation,
service and maintenance in the Territory.
2.2 Branding and Trademark
The Product will be sold under trademarks or trade names designated
(and solely owned) by PMSNA and will be branded with the Philips logo
and shield emblem and/or any other trademark or trade or brand name
that may be specified by PMSNA from time to time, in writing. The
trademark or trade name that PMSNA is considering for assignment to
the Product(s) as of the date of this Agreement is "PMX-2000." The
trademarks or trade names to be applied will either be in the form of
labeling provided by PMSNA or printed on the product, packaging,
manuals or other documentation in accordance with written instructions
provided by PMSNA.
2.3 Marketing Rights/License
2.3.1 Marketing
LORAD herewith grants to PMSNA the ***************************** to
sell, install, maintain and/or repair the Product(s)) and/or the individual
items thereof, within the Territory.
LORAD further agrees that, for a period of two years from the date of the
First Commercial Delivery of Product(s) under this Agreement, *****
*********************************** LORAD sells mobile radiographic
systems ******************************************, under a trademark
or trade name *************************************************
4
<PAGE>
Model RT 125 Mobile Radiographic Unit *******************************
********************** manufactured or distributed by LORAD.
************************************************************************
**********************:
- *************************************************
- *********************************************************************
*********************************************************************
*************************************************.
2.3.2 Regulatory Requirements
LORAD agrees to obtain for PMSNA all regulatory approvals and clearances
necessary for distribution and marketing of the Product(s), Option(s), Spare
Parts, upgrades or enhancements in ********************and also to provide to
PMSNA all documentation and assistance which is reasonably necessary for PMSNA
or a Philips Associated Company to complete all submittals for the regulatory or
other governmental approvals and clearances necessary for marketing and
distribution of Product(s), Option(s), Spare Parts, or upgrades or enhancements
to them, elsewhere in the Territory, in addition to assuring, that the
Product(s) meets all the requirements and standards listed in the Specification,
including labeling and certifications of compliance as set forth in the
Specification.
Furthermore, LORAD agrees to provide PMSNA with all current
information of the kind which is generally made available by
manufacturers of medical devices to their sales and service personnel
made concerning hardware and Software/Firmware modifications or
upgrades to the Product.
2.3.3 Marketing of Other Products
If LORAD, during the Term, offers a new mobile radiographic system and
sells such system directly or to LORAD's dealers under LORAD's own
name, this system shall, at PMSNA's option, be distributed by PMSNA in
place of the PMSNA version of the Model RT 125 Mobile Radiographic
Unit.
Such new mobile radiographic x-ray system or accessory or option for
such new mobile radiographic x-ray system or for LORAD's Model RT 125
Mobile Radiographic Unit, which is developed by LORAD for sale under
its own name shall also be made available to PMSNA for distribution in a
special version in PMSNA's trade dress. If PMSNA is interested in such
new product of LORAD, the parties shall in good faith negotiate the terms
for its distribution by PMSNA. PMSNA shall be the only reseller
supported by LORAD as original equipment supplier, of any new LORAD
mobile radiographic x-ray system, as set forth in section 2.3.1 above,
during the rest of the two year term specified in section 2.3.1 for
********* OEM distribution.
5
<PAGE>
LORAD agrees to make available to PMSNA all minor updates and
improvements which it develops for its LORAD's Model RT 125 Mobile
Radiographic Unit product, at no additional charge.
3. Product
3.1 Product Definition
3.1.1 Specification
The Specifications of the Product are incorporated and made a part of this
Agreement as Exhibit I and Exhibit V hereto.
LORAD agrees to adapt the Specifications of the Product as a result of
tests performed together by LORAD and PMSNA or according to further
requirements of PMSNA (subject to acceptance of such additional
requirements by LORAD) and will update the Specifications and provide
PMSNA with the revised version thereof. Upon written agreement of
LORAD and PMSNA such revised Specifications will be added to this
Agreement and replace the earlier version thereof.
3.1.2 Operator's Manuals
Part of the Product will also be the Operator's Manual, written in English
and French. Such Operator's Manual shall comply with the legal
requirements of ******************************* and be made in
accordance with the Philips house-style manual, an example of which
shall be supplied by PMSNA. LORAD shall be solely responsible for the
content of these manuals, even though they are in Philips' standard
format and even though parts of them may not be identical to the
manuals LORAD has prepared for its own version of the mobile x-ray
systems. PMSNA shall be responsible for the preparation and cost of
translation into all other languages as may be required and for the
expense of any arrangements made with LORAD for distribution of
Operator's Manuals in such other languages and for compliance of the
Operator's Manual with the legal requirements of all other jurisdictions.
3.2 Testing, Type-Approval, Release for Delivery
Prior to execution of this Agreement LORAD has consigned to PMSNA --
free of charge -- a test unit prototype ("Test Unit"). As a result of initial
tests PMSNA may require that certain additions, alterations or
modifications in the said Product are incorporated in order to reach full
compliance with PMSNA's requirements.
LORAD will provide PMSNA with a second test unit (collectively, with the
Test Unit, "Test Units") to comply with the Specifications and with such
changes as may be agreed upon by LORAD and PMSNA. LORAD will
provide PMSNA with the results and supporting data of all tests
performed within its development department, all in accordance with the
Time Schedule in Exhibit IV hereto.
Together with the Test Units LORAD shall provide PMSNA with
preliminary Documentation and technical service information.
6
<PAGE>
The Test Unit(s) shall be delivered "F.O.B." (as that term is defined in the
Connecticut Uniform Commercial Code, C.G.S. sec. 42a-2-319), at
LORAD's facility in Danbury, Connecticut.
PMSNA will execute such type-approval tests as PMSNA may reasonably
require to satisfy PMSNA that the Test Units conform to the
Specifications and PMSNA shall keep LORAD informed of the results of
the tests and will give LORAD a reasonable opportunity to be present at
said tests.
a. If, as a result of these tests, PMSNA is of the reasonable opinion to
be confirmed in writing that certain additions, alterations or
modifications in the Test Unit(s) are required in order that the Test
Unit(s) comply with the Specifications or to eliminate faulty or
substandard workmanship and/or material, LORAD undertakes to
modify and to make same in the Test Unit(s) and to supply to
PMSNA all at LORAD's cost and expense, the changed Test Unit(s).
b. If, as a result of these tests, PMSNA desires modifications or
enhancements of the Test Unit(s) in excess of the Specifications
and which were not earlier agreed upon, then, if both parties
hereto so agree, LORAD will provide a quotation and a revised Time
Schedule for PMSNA approval and the execution by LORAD of any
such modification or enhancements shall be the subject of a
separate Purchase Order by PMSNA.
Upon the finalization of the tests and changes requested by PMSNA and
agreed upon by LORAD and if PMSNA is reasonably satisfied that the
second test unit complies with its Specifications, PMSNA shall provide
LORAD with a written Release for Delivery Certificate signed by an officer
of PMSNA.
Upon PMSNA's satisfaction that the Test Units conform to the
Specifications or should the Test Units fail to comply with the
Specifications after the tests described above, the Test Units shall either
(i) be returned to LORAD in the same manner delivered to PMSNA or (ii)
be purchased by PMSNA at a price to be agreed upon between the
parties.
Any new or replacement version of the Product and Option(s) for PMSNA,
shall require a similar procedure for testing and releasing as described
above.
3.3 Modifications, Engineering Change Control
Once PMSNA has released the Product(s) for delivery LORAD shall not,
except as may be required by law, make any changes or modifications in
the Product(s), Spare Parts, Option(s) and/or Specifications which affect
Form, Fit or Function, intended use, labeling, listing or other certification
by standards agencies (as set forth in Exhibit I hereto), or which affect
government approvals or clearances of the Product(s) or Option(s) or
which affect the Spare Part stock, without the prior, written consent of
PMSNA. PMSNA's consent shall not be unreasonably withheld.
7
<PAGE>
The foregoing provision is intended, in particular, to assure continuing
conformity with the Specifications.
This requirement, however, does not preclude LORAD from using
equivalent components and parts that do not affect Form, Fit or Function
of the Product and/or interchangeability of Spare Parts and/or
compliance with the Specifications, Standards, Approval or
Certifications.
In the event LORAD uses such equivalent components and/or parts
LORAD shall provide PMSNA with an updated version of the
Documentation as soon as possible without additional charge to PMSNA.
If LORAD wishes to make a modification requiring PMSNA's consent,
LORAD shall, with sufficient lead time for PMSNA to process the request
before the modification is scheduled to be implemented, notify PMSNA in
writing of the proposed modification. The documentation and Philips
terminology used for the approval process for such modifications is:
ECR (Engineering Change Request): a standard form sheet, to be used
for all engineering and design data regarding such proposed
modifications.
ECC (engineering change committee): the PMSNA committee
responsible for discussing and deciding about such proposals
ECO (Engineering Change Order): the form sheet on which
decision of the ECC will be documented and released.
for a sample of form sheets see Exhibit VI.
In order to assist PMSNA in expediting these approvals, LORAD agrees to
submit ECR's and ECO in the format prescribed.
3.4 Proposals
During production of the Test Unit(s) PMSNA's technical, quality and
service experts are entitled to make suggestions and proposals, but such
suggestions and proposals shall be binding on LORAD and PMSNA only
if confirmed in a document signed by authorized representatives of both
parties.
3.5 New Type of Product Under this Agreement
If the parties hereto wish to introduce a new type of Product under this
Agreement, LORAD shall -- before the start of commercial deliveries of
such new type of Product -- execute such type approval tests as are
approved by PMSNA in order to ascertain that the new Product conforms
to its Specifications. LORAD shall promptly provide PMSNA with the
evidence thereof whereupon the Agreement shall be amended to reflect
any such change to the Specification.
8
<PAGE>
3.6 Continuity of Production, Supply of Products
In the event LORAD wishes to stop production of Product(s) LORAD shall
inform PMSNA thereof as early as possible but, in any event, at least
****************** prior to the date that production would be
discontinued. PMSNA shall then have the opportunity to place a final
Purchase Order in such quantities as PMSNA may require and LORAD
shall accept such Purchase Orders at a reasonable price (not exceeding
that set forth in Exhibit III if such production is discontinued during the
time schedule set forth in Exhibit III) to be agreed upon by the parties in
good faith. *************************************************************
*******************************************************************
************************************************************************
*************************, special attention to be given
to the Spare Part(s) supply as set forth in Exhibit II hereto, paragraphs 7
and 10 thereof.
Moreover, when LORAD gives notice that such production is to be
discontinued, ***********************************************************
*********************************************************************
************************************************************************
******************************************************************
*********************************************************************
*************************************************************************
*********************************************************************
**********************************************************************
***************************.
4. Planning and Ordering
4.1 Minimum Purchases
PMSNA agrees to purchase a minimum of three hundred (300) units of
Product(s) during the Term of this Agreement. The schedule for these
deliveries shall be as set forth in Exhibit III hereto.
4.2 General Planning
PMSNA and LORAD expect an increase in manufacturing and sales
activity for the Product(s) as indicated in Exhibit III hereto in response to
customer demand during the first years of the Term. The figures in
Exhibit III hereto and in later PMSNA forecasts, are not intended as
Purchase Orders, but rather as an indication, for planning purposes, of
expected market activity. Delivery dates, quantities, options included
and configuration of each unit of Product shall be specified by PMSNA
only by Purchase Order using the procedure described in Section 4.3
below.********************************************************************
************************************************************************
************************************************************
***************** minimum purchase commitment in Section 4.1
above.
9
<PAGE>
4.3 Forecast
4.3.1 Rolling Forecast, "Just in Time" Deliveries
A mutually satisfactory procedure will be established in which
production and shipment of Product and Spare Parts is matched as
closely as possible with the related demand set by orders from PMSNA's
customers.
The demand will be transmitted to LORAD by fax or telex as rolling
forecast with the following information:
Rolling Forecast:
********************** for ********************** will be renewed and
issued to LORAD on or about *******************************************
******************** according to the following *********************,
*********************forecast, during:
- months 1-3: ***************** indicated on an issue
************************* for *****************
*******************.
*****************************************************************
**************************************************************
*************************************************
*************************************
***************************************rolling forecast
*****************************************************************
************************************************
- ************ **********************************************
*******************************************
*************************rolling forecast)
*******************************************
***************************************
LORAD will use this planning to assure delivery of Product(s) and
Option(s) "just in time" within the requested delivery dates.
In order for PMSNA to minimize shipping and handling expenses, *****
***************************************************************************
******************** *.
4.3.2 Additional Quantities
Although it is the intention of the parties to assure a smooth delivery
schedule in accordance with *****************************, PMSNA may
require additional deliveries ********************* as indicated.
Then, LORAD shall use its best efforts to supply such additional
quantities.
10
<PAGE>
4.3.3 Shortage or Lack of Parts
Subject to Article 14 hereof, if LORAD can no longer or expects that it
will not (on short notice) be able to supply Product(s) to PMSNA because
of a shortage or lack of components and/or Spare Parts, LORAD shall
immediately inform PMSNA thereof and, at its own expense, take all
steps which are reasonable in the circumstances, including a redesign of
the Product(s), to obtain an additional supplier or suppliers for such
component or Spare Part.
The redesigned product shall be subject to the procedure set forth in
Article 3 of this Agreement.
4.4 Order and Delivery
4.4.1 Purchase Orders
At the beginning of each month PMSNA shall issue separate Purchase
Orders containing the consolidated figures as agreed upon.
Each Purchase Order shall specify at a minimum:
PMSNA-12-digit-code number
Price
Quantities and
Requested delivery day/week,
to cover at least the period of the commitment of the rolling forecast as
mentioned above.
The "requested delivery" specified for each shipment will be the date for
"receipt by PMSNA at the address stated on the Purchase Order form."
All Purchase Orders shall be deemed to incorporate and be subject to the
terms and conditions of this Agreement, as well as any supplemental
terms and conditions agreed to in writing by authorized representatives
of the parties. No other terms and conditions contained on any Purchase
Order form or any other form, agreement or correspondence originated
by either party, shall apply.
4.4.2 Confirmation, Delivery Dates
Purchase Orders will be confirmed by LORAD within one (1) week after
receipt by mail or telefax. They shall then be binding on LORAD and
PMSNA as set forth in Section 4.3.1 above and may be canceled only if
LORAD or PMSNA materially defaults in its execution thereof or if
otherwise agreed upon between the parties hereto.
LORAD shall take adequate delivery and transportation times into
account and shall meet the agreed upon delivery dates for each Purchase
Order. Any deviation from the delivery date specified which can be
foreseen during execution of a Purchase Order will be communicated to
PMSNA immediately. The delivery date for a unit of Product will normally
11
<PAGE>
be ***************** after receipt of PMSNA's Purchase Order, but may
be earlier or later if the parties so agree.
5. Pricing
5.1 Prices
During the term of this Agreement PMSNA will purchase and accept from
LORAD Product(s) at prices which, including their period of validity, are
specified in Exhibit III hereto. The lower pricing listed in Exhibit III
hereto for the second and subsequent years after the First Commercial
Delivery shall apply as soon as the total quantity purchased by PMSNA
during the Term is at the level shown for the prior year, even though that
prior year may not have ended at the time that level of purchases is
reached.
All agreed modifications at PMSNA's request as listed in Exhibit I hereto
are included in the price of the Product.
It is expressly understood that PMSNA's going prices in the market must
be competitive with similar products. In the event of unforeseen
circumstances affecting LORAD or PMSNA or both and/or in the event
the price/performance ratio of Products deteriorates as compared to
competitive products, the parties hereto will jointly review the situation
and attempt to find a solution reasonably acceptable to both parties.
Prices include adequate packing and any royalties or fees for licenses of
Software/Firmware for each Product.
All prices will be expressed in United States dollars ($).
5.2 Price Changes, Binding Prices
The prices of the Products set forth in Exhibit III hereto shall remain
valid for the time specified therein.
When price negotiations referred to in this Article 5 extend beyond the
price validity period the prices valid for the previous period will continue
to remain in effect until such time as the parties have reached mutual
agreement on the new prices.
5.3 Most Favored Treatment
In the event, that during the Term, LORAD would normally ***********
***** it supplies on an OEM basis or LORAD's distributors/dealers
********************************************************************************
**********************************************************RT125**************
**********************************************************************
*************************************************************************
********************************************************************************
****************
12
<PAGE>
5.4 Delivery Conditions, Transportation
Products and Spare Parts shall be delivered "F.O.B." (as that term is
defined in the Connecticut Uniform Commercial Code, C.G.S. sec. 42a-2-
319), at LORAD's facility in Danbury, Connecticut.
PMSNA shall be responsible for shipping arrangements.
5.5 Payment Conditions
Payment from PMSNA to LORAD shall be made within *********************
***, after date of invoice and delivery. A finance charge not to exceed the
lesser of *************************** or the maximum rate allowed by
law may be assessed by LORAD against any balance due LORAD which
is not paid when due.
5.6 Advance or Excess Deliveries
Unless mutually agreed upon by the parties hereto, LORAD shall not
deliver Products in excess of the quantities ordered nor in advance of the
agreed delivery date. Absent such agreement, if such advance or excess
deliveries occur, PMSNA shall be entitled - at its option - to refuse those
Products or keep them at its warehouse. Payment under any invoice
related to those deliveries shall not be due until the date originally set for
such delivery.
5.7 Invoices
All invoices shall contain at least the following information:
Purchase Order Number
Type-Number of Product (PMSNA's 12-digit ID-number)
Name of the Product
Serial Number(s) thereof
Indication of "certifiable items," contained in the Product
Unit price and total price
Bill of lading number
Invoices shall be submitted (an original and three copies) separately for each
shipment.
6. Production, Packing and Shipping
6.1 Production
The Products will be manufactured and tested by LORAD in accordance with the
Specification.
6.2 Product Identification and Labeling
LORAD shall mark the Products in accordance with PMSNA's marking
specifications, set forth in Exhibit I hereto and - if applicable - with
electrical current and frequency data.
13
<PAGE>
The S/N-number shall be listed and used on all documents, such as test
protocols, delivery papers and invoices for easy evaluation and cross
reference.
6.3 Packing, Delivery
The prices referred to include all appropriate and safe packing of
Product(s), Option(s), Spare Parts and all other items supplied for air
and ocean transport, unless otherwise specified in Exhibit I hereto.
The Packing shall be tested by PMSNA and approved in accordance with
the relevant sections of Philips Packing Standard UN-D 1400, Publication
no. UN-D 1400 (69), 1990-08-31. LORAD will use only this approved
packing method of shipment of the Product(s). Changes in approved
packing may be introduced only on PMSNA's written request or after
PMSNA's prior written approval.
The Products will be packed in a neutral box. There will be no other logo
or trademark inside or outside the packing. LORAD will, however, place
promotional stickers on the packing as PMSNA may require. Such
stickers will be supplied by PMSNA at no charge.
6.4 Labeling and Marking for Shipment, Trademarks
LORAD shall mark all packages and shipping papers (if applicable) with:
Type-Number of Product (PMSNA's 12-digit ID-number)
Name of the Product
Serial Number thereof
Indication of "certifiable items," contained in the Product,
Number of packages, if the shipment contains more than one
package per product.
Products shall only bear trademarks, trade names or other indications as
detailed in Exhibit I hereto.
Either party hereto acknowledges the other party's rights in and to said
other party's trademarks and trade names. Except as expressly set forth
in this Agreement, the manufacture and supply of Product(s), Option(s),
Spare Parts and packing with said trademarks and trade names shall not
be considered as giving either party any right to the other party's
trademarks and trade names or similar trademarks and trade names.
6.5 Execution of Logistic Procedures
PMSNA may have the Graner Company division of Philips Electronics
North America Corporation or Philips GmbH execute logistic procedures,
such as, without limitation, placing Purchase Orders for any shipments
of Product(s) sent *************************, payment of invoices,
transport arrangements, shipping instructions and handling of return
shipments for repair or replacement on behalf of PMSNA. LORAD agrees
to accept Purchase Orders from Graner Company or Philips GmbH and
deal directly with them or their authorized agents with regard to
14
<PAGE>
scheduling, invoicing, warranty claims and all matters relating to
Purchase Orders issued by Graner Company or Philips GmbH.
6.6 Export and Import Documentation
PMSNA shall obtain, at its own expense, any export or other official
authorization and carry out any other formalities necessary for the
transportation, exportation and importation of Product(s), Options and
Spare Parts to all jurisdictions in the Territory. LORAD shall provide all
documentation (including test reports) reasonably necessary for PMSNA
to prepare and submit the required documentation and to obtain any
authorization necessary for such export and import.
Except as to compliance with the standards and legal requirements set
forth in the Specification and in Exhibit V, PMSNA shall be responsible
for ensuring that the Product(s) comply with all local laws, standards and
regulations in the jurisdictions in the Territory, other than **********
******************. LORAD shall be solely responsible for such
compliance including labeling or listing Product(s), Option(s) or Spare
Part(s) as may be required by the electrical codes, ordinances or
regulations of ****************************.
7. Quality
7.1 Design Requirement, Compliance
All obligations for testing of Product, Option(s) or Spare Parts to confirm
that they comply with the Specification shall be the responsibility of
LORAD. Should it become evident that any Product(s), Option(s), Spare
Part(s) or parts thereof are not in compliance with the applicable
requirements of this Agreement and Exhibits I, II and V hereto, LORAD
shall make all necessary corrections at its own expense.
7.2 Change in Requirements, Regulations or Standards
If any of the requirements, safety regulations and/or standards listed in
the Specifications or in Exhibit V hereto change, LORAD shall, at its
costs, make all the necessary modifications in and to the Product,
Option(s) and/or parts thereof, including any Product(s) to which the
change applies which have not then been accepted by the end-user.
Subject to the provisions of this Section 7.2, implementation of
modifications or changes to Product(s) and Option(s) to comply with the
safety requirements of any and all applicable statutes, rules and
regulations, shall be mandatory.
If a revision or modification to any applicable standard or regulation
results in extraordinary cost or expense to LORAD, the parties shall
review and evaluate the change and make all reasonable efforts to find
an acceptable solution. Notwithstanding the foregoing, any revision or
modification to any applicable regulation or standard which is listed in
the Specification, which cannot be incorporated in the Product(s) at
a reasonable expense in LORAD's sole discretion (to be absorbed by
15
<PAGE>
LORAD) will be considered an event of force majeure as set forth in
Article 14 below.
7.3 Quality System, Quality Control/Audits
LORAD agrees that its quality system shall comply with the regulations
pertaining to the United States Food and Drug Administration ("FDA"),
Good Manufacturing Practices ("GMP") and shall also use its best efforts
to comply prior to the end of 1995 with the International Organization for
Standardization ("ISO") standards entitled ISO 9001 "Quality systems --
Model for quality assurance in design/development, production,
installation and servicing" and "Quality Systems -- Model for quality
assurance in production and installation" ISO 9002 (a copy of the ISO
certification shall be attached to this Agreement as Exhibit VII when
received).
Upon request and at least two (2) weeks - advance written notice to
LORAD, PMSNA's representative(s) or an independent notified body
acceptable under GMP or ISO, may visit, at their expense, the facilities of
LORAD at reasonable times to inspect the storage and quality of parts for
Product in LORAD's facilities, and audit the quality control procedures
and methods applied by LORAD in its facilities in the development and
manufacturing and assembling of Products in accordance with GMP and,
after LORAD obtains such certification, with ISO-9001.
With regard to the CE Mark, a certification which is to become
mandatory in the European Community, the parties have agreed that
LORAD will be responsible for this approval/certification by December
31, 1995, but that PMSNA or one of the Philips Associated Companies
will support LORAD in its contacts with the concerned European notified
body. Cost consequences of design changes, if any, caused by changes
relating to CE Mark certification are for the account of LORAD.
7.4 Outgoing Inspection and Record Keeping
It is understood between the parties that under normal circumstances
Product(s) may be shipped directly by LORAD to customers in **********
**************** or to Philips Associated Companies for any sales in
*********************, or, preferably, to their final destination. Hence,
PMSNA shall not be obligated to execute any incoming inspection or
other inspection of Product(s), Option(s) or Spare Part(s) delivered
hereunder by LORAD, for non-compliance with the Specifications.
Therefore, LORAD shall inspect all outgoing Product(s), Option(s) and/or
parts thereof to be supplied to PMSNA strictly in accordance with
Specifications and with the Acceptance Procedure as specified in Exhibit
VIII hereto. This Acceptance Procedure will be set up or adapted --
if necessary -- in close cooperation between the quality officers of both
companies.
LORAD will archive in a safe manner all records of the Product(s), or
Option(s) e.g. the Product master file and especially all records/test
protocols, for a period as required by law, but at least ************** after
16
<PAGE>
delivery of each Product or Option. These records will be made available
if necessary and upon specified request of PMSNA.
7.5 Incoming Inspection
PMSNA may inspect the delivered Product(s), Option(s) and Spare Part(s)
at PMSNA's factory or at PMSNA's customer's site, following the
Acceptance Procedures set forth in this Agreement and the Exhibits
hereto. PMSNA shall have the right to reject all or any of the Product(s),
Option(s) or Spare Parts which are proven, upon inspection and testing
by PMSNA, not to meet the applicable Specifications, provided that such
claim shall be submitted to LORAD with the supporting evidence within
thirty (30) days after arrival date at the destination. LORAD shall ship a
replacement within thirty (30) days of receipt of notice that a Product,
Option or Spare Part is to be returned for such reason.
8. Warranty
8.1 Extent of Warranty
LORAD warrants to PMSNA, Graner Company and Philips GmbH that
the Product(s), Option(s) and Spare Parts including the Software/
Firmware incorporated therein, comply in all material respects with the
Specifications for such Product(s), Option(s) and Spare Parts, are new
and are free from defects in material and workmanship. Except as
provided in Article 10 below, LORAD's sole obligation under the foregoing
warranty shall be to replace or repair, at its sole discretion and at its sole
cost and expense, any defective Product(s), Option(s) or Spare Parts
returned to LORAD by or on behalf of PMSNA or a Philips Associated
Company; provided, however, that (i) LORAD's sole obligation to replace
or repair Product(s), Options(s) or Spare Parts shall not exceed the lesser
of the lesser of ******************** from the date of delivery of such
Product(s), Option(s) or Spare Parts by LORAD to PMSNA or a Philips
Associated Company or ****************** from the date of completion of
its installation at a customer's site, (ii) PMSNA or its Associated Company
shall have notified LORAD, prior to the expiration of such period, with
respect to each claim that the Product(s), Option(s) or Spare Parts are
defective, and (iii) LORAD shall have no obligation to repair or replace the
defective Product(s), Option(s) or Spare Parts in the event that the
Product(s), Option(s) or Spare Parts have been transported, handled,
stored or operated in an improper or other manner which adversely
affects the Product(s), Option(s) or Spare Parts.
In addition, LORAD warrants that the Batteries incorporated in each unit
of Product(s) shall be free of defects in material or workmanship and
operate satisfactorily, provided such Batteries are maintained in
accordance with the instructions in the Operator's Manual, for a period
of *************** from the date of shipment by LORAD to PMSNA or
Graner Company. LORAD shall replace without charge, including
charges for packing (and shipment to PMSNA in Shelton, Connecticut or
to Graner Company in Port Chester, New York), Batteries which fail,
during this ************************, to be free from defects in material
and workmanship or to operate satisfactorily, provided such Batteries
are maintained in accordance with the instructions in the Operator's
17
<PAGE>
Manual. The battery manufacturer's standard warranty shall apply to
replacement Batteries provided under this warranty, except that the
duration of the warranty shall not be less than the unexpired part of the
original three year term.
LORAD shall use its reasonable best efforts to replace or repair Products,
parts of Products, Options and Spare Parts, if required by this Section, at
LORAD's cost within the shortest possible time.
8.2 Cost of Warranty Replacement or Repair
During the time LORAD's warranty is in effect for each unit of Product,
each Option and each Spare Part, LORAD shall provide without charge to
PMSNA all replacement parts necessary to correct any such Product,
Option or Spare Part which proves to be defective and shall pay all
shipping expenses (including reasonable return shipping expenses)
associated with such replacement.
8.3 Limited Warranty
EXCEPT AS EXPRESSED OR SET FORTH IN THIS AGREEMENT AND
THE EXHIBITS HERETO, PRODUCT(S), OPTION(S) AND SPARE PART(S)
SHALL BE SUPPLIED BY LORAD TO PMSNA, GRANER COMPANY OR
PHILIPS GMBH, "AS IS." LORAD HEREBY DISCLAIMS ANY AND ALL
REPRESENTATIONS AND WARRANTIES (OTHER THAN THOSE SET
FORTH IN THIS AGREEMENT) EXPRESS OR IMPLIED, WITH RESPECT
TO THE PRODUCT(S), OPTION(S) AND SPARE PARTS, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. PMSNA ACKNOWLEDGES
AND AGREES THAT IT HAS NOT RELIED ON ANY REPRESENTATIONS
OR WARRANTIES MADE BY LORAD, EXCEPT AS SET FORTH IN THIS
ARTICLE.
8.4 Epidemic Faults
Products, Options and Spare Parts shall be free of Epidemic Faults.
Epidemic Faults are, for the purpose of this Agreement, defined as
defects which
- either are the same or have the same origin and occur over a
period of ****************** during the ************* expected
lifetime of the product with a class failure quantity of at least
************************ sequentially delivered Products,
Options or Spare Parts, from the delivery date of the last
sequentially delivered Product, Option or Spare Part, and
- are such that they create an "unreasonable risk of
substantial harm" as that term is defined by the United
States Food, Drug and Cosmetic Act and the regulations
and guidelines issued thereunder.
In the event of the existence of an Epidemic Fault, the parties shall
consult with and cooperate fully with each other in a timely way to
determine if a safety concern exists and to take the appropriate actions
18
<PAGE>
and to allocate the resulting costs of such actions between them in
accordance with the terms hereof.
LORAD shall within ***************** after receipt of same respond to any
question and provide all necessary information to the PMSNA Service
Department arising out of a recall or corrective action program or related
program.
Furthermore LORAD shall inform PMSNA of all relevant details of
substantially similar incidents that occur with LORAD's products similar
to or part of Products.
In case of such Epidemic Fault(s), in any part or parts of Products or any
required recall program, LORAD shall, at its expense (including shipment
to each customer's site), provide sufficient parts to replace all such parts
in installed Products and Products purchased by PMSNA.
Spare Parts in stock which become obsolete due to Epidemic Fault(s)
may be returned to LORAD and will be credited at the original invoice
price or upgraded to the desired level at the expense of LORAD.
LORAD shall repair or replace uninstalled Products, Options and Spare
Parts which are subject to Epidemic Faults. LORAD warrants the
Products, Options and Spare Parts not yet delivered will be so upgraded.
For Products and Options in the installed base, upgraded components or
parts will be made available from LORAD at no charge and PMSNA will
be responsible for removing the old components or parts and installing
the new ones.
The remedies contained in this Section 8.4 shall be the sole remedies
available to PMSNA in the event of an Epidemic Fault as defined herein,
subject to the limitations set forth in Section 10.3 hereof.
9. Service and Spare Parts
The Spare Parts supply, maintenance and repair of Product and general
product and service support for the Product to be provided by each of
the parties shall be as set forth in Exhibit II hereto.
10. Claims
10.1 Personal Injury and Property Damage
LORAD agrees to defend, indemnify and hold harmless PMSNA and
Philips GmbH from and against any and all loss, cost and expense,
including counsel fees and all expenses of investigation, litigation,
judgment and/or settlement, arising through or out of personal injury or
death to person(s) or damage to property alleged or proven to have arisen
out of failure of a Product(s), Option(s) or Spare Parts to meet the
Specification or as a result of a defect in its workmanship or materials,
provided, that in any such case where indemnification is sought
hereunder (i) PMSNA or Philips GmbH shall have given prompt written
notice to LORAD of such claim and the facts and circumstances relating
thereto, (ii) PMSNA shall fully cooperate with LORAD in connection with
19
<PAGE>
any such claim by any governmental authority or third party, (iii) LORAD
shall have the sole right to defend, settle and compromise any such
claim, and (iv) LORAD shall have no obligation to indemnify and hold
harmless PMSNA for any negligent conduct of PMSNA or any action or
omission by PMSNA in violation of this Agreement.
PMSNA agrees to defend, indemnify and hold harmless LORAD from and
against any and all loss, cost and expense, including counsel fees and all
expenses of investigation, litigation, judgment and/or settlement, arising
through or out of personal injury or death of person(s) or damage to
property which is alleged or proven to have arisen out of the negligent act
or omission of PMSNA, its officers, directors, employees or agents,
provided, that in any such case where indemnification is sought
hereunder (i) LORAD shall have given prompt written notice to PMSNA of
such claim and the facts and circumstances relating thereto, (ii) LORAD
shall fully cooperate with PMSNA in connection with any such claim by
any governmental authority or third party, (iii) PMSNA shall have the sole
right to defend, settle and compromise any such claim, and (iv) PMSNA
shall have no obligation to indemnify and hold harmless LORAD for any
negligent conduct of LORAD or any action or omission by LORAD in
violation of this Agreement.
LORAD shall obtain and maintain current, at all times during the Term
of this Agreement and any extensions hereof, Commercial General
Liability insurance (including products and contractual coverage) with an
insurance company rated by Best "A" or better, in amounts not less than
***********single limit and ***********combined single limit. Such
insurance shall cover, among other things, product liability claims
relating to the Product. LORAD shall provide PMSNA with a certificate of
such insurance from LORAD's insurer, updated upon expiration thereof.
Such certificate shall designate PMSNA as a certificate holder. PMSNA
shall receive no less than thirty (30) days prior written notice of
cancellation or termination of such insurance.
10.2 Intellectual Property Indemnification
10.2.1 Indemnification by LORAD
LORAD shall defend PMSNA and its respective distributor, agent, dealer
or customer against any claim by a third party that manufacture, sale or
use of a Product(s), Option(s) or Spare Part infringes *******************
**************************************************************************
************** and LORAD will pay any resulting penalties, judgments or
awards finally determined by a court or other tribunal of competent
jurisdiction to be payable in connection therewith, or amounts payable in
settlement thereof, provided that in any such case where indemnification
is sought by PMSNA hereunder (i) PMSNA shall have given prompt
written notice to LORAD of such claim and the facts and circumstances
relating thereto, (ii) PMSNA shall fully cooperate with LORAD in
connection with any such claim, (iii) LORAD shall have the sole right to
defend, settle and compromise any such claim and (iv) LORAD shall have
no obligation to indemnify and hold harmless PMSNA for any negligent
conduct of PMSNA or for any action or omission by PMSNA in violation
of this Agreement. LORAD's obligations under this Article are
20
<PAGE>
conditioned on PMSNA's agreement that, if the Product(s), Option(s)
or Spare Part or the manufacture, sale or use thereof becomes or in
LORAD's reasonable opinion is likely to become, the subject of such a
claim, PMSNA will permit LORAD, at any time thereafter, at LORAD's
expense, either to procure the right for PMSNA to continue selling the
Product(s), Option(s) or Spare Part or to replace or modify the Product(s),
Option(s) or Spare Part so that it becomes non-infringing, and if neither
of the foregoing alternatives is available on terms which are acceptable to
LORAD in its reasonable judgment, LORAD may terminate this
Agreement immediately as to that part of the Territory in which
manufacture, sale or use of the Product(s), Option(s) or Spare Part may
be infringing and/or terminate this Agreement in its entirety with notice
as set forth in Section 3.6 above and LORAD shall reimburse PMSNA for
the purchase price actually paid by PMSNA, less an allowance for
depreciation, for Product(s) and Option(s) which can no longer be sold by
PMSNA or a Philips Associated Company or used by their customers.
The foregoing states the entire liability of LORAD with respect to
infringement of rights in intellectual property.
Notwithstanding the foregoing, LORAD shall have no liability to PMSNA
to the extent that any such claim is based upon or arises out of: (i)
alterations of the Product(s), Option(s) or Spare Part by PMSNA or any
third party, (ii) failure of PMSNA to use updated Product(s), Option(s) or
Spare Parts provided by LORAD to avoid such infringement, (iii) use of
the Product(s), Option(s) or Spare Parts in combination with apparatus or
software not furnished by LORAD, (iv) use of the Product(s), Option(s) or
Spare Parts in a manner for which such Product(s), Option(s) or Spare
Parts were neither designed nor contemplated or (v) a patent or
trademark owned by PMSNA or for which PMSNA has a royalty-free
license which precludes it from being held responsible for such claim of
infringement.
10.2.2 Indemnification by PMSNA
PMSNA shall defend LORAD and its respective distributor, agent, dealer
or customer against any claim by a third party that manufacture, sale or
use of any material(s) supplied by PMSNA hereunder infringes a********
********************patent, copyright, trade secret, mask work or other
intellectual property right and PMSNA will pay any resulting penalties,
judgments or awards finally determined by a court or other tribunal of
competent jurisdiction to be payable in connection therewith, or amounts
payable in settlement thereof, provided that in any such case where
indemnification is sought by LORAD hereunder (i) LORAD or shall have
given prompt written notice to PMSNA of such claim and the facts and
circumstances relating thereto, (ii) LORAD shall fully cooperate with
PMSNA in connection with any such claim, (iii) PMSNA shall have the
sole right to defend, settle and compromise any such claim and (iv)
PMSNA shall have no obligation to indemnify and hold harmless LORAD
for any negligent conduct of LORAD or for any action or omission by
LORAD in violation of this Agreement. PMSNA's obligations under this
Article are conditioned on LORAD's agreement that, if such material(s) or
the manufacture, sale or use thereof becomes or in PMSNA's reasonable
opinion is likely to become, the subject of such a claim, LORAD will
permit PMSNA, at any time thereafter, at PMSNA's expense, either to
21
<PAGE>
procure the right for LORAD to continue reselling such material(s) or to
replace or modify such material(s) so that it becomes non-infringing, and
if neither of the foregoing alternatives is available on terms which are
acceptable to PMSNA in its reasonable judgment, PMSNA may terminate
this Agreement immediately as to that part of the Territory in which
manufacture, sale or use of such material(s) may be infringing and/or
terminate this Agreement in its entirety with notice as set forth in
Section 3.6 above and PMSNA shall reimburse LORAD for the purchase
price actually paid by LORAD, less an allowance for depreciation, for
such material(s) which can no longer be sold by LORAD or used by its
customers. The foregoing states the entire liability of PMSNA with
respect to infringement of rights in intellectual property.
Notwithstanding the foregoing, PMSNA shall have no liability to LORAD
to the extent that any such claim is based upon or arises out of: (i)
alterations of such material(s) by LORAD or any third party, (ii) failure of
LORAD to use updated material(s) provided by PMSNA to avoid such
infringement, (iii) use of such material(s) in combination with apparatus
or software not furnished by PMSNA, (iv) use of such material(s) in a
manner for which such material(s) were neither designed nor
contemplated or (v) a patent or trademark owned by LORAD or for which
LORAD has a royalty-free license which precludes it from being held
responsible for such claim of infringement.
10.3 Limitation
In no event shall either party be liable to the other for special, indirect or
consequential damages of any kind including, but not limited to, loss of
other business opportunity, profit or revenue or loss of goodwill, arising
from any failure or matter arising under this Agreement. No claim or
recovery by one party against the other shall be greater in amount than
the purchase price of the individual unit of Product(s), Option(s) or Spare
Part with respect to which such claim or recovery arose.
Notwithstanding the foregoing, any obligation of the parties under
Section 10.1 above with respect to personal injury or death to persons or
damage to property shall not exceed ************************* and
*********************************, and any obligation under Section
10.2 above with respect to intellectual property shall not exceed the
aggregate purchase price to PMSNA of the Product(s) involved.
11. ********************
11.1 ********************************
Without limiting LORAD's liability to PMSNA thereunder in any way
whatsoever, it has been agreed that if LORAD;
a) intends to enter or actually enters liquidation procedures
(either voluntarily or forced); or
b) has entered bankruptcy procedures (either voluntarily or
forced); or
22
<PAGE>
c) within ninety days of written notification by PMSNA has not
remedied any material breach of this Agreement,
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
***********************************, if and to the extent required by PMSNA,
in exchange for compensation by PMSNA for LORAD's purchase price
therefor.
********** as used in this Article 11 shall mean *******************
relating to the ************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
************************************************************.
11.2 Right to Produce
Accordingly, ******************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
******************************
12. Confidentiality
The parties shall not use, employ or disclose Confidential Information
received from the other whether orally, in writing, by demonstration
or otherwise except as is necessary to implement this Agreement, unless
and to the extent the receiving party can prove by written record that it:
a. was already in the public domain or becomes available to the
public through no breach of this Agreement by the receiving
party;
b. was in the receiving party's possession prior to receipt from
the disclosing party as proven by its written records; or
c. was received independently from third party free to disclose
such information to the receiving party or
23
<PAGE>
d. was independently developed by the receiving party without
use of the Confidential Information as proven by its written
records; or
e. became available by inspection or analysis of other products
or techniques in the market.
In protecting Confidential Information, the receiving party will take all
necessary precautions and Confidential Information will be treated in the
same manner and with the same degree of care as the receiving party
applies with respect to its own confidential information.
Nothing contained in this Article shall be construed as a grant of license
to the other party, to make, use or sell any Products using Confidential
Information or as a license under any patents or claims covering same.
The first disclosure to the media or other first publication of data
concerning the cooperation envisaged under this Agreement, including
the existence of the Agreement itself, shall not be effected unless the
nondisclosing party has given its written approval for such disclosure,
which approval shall not be unreasonably withheld and which shall be
given in a prompt manner.
LORAD may, however file a copy of this Agreement Securities and
Exchange Commission pursuant to the requirements of the Securities
Act of 1933, as amended or the Securities Exchange Act of 1934, as
amended, provided that LORAD files a confidentiality request with the
Securities and Exchange Commission seeking to protect the
confidentiality of the pricing and forecasts in Exhibit III.
The provisions of this Article shall be in full force and effect retroactively
from March 18, 1992 and shall remain in full force and effect during the
duration of this Agreement and five (5) years thereafter.
13. Term and Termination
13.1 Term
This Agreement shall enter into force upon the date of signature by both
parties and shall initially continue until the earlier of two years from the
date of the First Commercial Delivery of Product(s) under this Agreement
or fulfillment of the minimum purchase commitment set forth in Section
4.1 above.
********************************************************************************
*****************, unless and until ********************************************
***************************************************prior written notice to
the receiving party, such notice being given as set forth in 15.10 below.
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
*****************************************. Any such notice(s) shall be
24
<PAGE>
effective as of the date received (certified mail return receipt requested)
by the other party.
13.2 Termination for Cause
This Agreement may also be terminated as follows:
a. if a party (the failing party) has not remedied any material
breach of this Agreement within ninety (90) days of receipt of
written notice (sent in accordance with Section 15.10 hereof)
of such breach, said other party is entitled to terminate this
Agreement and or any outstanding Purchase Orders placed
hereunder immediately by notice to the failing party, such
without prejudice to any other rights accruing under this
Agreement or in law.
b. by the other party in the event that either party shall cease
to carry on business in the normal course, becomes
insolvent, makes a general assignment for the benefit of its
creditors, suffers or permits the appointment of a receiver or
a manager for its business assets or avails itself or becomes
subject to any proceeding under bankruptcy laws or any
other statute or laws relating to the insolvency or protection
of the rights of creditors,
c. by PMSNA by written notice to LORAD in the event the
control of LORAD would pass to other(s) than those now
exercising control.
13.3 Continuing Commitments
The termination of this Agreement shall not relieve or release either party
from fulfilling any undertaking or commitment including, without
limitation, those affecting payments, work and deliveries which arise by
reason of any event other than termination, such as, for example, those
arising from Purchase Orders placed pursuant to this Agreement prior to
its termination.
14. Force Majeure
In the event of Force Majeure the party being delayed or damaged
thereby shall inform the other party as soon as possible but in any event
within fourteen (14) calendar days after the start of such Force Majeure
specifying the nature of the Force Majeure as well as the length of the
delay which is expected.
In the event the Force Majeure situation continues for more than sixty
days (60) days or is expected to last longer than sixty (60) days then
either party is entitled to terminate this Agreement by simple notice in
writing and without either party being entitled to any claim for damages.
Otherwise both parties' rights and obligations will be suspended and new
time schedules and supply dates shall be agreed upon between the
parties hereto.
25
<PAGE>
Force Majeure shall be understood to mean and to include damage or
delay by acts of God, acts of regulations or decrees of any Government
(de facto or de jure), natural phenomena, such as earthquakes or floods,
fires, riots, wars, shipwrecks, freight embargoes, labor disputes, defaults
by suppliers or other causes, whether similar or dissimilar to those
enumerated above, unforeseeable and beyond the reasonable control of
the parties and which prevent the total or partial carrying out of any
obligation under this Agreement.
PMSNA's purchase commitments under this Agreement are based on
present market information and estimates shared by both parties and
market growth figures extrapolated from that information. In the event
of unforeseen circumstances, major shifts in the market for radiographic
equipment (such as the rapid development of significant new ultrasound
technology similar to that being developed by other subsidiaries of
Thermo Trex Corporation which renders the Product obsolete) or other
occurrences which make distribution and sale not only of Product, but
also of substantially similar products by other firms in the industry,
impracticable at the levels contemplated by this Agreement, the parties
shall negotiate in good faith and agree upon alternative quantities which
are acceptable to both and reasonable given the then-current nature of
the market for radiographic equipment.
15. General Terms and Conditions
15.1 Applicable Law
This Agreement shall be deemed to have been made in the State of
Connecticut, shall be construed in accordance with, and the rights and
liabilities of the parties hereunder shall be governed by the laws of such
State, without regard to its conflicts of law doctrine, and this Agreement
shall be deemed in all respects to be a contract of such State.
15.2 Attorney's Fees
In the event of any claim or controversy arising regarding the
enforceability, interpretation or intent of this Agreement, the prevailing
party or parties (to the extent prevailing) shall be entitled to its
reasonable attorney's fee and expenses in addition to whatever other
relief said party would otherwise be entitled.
15.3 Entire Agreement
This Agreement sets forth the entire intent and understanding among the
parties relating to the subject matter hereof and merge all prior
negotiations and discussions between them and no party shall be bound
by any conditions, representations or warranty other than as expressly
set forth herein or subsequently set forth in writing executed by both
parties hereto.
Neither PMSNA's general conditions of purchase nor LORAD's general
conditions of sales are applicable to this Agreement or to any order and
order confirmations for Products or parts thereof in whole or in part.
26
<PAGE>
15.4 Waiver
No waiver by any of the parties hereto of any breach of any condition,
covenant or term thereof shall be effective unless it is in writing and it
shall not constitute a waiver of such condition, covenant or term.
15.5 Severability
If any of the terms or provisions of this Agreement are determined to be
invalid or unenforceable by any court of competent jurisdiction, it shall
not invalidate the rest of this Agreement which shall remain in full force
and effect as if such terms and provisions had not been a part of this
Agreement.
The parties shall, however, be obliged to immediately replace this term or
provision by an effective one, covering in so far as possible the original
intentions of the parties as to its legal and economic contents.
15.6 Non-Assignment
This Agreement shall be binding upon and accrue to the benefit of the
parties hereto, their respective successors and permitted assigns. This
Agreement may not be assigned, transferred or hypothecated in whole or
in part by either party except prior written consent of the other party. No
consent is required, however, to an assignment or transfer in whole or in
part by PMSNA to any of the Philips Associated Companies. PMSNA shall
notify LORAD of such assignment or transfer in writing.
15.7 Advertisements
LORAD shall not without PMSNA's prior written consent use PMSNA's or
any other of the Philips Associated Companies' name or trademark as
such and/or use name in connection with any advertisement or sale
literature nor advertise that it is a supplier of PMSNA and/or the Philips
Associated Companies and/or that this Agreement between LORAD and
PMSNA has been concluded.
15.8 Sales and Applications Support
LORAD agrees to provide four applications training courses at its facility
at Danbury, Connecticut for PMSNA personnel who will be responsible
for training PMSNA customers in the use of Product(s) and Option(s).
There shall be no charge by LORAD for these four initial training
courses which shall be of no more than two days, duration or for any
updates in training which may be necessary because of modifications or
improvements to the System. All travel and living expenses for PMSNA's
and LORAD's employees shall be at PMSNA's and LORAD's expense,
respectively. LORAD agrees to provide additional applications training to
support the Systems and any new accessories or System features, at
PMSNA's request and at such reasonable rates as LORAD and PMSNA
may agree upon. These rates when quoted by LORAD shall include all
incidental expenses, including those of travel and living expenses of
LORAD's employees.
27
<PAGE>
LORAD agrees to provide training in Shelton, Connecticut or Danbury,
Connecticut for PMSNA service engineers or PMSNA personnel
responsible for training its service engineers on the terms set out in
Exhibit II hereto.
15.9 Project Leaders
Upon the signature of this Agreement either party shall appoint, by
written notice, a Project Leader who shall represent his party in all
communication, contacts, meetings, negotiations and reports, of
technical nature as necessary for the performance of this Agreement. An
eventual subsequent change of the Project Leader shall be notified in
writing to the other party.
15.10 Notices
Notices will be addressed as follows:
If to PMSNA: Philips Medical Systems North
America Company.
710 Bridgeport Avenue
Shelton, Connecticut 06484
Attn: Vice President,
Marketing
cc: Vice President and
General Counsel
If to LORAD: LORAD Corporation,
36 Apple Ridge Road
Danbury, Connecticut 06810
Attn: Mr. A. Pellegrino
cc: Mr. H. Kirshner
or to such other address as the pertaining party will have previously
notified to the other party.
All notices will be deemed given ten (10) working days after they have
been mailed by registered mail or so much earlier as the receiving party
appears to have received the same.
15.11 Compliance with Law
Except to the extent it is precluded from doing so by the law of its
principal place of business, each party agrees that the performance of its
obligations, exercise of its rights and fulfillment of its duties under this
Agreement shall comply with applicable laws and ordinances of each
government having jurisdiction over such activity and all lawful orders,
rules and regulations issued thereunder. The Product(s), Option(s) and
Spare Part(s) in the form they are provided by LORAD to PMSNA shall
comply with all lawful orders, rules and regulations applicable in the
************************ to their shipment, installation and use.
28
<PAGE>
15.12 Surviving Articles
Articles 8, 9, 10, 11, 12, 15 and, as to Purchase Orders which have not
been filled as of the date of termination or cancellation, Articles 4, 5, 6
and 7 and such other terms and conditions of this Agreement which are
expressly intended to survive the expiration, termination or cancellation
of this Agreement shall so survive.
IN WITNESS WHEREOF authorized representatives of the parties hereto
have signed this document.
LORAD CORPORATION PHILIPS MEDICAL SYSTEMS
NORTH AMERICA COMPANY
By: /s/ Hal Kirshner By: /s/ William E Curran
------------------- ------------------------
Hal Kirshner William E. Curran
President Chief Operating &
Financial Officer
Date: November 2, 1993 Date: 11/2/95
------------------ ----------------------
29
<PAGE>
List of Exhibits
Exhibit I Specification
Exhibit II Service Arrangements
Appendix 1 Field Problem Report
Appendix 2 List of Spare Parts
Exhibit III Planning and Prices
Exhibit IV Time Schedule
Exhibit V Declaration
Exhibit VI Standard Form for Change Request
Exhibit VII ISO9000 Certificate
(to be added when obtained by LORAD)
30
<PAGE>
Exhibit 1
SPECIFICATIONS
PMX 2000 Mobile Radiographic System
Description:
The PMX 2000************************************************
***********************************************************
*********************************************************
* *************
* *******************
* ************************************************
* ***********
* ****************************
* ******************************
Subsystem Description:
***********
-----------
***** **************************************************
******* **************************************************
*******
**************************************************************
**********
************************************************************
**************************
***********
-----------
*************************************************************
*******************************
**************************************************************
*******************************************
************************************************
************************************************************
**********************
*********************
***************
***********************
************************
*************************
*******************************Increments
*********************increments down 20% increments
***************
<PAGE>
************************
**************************************************************
***************************************************
********************************
***********************************************
****************
*********************************
---------------------------------
********* ********
**** ************
********** ******
************ ***
************* *********
************* ******
*************** ***********************
******************* *******
*********************
*************** ********
****************
**********************************
**********
----------
**** *******************************************
***************************************
*********** *******************************************
***********
************************
------------------------
******* **
***** **************
******* ***************
*********** ***********************************
********************************** *****************
******************
**********
******* *********
******************************
------------------------------
**************************************************
**************************************************
********************************************************
******************************************************
******************
*************************
2
<PAGE>
***********************
-----------------------
**************************************
**************************************************
********
********************************
******************************
***************************************
************************
*********************************
************************ *****************
******************
*****************************************
**************** ********************
**************** ******************
******************
************ ***********************
************* ******************************
********* *******
*************************
************************************************************
********************************************************
***********************************************************
******************************************
**************************
*************************** **************************
*************************** *************************
**************** ********
******************* ********
**************** ************ *****
**************** **** *****
*********************
---------------------
****************
*********************
************************************************************
****************************
***************
*****************************************************
**************************
3
<PAGE>
October 19, 1993
Exhibit II
Service Arrangements
Exhibit II to the OEM Agreement between Lorad Corporation ("LORAD")
and Philips Medical Systems North America Company ("PMSNA") for
supply of portable radiographic x-ray systems.
1. Responsibilities for Product Service
Unless agreed to otherwise,
PMSNA is responsible for:
- installing and commissioning,
- training of the user
- maintenance and repair at customers' sites
- regular training of the PMSNA field engineers
LORAD is responsible for:
- provision and accuracy of documentation
- spare parts supply
- provision of special tools as required for repair of
Product(s),
Option(s) or Spare Parts
- initial training and support of PMSNA service staff and
regular training upon request
2. Product Delivery
The requirements for delivery of Product(s), Option(s) and Spare Parts
are
as set forth in the Agreement and in the other Exhibits to it.
2.1 Service Documentation
2.1.1 Preparation of Service Documentation
PMSNA will supply, at no cost to LORAD, binders with PMSNA's standard
register into which the service documentation enumerated below shall
be
inserted by LORAD (hereinafter, the "Service Documentation" or, as
assembled, the "Service Manual"). The binders will be ordered by
LORAD
from the PMSNA service organization with at least two months lead time
before the date they will be needed by LORAD for assembly of the
Service
Manuals.
The address for PMSNA's service organization is:
<PAGE>
Philips Medical Systems North America Co.
P.O. Box 860
710 Bridgeport Avenue
Shelton, Connecticut 06484
LORAD shall furnish to PMSNA ninety (90) days before the First
Commercial Delivery of Product, free of charge, two sets of Service
Documentation. If the Service Documentation complies with Philips'
standards, PMSNA will approve it for delivery and use by Philips'
service
organization.
The Service Documentation labeling shall carry only the "Philips" name,
trademark and Product or Option name (rather than LORAD's trademark
or tradename for that product).
PMSNA will assist LORAD in producing the said Service Documentation,
but each party will bear its own costs with respect to preparing the
Service Documentation.
The Service Documentation will be updated by LORAD during the lifetime
of the Product(s) or Option(s) to include all implemented changes and
modifications pertaining to Product(s) or Option(s). Corrections
(complete updated versions) will be furnished to PMSNA without
additional charge. LORAD will supply new documents at least thirty
(30)
days before the first delivery of Product which has been modified or
updated as provided in the Agreement.
2.1.2 Service Manual
For each Product or Option the following information shall be provided
by LORAD as part of the Service Documentation and the Service Manual
shall
be organized in the following format:
- Introduction and Technical Data
- Installation
- Setting to work
- Acceptance: specification checks and data applicable
or field service
- Corrective Maintenance
- Diagnostic procedures for fault identification
- Adjustment procedures
- Instructions for assembly and disassembly
- Instructions for removal and replacement
- Procedures after repair or replacement
- Simplified drawings to facilitate fault finding
- Theory of operation and explanation
- Diagrams and drawings
- Repair procedures
- Spare Parts lists with identification numbers
- Sorted by PMSNA ID code (a set of PMSNA ID codes
will be provided to LORAD)
- Sorted by LORAD ID code
- Specification of repairable/replaceable items
- Specification of required tools for:
2
<PAGE>
- Installation, setting to work and acceptance
- Maintenance
all non-metric tools required shall be listed
separately
The test and diagnostic software, if any, used by field service
personnel
will be made available by LORAD on a carrier suitable for the Product
or
Option and will be supplied with each Product or Option. ************
*****************************************************************
*********************************************************************
*******.
If PMSNA requires additional Service Manuals, LORAD will supply them
at a price of **** for each set.
2.1.3 Planned Maintenance Service Manual
Planned Maintenance is defined as pre-planned actions performed to
assure by means of systematic inspection that the Product or Option is
working in a specified manner.
The Planned Maintenance Service Manual is to be supplied directly to
Philips' service organization, not packed in shipments of Product(s)
or
Option(s) to PMSNA.
Initially, five (5) sets will be provided free of charge. Thereafter,
PMSNA,
may, free of charge, reproduce them for PMSNA's use or distribution to
Philips Associated Companies, dealers, manufacturer's representatives
and customers. PMSNA shall also have the right to revise, reorganize,
translate or otherwise modify them for distribution to and use by
Philips'
service organization.
The Planned Maintenance Service Manual will contain:
- Schedule(s)
- Instructions
- List of Spare Parts to be replaced
- List of required lubrication
- Specification of tools required (including non-
metric tools)
- Specification of other materials
2.2 Language
All Service Documentation will be made available in the English
language.
2.3 Additional Information on Data Carrier
All service-related information provided by LORAD hereunder,
including,
in particular, Spare Parts lists and prices, will be made available to
Philips' service organization on a data carrier, such as 3.5 inch
floppy
disk, and updated annually as necessary.
3
<PAGE>
3. Support on Site
If necessary and if requested by Philips' service organization,LORAD
will
provide support at customers' sites. Travel expenses and
accommodation and all other costs will be borne by PMSNA. All other
costs will be covered by an all-inclusive fee of ************. If,
however,
the problem or functional defect is a result of a design defect, the
per
diem fee will not be payable to Lorad for the time spent correcting
the
defect and travel and living expenses will also be born by LORAD.
4. Maintenance
4.1 Repair Policy
Repair will be done by replacing field exchangeable Spare Parts,
either
new or refurbished. LORAD will propose those parts in consultation
with
the PMSNA service organization. A list of these Spare Parts is
attached
(or is to be added when agreed upon) as Appendix 2 to this Exhibit.
4.2 Reporting by LORAD about Reliability
LORAD and PMSNA will exchange free of charge, all relevant data
regarding reliability of the Product, including, but not limited to:
- MTBF and MTTR-figures
- Problem reports
- Field failures
- Parts usage and approx. costs
at Product and Spare Part level.
4.3 Storage Conditions and Handling Procedures
LORAD will specify the storage conditions for Spare Part(s), such as
(but
not limited to) temperature, humidity, shelf life and air pressure,
for any
Spare Part(s) for which there are special requirements in this regard.
5. Field Change Order ("FCO"), Problem Reporting and
Service Information
5.1 Field Change Orders
5.1.1 Modification Kits
Field modifications, if any, will be made available to PMSNA in form
of individual modification kits in the quantity required to update the
entire
installed base of Product(s) or Option(s) to which each field
modification
applies.
These kits shall contain:
- List of applicable Products and their
serial numbers
- Implementation instructions
4
<PAGE>
- Material and Spare Parts
- Special tools (if any)
- Service Documentation and Operator's Manual
updates
Kits for field modifications in the categories of "mandatory for
safety" and
"action for performance" will be provided by LORAD to PMSNA without
charge.
5.1.2 Categories and Implementation of FCO's
Three (3) categories of FCO's are distinguished:
- Mandatory for Safety
- Action for Performance
- Service Recommendation
Classification into any of these categories and the terms and
conditions
of any action will be determined by PMSNA, based upon applicable law
and regulations, after consultation with LORAD.
5.2 Field Problem Reporting by PMSNA
PMSNA will report all problems using a Field Problem Report formsheet
(an example is attached as an annex to this Exhibit). In order to
shorten
turnaround times, PMSNA may report problems to LORAD by telephone
or fax. Telephone reports must be confirmed by a written Field
Problem
Report.
The categories of Problems are defined as "very urgent problems,"
"urgent
problems," "routine problems":
VERY URGENT PROBLEMS
- Disable product or cause an abnormal termination of
an application program.
- Cause danger for the patient being examined or for
personnel operating the product.
URGENT PROBLEMS
- Disable a product under certain conditions
- Disable certain function(s) of a product
ROUTINE PROBLEMS
- Problems other than VERY URGENT or URGENT
As soon as possible, but ultimately within two (2) working days after
a
problem has been reported, LORAD will confirm receipt of a Field
Problem Report and start reproducing and analyzing the Problem. In
its
confirmation LORAD will indicate the manner and time frame in which
LORAD expects to have a preliminary and/or definite solution
available,
and it will use its best efforts to meet or exceed the following
schedule:
5
<PAGE>
Time allowance:
Category Definite Solution
VERY URGENT *****************
URGENT *****************
ROUTINE *****************
6. Configuration Management
6.1 Identification/Labeling of Spare Parts
The packing as well as shipping documents for all Spare Parts,
assemblies and sub-assemblies will be clearly coded and marked.
6.2 Registration
LORAD will maintain a Configuration Record for each Product delivered
indicating:
- Product name,
- Serial number,
- Code number of each printed circuit board
("PCB"), including Hardware and
Software/Firmware level (if any), and
- Identification of assemblies and subassemblies
contained in the product by part numbers
and serial number.
The same procedure will apply for delivery of Field Change Order kits.
With each FCO kit LORAD will provide PMSNA with the valid
Configuration Record for the modified Product or Option.
7. Spare Parts
7.1 Spare Parts List
LORAD will provide to PMSNA a list of Spare Parts in Product(s) or
Option(s) as built, containing the following information,
- Spare Part numbers (to include the PMSNA- and
LORAD Spare Part numbers for reference)
- Description of the Spare Parts, including an illustrated
explosion drawing, whenever applicable
- Price of the Spare Parts
- Repair Exchange Prices
- Guaranteed delivery time per Spare Part or group of
Spare Parts
- Supplier name and address
- Restrictions on export from the United States (if
applicable)
6
<PAGE>
7.2 Availability, Delivery
LORAD will assure availability (F.O.B., Danbury, Connecticut) of Spare
Parts no less than **************** before the First Commercial
Delivery
of Product(s) or Option(s) or of each new version of a Product or
Option.
Delivery time for Spare Parts will be ************************* after
receipt
of order. For some Spare Parts LORAD may require a forecast in order
to meet this delivery time. LORAD will advise PMSNA which Spare Parts
are in this category.
LORAD guarantees the availability of Spare Parts for Product(s) and
Option(s) during a period of ************** after the last delivery of
a
Product or Option by LORAD to PMSNA under the Agreement. During
the seventh year after the last dispatch of Product(s) or Option(s)
PMSNA
and LORAD will consult each other about the expected demand for Spare
Parts over the remaining service life of the Product(s) or Option(s)
and
how this demand can best be met in a cost effective way.
7.3 Upgrade of Spare Parts
Stocks of Spare Parts in PMSNA's stores which have become obsolete due
to Field Change Orders will be returned to LORAD. The shipping costs
will be borne by PMSNA. LORAD will credit to PMSNA the actual
purchase value or modify the Spare Part to the highest configuration
level, if applicable.
7.4 Ordering of Spare Parts
7.4.1 Stock Recommendations and Planning
LORAD will provide PMSNA with recommendations for the stocking of
Spare Parts required to support and maintain the Products and update
such information as required.
LORAD will recommend and allow PMSNA to initiate an end-of-life order
after the agreed period.
PMSNA will - in so far as possible - provide LORAD with a forecast of
its expected demand for Spare Parts.
7.4.2 Priority 1 Orders (P1)
Spare Parts to be delivered under a "Priority 1 order" (breakdown or
out
of stock situation) will be shipped by LORAD, using courier service to
the
shipping address indicated on PMSNA's notification or order, within 24
hours after notification in writing (e.g. by fax).
LORAD will make all the necessary and appropriate shipping
arrangements. PMSNA will reimburse the freight costs. LORAD will
immediately inform PMSNA of the relevant shipping information and
expected time of arrival.
7
<PAGE>
*****************************************************************
*************************************************************
7.4.3 Priority 2 Orders (P2)
Spare Parts to be delivered under "Priority 2 orders" (replenishment
orders) may be placed by PMSNA during the term of this Agreement or
thereafter during the **************** set forth in the third
paragraph of
7.3 above. These Spare Parts will - in so far as they were forecasted
-
have a delivery time of *********************. In any case LORAD will
use its best efforts to meet delivery requirements.
LORAD will accept orders irrespective of value and will not impose
surcharges on any order (except as may be agreed upon with PMSNA for
Priority 1 orders).
7.5 Repair
7.5.1 Repair Services and Support
Those Spare Parts which are identified as repairable items may be
returned by PMSNA to LORAD for repair and will be repaired to their
highest configuration level within six (6) ********************** or be
replaced
within *************.
LORAD will provide repair services for a period of at least **********
after delivery of the last Product or Option under the Agreement.
Repairs will not affect Form, Fit, Function, interchangeability or
certification of the Spare Part(s).
For warranty repairs, LORAD shall be responsible for arranging and
paying for transportation and insurance for shipments of replacement
parts to and from LORAD.
For non-warranty repairs transportation charges to and from LORAD
are the responsibility of PMSNA.
LORAD will also provide Technical Assistance as required. A "help
desk"
will be available during regular working hours from 8:30 A.M. to 5:00
P.M. Eastern Standard Time.
7.5.2 Warranty on Repaired Items
Repaired parts will carry the same warranty as for primary delivered
parts (as set forth in Article 8 of the Agreement).
7.5.3 Repair at PMSNA
If PMSNA decides in the future to start repair of exchangeable Spare
Parts in its own workshops, then LORAD agrees to transfer to PMSNA all
relevant information concerning, for example but not limited to:
8
<PAGE>
- Troubleshooting
- Component specifications (names and addresses
of vendors included)
- Adjustment procedures
- Tools and repair aids (specifications and prices)
- Initial training (if applicable)
- Schematics and wiring diagrams
- Test software and firmware
The conditions (prices, reimbursement for work involved, etc.) for
transfer will be negotiated at the time of such transfer.
7.6 Packing
Each Spare Part will be packed in such a way that it can be held in
PMSNA's inventory without repacking for storage or shipment.
Electrostatic discharge packing is to be used where required.
If applicable, Spare Parts shall be marked as subject or not subject
to
United States export restrictions. Each item shall also be marked
with
the country of origin.
7.7 Prices
Prices for any additional Spare Parts required for the Product(s) or
Option(s) will be agreed upon between the parties when each new
Product or Option is added to the scope of this Agreement and is
incorporated in Appendix 2 at that time.
The prices will be based on **************************************
***************.
******************************************************************
*******************************************************************
*************************************************************
******************************************************************
***************************************************************
***************************************************************
**************************.
7.8 Modifications to Spare Parts (Because of FCO's)
For modifications to Spare Parts, or at the introduction of Product(s)
or
Option(s) for the Products, LORAD will make its best efforts to supply
new Spare Parts and price lists at least **************** before the
First
Commercial Delivery of that Option, Product or new version of a
Product
or Option which incorporates modified Spare Parts, takes place.
7.9 Second Sourcing
LORAD will Provide PMSNA with the manufacturer's name and part
numbers(s) for generic Spare Parts, to enable PMSNA, if LORAD is
unable
to supply Spare Parts, to directly source these generic Spare Parts
from
LORAD's suppliers.
9
<PAGE>
LORAD shall, however, remain responsible, as set forth herein, in the
event certain Spare Parts are no longer available from such vendors.
LORAD will then take all necessary actions to find, as soon as
possible,
substitutes for Spare Part(s) which are no longer available, including
undertaking the necessary engineering and test work connected with
such a substitution.
8. Training, Exchange of Experiences
LORAD will provide adequate initial training for the Philips' service
organization (a "train the trainer" program), to take place,
preferably, in
Danbury, Connecticut. This training will be done at least *******
******
in advance of the First Commercial Delivery of the Product, and be in
sufficient depth to enable PMSNA personnel to conduct the training of
other PMSNA technical personnel. LORAD will assist PMSNA in
preparing all documents and other training aids necessary for
successful
secondary training classes held by PMSNA. During instructor training
classes, a complete set of Service Manuals will be made available free
of
charge by LORAD to the participants.
If significant improvements are made to Products or new contract items
are added to the scope of the Agreement, LORAD will provide training
and documentation for those improvements or items on the conditions
stated above.
Once a year an exchange of experiences between PMSNA and LORAD will
the planned.
For all of the above activities, each party will bear its own costs.
The schedule for the initial training will be set by mutual consent.
Additional training will be scheduled on *************** notice from
PMSNA.
9. Software Support and Maintenance
9.1 General
LORAD will provide support, preventive and corrective maintenance for
Software/Firmware for a minimum of ************** following the last
shipment of Product(s) or Option(s) to PMSNA under this Agreement.
For this purpose, LORAD will keep available a software maintenance and
support group with adequate know-how regarding the various versions of
the software. This support will be in addition to that set forth in
Article 8
of the Agreement. For modifications to Software/Firmware the
procedure
set forth in section 3.3 of the Agreement will be followed.
9.2 Definitions
The following definitions will apply in addition to the other
definitions in
the Agreement:
10
<PAGE>
"Compatibility"
will mean that a new Release or a new Level can replace the former
Release(s) or Level(s) of the Software without degrading the
functionality
and/or affecting the interfacing of the Product or Software.
"Release(s)"
will mean a specified set of functions. A new Release of the Software
will
be made as a result of changed functional specifications and will also
contain the solutions to problems of previous Levels. A Release may
comprise a number of Versions.
"Version(3)"
will mean a distinction between various software programs which fulfil
essentially the same class of functions, but which are different for
alternative hardware choices and/or slightly different Software
configurations and/or differences in performance and/or for commercial
reasons.
"Level(s)"
will mean improved Software having the same functional specifications
as before, but originating from changed (corrected) source code.
9.3 General Support
While maintaining compatibility LORAD will actively:
search the Software/Firmware for errors and offer corrections therefor,
investigate, produce and offer enhancements to the Software/Firmware
which improve and optimize the user friendliness of the
Software/Firmware,
on request, provide advice with regard to the capabilities of the
Software/Firmware in order to fully exploit its potential, and
investigate advanced software diagnostics to aid the repair of
equipment
and maintain service efficiency and a low MTTR.
9.4 Corrective Maintenance
While maintaining compatibility and without prejudice to the
procedures
of Section 5.3 of this Exhibit, LORAD will provide Corrective
Maintenance
by:
delivering as soon as possible solutions for VERY URGENT and
URGENT PROBLEMS in the form of preliminary solutions
(temporary fixes only, no corrections to the Software/Firmware)
and
definite solutions (corrections to the Software/Firmware) if
necessary in an unscheduled Level of the Software/Firmware.
delivering solutions for ROUTINE PROBLEMS in the form of
definite solutions as part of the next Level of the
Sofware/Firmware.
11
<PAGE>
If LORAD cannot provide a definite solution without violating the
compatibility of the Sofware/Firmware with the Product(s) or Option(s)
hardware or the Specifications, then LORAD will promptly so inform
PMSNA in writing, with a comprehensive explanation of the reasons and
consequences. LORAD will not undertake any implementation of such
definite solution unless PMSNA has accepted the consequences of such
action in writing.
Both preliminary and definite solutions will be released to PMSNA as
soon as possible, but only after LORAD has produced and tested each
solution, in clinical application as well as in LORAD's product
development laboratory. Definite solutions shall be included in the
next
available Level of any Release. The solutions will be documented and
made available to PMSNA by the fastest means of communication and/or
transportation.
10. Duration of Service Arrangements
Unless explicitly agreed to the contrary in this Exhibit or in the
Agreement itself, the arrangements of this Exhibit will come into
effect on
the same day as the Agreement and continue until ************* after
delivery of the last Product or Option by LORAD pursuant to the
Agreement.
11. Survival
Should any of the provisions of this Agreement become invalid or be
ruled invalid by a court of competent jurisdiction, this shall not
impair
the legal effectiveness of the others, the parties shall, however,
immediately replace the invalid provision by one which, in so far as
possible, has the same legal and economic effect as the former.
Appendices:
Appendix 1: Field Problem Report
Appendix 2: List of Spare Parts
lrdptbsv.816
12
<PAGE>
APPENDIX 1
FIELD PROBLEM REPORT
SUPPLIER LICENSED PARTICIPANT
Form of Problem Report
1. Required urgency
2. Reporting date
3. Name
Address of participant
4. Reference to Philips International Agreement no. ...
5. Equipment (hardware) and Software configuration.
6. Problem description
7. Conditions under which the problem occurs.
Problem reports to be sent to: Name of Supplier
Address
Contact Person
Supplier will inform requesting Participant about:
- Problem acceptance/rejection for further treatment
- Status of solution such as: temporary solution, to
be solved in next
release, problem
solved etc.
<PAGE>
Exhibit II
Appendix 2
Recommended Spare Parts List for PMX 2000
(Preliminary)
- --------------------------------------------------------------------------------
P/N DESCRIPTION COMMENTS
- --------------------------------------------------------------------------------
*********** Assy L.V. Feedback Board
- --------------------------------------------------------------------------------
********** Nut, Axle Locking
- --------------------------------------------------------------------------------
********** Washer, Axle Lock
- --------------------------------------------------------------------------------
********** Wheel 10x2wx3/4 bore
- --------------------------------------------------------------------------------
********** Drive Motor
- --------------------------------------------------------------------------------
********** Gear Belt 1/2Pxl. Wx330Lg
- --------------------------------------------------------------------------------
********** Assy, Handle
- --------------------------------------------------------------------------------
********** Assy, Cable Counterweight
- --------------------------------------------------------------------------------
********** Assy, Cable Shock Absorbing
- --------------------------------------------------------------------------------
********** Switch, Micro
- --------------------------------------------------------------------------------
********** Switch, Micro
- --------------------------------------------------------------------------------
********** Fan Cooling
- --------------------------------------------------------------------------------
********** X-Ray Tube
- --------------------------------------------------------------------------------
********** Bearing Trunion
- --------------------------------------------------------------------------------
********** Assy, Collimator
- --------------------------------------------------------------------------------
********** Assy, Battery Pack
- --------------------------------------------------------------------------------
********** Assy, H.V. Tank
- --------------------------------------------------------------------------------
********** Assy, Panel (Control)
- --------------------------------------------------------------------------------
********** Switch Panel Mount
- --------------------------------------------------------------------------------
********** Label, Rotation TubeHd-RT
- --------------------------------------------------------------------------------
********** Label, Rotation TubeHd-LFT
- --------------------------------------------------------------------------------
********** Label, Rotation Housing
- --------------------------------------------------------------------------------
********** Label, Rotation TubeHd-RT
- --------------------------------------------------------------------------------
********** Label, Rotation TubeHd-LFT
- --------------------------------------------------------------------------------
********** Label, Rotation Housing
- --------------------------------------------------------------------------------
<PAGE>
Exhibit II
Appendix 2 - (cont'd)
Recommended Spare Parts List for PMX 2000
(Preliminary)
- --------------------------------------------------------------------------------
P/N DESCRIPTION COMMENTS
- --------------------------------------------------------------------------------
********** Assy Collimator
- --------------------------------------------------------------------------------
********** H.V. Cables
- --------------------------------------------------------------------------------
********** Assy Harness
- --------------------------------------------------------------------------------
********** Assy Harness
- --------------------------------------------------------------------------------
********** Assy Ribbon Cable
- --------------------------------------------------------------------------------
********** Assy Ribbon Cable
- --------------------------------------------------------------------------------
********** Assy Display Board
- --------------------------------------------------------------------------------
********** Assy L.C.D. Display
- --------------------------------------------------------------------------------
********** Assy, Pre-Regulator
- --------------------------------------------------------------------------------
********** Assy, H.V. Inverter
- --------------------------------------------------------------------------------
********** Assy Ribbon Cable
- --------------------------------------------------------------------------------
********** Assy Rotor Transformer
- --------------------------------------------------------------------------------
********** Assy Fuse Board
- --------------------------------------------------------------------------------
********** LG. Fuses D.C. Power
- --------------------------------------------------------------------------------
********** Battery Charger
- --------------------------------------------------------------------------------
********** Mobile Interconnect Board
- --------------------------------------------------------------------------------
********** Assy H.V. Control Board
- --------------------------------------------------------------------------------
********** Assy H.V. Drive Board
- --------------------------------------------------------------------------------
********** Assy Filament Supply Board
- --------------------------------------------------------------------------------
********** Assy Rotor Board
- --------------------------------------------------------------------------------
********** Assy DC Motor Drive Control
- --------------------------------------------------------------------------------
********** Assy Microprocessor Board
- --------------------------------------------------------------------------------
********** Assy Power Supply
- --------------------------------------------------------------------------------
********** Arm Interface PCB
- --------------------------------------------------------------------------------
********** Motor Interface PCB
- --------------------------------------------------------------------------------
<PAGE>
Exhibit II
Appendix 2 - (cont'd)
- --------------------------------------------------------------------------------
P/N DESCRIPTION COMMENTS
- --------------------------------------------------------------------------------
********** Pivot Brake, Arm
- --------------------------------------------------------------------------------
********** Extension Brake, Arm
- --------------------------------------------------------------------------------
********** Clevis Brake, Arm
- --------------------------------------------------------------------------------
********** Mast Brake
- --------------------------------------------------------------------------------
********** Caster 8"
- --------------------------------------------------------------------------------
********** Cable Reel
- --------------------------------------------------------------------------------
********** Input Circuit Breaker
- --------------------------------------------------------------------------------
********** Input Contactor
- --------------------------------------------------------------------------------
********** Hand Switch Assy
- --------------------------------------------------------------------------------
********** Fuse, 2A SB 2AG
- --------------------------------------------------------------------------------
********** Fuse, 1A 2AG
- --------------------------------------------------------------------------------
********** Fuse, 5A SB 2AG
- --------------------------------------------------------------------------------
********** Fuse, 3A 2AG
- --------------------------------------------------------------------------------
********** Fuse, 7A 2AG
- --------------------------------------------------------------------------------
********** Fuse, 7A SB 2AG
- --------------------------------------------------------------------------------
********** Fuse, 2A SB 3AG
- --------------------------------------------------------------------------------
********** Fuse, 7A SB 3AG
- --------------------------------------------------------------------------------
********** Fuse, 10A MDL 3AG
- --------------------------------------------------------------------------------
********** Fuse, 10A MDA 3AG
- --------------------------------------------------------------------------------
********** Fuse, 15A MDA 3AG
- --------------------------------------------------------------------------------
********** Fuse, 20A MDA
- --------------------------------------------------------------------------------
********** Fuse, 20A KTK
- --------------------------------------------------------------------------------
********** Fuse, 40A NON
- --------------------------------------------------------------------------------
********** Fuse, 60A FRN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Exhibit III
Planning and Prices
Year* Price Quantity Cumulative
* ******* *** *** ** ***
* ******* *** *** **** ***
* ******* *** *** **** ***
* ******* *** *** **** ***
From the date of the First Commercial Delivery under this
Agreement.
***********************************************************
*********************************************************
****************************************************
***********************************************************
************************************************************
********************************************************
************************************************************
***********************************************************
********************************************************
**************************
<PAGE>
Exhibit IV
PMX 2000 Program Time Schedule
Delivery
**************** ***************************
****************************************
***************
***********************
***************** ***************************
**************** ***************************
**************** ***************
****************
****************
****************
Product Requirements
* ****************************************
* ****************************************************************
*****
* **************************************************************
**************************
* **************************************************************
************
* **************************************
* *******************************************
Service Requirements
************ ************************
************ ********************
************ *************************
************ *************************
<PAGE>
Exhibit V
DECLARATION
SUBJECT: PMX 2000
1. Herewith Lorad Corp. confirms that PMX 2000 (LORAD RT-125) fully
complies with the following standards:
*****************
*********
********
****************************************
***************
******************
2. Furthermore, Lorad Corp. confirms that the serial number of the
tube
inserted in the tube housing of PMS 2000 (LORAD RT-125) is
indicated on
the tube. This number is identical with the serial number
indicated on
the label located on the tube housing.
3. Packing of PMX 2000 complies with *****************.
4. PMX 2000 fully complies with *************************************
*************.
LORAD Corporation
Date: _____________________
Signature: _____________________
<PAGE>
Exhibit VI
Standard Form for Change Request
Standard Form for Change Request
1. Change Request number: (date and sequence number)
2. Description of change:
Change of:
3. Reason of the change:
4. Change proposed for series:
5. Change proposed for serial number:
6. Reference to drawings:
7. Reference to reports and/or telexes:
8. Consequences for safety standards:
9. Consequences for service documentation and/or spare parts:
10. Consequences for delivery time:
11. Consequences for price:
12. Consequences for interfaces:
13. Consequences for stocks:
14. Initiated by:
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Exhibit VII
LORAD's ISO 9000 Certificate
[To be added Later.]
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EXHIBIT 10.8
CONFIDENTIAL TREATMENT
TREX MEDICAL CORPORATION HAS REQUESTED THAT THE
MARKED PORTIONS OF THIS DOCUMENT BE ACCORDED
CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
DUPLICATE ORIGINAL
OEM-Agreement
between
LORAD Corporation
A subsidiary of Thermo Trex Corporation
36 Apple Ridge Road
Danbury, Connecticut 06810
USA
hereinafter referred to as "LORAD"
and
Philips Medical Systems North America Company,
Division of Philips Electronics North America Corporation
P. O. Box 860
710 Bridgeport Avenue
Shelton, Connecticut 06484
hereinafter referred to as "PMSNA"
Subject: Supply of Mammography Systems
1. Introduction and Definition
1.1 Introduction
Whereas, LORAD is a company engaged in development, production and
supply of, among other products, mammography systems;
Whereas, LORAD has designed and developed a mammography system
LORAD's ************* is willing to modify it according to legal requirements
and certain PMSNA specifications and is interested in meeting PMSNA's
requirements for such modified product on an exclusive and long-term, original
equipment manufacturer basis;
Whereas, PMSNA desires to purchase from LORAD a minimum quantity of said
product, modified for PMSNA as further specified in this OEM Agreement and
the Exhibits hereto, for resale either directly and/or through PMSNA or its
associated company Philips GmbH, its/their distributors, agents and dealers;
Whereas, LORAD and PMSNA want to establish the terms and conditions
under which during the term of this Agreement LORAD shall supply the
modified **** system to PMSNA for subsequent resale throughout the world.
NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND
PREMISES HEREINAFTER SET FORTH, THE PARTIES HERETO HAVE
AGREED AS FOLLOWS:
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1.2 Definitions
1.2.1 "Agreement"
shall mean this present document and all the Exhibits and other
documents incorporated by reference herein or attached hereto and signed or
initialed by the parties hereto, all of which Exhibits or other documents are an
integral part hereof.
1.2.2 "Component(s)"
shall mean all parts to be supplied by PMSNA as further defined
in Section 4.5.1.
1.2.3 "Confidential Information"
means any and all information whether obtained or given orally or
in writing concerning either party not generally known to persons not
associated with the disclosing party, including, without limitation, information
about product research and development, manufacturing processes and
techniques, samples, drawings, customer marketing and new product data,
trade secrets, computer programming techniques and business strategy,
financial data and all other proprietary or trade secret information of whatever
description.
1.2.4 "Documentation"
shall mean the technical documentation by type or subpart for
Product(s) including, without limitation, electrical diagrams and parts lists,
necessary to incorporate the Product in or connect to other PMSNA systems,
respectively to service and sustain the Product in the field, all as further
specified in Exhibit 3, Exhibit 4 and Section 3.1.2 hereto.
1.2.5 *********************
shall mean that part of the Territory in which ****************
***********************************************************************.
The ******************************** at the beginning of the Term of
***************************************************************************
**************** in Exhibit 9 hereto. ************************ will, in any
event, ****************** throughout the Term.
The extent of *********************** will be reviewed by the parties
on an on-going basis in order to ******************************** given LORAD's
other, present contractual commitments, taking into account *****************
*****************************************************************************
*****************************************************************************
********************************************************.
LORAD agrees to use all reasonable efforts to *********************
****************************.
1.2.6 "First Commercial Delivery"
means the earliest date on which Product which conforms to the
Specifications and which has successfully completed testing as set forth in
Section 3.2 below, for which a Release for Delivery Certificate is issued and
for
which all legal and regulatory requirements for distribution and marketing in
**************************** have been met, is delivered to a customer of
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PMSNA ******************** in the ordinary course of PMSNA's business.
Delivery of Product to a clinical site as an investigational device or for
evaluation for marketing purposes or to serve as a "show" or "seed" site for
demonstration of the Product to prospective customers shall not be considered
to be a delivery in the ordinary course of PMSNA's business.
1.2.7 "Form, Fit or Function"
means items, components, or processes that are sufficient to
enable physical and functional interchangeability, in particular as to source,
size, configuration, mating, and attachment characteristics, functional
characteristics, and performance requirements.
1.2.8 "Know-How"
shall mean all the information relating to the design, development,
production, testing, and servicing of Products as manufactured by or for
LORAD, which is in its possession or under its control and as will be
sufficient
to enable PMSNA or a Philips Associated Company to manufacture or have
manufactured and service Products. All such Know-How shall be in a legible
and reproducible form.
1.2.9 "OEM"
means original equipment manufacturer.
1.2.10 "Option(s)"
means all those parts or accessories for Product(s) which can be
ordered from LORAD and be shipped on request. They will be specified, as
necessary, in close consultation between LORAD and PMSNA. They are listed
or may later be added to Exhibit 1 or Exhibit 2 hereto and identified by a
special PMSNA code number.
1.2.11 "Philips Associated Companies"
shall mean any and all companies, firms and legal entities with
respect to which now or hereafter Philips Electronics N.V. directly or
indirectly
holds 50% or more of the nominal value of the issued share capital or has 50%
or more of the voting power at general meetings or has the power to appoint a
majority of the directors or otherwise directs the activities of such company,
firm or legal entity but any such company firm or legal entity shall be deemed
a
Philips Associated Company only as long as such holding or power exists.
1.2.12 "Product(s)"
jointly and severally shall mean the PMSNA versions of LORAD's
********** mammography systems including Options and accessories, as
further set forth in the Specifications, including any changes thereto, as well
as
such new models and options and accessories as the parties hereto may agree
to include under this Agreement by amendment to this Agreement and Exhibits
1 and 2 hereto.
LORAD will manufacture the PMSNA version of LORAD's ****
mammography system in two configurations, for resale in, *******************
**************************************. The differences in specifications and
pricing for each configuration shall be as set forth in Exhibits 1 and 2. The
term "Product(s)" as used in this Agreement means either or both of these
configurations.
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1.2.13 "Purchase Order(s)"
shall mean the purchase order(s) for Products which will be placed
by the Purchasing Department of PMSNA or of Graner Company under this
Agreement.
1.2.14 "Software/Firmware"
shall mean all computer programs either on disk, diskettes or
embedded in other carriers (e.g. PROMS etc.) consisting of the set of logical
instructions and tables of the information which guide the functioning of the
processors, such programs include all necessary operating system software,
application software, related documentation useful with Software/Firmware
such as functional descriptions, design documentation, program description
and listings as well as the source code versions thereof on disk, all as
specified
in Exhibit 1 and Exhibit 2 hereto.
1.2.15 "Spare Part(s)"
shall mean those items listed as such in Exhibit 1 and Exhibit 3
(Spare Parts, Prices and other Service Aspects) hereto and any and all other
components or items necessary to allow PMSNA or its customers to keep the
Product in good repair throughout its useful life.
1.2.16 "Specification(s)"
shall mean the final functional requirements, technical
specifications, drawings, documentation and other requirements of the
Product(s) all as set forth in this Agreement and in Exhibit 1 and in Exhibit 4
hereto and such amendments thereto as the parties hereto may agree upon
from time to time, in writing.
1.2.17 "Term"
means the time period set forth in Section 13.1 below and any
extensions thereof.
1.2.18 "Territory"
shall mean **************************.
1.2.19 "Time Schedule"
shall mean the time schedule attached hereto as Exhibit 6.
2. Scope of Agreement
2.1 Delivery and Purchases
Subject to the terms of this Agreement, LORAD agrees to manufacture and to
supply and deliver Product(s), Option(s) and Spare Parts (such manufacture,
supply and delivery of Product(s) in PMSNA's trade dress and of any Option(s)
and Spare Parts which are unique to Product(s), being exclusively to PMSNA)
and
PMSNA agrees to purchase and take delivery of Product(s), Option(s) and Spare
Parts from LORAD for marketing, subsequent resale, installation, service and
maintenance in the Territory.
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2.2 Branding and Trademark
The Product will be sold under PMSNA's trademark "mammo DIAGNOST
3000" or "MD 3000" and will be branded with the "Philips" logo and shield
emblem and/or any other trademark or brandname as may be specified by
PMSNA from time to time in writing. The trademarks or trade names to be
applied will either be in the form of labeling provided by PMSNA or be printed
on the products, packaging, manuals or other documentation in accordance
with written instructions provided by PMSNA.
2.3 Marketing Rights/License
2.3.1 Marketing
LORAD herewith grants to PMSNA the ***************************** to sell,
install, maintain and/or repair the Product(s) and/or the individual items
thereof, within the Territory. **********************************************
**********************************************:
* **************************************************
* **********************************************************************
**********************************************************************
***************************.
****************** in or for use in the Territory.
LORAD further agrees that certain parts of the Territory shall be the Exclusive
Territory of PMSNA in that LORAD's **** product will not be offered for sale
there in any form other than as the Product(s) as set forth in Section 1.2.6 of
this Agreement. **************************************************************
******************************************************************************
*************************************************************************
*************************************************.
With regard to distribution ************************************************
***************************************************************************
*****************************.
2.3.2 Regulatory Requirements
LORAD agrees to obtain for PMSNA all regulatory approvals and clearances
necessary for distribution and marketing of the Product(s), Option(s), Spare
Parts, upgrades or enhancements in **************************** (and shall
notify PMSNA when such are obtained), to indemnify and hold harmless
PMSNA from and against any and all civil penalties assessed against PMSNA
under the United States Food, Drug and Cosmetic Act as a result of LORAD's
not having obtained such approvals and clearances before distribution and
marketing begins, and also to provide to PMSNA all documentation and
assistance which is reasonably necessary for PMSNA or a Philips Associated
Company to complete all submittals for the regulatory or other governmental
approvals and clearances necessary for marketing and distribution of
Product(s), Option(s), Spare Parts, or upgrades or enhancements to them,
elsewhere in the Territory, in addition to assuring, that the Product(s) meets
all
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the requirements and standards listed in the Specification, including
labeling
and certifications of compliance as set forth in the Specification.
Furthermore, LORAD agrees to provide PMSNA with all current information of
the kind which is generally made available by manufacturers of medical devices
to their sales and service personnel concerning hardware and
Software/Firmware modifications or upgrades to the Product.
2.3.3 Marketing of Other Products/Right of First Refusal
If LORAD wishes to commercially exploit other products in the field of
mammography, similar to or derived from the Product with any equipment
manufacturer other than PMSNA, LORAD shall first give PMSNA an
opportunity to investigate whether such new product or application may be of
interest to PMSNA. LORAD shall give PMSNA timely notice and provide PMSNA
with all relevant information concerning the product or application to enable
PMSNA to perform its investigation in a reasonable time period not exceeding
**************, or such longer period as the parties may agree upon. Subject
to the confidentiality obligations in Article 12 below, LORAD also agrees to
keep
PMSNA advised of LORAD's progress in the development of LORAD's *********
and other new product developments, upgrades and/or technological
advancements with respect to LORAD's mammography product line.
If LORAD offers *************************************************************
*******, the cost to PMSNA thereof shall not be higher than the PMSNA
version of LORAD's ****.
If PMSNA is interested, the parties shall in good faith negotiate the terms for
PMSNA's or Philips Associated Company, Philips GmbH's purchase of such a
new product or application.
If the parties do not agree in principle within that time to reasonable terms
and
conditions, LORAD shall be free to market such product or application in any
manner it deems fit provided distributorship is not offered to anyone else on
terms equal or better than those offered to PMSNA.
LORAD agrees to make available to PMSNA all minor updates and
improvements which it develops for LORAD's **** product, at no additional
charge.
3. Product
3.1 Product Definition
3.1.1 Specification
The Specifications for the Product to be called the mammoDIAGNOST3000 or
MD3000 are incorporated and made a part of this Agreement as Exhibit 1 and
Exhibit 4.
The implementation of the biopsy unit "CYTOGUIDE" is essential for the
execution of this Agreement. A material deviation from the Time Schedule
(Exhibit 6) may be considered a material breach and a cause for termination of
this Agreement as set forth in Section 13.2 hereof.
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LORAD agrees to adapt the Specifications of the Product as a result of tests
performed together by LORAD and PMSNA or according to further
requirements of PMSNA (subject to acceptance of such additional requirements
by LORAD) and will update the Specifications and provide PMSNA with the
revised version thereof. Upon written agreement of LORAD and PMSNA such
revised Specifications will be added to this Agreement and replace the earlier
version thereof.
3.1.2 Operator's Manuals
Part of the Product will also be the Operator's Manual, written in English,
German, Spanish and French, as set forth in Exhibit 6. Such Operator's
Manual shall comply with the legal requirements of *************************
*** and be made in accordance with the Philips house-style manual, an
example of which shall be supplied by PMSNA. LORAD shall be solely
responsible for the content of these manuals, even though they are in Philips'
standard format and even though parts of them may not be identical to the
manuals LORAD has prepared for its own version of the ****. PMSNA shall be
responsible for the preparation and cost of translation into all languages
other
than those listed in Exhibit 6, as may be required and for the expense of any
arrangements made with LORAD for distribution of Operator's Manuals in such
other languages. Except for ****************************, PMSNA shall be
responsible for compliance of the Operator's Manual with the legal
requirements of all jurisdictions if such requirements are not set forth in the
Specification.
3.2 Testing, Type-Approval, Release for Delivery
Prior to execution of this Agreement LORAD has consigned to PMSNA and
Philips Associated Company Philips GmbH - free of charge - certain Test Unit
prototypes. As a result of initial tests PMSNA may require that certain
additions, alterations or modifications in the Product are incorporated in order
to reach full compliance with PMSNA's requirements.
LORAD will provide PMSNA with a second Test Unit for the version of the ****
to be sold ************************************************** and a third Test
Unit for the version of the **** to be sold **********************************
********************** (or, collectively with the Test Units LORAD consigned to
PMSNA or Philips GmbH earlier, the "Test Units") both of which will fully
comply with the Specification and with such changes as may be agreed upon
by LORAD and PMSNA. LORAD will provide PMSNA with the results and
supporting data of all tests performed within its development department, all in
substantial compliance with the Time Schedule in Exhibit 6 hereto.
Together with the Test Units LORAD shall provide PMSNA with the preliminary
Documentation and technical service information.
The parties shall decide by the mutual consent by their respective project
teams whether the tests should be performed in Hamburg or in Danbury at
LORAD's facility. If the Test Unit(s) will be evaluated in Hamburg they shall
be
delivered F.O.B. at LORAD's facility in Danbury, Connecticut ("F.O.B." as used
in this Agreement is that term as defined in the Connecticut Uniform
Commercial Code, C.G.S. sec. 42a-2-319). If the tests are to be performed at
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LORAD's site, adequate space, tools/test-equipment and support will be given
to PMSNA's personnel at no additional charge.
PMSNA will execute such type-approval tests as PMSNA may reasonably
require to satisfy PMSNA that the Test Units conform to the latest version of
the Specifications and PMSNA shall keep LORAD informed of the results of the
tests and will give LORAD a reasonable opportunity to be present at said tests.
a. If, as a result of these tests, PMSNA is of the reasonable opinion, to be
confirmed in writing, that certain additions, alterations or modifications
in the Test Unit(s) are required in order that the Test Unit(s) comply with
the latest version of the Specification(s) or to eliminate faulty or
substandard workmanship and/or material, LORAD undertakes to
modify and to make same in the Test Unit(s) and to supply to PMSNA all
at LORAD's cost and expense, the changed Test Unit(s).
b. If, as a result of these tests, PMSNA desires modifications or
enhancements of the Test Unit(s) in excess of the latest version of the
Specification(s) and which were not earlier agreed upon, then, if both
parties hereto so agree, LORAD will provide a quotation and a revised
Time Schedule for PMSNA's approval and the execution by LORAD of any
such modifications or enhancements shall be the subject of a separate
Purchase Order by PMSNA.
Upon the finalization of the tests and changes requested by PMSNA and agreed
upon by LORAD and if PMSNA is reasonably satisfied, that the second and
third Test Unit comply with their Specifications, PMSNA shall provide LORAD
with a written Release for Delivery Certificate signed by an officer of PMSNA.
The version of the Product including the CYTOGUIDE will require a similar
procedure for testing and release for distribution as described above, all in
substantial compliance with the Time Schedule.
Upon PMSNA's satisfaction that the Test Units conform to the Specification(s) or
should the Test Units fail to comply with the Specification(s) after the tests
described above, the Test Units shall either (i) be returned to LORAD in the
same manner delivered to PMSNA or (ii) be purchased by PMSNA at a price to
be agreed upon between the parties.
Any new or replacement version of the Product(s) and Option(s) for PMSNA, shall
require a similar procedure for testing and release for distribution as
described
above.
3.3 Modifications, Engineering Change Control
Once PMSNA has released the Product for delivery LORAD shall not, except as
may be required by law, make any changes or modifications in the Product(s),
Spare Part(s) or Option(s) and/or the Specification(s) which affect Form, Fit or
Function, intended use, labeling, listing or other certification by standards
agencies (as set forth in this Agreement and the Specification(s) or which
affect
government approvals or clearances of the Product(s) or Option(s) or which
affect the Spare Part(s) stock, without the prior written consent of PMSNA.
PMSNA's consent shall not be unreasonably withheld.
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The foregoing provision is intended, in particular, to assure continuing
conformity with the Specification(s).
This requirement, however, does not preclude LORAD from using equivalent
components and parts that do not affect Form, Fit or Function of the Product(s)
and/or interchangeability of Spare Part(s) and/or compliance with the
Specifications, Standards, Approval or Certifications.
In the event LORAD uses such equivalent components and/or parts LORAD
shall provide PMSNA with an updated version of the Documentation as soon as
possible without additional charge to PMSNA.
PMSNA shall advise LORAD of any changes or modifications to the
Components which may effect Form, Fit and Function of the Component(s) in
Product(s), work with LORAD to incorporate the changed or modified
Component(s) into Product(s) and be responsible for any incremental expense
caused by changes or modifications in Component(s).
If LORAD wishes to make a modification requiring PMSNA's consent, LORAD
shall, with sufficient lead time for PMSNA to process the request before the
modification is scheduled to be implemented, notify PMSNA in writing of the
proposed modification. The documentation and Philips terminology used for
the approval process for such modifications is:
ECR (Engineering Change Request): a standard form sheet, to be used for all
engineering and design data regarding such proposed modifications.
ECC (Engineering Change Committee): the PMSNA committee responsible
for discussing and deciding about such proposals.
ECO (Engineering Change Order): the form sheet on which decision of the
ECC will be documented and released.
For a sample of form sheets see Exhibit 5.
In order to assist PMSNA in expediting these approvals, LORAD agrees to
submit ECR's and ECO in the format prescribed.
3.4 Proposals
During production of the Test Unit(s) PMSNA's technical, quality and service
experts are entitled to make suggestions and proposals, but such suggestions
and proposals shall be binding on LORAD and PMSNA only if confirmed in a
document signed by authorized representatives of both parties.
3.5 New Type of Product under this Agreement
If the parties hereto wish to introduce a new type of Product under this
Agreement, LORAD shall - before the start of commercial deliveries of such new
type of Product - execute such type approval tests as are approved by PMSNA
in order to ascertain that the new Product conforms to its Specifications.
LORAD shall promptly provide PMSNA with the evidence thereof whereupon
the Agreement shall be amended to reflect any such change to the
Specification.
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3.6 Continuity of Production, Supply of Products
In the event LORAD wishes to stop production of Product(s) LORAD shall
inform PMSNA thereof as early as possible but, in any event, at least *********
********* prior to the date that production would be discontinued. PMSNA
shall then have the opportunity to place a final Purchase Order in such
quantities as PMSNA may require and LORAD shall accept such Purchase
Order(s) at a reasonable price (not exceeding that set forth in Exhibit 2 if
such
production is discontinued during the time schedule set forth in Exhibit 2) to
be agreed upon by the parties in good faith. *******************************
******************************************************************************
***************************************************** from the date of the
First Commercial Delivery under this Agreement, special attention to be given
to the Spare Part(s) supply as set forth in Exhibit 3 hereto, paragraphs 7 and
10 thereof.
********************************************************************************
*******************************************************************************
*******************************************************************************
******************************************************************************
******************************************************************************
*******************************************************************************
********************** as set forth in Section 11.2 which LORAD
********************************************************************************
******************** ******************************** production of which
LORAD has also decided ******************************************************
********************************************** *****************
********. Such approval shall not be unreasonably withheld by LORAD.
4. Planning and Ordering
4. 1 Minimum Purchases
PMSNA agrees to purchase a minimum of eight hundred (800) units of Product(s)
during the Term. Purchases on an annual basis shall be:
Year 1 Year 2 Year 3 Year 4 Year 5
------ ------ ------ ------ ------
******** ********** *********** ********** ***********
* *****************************************************************
*************************************** *************************
******** by PMSNA shall be**************************************************
minimum purchase quantity of eight hundred units (800), ********************
*************************** *************. PMSNA's ********* may be ******
**************************************************************************
*****************************************************************************
******************************************************************************
********************************.
********************************************************************************
******************** ********. The start of a year for the purposes of the
********************************************************************************
******************** **************************************************.
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4.2 General Planning
PMSNA and LORAD expect an increase in manufacturing and sales activity for the
Product(s) as indicated in Section 4.1 and Exhibit 2 hereto in response to
customer demand during the first years of the Term. The figures in Section 4.1
and Exhibit 2 hereto and in later PMSNA forecasts, are not intended as
Purchase Orders, but rather as an indication, for planning purposes, of
expected market activity. Delivery dates, quantities, options included and
configuration of each unit of Product shall be specified by PMSNA only by
Purchase Order using the procedure described in Section 4.3 below. **********
**********************************************************************
**************************************************************************
**************** minimum purchase volume above) ************** minimum
purchase commitment of eight hundred (800) units******************************
******************* as set forth in Section 4.1 hereof.
4.3 Forecast
4.3.1 Rolling Forecast, "Just in Time" Deliveries
A mutually satisfactory procedure will be established in which production and
shipment of Product(s) and Spare Part(s) is matched as closely as possible with
the
related demand set by orders from PMSNA's customers.
The demand will be transmitted to LORAD by fax or telex as a rolling forecast
with the following information:
Rolling Forecast:
- - ********************** for ********************** will be renewed and
issued to LORAD on or about the *****************************************
************** according to the following schedule for delivery***********
******************** forecast, during:
- months 1-3 ***************** indicated on an issue of
********************** for **************************
**********.
********************************************************************
******************************************************************************
*******************************************************************************
********************************** rolling forecast *****************
***************************************************************
************ **************.
- ***********: *****************************************************
**************************************************
**** rolling forecast) ***************************
*************************************************
********.
LORAD will use this planning to assure delivery of Product(s) and Option(s)
"just in time" within the requested delivery dates.
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In order for PMSNA to minimize shipping and handling expenses, **********
**********************************************************************
*******************.
4.3.2 Additional Quantities
Although it is the intention of the parties to assure a smooth delivery schedule
in accordance with *****************************, PMSNA may require
additional deliveries *********************** as indicated. Then, LORAD
shall use its best efforts to supply such additional quantities.
4.3.3 Shortage or Lack of Parts
Subject to Article 14 hereof, if LORAD can no longer or expects that it will not
(on short notice) be able to supply Product(s) to PMSNA because of a shortage
or lack of components and/or Spare Part(s), LORAD shall immediately inform
PMSNA thereof and, at its own expense, take all steps which are reasonable in
the circumstances, including a redesign of the Product(s), to obtain an
additional supplier or suppliers for such component or Spare Part.
The redesigned product shall be subject to the procedure set forth in Article 3
of this Agreement.
4.4 Order and Delivery
4.4.1 Purchase Orders
At the beginning of each month PMSNA shall issue separate Purchase Orders
containing the consolidated figures as agreed upon.
Each Purchase Order shall specify at a minimum:
PMSNA-12-digit-code number
Price
Quantities and
Requested delivery day/week,
to cover at least the period of the commitment of the rolling forecast as
mentioned above.
The "requested delivery" specified for each shipment will be the date for
"receipt
by PMSNA at the address stated on the Purchase Order form."
All Purchase Orders shall be deemed to incorporate and be subject to the terms
and conditions of this Agreement, as well as any supplemental terms and
conditions agreed to in writing by authorized representatives of the parties.
No
other terms and conditions contained on any Purchase Order form or any other
form, agreement or correspondence originated by either party, shall apply.
4.4.2 Confirmation, Delivery Dates
Purchase Orders will be confirmed by LORAD within one (1) week after receipt
by mail or telefax. They shall then be binding on LORAD and PMSNA as set
forth in Section 4.3.1 above and may be canceled only if LORAD or PMSNA
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materially defaults in its execution thereof or if otherwise agreed upon between
the parties hereto.
LORAD shall take adequate delivery and transportation times into account and
shall meet the agreed upon delivery dates for each Purchase Order. Any
deviation from the delivery date specified which can be foreseen during
execution of a Purchase Order will be communicated to PMSNA immediately.
The delivery date for a unit of Product will normally be **************** after
receipt of PMSNA's Purchase Order, but may be earlier or later if the parties so
agree.
LORAD shall take adequate delivery and transportation times into account and
shall meet the agreed upon delivery dates. Any deviation which can be
foreseen during execution of a Purchase Order will be communicated to PMSNA
immediately.
4.4.3 Late Deliveries, Compensation
If LORAD fails to meet an agreed delivery date and the delay is not caused by
Component(s), the invoice price of the respective Product shall be **********
******************************************** for each week delivery is delayed,
****************************************************, as compensation to
PMSNA for such late delivery. Subject to Article 14 hereof, if a delay extends
beyond three months, PMSNA shall be entitled to cancel or terminate the
pertaining Purchase Order(s) and/or demand compensation for non-fulfillment,
without prejudice to any other rights accruing under this Agreement, in law or
in equity and subsequently the minimum purchase commitment pursuant to
Section 4.1 will be reduced. In no event, however, shall a minor delay in
delivery of a single unit of Product or any infrequent, unrelated delays in
deliveries of Product(s) or any delay by LORAD in meeting a disproportionately
large demand for Product(s) made by PMSNA outside the planning procedure in
Section 4.3.1 hereof be deemed sufficient to allow PMSNA to cancel or termi-
nate this Agreement or effect a reduction in the minimum quantity in Section
4.1 above.
The compensation described above shall be PMSNA's sole remedy for any delay
in the delivery of a unit of Product which is less than three (3) months.
4.5 Components Specific to the PMSNA Version
4.5.1 General
LORAD agrees - upon request of PMSNA - to build into and/or ship with the
Product(s) the following Components, which shall be furnished by PMSNA at no
charge to be used for the Product(s):
************************************
*******************
******************
**********************
Provision will be made by LORAD to integrate these Components into the
Product(s) as specified in Exhibit 1. LORAD shall be responsible for the overall
design and performance of the Product(s) not only as regards the Product(s)
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<PAGE>
meeting the Specifications (except as to the specifications for Component(s)),
but also as to their achieving the quality normally expected of products in the
medical x-ray industry and of LORAD's own products.
The technical responsibility for the Components themselves, however, will
remain with PMSNA.
The Components will be used solely for the Products and shipments to PMSNA
or to Philips Associated Companies. They shall not be used for other products
or applications nor for shipments to any third party, unless specifically agreed
to by PMSNA in writing.
All parts left over will be returned to PMSNA upon termination or expiration of
this Agreement.
4.5.2 Logistic Procedure
PMSNA will keep adequate stocks of Components at the warehouse of the
Graner Company in Port Chester, New York, to enable "just in time" supply to
LORAD. LORAD's monthly demand should be transmitted to Graner and
shipment requested, giving adequate advance notice. The stock of Components
at LORAD shall not exceed the quantity needed for the next month's
production of Product(s).
LORAD will handle these Component(s) like any other parts contained in the
Product (i.e. planning, ordering, incoming inspection, stock keeping, technical
supervision) at no extra cost to PMSNA and will use the same degree of
attention and care that it uses for its own property and inventory control.
The details of Component(s), leadtimes, addresses and procedures shall be as
set out in this Section, in Section 6.5 of this Agreement and in Exhibits 1 and
7
hereto.
4.5.3 Spare Parts, Replacement, Repair
Any Spare Part(s) required for repair or replacement of Component(s) will be
provided directly (by Philips GmbH) to PMSNA and Philips Associated
Companies.
4.5.4 Invoicing for Components
PMSNA and LORAD shall establish a "no charge" consignment invoice
procedure to track shipments of Components to LORAD.
4.5.5 Components Consigned to LORAD
Components will be shipped by PMSNA to LORAD F.O.B. Danbury,
Connecticut. LORAD shall be responsible for all risk of loss or damage to
Components consigned to LORAD while they are in LORAD's custody.
14
<PAGE>
5. Pricing
5.1 Prices
During the term of this Agreement PMSNA will purchase and accept from
LORAD Products at the prices specified in Exhibit 2 hereto.
All agreed modifications made at PMSNA's request and listed in Exhibit 1
hereto as well as the engineering work for the CYTOGUIDE adaptation are
included in the price of the Product.
It is expressly understood that PMSNA's going prices in the market have to be
competitive with similar products. In the event of unforeseen circumstances
affecting LORAD or PMSNA or both and/or in the event the price/performance
ratio of Products deteriorates as compared to competitive products, the parties
hereto will jointly review the situation and attempt to find a solution
reasonably
acceptable to both parties.
Prices include adequate packing and royalties for licenses, if any, for
Software/Firmware for each Product.
All prices are expressed in United States dollars ($).
5.2 Price Changes, Binding Prices
The prices of the Products set forth in Exhibit 2 hereto shall remain valid for
**** ***** from the date of the First Commercial Delivery under this Agreement.
Should any future price negotiations extend beyond the price validity period
the prices valid for the previous period will continue in effect until such time
as
the parties have reached mutual agreement on the new prices.
5.3 Most Favored Treatment
In the event, that during the Term, LORAD would normally ***************** it
supplies on an OEM basis or LORAD's distributors/dealers *****************
***************************************************************
******************************************************************************
******************************************
********************************************************************************
*******************************************************************************
***********************************.
5.4 Delivery Conditions, Transportation
Products and Spare Parts shall be delivered F.O.B. at LORAD's facility in
Danbury, Connecticut.
PMSNA shall be responsible for shipping arrangements.
5.5 Payment Conditions
Payment from PMSNA to LORAD shall be made within ************************,
after date of invoice and delivery. A finance charge not to exceed the lesser of
15
<PAGE>
*************************** or the maximum rate allowed by law, may be
assessed by LORAD against any balance due LORAD which is not paid when
due.
5.6 Advance or Excess Deliveries
Unless mutually agreed upon by the parties hereto, LORAD shall not deliver
Product(s) in excess of the quantities ordered nor in advance of the agreed
delivery date. Absent such agreement, if such advance or excess deliveries
occur, PMSNA shall be entitled - at its option - to refuse those Products or
keep
them at its warehouse. Payment under any invoice related to those deliveries
shall not be due until the date originally set for such delivery.
5.7 Invoices
All invoices shall contain at least the following information:
Purchase Order Number
Type-Number of Product (PMSNA's 12-digit ID-number)
Name of the Product
Serial Number(s) thereof
Indication of "certifiable items", contained in the Product
Unit price and total price
Bill of lading number
Invoices shall be submitted (an original and three copies) separately for each
shipment.
6. Production, Packing and Shipping
6.1 Production
The Product(s) shall be manufactured and tested by LORAD in accordance with
the Specification.
6.2 Product Identification and Labelling
LORAD shall mark the Product(s) in accordance with PMSNA's marking
specifications, set forth in Exhibit 1 hereto and - if applicable - with
electrical
current and frequency data.
The serial number shall be listed and used on all documents, such as test
protocols, delivery papers and invoices for easy evaluation and cross reference.
6.3 Packing, Delivery
The prices referred to include all appropriate and safe packing of Product(s),
Option(s), Spare Part(s) and all other items supplied for air and ocean
transport, unless otherwise specified in Exhibit 1 hereto.
The Packing shall be tested by PMSNA and approved in accordance with the
relevant sections of Philips Packing Standard UN-D 1400, Publication no. UN-D
1400 (69), 1990-08-31. LORAD will use only this approved packing method of
16
<PAGE>
shipment of the Product(s). Changes in approved packing may be introduced
only on PMSNA's written request or after PMSNA's prior written approval.
The Products will be packed in a neutral box. There will be no other logo or
trademark inside or outside the packing. LORAD will, however, place
promotional stickers on the packing as PMSNA may require. Such stickers will
be supplied by PMSNA at no charge.
6.4 Labelling and Marking for Shipment, Trademarks
LORAD shall mark all packages and shipping papers (if applicable) with:
Type-Number of Product (PMSNA's 12-digit ID-number)
Name of the Product
Serial Number thereof
Indication of "certifiable items", contained in the Product
Number of packages, if the shipment contains more than one package
per product.
Products shall only bear trademarks, trade names or other indications as
detailed in Exhibit 1 hereto.
Each party hereto acknowledges the other party's rights in and to said other
party's trademarks and tradenames. Except as expressly set forth in this
Agreement, the manufacture and supply of Product(s), Option(s), Spare Part(s)
and packing with said trademarks and tradenames shall not be considered as
giving either party any right to the other party's trademarks and tradenames or
similar trademarks and tradenames.
6.5 Execution of Logistic Procedures
PMSNA may have the Graner Company division of Philips Electronics North
America Corporation or Philips GmbH execute logistic procedures, such as,
without limitation, placing Purchase Orders for any shipments of Product(s)
sent ************************************, payment of invoices, transport
arrangements, shipping instructions and handling of return shipments for
repair or replacement on behalf of PMSNA. LORAD agrees to accept Purchase
Orders from Graner Company or Philips GmbH and deal directly with them or
their authorized agents with regard to scheduling, invoicing, warranty claims
and all matters relating to such Purchase Orders issued by Graner Company or
Philips GmbH.
The address and contact information for Graner Company is:
Graner Company
Philips Electronics North America Corporation
21 Grace Church Street
Port Chester, N.Y. 10573
Phone: (914) 935-8014
Fax: (914) 935-8019
Until further written notice Graner Company shall perform the services listed
above in the first paragraph of this Section 6.5 for all Purchase Orders for
Product(s), Option(s) or Spare Part(s) shipped to addresses ***************
*********************.
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<PAGE>
6.6 Export and Import Documentation
PMSNA shall obtain, at its own expense, any export or other official
authorization and carry out any other formalities necessary for the
transportation, exportation and importation of Product(s), Option(s) and Spare
Part(s) to all jurisdictions in the Territory. LORAD shall provide all
documentation (including test reports) reasonably necessary for PMSNA to
prepare and submit the required documentation and to obtain any
authorization necessary for such export and import.
Except as to compliance with the standards and legal requirements set forth in
the Specification, Exhibit 4 and Exhibit 8, PMSNA shall be responsible for
ensuring that the Product(s) comply with all local laws, standards and
regulations in the jurisdictions in the Territory, other than ***************
*************. LORAD shall be solely responsible for such compliance including
labeling or listing Product(s), Option(s) or Spare Part(s) as may be required by
the electrical codes, ordinances or regulations of *******************
*********.
7. Quality
7.1 Design Requirement, Compliance
All obligations for testing of Product(s), Option(s) or Spare Part(s) to confirm
that
they comply with the Specification shall be the responsibility of LORAD.
Should it become evident that any Product(s), Option(s), Spare Part(s) or parts
thereof are not in compliance with the applicable requirements of this
Agreement and Exhibits 1, 3 and 4 hereto, LORAD shall, subject to Section 7.2,
make all necessary corrections at its own expense.
7.2 Change in Requirements, Regulations or Standards
If any of the requirements, safety regulations and/or standards listed in the
Specifications or in Exhibits 4 and 8 hereto change, LORAD shall, at its cost,
make all the necessary modifications in and to the Product, Option(s) and/or
parts thereof, including any Product(s) to which the change applies which have
not then been accepted by the end-user.
Subject to the provisions of this Section 7.2, implementation of modifications
or changes to Product(s) and Option(s) to comply with the safety requirements
of any and all applicable statutes, rules and regulations, shall be mandatory.
As of the date the parties entered into this Agreement, changes to the
specifications for all mammography systems sold and installed in the United
States are under consideration by certain government agencies as a result, in
particular, of the Mammography Quality Standards Act of November, 1992 (the
"MQSA"). The final regulation implementing the MQSA is expected to be
published at the beginning of 1994. The parties agree that any such changes
affecting the design and/or performance of the Product(s), Option(s), Spare
Part(s) and/or Component(s) will be incorporated therein in due time, in
accordance with such legal and regulatory requirements. Each party shall bear
its own costs and expenses related to these changes. The responsibilities of the
parties with respect to any Product(s) and Option(s) installed at PMSNA's
customers sites which may be subject to modification as a result of retroactive
18
<PAGE>
application of any such requirements shall be as set forth for warranty
obligations in Article 8 of this Agreement, notwithstanding the fact that
LORAD's warranty on such Product(s) and Option(s) may have expired.
If a revision or modification to any applicable standard or regulation results
in extraordinary cost or expense to LORAD, the parties shall review and evaluate
the change and make all reasonable efforts to find an acceptable solution.
Notwithstanding the foregoing, any revision or modification to any applicable
regulation or standard which is listed in the Specification, which cannot be
incorporated in the Product(s) at a reasonable expense in LORAD's sole
discretion (to be absorbed by LORAD) will be considered an event of force
majeure as set forth in Article 14 below.
Any redesign of Component(s) which might be necessary as a result of new or
revised industry standards or government regulations which affect the design
or manufacture of such Component(s) shall be performed by PMSNA (or the
Philips Associated Company which manufactures such Component(s)) at its
own expense.
7.3 Quality System, Quality Control/Audits
LORAD agrees that its quality system shall comply with the regulations
pertaining to the United States' Food and Drug Administration ("FDA"), Good
Manufacturing Practices ("GMP") and shall also use its best efforts to comply
prior to the end of 1994 with the International Organization for Standardization
("ISO") standards entitled ISO 9001 "Quality systems - Model for quality
assurance in design/development, production, installation and servicing" and
"Quality Systems - Model for quality assurance in production and installation"
ISO 9002 (a copy of the ISO certification shall be attached to this Agreement as
Exhibit 8 when received).
Upon request and at least two (2) weeks advance written notice to LORAD,
PMSNA's representative(s) or an independent notified body acceptable under
GMP or ISO, may visit, at their expense, the facilities of LORAD at reasonable
times to inspect the storage and quality of parts for Product in LORAD's
facilities, and audit the quality control procedures and methods applied by
LORAD in its facilities in the development and manufacturing and assembling
of Products in accordance with GMP and, after LORAD obtains such
certification, with ISO-9001.
With regard to the CE Mark, a certification which is to become mandatory in
the European Community, LORAD will use its best efforts to obtain this
approval/certification by December 31, 1994. PMSNA or one of the Philips
Associated Companies will support LORAD in its contacts with the concerned
European notified body. Cost consequences of design changes, if any, caused
by changes relating to CE Mark certification are for the account of LORAD.
If LORAD does not comply with the ISO standards listed above and/or obtain
CE Mark certification by the date set forth in this Section 7.3 and if, as a
result of such non-compliance or absence of CE Mark certification, PMSNA is
prevented or prohibited by the statutes, regulations, ordnances or other legal
requirements of one or more jurisdictions in the Territory, from importing and
selling Product(s) or customers would be prevented or prohibited from
operating Product(s) in such jurisdictions of the Territory and if PMSNA
19
<PAGE>
provides LORAD with a written statement or notice to that affect from an
appropriate regulatory or standards agency, then LORAD and PMSNA shall
negotiate an extension of the time allowed to PMSNA to purchase the minimum
quantity set out in Section 4.1 of this Agreement. Neither party shall, in these
circumstances, be obligated to bring the Product(s) into compliance with any
alternate standards or certifications that may be acceptable in jurisdictions
where sale, installation or use of Product(s) is prevented or prohibited by any
lack of ISO compliance or CE Mark certification, after January 1, 1995.
7.4 Outgoing Inspection and Record Keeping
It is understood between the parties that under normal circumstances
Product(s) may be shipped directly by LORAD to customers in ***************
************* or to Philips Associated Companies for sales in **************
*******, or, preferably, to their final destination. Hence, PMSNA shall not be
obligated to execute any incoming inspection or other inspection of Product(s),
Option(s) or Spare Part(s) delivered hereunder by LORAD, for non-compliance
with the Specifications.
Therefore, LORAD shall inspect all outgoing Products and/or parts thereof to
be supplied to PMSNA strictly in accordance with Specifications and with the
Acceptance Procedure as specified in Exhibit 4. This Acceptance Procedure will
be set up or adapted - if necessary - in close cooperation between the quality
officers of both companies.
LORAD will archive in a safe manner all records of the Product(s), or Option(s)
e.g. the Product master file and especially all records/test protocols, for a
period as required by law, but at least ************** after delivery of each
Product or Option. These records will be made available if necessary and upon
specified request of PMSNA.
7.5 Incoming Inspection
PMSNA may inspect the delivered Product(s), Option(s) and Spare Part(s) at
PMSNA's factory or at PMSNA's customer's site, following the Acceptance
Procedures set forth in this Agreement and the Exhibits hereto. PMSNA shall
have the right to reject all or any of the Product(s), Option(s) or Spare
Part(s)
which are proven, upon inspection and testing by PMSNA, not to meet the
applicable Specification(s), provided that such claim shall be submitted to
LORAD with the supporting evidence within thirty (30) days after arrival date at
the destination. LORAD shall ship a replacement within thirty (30) days of
receipt of notice that a Product(s), Option(s) or Spare Part(s) is to be
returned for such
reason.
LORAD may inspect the delivered Component(s) at LORAD's factory, following
such test protocols as have been agreed upon for them by LORAD and PMSNA.
LORAD shall have the right to reject all or any of the Component(s) which are
proven, upon inspection and testing by PMSNA, not to meet the applicable
specifications, provided that such claim shall be submitted to PMSNA with the
supporting evidence within thirty (30) days after arrival date at the
destination.
PMSNA shall ship a replacement within thirty (30) days of receipt of notice that
a Component(s) is to be returned for such reason.
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<PAGE>
The parties agree that in the event of rejections of Product(s), Spare Part(s)
or Option(s) by PMSNA and rejections of Component(s) by LORAD, that concern
minor defects, each party will bear its own costs and expenses associated with
testing, rejection, minor rework, retesting, return of materials etc. and not
claim against the other for such costs and expenses.
Nevertheless, if such rejections exceed an acceptable level for either party,
that party's costs and expenses of such rejection shall be subject to
negotiation with the other party. In extraordinary cases, in which there is
clearly an unacceptable level of rejection, LORAD and PMSNA shall decide in
joint consultation:
a. which corrections and repairs can be made by the rejecting party against
reimbursement by the other party for labor and other expenses incurred
by the rejecting party in correction and repairing Products and/or parts
thereof.
b. which Product(s) or Component(s) respectively, or parts thereof shall be
replaced free of charge by the other party and within which period of time
such replacement shall be effected, it being understood that all costs
connected with forwarding of such replacement to the rejecting party and
removing the defective part and installing the new one shall be for the
account of the other party.
c. which replaced Product(s) or part thereof shall be returned to LORAD at
LORAD's risk and expense or which replaced Component(s) or part
thereof shall be returned to PMSNA at PMSNA's risk and expense.
In all cases the rejecting party shall advise the other party of the expected
costs and receive the other party's approval thereof prior to taking action.
8. Warranty
8.1 Extent of Warranty
LORAD warrants to PMSNA, Graner Company and Philips GmbH that the Product(s),
Option(s) and Spare Part(s) including the Software/Firmware incorporated
therein, comply in all material respects with the Specifications for such
Product(s), Option(s) and Spare Part(s), are new and are free from defects in
material and workmanship. Except as provided in Section 8.4 below, LORAD's sole
obligation under the foregoing warranty shall be to replace or repair, at its
sole discretion and at its sole cost and expense, any defective Product(s),
Option(s) or Spare Part(s) returned to LORAD by or on behalf of PMSNA or a
Philips Associated Company; provided, however, that (i) LORAD's sole obligation
to replace or repair Product(s), Options(s) or Spare Part(s) shall not extend
past the earlier of ******************** from the date of delivery of such
Product(s), Option(s) or Spare Part(s) by LORAD to PMSNA or a Philips Associated
Company or ****************** from the date of completion of its installation at
a customer's site, (ii) PMSNA or its Associated Company shall have notified
LORAD, prior to the expiration of such period, with respect to each claim that
the Product(s), Option(s) or Spare Part(s) are defective, and (iii) LORAD shall
have no obligation to repair or replace the defective Product(s), Option(s) or
Spare Part(s) in the event that the Product(s), Option(s) or Spare
21
<PAGE>
Part(s) have been transported, handled, stored or operated in an improper or
other manner which adversely affects the Product(s), Option(s) or Spare Part(s).
LORAD shall use its reasonable best efforts to replace or repair Product(s),
parts
of Product(s), Option(s) and Spare Part(s), if required by this Section, at
LORAD's
cost within the shortest possible time.
8.2 Cost of Warranty Replacement or Repair
During the time LORAD's warranty is in effect for each unit of Product, each
Option and each Spare Part, LORAD shall provide without charge to PMSNA all
replacement parts necessary to correct any such Product, Option or Spare Part
which proves to be defective and shall pay all shipping expenses (including
reasonable return shipping expenses) associated with such replacement.
8.3 Limited Warranty
EXCEPT AS EXPRESSED OR SET FORTH IN THIS AGREEMENT AND THE
EXHIBITS HERETO, PRODUCT(S), OPTION(S) AND SPARE PART(S) SHALL BE
SUPPLIED BY LORAD TO PMSNA, GRANER COMPANY OR PHILIPS GMBH,
"AS IS." LORAD HEREBY DISCLAIMS ANY AND ALL REPRESENTATIONS AND
WARRANTIES (OTHER THAN THOSE SET FORTH IN THIS AGREEMENT)
EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCT(S), OPTION(S) AND
SPARE PART(S), INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. PMSNA
ACKNOWLEDGES AND AGREES THAT IT HAS NOT RELIED ON ANY
REPRESENTATIONS OR WARRANTIES MADE BY LORAD, EXCEPT AS SET
FORTH IN THIS ARTICLE.
PMSNA shall be responsible for warranty claims for Component(s) and all costs
related thereto.
8.4 Epidemic Faults
Product(s), Option(s) and Spare Part(s) shall be free of Epidemic
Faults. Epidemic Faults are, for the purpose of this Agreement, defined as
defects which
- either are the same or have the same origin and occur over a
period of ****************** during the ************* expected lifetime of the
product with a class failure quantity of at least ************************
sequentially delivered Product(s), Option(s) or Spare Part(s), from the delivery
date
of the last sequentially delivered Product, Option or Spare Part, and
- are such that they create an "unreasonable risk of substantial
harm" as that term is defined by the United States, Food, Drug and Cosmetic
Act and the regulations and guidelines issued thereunder.
In the event of the existence of an Epidemic Fault, the parties shall consult
with and cooperate fully with each other in a timely way to determine if a
safety
concern exists and to take the appropriate actions and to allocate the
resulting
costs of such actions between them in accordance with the terms hereof.
LORAD shall within **************** after receipt of same respond to any
question and provide all necessary information to the PMSNA Service
22
<PAGE>
Department arising out of a recall or corrective action program or related
program.
Furthermore LORAD shall inform PMSNA of all relevant details of substantially
similar incidents that occur with LORAD's products similar to or part of
Product(s).
In case of such Epidemic Fault(s), in any part or parts of Product(s) or any
required recall program, LORAD shall, at its expense (including shipment to
each customer's site), provide sufficient parts to replace all such parts in
installed Product(s) and Product(s) purchased by PMSNA.
Spare Part(s) in stock which become obsolete due to Epidemic Fault(s) may be
returned to LORAD and will be credited at the original invoice price or
upgraded to the desired level at the expense of LORAD.
LORAD shall repair or replace uninstalled Product(s), Option(s) and Spare Parts
which are subject to Epidemic Faults. LORAD warrants the Products, Options
and Spare Part(s) not yet delivered will be so upgraded. For Products and
Option(s) in the installed base, upgraded components or parts will be made
available from LORAD at no charge and PMSNA will be responsible for
removing the old components or parts and installing the new ones.
The remedies contained in this Section 8.4 shall be the sole remedies available
to PMSNA in the event of an Epidemic Fault as defined herein, subject to the
limitations set forth in Section 10.3 hereof.
9. Service and Spare Parts
The Spare Part(s) supply, maintenance and repair of Product and general
product and service support for the Product, to be provided by each of the
parties shall be as set forth in Exhibit 3 hereto.
10. Claims
10.1 Personal Injury and Property Damage
LORAD agrees to defend, indemnify and hold harmless PMSNA and Philips
GmbH from and against any and all loss, cost and expense, including counsel
fees and all expenses of investigation, litigation, judgment and/or settlement,
arising through or out of personal injury or death to person(s) or damage to
property alleged or proven to have arisen out of failure of a Product(s),
Option(s) or Spare Part(s) to meet the Specification or as a result of a defect
in
its workmanship or materials, provided, that in any such case where
indemnification is sought hereunder (i) PMSNA or Philips GmbH shall have
given prompt written notice to LORAD of such claim and the facts and
circumstances relating thereto, (ii) PMSNA shall fully cooperate with LORAD in
connection with any such claim by any governmental authority or third party,
(iii) LORAD shall have the sole right to defend, settle and compromise any such
claim, and (iv) LORAD shall have no obligation to indemnify and hold harmless
PMSNA for any negligent conduct of PMSNA or any action or omission by
PMSNA in violation of this Agreement.
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<PAGE>
PMSNA agrees to defend, indemnify and hold harmless LORAD from and
against any and all loss, cost and expense, including counsel fees and all
expenses of investigation, litigation, judgment and/or settlement, arising
through or out of personal injury or death of person(s) or damage to property
which is alleged or proven to have arisen out of the negligent act or omission
of
PMSNA, its officers, directors, employees or agents, provided, that in any such
case where indemnification is sought hereunder (i) LORAD shall have given
prompt written notice to PMSNA of such claim and the facts and circumstances
relating thereto, (ii) LORAD shall fully cooperate with PMSNA in connection
with any such claim by any governmental authority or third party, (iii) PMSNA
shall have the sole right to defend, settle and compromise any such claim, and
(iv) PMSNA shall have no obligation to indemnify and hold harmless LORAD for
any negligent conduct of LORAD or any action or omission by LORAD in
violation of this Agreement.
LORAD shall obtain and maintain current, at all times during the Term of this
Agreement and any extensions hereof, Commercial General Liability insurance
(including products and contractual coverage) with an insurance company
rated by Best "A" or better, in amounts not less than ********** single limit
and ********** combined single limit. Such insurance shall cover, among
other things, product liability claims relating to the Product. LORAD shall
provide PMSNA with a certificate of such insurance from LORAD's insurer,
updated upon expiration thereof. Such certificate shall designate PMSNA as a
certificate holder. PMSNA shall receive no less than thirty (30) days prior
written notice of cancellation or termination of such insurance.
10.2 Intellectual Property Indemnification
10.2.1 Indemnification by LORAD
LORAD shall defend PMSNA and its respective distributor, agent, dealer or
customer against any claim by a third party that the manufacture, sale or use
of a Product(s), Option(s) or Spare Part(s) supplied by LORAD infringes******
************************************************************************** and
LORAD will pay any resulting penalties, judgments or awards finally
determined by a court or other tribunal of competent jurisdiction to be payable
in connection therewith, or amounts payable in settlement thereof, provided
that in any such case where indemnification is sought by PMSNA hereunder (i)
PMSNA shall have given prompt written notice to LORAD of such claim and
the facts and circumstances relating thereto, (ii) PMSNA shall fully cooperate
with LORAD in connection with any such claim, (iii) LORAD shall have the sole
right to defend, settle and compromise any such claim and (iv) LORAD shall
have no obligation to indemnify and hold harmless PMSNA for any negligent
conduct of PMSNA or for any action or omission by PMSNA in violation of this
Agreement. LORAD's obligations under this Section 10.2.1 are conditioned on
PMSNA's agreement that, if the Product(s), Option(s) or Spare Part(s) or the
manufacture, sale or use thereof becomes or in LORAD's reasonable opinion is
likely to become, the subject of such a claim, PMSNA will permit LORAD, at
any time thereafter, at LORAD's expense, either to procure the right for PMSNA
to continue selling the Product(s), Option(s) or Spare Part(s) or to replace or
modify, in a manner such that its performance is not degraded, the Product(s),
Option(s) or Spare Part(s) so that it becomes non-infringing, and if neither of
the
foregoing alternatives is available on terms which are acceptable to LORAD in
its reasonable judgment, LORAD may terminate this Agreement immediately as
24
<PAGE>
to that part of the Territory in which manufacture, sale or use of the
Product(s),
Option(s) or Spare Part(s) may be infringing and LORAD shall reimburse PMSNA
for the purchase price actually paid by PMSNA, less an allowance for
depreciation, for Product(s), Option(s) and Spare Part(s) which can no longer be
sold by PMSNA or a Philips Associated Company or used by their customers.
The foregoing states the entire liability of LORAD with respect to infringement
of rights in intellectual property.
Notwithstanding the foregoing, LORAD shall have no liability under this
Section 10.2.1 for a claim by a third party that the manufacture, sale or use of
a Product(s), Option(s) or Spare Part(s) infringes a patent, copyright, trade
secret, mask work or other intellectual property right in any of the following
circumstances: (i) The Product(s), Option(s) or Spare Part(s) was altered or
modified by PMSNA or any third party and such alteration or modification
resulted in or is the basis for the claim of infringement. (ii) PMSNA or its
customers failed to use updated Product(s), Option(s) or Spare Part(s) provided
by LORAD which would have avoided the claim of infringement. (iii) PMSNA or
any third party used the Product(s), Option(s) or Spare Part(s) in combination
with apparatus or software not furnished by LORAD; this combination resulted
in or is the basis for the claim of infringement; and the claim of infringement
would not have occurred if the Product(s), Option(s) or Spare Part(s) had been
used in combination with the usual apparatus or software (if any) specified by
LORAD for that use in or with the Product(s), Option(s) or Spare Part(s). In
particular, LORAD shall be responsible for a claim of infringement by a
Product(s), Option(s) or Spare Part(s) in combination with Component(s) if and
only if that claim can also be stated in the same terms against the item which
LORAD itself has specified for that use. (iv) The Product(s), Option(s) or Spare
Part(s) was used in a manner for which it was not designed, specified or
otherwise contemplated by LORAD and that use resulted in or is the basis for
the claim of infringement. (v) PMSNA owns an intellectual property right or has
a license which precludes it from being held responsible for the claim of
infringement.
10.2.2 Indemnification by PMSNA
PMSNA shall defend LORAD and its respective distributor, agent, dealer or
customer against any claim by a third party that the manufacture, sale or use
of Component(s) supplied by PMSNA hereunder infringes a patent, copyright,
trade secret, mask work or other intellectual property right and PMSNA will pay
any resulting penalties, judgments or awards finally determined by a court or
other tribunal of competent jurisdiction to be payable in connection therewith,
or amounts payable in settlement thereof, provided that in any such case
where indemnification is sought by LORAD hereunder (i) LORAD shall have
given prompt written notice to PMSNA of such claim and the facts and
circumstances relating thereto, (ii) LORAD shall fully cooperate with PMSNA in
connection with any such claim, (iii) PMSNA shall have the sole right to defend,
settle and compromise any such claim and (iv) PMSNA shall have no obligation
to indemnify and hold harmless LORAD for any negligent conduct of LORAD or
for any action or omission by LORAD in violation of this Agreement. PMSNA's
obligations under this Section 10.2.2 are conditioned on LORAD's agreement
that, if such Component(s) or the manufacture, sale or use thereof becomes or
in PMSNA's reasonable opinion is likely to become, the subject of such a claim,
LORAD will permit PMSNA, at any time thereafter, at PMSNA's expense, either
to procure the right for LORAD to continue using such Component(s) or to
25
<PAGE>
replace or modify, in a manner such that its performance is not degraded, such
Component(s) so that it becomes non-infringing, and if neither of the foregoing
alternatives is available on terms which are acceptable to PMSNA in its
reasonable judgment, PMSNA may terminate this Agreement immediately as to
that part of the Territory in which manufacture, sale or use of such
Component(s) may be infringing and PMSNA shall reimburse LORAD for the
purchase price actually paid by LORAD, less an allowance for depreciation, for
such Component(s) which can no longer be sold by LORAD or used by its
customers. The foregoing states the entire liability of PMSNA with respect to
infringement of rights in intellectual property.
Notwithstanding the foregoing, PMSNA shall have no liability under this
Section 10.2.2 for a claim by a third party that the manufacture, sale or use of
a Component(s) infringes a patent, copyright, trade secret, mask work or other
intellectual property right in any of the following circumstances: (i) The
Component(s) was altered or modified by LORAD or any third party and such
alteration or modification resulted in or is the basis for the claim of
infringement. (ii) LORAD failed to use updated Component(s) provided by
PMSNA which would have avoided the claim of infringement. (iii) LORAD or
any third party used the Component(s) in combination with apparatus or
software not furnished by PMSNA; this combination resulted in or is the basis
for the claim of infringement; and the claim of infringement would not have
occurred if the Component(s) had been used in combination with the usual
apparatus or software (if any) specified by PMSNA for that use in or with the
Product(s), Option(s) or Spare Part(s). In particular, PMSNA shall be
responsible for a claim of infringement by a Product(s), Option(s) or Spare
Part(s) in combination with Component(s) if and only if that claim can not also
be stated in the same terms against the item which LORAD itself has specified
for that use. (iv) The Component(s) was used in a manner for which it was not
designed, specified or otherwise contemplated by PMSNA and that use resulted
in or is the basis for the claim of infringement. (v) LORAD owns an intellectual
property right or has a license trademark which precludes it from being held
responsible for the claim of infringement.
10.3 Limitation
In no event shall either party be liable to the other for special, indirect or
consequential damages of any kind including, but not limited to, loss of other
business opportunity, profit or revenue or loss of goodwill, arising from any
failure or matter arising under this Agreement. No claim or recovery by one
party against the other shall be greater in amount than the purchase price of
the individual unit of Product(s), Option(s) or Spare Part with respect to which
such claim or recovery arose. Notwithstanding the foregoing, any obligation of
the parties under Section 10.1 above with respect to personal injury or death to
persons or damage to property shall not exceed ************************* and
*********************************, and any obligation under Section 10.2
above with respect to intellectual property shall not exceed the aggregate
purchase price to PMSNA of the Product(s) involved.
26
<PAGE>
11. ********************
11.1 ********************************
Without limiting LORAD's liability to PMSNA thereunder in any way
whatsoever, it has been agreed that if LORAD;
a) intends to enter or actually enters liquidation procedures (either
voluntarily or forced); or
b) has entered bankruptcy procedures (either voluntarily or forced);
or
c) within ninety (90) days of written notification by PMSNA has not
remedied any material breach of this Agreement,
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
*******************************************************************************
******************** ************************************, if and to the extent
required by PMSNA, in exchange for compensation by PMSNA for LORAD's
purchase price for such components and Spare Part(s).
11.2 Right to Produce
Accordingly,*******************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
***************************************************************************
********************************************************************************
*******************************************************************************
***************************************** *******.
11.3 *****************
If, during the Term of this Agreement or any extensions hereof, there is a
********************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
****************************************************************
************************* ******PMSNA shall be solely responsible for
the fees and expenses of setting up and maintaining the **************.
LORAD shall be responsible for its own costs and expenses of assembling,
checking and keeping current the ********************************************
***********************************. The terms for the escrow
*********shall be as agreed upon by the parties, consistent with those terms
which are customary and reasonable for *************************** in the
computer industry.
27
<PAGE>
12. Confidentiality
The parties shall not use, employ or disclose Confidential Information received
from the other whether orally, in writing, by demonstration or otherwise except
as is necessary to implement this Agreement, unless and to the extent the
receiving party can prove by written record that it:
a. was already in the public domain or becomes available to the
public through no breach of this Agreement by the receiving party;
b. was in the receiving party's possession prior to receipt from the
disclosing party as proven by its written records; or
c. was received independently from third party free to disclose such
information to the receiving party; or
d. was independently developed by the receiving party without use of
the Confidential Information as proven by its written records; or
e. became available by inspection or analysis of other products or
techniques in the market.
In protecting Confidential Information, the receiving party will take all
necessary precautions and Confidential Information will be treated in the same
manner and with the same degree of care as the receiving party applies with
respect to its own confidential information.
Nothing contained in this Article shall be construed as a grant of license to
the
other party, to make, use or sell any Product(s) using Confidential Information
or as a license under any patents or claims covering same.
LORAD may, however, file a copy of this Agreement with the Securities and
Exchange Commission pursuant to the requirements of the Securities Act of
1933, as amended or the Securities Exchange Act of 1934, as amended,
provided that LORAD files a confidentiality request with the Securities and
Exchange Commission seeking to protect the confidentiality of the pricing and
forecasts herein and in Exhibit 2.
The provisions of this Article shall be in full force and effect retroactively
from
March 18, 1992 and shall remain in full force and effect during the duration of
this Agreement and five (5) years thereafter.
13. Term and Termination
13.1 Term
This Agreement shall enter into force upon the date of signature by both
parties and shall initially continue until the earlier of five (5) years from
the
date of the First Commercial Delivery of Product(s) under this Agreement or
fulfillment of the minimum purchase commitment set forth in Section 4.1
above.
********************************************************************************
****************, unless and until ************************************
28
<PAGE>
******************************** prior written notice to the other party, such
notice being given as set forth in Section 15.10 hereof.
13.2 Termination for Cause
This Agreement may also be terminated as follows:
a. if a party (the failing party) has not remedied any material breach
of this Agreement within ninety (90) days of receipt of written
notice (sent in accordance with Section 15.10 hereof) of such
breach, said other party is entitled to terminate this Agreement
and or any outstanding Purchase Order(s) placed hereunder
immediately by notice to the failing party, such without prejudice
to any other rights accruing under this Agreement or in law,
b. by the other party in the event that either party shall cease to carry
on business in the normal course, becomes insolvent, makes a
general assignment for the benefit of its creditors, suffers or
permits the appointment of a receiver or a manager for its business
assets or avails itself or becomes subject to any proceeding under
bankruptcy laws or any other statute or laws relating to the
insolvency or protection of the rights of creditors, or
c. by PMSNA by written notice to LORAD in the event the control of
LORAD would pass to other(s) than those now exercising control.
13.3 Continuing Commitments
The termination of this Agreement shall not relieve or release either party from
fulfilling any undertaking or commitment including, without limitation, those
affecting payments, work and deliveries which arise by reason of any event
other than termination, such as those arising from Purchase Order(s) placed
pursuant to this Agreement prior to its termination.
14. Force Majeure
In the event of Force Majeure the party being delayed or damaged thereby shall
inform the other party as soon as possible but in any event within fourteen (14)
calendar days after the start of such Force Majeure specifying the nature of the
Force Majeure as well as the length of the delay which is expected.
In the event the Force Majeure situation continues for more than sixty days
(60) days or is expected to last longer than sixty (60) days then either party
is
entitled to terminate this Agreement by simple notice in writing and without
either party being entitled to any claim for damages. Otherwise both parties'
rights and obligations will be suspended and new time schedules and supply
dates shall be agreed upon between the parties hereto.
Force Majeure shall be understood to mean and to include damage or delay by
acts of God, acts of regulations or decrees of any Government (de facto or de
jure), natural phenomena, such as earthquakes or floods, fires, riots, wars,
shipwrecks, freight embargoes, labor disputes, defaults by suppliers or other
causes, whether similar or dissimilar to those enumerated above,
29
<PAGE>
unforeseeable and beyond the reasonable control of the parties and which
prevent the total or partial carrying out of any obligation under this
Agreement.
PMSNA's purchase commitments under this Agreement are based on present
market information and estimates shared by both parties and market growth
figures extrapolated from that information. In the event of unforeseen
circumstances, major shifts in the market for mammography equipment (such
as the rapid development of significant new ultrasound technology similar to
that being developed by other subsidiaries of Thermo Trex Corporation) which
renders the Product obsolete or other occurrences which make distribution and
sale not only of Product, but also of substantially similar products by other
firms in the industry, impracticable at the levels contemplated by this
Agreement, the parties shall negotiate in good faith and agree upon alternative
quantities which are acceptable to both and reasonable given the then-current
nature of the market for mammography equipment.
15. General Terms and Conditions
15.1 Applicable Law
This Agreement shall be deemed to have been made in the State of
Connecticut, shall be construed in accordance with, and the rights and
liabilities of the parties hereunder shall be governed by the laws of such
State,
without regard to its conflicts of law doctrine, and this Agreement shall be
deemed in all respects to be a contract of such State.
15.2 Attorney's Fees
In the event of any claim or controversy arising regarding the enforceability,
interpretation or intent of this Agreement, the prevailing party or parties (to
the
extent prevailing) shall be entitled to its reasonable attorney's fee and
expenses
in addition to whatever other relief said party would otherwise be entitled.
15.3 Entire Agreement
This Agreement sets forth the entire intent and understanding among the
parties relating to the subject matter hereof and merges all prior negotiations
and discussions between them. No party shall be bound by any conditions,
representations or warranty other than as expressly set forth herein or subse-
quently set forth in writing executed by both parties hereto.
Neither PMSNA's general conditions of purchase nor LORAD's general
conditions of sales are applicable to this Agreement or to any order and order
confirmations for Product(s) or parts thereof in whole or in part.
15.4 Waiver
No waiver by any of the parties hereto of any breach of any condition, covenant
or term thereof shall be effective unless it is in writing and it shall not
constitute a waiver of such condition, covenant or term.
30
<PAGE>
15.5 Severability
If any of the terms or provisions of this Agreement are determined to be invalid
or unenforceable by any court of competent jurisdiction, it shall not invalidate
the rest of this Agreement which shall remain in full force and effect as if
such
terms and provisions had not been a part of this Agreement.
Parties are, however, obliged to immediately replace this term or provision by
an effective one, covering in so far as possible the original intentions of the
parties as to its legal and economic contents.
15.6 Non-Assignment
This Agreement shall be binding upon and accrue to the benefit of the parties
hereto, their respective successors and permitted assigns. This Agreement may
not be assigned, transferred or hypothecated in whole or in part by either party
without the prior written consent of the other party. No consent is required,
however, to an assignment or transfer in whole or in part by PMSNA to any of
the Philips Associated Companies. PMSNA shall notify LORAD of such
assignment or transfer in writing. The references to Graner Company, Philips
GmbH, and a Philips Associated Company or Companies in this Agreement are
intended only as notice to LORAD that certain functions, rights and duties
hereunder have been assigned to those entities as of the date of this
Agreement.
15.7 Advertisements
LORAD shall not without PMSNA's prior written consent use PMSNA's or any
other of the Philips Associated Companies' name or trademark as such and/or
use name in connection with any advertisement or sale literature nor advertise
that it is a supplier of PMSNA and/or the Philips Associated Companies and/or
that this Agreement between LORAD and PMSNA has been concluded.
15.8 Sales and Applications Support
LORAD shall also provide materials, documentation and training for sales and
applications training personnel of PMSNA or Philips Associated Companies and
assistance in preparation of sales materials for Product(s) and Option(s), as
reasonably required by PMSNA.
LORAD shall provide sales, applications and service training to support the
introduction of the Product(s) to the market consisting of: (i) five sessions of
sales training of no more than one day each, (ii) five sessions of applications
training of no more than one day each, and (iii) five sessions of service
training
each of no more than five days duration. The sales and applications training
and one of the service training sessions shall be held no later than four (4)
weeks before the First Commercial Delivery of Product(s) under this Agreement.
Each party shall bear its own expenses associated with training. The training
shall be conducted by LORAD personnel at PMSNA's Shelton, Connecticut
facility or at LORAD's facility in Danbury, Connecticut.
LORAD may charge PMSNA at LORAD's usual rate for additional training and
documentation services.
31
<PAGE>
LORAD's pricing for any new Product(s) or Option(s) added to the scope of this
Agreement shall include sales, service and applications training as set forth
above.
15.9 Project Leaders
Upon the signature of this Agreement either party shall appoint, by written
notice, a Project Leader who shall represent his party in all communication,
contacts, meetings, negotiations and reports, of technical nature as necessary
for the performance of this Agreement. Any subsequent change of the Project
Leader shall be notified in writing to the other party.
15.10 Notices
Notices will be addressed as follows:
If to PMSNA: Philips Medical Systems North
America Company.
710 Bridgeport Avenue
Shelton, Connecticut 06484
Attn: Vice President,
Marketing
cc: Vice President and
General Counsel
If to LORAD: LORAD Corporation,
36 Apple Ridge Road
Danbury, Connecticut 06810
Attn: Mr. A. Pellegrino
cc: Mr. H. Kirshner
or to such other address as the pertaining party will have previously notified
to
the other party.
All notices will be deemed given ten (10) working days after they have been
mailed by registered mail or so much earlier as the receiving party can be
proven to have received such notice.
15.11 Compliance with Law
Except to the extent it is precluded from doing so by the law of its principal
place of business, each party agrees that the performance of its obligations,
exercise of its rights and fulfillment of its duties under this Agreement shall
comply with applicable laws and ordinances of each government having
jurisdiction over such activity and all lawful orders, rules and regulations
issued thereunder. The Product(s), Option(s) and Spare Part(s) in the form they
are provided by LORAD to PMSNA shall comply with all lawful orders, rules
and regulations applicable in the************************** to their shipment,
installation and use therein (including any such statutes and regulations
relating to hazardous substances or environmental concerns), as well as all
legal requirements relating to their export from the United States.
32
<PAGE>
15.12 Surviving Articles
Articles 8, 9, 10, 11, 12, 15 and, as to Purchase Order(s) which have not been
filled as of the date of termination or cancellation, Articles 4, 5, 6 and 7 and
such other terms and conditions of this Agreement which are expressly
intended to survive the expiration, termination or cancellation of this
Agreement shall so survive.
IN WITNESS WHEREOF authorized representatives of the parties hereto have
signed this document.
LORAD CORPORATION PHILIPS MEDICAL SYSTEMS
NORTH AMERICA COMPANY
By: /s/ Hal Kirshner By: /s/ Michael P. Moakley
-------------------- ----------------------
Hal Kirshner Michael P. Moakley
President President
Date: DATE APPEARS HERE Date: NOV. 17, 1993
------------------ ----------------------
33
<PAGE>
List of Exhibits
The following Exhibits and Appendices are incorporated in this OEM
Agreement between LORAD Corporation and Philips Medical Systems North
America Company and are made a part hereof:
Exhibit 1 Specification
Exhibit 2 Planning and Prices
Exhibit 3 Service Arrangements
Appendix 1 Field Problem Report
Appendix 2 List of Spare Parts
Exhibit 4 Final Test Report
Exhibit 5 Standard Form of Change Request
Exhibit 6 Time Schedule
Exhibit 7 Components from PMS\Logistic Procedures
Exhibit 8 Lorad's ISO 9000 Certificate
Exhibit 9 Exclusive Territory
34
<PAGE>
Exhibit 1
SYSTEMS SPECIFICATIONS FOR PHILIPS MAMMO DIAGNOST
1.0 SCOPE AND PURPOSE
This document is intended to define the requirements of a
group of products called the "Mammo DIAGNOST 3000". The
product is to be designed and manufactured for Philips
Medical Systems by Lorad Corporation.
2.0 APPLICABLE DOCUMENTS STANDARDS
The following documents are incorporated into this document
to the extent described in this specification.
2.1 Philips Documents
**************************************************
**************************************************
***********************************
**************************************************
**************************************
2.2 Lorad Documents
*********************************************
****************************
***********
***********
***********
***********
***********
2.3 Other Documents
2.3.1 IEC 601-1 [Medical electrical equipment]
2.3.2 IEC 601-2-7 [Particular requirements for the
safety of high-voltage generators of
diagnostic x-ray generators]
2.3.3 IEC 601-1-1 [Collateral standard: Safety
requirements for medical electrical
systems]
- --------------------------------------------------------------------------------
Philips MD3000 Page - 1 15/October/93
<PAGE>
2.3.4 IEC 601-1-2 [Collateral standard:
Electromagnetic compatibility -
Requirements and tests]
2.3.5 IEC 788 Publication
[Medical radiology - Terminology]
2.3.6 IEC-4l7G [Graphical symbols for use on
equipment]
2.3.7 IEC-80l-2 [Electromagnetic compatibility for
industrial-process measurement and
control equipment. Part 2:
Electrostatic discharge requirements]
2.3.8 EC Medical Device Directive
2.3.9 U/L 187 [Standard for safety x-ray
equipment]
2.3.10 CSA C22.2 No. 601.1-M90
[Medical Electrical Equipment Part
1: General Requirements for Safety]
2.3.11 2lCFR U.S. Code of Federal Regulations
3.0 FUNCTIONAL AND DESIGN REQUIREMENTS
3.1 General System Requirements
3.1.1 ELECTRICAL INPUT
3.1.1.1 *************************
************************************
3.1.1.2 ******************************
******************************
3.1.1.3 ***********************
3.1.1.4 ***************************
3.1.1.5 ***********************************
***********************************
3.1.1.6 *****************************
3.1.2 DIMENSIONS
All dimensions are preliminary based on design
for September 1993 unit.
3.1.2.1 Height
- --------------------------------------------------------------------------------
Philips MD3000 Page - 2 15/October/93
<PAGE>
*******************
*******************
3.1.2.2 Width
*****************************
*******************
3.1.2.3 Length
****************************
3.1.2.4 Weight
***********************
***********************
3.1.3 USE ENVIRONMENT
3.1.3.1 ***************************
3.1.3.2 **********************************
3.1.3.3 **********************************
**********************************
********************
******************************
3.1.3.4 ************************************
**********************
3.1.3.5 ************************************
************************************
3.1.4 NOT IN USE ENVIRONMENT
**********************************************
3.2 Mechanical and Geometric Requirements
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 3 15/October/93
<PAGE>
3.2.1 ROTATION BRAKE
*****************************************
3.2.2 C-ARM ANGULATION
*****************************
3.2.3 VERTICAL TRAVEL
**********************************************
***********
3.2.4 ALIGNMENT OF FOCAL SPOT, COMPRESSION DEVICE
AND IMAGE RECEPTOR
**********************************************
**********************************************
************************************
3.2.5 SOURCE TO IMAGE RECEPTOR DISTANCE (SID)
**********************************************
**********************************************
**********************************************
********************
********************
***************
3.2.6 COMPRESSION
3.2.6.1
**********************************************
*********************
***********************
*******************************
*******************************
*******************************
***********************
*****************************
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 4 15/October/93
<PAGE>
3.2.6.2 ********************************
*********
****************************************
***********************************
*****************
****************************************
*****************
****************************************
****************************************
*****************
****************************************
************************************
************************************
******
3.2.6.3 ******************
*****************************************
*****************************************
3.2.6.4 *********************
*****************************************
**************
3.2.6.5 ***************
*****************************************
***********************************
3.2.7 MAGNIFICATION
3.2.7.1 ***************
************************************
3.2.7.2 *******************
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 5 15/October/93
<PAGE>
*******************
3.2.7.3 ****************
**********
3.2.7.4 ************************************
3.2.7.5 ************************************
3.2.8 STEREOTACTIC CAPABILITY
**********************************************
*************
**********************************************
**********************************************
********
3.3 X-Ray Source Filtration and Collimation Requirements
3.3.1 X-RAY TUBE
3.3.1.1 Tube Type
*********************
3.3.1.2 Focal spot size
*********************
3.3.1.3 Tube loading
***********************
3.3.1.4 Tube voltage
**********
3.3.1.5 Heat Capacity
*************************
3.3.1.6 Maximum continuous heat dissipation
******
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 6 15/October/93
<PAGE>
3.3.1.7 Anode rotation speed
************************
3.3.1.8 Anode material
***************************
3.3.1.9 Anode angle
******
3.3.1.10 Anode disc diameter
*****
3.3.1.11 X-ray window
*****
3.3.2 X-RAY TUBE ASSEMBLY
3.3.2.1 Continuous heat dissipation
***************
3.3.2.2 Maximum temperature of housing
surface
*******
3.3.2.3 Filtration
****************
3.3.2.4 Safety class of IEC 601/88
*******
3.3.2.5 Over-temperature protection sensor
3.3.3 X-RAY COLLIMATION
**********************************************
**********************************************
**********************************************
**********************************************
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 7 15/October/93
<PAGE>
**********************************************
*********
3.3.4 LIGHT FIELD INDICATOR
3.3.4.1 ************************************
************
3.3.4.2 ************************************
************************************
*************
3.4 High Voltage Generator Requirements
3.4.1 MAXIMUM RIPPLE
*****
3.4.2 RATING AND DUTY CYCLE
3.4.2.1 Maximum voltage
**********
3.4.2.2 Maximum power consumption (at 30kV,
0.5 seconds)
**********
3.4.2.3 Regulation type
********************
3.4.2.4 Continuous duty rating
*****
3.4.2.5 Duty cycle
***************
3.4.3 RANGE KV,MAS
3.4.3.1 Tube voltage
*******
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 8 15/October/93
<PAGE>
3.4.3.2 Tube current
**************************************
*****************************************
****************************************
*************************************
***************
*************************************
*************************************
**************************
3.4.3.3 Exposure time
******************
*************************************
*********
3.4.4 ACCURACY
3.4.4.1 Reproducibility of radiation output
******************************
3.4.4.2 Linearity of radiation output versus
mAs product
************************************
**********
3.4.4.3 Accuracy of tube voltage
*****
3.4.4.4 Accuracy of mAs product
******************
3.4.4.5 Accuracy of mA
*****
3.4.4.6 Accuracy of mAs post-exposure
display
************************************
************************
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 9 15/October/93
<PAGE>
3.5 Image Receptors
**********
**********
*****************************************************
****************************************
3.6 AEC
3.6.1 DETECTOR DESIGN
**********************************************
******
3.6.2 AEC POSITIONING
**********************************************
**********************************************
**********************************************
************
3.6.3 ACCURACY
************************************
3.6.4 REPRODUCIBILITY
**********************************
3.6.5 AEC EXPOSURE TERMINATION
**********************************************
************
3.7 Control and Display Requirements
*************************************************
4.0 SAFETY REQUIREMENTS
4.1 Electrical Safety
********************************************************
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 10 15/October/93
<PAGE>
***************
4.1.1 CLASSIFICATION
**********************************************
***************************************
4.1.2 LEAKAGE CURRENTS
4.1.2.1 ***************
4.1.2.2 ***************
4.1.2.3 ***************
Phillips has not confirmed these values
4.1.3 PROTECTIVE EARTH IMPEDANCE
**********************************************
******************
4.1.4 EMERGENCY POWER OFF
**********************************************
******************
4.2 Mechanical Safety
**********************************************
************************
4.2.1 ******************************
4.2.2 **********************************************
4.2.3 ***********************************
4.3 Radiation Safety
**********************************************
************
4.3.1 Interlocks
**********************************************
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 11 15/October/93
<PAGE>
***************
**************
4.3.2 X-ray Switch
**********************************************
***********************
4.3.3 Exposure Duration
*******************************
****************************
**********************************************
**********************************************
*******
****************************
4.3.4 Radiation shield
**********************************************
**********************************************
*******
**********************************************
**********************************************
********
5.0 TEST AND COMPLIANCE REQUIREMENTS
5.1 Test Requirements
5.1.1 **********************************************
**************************
5.1.2 **********************************************
*******************************************
5.1.3 **********************************************
******************
**********************************************
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 12 15/October/93
<PAGE>
*******
**********************************************
*************************
6.0 DOCUMENTATION REQUIREMENTS
6.1 Deliverables
6.1.1 Operator's Manual - Mammographic System
6.1.2 Operator's Manual - Cytoguide Option
6.1.3 Technical Service Manual
6.1.4 Planned Maintenance Booklet
6.1.5 Site Planning Guide (with seismic mounting
data)
6.2 Relevant Document Specifications
6.2.1 Operator's Manual - Mammographic System: in
lieu of a formal spec from Philips,
Operator's Manual 4512 109 0734l/7l4H -1990-03
"mammo DIAGNOST UC" will be used
as a content and format guide.
6.2.2 Operator's Manual - Cytoguide System: Operator's
Manual 4512 109 0955l/7l4H -1992-05,
Cytoguide Rel. 2 will be used as a content and
format standard.
6.2.3 Service Manual: unnumbered document entitled
"Service Documentation" (received from
PMSNA Tech. Pub. Mgr) will be used as a content
guide. Supplied "Technical Service
Manual" for the mammo DIAGNOST UC (9885 291 40001)
will be used as a format guide.
6.2.4 Planned Maintenance Booklet: PMSNA document
entitled "SERVICE MANUAL
GUIDELINES, System Manual - Planned Maintenance"
will be used as a standard.
6.3 Language Requirements
6.3.1 Operator's Manuals (described in 6.1.1 and
6.1.2, above) will be produced in English,
French,
German and Spanish versions.
6.3.2 Technical Service Manual and Planned
Maintenance Booklet (described in 6.1.3 and
6.1.4)
will be supplied only in the English language.
6.4 Production
6.4.1 Lorad will print manuals.
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 13 15/October/93
<PAGE>
6.4.2 Production Manuals will be produced and bound
in the manner exhibited by the mammo
DIAGNOST UC package. Philips will supply service
manual binder and indexes.
- --------------------------------------------------------------------------------
PhilipsMD3000 Page - 14 15/October/93
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 1 OF 35 NO. ************ C
----------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
ISSUED REVISED APP'D.
C 10/15/93 ROGERS/WEICHERS 10/15/93
- --------------------------------------------------------------------------------
Exhibit 1 (cont'd)
SOFTWARE SPECIFICATIONS FOR PHILIPS MD 3000
1.0 INTRODUCTION
This document describes the functional requirements of the
Operating Software for the Philips Mammo Diagnost 3000. The
reader will find some text printed plain, and some in italics.
Plain text is a general specification for the topic being
discussed, while italic text represents a more technical software
requirement.
The designer may use different designations for labels denoting
active low signals. The following text will consistently use a
preceding slash (/) to the label name (i.e. /RESET), to imply that
a logic low will activate the function.
2.0 GENERAL DESCRIPTION
The Philips MD 3000 mammography system********************************
************.
****************
**********************************************
**********************************************.
**********************************************
**********************************************
**********************************************
**********************************************
***********
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 2 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
3.0 SPECIFIC REQUIREMENTS
---------------------
3.1 DESIGN CONSTRAINTS
------------------
3.1.1 Hardware
A.) **********************************************
**********************************************
B.) **********************************************
**********************************************
**********************************************
C.) Complete code will be sized to fit any 32K by 8
bit PROM.
3.1.2 Software
A.) **********************************************
**********************************************
B.) **********************************************
**********************************************
C.) **********************************************
D.) *********************************************
3.2 FUNCTIONAL REQUIREMENTS FOR POWER-ON DIAGNOSTIC TEST
----------------------------------------------------
Upon power-on the software will automatically test the following
conditions:
3.2.1 Check Sum
**********************************************
**********************************************
****************
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 3 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
3.2.2 ************************************
**********************************************
**********************************************
**********************************************
**********************************
3.2.3 ******************************
**********************************************
**********************************************
**********************************************
*******************************************
3.3 Functional Requirements For Power On MACHINE SETUP
SCREEN
The User Option Menu sets up default settings used in the normal Main
Menu. It will be
selectable following power up diagnostics, when the operator is queried
as to which menu is
desired. Selecting 'Change' will bring up the User Option Menu, which
will present the
following menu display:
1. SET DATE
2. SET TIME
3. SET START UP DEFAULTS
4. SET MAGNIFICATION DEFAULTS
5. SET BACK-UP TIME
6. SELECT AUTO-KV WINDOW
7. SET PRE-COMPRESSION FORCE
By pressing the number key corresponding to the desired item, the
operator may edit any of
the defaults.
3.3.1 Set Date
This option will allow the operator to modify the time and to
select among two
methods of display. These will be MM/DD/YY or DD/MM/YY.
3.3.2 Set Time
This selection will allow the operator to modify the time as
well as to select a 12 or
24 hour clock.
- --------------------------------------------------------------------------------
<PAGE>
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LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 4 OF 35 NO. ************ C
----------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
3.3.3 *****************************
Making this selection, will cause the following menu
with one of the listed options to be displayed.
********
************* *******************************
************* *******************************
************* *******************************
************* *******************************
************* *******************************
************* *******************************
************* *******************************
******** *******************************
************* *******************************
************* *******************************
The user will be able to modify the default by using the
Up/Down cursor keys to
select the item, and then pressing the Change button to cycle
through the available
options. The option will be selected by pressing another
character key other than the
"Change" key. "Return" will return the operator to the User
Option Menu.
3.3.4 **************************
Selecting this menu item, will present the operator with
the following menu along with one of the listed options:
*******************************
************* *******************************
************* *******************************
************* *******************************
*******************************
************* *******************************
************* *******************************
The operator will be able to select an item using the
'Up' and 'Down' cursor keys.
_______________________________________________________________
1. Film type available only if DSM Receptor is not selected
2. Available only if Manual or Auto Time exposure mode is
selected.
3. Available only if Manual exposure mode is selected.
4. Available only if Manual or Auto Time exposure mode is
selected.
5. Available only if Manual exposure mode is selected.
- --------------------------------------------------------------------------------
<PAGE>
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LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 5 OF 35 NO. ************ C
----------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
Options will be cycled through by pressing the Change key,
and selected by selecting the next item, or pressing Return.
which will return the operator to the main User Option Menu.
3.3.5 ***************
***************************************************
***************************************************
***************************************************
*************************************
See also section 3.8.4.2
3.3.6. ****************************
***************************************************
*************************
************************
***********************************
***********************************
3.3.7 ********************* Force
Selecting this option will offer the operator two options, either
***************Force ********************Force. Whichever one was
previously selected, will be displayed. The operator will be
instructed to press the 'Change' key to cycle through the
displayed forces or 'Clear' to select the opposite option (*****
****************). As the operator cycles through the displayed
forces, the force will be video highlighted. The operator will be
instructed to press 'Return' to select the highlighted force which
will return the operator to the User Option Menu.
*****************Force will offer the following display, with
larger numbers representing increasing force:
***************************
******* *********
***************************
***************************
*******force*************************************************
***********************force*********************************
************force***************
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 6 OF 35 NO. ************ C
----------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 7 OF 35 NO. ************ C
----------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
***************Force*********************************:
**************************************************
*************************
**********************
**********************
**********forces*********************************************:
*********
*********
*********
3.4 ****************************************************
*******************
3.4.1 Summary of C-Arm Switches
A. ********************************************************
********************************************************
****************
****************
******************
*************
***************
*********
***********
B. ********************************************************
********************************************************
***********
******************
*************
***************
C. *******************************************
********************
********************
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 8 OF 35 NO. ************ C
----------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
D. ******************** An additional switch will be
provided for
*******************
When any of the above **************** are actuated, the
following actions will be initiated:
3.4.2 **********************
********************************************************
********************************************************
************************
********************************************************
********************************************************
********************************************************
********************************************************
*********
3.4.3 **************************
********************************************************
***********************************
********************************************************
********************************************************
********************************************************
********************************************************
*************************************************
3.4.4 ***********************
********************************************************
*************************************
********************************************************
********************************************************
*************************************
3.4.5 ****************
********************************************************
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 9 OF 35 NO. ************ C
----------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
********************************************************
********************************************************
********************************************************
**************
3.4.6 **************************
********************************************************
********************************************************
********************************************************
********************************************************
********
********************************************************
********************
********************************************************
********************************************************
************************************
********************************************************
********************************************************
**************
********************************************************
********************************************************
******************************************
********************************************************
********************************************************
********
- --------------------------------------------------------------------------------
[FOOTNOTE APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 10 OF 35 NO. ************ C
----------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
[FORM APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 11 OF 35 NO. ************ C
----------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
3.4.7. *****************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
***************************************
** *********************************************
*****
** ******************************
*****************************************************
*****************************************************
**********
*****************************************************
*****************************************************
********************************
*****************************************************
*****************************************************
*****************************************************
**********************************************
*****************************************************
*****************************************************
**********************************
*****************************************************
*****************************
3.4.8 ****************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************
- --------------------------------------------------------------------------------
[FOOTNOTE APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 12 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
*****************************************************
*****************************************************
************
*********************************************
************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
**********************************************
3.5. *****************************************************
****************
3.5.1 ************
*****************************************************
******************
*****************************************************
*********************************************
*****************************************************
*****************************************************
*****************************************************
*****************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
3.5.2 ************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 13 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
3.5.3 ************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
3.5.4 **************
*****************************************************
*****************************************************
*****************************************************
***********************************
*****************************************************
*****************************************************
********************************
3.5.5. ******************
*****************************************************
*****************************************************
***********************************************
*****************************************************
*****************************************************
***********************************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 14 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
3.5.6 *************
*****************************************************
****************
****************
****************
****************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*******************************
*******************************
*****************************************************
*****************************************************
3.5.7. ************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 15 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
3.5.8 ******************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
3.6 *****************************************************
********************************************
3.6.1 ***************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
3.6.1.1 ************************
********************************************
********************************************
********************************************
********************************************
********************************************
****************************
*** *** *** ***
******* ** ***** **
****** ** ***** **
****** ** ****** **
****** ** ****** **
****** ** ****** **
******* ** ****** **
******* ** ***** **
******* ** ****** **
******* ** ****** **
******* ** ***** **
****** ** ****** **
******* ** ****** **
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 16 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
*********************************
3.6.1.2 ************************
*****************************************************
*****************************************************
*****************************************************
****************
*****************************************************
*****************************************************
******
3.6.1.3 *******************
Refer to section 3.4.8
3.6.2 ******************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
****************************************************
*****************************************************
*******************************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 17 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
Figure 2 - Main Menu
********************************
*************** ***************
************** ***************
********** *****************
********************
******************** *******
********************* ************* ************ *****
********************** ******** ******* ******
*********************** ******
*********************** **** **************
***************** **********************************
***************** **********************************
***************** **********************************
***************** **********************************
***************
***************
***************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 18 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
*****************************************************
*****************************************************
*****************************************************
*************
***************************
********************************
***************************
*****************************
*****************************
*****************************
*******************************
*******************************
***************************
*******************************
*******************************
*****************************
**********************************************
********************************
************************************************
**********************************
************************************************
************************************************
*********************
*****
********************
************
****************
**************
********************
*******************
3.6.3 *************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
***************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 19 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
*****************************************************
*****************************************************
*****************************************************
************************
**********************************
*****************************
**********************************
**********************************
*****************************************************
*********
3.7 *****************************************************
***********
*****************************************************
*****************************************************
**************
3.7.1 *********************
*****************************************************
*****************************************************
*********
*****************************************************
*************************************************
3.7.2 ******************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
******************
*****************************************************
*****************************************************
**********
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 20 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
3.7.3 ***************
*****************************************************
*****************************************************
*****************************************************
********
*****************************************************
*****************************************************
***********************
3.8 *****************************************************
******************
3.8.1 ********
************************
************************************************
*******************
************************************************
************************************************
************************************************
************************************************
***********
*****************************************************
*****************************************************
**********
**************************
*******************************************
************************************************
************************************************
**********************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 21 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
TABLE 2
*************************
***********
********************************
****************************
***********
********************************
***************************
***********
*********************************
****************************
3.8.2 ********************
***************
*****************************************************
*****************************************************
*****************************************************
************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*********************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 22 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
***************************************
*********************************
*********************************
*********************************
*********************************
*********************************
*********************************
*********************************
*********************************
*********************************
*********************************
*********************************
*********************************
***********
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
3.8.2.2 ***********************
*******************************************************
***********************************
**************
***************
*******************************************************
*******************************************************
*******************************************************
***************
*******************************************************
*******************************************************
*******************************************************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 23 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
3.8.3 ****************
3.8.3.1 *********************
*********************************************
*********************************************
*********************************************
*********************************************
*********************************************
**********************************
*********************************************
*********************************************
*********************************************
*********************************************
***************
**************************************************
**************************************************
**************************************************
3.8.3.2 **************************
**************************************************
**************************************************
**************************************************
***********************
**************************************************
**************************************************
**************************************************
*******
**************************************************
**************************************************
**************************************************
**************************************************
***********************************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 24 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
3.8.3.3 ****************
**************************************************
*************************
****************************************
****************************************
****************************************************
****************************
***********************************************
***************************
**********
**********
**********
***********************************************
***********************************************
3.8.3.4 ***************
****************************************************
**************
*************************
*************************
*************************
***************************************
**********************************
3.8.3.5 ***************
***************************************************
***************************************************
***************************************************
******
************************************
************** ************
********* ***** ******* ******
--------- ----- ------- ------
***************************************************
***************************************************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 25 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
3.8.3.6 ***************
**************************************************
**************************************************
**************************************************
**************************************************
******
3.8.3.7 ****************
**************************************************
**************************************************
**************************************************
**************************************************
**************************************************
*********************
*****************************************
*************************************************
******
* * *
- - -
********** *** *** *** ***
********** ** ** ** ***
**********************************************
3.8.5 ********************
*******************************************************
*******************************************************
*******************************************************
****************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 26 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
*******************************************************
*******************************************************
******************************
3.9 *******************************************************
-------------------------------------------------------
***********
-----------
3.9.1 ******
*******************************************************
***************************
*******************************************************
*********************
****************************************
****************************************
****************************************
****************************************
****************************************
****************************************
******************************************
3.9.2 ***********
*******************************************************
*******************************************************
*******************************************************
***********
*******************************************************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 27 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
************************************
**************************************************
**************************************************
**********************************
**********************************
*************************************
*************************************
*************************************
****************************************
*************
**************************************************
**************
**********
***************
************
*********************
*********************
3.9.3 **********
*******************************************
3.9.4 *******
*******************************************************
*******************************************************
*******************************************************
*******************
***********************************
3.9.5 ************
*******************************************************
*******************************************************
*************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 28 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
3.10 ***********
-----------
*******************************************************
*******************************************************
*******************************************************
**********
*******************************************************
*******************************************************
****************************************
*******************************************************
*******************************************************
****************************************
3.10.1 ************
*******************************************************
*******************************************************
*******************************************************
***************
*******************************************************
*******************************************************
********************************
3.10.2 ***********
*******************************************************
*******************************************************
*******************************************************
**********
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******
3.10.3 ***********
*******************************************************
*******************************************************
*******************************************************
<PAGE>
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LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 29 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
*******************************************************
********************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
**********************
3.10.4 ***********
*******************************************************
*******************************************************
**********************
*******************************************************
*******************************************************
*******************************************************
************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*********
3.10.5 ***********
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************************************
*******************************
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 30 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
********************
***************************************************
************ ******
------------ ------
********************** *****************
********************** *****************************
********************** ***********************
********************** ******************************
**********
**
******************************
*******************
********************** ****************
***************** ***********************
********** *****************************
********** *******************************
********************* ********************************
*********************** ***************************
***************** ***************************
**************** *********************************
******
******************** **********************************
**********
*********** *************
**************** ******************
************** ******************
*************** *********
<PAGE>
- --------------------------------------------------------------------------------
LORAD Corporation DATA SHEET DWG. REV.
Engineering Standard STORAGE 31 OF 35 NO. ************ C
------------------------------------------------
TITLE: Software Specifications for
Philips MD 3000
- --------------------------------------------------------------------------------
*************** ***********************************
*******
********************** **************************
************* *********************
********************** ***********************************
*****************************
******************** **********************************
***********************
*********************** ***********************************
<PAGE>
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LORAD Corporation DATA SHEET DWG. REV.
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LORAD Corporation DATA SHEET DWG. REV.
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TITLE: Software Specifications for
Philips MD 3000
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APPENDIX A3 LORAD SERIAL COMMUNICATION PROTOCOL
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TITLE: Software Specifications for
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<PAGE>
Agreement between Philips Medical Systems and LORAD Exhibit 2
Planning and Prices
Date: 1, October 1993 Page 1
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<PAGE>
November 11, 1993
Exhibit 3
Service Arrangements
Exhibit 3 to the OEM Agreement (the "Agreement") between LORAD
Corporation ("LORAD") and Philips Medical Systems North America
Company ("PMSNA") for supply of mammography x-ray systems.
1. Responsibilities for Product Service
Unless agreed to otherwise,
PMSNA is responsible for:
- installing and commissioning
- training of the user
- maintenance and repair at customers' sites
- regular training of the PMSNA field engineers
LORAD is responsible for:
- provision and accuracy of documentation
- spare parts supply
- provision of special tools as required for repair of
Product(s)
(except for Component(s)), Option(s) or Spare
Parts
- initial training and support of PMSNA service staff and
regular training upon request
2. Product Delivery
The requirements for delivery of Product(s), Option(s) and Spare
Parts are
as set forth in the Agreement and in the other Exhibits to it.
2.1 Service Documentation
2.1.1 Preparation of Service Documentation
PMSNA will supply, at no cost to LORAD, binders with PMSNA's
standard
register into which the service documentation enumerated
below shall be
inserted by LORAD (hereinafter, the "Service Documentation" or, as
assembled, the "Service Manual"). The binders will be ordered by
LORAD
from the PMSNA service organization with at least two months lead time
before the date they will be needed by LORAD for assembly of the
Service
Manuals.
The address for PMSNA's service organization is:
Philips Medical Systems North America Co.
P.O. Box 860
710 Bridgeport Avenue
Shelton, Connecticut 06484
<PAGE>
(1) Pricing for the Cytoguide adaptation and upgrade shall be *****
for a design using plastic bearings and ****** for a design
using
steel bearings. These prices are based on LORAD's preliminary
estimate of its cost of producing the Cytoguide adaptation and
upgrade. ****************************************************
**************************************************************
*********.
<PAGE>
LORAD shall furnish to PMSNA ninety (90) days before the First
Commercial Delivery of Product, free of charge, two sets of
Service
Documentation. If the Service Documentation complies with
Philips'
standards, PMSNA will approve it for delivery and use by Philips'
service
organization.
The Service Documentation labeling shall carry only the "Philips" name,
trademark and Product or Option name (rather than LORAD's trademark
or tradename for that product).
PMSNA will assist LORAD in producing the said Service Documentation,
but each party will bear its own costs with respect to preparing the
Service Documentation.
The Service Documentation will be updated by LORAD during the lifetime
of the Product(s) or Option(s) to include all implemented changes and
modifications pertaining to Product(s) or Option(s). Corrections
(complete updated versions) will be furnished to PMSNA without
additional charge. LORAD will supply new documents at least thirty
(30)
days before the first delivery of Product which has been modified or
updated as provided in the Agreement.
2.1.2 Service Manual
For each Product or Option the following information shall be provided
by LORAD as part of the Service Documentation and the Service Manual
be organized in the following format:
- Introduction and Technical Data
- Installation
- Setting to work
- Acceptance: specification checks and data applicable
or field service
- Corrective Maintenance
- Diagnostic procedures for fault identification
- Adjustment procedures
- Instructions for assembly and disassembly
- Instructions for removal and replacement
- Procedures after repair or replacement
- Simplified drawings to facilitate fault finding
- Theory of operation and explanation
- Diagrams and drawings
- Repair procedures
- Spare Parts lists with identification numbers
- Sorted by PMSNA ID code (a set of PMSNA ID codes
will be provided to LORAD)
- Sorted by LORAD ID code
- Specification of repairable/replaceable items
- Specification of required tools for:
- Installation, setting to work and acceptance
- Maintenance, all non-metric tools required shall
be listed separately
2
<PAGE>
The test and diagnostic software, if any, used by field service
personnel
will be made available by LORAD on a carrier suitable for the Product
or
Option and will be supplied with each Product or Option. **********
****************************************
**************************************************************
***************
If PMSNA requires additional Service Manuals, LORAD will supply them
at a price of ********************** for each set.
2.1.3 Planned Maintenance Service Manual
Planned Maintenance is defined as pre-planned actions performed to
assure by means of systematic inspection that the Product or Option is
working in a specified manner.
The Planned Maintenance Service Manual is to be supplied directly to
Philips' service organization, not packed in shipments of
Product(s) or Option(s) to PMSNA.
Initially, five (5) sets will be provided free of charge. Thereafter,
PMSNA,
may, free of charge, reproduce them for PMSNA's use or distribution to
Philips Associated Companies, dealers, manufacturer's representatives
and customers. PMSNA shall also have the right to revise, reorganize,
translate or otherwise modify them for distribution to and use by
Philips'
service organization.
The Planned Maintenance Service Manual will contain:
- Schedule(s)
- Instructions
- List of Spare Part(s) to be replaced
- List of required lubrication
- Specification of tools required (including non-
metric tools)
- Specification of other materials
2.2 Language
All Service Documentation will be made available in the English
language.
2.3 Additional Information on Data Carrier
All service-related information provided by LORAD hereunder, including,
in particular, Spare Part(s) lists and prices, will be made available
to
Philips' service organization on a data carrier, such as 3.5 inch
floppy
disk, and updated annually as necessary.
3. Support on Site
If necessary and if requested by Philips' service organization, LORAD
will
provide support at customers' sites. Travel expenses, accommodations
3
<PAGE>
and all other travel and living expenses of LORAD's personnel at the site
will be borne by PMSNA. All other costs will be covered by an all-
inclusive fee of *****************************. If, however,
the problem or functional defect is a result of a design defect, the per
diem fee will not be payable to LORAD for the time spent correcting the
defect and travel and living expenses will also be born by LORAD.
4. Maintenance
4.1 Repair Policy
Repair will be done by replacing field exchangeable Spare Part(s), either
new or refurbished. LORAD will propose those parts in consultation with
the PMSNA service organization. A list of these Spare Part(s) is attached
(or is to be added when agreed upon) as Appendix 2 to this Exhibit.
4.2 Reporting by LORAD about Reliability
LORAD and PMSNA will exchange free of charge, all relevant data
regarding reliability of the Product, including, but not limited to:
- MTBF and MTTR-figures
- Problem reports
- Field failures
- Parts usage and approx. costs
at the Product and Spare Part level.
4.3 Storage Conditions and Handling Procedures
LORAD will specify the storage conditions for Spare Part(s), such as (but
not limited to) temperature, humidity, shelf life and air pressure, for any
Spare Part(s) for which there are special requirements in this regard.
5. Field Change Order ("FCO"), Problem Reporting and
Service Information
5.1 Field Change Orders
5.1.1 Modification Kits
Field modifications (referred to in this Exhibit as "Field Change Orders"
or "FCO's"), if any, will be made available to PMSNA in form of individual
modification kits in the quantity required to update the entire installed
base of Product(s) or Option(s) to which each field modification applies.
These kits shall contain:
- List of applicable Products and their serial
numbers
- Implementation instructions
- Material and Spare Parts
- Special tools (if any)
4
<PAGE>
- Service Documentation and Operator's Manual
updates
Kits for field modifications in the categories of "mandatory for
safety" and
"action for performance" will be provided by LORAD to PMSNA without
charge.
5.1.2 Categories and Implementation of FCO's
Three (3) categories of FCO's are distinguished:
- Mandatory for Safety
- Action for Performance
- Service Recommendation
Classification into any of these categories and the terms and
conditions
of any action will be determined by PMSNA, based upon applicable law
and regulations, after consultation with LORAD.
5.2 Field Problem Reporting by PMSNA
PMSNA will report all problems using a Field Problem Report formsheet
(an example is attached as an annex to this Exhibit). In order to
shorten
turnaround times, PMSNA may report problems to LORAD by telephone or
fax. Telephone reports must be confirmed by a written Field Problem
Report.
The categories of Problems are defined as "very urgent problems,"
"urgent
problems," "routine problems":
VERY URGENT PROBLEMS
- Disable product or cause an abnormal termination of
an application program.
- Cause danger for the patient being examined or for
personnel operating the product.
URGENT PROBLEMS
- Disable a product under certain conditions
- Disable certain function(s) of a product
ROUTINE PROBLEMS
- Problems other than VERY URGENT or URGENT
As soon as possible, but ultimately within two (2) working days after
a
problem has been reported, LORAD will confirm receipt of a Field
Problem Report and start reproducing and analyzing the Problem. In
its
confirmation LORAD will indicate the manner and time frame in which
LORAD expects to have a preliminary and/or definite solution available,
and it will use its best efforts to meet or exceed the following
schedule:
5
<PAGE>
Time allowance:
Category Definite Solution
VERY URGENT *****************
URGENT *****************
ROUTINE *****************
6. Configuration Management
6.1 Identification / Labeling of Spare Part(s)
The packing as well as shipping documents for all Spare Part(s),
assemblies and sub-assemblies will be clearly coded and marked.
6.2 Registration
LORAD will maintain a Configuration Record for each Product delivered
indicating:
- Product name,
- Serial number,
- Code number of each printed circuit board
("PCB"), including Hardware and
Software/Firmware level (if any), and
- Identification of assemblies and subassemblies
contained in the product by part numbers and
serial number.
The same procedure will apply for delivery of Field Change Order kits.
With each FCO kit LORAD will provide PMSNA with the valid
Configuration Record for the modified Product or Option.
7. Spare Part(s)
7.1 Spare Part(s) List
LORAD will provide to PMSNA a list of Spare Part(s) in Product(s) or
Option(s) as built, containing the following information,
- Spare Part numbers (to include the PMSNA- and
LORAD Spare Part numbers for reference)
- Description of the Spare Part(s), including an
illustrated
explosion drawing, whenever applicable
- Price of the Spare Part(s)
- Repair and Exchange Prices
- Guaranteed delivery time per Spare Part or group
of Spare Part(s)
- Supplier name and address
- Restrictions on export from the United States (if
applicable)
6
<PAGE>
7.2 Availability, Delivery
LORAD will assure availability (F.O.B., Danbury, Connecticut) of Spare
Part(s) no less than ***************** before the First Commercial
Delivery
of Product(s) or Option(s) or of each new version of a Product or
Option.
Delivery time for Spare Part(s) will be ********************** after
receipt
of order. For some Spare Part(s) LORAD may require a forecast in order
to meet this delivery time. LORAD will advise PMSNA which Spare Part
(s)
are in this category.
LORAD guarantees the availability of Spare Part(s) for Product(s) and
Option(s) during a period of *************** after the last delivery
of a
Product or Option by LORAD to PMSNA under the Agreement. During
the seventh year after the last dispatch of Product(s) or Option(s)
PMSNA
and LORAD will consult each other about the expected demand for Spare
Part(s) over the remaining service life of the Product(s) or Option(s)
and
how this demand can best met in a cost effective way.
7.3 Upgrade of Spare Part(s)
Stocks of Spare Part(s) in PMSNA's stores which have become obsolete
due
to Field Change Orders will be returned to LORAD. The shipping costs
will be borne by PMSNA. LORAD will credit to PMSNA the actual
purchase value or modify the Spare Part to the highest configuration
level, if applicable.
7.4 Ordering of Spare Part(s)
7.4.1 Stock Recommendations and Planning
LORAD will provide PMSNA with recommendations for the stocking of
Spare Part(s) required to support and maintain the Products and update
such information as required.
LORAD will recommend and allow PMSNA to initiate an end-of-life order
after the agreed period.
PMSNA will - in so far as possible - provide LORAD with a forecast of
its
expected demand for Spare Part(s).
7.4.2 Priority 1 Orders (P1)
Spare Part(s) to be delivered under a "Priority 1 order" (breakdown or
out
of stock situation) will be shipped by LORAD, using courier service to
the
shipping address indicated on PMSNA's notification or order, within 24
hours after notification in writing (e.g. by fax).
LORAD will make all the necessary and appropriate shipping
arrangements. PMSNA will reimburse the freight costs. LORAD will
immediately inform PMSNA of the relevant shipping information and
expected time of arrival.
7
<PAGE>
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***********************************************
7.4.3 Priority 2 Orders (P2)
Spare Part(s) to be delivered under "Priority 2 orders" (replenishment
orders) may be placed by PMSNA during the term of this Agreement or
thereafter during the **************** set forth in the third paragraph of
7.3 above. These Spare Part(s) will - in so far as they were forecasted -
have a delivery time of ********* *********. In any case LORAD will
use its best efforts to meet delivery requirements.
LORAD will accept orders irrespective of value and will not impose
surcharges on any order (except as may be agreed upon with PMSNA for
Priority 1 orders).
7.5 Repair
7.5.1 Repair Services and Support
Those Spare Part(s) which are identified as repairable items may be
returned by PMSNA to LORAD for repair and will be repaired to their
highest configuration level within six (6) ***************** or be replaced
within ***************.
LORAD will provide repair services for a period of at least ***********
after delivery of the last Product or Option under the Agreement.
Repairs will not affect Form, Fit, Function, interchangeability or
certification of the Spare Part(s).
For warranty repairs, LORAD shall be responsible for arranging and
paying for transportation and insurance for shipments of replacement
parts to and from LORAD.
For non-warranty repairs transportation charges to and from LORAD
are the responsibility of PMSNA.
LORAD will also provide Technical Assistance as required. A "help desk"
will be available during regular working hours from 8:30 A.M. to 5:00
P.M. Eastern Standard Time.
7.5.2 Warranty on Repaired Items
Repaired parts will carry the same warranty as for primary delivered
parts (as set forth in Article 8 of the Agreement).
7.5.3 Repair at PMSNA
If PMSNA decides in the future to start repair of exchangeable Spare
Part(s) in its own workshops, then LORAD agrees to transfer to PMSNA all
relevant information concerning, for example but not limited to:
8
<PAGE>
- Troubleshooting
- Component specifications (names and addresses
of vendors included)
- Adjustment procedures
- Tools and repair aids (specifications and prices)
- Initial training (if applicable)
- Schematics and wiring diagrams
- Test software and firmware
The conditions (prices, reimbursement for work involved, etc.) for
transfer will be negotiated at the time of such transfer.
7.6 Packing
Each Spare Part will be packed in such a way that it can be held in
PMSNA'S inventory without repacking for storage or shipment.
Electrostatic discharge packing is to be used where required.
If applicable, Spare Part(s) shall be marked as subject or not subject to
United States export restrictions. Each item shall also be marked with
the country of origin.
7.7 Prices
Prices for any additional Spare Part(s) required for the Product(s) or
Option(s) will be agreed upon between the parties when each new
Product or Option is added to the scope of this Agreement and is
incorporated in Appendix 2 at that time.
The prices will be based on ************************************
******************.
****************************************************************
****************************************************************
****************************************************************
****************************************************************
****************************************************************
****************************************************************
**********************************
7.8 Modifications to Spare Part(s) (Because of FCO's)
For modifications to Spare Part(s), or at the introduction of Product(s) or
Option(s) for the Products, LORAD will make its best efforts to supply
new Spare Part(s) and price lists at least ****************** before the First
Commercial Delivery of that Option, Product or new version of a Product
or Option which incorporates modified Spare Part(s), takes place.
7.9 Second Sourcing
LORAD will Provide PMSNA with the manufacturer's name and part
numbers(s) for generic Spare Part(s), to enable PMSNA, if LORAD is unable
to supply Spare Part(s), to directly source these generic Spare Part(s) from
LORAD's suppliers.
9
<PAGE>
LORAD shall, however, remain responsible, as set forth herein, in the
event certain Spare Parts are no longer available from such vendors.
LORAD will then take all necessary actions to find, as soon as
possible, substitutes for Spare Part(s) which are no longer
available, including undertaking the necessary engineering and
test work connected with such a substitution.
8. Training, Exchange of Experiences
LORAD will provide adequate initial training for the Philips' service
organization (a "train the trainer" program), to take place,
preferably, in Danbury, Connecticut, as set forth in Section 15.8 of
the Agreement. One training session will be held at least
***************** in advance of the First Commercial Delivery of the
Product, and be in sufficient depth to enable PMSNA personnel to
conduct the training of other PMSNA technical personnel. LORAD will
assist PMSNA in preparing all documents and other training aids
necessary for successful secondary training classes held by PMSNA.
During instructor training classes, a complete set of Service Manuals
will be made available free of charge by LORAD to the participants.
If significant improvements are made to Products or new contract
items are added to the scope of the Agreement, LORAD will provide
training and documentation for those improvements or items on the
conditions stated above.
Once a year an exchange of experiences between PMSNA and LORAD
will the planned.
For all of the above activities, each party will bear its own
costs.
The schedule for the initial training will be set by mutual
consent. Additional training will be scheduled on *************
notice from PMSNA.
9. Software Support and Maintenance
9.1 General
LORAD will provide support, preventive and corrective maintenance
for Software/Firmware for a minimum of *************** following
the last shipment of Product(s) or Option(s) to PMSNA under this
Agreement.
For this purpose, LORAD will keep available a software maintenance
and support group with adequate know-how regarding the various
versions of the software. This support will be in addition to
that set forth in Article 8 of the Agreement. For modifications
to Software/Firmware the procedure set forth in Section 3.3 of the
Agreement will be followed.
10
<PAGE>
9.2 Definitions
The following definitions will apply in addition to the other
definitions in the Agreement:
"Compatibility"
will mean that a new Release or a new Level can replace the former
Release(s) or Level(s) of the Software without degrading the
functionality and/or affecting the interfacing of the Product or
Software.
"Release(s)"
will mean a specified set of functions. A new Release of the Software
will be made as a result of changed functional specifications and will
also contain the solutions to problems of previous Levels. A Release
may comprise a number of Versions.
"Version(3)"
will mean a distinction between various software programs which fulfil
essentially the same class of functions, but which are different for
alternative hardware choices and/or slightly different Software
configurations and/or differences in performance and/or for commercial
reasons.
"Level(s)"
will mean improved Software having the same functional specifications
as before, but originating from changed (corrected) source code.
9.3 General Support
While maintaining compatibility LORAD will actively:
search the Software/Firmware for errors and offer corrections therefor,
investigate, produce and offer enhancements to the Software/Firmware
which improve and optimize the user friendliness of the
Software/Firmware,
on request, provide advice with regard to the capabilities of the
Software/Firmware in order to fully exploit its potential, and
investigate advanced software diagnostics to aid the repair of
equipment and maintain service efficiency and a low MTTR.
9.4 Corrective Maintenance
While maintaining compatibility and without prejudice to the procedures
of Section 5.3 of this Exhibit LORAD will provide Corrective
Maintenance by:
delivering as soon as possible solutions for VERY URGENT and
URGENT PROBLEMS in the form of preliminary solutions
(temporary fixes only, no corrections to the Software/
Firmware) and definite solutions (corrections to the Software/
Firmware) if necessary in an unscheduled Level of the
Software/Firmware.
11
<PAGE>
delivering solutions for ROUTINE PROBLEMS in the form of
definite solutions as part of the next Level of the
Software/Firmware.
If LORAD cannot provide a definite solution without violating the
compatibility of the Software/Firmware with the Product(s) or
Option(s)'
hardware or the Specifications, then LORAD will promptly so inform
PMSNA in writing, with a comprehensive explanation of the reasons and
consequences. LORAD will not undertake any implementation of such
definite solution unless PMSNA has accepted the consequences of such
action in writing.
Both preliminary and definite solutions will be released to PMSNA as
soon as possible, but only after LORAD has produced and tested each
solution, in clinical application as well as in LORAD's product
development laboratory. Definite solutions shall be included in the
next available Level of any Release. The solutions will be documented
and made available to PMSNA by the fastest means of communication
and/or transportation.
10. Duration of Service Arrangements
Unless explicitly agreed to the contrary in this Exhibit or in the
Agreement itself, the arrangements of this Exhibit will come into
effect on the same day as the Agreement and continue until
*************** after delivery of the last Product or Option by LORAD
pursuant to the Agreement.
11. Survival
Should any of the provisions of this Agreement become invalid or be
ruled invalid by a court of competent jurisdiction, this shall not
impair the legal effectiveness of the others, the parties shall,
however, immediately replace the invalid provision by one which, in so
far as possible, has the same legal and economic effect as the former.
Appendices:
Appendix 1: Field Problem Report
Appendix 2: List of Spare Part(s)
12
<PAGE>
ACCEPTANCE TEST
CONTENT:
1. Valid papers
hardware specification version ****************
software specification version ****************
******** list date ****************
SUMMARY OF ACTION ITEMS date ******************
Mentioned open test are done in the meantime.
time schedule (EXHIBIT 6 OF CONTRACT)
2. First Target: ******************************
Open major problems:
*********
- *********************************
- ****************
- ***************************
- *********** **********
- *********** **********
******** *****************************************
*********
- *********************************
- *****************************************************
***********
- ***********************************************
- ********************
3. Second Target: *************
all points mentioned in the ***************
all points listed in "SUMMARY OF ACTION ITEMS"
all jobs listed in the time schedule
(EXHIBIT 6 of contract)
Regarding the lower requirements for application this release
is only valid for application and not for series.
<PAGE>
WHAT KIND OF ACTIONS ARE NECESSARY
TO GET A RELEASE FOR APPLICATION
The release for application will be done by Quality department in
Hamburg. For a decision the
following parts/information must be available before in Hamburg.
* ***************************************************
**************
* ********************************
* ***********************************
* ****************************************
****************************************
Requirements regarding software will be done by quality department
in Hamburg a.s.a.p.
[/s/ Signature Appears Here]
------------------------------
John Rogers, LORAD
[/s/ Signature Appears Here]
------------------------------
Judy Haynie, Philips
[/s/ Signature Appears Here]
------------------------------
Juergen Wiechers, Philips
<PAGE>
Exhibit 3
Appendix 1
----------
Field Problem Report
--------------------
SUPPLIER LICENSED PARTICIPANT
FORM OF PROBLEM REPORT
----------------------
1. Required urgency
2. Reporting date
3 Name
Address of participant
4. Reference to Philips International Agreement no. ...
5. Equipment (hardware) and Software configuration.
6. Problem description
7. Conditions under which the problem occurs.
Problem reports to be sent to: Name of Supplier
Address
Contact Person
Supplier will inform requesting Participant about:
- Problem acceptance/rejection for further treatment
- Status of Solution such as: temporary solution, to
be solved in next
release, problem
solved etc.
<PAGE>
Exhibit 3
Appendix 2
PHILIPS MD3000 SPARE PARTS LIST 10/13/93 PAGE 1
DOMESTIC VERSION
* To assure latest software revision, these parts will be shipped
direct from LORAD.
-----------------------------------------------------------------
# PHILIPS P/N LORAD P/N DESCRIPTION QTY
-----------------------------------------------------------------
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---------------------------------------------------------------
<PAGE>
PHILIPS MD3000 SPARE PARTS LIST 10/13/93 PAGE 2
DOMESTIC VERSION
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<PAGE>
Exhibit 4
mammo DIAGNOST 3000 Final Production Test Page 1
------------------- --------------------------------- ----------
Distribution:
Original: Archive at LORAD
Copy: PMS-Hamburg, attn. Incoming Inspection
Philips ID-Number
*********************************** S/N .....................
*********************************** S/N .....................
*********************************** S/N .....................
*********************************** S/N .....................
*********************************** S/N .....................
*********************************** S/N .....................
*********************************** S/N .....................
Name:..........................
Department:..........................
Date:..........................
Signature:..........................
Check OK
or
Insert Value
------------
1. Production-Line Test
Earth Resistance ***** .......
Earth leakage Current ***** MA
Touch voltage .......
High voltage test ***** .......
High voltage test ***** .......
2. C-Arm Controls
C-Arm up-movement .......
C-Arm down-movement .......
C-Arm rotation release .......
Compression Up .......
Compression down .......
Compression release .......
Light field - illuminate the image field
for approximately 30 seconds .......
Compression handwheel .......
Footswitches .......
Front panel release key .......
<PAGE>
mammo DIAGNOST 3000 Final Production Test Page 2
------------------- --------------------------------- ----------
Check OK
or
Insert Value
3. C-Arm Movements
C-Arm vertical movement
*********** from floor (breast tray height) cm
C-Arm down movement motorized 1b
C-Arm up movement motorized 1b
C-Arm rotation
*************************************** 1b
C-Arm rotation locked min...N N
4. Compression
Compression plate selection
********************** .....
********************** .....
********************** .....
********************** .....
********************** .....
********************** .....
Compression motorized up ********** 1B
Compression motorized down ********** 1B
Compression manual up ********** 1B
Compression manual down ********** 1b
Compression release ********** cm
(switch is located on the C-Arm 7 key
switchpad and on the front panel)
Compression release strength N
tolerance
5. C-Arm Pivot Tube
Gradient of C-Arm pivot tube mm
6. Filter and mirror
.....
Artefact free exposure .....
7. Resolution
Fokus 0.1 > ..... lp/mm vertical x = lo/mm
horizontal y = lo/mm
8. Labels
Main identification plate
X-ray tube compliance label
HV-generator compliance label
Beam limiting device compliance label
X-ray control compliance label
Image receptor support device compliance label
<PAGE>
mammo DIAGNOST 3000 Final Production Test Page 3
------------------- --------------------------------- ----------
Check OK
or
Insert Value
9. Evaluation Sheet for Text Exposure
type ............
**********
Symetric Radiaton (left/right)
Symmetry a1 (left) ...... mm
Symmetry a2 (right) ...... mm
Symmetry deviation: [a1-a2] mm
Excess radiation or overradiation to the front: not less than 1 mm
overradiation b1 (left) ...... mm
overradiation b2 (right) ...... mm
Max excess radiation ...... mm
Straight forward: deviation [b1 - b2] mm
**********
Symetric Radiation (left/right)
Symmetry a1 (left) ...... mm
Symmetry a2 (right) ...... mm
Symmetry deviation: [a1-a2] mm
Excess radiation or overradiation to the front: not less than 1 mm
overradiation b1 (left) ...... mm
overradiation b2 (right) ...... mm
Max excess radiation ...... mm
Straight forward: deviation
[b1-b2] mm
10. Illuminance of Light Field
Light field consistancy lux
(The difference between background lux and
light field lux >= 200 lux)
Light field alignment
(The light field borders must be less than ****
away from the x-ray field borders)
11. Exposure
Auto-kV mode begin at ***** .....
Auto-kV mode keeps the exposure mAs within the
preset "windows" .....
Small focus ********** .....
Large focus ********** .....
12. Image Receptor Selection
Cassette holder .....
Cassette type
********* .....
Bucky .....
<PAGE>
mammoDIAGNOST 3000 Final Production Test page 4
------------------ --------------------------------- ----------
Check OK
or
Insert Value
------------
13. Aperture
Auto-aperture .....
Fixed aperture .....
14. x-ray prevention
Patient shields
Abdomen shield .....
Face shield .....
The official authorisation for the x-ray tube has
been granted
15. Biopsy
Couple the biopsy unit: a lamp in the frame must
be light up. .....
The locking brakes for traverse and longitudinal
carriage are applied a lamp must light up. .....
Switch off the system. The locking brakes for
traverse and longitudi-
nal carriage remain to
be applied. .....
Use the non-locking switch.
The brakes are released. .....
Bring the radiography unit into the upright position.
Exposure release must not
be possible. .....
Correction values for the position of the biopsy unit
are entered. .....
Checking adjustment of the biopsy cone. .....
Adjustment of the Z-axis of the needle. .....
Checking the radiation going beyond the film.
Symetric Radiaton (left/right)
Symmetry a1 (left) ...... mm
Symmetry a2 (right) ...... mm
Symmetry deviation: [a1 - a2] **
Excess radiation or overradiation to the front: not less than 1 mm
overradiation b1 (left) ...... mm
overradiation b2 (right) ...... mm
Max excess radiation ...... mm
Straight forward: deviation
[b1 - b2] **
16. Printer ......
17. Keyboards ......
18. Monitor ......
<PAGE>
Exhibit 5
Standard Form for Change Request
Standard Form for Change Request
1. Change request number: (date and sequence number)
2. Description of change:
Change of:
3. Reason of the change:
4. Change proposed for series:
5. Change proposed for Serial Number:
6. Reference to Drawings:
7. Reference to Reports and/or telexes:
8. Consequences for Safety standards:
9. Consequences for Service documentation and/or spare parts:
10. Consequences for Delivery Time:
11. Consequences for Price:
12. Consequences for Interfaces:
13. Consequences for Stock:
14. Initiated by:
<PAGE>
Exhibit 6
Time Schedule
Date: 1 October 1993
(drawing omitted)
<PAGE>
Agreement between Philips Medical Systems and LORAD Exhibit 7
Components from PMS, Logistic Procedures
Date: 30 September 1993 Page 1
1. Components
The following Components are to be supplied to LORAD
Philips Code Number Name
*********** ****************
*********** ****************
*********** ****************
*********** ****************
2. Logistic Procedure
(Drawing Omitted)
Graner: actions, responsibilities
- import activities, custom clearance
- stock keeping and reporting to PMS on incoming and outgoing
material
- handle LORAD's request and provide components to LORAD
without charge, CIP, on an "just in time" procedure
- transport arrangement to LORAD
- handle return procedure if necessary
Lorad: actions, responsibilities
- Request from GRANER Components in due time
(average 1 week lead time or as found practical during daily
operation)
- stockkeeping (stock for manufacturing) not to exceed 1 months
demand
- inventory control and reporting if required
- returnshipment of Components, which found to be of not
sufficient quality
- build in and test, shipment with Product
<PAGE>
Agreement between Philips Medical Systems and LORAD Exhibit 7
Components from PMS, Logistic Procedures
Date: 30 September 1993 Page 2
-----------------------------------------------------------------
3 Name and Addresses
Graner Company
Philips Electronics North American Corporation
21 Grace Church Street
Port Chester, N.Y. 10573
NAME TITLE PHONE FAX
Al Singleton President 001-914-935-8003 001-914-935-8019
Gina Knox Sr. Buyer 001-914-935-8070 001-914-935-8099
Dianne DiBiello Purch. Mgr 001-914-935-8040 001-914-935-8099
Steven Holic Log. Manager 001-914-935-8014 001-914-935-8019
LORAD Corporation
A subsidiary of Thermo Trex Corporation
36 Apple Ridge Road
Danbury, Connecticut 06810
NAME TITLE PHONE FAX
Hal Kirshner President 001-203-790-1188 001-203-792-8220
John Rodgers VP Research&E 001-203-790-1189 001-203-743-3370
Barry Wrenn VP Operations 001-203-790-1188 001-203-743-3370
Jack DeMorro Traffic Man. 001-203-731-8412 001-203-731-8440
Bill Smith Prod. Control 001-203-731-8417 001-203-731-8441
<PAGE>
Exhibit 8
LORAD's ISO 9000 Certificate
[To be added later as received].
<PAGE>
Exhibit 9
***********************************Page 1
=====================================================
|***** | ***** | ***** | ****** |
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=====================================================
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+-----------+------------+------------+-------------+
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+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
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+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
=====================================================
*** ************************************************
************************************************
************************************************
************************************************
*****
<PAGE>
Exhibit 9
******************************** *****
-------------------------------- -----
+-----------+------------+------------+-------------+
|***** | ***** | ***** | ****** |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
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+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
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+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
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|***** | x | | |
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+-----------+------------+------------+-------------+
<PAGE>
Exhibit 9
Page 3
**************
=====================================================
|***** | x | | |
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|***** | x | | |
+-----------+------------+------------+-------------+
|***** | x | | |
+-----------+------------+------------+-------------+
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|***** | x | | |
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|***** | | | x |
+-----------+------------+------------+-------------+
|***** | x | | |
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|***** | x | | |
+-----------+------------+------------+-------------+
|***** | x | | |
+-----------+------------+------------+-------------+
|***** | | | x |
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|***** | x | | |
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|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | x | | |
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|***** | x | | |
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+-----------+------------+------------+-------------+
|***** | x | | |
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|***** | | | x |
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|***** | | | x |
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|***** | x | | |
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|***** | | | x |
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|***** | x | | |
+-----------+------------+------------+-------------+
|***** | x | | |
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=====================================================
<PAGE>
Exhibit 9
************** Page 4
=====================================================
|***** | ***** | ***** | ****** |
** **
=====================================================
|***** | | | x |
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| | | | |
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=====================================================
=====================================================
|***** | ***** | | ****** |
* *
=====================================================
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
|***** | | | x |
+-----------+------------+------------+-------------+
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+-----------+------------+------------+-------------+
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+-----------+------------+------------+-------------+
|***** | | | x |
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=====================================================
<PAGE>
EXHIBIT 10.89
N E T L E A S E
-----------------
ARTICLE I
Reference Data
--------------
1.1 Subjects Referred To.
--------------------
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1.1.
(a) Date of this Lease: May 29, 1996
(b) Premises: The land with the 156,000 square foot building thereon
commonly known as 300 Foster Street, Littleton, Massachusetts,
more particularly shown on Exhibit A attached hereto.
(c) Landlord: John K. Grady, Trustee of Concord Associates Foster
Street Trust u/d/t dated July 21, 1982 and recorded with the
Middlesex South District Registry of Deeds in Book 14680, Page 354.
(d) Original Address of Landlord: 300 Foster Street,
Littleton, Massachusetts 01460
(e) Tenant: XRE Acquisition Corp., a Delaware
corporation
(f) Original Address of Tenant: 300 Foster Street,
Littleton, Massachusetts 01460
(g) Term: Sixteen (16) Years.
<PAGE>
(h) Annual Fixed Rent:
Lease Years: Annual Fixed Rent:
1 through 5 $858,000
6 through 10 $975,000
11 through 16 $1,092,000
(i) Permitted Uses: All uses permitted by applicable law
(j) Public Liability Insurance Limits:
Bodily Injury: $2,000,000
Property Damage: $2,000,000
(k) Tenant's Option to Purchase: As set forth in Section 9.11.
1.2 Exhibits.
--------
The Exhibits listed below in this section are incorporated in this
Lease by reference and are to be construed as a part of this Lease:
EXHIBIT A. Description of Premises.
-2-
<PAGE>
ARTICLE II
Premises and Term
-----------------
2.1 Premises. Landlord hereby leases and demises to Tenant and Tenant
--------
hereby leases from Landlord, subject to and with the benefit of the terms,
covenants, conditions and provisions of this Lease, the Premises.
2.2 Term. TO HAVE AND TO HOLD for a term beginning on the date hereof
----
and continuing for the Term, unless sooner terminated as hereinafter provided.
ARTICLE III
Condition of Premises
---------------------
3.1 As Is. Tenant accepts the Premises in their "as is" condition as
-----
of the date of this Lease. Landlord shall not be required to construct any
leasehold improvements as a condition precedent to the commencement of the
Term of this Lease.
ARTICLE IV
Rent
----
4.1 The Fixed Rent. Tenant covenants and agrees to pay Annual Fixed
--------------
Rent to Landlord at the Original Address of Landlord or at such other place or
to such other person or entity as Landlord may by notice to Tenant from time
to time direct in equal installments of 1/12th of the Annual Fixed Rent in
advance on the first day of each calendar month included in the Term; and for
any portion of a calendar month at the beginning or end of the Term, at that
rate payable in advance for such portion.
4.2 Additional Rent. This Lease is a NET LEASE, and Landlord shall
---------------
not be obligated to pay any charge or bear any expense whatsoever against or
with respect to the Premises except to the extent hereinafter provided. In
order that the Fixed Rent shall be net to Landlord, Tenant covenants and
agrees to pay, as Additional Rent, taxes, betterment assessments, insurance
costs, and utility charges with respect to the Premises as provided in this
Section 4.2 as follows:
4.2.1 Real Estate Taxes. Tenant shall pay, directly to the
-----------------
authority charged with collection all "real estate taxes" which are, at any
time prior to or during the Term hereof, imposed or levied upon or assessed
against the Premises. If any real estate taxes levied against the Premises
may legally be paid in installments, Tenant may elect to pay such real estate
taxes in
-3-
<PAGE>
installments together with all interest and other charges due thereon
or on account thereof. For each tax or assessment period, or installment
period thereof, wholly included in the Term, all such payments shall be made
by Tenant no later than the last date on which the same may be paid without
interest or penalty; provided that for any fraction of a tax or assessment
period, or installment period thereof, included in the Term at the beginning
or end thereof, Tenant shall pay to Landlord, within 20 days after receipt of
invoice therefor, the fraction of real estate taxes so levied or assessed or
becoming payable which is allocable to such included period.
The term "real estate taxes" as used herein shall mean all real
estate taxes, assessments, and other governmental impositions and charges of
every kind and nature whatsoever, extraordinary as well as ordinary, foreseen
and unforeseen, and each and every installment thereof, which shall or may
during the Term as it may be extended be assessed, imposed, become due and
payable or be levied by the lawful taxing authorities attributable to the
period commencing on the Term commencement date against the Premises or liens
upon or arising in connection with the use or occupancy or possession of, or
becoming due or payable out of or for, the Premises or any part thereof.
"Real estate taxes" shall include all interest or penalties imposed with
respect to the Premises which arise due to Tenant's failure to pay tax
payments as and when due pursuant to this Lease.
Except as otherwise set forth in the immediately succeeding
paragraph of this Section 4.2.1 nothing herein contained shall be construed to
include as a real estate tax any inheritance, estate, succession, transfer,
gift, franchise, corporation, income or profit tax or capital levy that is or
may be imposed upon Landlord; provided, however, that, if at any time during
the Term the methods of taxation prevailing at the Term commencement date
shall be altered so that in lieu of or as a substitute for the whole or any
part of the real estate taxes now levied, assessed or imposed, there shall be
levied, assessed or imposed an income or other tax of whatever nature, then
the same shall be included in the computation of real estate taxes hereunder.
Real estate taxes shall include any excise, transaction, sales or
privilege tax now or hereafter imposed by any government or governmental
agency upon Landlord, in substitution for or in addition to the real estate
taxes now levied on the Premises, on account of, attributed to, or measured by
rent or other charges payable by Tenant or levied by reason of the parking
available on the Premises, and shall be repaid by Tenant to Landlord in
addition to and together with the Annual Fixed Rent, additional rent and other
charges otherwise payable hereunder.
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Notwithstanding any other provision of this Lease, Tenant shall
not be obligated to pay any tax unless it is levied solely upon the Premises
or on the Annual Fixed Rent or any additional rent payable under this Lease.
If Tenant shall deem itself aggrieved by any such real estate
taxes and shall elect to contest the payment thereof, Tenant may make such
payment under protest or, if postponement of such payment will not result in
a lien or otherwise jeopardize Landlord's title to the Premises nor prejudice
Landlord's rights with respect to abatement proceedings, Tenant may postpone
the same.
Either party paying any real estate taxes shall be entitled to
recover, receive and retain for its own benefit all abatements and refunds
related thereto, unless it has previously been reimbursed by the other party.
Any abatement or refund related to the payment of which was apportioned
between the parties shall be first applied to the costs of securing such
abatement or refund, and the balance shall be apportioned in like manner.
Neither party shall discontinue any abatement proceedings begun by it without
first giving the other party notice of its intent so to do and reasonable
opportunity to be substituted in such proceedings. Notwithstanding any other
provision of this Lease to the contrary, neither party paying any real estate
taxes shall make such payment in such an amount, in such a manner, or at such
a time as would prejudice any abatement proceeding.
4.2.2 Insurance. Tenant shall take out and maintain throughout
---------
the Term the following insurance:
4.2.2.1 All-risk insurance covering all buildings and
improvements now existing or hereafter erected upon the Premises, and all
equipment, fixtures, motors, machinery, furnishings and furniture installed in
or used in connection with the Premises, with such additional endorsements as
may be necessary to include coverage for vandalism and malicious conduct,
floods, water damage, earthquake and debris removal and demolition, in an
amount sufficient for Tenant to avoid any co-insurance obligation and not less
than the replacement cost of all such buildings, improvements, equipment,
fixtures, motors, machinery, furnishings and furniture (but not less than the
agreed amount if coverage is pursuant to an agreed amount clause) as such
replacement cost may be determined from time to time by agreement with the
insurance carrier. Tenant shall not be required to provide insurance with
respect to defect in the Premises or any obligation of Landlord existing as of
the commencement of the Term of this Lease.
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4.2.2.2 Commercial general liability insurance indemnifying
Landlord and Tenant against all claims and demands for any injury to person or
property which may be claimed to have occurred on or about the Premises or on
the sidewalk or ways adjoining the Premises, in amounts which shall, at the
beginning of the Term, be at least equal to the limits set forth in Section
1.1, and, from time to time during the Term, shall be for such higher limits,
if any, as are customarily carried in the area in which the Premises are
located on property similar to the Premises and used for similar purposes; and
workmen's compensation insurance with statutory limits covering all of
Tenant's employees working on the Premises.
4.2.2.3 Insurance against loss or damage from sprinklers
and from leakage or explosion or cracking of boilers, pipes carrying steam or
water, or both, pressure vessels or similar apparatus, in the so-called
"broad form" and in such amounts as Landlord may reasonably require.
4.2.2.4 All policies required under this Section 4.2.2
shall be obtained from responsible companies qualified to do business in the
state in which the Premises are located and in good standing therein, which
companies and the amount of insurance allocated thereto shall be subject to
Landlord's reasonable approval. Such insurance may be provided under blanket
policies. All such insurance shall name Tenant, Landlord and any mortgagee of
which Landlord has provided Tenant notice as an additional insured as their
interests may appear. Tenant agrees to furnish Landlord with certificates
evidencing all such insurance prior to the beginning of the Term hereof and
evidence of each renewal policy at least 30 days prior to the expiration of
the policy it renews. Each such policy shall be non-cancellable with respect
to the interest of Landlord and the holders of any mortgages on the Premises
without at least 30 days' prior written notice thereto.
4.2.2.5 All insurance which is carried by either party with
respect to the Premises or to furniture, furnishings, fixtures or equipment
therein or alterations or improvements thereto, whether or not required,
shall include provisions which either designate the other party as one of the
insured or deny to the insurer acquisition by subrogation of rights of
recovery against the other party to the extent such rights have been waived by
the insured party prior to occurrence of loss or injury, insofar as, and to
the extent that such provisions may be effective without making it impossible
to obtain insurance coverage from responsible companies qualified to do bus-
iness in the state in which the Premises are located (even though extra
premium may result therefrom). In the event that extra premium is payable by
either party as a result of this provision, the other party shall
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reimburse the party paying such premium the amount of such extra premium. If at
the request of one party, this non-subrogation provision is waived as to such
party, then the obligation of reimbursement by such party shall cease for such
period of time as such waiver shall be effective, but nothing contained in this
Section 4.2.2.5 shall derogate from or otherwise affect releases else-where
herein contained of either party for claims. Each party shall be entitled to
have duplicates or certificates of any policies containing such provisions. Each
party hereby waives all rights of recovery against the other for loss or injury
against which the waiving party is protected by insurance containing said non-
subrogation provisions, reserving, however, any rights with respect to any
excess of loss or injury over the amount recovered by such insurance.
4.2.3 Utilities. Tenant shall pay directly to the proper
---------
authorities charged with the collection thereof all charges for water, sewer,
gas, electricity, telephone and other utilities or services used or consumed
on the Premises, whether called charge, tax, assessment, fee or otherwise,
including, without limitation, water and sewer use charges and taxes, if any,
all such charges to be paid as the same from time to time become due.
4.3 Late Payment of Rent. If any installment of Fixed Rent or payment
--------------------
of Additional Rent is paid more than ten (10) days after the date the same was
due, it shall bear interest from the due date at the prime commercial rate of
The First National Bank of Boston, as it may be adjusted from time to time,
plus two percent per annum, but in no event more than the maximum rate of
interest allowed by law, the payment of which shall be Additional Rent.
ARTICLE V
Tenant's Additional Covenants
-----------------------------
5.1 Affirmative Covenants. Tenant covenants at its sole expense at
---------------------
all times during the Term and for such prior or subsequent time as Tenant
occupies the Premises or any part thereof:
5.1.1 Perform Obligations. To perform promptly all of the
-------------------
obligations of Tenant set forth in this Lease; and to pay when due the Fixed
Rent and Additional Rent and all charges, rates and other sums which by the
terms of this Lease are to be paid by Tenant.
5.1.2 Use. To use the Premises only for the Permitted Uses, and
---
from time to time to procure all licenses and permits necessary therefor at
Tenant's sole expense.
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5.1.3 Repair and Maintenance. Except as otherwise provided in
----------------------
Article VI, to keep the Premises (but not the roof and structure of the
Premises, which shall be maintained by Landlord in good condition during the
Term) in good order, condition and repair and in at least as good order,
condition and repair as they are in on the Commencement Date or may be put in
during the Term, reasonable use and wear, fire and other casualty only
excepted; to maintain in good condition all lawns and planted areas and keep
in good repair and clean and neat and free of snow and ice all surfaced
roadways, walks, and parking and loading areas; and to make all repairs and to
do all other work necessary for the foregoing purposes.
5.1.4 Compliance with Law. To make all non-structural repairs,
-------------------
alterations, additions or replacements to the Premises required by any law or
ordinance or any order or regulation of any public authority; to keep the
Premises equipped with all safety equipment required; to pay all municipal,
county, or state taxes assessed against the leasehold interest hereunder, or
against personal property of any kind on or about the Premises; and to comply
with the orders, regulations, variances, licenses and permits of or granted by
governmental authorities with respect to zoning, building, fire, health and
other codes, regulations, ordinances or laws applicable to the Premises, and
the condition, use or occupancy thereof, except that Tenant may defer
compliance so long as the validity of any such order, regulation, code,
ordinance or law shall be contested by Tenant in good faith and by appropriate
legal proceedings. Notwithstanding the foregoing, Landlord shall make such
repairs, alterations or replacements, shall furnish such safety equipment, and
shall otherwise bring the Premises into compliance with all applicable laws as
of the commencement of the Term of this Lease.
5.1.5 Tenant's Work. To procure at Tenant's sole expense all
-------------
necessary permits and licenses before undertaking any work on the Premises; to
do all such work in a good and workmanlike manner employing materials of good
quality and so as to conform with all applicable zoning, building, fire,
health and other codes, regulations, ordinances and laws; to pay promptly when
due the entire cost of any work on the Premises undertaken by Tenant so that
the Premises shall at all times be free of liens for labor and materials; to
require such contractors employed by Tenant to carry workmen's compensation
insurance in accordance with statutory requirements; and to save Landlord
harmless and indemnified from all injury, loss, claims or damage to any person
or property occasioned by or growing out of such work. Tenant shall not make
any alterations to the Premises having a cost in excess of $50,000 or which
affect the structure of the Premises without the Landlord's prior approval of
the plans and specifications therefor, which approval shall not be
unreasonably
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withheld or delayed. Tenant shall furnish Landlord with such
insurance as Landlord shall reasonably request when any such alterations are
being undertaken by Tenant.
5.1.6 Indemnity. Tenant shall defend all actions against
---------
Landlord, any partner, trustee, stockholder, officer, director, employee or
beneficiary of Landlord, holders of mortgages on the Premises and any other
party having an interest in the Premises (herein, "Indemnified Parties") with
respect to, and shall pay, protect, indemnify and save harmless, to the extent
permitted by law, all Indemnified Parties from and against, any and all
liabilities, losses, damages, costs, expenses (including reasonable attorneys'
fees and expenses), causes of action, suits, claims, demands or judgments of
any nature arising from (i) injury to or death of any person, or damage to or
loss of property, on or about the Premises or on adjoining sidewalks, streets
or ways, or connected with the use, condition or occupancy of any thereof,
unless such injury, death or damage was caused by the negligence or willful
misconduct of Landlord or its agents, contractors, licensees or invitees, (ii)
violation by Tenant of this Lease, or (iii) any act, fault, omission, or other
misconduct of Tenant or its agents, contractors, licensees, sublessees or
invitees.
Landlord shall defend all actions against Tenant, any partner,
trustee, stockholder, officer, director, employee or beneficiary of Tenant
(herein, "Tenant Indemnified Parties") with respect to, and shall pay, protect,
indemnify and save harmless, to the extent permitted by law, all Tenant
Indemnified Parties from and against, any and all liabilities, losses, damages,
costs, expenses (including reasonable attorneys' fees and expenses), causes of
action, suits, claims, demands or judgments of any nature arising from (i)
injury to or death of any person, or damage to or loss of property, on or about
the Premises or on adjoining sidewalks, streets or ways, or connected with the
use, condition or occupancy of any thereof caused by the negligence or willful
misconduct of Landlord or its agents, contractors, licensees or invitees, (ii)
violation by Landlord of this Lease, or (iii) any act, fault, omission, or other
misconduct of Landlord or its agents, contractors, licensees, sublessees or
invitees.
5.1.7 Landlord's Right to Enter. To permit Landlord and its
-------------------------
agents to enter the Premises at reasonable times after reasonable notice to
examine the Premises, to make such repairs and replacements as Landlord may
elect or as Landlord may be required to perform hereunder, and to show the
Premises to prospective purchasers, lenders and tenants, and, during the last
six months of the Term, to keep affixed in suitable places notices of
availability of the Premises.
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5.1.8 Personal Property at Tenant's Risk. All of the
----------------------------------
furnishings, fixtures, equipment, effects and property of every kind, nature
and description of Tenant and of all persons claiming by, through or under
Tenant which, during the continuance of this Lease or any occupancy of the
Premises by Tenant or anyone claiming under Tenant, may be on the Premises,
shall be at the sole risk and hazard of Tenant and if the whole or any part
thereof shall be destroyed or damaged by fire, water or otherwise, or by the
leakage or bursting of water pipes, steam pipes, or other pipes, by theft or
from any other cause, no part of said loss or damage is to be charged to or to
be borne by Landlord, except that Landlord shall in no event be indemnified
or held harmless or exonerated from any liability to Tenant or to any other
person for any injury, loss, damage or liability caused by Landlord's
negligence or willful misconduct.
5.1.9 Yield Up. At the expiration of the Term or earlier
--------
termination of this Lease: to surrender all keys to the Premises, to remove
all furnishings, fixtures, equipment and other personal property now or
hereafter located in the Premises, and to deliver and yield up the Premises
broom-clean and in the same condition the Premises are in as of the date
hereof, reasonable wear and tear, fire and other casualty excepted.
5.1.10 Estoppel Certificate. Upon not less than 20 days' prior
--------------------
notice by Landlord, to execute, acknowledge and deliver to Landlord a
statement in writing, addressed to such party as Landlord shall designate in
its notice to Tenant, certifying that this Lease is unmodified and in full
force and effect and that Tenant has no defenses, offsets or counterclaims
against its obligations to pay the Fixed Rent and Additional Rent and any
other charges and to perform its other covenants under this Lease (or, if
there have been any modifications that the same is in full force and effect as
modified and stating the modifications and, if there are any defenses, offsets
or counterclaims, setting them forth in reasonable detail), the dates to
which the Fixed Rent and Additional Rent and other charges have been paid and
a statement that Landlord is not in default hereunder (or if in default, the
nature of such default, in reasonable detail). Any such statement delivered
pursuant to this Section 5.1.10 may be relied upon by any prospective
purchaser or mortgagee of the Premises, or any prospective assignee of any
such mortgagee.
5.2 Negative Covenants. Tenant covenants at all times during the Term
------------------
and for such further time as Tenant occupies the Premises or any part thereof:
5.2.1 Assignment and Subletting. Not to assign, transfer,
-------------------------
mortgage or pledge this Lease or to grant a security interest in Tenant's
rights hereunder, or to sublease (which term
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shall be deemed to include the granting of concessions and licenses and the
like) or permit anyone other than Tenant to occupy all or any part of the
Premises or suffer or permit this Lease or the leasehold interest hereby
created or any other rights arising under this Lease to be assigned,
transferred or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, unless, in each instance the prior
written consent of Landlord thereto shall have been obtained, which consent
shall not be unreasonably withheld, conditioned or delayed. Tenant may
assign this Lease or sublet any portion or all of the Premises to any
corporation, partnership, trust, association or other business or
organization (x) directly or indirectly controlling and beneficially owning
Tenant, (y) directly or indirectly controlled by and beneficially owned by
Tenant, or (z) in common control with Tenant, or to any successor of Tenant
by merger, consolidation or acquisition of substantially all of the assets
of Tenant, without the prior written consent of Landlord. For purposes of
this Lease, "control" shall mean the controlling party owns directly or
indirectly fifty-one percent (51%) or more of the voting interest of the
controlled party and that there are no super majority requirements generally
prohibiting control with fifty-one percent (51%) of such voting interest.
If for any assignment or sublease or occupancy by another, Tenant
receives rent or other consideration, either initially or over the term of the
assignment, sublease or occupancy, after payment of any expenses incurred in
connection therewith, in excess of the rent called for hereunder, or in case
of sublease of part of the Premises, in excess of such rent fairly allocable
to the part so subleased, after appropriate adjustments to assure that all
other payments called for hereunder are appropriately taken into account,
Tenant shall pay to Landlord, as Additional Rent, 50% of the excess of each
such payment of rent or other consideration received by Tenant promptly after
its receipt.
Any attempted assignment, transfer, mortgage, pledge, grant of
security interest, sublease or other encumbrance, except as permitted by this
Section 5.2.1, shall be void. No assignment, transfer, mortgage, grant of
security interest, sublease or other encumbrance, whether or not approved, and
no indulgence granted by Landlord to any assignee, sublessee or occupant shall
in any way impair Tenant's continuing primary liability (which after an
assignment or subletting shall be joint and several with the assignee or
sublessee) of Tenant hereunder, and no approval in a particular instance shall
be deemed to be a waiver of the obligation to obtain Landlord's approval in
any other case.
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5.2.2 Overloading and Nuisance. Not to injure, overload, deface
------------------------
or otherwise harm the Premises; nor commit any nuisance.
5.2.3 Environmental Considerations.
----------------------------
(a) For purposes of this Section 5.2.3 the following
definitions shall apply:
"Environmental Release": The term Environmental Release
shall mean any intentional or unintentional releasing,
spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing,
abandoning, discarding or dumping of any Toxic Substance
from, on, into or about the land, water or air of the
Premises in violation of applicable law.
"Remediation": The term Remediation shall mean
activities in connection with the clean-up of an
Environmental Release, including but not limited to
sampling, analysis, excavation, removal, disposal and
replacement of soils, ground water and/or other materials
in accordance with the provisions of any and all
applicable laws, ordinances and regulations, now or
hereinafter enacted.
"Toxic Substance": The term Toxic Substance shall mean
hazardous substance, hazardous waste, hazardous material,
pollutant or contaminant, as such terms are now or
hereafter defined in all applicable federal, state, and
local laws, ordinances or regulations now or hereafter
enacted or amended, and any and all other terms which are
or may be used in any or all applicable laws now or
hereafter enacted to define prohibited or regulated
substances.
(b) Tenant shall not use the Premises or any part
thereof for the purpose of treating, producing, handling, transferring,
processing, transporting, disposing, using or storing a Toxic Substance except
in accordance with applicable law.
(c) Tenant and its agents, employees, contractors,
licensees and invitees shall not cause or permit to exist, as the result of an
action or omission by one or more of them, an Environmental Release in
violation of applicable law.
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The occurrence of an Environmental Release in violation of applicable law shall
be deemed an Event of Default under this Lease.
(d) Notwithstanding this foregoing, Tenant may use
Toxic Substances in the ordinary course of Tenant's business provided that
such materials are used, stored and disposed of in compliance with any and all
applicable laws, ordinances and regulations, as now or hereafter enacted.
(e) Except as otherwise provided herein, Tenant shall
dispose, remove and/or arrange for the disposal and/or removal of its trash by
a trash disposal company, reasonably approved by Landlord, and which shall be
operated in accordance with applicable laws, ordinances and regulations.
Tenant and its agents, employees, contractors, licensees and invitees shall
not place or permit the placement of any Toxic Substance in any waste
receptacle located in the Premises or the plumbing or sewer systems of the
Premises.
(f) The covenants, representations and warranties
provided in this Section 5.2.2 shall survive the expiration or earlier
termination of this Lease.
(g) Tenant shall pay, defend, at its expense with
counsel reasonably acceptable to Landlord, indemnify, and hold harmless
Landlord and its agents, officers, directors and employees from and against
any and all claims, losses, costs, damages, liabilities and fines arising from
or relating to an Environmental Release by Tenant, Remediation with respect to
such a Release by Tenant, or the failure of Tenant, or its agents, employees,
contractors, licensees or invitees to comply with the provisions of this
Section 5.2.2.
(h) Notwithstanding the foregoing, Landlord shall
indemnify and hold Tenant harmless from and against all loss, cost, expense or
damages Tenant, its stockholders, officers, directors or employees may suffer
or incur as a result of (i) an Environmental Release caused by Landlord,
including the costs of any Remediation thereof, or (ii) an Environmental
Release on or about the Premises prior to the commencement of the Term of this
Lease, including the costs of any Remediation thereof.
ARTICLE VI
Casualty or Taking
------------------
6.1 Termination. In the event that the Premises, or any material part
-----------
thereof, shall be taken by any public authority or for any public use, or
shall be destroyed or damaged by fire or
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casualty, or by the action of any public authority, then this Lease may be
terminated at the election of Tenant. For purposes hereof, a material part of
the Premises shall mean that not less than twenty-five percent (25%) of the
building contained on the Premises shall have been taken, destroyed or damaged
and can not be restored within 90 days. Such election, which may be made
notwithstanding the fact that Landlord's entire interest may have been divested,
shall be made by the giving of notice within 30 days after the right of election
accrues.
6.2 Restoration. If this Lease is not terminated as aforesaid, this
-----------
Lease shall continue in force and a just proportion of the rent reserved,
according to the nature and extent of the damages sustained by the Premises,
shall be suspended or abated until the Premises, or what may remain thereof,
shall be put by Landlord in proper condition for use, which Landlord covenants
to do with reasonable diligence.
In no event shall the Landlord or any mortgagee be liable for
restoration beyond the extent of available insurance proceeds. The Landlord's
obligation to restore is further conditioned upon the holder of any mortgage
on the Premises releasing insurance proceeds for restoration. If any
mortgagee refuses to permit all such insurance proceeds to be utilized in the
restoration of the Premises and the Landlord elects not to restore the
Premises, then either Landlord or Tenant may elect to terminate this Lease
within 15 days after the date Landlord notifies Tenant of Landlord's election
not to restore the Premises. The Landlord shall notify the Tenant within 15
days of the date the Landlord receives notice from its mortgagee that
insurance proceeds will not be made available for restoration.
Notwithstanding anything contained in this Section 6.2 to the
contrary, if the unexpired portion of the Term of this Lease remaining after
the anticipated completion of restoration to the Premises is six months or
less, then either the Landlord or Tenant may terminate this Lease.
6.3 Eminent Domain Award. The Landlord reserves, and the Tenant
--------------------
grants to the Landlord, all rights which the Tenant may have for damages or
injury to the Premises for any taking by eminent domain, except for damage to
the Tenant's fixtures, property, or equipment, and except for any separate
award for Tenant's moving expenses.
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ARTICLE VII
Defaults
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7.1 Events of Default. (a) If Tenant shall default in the performance
-----------------
of any of its obligations to pay the Fixed Rent or Additional Rent hereunder
and if such default shall continue for 10 days after notice from Landlord
designating such default (provided, however, that Landlord shall not be
obligated to send such notice more than two (2) times in any twelve month
period) or if within 30 days after notice from Landlord to Tenant specifying
any other default or defaults Tenant has not commenced diligently to correct
the default or defaults so specified or has not thereafter diligently pursued
such correction to completion, or (b) if Tenant becomes insolvent or fails to
pay its debts as they fall due, or (c) if a trust mortgage or assignment is
made by Tenant for the benefit of creditors, or (d) if Tenant proposes a
composition, arrangement, reorganization or recapitalization with creditors,
or (e) if the leasehold estate under this Lease or any substantial part of the
property of Tenant is taken on execution, or by other process of law, or is
attached or subjected to any other involuntary encumbrance, or (f) if a
receiver, trustee, custodian, guardian, liquidator or similar agent is
appointed with respect to Tenant, or if any such person or a mortgagee,
secured party or other creditor takes possession of the Premises or of any
substantial part of the property of Tenant, and, in either case, if such
appointment or taking of possession is not terminated within 90 days after it
first occurs, or (g) if a petition is filed by or with the consent of Tenant
under any federal or state law concerning bankruptcy, insolvency,
reorganization, arrangement, or relief from creditors, or (h) if a petition is
filed against Tenant under any federal or state law concerning bankruptcy,
insolvency, reorganization, arrangement, or relief from creditors, and such
petition is not dismissed within 90 days thereafter, or (i) if Tenant
dissolves or is dissolved or liquidates or adopts any plan or commences any
proceeding, the result of which is intended to include dissolution or
liquidation, then, and in any of such cases, Landlord and the agents and ser-
vants of Landlord lawfully may, in addition to and not in derogation of any
remedies for any preceding breach of covenant, immediately or at any time
thereafter and without demand or notice and with or without process of law
enter into and upon the Premises or any part thereof in the name of the whole
or mail a notice of termination addressed to Tenant, and repossess the same
as of Landlord's former estate and expel Tenant and those claiming through or
under Tenant and remove its and their effects without being deemed guilty of
any manner of trespass and without prejudice to any remedies which might other-
wise be used for arrears of rent or prior breach of covenant, and upon such
entry or mailing as aforesaid this Lease shall terminate. Notwithstanding
anything to the contrary hereunder, Tenant will pay all reasonable attorney's
fees incurred by Landlord in the exercise by Landlord of its remedies
hereunder in the event of a default by Tenant.
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7.2 Remedies. In the event this Lease is terminated by reason of the
--------
Tenant's default hereof, Landlord may at Landlord's option occupy the Premises
or cause the Premises to be altered or divided or otherwise changed or
prepared for reletting, and may relet the Premises or any part thereof, for a
term or terms to expire prior to, at the same time as or subsequent to, the
original expiration date of this Lease, at Landlord's option, and receive the
rent therefor, applying the same first to the payment of such reasonable
expense as Landlord may have incurred in connection with the recovery of
possession, altering, dividing or otherwise changing or preparing for
reletting, including brokerage and reasonable attorney's fees, and then to the
payment of damages in amounts equal to the Annual Fixed Rent, additional rent
and other charges hereunder and to the cost and expense of performance of the
other covenants of Tenant as herein provided; and Tenant agrees, whether of
not Landlord has relet, to pay to Landlord damages equal to the rent,
additional rent and all other sums to be paid by Tenant as and when due under
the terms of this Lease as if there were no default, less the net proceeds of
the reletting, if any, as ascertained from time to time. Landlord agrees to
use reasonable efforts to mitigate its damages in the event of such default by
Tenant. In reletting the Premises as aforesaid, Landlord may grant such rent
concessions as Landlord may deem reasonably necessary for such reletting, and
Tenant shall not be credited therewith. No such reletting shall constitute a
surrender and acceptance or be deemed evidence thereof. The Tenant shall not
be entitled to any surplus accruing as a result of any reletting.
Nothing contained in this Lease shall however, limit or prejudice
the right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proven, whether or
not the amount be greater, equal to, or less than the amount of the loss or
damages referred to above.
7.3 Remedies Cumulative. Any and all rights and remedies which
-------------------
Landlord or Tenant may have under this Lease, and at law and equity, shall be
cumulative and shall not be deemed inconsistent with each other, and any two
or more of all such rights and remedies may be exercised at the same time
insofar as permitted by law.
7.4 Landlord's and Tenant's Right to Cure Defaults. Either Landlord
----------------------------------------------
or Tenant may, but shall not be obligated to, cure, at any time, following 10
days' prior notice to the other party hereto, except in cases of emergency
when no notice shall be required, any default by the other party hereto under
this Lease;
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and whenever the non-defaulting party so elects, all costs and
expenses incurred by such non-defaulting party, including reasonable
attorneys' fees, in curing a default shall be paid by the defaulting party on
demand, together with interest thereon at the rate provided in Section 4.3.
In the event Landlord fails to reimburse any such amount paid by Tenant within
ten (10) days after demand, Tenant shall have the right to offset such amount
against the Fixed Rent and Additional Rent payable by Tenant hereunder.
7.5 Effect of Waivers of Default. Any consent or permission by
----------------------------
Landlord or Tenant to any act or omission which otherwise would be a breach of
any covenant or condition herein, or any waiver by Landlord or Tenant of the
breach of any covenant or condition herein, shall be effective only if made in
writing, and according to its express terms and conditions and shall not in
any way be held or construed (unless expressly so declared) to operate so as
to impair the continuing obligation of any covenant or condition herein, or
otherwise, except as to the specific instance, operate to permit similar acts
or omissions.
The failure of Landlord or Tenant to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease shall not be deemed a waiver of such violation nor prevent a subsequent
act, which would have originally constituted a violation, from having all
the force and effect of an original violation. The receipt by Landlord of
rent with knowledge of the breach of any covenant of this Lease shall not be
deemed to have been a waiver of such breach by Landlord, or by Tenant, unless
such waiver be in writing signed by the party to be charged. No consent or
waiver, express or implied, by Landlord or Tenant to or of any breach of any
agreement or duty shall be construed as a waiver or consent to or of any
other breach of the same or any other agreement or duty.
7.6 No Accord and Satisfaction. No acceptance by Landlord of a
--------------------------
lesser sum than the Fixed Rent, Additional Rent or any other charge then due
shall be deemed to be other than on account of the earliest installment of
such rent or charge due, unless Landlord elects by notice to Tenant to credit
such sum against the most recent installment due, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as rent
or other charge be deemed a waiver, an agreement or an accord and satis-
faction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such installment or pursue any
other remedy in this Lease provided.
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<PAGE>
ARTICLE VIII
Mortgages
---------
8.1 Rights of Mortgage Holders. The word "mortgage" as used herein
--------------------------
includes mortgages, deeds of trust or other similar instruments evidencing
other voluntary liens or encumbrances, and modifications, consolidations,
extensions, renewals, replacements and substitutes thereof. The word "holder"
shall mean a mortgagee, and any subsequent holder or holders of a mortgage.
Until the holder of a mortgage shall enter and take possession of the Premises
for the purpose of foreclosure, such holder shall have only such rights of
Landlord as are necessary to preserve the integrity of this Lease as security.
Upon entry and taking possession of the Premises for the purpose of
foreclosure, such holder shall have all the rights of Landlord.
Notwithstanding any other provision of this Lease to the contrary, including
without limitation Section 9.4, no such holder of a mortgage shall be liable
either as mortgagee or as assignee, to perform, or be liable in damages for
failure to perform, any of the obligations of Landlord unless and until such
holder shall enter and take possession of the Premises for the purpose of
foreclosure. Upon entry for the purpose of foreclosure, such holder shall be
liable to perform all of the obligations of Landlord accruing from and after
such entry, subject to and with the benefit of the provisions of Section 9.4,
provided that a discontinuance of any foreclosure proceeding shall be deemed a
conveyance under said provisions to the owner of the Premises. No Fixed Rent,
Additional Rent or any other charge shall be paid more than 30 days prior to
the due dates thereof and payments made in violation of this provision shall
(except to the extent that such payments are actually received by a mortgagee
in possession or in the process of foreclosing its mortgage) be a nullity as
against such mortgagee and Tenant shall be liable for the amount of such
payments to such mortgagee.
The covenants and agreements contained in this Lease with respect to the
rights, powers and benefits of a holder of a mortgage (including, without
limitation, the covenants and agreements contained in this Section 8.1)
constitute a continuing offer to any person, corporation or other entity,
which by accepting a mortgage subject to this Lease, assumes the obliga-
tions herein set forth with respect to such holder; such holder is hereby
constituted a party of this Lease as an obligee hereunder to the same extent
as though its name were written hereon as such; and such holder shall be
entitled to enforce such provisions in its own name. Tenant agrees on
request of Landlord to execute and deliver from time to time any agreement
which may be necessary to implement the provisions of this Section 8.1.
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<PAGE>
8.2 Lease Superior or Subordinate to Mortgages. This Lease is and
------------------------------------------
shall continue to be subject and subordinate to any presently existing
mortgage or mortgages secured by the Premises, and to any and all advances
hereafter made thereunder, and to the interest of the holder or holders
thereof in the Premises. The holder of any such presently existing mortgage
shall have the election to subordinate the same to this Lease, exercisable by
filing with the appropriate recording office a notice of such election,
whereupon this Lease shall have priority over such mortgage. A copy of such
filing shall be given to Tenant. Such election by the holder of any
presently existing mortgage shall not affect priority with respect to this
Lease of any other presently existing mortgage.
Any mortgage or other voluntary lien or other encumbrance recorded
subsequent to the recording of the notice or short form referred to in Section
9.3 shall be subject and subordinate to this Lease unless Landlord and the
holder of any such subsequent mortgage and the holders of all mortgages prior
to such subsequent mortgage elect to subordinate this Lease to such subsequent
mortgage and to any and all advances thereafter made thereunder and to the
interest of the holder thereof in the Premises, such election to be
exercisable by Landlord and all such holders by filing with the appropriate
recording office (a) a notice of such election and (b) an agreement between
the holder of such subsequent mortgage and Tenant, consented to by holders of
all mortgages having priority over such subsequent mortgage, by the terms of
which such holder will agree to recognize the rights of Tenant under this
Lease and to accept Tenant as tenant of the Premises under the terms and
conditions of this Lease in the event of acquisition of title by such holder
through foreclosure proceedings or otherwise and Tenant will agree to
recognize the holder of such subsequent mortgage as Landlord in such event,
which agreement shall be made expressly to bind and inure to the benefit of
the successors and assigns of Tenant and of such holder and upon anyone
purchasing said Premises at any foreclosure sale brought by such holder.
Tenant and Landlord agree to execute and deliver any appropriate instruments
necessary to carry out the agreements contained in this Section 8.2.
ARTICLE IX
Miscellaneous Provisions
------------------------
9.1 Notices from One Party to the Other. All notices required or
-----------------------------------
permitted hereunder shall be in writing and addressed, if to the Tenant, at
the Original Address of Tenant or such other address as Tenant shall have
last designated by notice in writing to Landlord and, if to Landlord, at the
Original Address of Landlord or such other address as Landlord shall have
last designated
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<PAGE>
by notice in writing to Tenant. Any notice shall be deemed duly given when
mailed to such address postage prepaid, registered or certified mail, return
receipt requested, or when delivered to such address by hand or by nationally
recognized overnight courier service.
9.2 Quiet Enjoyment. Landlord agrees that upon Tenant's paying the
---------------
rent and performing and observing the terms, covenants, conditions and
provisions on its part to be performed and observed, Tenant shall and may
peaceably and quietly have, hold and enjoy the Premises during the Term
without any manner of hindrance or molestation from Landlord or anyone
claiming under Landlord.
9.3 Lease not to be Recorded. Tenant agrees that it will not record
------------------------
this Lease. Both parties shall, upon the request of either, execute and
deliver a notice or short form of this Lease in such form, if any, as may be
permitted by applicable statute. If this Lease is terminated before the Term
expires the parties shall execute, deliver and record an instrument acknow-
ledging such fact and the actual date of termination of this Lease.
9.4 Bind and Inure. The obligations of this Lease shall run with the
--------------
land, and this Lease shall be binding upon and inure to the benefit of the par-
ties hereto and their respective permitted successors and assigns.
9.5 Acts of God. In any case where either party hereto is required to
do any act, delays caused by or resulting from Acts of God, war, civil
commotion, fire, flood or other casualty, labor difficulties, shortages of
labor, materials or equipment, government regulations, unusually severe
weather, or other causes beyond such party's reasonable control shall not be
counted in determining the time during which work shall be completed, whe-
ther such time be designated by a fixed date, a fixed time or a "reasonable
time", and such time shall be deemed to be extended by the period of such
delay.
9.6 Landlord's Default. Landlord shall not be deemed to be in default
------------------
in the performance of any of its obligations hereunder unless it shall fail to
perform such obligations and such failure shall continue for a period of 30
days following receipt of notice from Tenant, or such additional time as is
reasonably required with the exercise of reasonable diligence to correct any
such default, after notice has been given by Tenant to Landlord specifying the
nature of Landlord's default. Any notice to Landlord shall also be sent to
each mortgagee of which Tenant has been given notice by Landlord, which notice
shall include the mailing address of such mortgagee.
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<PAGE>
9.7 Brokerage. Landlord and Tenant each warrants and represents to
---------
the other party hereto that it has had no dealings with any broker or agent in
connection with this Lease and covenants to defend, hold harmless and
indemnify the other party hereto from and against any and all cost, expense or
liability for any compensation, commissions and charges claimed by any broker
or agent with respect to such party's dealings in connection with this Lease
or the negotiation thereof.
9.8 Applicable Law and Construction.
-------------------------------
9.8.1 Applicable Law. This Lease shall be governed by and
--------------
construed in accordance with the laws of the state in which the Premises are
located and shall be subject to the jurisdiction of the courts of such state.
If any term, covenant, condition or provision of this Lease or the application
thereof to any person or circumstances shall be declared invalid, or
unenforceable by the final ruling of a court of competent jurisdiction having
final review, the remaining terms, covenants, conditions and provisions of
this Lease and their application to persons or circumstances shall not be
affected thereby and shall continue to be enforced and recognized as valid
agreements of the parties, and in the place of such invalid or unenforceable
provision, there shall be substituted a like, but valid and enforceable
provision which comports to the findings of the aforesaid court and most
nearly accomplishes the original intention of the parties.
9.8.2 No Other Agreement. There are no oral or written
------------------
agreements between Landlord and Tenant affecting this Lease. This Lease may
be amended, and the provisions hereof may be waived or modified, only by
instruments in writing executed by Landlord and Tenant.
9.8.3 Titles. The titles of the several Articles and Sections
------
contained herein are for convenience only and shall not be considered in
construing this Lease.
9.8.4 "Landlord" and "Tenant". Unless repugnant to the context,
-----------------------
the words "Landlord" and "Tenant" appearing in this Lease shall be construed
to mean those named above and their respective heirs, executors, admin-
istrators, successors and assigns, and those claiming through or under them
respectively. If there be more than one tenant the obligations imposed by
this Lease upon Tenant shall be joint and several.
9.9 Submission Not an Offer. The submission of a draft of this Lease
-----------------------
or a summary of some or all of its provisions does not constitute an offer to
lease or demise the Premises, it being understood and agreed that neither
Landlord nor Tenant shall be legally bound with respect to the leasing of the
Premises unless
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<PAGE>
and until this Lease has been executed by both Landlord and Tenant and a fully
executed copy delivered.
9.10 Attorneys' Fees. Landlord and Tenant, as the case may be, shall
---------------
each be entitled to recover reasonable attorneys fees incurred by such party
in connection with the successful enforcement of any provision of this Lease.
9.11 Tenant's Option to Purchase. Tenant will have the option to
---------------------------
purchase the Premises during the Term of this Lease at a price equal to "Fair
Market Value" (as defined below) plus the amount due under any promissory note
or mortgage securing same in excess of the outstanding principal and interest
due thereunder, such as (without limitation) a prepayment penalty or a payment
in accordance with a yield maintenance formula. "Fair Market Value" will be
the value of the Premises, not to be less than $10,000,000, as determined by a
qualified professional real estate appraiser or appraisal firm (an
"Appraiser") selected by agreement between Landlord and Tenant, which value
shall be determined (i) assuming an arms-length sale pursuant to the Greater
Boston Real Estate Board Form Purchase and Sale Agreement with the usual and
customary changes thereto between a willing buyer and a willing seller,
(ii) assuming delivery of good and clear record and marketable title, free of
mortgages and encumbrances, and (iii) using a combination of valuation methods
which include replacement cost, income capitalization and comparable sales
data (with the Appraiser to determine the relative weights of the respective
methods). The cost of such appraisal to be equally divided between Landlord
and Tenant. In the event Landlord and Tenant are unable to agree on an
Appraiser, Landlord and Tenant shall each engage an Appraiser at its own
expense and those two Appraisers shall together engage a third qualified
Appraiser, the cost and expense of which shall be divided equally between
Landlord and Tenant. If the determination of the Fair Market Value of any two
or all three of the Appraisers shall be identical in amount, said amount shall
be deemed to be the Fair Market Value of the Premises. If the determinations
of all three Appraisers shall be different in amount, the average of the two
values nearest in amount shall be deemed the Fair Market Value. The Fair
Market Value of the Premises determined in accordance with the provisions of
this Section 9.11 shall be binding and conclusive upon Landlord and Tenant.
Notwithstanding the foregoing option rights, if Landlord should desire
to sell the Premises, or any portion thereof, Landlord will give Tenant
written notice in accordance with this Lease (the "Landlord's Offer Notice"),
which shall include the proposed purchase price (the "Asking Price") and other
terms and conditions of the offer to sell. Landlord agrees that the Asking
Price shall be no greater than Landlord's good faith determination
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<PAGE>
of the fair market value of the Premises or portion thereof to be sold. Tenant
shall have the right to exercise its rights hereunder by notice (the "Tenant's
Notice") given to Landlord in accordance with this Lease not later than thirty
(30) days from the date of Landlord's Offer Notice, a Purchase and Sale
Agreement will be executed within fifteen (15) days from the date of Tenant's
Notice and the closing will be held no later than ninety (90) days from the date
of Landlord's Offer Notice. If Tenant does not exercise it rights as provided in
the immediately preceding sentence, then Tenant's option rights hereunder shall
expire and be of no further legal effect, unless Landlord fails to close on the
sale of the Premises (or portion thereof as described in Landlord's Offer
Notice) within six (6) months of the date of Landlord's Offer Notice at a price
substantially equal to or greater than the Asking Price, in which event Tenant's
option rights hereunder shall remain in full force and effect.
WITNESS the execution hereof under seal as of the day and year set forth
in Section 1.1.
Landlord:
By: /s/ John K. Grady
-------------------------------------
Trustee as aforesaid, and not
individually
Tenant:
XRE ACQUISITION CORP.
By: /s/ Hal Kirshner
-------------------------------------
Title: Chief Executive Officer
of XRE Acquisition Corp.
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<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trex Medical Corporation:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement and related Prospectus of Trex Medical Corporation.
Arthur Andersen LLP
Boston, Massachusetts
May 30, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bennett X-Ray Corporation:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement and related Prospectus of Trex Medical Corporation.
Arthur Andersen LLP
Boston, Massachusetts
May 30, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To XRE Corporation:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement and related Prospectus of Trex Medical Corporation.
Arthur Andersen LLP
Boston, Massachusetts
May 30, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Continental Group:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement and related Prospectus of Trex Medical Corporation.
Topel Forman L.L.C.
Chicago, Illinois
May 30, 1996
