<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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TREX MEDICAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
06-1439626
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
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
81 WYMAN STREET
P.O. BOX 9046
WALTHAM, MA 02254-9046
(781) 622-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
SETH H. HOOGASIAN, ESQ. EDWIN L. MILLER, JR., ESQ.
GENERAL COUNSEL TREX MEDICAL TESTA, HURWITZ & THIBEAULT, LLP
CORPORATION HIGH STREET TOWER
81 WYMAN STREET, P.O. BOX 9046 125 HIGH STREET
WALTHAM, MASSACHUSETTS 02254-9046 BOSTON, MASSACHUSETTS 02110
(781) 622-1000 --------------- (617) 248-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE.
---------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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(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 delivery of the Prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO OFFERING PRICE PER PROPOSED MAXIMUM AMOUNT OF
REGISTERED BE REGISTERED(1) SHARE(2) AGGREGATE OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock ($.01 par
value)................ 5,175,000 $14.063 $72,776,025 $21,469
</TABLE>
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(1) Includes 675,000 shares reserved to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low prices
of the Common Stock on the American Stock Exchange on January 14, 1998.
---------------
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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 JANUARY 16, 1998
PROSPECTUS
4,500,000 SHARES
TREX MEDICAL CORPORATION
COMMON STOCK
---------
All of the shares of Common Stock offered hereby are being sold by Trex
Medical Corporation (the "Company"), a subsidiary of ThermoTrex Corporation
("ThermoTrex"), which is a subsidiary of Thermo Electron Corporation ("Thermo
Electron"). Following the offering, ThermoTrex will own approximately 69% of
the outstanding shares of Common Stock of the Company.
The Company's Common Stock is traded on the American Stock Exchange ("AMEX")
under the symbol "TXM." On January 14, 1998, the closing price of the Common
Stock on the AMEX was $14.00 per share. See "Price Range of Common Stock."
---------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
---------
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) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses of this offering payable by the Company
estimated at $200,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up
to 675,000 additional shares of Common Stock solely to cover over-
allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company will be $ , $ and $ , respectively.
---------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, 1998, at the office of Smith Barney Inc., 333 West 34th Street, New York,
New York 10001.
---------
SALOMON SMITH BARNEY LEHMAN BROTHERS
, 1998
<PAGE>
[The photographs on the left and right, above, show a conventional
x-ray image and corresponding digital image, respectively.]
The Company believes that the enhanced images produced by its full-field
mammography technology, such as those shown above, will permit earlier
diagnosis of tumors, particularly in the dense breast tissue of younger women.
The Company's system is the subject of a 510(k) application to the U.S. Food
and Drug Administration, which must grant market clearance before this system
can be sold commercially.
[The photograph on the left, above, shows a Lorad M-IV mammography system.
The photograph on the right, above, shows a Bennett Contour Plus
mammography system.]
Trex Medical offers a complete line of mammography systems. The Lorad M-IV
and the Bennett Contour Plus mammography systems, currently being sold, are
upgradeable to digital technology, which would enable physicians to view the
image on a screen and enhance suspicious areas.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVERALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements appearing elsewhere in this Prospectus
or incorporated herein by reference. Except as otherwise indicated, all
information contained in this Prospectus 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 the worldwide leader in the design, manufacture and marketing
of mammography equipment and minimally invasive stereotactic breast biopsy
systems used for the detection of breast cancer, as well as a leading designer
and manufacturer of general-purpose radiography (X-ray), cardiac
catheterization and radiographic/fluoroscopic systems. A mammography system is
a dedicated radiographic system designed specifically to image breast tissue.
Minimally invasive stereotactic breast biopsy systems, which use a digitally
guided hollow needle to extract breast tissue samples, offer a cost-effective,
less invasive alternative to open surgery for the biopsy of suspicious breast
lesions. The mammography and breast biopsy markets are targeted by Lorad, a
division acquired by the Company in 1992. The Company has subsequently
broadened its product base to serve a market estimated at approximately $2.5
billion by acquiring (i) Bennett X-Ray Corporation ("Bennett"), a leading
producer of specialty and general-purpose radiographic systems, including
mammography systems, in September 1995; (ii) XRE Corporation ("XRE"), a
manufacturer of X-ray imaging systems used for cardiac catheterization and
angiography, in May 1996; and (iii) Continental X-Ray Corporation
("Continental"), a manufacturer of general-purpose radiographic systems and
specialty radiographic systems including radiographic/fluoroscopic products, in
September 1996.
As a result of the Company's acquisitions and internal growth, the Company's
revenues increased from $37.5 million for the fiscal year ended January 1, 1994
to $229.3 million for the fiscal year ended September 27, 1997, representing a
compound annual growth rate of 61%. The Company's net income increased from
$827,000 for the fiscal year ended January 1, 1994 to $14.7 million for the
fiscal year ended September 27, 1997, representing a compound annual growth
rate of 113%.
The Company's mammography and upright and prone stereotactic digital breast
biopsy systems are used by radiologists and physicians in offices, hospitals
and dedicated breast-care centers, and its general radiography systems are used
by radiologists in offices and hospitals. The Company sells its systems
worldwide principally through a network of independent dealers and a direct
sales force. 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 ("GE")
and the Philips Medical Systems North America Company subsidiary of Philips
N.V. ("Philips").
The Company's growth strategy is to (i) maintain its leading market position
in breast imaging and biopsy systems, (ii) increase its share of the general-
purpose radiography, cardiac catheterization and radiographic/ fluoroscopic
markets and (iii) expand into other complementary markets with high-growth
opportunities through continued technological innovation and strategic
acquisitions. Recent innovations include a proprietary high-transmission
cellular ("HTC")(TM) 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-purpose radiography
systems that reduces the need for multiple exposures during tomography
procedures, thereby reducing the overall radiation exposure to the patient.
The Company believes the most promising technological advances in the
radiography field will be derived from the substitution of digital 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 and other
physicians. The Company has developed a full-field digital imaging screening
and diagnostic
1
<PAGE>
mammography system and has installed clinical evaluation units at three sites.
The Company has collected clinical data that was submitted in December 1997
with the Company's 510(k) application to the U.S. Food and Drug Administration.
The Company believes that the digital imaging technology being developed for
this system may be adaptable to general-purpose radiography, fluoroscopy and
cardiac diagnostic imaging systems, and the Company will seek to develop
applications in these markets.
The Company's growth strategy includes making acquisitions of companies that
can benefit from the Company's distribution channels, technology and management
team, or that can provide the Company with expanded distribution capabilities
or broaden its technology and product lines. In December 1997, the Company
signed a nonbinding letter of intent to acquire Trophy Radiologie ("Trophy"), a
leading French manufacturer of dental digital X-ray systems and medical X-ray
equipment. For the fiscal year ended August 31, 1997, Trophy reported revenues
of approximately $70 million. The Company believes that there is a potential
worldwide market for over 500,000 dental digital imaging devices, such as those
sold by Trophy. While the Company believes that less than 10% of this market
has been penetrated to date, Trophy has the largest installed base of dental
digital imaging systems in the world. See "Business--Pending Acquisition."
There can be no assurance that the Trophy acquisition will be successfully
completed.
Unless the context otherwise requires, references in this Prospectus to the
Company or Trex Medical Corporation refer to Trex Medical Corporation and its
subsidiaries and their predecessors. As of September 27, 1997, ThermoTrex
beneficially owned 79% of the Company's outstanding common stock, $.01 par
value (the "Common Stock"), excluding 678,541 shares of Common Stock issuable
upon the conversion of $8,000,000 principal amount of the Company's 4.2%
convertible note due 2000, issued to ThermoTrex (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 OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the
Company................... 4,500,000 shares
Common Stock to be
Outstanding after the
Offering (1).............. 33,394,630 shares
Use of Proceeds............ For general corporate purposes, including possible
acquisitions. See "Use of Proceeds."
AMEX Symbol................ TXM
</TABLE>
- --------
(1) Does not include 2,123,001 shares of Common Stock reserved for issuance
under the Company's stock-based compensation plans and 678,541 shares of
Common Stock reserved for issuance upon the conversion of the Convertible
Note. See "Capitalization," and Notes 4 and 7 of Notes to Consolidated
Financial Statements.
2
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL FISCAL
YEAR ENDED NINE MONTHS YEAR ENDED
----------------------- ENDED -----------------------------------------
JANUARY 1, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 27,
1994 1994 1995(1)(2) 1995(1)(2) 1996(3) 1997
---------- ------------ ------------- ------------- ------------- -------------
(UNAUDITED)
STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C> <C> <C>
Revenues................. $37,519 $54,410 $55,291 $70,505 $150,195 $229,294
Gross Profit............. 18,930 26,616 27,111 34,185 63,553 90,232
Research and Development
Expenses................ 7,182 10,662 8,595 11,937 18,862 24,705
Operating Income......... 1,960 2,682 6,342 6,596 17,535 25,346
Net Income............... 827 1,194 3,483 3,592 9,344 14,674
Earnings per Share (4):
Primary................. .04 .06 .17 .18 .40 .51
Fully diluted........... .04 .06 .17 .18 .38 .51
Weighted Average Shares
(4):
Primary................. 20,151 20,151 20,151 20,151 23,483 28,826
Fully diluted........... 20,151 20,151 20,151 20,151 26,550 28,826
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 27, 1997
--------------------
AS
ACTUAL ADJUSTED(5)
-------- -----------
BALANCE SHEET DATA:
<S> <C> <C>
Working Capital............................................ $ 79,649 $138,669
Total Assets............................................... 229,437 288,457
Long-term Obligations...................................... 8,047 8,047
Shareholders' Investment................................... 169,094 228,114
</TABLE>
- --------
(1) 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 39-week transition period ended September 30,
1995 is presented.
(2) Includes the results of Bennett since its acquisition by ThermoTrex in
September 1995.
(3) Includes the results of XRE and Continental since their acquisition by the
Company in May 1996 and September 1996, respectively.
(4) 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 initial public offering in June 1996.
(5) Adjusted to reflect the sale by the Company of 4,500,000 shares of Common
Stock offered hereby at an assumed offering price of $14.00 (the closing
price on the AMEX on January 14, 1998), after deducting the estimated
underwriting discounts and commissions and offering expenses payable by the
Company.
3
<PAGE>
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus, investors should carefully consider the following risk
factors when evaluating an investment in the shares of Common Stock offered
hereby. This Prospectus contains forward-looking statements that involve risks
and uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all forward-looking statements wherever
they appear in this Prospectus or in the documents incorporated by reference
herein. The Company's actual results could differ materially from those
discussed herein or therein. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed
elsewhere in this Prospectus or in the documents incorporated by reference
herein.
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.
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 October 1995, the Company
acquired its Bennett subsidiary, a manufacturer of general-purpose X-ray and
mammography equipment; in May 1996, the Company acquired substantially all of
the assets and liabilities of XRE, a manufacturer of X-ray imaging systems
used in the diagnosis and treatment of coronary artery disease and other
vascular conditions; in September 1996, the Company acquired substantially all
of the assets and liabilities of Continental, a manufacturer of general-
purpose and specialized X-ray systems; and, in October 1997, the Company
acquired substantially all of the assets, subject to certain liabilities, of
Digitec Corporation, a manufacturer of physiological-monitoring equipment and
digital-image archiving and networking systems used in cardiac catheterization
procedures. In December 1997, the Company entered into a nonbinding letter of
intent to acquire Trophy, a leading French manufacturer of dental X-ray
systems specializing in digital technology. There can be no assurance that the
Trophy acquisition will be successfully completed or that, if such acquisition
is completed, the Company will be able to successfully integrate Trophy's
operations with those of the Company and realize the benefits expected from
its acquisition. In addition, 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 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
that 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 affecting 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., Toshiba America MRI, Inc., Shimadzu, and Picker International,
Inc. 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
4
<PAGE>
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 U.S. Surgical through an original equipment manufacturer ("OEM")
arrangement. The products sold by such OEM customers compete with products
offered by the Company directly and through 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.
Dependence Upon Significant OEM Relationships. A significant portion of the
Company's sales are to U.S. Surgical through an OEM arrangement. Sales to U.S.
Surgical accounted for 17% and 11% of the Company's total revenues in fiscal
1997 and 1996, respectively. The Company's sales depend, in part, on the
continuation of this and other 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.
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 Lorad's prone breast-biopsy system infringes a Fischer
patent on a precision mammographic needle-biopsy system. The Company expects
the trial to begin with respect to this lawsuit before the end of fiscal 1998.
As of September 27, 1997, the Company had recognized aggregate revenues of
approximately $107.1 million from sales of such systems, of which $34.4 million
represents sales prior to October 16, 1995. 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(R) 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 that the Company may be required to pay. The Company believes
the costs of litigating this matter may be substantial.
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 with respect to sales of the Company's products occurring prior
to October 16, 1995, when Lorad was 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 (approximately $2 million as of September 27, 1997), with any
indemnification payment it receives from ThermoTrex being treated as a
contribution to shareholders' investment.
The Company is also aware of two U.S. patents owned by a former employee that
have been asserted against the Company relating to its high-transmission
cellular ("HTC")(TM) grid used with its 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 unfavorable outcome of any one or both of the above described matters
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's competitors and other
parties hold other 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
5
<PAGE>
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 time frame.
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 or seizures of
products, 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-field
digital mammography systems such as the one being developed by the Company.
While not classifying such systems, the FDA has issued a final guidance
document relating to the protocol for marketing clearance of full-field digital
mammography systems. This document suggests that clearance may be obtained
through an enhanced 510(k) application with more extensive clinical trials. The
protocol set forth in the final guidance document calls for clinical trials on
520 subjects prior to applying to the FDA for clearance to commercially market
such a system. Accordingly, in December 1997, the Company submitted a 510(k)
application with clinical data for its full-field digital mammography system.
There can be no assurance that full-field digital mammography systems will not
be classified by the FDA as Class III medical devices subject to the PMA
process. If such systems are classified as Class III devices, the Company would
be required to file for FDA marketing approval for its full-field digital
mammography system under the PMA process or the Product Development Protocol
("PDP"), which would likely require substantial additional clinical trials
before being accepted by the FDA, if at all. Regardless of whether a 510(k), a
PMA, or a PDP is finally accepted by the FDA, there can be no assurance that
the product will receive marketing clearance or approval. In addition, full-
field digital mammography systems will be subject to alternate quality
assurance standards under the Mammography Quality Standards Act. These
alternate standards will be submitted by the Company to the FDA for review. The
Company can make no prediction as to when the FDA will approve such standards,
if at all. In addition, 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
current good manufacturing practices as set forth in the quality system
regulation ("QSR"), 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 will not in the
future find the Company to be in violation of the QSRs.
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. In addition, the federal government regulates
reimbursement of fees for certain diagnostic examinations and capital equipment
acquisition costs connected with services to Medicare beneficiaries. Cost-
containment policies may have the effect of reducing reimbursement for certain
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.
6
<PAGE>
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 that 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.
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.
Risks Associated With International Operations. International sales accounted
for 17%, 22%, and 21% of the Company's revenues in fiscal 1997, 1996, and 1995,
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 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.
Control by ThermoTrex. The Company's stockholders do not have the right to
cumulate votes for the election of directors. ThermoTrex, which currently owns
79% of the outstanding Common Stock of the Company, 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 with Affiliates."
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 with Affiliates." 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
7
<PAGE>
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 with Affiliates."
Significant Additional Shares Eligible for Future Sale. The 22,882,420 shares
of Common Stock owned by ThermoTrex as of January 3, 1998 are eligible for
resale under Rule 144. In addition, 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 could adversely affect
the market price of the Common Stock. See "Relationship with Affiliates."
Potential Volatility of Stock Price. Since public trading of the Company's
Common Stock commenced in June 1996, the market price has fluctuated
considerably, and it may continue to fluctuate in the future. 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."
8
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock will be used by the
Company for general corporate purposes, including possible future
acquisitions. The precise amount and timing of the application of such
proceeds will depend upon the funding requirements of the Company, and the
availability and cost of other funds. Pending these uses, the Company expects
to invest the net proceeds primarily in investment grade interest or dividend
bearing instruments, either directly by the Company or pursuant to a
repurchase agreement with Thermo Electron. See "Relationship with Affiliates."
A portion of the net proceeds may be used to acquire Trophy. However, the
final terms of the acquisition of Trophy by the Company have not yet been
determined and there can be no assurance that the Trophy acquisition will be
successfully completed. See "Business--Pending Acquisition."
DIVIDEND POLICY
The Company anticipates that for the foreseeable future the Company's
earnings, if any, will be retained to finance the growth and development of
its business and that no cash dividends will be paid on the Common Stock.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been publicly traded on the AMEX since June
27, 1996. The following table sets forth the high and low sales prices, for
the periods indicated, of the Company's Common Stock on the AMEX (symbol:
TXM).
<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW
----------- -------- --------
<S> <C> <C>
Third Quarter (since June 27, 1996).................... $19 1/4 $ 15 3/8
Fourth Quarter......................................... 26 17 7/8
<CAPTION>
FISCAL 1997
-----------
<S> <C> <C>
First Quarter.......................................... 20 1/4 12 1/2
Second Quarter......................................... 17 11 1/8
Third Quarter.......................................... 14 9/16 11
Fourth Quarter......................................... 16 1/16 11 1/2
<CAPTION>
FISCAL 1998
-----------
<S> <C> <C>
First Quarter.......................................... 15 7/16 12 1/16
Second Quarter (through January 14, 1998).............. 15 3/8 13 13/16
</TABLE>
As of January 14, 1998, the Company had 609 holders of record of its Common
Stock. This does not include holdings in street or nominee names. The closing
price on the AMEX for the Company's Common Stock on January 14, 1998 was
$14.00.
9
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 27, 1997 and as adjusted to give effect to the sale of the shares of
Common Stock offered hereby at an assumed offering price of $14.00 per share
(based on the closing price on the AMEX on January 14, 1998), after deducting
the estimated underwriting discounts and commissions and offering expenses
payable by the Company.
<TABLE>
<CAPTION>
SEPTEMBER 27, 1997
--------------------
AS
ACTUAL ADJUSTED
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Long-term Obligations:
4.2% subordinated convertible note, due to parent
company................................................. $ 8,000 $ 8,000
Other.................................................... 47 47
--------- ---------
8,047 8,047
--------- ---------
Shareholders' Investment:
Common stock, $.01 par value, 50,000,000 shares
authorized; 28,894,630 shares issued and outstanding and
33,394,630 shares as adjusted (1)....................... 289 334
Capital in excess of par value........................... 144,787 203,762
Retained earnings........................................ 24,018 24,018
--------- ---------
Total Shareholders' Investment......................... 169,094 228,114
--------- ---------
Total Capitalization (Long-term Obligations and
Shareholders' Investment)............................. $ 177,141 $ 236,161
========= =========
</TABLE>
- --------
(1) Does not include 2,123,001 shares of Common Stock reserved for issuance
under the Company's stock-based compensation plans and 678,541 shares of
Common Stock reserved for issuance upon conversion of the Convertible
Note. Options to purchase 1,839,500 shares of Common Stock had been
granted and were outstanding under the Company's stock-based compensation
plans as of January 3, 1998.
10
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected financial information presented below for the nine months ended
September 30, 1995, and as of and for the fiscal years ended September 28,
1996, and September 27, 1997, 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. This information should be read in conjunction
with the Company's Consolidated Financial Statements and related notes
included elsewhere in this Prospectus. The selected financial information as
of September 30, 1995, and as of and for the fiscal years ended January 1,
1994 and December 31, 1994, has been derived from the Company's Consolidated
Financial Statements, which have been audited by Arthur Andersen LLP, but have
not been included in this Prospectus. The selected financial information for
the year ended September 30, 1995, 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.
<TABLE>
<CAPTION>
FISCAL FISCAL
YEAR ENDED NINE MONTHS YEAR ENDED
----------------------- ENDED -----------------------------------------
JANUARY 1, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 27,
1994 1994 1995 (1)(2) 1995 (1)(2) 1996 (3) 1997
---------- ------------ ------------- ------------- ------------- -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues................ $37,519 $54,410 $ 55,291 $70,505 $150,195 $229,294
------- ------- -------- ------- -------- --------
Costs and Operating
Expenses:
Cost of revenues....... 18,589 27,794 28,180 36,320 86,642 139,062
Selling, general and
administrative
expenses.............. 9,788 13,272 12,174 15,652 27,156 40,181
Research and
development expenses.. 7,182 10,662 8,595 11,937 18,862 24,705
------- ------- -------- ------- -------- --------
35,559 51,728 48,949 63,909 132,660 203,948
------- ------- -------- ------- -------- --------
Operating Income........ 1,960 2,682 6,342 6,596 17,535 25,346
Interest and Other
Income (Expense), net.. (158) (22) 22 11 (23) 2,118
------- ------- -------- ------- -------- --------
Income Before Provision
for Income Taxes....... 1,802 2,660 6,364 6,607 17,512 27,464
Provision for Income
Taxes.................. 975 1,466 2,881 3,015 8,168 12,790
------- ------- -------- ------- -------- --------
Net Income.............. $ 827 $ 1,194 $ 3,483 $ 3,592 $ 9,344 $ 14,674
======= ======= ======== ======= ======== ========
Earnings per Share(4):
Primary................ $ .04 $ .06 $ .17 $ .18 $ .40 $ .51
======= ======= ======== ======= ======== ========
Fully Diluted.......... $ .04 $ .06 $ .17 $ .18 $ .38 $ .51
======= ======= ======== ======= ======== ========
Weighted Average
Shares(4):
Primary................ 20,151 20,151 20,151 20,151 23,483 28,826
======= ======= ======== ======= ======== ========
Fully Diluted.......... 20,151 20,151 20,151 20,151 26,550 28,826
======= ======= ======== ======= ======== ========
BALANCE SHEET DATA (AT
END OF PERIOD):
Working Capital......... $ 6,148 $ 8,584 $ 13,171 $ 59,834 $ 79,649
Total Assets............ 44,553 48,000 102,374 204,061 229,437
Long-term Obligations... -- -- -- 8,109 8,047
Shareholders'
Investment............. 36,694 37,033 80,010 149,297 169,094
</TABLE>
- -------
(1) 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 39-week transition period ended September 30,
1995 is presented.
(2) Includes the results of Bennett since its acquisition by ThermoTrex in
September 1995.
(3) Includes the results of XRE and Continental since their acquisition by the
Company in May 1996 and September 1996, respectively.
(4) 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, for periods prior to
the Company's initial public offering, the effect of the assumed exercise
of stock options issued within one year prior to the Company's initial
public offering in June 1996.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, are made throughout this
Management's Discussion and Analysis of Financial Condition and Results of
Operations. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," "seeks," "estimates," and similar expressions are intended to
identify forward-looking statements. There are a number of important factors
that could cause the results of the Company to differ materially from those
indicated by such forward-looking statements, including those detailed
elsewhere in this Prospectus under the caption "Risk Factors."
OVERVIEW
The Company designs, manufactures, and markets mammography equipment and
minimally invasive stereotactic digital breast biopsy systems, general-purpose
X-ray equipment, and specialized X-ray equipment, including imaging systems
used during diagnostic and interventional vascular and cardiac procedures such
as balloon angioplasty and radiographic/fluoroscopic equipment. The Company
sells its systems worldwide principally through a network of independent
dealers. In addition, the Company manufactures breast biopsy and X-ray systems
as an OEM for other medical equipment companies such as U.S. Surgical and GE.
The Company has four operating units: Lorad, a manufacturer of mammography and
digital breast biopsy systems; Bennett, a manufacturer of general-purpose X-
ray and mammography equipment; XRE, a manufacturer of X-ray imaging systems
used in the diagnosis and treatment of coronary artery disease and other
vascular conditions; and Continental, a manufacturer of general-purpose and
specialized X-ray systems.
The Company conducts all of its manufacturing operations in the United
States and sells its products worldwide. The Company anticipates that an
increasing percentage of its revenues will be from export sales. The Company's
export sales are denominated in U.S. dollars; however, the Company's financial
performance and competitive position can be affected by currency exchange rate
fluctuations affecting the relationship between the U.S. dollar and foreign
currencies.
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 1996 compares the year ended September 28, 1996
(fiscal 1996) with the unaudited year ended September 30, 1995 (1995).
Fiscal 1997 Compared With Fiscal 1996
Revenues increased 53% to $229.3 million in fiscal 1997 from $150.2 million
in fiscal 1996. Revenues increased $56.2 million due to the acquisitions of
XRE in May 1996 and Continental in September 1996. Revenues at Lorad increased
20% in fiscal 1997 from fiscal 1996 as a result of increased sales of higher-
priced mammography systems, increased demand for biopsy systems, and increased
sales of lasers to ThermoLase Corporation ("ThermoLase"), a majority-owned
subsidiary of ThermoTrex, offset in part by a decline in demand for
nondestructive testing ("NDT") systems.
The gross profit margin declined to 39% in fiscal 1997 from 42% in fiscal
1996, primarily due to sales of certain recently introduced products that
incurred high start-up production costs, the inclusion of lower-margin
revenues at Continental, and the mix of products sold at Bennett.
Excluding the cost of revenues, total operating expenses as a percentage of
revenues declined to 28% in fiscal 1997 from 31% in fiscal 1996. Selling,
general, and administrative expenses as a percentage of revenues were
unchanged at 18% in fiscal 1997 and fiscal 1996. Research and development
expenses increased $5.8 million to $24.7 million in fiscal 1997 from $18.9
million in fiscal 1996. Research and development expenses
12
<PAGE>
increased $5.6 million due to the acquisitions of XRE and Continental and also
reflect the Company's continued efforts to develop and commercialize new
products including the full-field 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 $2.2 million during fiscal 1998 for additional research
and development and to expand the field of use in which it is entitled to use
ThermoTrex's direct-detection digital-imaging technology (see Note 7 of Notes
to Consolidated Financial Statements).
Interest income increased to $1.9 million in fiscal 1997 from $1.3 million
in fiscal 1996, primarily due to interest income earned on the invested
proceeds from the Company's initial public offering in July 1996, net of cash
paid for the September 1996 acquisition of Continental. Interest expense,
related party, decreased to $0.3 million in fiscal 1997 from $1.4 million in
fiscal 1996 as a result of the conversion by ThermoTrex of $34.0 million
principal amount of the Company's 4.2% subordinated convertible note,
primarily in the fourth quarter of fiscal 1996.
The effective tax rate was 47% in fiscal 1997 and fiscal 1996. The effective
tax rates exceed the statutory federal income tax rate primarily due to the
impact of state income taxes and nondeductible amortization of cost in excess
of net assets of acquired companies.
The Company is a defendant in certain patent litigation (see Note 2 of Notes
to Consolidated Financial Statements) and has been notified that it allegedly
infringes certain other technology owned by a third party (see Note 9 of Notes
to Consolidated Financial Statements). Although an unsuccessful resolution of
one or both of these matters could have a material adverse effect on the
Company's results of operations, management does not believe that it is
reasonably likely that any resolution would have a material adverse effect on
the Company's financial position.
Fiscal 1996 Compared With 1995
Revenues increased 113% to $150.2 million in fiscal 1996 from $70.5 million
in 1995. Revenues increased $56.2 million due to the acquisitions of Bennett,
XRE, and Continental. Revenues at Lorad increased 35% in fiscal 1996 as a
result of increased demand for mammography systems, NDT systems, and lasers
sold to ThermoLase.
The gross profit margin declined to 42% in fiscal 1996 from 48% in 1995,
primarily due to the inclusion of lower-margin revenues at Bennett and XRE.
Excluding the cost of revenues, total operating expenses as a percentage of
revenues declined to 31% in fiscal 1996 from 39% in 1995. Selling, general,
and administrative expenses as a percentage of revenues decreased to 18% in
fiscal 1996 from 22% in 1995, primarily due to increased revenues at Lorad and
the inclusion of the operations of Bennett and XRE, which incurred lower
expenses as a percentage of revenues. Research and development expenses
increased to $18.9 million in fiscal 1996 from $11.9 million in 1995, due to
the inclusion of $4.2 million of expense at Bennett and XRE and the Company's
continued efforts to develop and commercialize new products including the
Company's M-IV mammography system (first shipped in the fourth quarter of
fiscal 1996), full-field digital mammography system, and direct-detection X-
ray sensor, as well as enhancements of existing systems.
Interest income in fiscal 1996 primarily represents interest income earned
on the invested proceeds from the Company's private placements of common stock
in November 1995 and January 1996, and initial public offering in July 1996.
Interest expense, related party, in fiscal 1996 represents interest associated
with the $42.0 million principal amount 4.2% subordinated convertible note
issued to ThermoTrex.
The effective tax rate was 47% in fiscal 1996, compared with 46% in 1995.
The effective tax rates exceed the statutory federal income tax rate primarily
due to the impact of state income taxes and nondeductible amortization of cost
in excess of net assets of acquired companies.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $79.6 million at September 27, 1997,
compared with $59.8 million at September 28, 1996. Included in working capital
are cash and cash equivalents of $36.5 million at September 27, 1997, and
$34.0 million at September 28, 1996. Net cash provided by operating activities
was $3.9 million in 1997. The Company funded a $15.8 million increase in
accounts receivable, primarily due to increased sales in fiscal 1997 compared
with fiscal 1996 and, to a lesser extent, due to longer customer payment
patterns. The Company expects to improve cash flow by increasing adherence to
the Company's commercial terms in fiscal 1998. The Company funded a $10.3
million increase in inventories to support the Company's increased sales and
new product introductions at Lorad and Bennett.
The Company expended $5.5 million on purchases of property, plant, and
equipment during fiscal 1997. The Company expects to expend approximately $7.0
million for purchases of property, plant, and equipment during fiscal 1998.
In October 1997, the Company acquired substantially all of the assets,
subject to certain liabilities, of Digitec Corporation, a North Carolina-based
manufacturer of physiological-monitoring equipment and digital-image archiving
and networking systems used in cardiac catheterization procedures, for
approximately $7.2 million in cash, subject to a post-closing adjustment.
In December 1996, the Company sold 300,000 shares of its common stock in a
private placement for net proceeds of $4.1 million.
Although the Company expects to have positive cash flow from its existing
operations, the Company may require significant amounts of cash for any
acquisition of a business or technology. The Company expects that it will
finance any such acquisitions through a combination of internal funds,
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 its existing resources are sufficient to meet the
capital requirements of its existing operations for the foreseeable future.
14
<PAGE>
BUSINESS
The Company is the worldwide leader in the design, manufacture and marketing
of mammography equipment and minimally invasive stereotactic breast biopsy
systems used for the detection of breast cancer, as well as a leading designer
and manufacturer of general-purpose radiography (X-ray), cardiac
catheterization and radiographic/fluoroscopic systems. A mammography system is
a dedicated radiographic system designed specifically to image breast tissue.
Minimally invasive stereotactic breast biopsy systems, which use a digitally
guided hollow needle to extract breast tissue samples, offer a cost-effective,
less invasive alternative to open surgery for the biopsy of suspicious breast
lesions. The mammography and breast biopsy markets are targeted by Lorad, a
division acquired by the Company in 1992. The Company has subsequently
broadened its product base to serve a market estimated at approximately $2.5
billion by acquiring (i) Bennett X-Ray Corporation ("Bennett"), a leading
producer of specialty and general-purpose radiographic systems, including
mammography systems, in September 1995; (ii) XRE Corporation ("XRE"), a
manufacturer of X-ray imaging systems used for cardiac catheterization and
angiography, in May 1996; and (iii) Continental X-Ray Corporation
("Continental"), a manufacturer of general-purpose radiographic systems and
specialty radiographic systems including radiographic/fluoroscopic products,
in September 1996.
As a result of the Company's acquisitions and internal growth, the Company's
revenues increased from $37.5 million for the fiscal year ended January 1,
1994 to $229.3 million for the fiscal year ended September 27, 1997,
representing a compound annual growth rate of 61%. The Company's net income
increased from $827,000 for the fiscal year ended January 1, 1994 to $14.7
million for the fiscal year ended September 27, 1997 representing a compound
annual growth rate of 113%.
The Company's mammography and upright and prone stereotactic digital breast
biopsy systems are used by radiologists and physicians in offices, hospitals
and dedicated breast-care centers, and its general radiography systems are
used by radiologists in offices and hospitals. The Company sells its systems
worldwide principally through a network of independent dealers and a direct
sale force. 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 ("GE")
and the Philips Medical Systems North America Company subsidiary of Philips
N.V. ("Philips").
The Company's growth strategy is to (i) maintain its leading market position
in breast imaging and biopsy systems, (ii) increase its share of the general-
purpose radiography, cardiac catheterization and radiographic/
fluoroscopic markets and (iii) expand into other complementary markets with
high-growth opportunities through continued technological innovation and
strategic acquisitions. Recent innovations include a proprietary high-
transmission cellular ("HTC")(TM) 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-purpose
radiography systems that reduces the need for multiple exposures during
tomography procedures, thereby reducing the overall radiation exposure to the
patient.
The Company believes the most promising technological advances in the
radiography field will be derived from the substitution of digital 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 and other
physicians. The Company has developed a full-field digital imaging screening
and diagnostic mammography system and has installed clinical evaluation units
at three sites. The Company has collected clinical data that was submitted in
December 1997 with the Company's 510(k) application to the U.S. Food and Drug
Administration. The Company believes that the digital imaging technology being
developed for this system may be adaptable to general-purpose radiography,
fluoroscopy and cardiac diagnostic imaging systems, and the Company will seek
to develop applications in these markets.
The Company's growth strategy includes making acquisitions of companies that
can benefit from the Company's distribution channels, technology and
management team, or that can provide the Company with expanded distribution
capabilities or broaden its technology and product lines. In December 1997,
the Company signed a nonbinding letter of intent to acquire Trophy Radiologie
("Trophy"), a leading French
15
<PAGE>
manufacturer of dental digital X-ray systems and medical X-ray equipment. For
the fiscal year ended August 31, 1997, Trophy reported revenues of
approximately $70 million. The Company believes that there is a potential
worldwide market for over 500,000 dental digital imaging devices, such as
those sold by Trophy. While the Company believes that less than 10% of this
market has been penetrated to date, Trophy has the largest installed base of
dental digital imaging systems in the world. See "Pending Acquisition." There
can be no assurance that the Trophy acquisition will be successfully
completed.
PRODUCTS AND MARKETS
Breast Cancer Detection
Mammography Systems. Through Lorad and Bennett, the Company designs,
manufactures, and markets mammography systems that are generally
differentiated on the basis of price and performance. The Company's high-end
models are the Lorad M-IV and the Bennett Contour Plus. Many of the Lorad M-
IV's features were developed in response to user demands, including the
ability to be upgraded to accept the full-field digital-imaging technology
being developed by the Company, when available. The Bennett Contour Plus is
also upgradable for digital imaging and offers a patented tilt C-arm that
permits the system to tilt toward or away from the patient to aid in imaging
breast tissue. The Company also offers two lower-priced models and two mobile
mammography systems.
The Company has developed a full-field digital mammography system that is
intended to be capable of higher image quality without a significant increase
in radiation dose. The system is designed to enhance the X-ray image through
software and to allow near-real-time analysis. The Company expects that it
will be possible to electronically transmit these images to allow off-site
analysis by another radiologist. The Company believes this technology may also
provide better images of dense breast tissue, which is often found in younger
women. The Company has collected clinical data that was submitted in December
1997 with the Company's 510(k) application to the U.S. Food and Drug
Administration ("FDA"), which must grant market clearance before this system
can be sold commercially. The Company has designed its new, high-end
conventional mammography systems so that radiologists can upgrade to digital
technology when it becomes available. The Company believes that the digital-
imaging technology being developed for this system may be adaptable to its
general-purpose and specialized X-ray systems, and the Company will seek to
develop applications in these markets. The Company is also working on a more
advanced version of its digital technology, which incorporates a flat-panel,
direct-digital detector and could provide still more information for earlier
diagnoses.
The Company believes that demand in the market for mammography systems is
driven primarily by technological innovation that results in better image
quality. Although growth of the installed base has slowed, demand for new
systems continues as older models are replaced with those offering
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 adopted in the United States.
Minimally Invasive Stereotactic Digital Breast Biopsy Systems. The Company
offers a variety of minimally invasive stereotactic digital breast biopsy
systems, manufactured by Lorad and Bennett, that provide an alternative to
surgical biopsy. These digital breast biopsy systems were introduced to
address the disadvantages of open surgical biopsy and can be performed on an
outpatient basis under local anesthetic. The Company believes that the
minimally invasive stereotactic digital breast biopsy system market will grow
as the procedure becomes more widely accepted by the medical community and as
pressures to contain healthcare costs increase.
The Company believes that it is the only company currently offering digital
imaging and guidance systems for both prone and upright breast biopsy. The
Company offers a dedicated prone table, the StereoGuide(R), for customers who
perform a range of biopsy procedures, at a cost of approximately one-third
that of an open surgical biopsy. With the dedicated prone table, the patient
lies down with her breast suspended through an aperture in the table. X-ray
imaging equipment and a variety of biopsy system attachments 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 the breast, reducing the chance of fainting. The
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Company's StereoGuide system is the subject of a lawsuit alleging infringement
of a Fischer Imaging Corporation patent. See "Certain Legal Proceedings" and
"Risk Factors--Risks Associated with Pending and Threatened Patent Litigation."
Since October 1995, when the Lorad division signed a multiyear, exclusive
agreement with U.S. Surgical, the Company has manufactured a modified version
of the StereoGuide that is compatible with U.S. Surgical's Advanced Breast-
biopsy Instrument ("ABBI")(TM), a disposable component. U.S. Surgical markets
this product as the ABBI system, which consists of the Company's digital
guidance system and a specialized table that has been modified to accept the
ABBI device. The Company's system is also compatible with U.S. Surgical's MIBB
(minimally invasive breast biopsy) device and the Biopsys Mammotome(R)
manufactured by Johnson & Johnson's Ethicon division. The Company believes that
these systems currently account for a majority of the minimally invasive
digital breast biopsy devices marketed today.
The Company also offers upright, add-on systems that can be attached to most
of its mammography systems. Add-on systems principally consist of a needle-gun
attachment that fits onto the mammography system in place of the breast-
compression paddle. These systems enhance the functionality of a mammography
system and are beneficial to customers who have only periodic demand for
minimally invasive needle-biopsy procedures.
General-Purpose Radiography
The Company addresses the general-purpose X-ray market through its Bennett
and Continental subsidiaries. Bennett designs, manufactures, and markets basic
X-ray systems generally used in medical outpatient facilities, such as doctors'
offices and surgi-care centers. Bennett has focused on this segment of the
market by providing low-cost, reliable systems. Continental (and, to a lesser
extent, Bennett) markets the more sophisticated and expensive X-ray systems
typically used in hospitals and clinics. These include the two linear
tomography systems marketed by the Company. The Company believes that for a
number of applications its linear tomography systems may be a cost-effective
alternative to computed tomography ("CT") systems. In addition, Bennett
manufactures and markets imaging systems designed specifically for
chiropractors and veterinarians.
The U.S. market for general-purpose X-ray 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
U.S. market and that the installed base of systems is still growing,
particularly in developing countries. The Company has recently expanded its
international sales efforts.
The Company believes digital imaging will have significant application in the
general-purpose and specialized X-ray markets and that the technology it
develops for its full-field digital mammography system may be adaptable to
these applications. In general-purpose X-ray applications, the Company believes
digital imaging will produce better quality images and reduce operating costs
by eliminating the need for film, 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 could make the
image intensifiers, which are large and expensive components in certain imaging
systems, obsolete.
Cardiac Catheterization, Angiography, and Electrophysiology
The Company's XRE subsidiary designs, manufactures, and markets cardiac
catheterization laboratories (also called cath labs) and positioners for
cardiovascular imaging systems. XRE's imaging equipment is used in cath labs
where angiography (the examination of blood vessels using X-rays following the
injection of a radiopaque contrast medium) is performed by an interventional
cardiologist. XRE systems are designed to provide real-time images of
peripheral blood vessels and of the heart and coronary arteries for physicians
performing diagnostic and interventional procedures, such as balloon
angioplasty.
In recent years, significant advances have been made in the treatment of
atherosclerosis, which can lead to a narrowing of the arteries, and other
coronary artery diseases without extensive surgery. A common alternative
treatment to open-heart bypass surgery is balloon 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
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development involves the permanent implantation of a device called a stent into
the blood vessel in order to keep the restricted vessel open once it has been
expanded by balloon angioplasty. The Company believes vascular and
cardiovascular surgeons will increasingly use balloon angioplasty and these
other less invasive techniques to treat vascular diseases. These procedures are
performed under the guidance of X-ray imaging such as that provided by the
Company's equipment.
XRE's products include the Unicath C cardiovascular imaging system, the
Unicath LP biplane cardiovascular imaging system, and the Unicath SP, its
newest single-plane cardiovascular imaging system, with enhanced features such
as a larger X-ray tube and advanced image intensifier with Full-Frame(TM) Zoom
to further improve the visualization of interventional devices such as stents.
To complement its Unicath SP labs, XRE has developed a line of digital image-
processing systems, workstations, and archive alternatives. XRE's new DVFX
digital video filter system acquires, enhances, and displays high-resolution
images at 30 frames per second to clearly image and freeze the motion of the
heart. In October 1997, XRE acquired substantially all of the assets, subject
to certain liabilities, of Digitec Corporation, a North Carolina-based
manufacturer of physiological-monitoring equipment and digital-image archiving
and networking systems used in cardiac catheterization procedures. The digital-
image management system integrates physiological data, acquired images, and
other data to create a single source of patient information.
In addition, the Company's Continental subsidiary designs, manufactures, and
sells electrophysiology systems that are used in the diagnosis and treatment of
cardiac arrhythmia, which is characterized by the sudden, erratic beating of
the heart and can result in cardiac arrest.
Radiographic/Fluoroscopic Systems
Through its Continental subsidiary, the Company designs, manufactures, and
markets radiographic/ fluoroscopic ("R/F") products. An 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
to image in real-time the progress of a radiopaque ingested solution (typically
barium) through the digestive tract.
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(TM)
2000, a high-speed digital-imaging system that records the image in an
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 to film-based systems.
Other Products
The Company uses its technological and manufacturing expertise to produce a
number of other products.
The Company manufactures the lasers used in ThermoLase Corporation's hair-
removal process. ThermoLase is a publicly traded, majority-owned subsidiary of
ThermoTrex. During fiscal 1997, 1996, and 1995, sales of these lasers totaled
$11,390,000, $8,549,000, and $350,000, respectively. The Company has committed
to deliver additional laser systems and components to ThermoLase under this
arrangement for approximately $6.0 million.
The Company's LPX-160 portable imaging system, based on the Company's medical
imaging technology, is designed to produce high-resolution images of metals,
composites, and plastics. Customers for this system have included the United
States Air Force, several commercial airlines, and Canadian and American
utilities.
In November 1997, the Company entered into a 5-year, exclusive agreement
under which it will distribute magnetic resonance imaging ("MRI") systems
manufactured by IMiG-MRI Systems, LLC, a subsidiary of Intermagnetics General
Corporation. Under this agreement, the system will be marketed as the TREX-MRI,
and will be distributed by the Company's direct sales force and through dealers
worldwide. In addition to expanding its product offerings, the Company is
exploring this technology as an adjunct to mammography and for use in MRI-
guided breast biopsy.
PENDING ACQUISITION
In December 1997, the Company entered into a nonbinding letter of intent to
acquire Trophy, a leading
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manufacturer of dental X-ray systems, specializing in digital technology.
Trophy, based outside Paris, France, has developed, manufactured and marketed
low-cost dental digital detection technology for more than 10 years, and also
manufactures a line of medical general-purpose X-ray and R/F imaging systems.
For the fiscal year ended August 1997, Trophy reported revenues of
approximately $70 million.
The Company believes that the acquisition of Trophy would provide the
Company with a full line of dental imaging systems, allowing the Company to
expand its business into a significant new growth market. The Company believes
that dentists, who generally perform their own radiology work, represent the
single largest group of radiologists in the world and that the dental industry
is, in terms of unit volume, the largest consumer of X-ray imaging products
and equipment. Moreover, the Company believes that there is a potential
worldwide market for over 500,000 dental digital imaging devices, such as
those sold by Trophy. While the Company believes that less than 10% of this
market has been penetrated to date, Trophy has the largest installed base of
dental digital imaging systems in the world.
Trophy sells its dental and medical X-ray equipment directly and through
distributors, principally in Europe and the United States. The Company also
believes that, if the acquisition is completed, Trophy will provide a
significant base of operations in France and distribution channels throughout
Europe through which the Company may expand overseas sales of its mammography,
breast biopsy, R/F and cath lab systems. In addition, the Company believes
that Trophy's reputation and market credibility, particularly in the United
States, where Trophy has been less successful in establishing a marketing
presence, will benefit from its affiliation with the Company, ThermoTrex and
Thermo Electron.
Dentists have a particularly strong motivation to adopt digital dental
imaging technology. Radiographic examinations are an integral part of routine
dental checkups and dentists are directly involved in the film development
process. The use of digital X-ray imaging eliminates delays in film
processing, thus increasing dentists' potential revenue streams and
efficiency, and reduces overhead expenses. The use of digital imaging also
allows dentists to more effectively communicate diagnosis and treatment plans
to patients, which the Company believes has the potential to increase the rate
of patients' treatment acceptance and resulting revenues. Finally, the dosage
required to produce an intra-oral X-ray, which is high when compared to other
medical X-rays, can be reduced by up to 90% through the use of digital
imaging.
The final terms of the acquisition of Trophy by the Company have not yet
been determined. There can be no assurance that the Trophy acquisition will be
successfully completed. See "Risk Factors--Risks Associated with Acquisition
Strategy."
CUSTOMERS, MARKETING AND DISTRIBUTION
The Company sells its products through a worldwide network of more than 150
independent dealers and, to a lesser extent, on a direct basis. Each of the
Company's operating units employs regional sales managers who oversee the
performance of the independent dealers on a domestic and international basis
and, in certain instances, support direct sales efforts. The Company and its
independent dealers maintain a staff of factory-trained technicians and
applications and training specialists to support its systems on a worldwide
basis.
In addition to manufacturing and marketing its own systems, the Company
manufactures systems and system components as an OEM for other medical
equipment companies such as U.S. Surgical and GE. Revenues from OEM sales of a
modified design of the Company's stereotactic prone breast-biopsy system to
U.S. Surgical accounted for 17% of the Company's total revenues in fiscal
1997.
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-field digital mammography system, X-ray
sensors for flat-panel direct-detection digital-imaging technology, the
enhancement of existing mammography products, and the introduction of an
interventional radiology product. The Company believes that the digital-
imaging technology developed for this system also may be adaptable to general-
purpose and specialized X-ray systems.
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The Company is developing products based on flat-panel direct-detection
digital-imaging technology being developed by scientists at ThermoTrex.
ThermoTrex has granted the Company a fully paid, exclusive, worldwide,
perpetual license to use 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 $6.0 million of the research and
development in the fields of R/F, mobile C-arm fluoroscopy, and
cardiography/angiography over a three-year period, the Company's license will
be extended to cover such fields. As of September 27, 1997, the Company had
cumulatively funded $3.8 million under the agreement.
Research and development expenses of the Company were $24.7 million, $18.9
million, and $8.6 million for fiscal 1997, fiscal 1996, and the nine months
ended September 30, 1995.
BACKLOG
The backlog of firm orders was $54.3 million as of September 27, 1997,
compared with $71.7 million as of September 28, 1996. The backlog at September
28, 1996, was affected by a build-up of new orders for the Company's M-IV
mammography system, which the Company began shipping in late fiscal 1996, and
the timing of certain orders received in late fiscal 1996. Accordingly, the
Company does not believe that the decline in backlog is indicative of a trend.
The Company anticipates that substantially all of the backlog at September 27,
1997, will be shipped during fiscal 1998.
COMPETITION
The healthcare 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, Siemens, Toshiba American Medical Systems,
Inc., Toshiba America MRI, Inc., Shimadzu, and Picker International, Inc.,
which compete in most diagnostic imaging modalities, including X-ray imaging.
In addition, a significant portion of the Company's sales are to U.S. Surgical
through an OEM arrangement. The products sold through OEM agreements compete
with those offered by the Company directly and through its independent
dealers. The Company's StereoLoc II, Cytoguide, and StereoGuide breast-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. The Company believes that competition
is likely to increase as a result of healthcare cost-containment pressures and
the development of alternative diagnostic and interventional technologies.
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.
The Company is also subject to periodic inspections by the FDA, which audits
the Company's compliance with current good manufacturing practices as set
forth in the quality system regulation ("QSR") during such inspections.
Enforcement of QSR regulations has increased significantly in the last several
years. 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 shipments until compliance is achieved. Such penalties
or remedies could have a material adverse effect on the Company's business and
results of operations.
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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, as well as annual reports
and reports of accidental radiation occurrences.
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, the
manufacturer must repair, replace, or refund the cost of any product that is
not in compliance with the relevant performance standard.
INTELLECTUAL PROPERTY
The Company's policy is to protect its intellectual property rights and to
apply for patent protection when appropriate. The Company currently holds
numerous issued United States patents expiring at various dates ranging from
2003 to 2014. The Company also has more than 10 applications pending for
additional United States patents and a number of foreign counterparts for its
patents in various foreign countries. 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.
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 "Certain Legal Proceedings"
and "Risk Factors--Risks Associated With Pending and Threatened Patent
Litigation."
EMPLOYEES
As of September 27, 1997, the Company employed 1,041 persons.
FACILITIES
The Company owns two office and manufacturing facilities: a 62,500-square-
foot facility in Danbury, Connecticut, and a 143,000-square-foot facility in
Broadview, Illinois. The Company leases a 120,000-square-foot office and
manufacturing facility in Copiague, New York, under a lease expiring in 2005,
a 156,000-square-foot office and manufacturing facility in Littleton,
Massachusetts, under a lease expiring in 2012, and a 60,000-square-foot office
and manufacturing facility in Danbury, Connecticut, under a lease expiring in
2007. The Company believes that its facilities are in good condition and are
suitable and adequate to meet current needs.
CERTAIN LEGAL PROCEEDINGS
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 Lorad's prone breast-biopsy system
infringes a Fischer patent on a precision mammographic needle-biopsy system.
The Company expects the trial to begin with respect to this lawsuit before the
end of fiscal 1998. As of September 27, 1997, the Company had recognized
aggregate revenues of approximately $107.1 million from the sale of such
systems, of which $34.4 million represents sales prior to October 16, 1995.
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 prone breast-biopsy 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 that the Company may eventually be
required to pay in expenses or in such damages.
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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 with respect to sales of the Company's products occurring prior
to October 16, 1995, when Lorad was 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 (approximately $2 million as of
September 27, 1997), with any indemnification payment it receives from
ThermoTrex being treated as a contribution to shareholders' investment.
The Company is also aware of two U.S. patents owned by a former employee that
have been asserted against the Company relating to its high-transmission
cellular ("HTC") grid used with its 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 unfavorable outcome of any one or both of the above described matters
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's competitors and other
parties hold other 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.
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RELATIONSHIP WITH AFFILIATES
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 several privately and publicly held majority-owned
subsidiaries, including the Company which was created by ThermoTrex. From time
to time, Thermo Electron and its subsidiaries will create other majority-owned
subsidiaries as part of its spinout strategy. (The Company and the other
Thermo Electron subsidiaries are referred to hereinafter as the "Thermo
Subsidiaries.")
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.
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.
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
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administration, tax advice and preparation of tax returns, centralized cash
management and certain financial and other services to the Company. In
calendar 1996 and calendar 1997, Thermo Electron assessed the Company an
annual fee for these services equal to 1.0% of the Company's total revenues.
Effective January 4, 1998, the fee was reduced to 0.8% of the Company's total
revenues. The fee may be changed by mutual agreement of the Company and Thermo
Electron. During fiscal 1997, Thermo Electron assessed the Company $2,293,000
in fees under the Services Agreement. Management 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.
From time to time, the Company may transact business with other companies in
the Thermo Group. In fiscal 1997, such transactions included the following.
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 additional
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. As of September 27, 1997, the Company had paid approximately
$3,800,000 to ThermoTrex under this arrangement.
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. During fiscal 1997, the Company purchased grids for an aggregate
purchase price of $678,000 under this arrangement.
Under an arrangement with ThermoLase Corporation, a majority-owned
subsidiary of ThermoTrex, the Company manufactures the laser used in
ThermoLase Corporation's hair-removal process. The Company manufactures these
lasers for ThermoLase pursuant to written purchase orders. During fiscal 1997,
the Company sold laser systems to ThermoLase at various prices for an
aggregate of $11,390,000 under this arrangement. As of September 27, 1997, the
Company had committed to deliver additional lasers to ThermoLase under this
arrangement for an aggregate of approximately $6,000,000.
Under an arrangement with Thermedics Detection Inc., a majority-owned
subsidiary of Thermedics Inc., a majority-owned subsidiary of Thermo Electron,
the Company manufactures an X-ray source that is used as a
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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. During fiscal 1997, Thermedics Detection purchased X-
ray source units from the Company for an aggregate purchase price of $37,000
under this arrangement.
On October 2, 1995, in exchange for all of the outstanding shares of capital
stock of Bennett, the Company issued to ThermoTrex a $42,000,000 principal
amount 4.2% subordinated convertible note due 2000 (the "Convertible Note"),
convertible into shares of the Company's Common Stock at a conversion price of
$11.79 per share. In fiscal 1996, ThermoTrex converted $34,000,000 principal
amount of the Convertible Note into 2,883,798 shares of Common Stock and
$8,000,000 principal amount remained outstanding at September 27, 1997.
As of September 27, 1997, $34,587,000 of the Company's cash equivalents were
invested 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 are readily convertible into cash by the Company. The repurchase
agreement earns a rate based on the 90-day Commercial Paper Composite Rate
plus 25 basis points, set at the beginning of each quarter.
STOCK HOLDING ASSISTANCE PLAN
In 1996, the Company adopted a stock holding policy which requires its
executive officers to acquire and hold a minimum number of shares of Common
Stock. In order to assist the executive officers in complying with the policy,
the Company also adopted a Stock Holding Assistance Plan under which it may
make interest-free loans to certain key employees, including its executive
officers, to enable such employees to purchase the Common Stock in the open
market. No such loans are currently outstanding under the plan.
25
<PAGE>
MANAGEMENT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Hal Kirshner............... 56 Chief Executive Officer, President and Director
John N. Hatsopoulos........ 63 Chief Financial Officer and Vice President
John M. Brenna............. 51 Vice President
Paul F. Kelleher........... 55 Chief Accounting Officer
Gary S. Weinstein.......... 40 Chairman of the Board and Director
Dr. Elias P. Gyftopoulos... 70 Director
John T. Keiser............. 62 Director
Dr. James W. May, Jr....... 54 Director
Hutham S. Olayan........... 43 Director
Firooz Rufeh............... 60 Director
</TABLE>
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. Hatsopoulos, Mr. Kelleher, Mr. Weinstein and Mr. Keiser
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 with Affiliates."
Mr. Kirshner has been Chief Executive Officer, President and a Director of
the Company since its inception in October 1995. Mr. Kirshner was also
president of the Company's Lorad division from 1991 until 1997.
Mr. Hatsopoulos has been the Chief Financial Officer of the Company since
its inception in October 1995 and a Senior Vice President since 1997. From
1995 until 1997, he also served as a Vice President of the Company. Mr.
Hatsopoulos has been the president of Thermo Electron since January 1, 1997,
and its chief financial officer since 1988. Prior to being named president of
Thermo Electron, Mr. Hatsopoulos served as an executive vice president, a
position he had held since 1986. Mr. Hatsopoulos is also a director of
LOIS/USA Inc., Thermo Electron, Thermedics Inc., Thermedics Detection Inc.,
Thermo Ecotek Corporation, Thermo Fibertek Inc., Thermo Instrument Systems
Inc., Thermo TerraTech Inc. and Thermo Vision Corporation.
Mr. Brenna was appointed president of the Company's Lorad division in June
1997 and a Vice President of the Company in September 1997. Before joining the
Company as vice president of marketing in 1996, Mr. Brenna held senior
marketing and sales positions at Philips Medical Systems.
Mr. Kelleher has been the Chief Accounting Officer of the Company since its
inception in October 1995. Mr. Kelleher has been Senior Vice President,
Finance and Administration, of Thermo Electron since June 1997, and served as
its Vice President, Finance, from 1987 until 1997, and as its Controller from
1982 to January 1996. He is a director of ThermoLase Corporation.
Mr. Weinstein has been Chairman of the Board and a Director of the Company
since February 1996. Mr. Weinstein has also served as 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 from March 1995 until February 1996 as Managing
Director and head of Global Syndicate and Equity Capital Markets. Mr.
Weinstein joined Lehman Brothers in 1988 and served in various positions,
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.
26
<PAGE>
Dr. Gyftopoulos has been a Director of the Company since November 1995. Dr.
Gyftopoulos is Professor Emeritus of the Massachusetts Institute of
Technology, where he was the Ford Professor of Mechanical Engineering and of
Nuclear Engineering for more than 20 years until his retirement. Dr.
Gyftopoulos is also a director of Thermo BioAnalysis Corporation, Thermo
Cardiosystems Inc., Thermo Electron, ThermoLase Corporation, Thermo
Remediation Inc., ThermoSpectra Corporation and Thermo Voltek Corp.
Mr. Keiser has been a Director of the Company since June 1997. Mr. Keiser
has been a vice president of Thermo Electron since April 1997. Since 1994, Mr.
Keiser has been a senior vice president of Thermedics Inc. and the president
of the Thermo Biomedical division of Thermo Electron, which manufactures a
variety of medical equipment and instruments. Mr. Keiser was president of the
Eberline Instrument division of Thermo Instrument Systems Inc., a majority-
owned subsidiary of Thermo Electron, from 1985 to July 1994. The Eberline
Instrument division manufactures radiation detection and counting
instrumentation and radiation monitoring systems. Mr. Keiser is also a
director of Metrika Systems Corporation, Thermedics Inc. and Thermo
Cardiosystems Inc.
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 since 1995 as President and a director of Olayan America Corporation
and since 1986 as President and a director of Competrol Real Estate Limited,
which are members of the Olayan Group engaged in advisory services and private
and 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. Mr. Rufeh presently serves as a consultant to Thermo Electron. Mr. Rufeh
served as the chief executive officer of ThermoTrex from 1988 to February
1996, and as the president of ThermoTrex from 1988 to February 1997. Mr. Rufeh
also served as a vice president of Thermo Electron from 1986 until his
retirement in February 1997.
27
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each of the underwriters (the "Underwriters")
named below has severally agreed to purchase and the Company has agreed to
sell to such Underwriter, the number of shares of Common Stock set forth
opposite the name of such Underwriter.
<TABLE>
<CAPTION>
NUMBER OF
NAME OF UNDERWRITER SHARES
------------------- ---------
<S> <C>
Smith Barney Inc................................................
Lehman Brothers Inc.............................................
---------
Total....................................................... 4,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the shares are subject to approval of
certain legal matters by counsel and to certain other conditions. The
Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.
The Underwriters propose to offer part of the shares directly to the public
at the public offering price set forth on the cover page of this Prospectus
and part of the shares to certain dealers at a price which represents a
concession not in excess of $ per share under the public offering price.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. After the initial offering
of the shares to the public, the public offering price and such concessions
may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of
675,000 additional shares of Common Stock at the price to public set forth on
the cover page of this Prospectus minus the underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose
of covering over-allotments, if any, in connection with the offering of the
shares offered hereby. To the extent such option is exercised, each
Underwriter will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite each Underwriter's name in the preceding table bears
to the total number of shares listed in such table.
The Company, ThermoTrex and Thermo Electron have agreed that they will not,
without the prior written consent of Smith Barney Inc., for a period of 180
days after the date of this Prospectus, offer, sell or contract to sell, or
otherwise dispose of (or enter into any transaction which is designed to, or
might reasonably be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) by the Company, Thermo Electron or any affiliate of the Company or
any person in privity with the Company, Thermo Electron or any affiliate of
the Company) directly or indirectly, or announce the offering of, any other
shares of Common Stock or any securities convertible into, or exchangeable
for, shares of Common Stock (except for the issuance of shares of Common Stock
pursuant to existing stock option, purchase and compensation plans, or upon
conversion of any currently outstanding convertible securities or the issuance
of shares of Common Stock as 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, or sales of shares of
Common Stock by the Company to ThermoTrex), or sell or grant options, rights
or warrants with respect to any shares of Common Stock (other than the grant
of options pursuant to existing stock option, purchase and compensation
plans), otherwise than in accordance with this Agreement or as contemplated in
the Prospectus, including but not limited to options to be granted under the
existing ThermoTrex stock option plan.
28
<PAGE>
The Company, Thermo Electron and the Underwriters have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act").
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids for
and purchases of the Common Stock so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases
of the Common Stock in the open market in order to cover syndicate short
positions. Penalty bids permit the Underwriters to reclaim a selling
concession from a syndicate member when the Common Stock originally sold by
such syndicate member is purchased in a stabilizing transaction or syndicate
covering transaction to cover syndicate short positions. Such stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of the Common Stock to be higher than it would otherwise be in the
absence of such transactions. These transactions may be effected on the AMEX
or otherwise and, if commenced, may be discontinued at any time.
The Underwriters have from time to time performed various investment banking
services for Thermo Electron, the Company and their affiliates, and received
customary compensation therefor.
29
<PAGE>
LEGAL OPINIONS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Seth H. Hoogasian, Esq., General Counsel of the Company and Thermo
Electron. Mr. Hoogasian is a full-time employee of Thermo Electron and owns or
has the right to acquire 6,000 shares of Common Stock, 7,714 shares of the
common stock of ThermoTrex and 108,764 shares of the common stock of Thermo
Electron. The validity of the Common Stock offered hereby will be passed upon
for the Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston,
Massachusetts.
EXPERTS
The financial statements of the Company included in this Prospectus, the
financial statements of Bennett incorporated by reference in this Prospectus
and the financial statement schedules incorporated by reference 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
incorporated by reference herein in reliance upon the authority of said firm
as experts in giving said reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, DC 20549; and at the Commission's regional
offices at 500 West Madison Street, Chicago, Illinois 60661; and 7 World Trade
Center, New York, New York 10048. Copies of such material can be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, DC 20549, at prescribed rates. The Commission also maintains
a Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission, including the Company; the address of such Web site is
http://www.sec.gov. The Common Stock is listed on the AMEX, and such material
that relates to the Company may also be inspected at the offices of the AMEX,
86 Trinity Place, New York, New York 10006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of which this Prospectus
constitutes a part. This Prospectus 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. For further
information, reference is made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
1-11827) are hereby incorporated by reference into this Prospectus:
(a) Annual Report on Form 10-K for the fiscal year ended September 27,
1997; and
(b) The description of the Common Stock, which is contained in the
Company's Registration Statement on Form 8-A filed under the Exchange Act,
as such description may be amended from time to time.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Common Stock shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the respective dates
30
<PAGE>
of filing of such documents. Any statement contained herein or in a document
all or any portion of which is incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such earlier
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
Pursuant to Item 11(b) of Form S-3, the financial statements of Bennett X-
Ray Corporation are incorporated by reference into this Prospectus from the
Company's prospectus dated June 27, 1996 forming a part of the Company's
Registration Statement on Form S-1 (Registration Number 333-2926).
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than certain exhibits to such documents). Requests for such copies
should be directed to Sandra L. Lambert, Secretary, Trex Medical Corporation,
81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046 (telephone:
(781) 622-1000).
31
<PAGE>
TREX MEDICAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants................................. F-2
Consolidated Statement of Income for the years ended September 27, 1997,
September 28, 1996, and September 30, 1995 and for the nine months ended
September 30, 1995...................................................... F-3
Consolidated Balance Sheet as of September 27, 1997, and September 28,
1996.................................................................... F-4
Consolidated Statement of Cash Flows for the years ended September 27,
1997, September 28, 1996, and September 30, 1995 and for the nine months
ended September 30, 1995................................................ F-5
Consolidated Statement of Shareholders' Investment for the years ended
September 27, 1997, and September 28, 1996, and for the nine months
ended September 30, 1995................................................ F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Trex Medical Corporation:
We have audited the accompanying consolidated balance sheet of Trex Medical
Corporation (a Delaware corporation and 79%-owned subsidiary of ThermoTrex
Corporation) and subsidiaries as of September 27, 1997, and September 28,
1996, and the related consolidated statements of income, shareholders'
investment and cash flows for the years ended September 27, 1997, and
September 28, 1996, and 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 September 27, 1997, and September
28, 1996, and the results of their operations and their cash flows for the
years ended September 27, 1997, and September 28, 1996, and the nine months
ended September 30, 1995, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Boston, Massachusetts
November 3, 1997
F-2
<PAGE>
TREX MEDICAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
--------------------------------- ENDED
SEPT. 27, SEPT. 28, SEPT. 30, SEPT. 30,
1997 1996 1995 1995
--------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES (includes $11,427, $8,910,
$470, and $470 to affiliated
companies; Notes 7 and 8)......... $229,294 $150,195 $70,505 $55,291
-------- -------- ------- -------
Costs and Operating Expenses:
Cost of revenues (includes
$7,238, $4,698, $223, and $223
for affiliated companies
revenues; Note 7)............... 139,062 86,642 36,320 28,180
Selling, general, and
administrative expenses (Note
7).............................. 40,181 27,156 15,652 12,174
Research and development expenses
(Note 7)........................ 24,705 18,862 11,937 8,595
-------- -------- ------- -------
203,948 132,660 63,909 48,949
-------- -------- ------- -------
Operating Income................... 25,346 17,535 6,596 6,342
Interest Income.................... 1,895 1,290 -- --
Interest Expense, Related Party
(Note 7).......................... (336) (1,373) -- --
Other Income, Net.................. 559 60 11 22
-------- -------- ------- -------
Income Before Provision for Income
Taxes............................. 27,464 17,512 6,607 6,364
Provision for Income Taxes (Note
5)................................ 12,790 8,168 3,015 2,881
-------- -------- ------- -------
NET INCOME......................... $ 14,674 $ 9,344 $ 3,592 $ 3,483
======== ======== ======= =======
EARNINGS PER SHARE:
Primary.......................... $ .51 $ .40 $ .18 $ .17
======== ======== ======= =======
Fully diluted.................... $ .51 $ .38 $ .18 $ .17
======== ======== ======= =======
WEIGHTED AVERAGE SHARES:
Primary.......................... 28,826 23,483 20,151 20,151
======== ======== ======= =======
Fully diluted.................... 28,826 26,550 20,151 20,151
======== ======== ======= =======
</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>
SEPT. 27, SEPT. 28,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................ $ 36,490 $ 33,966
Accounts receivable, less allowances of $1,298 and
$1,264.................................................. 44,774 29,104
Inventories.............................................. 43,341 33,010
Prepaid expenses......................................... 971 1,316
Prepaid income taxes (Note 5)............................ 6,147 5,712
Due from affiliated companies............................ -- 3,211
-------- --------
131,723 106,319
-------- --------
Property, Plant, and Equipment, at Cost, Net............... 16,415 13,770
-------- --------
Cost in Excess of Net Assets of Acquired Companies (Note
2)........................................................ 81,299 83,972
-------- --------
$229,437 $204,061
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable......................................... $ 13,900 $ 12,598
Accrued payroll and employee benefits.................... 4,494 4,616
Accrued warranty costs................................... 5,740 5,344
Accrued commissions...................................... 3,721 1,938
Customer deposits........................................ 3,074 3,414
Accrued income taxes (includes $7,458 and $6,300 due to
parent company)......................................... 10,835 8,310
Other accrued expenses (Note 2).......................... 8,998 10,265
Due to affiliated companies.............................. 1,312 --
-------- --------
52,074 46,485
-------- --------
Deferred Income Taxes (Note 5)............................. 222 170
-------- --------
Long-term Obligations:
4.2% Subordinated convertible note, due to parent company
(Note 7)................................................ 8,000 8,000
Other.................................................... 47 109
-------- --------
8,047 8,109
-------- --------
Commitments and Contingencies (Notes 2, 6, 7, and 9)
Shareholders' Investment (Notes 3 and 4):
Common stock, $.01 par value, 50,000,000 shares
authorized; 28,894,630 and 28,592,630 shares issued and
outstanding............................................. 289 286
Capital in excess of par value........................... 144,787 139,667
Retained earnings........................................ 24,018 9,344
-------- --------
169,094 149,297
-------- --------
$229,437 $204,061
======== ========
</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>
YEAR ENDED NINE MONTHS
--------------------------------- ENDED
SEPT. 27, SEPT. 28, SEPT. 30, SEPT. 30,
1997 1996 1995 1995
--------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income....................... $ 14,674 $ 9,344 $ 3,592 $ 3,483
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization.. 4,996 3,195 1,702 1,315
Provision for losses on
accounts receivable........... 170 273 75 25
Increase (decrease) in deferred
income taxes.................. 52 (26) 61 29
Changes in current accounts,
excluding the effects of
acquisitions:
Accounts receivable.......... (15,840) (7,681) (1,305) (693)
Inventories.................. (10,331) (2,105) (533) (1,476)
Other current assets......... 470 (1,835) (6) (82)
Accounts payable............. 1,302 106 2,342 621
Other current liabilities.... 8,480 4,711 (1,139) 444
Other.......................... (67) (32) (15) (15)
-------- -------- ------- -------
Net cash provided by operating ac-
tivities.......................... 3,906 5,950 4,774 3,651
-------- -------- ------- -------
INVESTING ACTIVITIES:
Acquisitions, net of cash
acquired (Note 2)............... -- (36,888) -- --
Purchases of property, plant, and
equipment....................... (5,461) (3,071) (1,533) (957)
Other, net....................... -- 16 14 14
-------- -------- ------- -------
Net cash used in investing
activities........................ (5,461) (39,943) (1,519) (943)
-------- -------- ------- -------
FINANCING ACTIVITIES:
Net proceeds from issuance of
Company common stock (Note 3)... 4,141 67,757 -- --
Net transfers to parent company.. -- -- (3,053) (2,506)
Other............................ (62) -- -- --
-------- -------- ------- -------
Net cash provided by (used in)
financing activities.............. 4,079 67,757 (3,053) (2,506)
-------- -------- ------- -------
Increase in Cash and Cash
Equivalents....................... 2,524 33,764 202 202
Cash and Cash Equivalents at
Beginning of Period............... 33,966 202 -- --
-------- -------- ------- -------
Cash and Cash Equivalents at End of
Period............................ $ 36,490 $ 33,966 $ 202 $ 202
======== ======== ======= =======
CASH PAID FOR:
Interest......................... $ 182 $ 1,373 $ -- $ --
Income taxes..................... $ 8,304 $ 1,294 $ -- $ --
NONCASH ACTIVITIES:
Fair value of assets of acquired
companies....................... $ -- $ 53,519 $ -- $ --
Cash paid for acquired
companies....................... -- (38,178) -- --
-------- -------- ------- -------
Liabilities assumed of acquired
companies....................... $ -- $ 15,341 $ -- $ --
======== ======== ======= =======
Transfer of acquired business
from parent company, net of
cash............................ $ -- $ -- $42,000 $42,000
Issuance of subordinated
convertible note to parent
company......................... $ -- $ 42,000 $ -- $ --
Conversions of subordinated
convertible note by parent
company......................... $ -- $ 34,000 $ -- $ --
</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>
YEAR ENDED NINE MONTHS
------------------- ENDED
SEPT. 27, SEPT. 28, SEPT. 30,
1997 1996 1995
--------- --------- -----------
<S> <C> <C> <C>
COMMON STOCK, $.01 PAR VALUE
Balance at beginning of period............... $ 286 $ -- $ --
Net proceeds from issuance of Company common
stock (Note 3).............................. 3 57 --
Capitalization of Company.................... -- 200 --
Conversions of subordinated convertible note
by parent company........................... -- 29 --
-------- -------- -------
Balance at end of period..................... 289 286 --
-------- -------- -------
CAPITAL IN EXCESS OF PAR VALUE
Balance at beginning of period............... 139,667 -- --
Net proceeds from issuance of Company common
stock (Note 3).............................. 4,116 67,700 --
Issuance of stock under employees' and direc-
tors' stock plans........................... 22 -- --
Tax benefit related to employees' and direc-
tors' stock plans........................... 982 186 --
Issuance of subordinated convertible note to
parent company (Note 7)..................... -- (42,000) --
Capitalization of Company.................... -- 79,810 --
Conversions of subordinated convertible note
by parent company........................... -- 33,971 --
-------- -------- -------
Balance at end of period..................... 144,787 139,667 --
-------- -------- -------
RETAINED EARNINGS
Balance at beginning of period............... 9,344 -- --
Net income................................... 14,674 9,344 --
-------- -------- -------
Balance at end of period..................... 24,018 9,344 --
-------- -------- -------
NET PARENT COMPANY INVESTMENT
Balance at beginning of period............... -- 80,010 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
Capitalization of Company.................... -- (80,010) --
-------- -------- -------
Balance at end of period..................... -- -- 80,010
-------- -------- -------
TOTAL SHAREHOLDERS' INVESTMENT................. $169,094 $149,297 $80,010
======== ======== =======
</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 digital breast-biopsy systems
used for the detection of breast cancer. The Company also designs and
manufactures general-purpose X-ray equipment and specialized X-ray equipment,
including imaging systems used during diagnostic and interventional vascular
and cardiac procedures such as balloon angioplasty. The Company's mammography
and digital breast-biopsy systems are used by radiologists and physicians in
offices, hospitals, and dedicated breast-care centers, and its general-purpose
X-ray 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 shares of capital stock of
Bennett X-Ray Corporation (Bennett), in exchange for a $42.0 million principal
amount 4.2% subordinated convertible note (Note 7). As of September 27, 1997,
ThermoTrex had converted $34.0 million principal amount of this note. 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(TM) 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 27, 1997, ThermoTrex owned 22,883,798 shares of the
Company's common stock, representing 79% of such stock outstanding. ThermoTrex
is a 53%-owned subsidiary of Thermo Electron Corporation (Thermo Electron).
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, was the 39-
week period from January 1, 1995, to September 30, 1995, referenced as fiscal
1995. References to fiscal 1997 and fiscal 1996 are for the years ended
September 27, 1997, and September 28, 1996, respectively. Fiscal 1997 and
fiscal 1996 each included 52 weeks. The unaudited consolidated statements of
income and cash flows for the 52-week period ended September 30, 1995, are
presented for comparative purposes only.
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.
Concentration of Credit Risk
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.
F-7
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock-based Compensation Plans
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans (Note 4). Accordingly, no
accounting recognition is given to stock options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity.
Income Taxes
The Company and ThermoTrex entered into a tax allocation agreement under
which the Company was included in the consolidated income tax returns filed by
ThermoTrex. The agreement provided that in years in which the Company had
taxable income, it would pay to ThermoTrex amounts comparable to the taxes the
Company would have paid if it had filed separate tax returns. Subsequent to
the Company's sale of common stock in December 1996 (Note 3), ThermoTrex's
ownership of the Company was reduced below 80% and, as a result, the Company
is required to file its own income tax returns.
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
Earnings per share has been computed based on the weighted average number of
shares outstanding during the period. Weighted average shares for fiscal 1996
and 1995 include the effect of the assumed exercise of stock options issued
within one year prior to the Company's initial public offering. Because the
effect of the assumed exercise of stock options would be immaterial, they have
been excluded from the primary earnings per share calculation subsequent to
the Company's initial public offering. Fully diluted earnings per share in
fiscal 1996 include the effect of the assumed exercise of stock options and
the effect of the assumed conversion of the Company's 4.2% subordinated
convertible note, due to parent company.
Cash and Cash Equivalents
As of September 27, 1997, $34,587,000 of the Company's cash equivalents were
invested in 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 U.S.
government-agency securities, corporate notes, commercial paper, money market
funds, and other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement are
readily convertible into cash by the Company. The repurchase agreement earns a
rate based on the 90-day Commercial Paper Composite Rate plus 25 basis points,
set at the beginning of each quarter.
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>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies............................... $25,691 $20,513
Work in process.......................................... 12,755 9,218
Finished goods........................................... 4,895 3,279
------- -------
$43,341 $33,010
======= =======
</TABLE>
F-8
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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: buildings, 29 to 31.5
years; machinery and equipment, 3 to 10 years; and leasehold improvements, the
shorter of the term of the lease or the life of the asset. Property, plant,
and equipment consists of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land..................................................... $ 1,299 $ 1,194
Buildings................................................ 3,715 3,788
Leasehold improvements................................... 2,904 2,195
Machinery and equipment.................................. 14,769 10,082
------- -------
22,687 17,259
Less: Accumulated depreciation and amortization.......... 6,272 3,489
------- -------
$16,415 $13,770
======= =======
</TABLE>
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 $5,807,000 and $3,621,000 as of September 27, 1997, and
September 28, 1996, 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. If impairment has occurred, any excess of
carrying value over fair value is recorded as a loss.
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,
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.
Presentation
Certain amounts in fiscal 1996 have been reclassified to conform to the
presentation in the fiscal 1997 financial statements.
2. ACQUISITIONS
In September 1996, the Company acquired substantially all of the assets and
liabilities of Continental X-Ray Corporation and affiliates (Continental), an
Illinois-based company that designs, manufactures, and markets general-purpose
and specialized X-ray systems, for approximately $18.4 million in cash, net of
cash acquired and including the repayment of debt.
In May 1996, the Company acquired substantially all of the assets and
liabilities of XRE Corporation (XRE), a Massachusetts-based company that
designs, manufactures, and markets X-ray imaging systems used in the diagnosis
and treatment of coronary artery disease and other vascular conditions, for
approximately $18.5 million in cash, net of cash acquired and including the
repayment of debt.
F-9
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In September 1995, ThermoTrex acquired all of the outstanding capital stock
of Bennett, a New York-based manufacturer of high-frequency specialty and
general-purpose X-ray systems, for approximately $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 (Note 7).
These acquisitions have been accounted for using the purchase method of
accounting, and their results of operations have been included in the
accompanying financial statements from their respective dates of acquisition
by the Company, or for Bennett, by ThermoTrex. The cost of the acquisitions
exceeded the estimated fair value of the acquired net assets by $63.5 million,
which is being amortized over 40 years. Allocation of the purchase price for
these acquisitions was based on estimates of the fair value of the net assets
acquired.
Based on unaudited data, the following table presents selected financial
information for the Company and the businesses acquired on a pro forma basis,
assuming they had been combined since the beginning of fiscal 1995.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
SEPT. 28, 1996 ENDED SEPT. 30, 1995
-------------- --------------------
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues.............................. $191,351 $126,185
Net income............................ 9,300 2,012
Earnings per share:
Primary............................. .29 .07
Fully diluted....................... .29 .07
</TABLE>
The pro forma results are not necessarily indicative of future operations or
the actual results that would have occurred had the acquisitions been made at
the beginning of 1995.
Other accrued expenses in the accompanying balance sheet includes $2.5
million and $3.5 million as of September 27, 1997, and September 28, 1996,
respectively, for estimated reserves associated with acquisitions, including a
reserve of approximately $2 million 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),
alleging that Lorad infringes 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 treated as a contribution to shareholders' investment.
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, management does not believe that it is reasonably likely that any
resolution would have a material adverse effect on the Company's financial
position.
3. COMMON STOCK
Sale of Common Stock
In December 1996, the Company sold 300,000 shares of its common stock at
$14.50 per share, for net proceeds of $4,119,000.
In July 1996, the Company sold 2,875,000 shares of its common stock in an
initial public offering and 871,832 shares of its common stock in a concurrent
rights offering at $14.00 per share, for net proceeds of $49,068,000.
F-10
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 $17,619,000. 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 purchased an aggregate of 143,300 shares
of the Company's common stock issued in these private placements. In addition,
an entity indirectly related to a director of the Company purchased 200,000
shares of the Company's common stock issued in these private placements. This
director, however, disclaims beneficial ownership of such shares.
Conversion of Subordinated Convertible Note
During fiscal 1996, ThermoTrex converted $34,000,000 principal amount of the
Company's 4.2% subordinated convertible note into 2,883,798 shares of the
Company's common stock.
Reserved Shares
As of September 27, 1997, the Company had reserved 2,801,542 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, due to
parent company.
4. EMPLOYEE BENEFIT PLANS
STOCK-BASED COMPENSATION PLANS
Stock Option Plans
In 1995 and 1997, the Company adopted stock-based compensation plans for its
key employees, directors, and others, which permit 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. To date,
only nonqualified stock options have been awarded under these plans. The
option recipients and the terms of options granted under these plans are
determined by the Board Committee. Generally, options granted to date are
exercisable immediately, but are 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 lapse ratably over a five- to ten-year period,
depending on the term of the option, which may range from seven 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. To date, all options have been granted at fair market value. The
Company also has a directors' stock option plan, adopted in 1995, that
provides for the grant of stock options to outside directors pursuant to a
formula approved by the Company's shareholders. Options granted under this
plan have the same general terms as options granted under the stock-based
compensation plans described above, except that the restrictions and
repurchase rights generally lapse ratably over a four-year period and the
option term is five years. 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 and ThermoTrex.
F-11
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the Company's stock option information is as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
WEIGHTED WEIGHTED
NUMBER OF AVERAGE NUMBER OF AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- -------------- --------- --------------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C>
Options outstanding, be-
ginning of year......... 1,381 $11.14 -- $ --
Granted................ 512 15.82 1,401 11.14
Exercised.............. (2) 11.00 -- --
Forfeited.............. (131) 14.58 (20) 11.00
----- -----
Options outstanding, end
of year................. 1,760 $12.24 1,381 $11.14
===== ====== ===== ======
Options exercisable...... 1,760 $12.24 -- --
===== ====== ===== ======
Options available for
grant................... 238 519
===== =====
Weighted average fair
value per share of op-
tions granted during
year.................... $ 7.88 $ 5.47
====== ======
</TABLE>
A summary of the status of the Company's stock options at September 27,
1997, is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
-------------------------------------------
WEIGHTED AVERAGE
NUMBER OF REMAINING WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES SHARES CONTRACTUAL LIFE EXERCISE PRICE
------------------------ --------- ---------------- ----------------
(SHARES IN THOUSANDS)
<S> <C> <C> <C>
$10.25 - $12.04............. 1,331 9.6 years $11.14
12.05 - 13.82............. 168 11.7 years 13.48
13.83 - 15.61............. 29 11.3 years 15.33
15.62 - 17.40............. 232 11.2 years 17.27
-----
$10.25 - $17.40............. 1,760 10.0 years $12.24
=====
</TABLE>
Employee Stock Purchase Program
Effective November 1, 1997, substantially all of the Company's full-time
employees are eligible to participate in an employee stock purchase program
sponsored by the Company and Thermo Electron, under which employees can
purchase shares of the Company's and Thermo Electron's common stock. Prior to
November 1, 1997, the program was sponsored by ThermoTrex and Thermo Electron.
Under this program, the applicable shares of common stock can be purchased at
the end of a 12-month period at 95% of the fair market value at the beginning
of the period, and the shares purchased are subject to a six-month resale
restriction. Prior to November 1, 1995, the applicable shares of common stock
could be purchased at 85% of the fair market value at the beginning of the
period, and the shares purchased were subject to a one-year resale
restriction. Shares are purchased through payroll deductions of up to 10% of
each participating employee's gross wages.
PRO FORMA STOCK-BASED COMPENSATION EXPENSE
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-based Compensation," which sets forth a fair-value
based method of recognizing stock-based compensation expense. As permitted by
SFAS No. 123, the Company has elected to continue to apply APB No. 25 to
account for its stock-based compensation plans. Had compensation cost for
awards in fiscal 1997 and 1996 under the
F-12
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company's stock-based compensation plans been determined based on the fair
value at the grant dates consistent with the method set forth under SFAS No.
123, the effect on the Company's net income and earnings per share would have
been as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net income:
As reported....................................... $ 14,674 $ 9,344
Pro forma......................................... 14,071 9,102
Primary earnings per share:
As reported....................................... .51 .40
Pro forma......................................... .49 .38
Fully diluted earnings per share:
As reported....................................... .51 .38
Pro forma......................................... .49 .37
</TABLE>
Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to October 1, 1995, the resulting pro forma compensation
expense may not be representative of the amount to be expected in future
years. Compensation expense for options granted is reflected over the vesting
period; therefore, future pro forma compensation expense may be greater as
additional options are granted.
The fair value of each option grant was estimated on the grant date using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Volatility............................................ 26% 29%
Risk-free interest rate............................... 6.5% 6.4%
Expected life of options.............................. 8.5 years 7.8 years
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions including expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
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. Contributions to the
401(k) savings plan 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 $1,080,000, $701,000, and
$242,000 in fiscal 1997, 1996, and 1995, respectively.
F-13
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal......................................... $ 9,913 $6,324 $2,474
State........................................... 2,677 1,866 808
------- ------ ------
12,590 8,190 3,282
------- ------ ------
Deferred (Prepaid):
Federal......................................... 172 (16) (228)
State........................................... 28 (6) (173)
------- ------ ------
200 (22) (401)
------- ------ ------
$12,790 $8,168 $2,881
======= ====== ======
</TABLE>
The Company receives a tax deduction upon exercise of nonqualified stock
options by employees for the difference between the exercise price and the
market price of the Company's common stock on the date of exercise. The
provision for income taxes that is currently payable does not reflect $982,000
and $186,000 of such benefits that have been allocated to capital in excess of
par value for fiscal 1997 and 1996, respectively.
The provision for income taxes in the accompanying statement of income for
fiscal 1997, 1996, and 1995 differs from the provision calculated by applying
the statutory federal income tax rate of 35% in fiscal 1997 and 1996, and 34%
in fiscal 1995 to income before provision for income taxes due to the
following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory rate...... $ 9,612 $6,129 $2,164
Increases resulting from:
State income taxes, net of federal tax.......... 1,758 1,209 419
Amortization of cost in excess of net assets of
acquired companies............................. 541 541 197
Other, net...................................... 879 289 101
------- ------ ------
$12,790 $8,168 $2,881
======= ====== ======
</TABLE>
Prepaid income taxes and deferred income taxes in the accompanying balance
sheet consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
Reserves and accruals.................................. $ 3,416 $ 3,409
Accrued compensation................................... 755 1,107
Allowance for doubtful accounts........................ 503 430
Inventory basis difference............................. 1,375 766
Other, net............................................. 98 --
------- -------
$ 6,147 $ 5,712
======= =======
Deferred income taxes:
Depreciation........................................... $ 222 $ 170
======= =======
</TABLE>
F-14
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. COMMITMENTS
The Company leases portions of its office and operating facilities under
various noncancelable operating lease arrangements expiring between fiscal
1998 and fiscal 2007. The accompanying statement of income includes expenses
from these operating leases of $1,408,000, $674,000, and $44,000 in fiscal
1997, 1996, and 1995, respectively. Future minimum payments due under these
noncancelable operating leases at September 27, 1997, are $1,411,000 in fiscal
1998; $1,383,000 in fiscal 1999; $1,374,000 in fiscal 2000; $1,372,000 in
fiscal 2001; $1,402,000 in fiscal 2002; and $5,007,000 in fiscal 2003 and
thereafter. Total future minimum lease payments are $11,949,000. The Company
also has an operating lease arrangement with a related party as discussed in
Note 7.
7. 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 1.0% of the Company's revenues. The Company paid an annual fee equal to
1.20% of the Company's revenues in calendar year 1995. The annual fee is
reviewed and adjusted annually by mutual agreement of the parties. For these
services, the Company was charged $2,293,000, $1,567,000, and $663,000 in
fiscal 1997, 1996, and 1995, respectively. 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.
Related-party Revenues
ThermoLase Corporation (ThermoLase), a majority-owned subsidiary of
ThermoTrex, has engaged the Company to design and manufacture the laser used
in ThermoLase's laser-based hair-removal system. During fiscal 1997, 1996, and
1995, the Company recorded $11,390,000, $8,549,000, and $350,000,
respectively, of revenue under this arrangement.
Under an arrangement with Thermedics Detection Inc., a majority-owned
subsidiary of Thermo Electron, the Company manufactures an X-ray source,
pursuant to written purchase orders, that is used as a component in a fill-
measuring device produced by Thermedics Detection. During fiscal 1997, 1996,
and 1995, the Company recorded $37,000, $361,000, and $120,000, respectively,
of revenue under this arrangement.
Vendor Agreement
During 1995, the Company placed an order for $2,500,000 for the design and
production of high-transmission cellular grids from Thermo Electron's Tecomet
division (Tecomet), which are expected to be received through fiscal 1999.
During fiscal 1997 and 1996, the Company purchased grids valued at $678,000
and $397,000 from Tecomet under this arrangement. In addition, the Company
recorded expense of $250,000 during fiscal 1995 related to research and
development funding provided to Tecomet in connection with this project.
F-15
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Research and Development Agreement
In October 1995, the Company and ThermoTrex entered into a license agreement
under which the Company may elect to fund approximately $6.0 million of
ThermoTrex's research and development efforts related to direct-detection
digital imaging technology in certain medical imaging fields. If the Company
elects to fund such costs, it is required to pay approximately $2,000,000 in
each of three years through 1998 and its license will be extended to cover
such fields. In fiscal 1997 and 1996, the Company recorded $2,000,000 and
$1,800,000 of expense under this agreement. Prior to this agreement,
ThermoTrex provided certain research and development contract services to the
Company, which were charged to the Company based on actual cost and usage. For
these services, the Company was charged $1,536,000 in fiscal 1995.
Operating Lease
The Company leases an office and operating facility from a realty trust
controlled by an employee under a noncancelable operating lease arrangement
expiring in fiscal 2012. The accompanying statement of income includes
expenses from this operating lease of $982,000 and $286,000 in fiscal 1997 and
1996, respectively. Future minimum payments due under this noncancelable
operating lease at September 27, 1997, are $982,000 per year in fiscal 1998,
1999, 2000, 2001, and 2002, and $9,497,000 in fiscal 2003 and thereafter.
Total future minimum lease payments are $14,407,000.
Additionally, the Company leases certain office space from ThermoTrex on a
month-to-month basis. The accompanying statement of income includes expenses
from this operating lease of $43,000, $7,000, and $5,000 in fiscal 1997, 1996,
and 1995, respectively.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
Subordinated Convertible Note
In September 1995, ThermoTrex acquired all of the outstanding capital stock
of Bennett for $42,865,000 in cash. On October 2, 1995, ThermoTrex transferred
to the Company all of the outstanding capital stock of 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. As
of September 27, 1997, ThermoTrex had converted $34,000,000 principal amount
of this note.
8. SIGNIFICANT CUSTOMERS AND EXPORT SALES
Sales to one customer accounted for 17% and 11% of the Company's total
revenues in fiscal 1997 and 1996, respectively, and sales to another customer
accounted for 18% of the Company's total revenues in fiscal 1995. Export sales
to Germany accounted for 1%, 7%, and 11%, of the Company's total revenues in
fiscal 1997, 1996, and 1995, respectively. Other export sales accounted for
16%, 15%, and 10% of the Company's total revenues in fiscal 1997, 1996, and
1995, respectively. In general, export sales are denominated in U.S. dollars.
9. CONTINGENCIES
The Company is aware of two U.S. patents owned by a former employee which
have been asserted against the Company relating to its High-Transmission
Cellular (HTC)(TM) grid 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.
F-16
<PAGE>
TREX MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
See Note 2 for a discussion of certain litigation.
Due to the inherent uncertainty of dispute resolution, management cannot
predict the outcome of these matters. While an unfavorable outcome of one or
both of these matters could have a material adverse effect on the Company's
results of operations, management does not believe that it is reasonably
likely that any resolution would have a material adverse effect on the
Company's financial position.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable, due to affiliated
companies, and its 4.2% subordinated convertible note, due to parent company.
The carrying amounts of the Company's cash and cash equivalents, accounts
receivable, accounts payable, and due to affiliated companies approximate fair
value due to their short-term nature. The fair value of the Company's
$8,000,000 principal amount 4.2% subordinated convertible note (Note 7),
determined based on quoted market prices, was $11,605,000 at September 27,
1997, and exceeds the carrying amount primarily due to the market price of the
Company's common stock exceeding the conversion price of the convertible note
at year end.
11. UNAUDITED QUARTERLY INFORMATION
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 FIRST SECOND THIRD FOURTH
---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues..................................... $54,915 $58,642 $58,103 $57,634
Gross profit................................. 21,465 21,738 23,285 23,744
Net income................................... 3,286 3,366 3,660 4,362
Earnings per share:
Primary.................................... .11 .12 .13 .15
Fully diluted.............................. .11 .12 .13 .15
</TABLE>
<TABLE>
<CAPTION>
1996 FIRST SECOND THIRD(A) FOURTH(B)
---- ------- ------- -------- ---------
<S> <C> <C> <C> <C>
Revenues.................................. $32,509 $34,320 $36,681 $46,685
Gross profit.............................. 14,261 14,976 15,961 18,355
Net income................................ 1,626 2,108 2,169 3,441
Earnings per share:
Primary................................. .08 .10 .10 .12
Fully diluted........................... .08 .09 .09 .12
</TABLE>
- --------
(a) Reflects the May 1996 acquisition of XRE.
(b) Reflects the September 1996 acquisition of Continental.
F-17
<PAGE>
[The photograph above shows the Company's Unicath SP cardiac
catheterization imaging system.]
Trex Medical's Unicath SP(TM) cardiac catheterization imaging system,
manufactured by its XRE subsidiary, provides real-time images of the arteries
so that cardiologists can perform balloon angioplasty and other procedures.
[The photograph above shows the Company's Bennett
general-purpose radiographic system.]
Trex Medical's Bennett X-Ray division is a leading producer of specialty and
general-purpose radiographic systems and manufactures systems that are used
for applications ranging from chest X-rays to diagnosing kidney disease.
[The photograph above shows the Company's DigiSpot 2000
radiographic/fluoroscopic system.]
The DigiSpot 2000, manufactured by Trex Medical's Continental subsidiary, is
a radiographic/fluoroscopic system often used for diagnostic gastrointestinal
procedures.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, IN ANY
STATE OR TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 4
Use of Proceeds.......................................................... 9
Dividend Policy.......................................................... 9
Price Range of Common Stock.............................................. 9
Capitalization........................................................... 10
Selected Financial Information........................................... 11
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 12
Business................................................................. 15
Relationship with Affiliates............................................. 23
Management............................................................... 26
Underwriting............................................................. 28
Legal Opinions........................................................... 30
Experts.................................................................. 30
Available Information.................................................... 30
Incorporation of Certain Documents by Reference.......................... 30
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,500,000 SHARES
TREX MEDICAL
CORPORATION
COMMON STOCK
--------
PROSPECTUS
, 1998
--------
SALOMON SMITH BARNEY
LEHMAN BROTHERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses (other than underwriting discounts and commissions) incurred by
the Company in connection with the issuance and distribution of the securities
being registered (including the securities which may be issued pursuant to an
over-allotment option) are as follows:
<TABLE>
<CAPTION>
AMOUNT*
--------
<S> <C>
Securities and Exchange Commission registration fee........ $ 21,469
NASD filing fee............................................ 7,745
American Stock Exchange listing fee........................ 17,500
Legal fees and expenses.................................... 15,000
Accounting fees and expenses............................... 20,000
Blue Sky fees and expenses (including legal fees and
expenses)................................................. 1,000
Printing and engraving expenses............................ 75,000
Miscellaneous.............................................. 42,286
--------
Total.................................................... $200,000
========
</TABLE>
--------
* All amounts are estimates except the Securities and Exchange
Commission registration fee, the NASD filing fee and the
American Stock Exchange listing fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and the Company's Certificate of
Incorporation and By-Laws limit the monetary liability of directors to the
Company and to its stockholders and provide for indemnification of the
Company'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 Company, and with respect
to any criminal action or proceeding, actions that the indemnitee had no
reasonable cause to believe were unlawful. The Company also has indemnification
agreements with its directors and officers that provide for the maximum
indemnification allowed by law.
Thermo Electron Corporation has an insurance policy which insures the
directors and officers of Thermo Electron and its subsidiaries, including the
Company, against certain liabilities which might be incurred in connection with
the performance of their duties.
The underwriting agreement provides for indemnification of the directors,
certain officers and controlling persons of the Company against certain
liabilities under the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See the Exhibit Index included immediately preceding the exhibits to this
Registration Statement.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-1
<PAGE>
(b) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(c) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HEREBY CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF WALTHAM, COMMONWEALTH OF
MASSACHUSETTS, ON THIS 16TH DAY OF JANUARY, 1998.
Trex Medical Corporation
/s/ Hal Kirshner
By: _________________________________
HAL KIRSHNER PRESIDENT AND CHIEF
EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints John N. Hatsopoulos, Paul F. Kelleher, Seth H.
Hoogasian, Sandra L. Lambert and Melissa F. Riordan, and each of them, as his
true and lawful attorneys-in-fact and agents for the undersigned, with full
power of substitution, for and in the name, place and stead of the
undersigned, to sign and file with the Securities and Exchange Commission
under the Securities Act of 1933 any and all amendments and exhibits to this
Registration Statement (including any subsequent Registration Statement for
the same offering which may be filed under Rule 462(b)), and any and all
applications and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby,
with full power and authority to do and perform any and all acts and things
whatsoever requisite and necessary or desirable.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE(S) DATE
/s/ Hal Kirshner President, Chief January 16,
By: _________________________________ Executive Officer, 1998
HAL KIRSHNER and Director
/s/ John N. Hatsopoulos Chief Financial January 16,
By: _________________________________ Officer and Vice 1998
JOHN N. HATSOPOULOS President
/s/ Paul F. Kelleher Chief Accounting January 16,
By: _________________________________ Officer 1998
PAUL F. KELLEHER
/s/ Gary S. Weinstein Chairman of the January 16,
By: _________________________________ Board and Director 1998
GARY S. WEINSTEIN
/s/ Dr. Elias P. Gyftopoulos Director January 16,
By: _________________________________ 1998
DR. ELIAS P. GYFTOPOULOS
/s/ John T. Keiser Director January 16,
By: _________________________________ 1998
JOHN T. KEISER
/s/ Dr. James W. May, Jr. Director January 16,
By: _________________________________ 1998
DR. JAMES W. MAY, JR.
/s/ Hutham S. Olayan Director January 16,
By: _________________________________ 1998
HUTHAM S. OLAYAN
/s/ Firooz Rufeh Director January 16,
By: _________________________________ 1998
FIROOZ RUFEH
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1 Form of Underwriting Agreement
4 $42,000,000 4.2% Subordinated Convertible Note due 2000 issued by the
Registrant to ThermoTrex Corporation (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-1 [Reg. No. 333-2926]
and incorporated herein by reference)
5 Opinion of Seth H. Hoogasian, Esq.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Seth H. Hoogasian, Esq. (contained in Exhibit 5)
24 Power of Attorney (See Signature Page)
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1 Form of Underwriting Agreement
4 $42,000,000 4.2 % Subordinated Convertible Note due 2000 issued by the
Registrant to ThermoTrex Corporation (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-1 [Reg. No. 333-2926]
and incorporated herein by reference)
5 Opinion of Seth H. Hoogasian, Esq.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Seth H. Hoogasian, Esq. (contained in Exhibit 5)
24 Power of Attorney (See Signature Page)
</TABLE>
<PAGE>
TREX MEDICAL CORPORATION
4,500,000 SHARES*
COMMON STOCK
($.01 PAR VALUE)
UNDERWRITING AGREEMENT
----------------------
New York, New York
, 1998
Salomon Smith Barney
Smith Barney Inc.
Lehman Brothers Inc.
As Representatives of the several Underwriters
c/o Smith Barney Inc
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Trex Medical Corporation, a Delaware corporation (the "Company"), proposes
-------
to sell to the several underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
- ------------- ---------------
representatives, 4,500,000 shares of Common Stock, $.01 par value ("Common
------
Stock"), of the Company (said shares to be issued and sold by the Company being
hereinafter called the "Underwritten Securities"). The Company also proposes to
-----------------------
grant to the Underwriters an option to purchase up to 675,000 additional shares
of Common Stock (the "Option Securities"; the Option Securities, together with
-----------------
the Underwritten Securities, being hereinafter called the "Securities"). To the
----------
extent there are no additional Underwriters listed on Schedule I other than you,
the terms "Representatives" as used herein shall me you, as Underwriters, and
---------------
the terms "Representatives" and "Underwriters" shall mean either the singular or
--------------- ------------
plural as the context requires. Any reference herein to the Registration
Statement, a Preliminary Prospectus or the Prospectus, including use of the
words, "appear in,' "contained in," "contemplated by," "described in,"
"disclosed in," "included in" or "set forth in" any of the foregoing documents,
or words of similar effect, shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Exchange Act on or before the Effective Date of the
Registration Statement or the issue
- ------------------------
* Plus an option to purchase from Trex Medical Corporation up to 675,000
additional shares to cover over-allotments.
1
<PAGE>
date of such Preliminary Prospectus or the Prospectus, as the case may be; and
any reference herein to the terms "amend", "amendment" or "supplement" with
respect to the Registration Statement, any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the filing of any document
under the Exchange Act after the Effective Date of the Registration Statement,
or the issue date of any Preliminary Prospectus or the Prospectus, as the case
may be, deemed to be incorporated therein by reference. Certain terms used
herein are defined in Section 15 hereof.
The Company currently is a majority-owned subsidiary of ThermoTrex
Corporation, a Delaware corporation ("ThermoTrex"), which is, in turn, a
----------
majority-owned subsidiary of Thermo Electron Corporation, a Delaware corporation
("Thermo Electron"). To the extent provided herein and for good and valuable
---------------
consideration, Thermo Electron has become a party to this Underwriting
Agreement.
1. Representations and Warranties. The Company and Thermo Electron,
------------------------------
jointly and severally, represent and warrant to, and agree with, each
Underwriter as set forth below in this Section 1. The following
representations, warranties and agreements shall be deemed to apply to each
Subsidiary (as defined in Section 15) of the Company, unless the context does
not permit. Any certificate signed by any officer of the Company and delivered
to the Representatives or counsel for the Underwriters shall be deemed a
representation and warranty by the Company, as to matters covered thereby, to
each Underwriter.
(a) The Company meets the requirements for use of Form S-3 under the
Act and has prepared and filed with the Commission a registration statement
(File Number 333- ) on Form S-1, including a related preliminary prospectus, for
the registration under the Act of the offering and sale of the Securities. The
Company may have filed one or more amendments thereto, including the related
preliminary prospectus, each of which has previously been furnished to you. The
Company will next file with the Commission either (1) prior to the Effective
Date of such registration statement, a further amendment to such registration
statement (including the form of final prospectus) or (2) after the Effective
Date of such registration statement, a final prospectus in accordance with Rules
430A and 424(b). In the case of clause (2), the Company has included in such
registration statement, as amended at the Effective Date, all material
information (other than Rule 430A Information) required by the Act and the rules
thereunder to be included in such registration statement and the Prospectus. As
filed, such amendment and form of final prospectus, or such final prospectus,
shall contain all Rule 430A Information, together with all other such required
information, and, except to the extent the Representatives shall agree in
writing to a modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not completed at
the Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Prospectus) as
the Company has advised you, prior to the Execution Time, will be included or
made therein. Upon your request, but not without your agreement, the Company
also will file a Rule 462(b) Registration Statement in accordance with Rule
462(b). To the extent applicable, the copies of the Registration Statement and
each amendment thereto (including all exhibits filed therewith), any Preliminary
Prospectus or Prospectus (in each case, as amended or supplemented) furnished to
the Underwriters have
2
<PAGE>
been and will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to the Commission's Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR"), except to the extent
-----
permitted by Regulation S-T.
(b) On the Effective Date, the Registration Statement did or will, and when
the Prospectus is first filed (if required) in accordance with Rule 424(b) and
on the Closing Date and on any date on which Option Securities are purchased, if
such date is not the Closing Date (a "settlement date"), the Prospectus (and any
---------------
supplements thereto) will, comply in all material respects with the applicable
requirements of the Act and the Exchange Act and the respective rules
thereunder; on the Effective Date and at the Execution Time, the Registration
Statement did not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and, on the Effective Date,
the Prospectus, if not filed pursuant to Rule 424(b), will not, and on the date
of any filing pursuant to Rule 424(b) and on the Closing Date and any settlement
date, the Prospectus (together with any supplement thereto) will not, include
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company and Thermo Electron make no representations or warranties as to
the information contained in or omitted from the Registration Statement or the
Prospectus (or any supplement thereto) in reliance upon and in conformity with
information furnished herein or in writing to the Company by or on behalf of any
Underwriter through the Representatives specifically for inclusion in the
Registration Statement or the Prospectus (or any supplement thereto).
(c) The accounting firm(s) whose report(s) appear in the Prospectus are
independent certified public accountants as required by the Act and the rules
thereunder. The financial statements and schedules (including the related
notes) included in the Registration Statement, any Preliminary Prospectus or the
Prospectus present fairly, in all material respects, the financial condition,
results of operations and cash flows of the entities purported to be shown
thereby at the dates and for the periods indicated, comply as to form with the
applicable accounting requirements of the Act and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as otherwise noted therein).
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus, and is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the business conducted by it or the location of the properties
owned or leased by it makes such qualification necessary except where the
failure to so qualify or be in good standing would not have a Material Adverse
eEffect; and, except as described in the Prospectus, the Company holds all
material licenses, certificates and permits from governmental authorities
necessary for the conduct of its business as described in the Prospectus.
(e) All of the outstanding shares of Common Stock have been, and the
Securities,
3
<PAGE>
upon issuance and delivery and payment therefor in the manner herein described,
will be, duly authorized, validly issued, fully paid and nonassessable. Other
than as described in the Prospectus, there are no preemptive rights or other
rights to subscribe for or to purchase, or any restriction upon the voting or
transfer of, any shares of Common Stock pursuant to the Company's corporate
charter, by-laws or other governing documents or any agreement or other
instrument to which the Company is a party or by which it may be bound. Neither
the filing of the Registration Statement nor the offering or sale of the
Securities as contemplated by this Agreement gives rise to any rights, other
than those which have been waived or satisfied and other than as described in
the Prospectus, for or relating to the registration of any shares of Common
Stock or other securities of the Company. The capitalization of the Company as
of _________________ is as set forth in the Prospectus, and the Common Stock
conforms, in all material respects, to the description thereof contained in the
Prospectus. Except as set forth in or contemplated by the Prospectus, no
options, warrants or other rights to purchase, agreements or other obligations
to issue, or rights to convert any obligations into or exchange any securities
for, shares of capital stock or or ownership interests in the Company are
outstanding. Except as described in the Prospectus, all of the outstanding
shares of capital stock of each Subsidiary of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and are owned
directly or indirectly by the Company, free and clear of any claim, lien,
encumbrance, security interest, restriction upon voting or transfer or any other
claim of any third party.
(f) Except as described in or contemplated by the Registration Statement
and the Prospectus, there has not been any Material Adverse Change or any
adverse development which has a Material Adverse Effect from the date as of
which information is given in the Prospectus.
(g) The Company is not, and would not be with the giving of notice or lapse
of time or both, in violation of or in default under, nor will the execution or
delivery hereof or consummation of the transactions contemplated hereby result
in a violation of, or constitute a default under, the corporate charter, by-laws
or other governing documents of the Company, or any material agreement,
indenture or other instrument to which the Company is a party or by which it is
bound, or to which any of its properties is subject, nor will the performance by
the Company of its obligations hereunder violate any existing law, rule,
administrative regulation or decree of any court or any governmental agency or
body having jurisdiction over the Company or any of its properties, or result in
the creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of the Company, which would be material to the Company and its
Subsidiaries taken as a whole. Except for permits and similar authorizations
required under the Act and the securities or "Blue Sky" laws of certain
jurisdictions and for such permits and authorizations as have been obtained, no
consent, approval, authorization or order of, or filing with, any court,
governmental agency or body or any financial institution is required in
connection with the consummation by the Company of the transactions contemplated
by this Agreement.
(h) This Agreement has been duly authorized, executed and delivered by the
Company.
(i) The Company owns, or has valid rights to use, all items of real and
personal
4
<PAGE>
property which are material to the business of the Company and its Subsidiaries
taken as a whole, free and clear of all liens, encumbrances and claims which may
materially interfere with the business, properties, financial condition or
results of operations of the Company on a consolidated basis.
(j) Except as described in the Prospectus, there is no action, suit or
proceeding to which the Company is a party or to which any property of the
Company is subject or which is pending or, to the knowledge of the Company or
Thermo Electron, contemplated against the Company that is required to be
disclosed in the Prospectus and that is not so disclosed.
(k) There is no franchise, contract or other document of a character
required to be described in the Registration Statement or Prospectus, or to be
filed as an exhibit thereto, which is not described or filed as required; and
the statements in the Prospectus under the headings "Description of Capital
Stock" and "Shares Eligible for Future Sale" fairly summarize the matters
therein described.
(k) The Company is not in violation of any law, ordinance, governmental
rule or regulation or court decree to which it is subject, which violation could
reasonably be expected to have a Material Adverse Effect.
(l) The Company possesses all licenses, certificates, permits and other
authorizations issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business, and the Company has not received
any notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect, except as set forth in or contemplated in the Prospectus.
(m) No Subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital stock, from repaying to the Company
any loans or advances to such subsidiary from the Company or from transferring
any of such subsidiary's property or assets to the Company or any other
subsidiary of the Company, except as described in or contemplated by the
Prospectus.
(n) Except as disclosed in the Prospectus, the Company owns or possesses
adequate licenses or other rights to use all intellectual property rights,
including patents, trademarks, service marks, trade names, copyrights or know-
how, necessary to conduct its business as described or referred to in the
Prospectus, except where such failure, singularly or in the aggregate, would not
have a Material Adverse Effect and, except as disclosed in the Prospectus,
neither Thermo Electron nor the Company has received any notice of infringement
of or conflict with (or knows of any such infringement of or conflict with)
rights or claims of others with respect to any patents, trademarks, service
marks, trade names, copyrights or know-how, that if the subject of an
unfavorable decision, ruling or finding, would result in a Material Adverse
Effect, and, except as disclosed in the Prospectus, all products or processes
referred to in the Prospectus and relating to the business of the Company now
conducted by it do not infringe upon or conflict with any right or patent, or
with any discovery, invention, product or process which is
5
<PAGE>
the subject of any patent application known to the Company or Thermo Electron,
in a manner which would have a Material Adverse Effect.
(o) The Company has not taken and shall not take, directly or indirectly,
any action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation of
the price of the shares of Common Stock to facilitate the sale or resale of the
Securities in violation of the Commission's rules and regulations.
(p) The Securities have been approved for listing on the American Stock
Exchange, subject only to official notice of issuance.
1A. Representations and Warranties of Thermo Electron. Thermo Electron
-------------------------------------------------
represents and warrants to, and agree with, each Underwriter that:
(a) Thermo Electron has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority (corporate and other) to own or
lease its properties and conduct its business, and is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the business conducted by it or the location of the properties owned or leased
by it makes such qualification necessary, except where the failure to so qualify
or be in good standing would not have a Material Adverse Effect with respect to
Thermo Electron.
(b) There has not been any Material Adverse Change with respect to Thermo
Electron from the date as of which information is given in the most recent
quarterly or annual report filed by Thermo Electron pursuant to the Exchange
Act, except any as may have been disclosed to the public.
(c) Except as may be described in its filings under the Exchange Act,
Thermo Electron is not, nor with the giving of notice or lapse of time or both
would Thermo Electron be, in violation of or in default under, nor will the
execution or delivery hereof or consummation of the transactions contemplated
hereby result in a violation of, or constitute a default under, the corporate
charter, by-laws or other governing documents of Thermo Electron, or any
material agreement, indenture or other instrument to which Thermo Electron is a
party or by which it is bound, or to which any of its properties is subject, nor
will the performance by Thermo Electron of its obligations hereunder violate any
existing law, rule, administrative regulation or decree of any court or any
governmental agency or body having jurisdiction over Thermo Electron or any of
their its properties, or result in the creation or imposition of any lien,
charge, claim or encumbrance upon any property or asset of Thermo Electron,
which would be material to Thermo Electron and its Subsidiaries taken as a
whole. Except for permits and similar authorizations required under the
Securities Act and the securities or "Blue Sky" laws of certain jurisdictions
and for such permits and authorizations as have been obtained, no consent,
approval, authorization or order of any court, governmental agency or body or
financial institution is required in connection with the consummation by Thermo
Electron of the transactions contemplated by this Agreement.
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(d) This Agreement has been duly authorized, executed and delivered by
Thermo Electron.
(e) ThermoTrex owns, and will own as of each Closing Date (as defined
below), of record and beneficially, the number of shares of Common Stock of the
Company set forth in the Prospectus, free and clear of any liens, encumbrances,
claims or restrictions, except that certain of such shares are reserved for
issuance pursuant to stock option and other benefit plans under which options to
purchase Common Stock of the Company owned by ThermoTrex are granted to certain
employees, directors or consultants of Thermo Electron and its Subsidiaries.
(f) The most recent Annual Report on Form 10-K of Thermo Electron and any
subsequent reports filed pursuant to the Exchange Act complied as of the date
thereof in all material respects with the Exchange Act and the rules and
regulations thereunder.
(g) Neither Thermo Electron nor any Subsidiary of Thermo Electron has taken
and none of such companies shall take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Securities in violation of the Commission's rules and regulations.
2. Purchase and Sale.
-----------------
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to sell to
each Underwriter, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the amount
of the Underwritten Securities set forth opposite such Underwriter's name in
Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up to
675,000 Option Securities at the same purchase price per share as the
Underwriters shall pay for the Underwritten Securities. Said option may be
exercised only to cover over-allotments in the sale of the Underwritten
Securities by the Underwriters. Said option may be exercised in whole or in
part at any time (but not more than once) on or before the 30th day after the
date of the Prospectus upon written or telegraphic notice by the Representatives
to the Company setting forth the number of Option Securities as to which the
several Underwriters are exercising the option and the settlement date.
Delivery of certificates for the Option Securities by the Company, and payment
therefor to the Company, shall be made as provided in Section 3 hereof. The
number of Option Securities to be purchased by each Underwriter shall be the
same percentage of the total number of Option Securities to be purchased by the
several Underwriters as such Underwriter is purchasing of the Underwritten
Securities, subject to such adjustments as you in your absolute discretion shall
make to eliminate any fractional shares.
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3. Delivery and Payment. Delivery of and payment for the Underwritten
--------------------
Securities and the Option Securities (if the option provided for in Section 2(b)
hereof shall have been exercised on or before the second Business Day prior to
the Closing Date) shall be made at 10:00 AM, Eastern time, on ________________,
1998, or at such time on such later date not more than three Business Days after
the foregoing date as the Representatives shall designate, which date and time
may be postponed by agreement among the Representatives and the Company or as
provided in Section 9 hereof (such date and time of delivery and payment for the
Securities being herein called the "Closing Date"). Delivery of the Securities
------------
shall be made to the Representatives for the respective accounts of the several
Underwriters against payment by the several Underwriters through the
Representatives of the respective aggregate purchase prices of the Securities
being sold by the Company to or upon the order of the Company by wire transfer
payable in same-day funds to the account specified by the Company. Delivery of
the Underwritten Securities and the Option Securities shall be made through the
facilities of The Depository Trust Company unless the Representatives shall
otherwise instruct.
If the option provided for in Section 2(b) hereof is exercised after the
second Business Day prior to the Closing Date, the Company will deliver the
Option Securities (at the expense of the Company) to the Representatives on the
date specified by the Representatives (which shall be within three Business Days
after exercise of said option), for the respective accounts of the several
Underwriters, against payment by the several Underwriters through the
Representatives of the purchase price thereof to or upon the order of the
Company by wire transfer payable in same-day funds to the account specified by
the Company. If settlement for the Option Securities occurs after the Closing
Date, the Company will deliver to the Representatives on the settlement date for
the Option Securities, and the obligation of the Underwriters to purchase the
Option Securities shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
------------------------
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements. The Company and Thermo Electron, jointly and severally,
----------
agree with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment thereof, to
become effective. Prior to the termination of the offering of the Securities,
the Company will not file any amendment of the Registration Statement,
supplement to the Prospectus or any Rule 462(b) Registration Statement unless
the Company has furnished you a copy for your review prior to filing and will
not file any such proposed amendment, supplement or registration statement to
which you reasonably object. Subject to the foregoing sentence, if the
Registration Statement has become or becomes effective pursuant to Rule 430A, or
filing of the Prospectus is otherwise required under Rule 424(b), the Company
will cause the Prospectus, properly completed, and any supplement thereto to be
filed with the Commission pursuant to the applicable paragraph of Rule 424(b)
within the time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing.
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Upon your request, the Company will cause the Rule 462(b) Registration
Statement, completed in compliance with the Act and the applicable rules and
regulations thereunder, to be filed with the Commission pursuant to Rule 462(b)
and will provide evidence satisfactory to the Representatives of such filing.
The Company will promptly advise the Representatives (1) when the Registration
Statement, if not effective at the Execution Time, shall have become effective,
(2) when the Prospectus or any supplement thereto or any Rule 462(b)
Registration Statement shall have been filed (if required) with the Commission
pursuant to Rule 424(b) or when any Rule 462(b) Registration Statement shall
have been filed with the Commission, (3) when, prior to termination of the
offering of the Securities, any amendment to the Registration Statement shall
have been filed or become effective, (4) of any request by the Commission or its
staff for any amendment of the Registration Statement or any Rule 462(b)
Registration Statement or any supplement to the Prospectus or for any additional
information, (5) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the institution or, to the
Company's knowledge, threatening of any proceeding for that purpose and (6) of
the receipt by the Company of any notification with respect to the suspension of
the qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The Company will
use its best efforts to prevent the issuance of any such stop order or the
suspension of any such qualification and, if issued, to obtain as soon as
possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend the Registration Statement
or supplement the Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, the Company promptly will (1) notify the
Representatives of any such event; (2) prepare and file with the Commission,
subject to the second sentence of paragraph (a) of this Section 5, an amendment
or supplement which will correct such statement or omission or effect such
compliance; and (3) supply any supplemented Prospectus to you in such quantities
as you may reasonably request.
(c) As soon as practicable, the Company will make generally available to
its security holders and to the Representatives an earnings statement or
statements of the Company and its Subsidiaries which will satisfy the provisions
of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration Statement
(including exhibits thereto) and to each other Underwriter a copy of the
Registration Statement (without exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, as many
copies of each Preliminary Prospectus and the Prospectus and any supplement
thereto as the Representatives may reasonably request.
(e) The Company will arrange, if necessary, for the qualification of the
Securities for
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sale under the laws of such jurisdictions as you may designate and will maintain
such qualifications in effect so long as required for the distribution of the
Securities; provided that in no event shall the Company be obligated to qualify
to do business in any jurisdiction where it is not now so qualified or to take
any action that would subject it to service of process in suits, other than
those arising out of the offering or sale of the Securities, in any jurisdiction
where it is not now so subject.
(f) The Company and Thermo Electron shall not, during the 180-day period
following the Execution Time, without the prior written consent of Salomon Smith
Barney, offer, sell or contract to sell, or otherwise dispose of (or enter into
any transaction which is designed to, or might reasonably be expected to, result
in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Company, Thermo Electron
or any affiliate of the Company or any person in privity with the Company,
Thermo Electron or any affiliate of the Company) directly or indirectly, or
announce the offering of, any other shares of Common Stock or any securities
convertible into, or exchangeable for, shares of Common Stock (except for the
issuance of shares of Common Stock pursuant to existing stock option, purchase
and compensation plans, or upon conversion of any currently outstanding
convertible securities described in the Prospectus or the issuance of shares of
Common Stock as 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, or sales of shares of Common Stock by the
Company to ThermoTrex), or sell or grant options, rights or warrants with
respect to any shares of Common Stock (other than the grant of options pursuant
to existing stock option, purchase and compensation plans), otherwise than in
accordance with this Agreement or as contemplated in the Prospectus, including
but not limited to options to be granted under the ThermoTrex stock option plan
described in the Prospectus.
(g) The Company and Thermo Electron will not take, and Thermo Electron
cause its other Subsidiaries not to take, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.
(h) The Company agrees to pay the costs and expenses relating to the
following matters: (i) the preparation, printing or reproduction and filing
with the Commission of the Registration Statement (including financial
statements and exhibits thereto), each Preliminary Prospectus, the Prospectus,
any Rule 462(b) Registration Statement, and each amendment or supplement to any
of them; (ii) the printing (or reproduction) and delivery (including postage,
air freight charges and charges for counting and packaging) of such copies of
the Registration Statement, each Preliminary Prospectus, the Prospectus, any
Rule 462(b) Registration Statement, and all amendments or supplements to any of
them, as may, in each case, be reasonably requested for use in connection with
the offering and sale of the Securities; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Securities,
including any stamp or transfer taxes in connection with the original issuance
and sale of the Securities; (iv) the printing (or reproduction) and delivery of
this Agreement, any blue sky memorandum and all
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other agreements or documents printed (or reproduced) and delivered in
connection with the offering of the Securities; (v) the registration of the
Securities under the Exchange Act and the listing of the Securities on the
American Stock Exchange; (vi) any registration or qualification of the
Securities for offer and sale under the securities or blue sky laws of the
several states (including filing fees and the reasonable fees and expenses of
counsel for the Underwriters relating to such registration and qualification);
(vii) any filings required to be made with the National Association of
Securities Dealers, Inc. (including filing fees and the reasonable fees and
expenses of counsel for the Underwriters relating to such filings); (viii) the
transportation and other expenses incurred by or on behalf of Company
representatives in connection with presentations to prospective purchasers of
the Securities; (ix) the fees and expenses of the Company's accountants and the
fees and expenses of counsel (including local and special counsel) for the
Company; and (x) all other costs and expenses incident to the performance by the
Company of its obligations hereunder.
6. Conditions to the Obligations of the Underwriters. The obligations of
-------------------------------------------------
the Underwriters to purchase the Underwritten Securities and the Option
Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company and Thermo Electron
contained herein as of the Execution Time, the Closing Date and any settlement
date pursuant to Section 3 hereof, to the accuracy of the statements of the
Company and Thermo Electron made in any certificates pursuant to the provisions
hereof, to the performance by the Company and Thermo Electron of their
respective obligations hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective prior to the
Execution Time, unless the Representatives agree in writing to a later time, the
Registration Statement will become effective not later than (i) 6:00 PM Eastern
time on the date of determination of the public offering price, if such
determination occurred at or prior to 3:00 PM Eastern time on such date, or (ii)
12:00 Noon on the Business Day following the day on which the public offering
price was determined, if such determination occurred after 3:00 PM Eastern time
on such date; if filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b), the Prospectus, and any such supplement, will
be filed in the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been instituted
or threatened.
(b) The Company shall have furnished to the Representatives the opinion of
Seth H. Hoogasian, General Counsel of the Company, ThermoTrex and Thermo
Electron, dated the Closing Date, to the effect that:
(i) Each of the Company and its Significant Subsidiaries has been duly
organized and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, with full corporate power and
authority to own or lease its properties and conduct its business as described
in the Prospectus, and is duly qualified to do business and is in good standing
in each jurisdiction in which the character of the business conducted by it or
the location of the properties owned or leased by it makes such qualification
11
<PAGE>
necessary, except where the failure to so qualify or be in good standing would
not have a Material Adverse Effect.
(ii) Each of Thermo Electron and its Significant Subsidiaries (as
defined in Section 15) has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus;
(iii) the Company's authorized capital stock and outstanding
capital stock as of ___________, 1998 is as set forth in the Prospectus
under the caption "Description of Capital Stock"; the capital stock of the
Company conforms as to legal matters in all material respects to the
description thereof contained in the Prospectus; the outstanding shares of
Common Stock have been duly and validly authorized and issued and are fully
paid and nonassessable; the Securities have been duly and validly
authorized, and, when issued and delivered to and paid for by the
Underwriters pursuant to this Agreement, will be fully paid and
nonassessable; the Securities are duly authorized for listing, subject to
official notice of issuance, on the American Stock Exchange; the
certificates for the Securities are in valid and sufficient form; there are
no preemptive or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any of the Securities pursuant
to the Company's corporate charter, by-laws, other governing documents, or
any agreement or other instrument known to such counsel to which the
Company or a Subsidiary thereof is a party or by which the Company or a
Subsidiary thereof may be bound or to which any of their respective
properties is subject; and, to such counsel's knowledge, neither the filing
of the Registration Statement nor the offering or sale of the Securities as
contemplated by this Agreement gives rise to any rights for or relating to
the registration of any shares of Common Stock except such as have been
waived or satisfied; except as set forth in the Prospectus, no options,
warrants or other rights to purchase, agreements or other obligations to
issue, or rights to convert any obligations into or exchange any securities
for, shares of capital stock of or ownership interests in the Company are
outstanding; and all of the outstanding shares of capital stock of each
Significant Subsidiary of the Company have been duly and validly authorized
and issued and are fully paid and nonassessable and are owned directly or
indirectly by the Company free and clear of any claim, lien, encumbrance or
security interest known to such counsel (except for certain obligations of
the Company pursuant to stock and employee benefit plans maintained for the
benefit of employees, officers, directors and consultants of the Company
and its Subsidiaries);
(iv) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental agency,
authority or body or any arbitrator involving the Company or any Subsidiary
required to be disclosed in the Registration Statement which is not so
disclosed, and there is no franchise, contract or other document required to be
described in the Registration Statement or Prospectus, or to be filed as an
exhibit, which is not described or filed as required;
(v) the Registration Statement has become effective under the Act; any
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required filing of the Prospectus, and any supplements thereto, pursuant to Rule
424(b) has been made in the manner and within the time period required by Rule
424(b); to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued, no proceedings for
that purpose have been instituted or threatened and the Registration Statement
as of the Effective Date and the Prospectus as of its date (other than the
financial statements and schedules and other financial, statistical and
accounting information contained therein as to which such counsel need express
no opinion) complied as to form in all material respects with the applicable
requirements of the Act and the rules thereunder;
(vi) this Agreement has been duly authorized, executed and delivered
by the Company and Thermo Electron;
(vii) to the knowledge of such counsel, no consent, approval,
authorization, filing with or order of any court or governmental agency or body
is required for the consummation by the Company of the transactions contemplated
herein, except such as have been obtained under the Act, such as may be required
under the blue sky and state securities laws of any jurisdiction applicable to
the offering and sale of the Securities by the Underwriters and such as may be
required for the clearance of the underwriting arrangements relating to such
offering and sale with the NASD (as to which such counsel need express no
opinion), and such other approvals (specified in such opinion) as have been
obtained; and
(viii) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in a breach or
violation of, or constitute a default under any law or the charter or by-laws of
the Company (or any of its Significant Subsidiaries), ThermoTrex or Thermo
Electron, or the terms of any indenture or other agreement or instrument known
to such counsel and to which the Company (or any of its Significant
Subsidiaries), ThermoTrex or Thermo Electron, is a party or bound or any
statute, law, rule, regulation, judgment, order or decree applicable to the
Company (or any of its Significant Subsidiaries) or to ThermoTrex or Thermo
Electron of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company or any
of such entities or any of its or their respective properties.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent accountants of the Company, representatives
of the Underwriters and representatives of counsel for the Underwriters, at
which the contents of the Registration Statement and the Prospectus and related
matters were discussed and, although such counsel need not pass upon, and need
not assume any responsibility for, the accuracy, completeness or fairness of any
statement contained in the Registration Statement or the Prospectus (except for
those statements referred to in the opinions expressed in the first two clauses
of subsection (iii) above) and has made no independent check or verification
thereof, such counsel shall state that on the basis of the foregoing, no facts
have come to such counsel's attention that has led such counsel to believe that
the Registration Statement, on the Effective Date or at the Execution Time,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated
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therein or necessary to make the statements therein not misleading or that the
Prospectus, as of its date or the date of such opinion, included or includes any
untrue statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that such counsel need
express no opinion or belief with respect to the financial statements, financial
statement schedules and other financial, accounting and statistical data
included therein.
In rendering such opinion, such opinion shall be limited to matters
involving the application of laws of the Commonwealth of Massachusetts, the
United States or the General Corporation Law of the State of Delaware and
further such counsel may rely as to matters of fact, to the extent such counsel
deems proper, on certificates of officers of the Company and public officials.
References to the Prospectus in this paragraph (b) include any supplements
thereto.
(c) The Representatives shall have received from Testa, Hurwitz &
Thibeault, LLP, counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, with respect to the issuance and sale of the Securities, the
Registration Statement, the Prospectus (together with any supplement thereto)
and other related matters as the Representatives may reasonably require, and the
Company shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(d) The Company shall have furnished to the Representatives a certificate
of the Company, signed by the Chairman of the Board, Chief Executive Officer,
the President or a vice president and the Treasurer or Secretary of the Company,
dated the applicable Settlement Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the Prospectus,
any supplements to the Prospectus and this Agreement and that, to the best of
such person's knowledge:
(i) the representations and warranties of the Company in this
Agreement are true and correct on and as of the date of the certificate
with the same effect as if made on the date of the certificate, and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date or the settlement date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to such person's knowledge, threatened; and
(iii) since the date of the most recent financial statements included
in the Prospectus (exclusive of any supplement thereto), there has been no
Material Adverse Change, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto).
(e) Thermo Electron shall have furnished to the Representatives a
certificate of Thermo Electron, signed by its President or a Vice President and
by its Treasurer or Secretary,
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dated the applicable Settlement Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the Prospectus,
any supplements to the Prospectus and this Agreement and that, to the best of
such person's knowledge:
(i) the representations and warranties of Thermo Electron in this
Agreement are true and correct on and as of the date of the certificate
with the same effect as if made on the date of the certificate, and Thermo
Electron has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date or the settlement date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the best of such person's knowledge, threatened; and
(iii) since the date of the most recent financial statements included
in the Prospectus (exclusive of any supplement thereto), there has been no
Material Adverse Change, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto).
(f) On the date of this Agreement, the Closing Date and any settlement date
you shall have received a letter from each accounting firm whose report appears
in the Prospectus, dated the date of this Underwriting Agreement, the Closing
Date or the settlement date, as the case may be, and addressed to you,
confirming that they are independent certified public accountants within the
meaning of the Act and the rules thereunder, and stating, as of the date of such
letter (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in the
Prospectus, as of a date not more than five days prior to the date of each such
letter), the conclusions and findings of each such firm with respect to the
financial information and other matters covered by its letter delivered to you
concurrently with the execution of this Agreement, and with respect to each
letter delivered on the Closing Date or the settlement date confirming the
conclusions and findings set forth in such prior letter.
(g) Subsequent to the Execution Time or, if earlier, the dates as of which
information is given in the Registration Statement (exclusive of any amendment
thereof) and the Prospectus (exclusive of any supplement thereto), there shall
not have been (i) any change or decrease specified in the letter or letters
referred to in paragraph (g) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the
condition,(financial or otherwise), earnings, business or properties of the
Company and its Subsidiaries as a whole, whether or not from transactions
arising in the ordinary course of business, the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Registration Statement (exclusive of any amendment thereof)
and the Prospectus (exclusive of any supplement thereto).
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(h) The Securities shall have been listed and admitted and authorized
for trading on the American Stock Exchange, and satisfactory evidence of such
actions shall have been provided to the Representatives.
(i) At the Execution Time, the Company shall have furnished to the
Representatives a letter substantially in the form of Exhibit A hereto from
---------
ThermoTrex addressed to the Representatives.
(j) Prior to the Closing Date or the settlement date, as applicable,
the Company shall have furnished to the Representatives such further
information, certificates and documents as the Representatives may
reasonably request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of
such cancellation shall be given to the Company in writing or by telephone or
facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be delivered
at the office of Testa, Hurwitz & Thibeault, LLP, , counsel for the
Underwriters, at 125 High Street, Boston, Massachusetts, on the Closing Date or
the settlement date, as applicable.
7. Reimbursement of Underwriters' Expenses. If the sale of the Securities
---------------------------------------
provided for herein is not consummated because any condition to the obligations
of the Underwriters set forth in Section 6 hereof is not satisfied, because of
any termination pursuant to Section 10 hereof or because of any refusal,
inability or failure on the part of the Company or Thermo Electron to perform
any agreement herein or comply with any provision hereof other than by reason of
a default by any of the Underwriters, the Company (or Thermo Electron) will
reimburse the Underwriters severally through Smith Barney upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the proposed purchase
and sale of the Securities.
8. Indemnification and Contribution. (a) The Company and Thermo
--------------------------------
Electron, jointly and severally, agree to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter
and each person who controls any Underwriter within the meaning of either the
Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement made by the Company or
Thermo Electron in Section 1 hereof or by Thermo Electron in Section 1A hereof,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the registration statement for the registration of the Securities
as originally filed or in any
16
<PAGE>
amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(iii) any act or failure to act or any alleged act or failure to act by any
Underwriter in connection with, or relating in any manner to, the Securities or
the offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based upon
matters covered by clause (i) or (ii) above (provided that the Company and
Thermo Electron shall not be liable under this clause (iii) to the extent that
it is determined in a final judgment by a court of competent jurisdiction that
such loss, claim, damage, liability or action resulted directly or indirectly
from any such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or willful misconduct); and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that (i) the Company and Thermo Electron will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representatives specifically for inclusion therein and (ii) with respect to
any untrue statement or omission of a material fact made in any Preliminary
Prospectus, the indemnity agreement contained in this Section 8(a) shall not
inure to the benefit of any Underwriter (or any of the directors, officers,
employees and agents of such Underwriter or any controlling person of such
Underwriter) from whom the person asserting any such loss, claim, damage or
liability purchased the Securities concerned, to the extent that any such loss,
claim, damage or liability of such Underwriter occurs under the circumstances
where it shall have been determined by a court of competent jurisdiction by
final and nonappealable judgment that (w) the Company had previously furnished
copies of the Prospectus to the Underwriters, (x) delivery of the Prospectus was
required by the Act to be made to such person, (y) the untrue statement or
omission of a material fact contained in the Preliminary Prospectus was
corrected in the Prospectus and (z) there was not sent or given to such person,
at or prior to the written confirmation of the sale of such Securities to such
person, a copy of the Prospectus. This indemnity agreement will be in addition
to any liability which the Company or Thermo Electron may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who signs the
Registration Statement, and Thermo Electron and its employees and agents and
each person who controls the Company within the meaning of either the Act or the
Exchange Act, to the same extent as the foregoing indemnity from the Company and
Thermo Electron to each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the Company by or on
behalf of such Underwriter through the Representatives specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any Underwriter
may otherwise have. The Company and Thermo Electron acknowledge that the
statements set forth in the last paragraph of the cover page, the paragraph
containing stabilization information on the inside front cover page and the
sentences related to concessions and reallowances and the paragraph relating to
stabilization, syndicate covering transactions and
17
<PAGE>
penalty bids under the heading "Underwriting" in any Preliminary Prospectus and
the Prospectus constitute the only information furnished in writing by or on
behalf of the several Underwriters for inclusion in any Preliminary Prospectus
or the Prospectus, and you, as the Representatives, confirm that such statements
are correct.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of such
claim or commencement; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of one
such separate counsel for all indemnified parties if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, (iii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company Thermo Electron and the
Underwriters agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
------
Company and one or more of the Underwriters may be subject in such proportion as
is appropriate to reflect
18
<PAGE>
the relative benefits received by the Company and
Thermo Electron on the one hand, and by the Underwriters severally on the other,
from the offering of the Securities; provided, however, that in no case shall
any Underwriter (except as may be provided in any agreement among underwriters
relating to the offering of the Securities) be responsible for any amount in
excess of the underwriting discount or commission applicable to the Securities
purchased by such Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company and
Thermo Electron, on the one hand, and the Underwriters on the other, shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and Thermo Electron
on the one hand, and of the Underwriters on the other, in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company and Thermo
Electron shall be deemed to be equal to the total net proceeds from the offering
(before deducting expenses), and benefits received by the Underwriters shall be
deemed to be equal to the total underwriting discounts and commissions, in each
case as set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether any untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information provided by the Company or Thermo Electron
on the one hand, or the Underwriters on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and Thermo Electron and
the Underwriters agree that it would not be just and equitable if contribution
were determined by pro rata allocation or any other method of allocation which
does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls an Underwriter within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of an Underwriter shall have the
same rights to contribution as such Underwriter, and each person who controls
the Company within the meaning of either the Act or the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company, as well as Thermo Electron, shall have the same rights
to contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
9. Default by an Underwriter. If any one or more Underwriters shall fail
-------------------------
to purchase and pay for any of the Securities agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not
19
<PAGE>
purchase all the Securities, this Agreement will terminate without liability to
any nondefaulting Underwriter or the Company. In the event of a default by any
Underwriter as set forth in this Section 9, the Closing Date shall be postponed
for such period, not exceeding five Business Days, as the Representatives shall
determine in order that the required changes in the Registration Statement and
the Prospectus or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any defaulting Underwriter of
its liability, if any, to the Company and any nondefaulting Underwriter for
damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in the
-----------
absolute discretion of the Representatives, by notice given to the Company prior
to delivery of and payment for the Securities, if at any time prior to such time
(i) trading in the Company's Common Stock shall have been suspended by the
Commission or the American Stock Exchange or trading in securities generally on
the New York Stock Exchange or the American Stock Exchange shall have been
suspended or limited or minimum prices shall have been established on either the
New York Stock Exchange or the American Stock Exchange, (ii) a banking
moratorium shall have been declared either by Federal, New York State or
Massachusetts authorities or (iii) there shall have occurred any outbreak or
escalation of hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis the effect of which on financial
markets is such as to make it, in the sole judgment of the Representatives,
impractical or inadvisable to proceed with the offering or delivery of the
Securities as contemplated by the Prospectus (exclusive of any supplement
thereto).
11. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers, or Thermo Electron, and of the Underwriters set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or the
Company or any of the officers, directors or controlling persons referred to in
Section 8 hereof, and will survive delivery of and payment for the Securities.
The provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telefaxed (fax. no. ) care of Salomon Smith Barney, at
Seven World Trade Center, New York, New York, 10048, attention: Legal
Department; or, if sent to the Company, will be mailed, delivered or telefaxed
(fax no. ) at Trex Medical Corporation, 36 Apple Ridge Road,
Danbury, CT 06810, attention: President, with a copy to Seth H. Hoogasian, Esq.,
c/o Thermo Electron Corporation, 81 Wyman Street, Waltham, Massachusetts 02254-
9046.
13. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
20
<PAGE>
15. Definitions. The terms which follow, when used in this
-----------
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and the rules
---
and regulations of the Commission promulgated thereunder.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
------------
legal holiday or a day on which banking institutions or trust companies are
authorized or obligated by law to close in New York City or Boston,
Massachusetts.
"Commission" shall mean the Securities and Exchange Commission.
----------
"Effective Date" shall mean each date that the Registration Statement,
--------------
any post-effective amendment or amendments thereto and any Rule 462(b)
Registration Statement became or become effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Execution Time" shall mean the date and time that this Agreement is
--------------
executed and delivered by the parties hereto.
"Material Adverse Change" or "Material Adverse Effect" shall mean any
----------------------- -----------------------
material adverse change in, or material adverse effect upon, the condition
(financial or otherwise), prospects, earnings, business or properties of
the Company and its Subsidiaries taken as a whole, or of Thermo Electron
and its Subsidiaries taken as a whole, as the case may be, whether or not
arising from transactions arising in the ordinary course of business.
"Preliminary Prospectus" shall mean any preliminary prospectus
----------------------
referred to in paragraph 1(a) above and any preliminary prospectus included
in the Registration Statement at the Effective Date that omits Rule 430A
Information.
"Prospectus" shall mean the prospectus relating to the Securities
----------
that is first filed pursuant to Rule 424(b) after the Execution Time or, if
no filing pursuant to Rule 424(b) is required, shall mean the form of final
prospectus relating to the Securities included in the Registration
Statement at the Effective Date.
"Registration Statement" shall mean the registration statement
----------------------
referred to in paragraph 1(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in the
event any post-effective amendment thereto or any Rule 462(b) Registration
Statement becomes effective prior to the Closing Date, shall also mean such
registration statement as so amended or such Rule 462(b) Registration
Statement, as the case may be. Such term shall include any Rule 430A
Information
deemed to be included therein at the Effective Date as provided by Rule
430A.
21
<PAGE>
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules under
-------- --------- --------
the Act.
"Rule 430A Information" shall mean information with respect to the
---------------------
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration
----------------------------------
statement and any amendments thereto filed pursuant to Rule 462(b) relating
to the offering covered by the initial registration statement (file number
333- ). For purposes of this Agreement, all references to the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement to any of the foregoing, shall be deemed to include
the respective copies thereof filed with the Commission pursuant to EDGAR..
"Salomon Smith Barney" shall mean Smith Barney Inc. or Salomon
--------------------
Brothers Inc to the extent that either such party is a signatory to this
Agreement.
Significant Subsidiary" shall have the meaning set forth in Item 1-02
----------------------
of Regulation S-X under the Act.
"Subsidiary" shall have the meaning set forth in Rule 405 under the
----------
Act.
"Rule 430A Information" means information with respect to the
----------------------
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration statement
-----------------------------------
and any amendments thereto filed pursuant to Rule 462(b) relating to the
offering covered by the initial registration statement
[Remainder of page intentionally left blank]
22
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and the several Underwriters.
Very truly yours,
Trex Medical Corporation
By:
----------------------------
Name:
Title:
Thermo Electron Corporation
By:
----------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Smith Barney Inc.
Lehman Brothers Inc.
By: Smith Barney Inc.
By:
----------------------------
Name:
Title:
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
23
<PAGE>
SCHEDULE I
Number of Shares of
Underwritten Securities
Underwriters To Be Purchased
- ------------ -----------------------
Smith Barney Inc. .............................
Lehman Brothers Inc. ..........................
TOTAL.......................................... 4,500,000
=========
24
<PAGE>
EXHIBIT A
---------
Trex Medical Corporation
------------------------
Public Offering of Common Stock
-------------------------------
, 1998
Smith Barney Inc.
Lehman Brothers Inc.
As Representatives of the several Underwriters,
c/o Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), between Trex Medical
----------------------
Corporation, a Delaware corporation (the "Company"), and each of you as
-------
representatives of a group of Underwriters named therein, relating to an
underwritten public offering of Common Stock of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned will not, without the prior written
consent of Smith Barney Inc., offer, sell, contract to sell, pledge or otherwise
dispose of, or file (or participate in the filing of) a registration statement
with the Securities and Exchange Commission in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder with respect to, any shares of capital stock
of the Company or any securities convertible into or exercisable or exchangeable
for such capital stock, or publicly announce an intention to effect any such
transaction, for a period of 180 days after the date of this Agreement.
If for any reason the Underwriting Agreement shall be terminated prior
to the Closing Date (as defined in the Underwriting Agreement), the agreement
set forth above shall likewise be terminated.
Yours very truly,
[Signature of officer, director or major
stockholder]
[Name and address of officer, director or major
stockholder]
25
<PAGE>
January 14, 1998
Trex Medical Corporation
36 Apple Ridge Road
Danbury, CT 06810
Re: Registration Statement on Form S-3 Relating to Shares of the Common Stock
of Trex Medical Corporation
Ladies and Gentlemen;
I am General Counsel to Trex Medical Corporation, a Delaware corporation
(the "Company"), and have acted as counsel in connection with the registration
under the Securities Act of 1933, as amended (the "Securities Act"), on Form S-3
(the "Registration Statement"), of 5,175,000 shares of the Company's Common
Stock, $.01 par value per share (the "Common Stock"). Such shares, together with
any shares of Common Stock registered under a registration statement related to
the offering contemplated by the Registration Statement that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act (a "462(b)
Registration Statement"), are collectively referred to herein as the "Shares".
I or a member of my legal staff have reviewed the corporate proceedings
taken by the Company with respect to the authorization of the issuance of the
Shares. I or a member of my legal staff have also examined and relied upon
originals or copies, certified or otherwise authenticated to my satisfaction, of
all corporate records, documents, agreements or other instruments of the Company
and have made all investigations of law and have discussed with the Company's
representatives all questions of fact that I have deemed necessary or
appropriate.
Based upon and subject to the foregoing, I am of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
corporate good standing under the laws of the State of Delaware.
2. The issuance and sale of the Shares registered pursuant to the Registration
Statement have been duly authorized by the Company and the issuance and
sale of the Shares registered pursuant to a 462(b) Registration Statement
will have been duly authorized by the Company prior to their issuance and
sale.
3. The Shares, when issued and sold in accordance with the provisions of the
Underwriting Agreement between the Company and the several Underwriters
named on Schedule I thereto (in the form of Exhibit 1 to the Registration
Statement) will be validly issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement or any 462(b) Registration Statement and to being named
in the related Prospectus.
Very truly yours,
/s/ Seth H. Hoogasian
Seth H. Hoogasian
General Counsel
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Exhibit 23.1
To Trex Medical Corporation:
As independent public accountants, we hereby consent to the incorporation of
our reports dated November 3, 1997 included (or incorporated by reference) in
this registration statement and to all references to our firm included in or
made a part of this registration statement on Form S-3.
Boston, Massachusetts Arthur Andersen, llp
January 15, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bennett X-Ray Corporation:
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated November 3, 1995
included in Trex Medical Corporation's registration statement on Form S-1 and
to all references to our firm included in or made a part of this registration
statement on Form S-3.
Boston, Massachusetts Arthur Andersen, llp
January 15, 1998
