SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended September 28, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-14262
THERMOQUEST CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 77-0407461
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
355 River Oaks Parkway
San Jose, California 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter
period that the Registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of
the issuer's classes of Common Stock, as of the
latest practicable date.
Class Outstanding at October 25, 1996
---------------------------- -------------------------------
Common Stock, $.01 par value 48,450,000
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMOQUEST CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
September 28, December 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $159,553 $120,354
Available-for-sale investments, at quoted
market value (amortized cost of $7,505) 7,524 -
Accounts receivable, less allowances of
$4,454 and $2,341 76,701 65,729
Inventories:
Raw materials and supplies 25,939 17,970
Work in process and finished goods 35,258 29,050
Prepaid expenses 2,121 1,258
Prepaid income taxes 8,776 8,695
-------- --------
315,872 243,056
-------- --------
Property, Plant and Equipment, at Cost 69,505 60,665
Less: Accumulated depreciation and
amortization 17,513 17,134
-------- --------
51,992 43,531
-------- --------
Patents and Other Assets 4,685 5,627
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 159,870 135,828
-------- --------
$532,419 $428,042
======== ========
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THERMOQUEST CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
September 28, December 30,
(In thousands except share amounts) 1996 1995
-----------------------------------------------------------------------
Current Liabilities:
Notes payable and current maturities of
long-term obligations $ 20,619 $ 11,755
Accounts payable 20,839 13,144
Accrued payroll and employee benefits 14,445 10,533
Accrued installation and warranty expenses 9,380 7,079
Deferred revenue 8,800 8,417
Customer deposits 9,096 6,403
Accrued income taxes 11,853 4,118
Other accrued expenses 13,924 12,077
Due to parent company 2,377 2,628
-------- --------
111,333 76,154
-------- --------
Deferred Income Taxes 5,767 5,767
-------- --------
Accrued Pension and Other Deferred Items 17,080 11,925
-------- --------
Long-term Obligations:
5% Subordinated convertible debentures 96,250 96,250
Other 8,581 10,206
-------- --------
104,831 106,456
-------- --------
Shareholders' Investment (Note 3):
Common stock, $.01 par value, 100,000,000
shares authorized; 48,450,000 and
45,000,000 shares issued and outstanding 485 450
Capital in excess of par value 261,121 213,378
Retained earnings 31,021 11,764
Cumulative translation adjustment 768 2,148
Net unrealized gain on available-for-sale
investments 13 -
-------- --------
293,408 227,740
-------- --------
$532,419 $428,042
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOQUEST CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
------------------------------
September 28, September 30,
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Revenues $ 78,155 $ 58,492
-------- --------
Costs and Operating Expenses:
Cost of revenues 40,395 30,055
Selling, general and administrative
expenses 20,728 15,938
Research and development expenses 5,822 4,318
-------- --------
66,945 50,311
-------- --------
Operating Income 11,210 8,181
Interest Income 2,519 1,023
Interest Expense (1,902) (1,287)
-------- --------
Income Before Provision for Income Taxes 11,827 7,917
Provision for Income Taxes 5,099 3,285
-------- --------
Net Income $ 6,728 $ 4,632
======== ========
Earnings per Share $ .14 $ .10
======== ========
Weighted Average Shares 48,450 45,187
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOQUEST CORPORATION
Consolidated Statement of Income
(Unaudited)
Nine Months Ended
-------------------------------
September 28, September 30,
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Revenues $227,146 $172,726
-------- --------
Costs and Operating Expenses:
Cost of revenues 120,529 86,956
Selling, general and administrative
expenses 57,544 48,024
Research and development expenses 16,605 13,106
-------- --------
194,678 148,086
-------- --------
Operating Income 32,468 24,640
Interest Income 6,528 1,149
Interest Expense (5,501) (2,078)
-------- --------
Income Before Provision for Income Taxes 33,495 23,711
Provision for Income Taxes 14,238 9,841
-------- --------
Net Income $ 19,257 $ 13,870
======== ========
Earnings per Share $ .41 $ .31
======== ========
Weighted Average Shares 47,419 45,187
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOQUEST CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
-------------------------------
September 28, September 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Operating Activities:
Net income $ 19,257 $ 13,870
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,948 6,489
Provision for losses on accounts
receivable 56 16
Other noncash expenses 1,060 809
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable 6,110 (598)
Inventories (1,908) (4,660)
Other current assets (581) (2,162)
Accounts payable (1,654) 1,611
Other current liabilities 7,406 (9,039)
Other 1,189 537
-------- --------
Net cash provided by
operating activities 37,883 6,873
-------- --------
Investing Activities:
Acquisitions, net of cash acquired (Note 2) (32,408) -
Purchases of available-for-sale investments (7,250) -
Purchases of property, plant and equipment (3,160) (1,960)
Other 101 190
-------- --------
Net cash used in
investing activities (42,717) (1,770)
-------- --------
Financing Activities:
Net proceeds from issuance of Company
common stock (Note 3) 47,778 -
Net proceeds from issuance of subordinated
convertible debentures - 93,994
Decrease in short-term obligations (1,844) (2,131)
Repayment of long-term obligations (1,016) (593)
Net transfer to parent company - (3,536)
Other (143) 286
-------- --------
Net cash provided by
financing activities $ 44,775 $ 88,020
-------- --------
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THERMOQUEST CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
-------------------------------
September 28, September 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Exchange Rate Effect on Cash $ (742) $ 1,412
-------- --------
Increase in Cash and Cash Equivalents 39,199 94,535
Cash and Cash Equivalents at Beginning of
Period 120,354 13,050
-------- --------
Cash and Cash Equivalents at End of Period $159,553 $107,585
======== ========
Noncash Activities (Note 2):
Fair value of assets of acquired companies $ 69,651 $ -
Cash paid for acquired companies (33,148) -
-------- --------
Liabilities assumed of acquired companies$ 36,503 $ -
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOQUEST CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by ThermoQuest Corporation (the Company) without audit and, in
the opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at
September 28, 1996, the results of operations for the three- and
nine-month periods ended September 28, 1996 and September 30, 1995, and
the cash flows for the nine-month periods ended September 28, 1996 and
September 30, 1995. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of December 30, 1995,
has been derived from the consolidated financial statements that have
been audited by the Company's independent public accountants. The
consolidated financial statements and notes are presented as permitted by
Form 10-Q and do not contain certain information included in the annual
financial statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Registration
Statement on Form S-1 (Reg. No. 333-00276), filed with the Securities and
Exchange Commission.
2. Acquisitions
On December 1, 1995, Thermo Instrument Systems Inc. (Thermo
Instrument) acquired the assets of the analytical instruments division of
Analytical Technology, Inc. (ATI). In June 1996, the Company acquired the
Automass division of ATI from Thermo Instrument for $4.1 million in cash.
The Automass division of ATI is a manufacturer of mass spectrometers.
Because the Company and the Automass division of ATI were deemed for
accounting purposes to be under control of their common majority owner,
Thermo Instrument, the transaction has been accounted for in a manner
similar to a pooling of interests. The results of the Automass division
of ATI for December 1995 were not material to the Company's results,
therefore the Company's 1995 historical financial information has not
been restated. The Company's 1996 historical financial information has
been restated to include the results of the Automass division of ATI from
January 1, 1996.
On March 29, 1996, Thermo Instrument acquired a substantial portion
of the businesses comprising the Scientific Instruments Division of
Fisons plc (Fisons), a wholly owned subsidiary of Rhone-Poulenc Rorer,
Inc. In September 1996, the Company acquired two businesses formerly part
of Fisons, CE Instruments and MassLab Instruments (MassLab), from Thermo
Instrument for an aggregate $27.3 million in cash and the assumption of
approximately $8.9 million in debt, subject to a post-closing adjustment
to be negotiated with Fisons by Thermo Instrument. CE Instruments is a
manufacturer of gas chromatographs and MassLab is a manufacturer of mass
spectrometers. The purchase price was determined based on the net book
value of CE Instruments and MassLab at March 29, 1996, and a pro rata
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THERMOQUEST CORPORATION
2. Acquisitions (continued)
allocation of Thermo Instrument's total cost in excess of net assets of
acquired companies recorded in connection with the acquisition of the
Fisons businesses. Because the Company, CE Instruments, and MassLab were
deemed for accounting purposes to be under control of their common
majority owner, Thermo Instrument, the transaction has been accounted for
in a manner similar to a pooling of interests. Accordingly, the Company's
1996 historical financial information has been restated to include the
results of CE Instruments and MassLab from March 29, 1996, the date these
businesses were acquired by Thermo Instrument.
In January 1996, the Company acquired Extrel FTMS, Inc. (Extrel)
for $1.7 million in cash. Extrel is a manufacturer of Fourier transform
mass spectrometers. The acquisition of Extrel has been accounted for
using the purchase method of accounting and its results of operations
have been included in the accompanying financial statements from the date
of acquisition.
The cost of these acquisitions exceeded the estimated fair value of
the acquired net assets by $26.4 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 and is
subject to adjustment upon finalization of the purchase price allocation.
Pro forma data is not presented since these acquisitions were not
material to the Company's results of operations and financial position.
3. Initial Public Offering
In March and April 1996, the Company sold 3,450,000 shares of its
common stock in an initial public offering at $15.00 per share for net
proceeds of approximately $47.8 million. Following the offering, Thermo
Instrument, a majority-owned subsidiary of Thermo Electron Corporation,
owned 93% of the Company's outstanding common stock.
Item 2 - 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, are made throughout this
Management's Discussion and Analysis of Financial Condition and Results
of Operations. These statements involve a number of risks and
uncertainties, including those detailed in Item 5 of this Quarterly
Report on Form 10-Q.
Overview
The Company develops, manufactures, and sells mass spectrometers,
liquid chromatographs, and gas chromatographs. These analytical
instruments are used in the quantitative and qualitative chemical
analysis of organic and inorganic compounds at ultra-trace levels of
detection. The Company's products are used primarily by pharmaceutical
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THERMOQUEST CORPORATION
Overview (continued)
companies for drug research, testing, and quality control; by
environmental laboratories for testing water, air, and soil samples for
compliance with environmental regulations; by chemical companies for
research and quality control; by manufacturers for testing in certain
industrial applications, such as the manufacture of semiconductor wafers,
and for quality control; by food and beverage companies for quality
control and to test for product contamination; and in forensic
applications.
The Company's strategy is to supplement its internal growth with
the acquisition of complementary products and technologies. The Company
acquired Extrel FTMS, Inc., a manufacturer of Fourier transform mass
spectrometers, from Waters Technologies Corporation on January 19, 1996;
the Automass division of Analytical Technology, Inc. (ATI), a
manufacturer of mass spectrometers, from Thermo Instrument Systems Inc.
(Thermo Instrument) effective January 1, 1996 (Note 2); and CE
Instruments, a manufacturer of gas chromatographs, and MassLab
Instruments (MassLab), a manufacturer of mass spectrometers, from Thermo
Instrument effective March 29, 1996 (Note 2).
The Company sells its products on a worldwide basis. Although the
Company seeks to charge its customers in the same currency as its
operating costs, 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. Where
appropriate, the Company uses forward contracts to reduce its exposure to
currency fluctuations.
Results of Operations
Third Quarter 1996 Compared With Third Quarter 1995
Revenues increased 34% to $78.2 million in the third quarter of
1996 from $58.5 million in the third quarter of 1995 primarily as a
result of the inclusion of $12.1 million of revenues due to the
acquisition of CE Instruments and MassLab effective March 29, 1996
(Note 2), an increase of $7.6 million of revenues from the Company's
existing mass spectrometry business, and the inclusion of $1.6 million of
revenues due to the acquisition of the Automass division of ATI effective
January 1, 1996 (Note 2). The increase in revenues from the Company's
existing mass spectrometry business was primarily due to the introduction
of a new product in the first quarter of 1996. These increases were
offset by a decrease of $2.0 million in revenues due to the strengthening
of the U.S. dollar in relation to the Japanese yen and the German mark.
The gross profit margin was relatively unchanged at 48.3% in the
third quarter of 1996, compared with 48.6% in the third quarter of 1995.
An increase in the gross profit margin at the Company's existing mass
spectrometry business due to a shift in product mix was offset by the
inclusion of lower-margin revenues from CE Instruments and MassLab. The
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THERMOQUEST CORPORATION
Third Quarter 1996 Compared With Third Quarter 1995 (continued)
combined gross profit margin at CE Instruments and MassLab was 36% in the
third quarter of 1996. The Company's goal is to increase the gross profit
margin at CE Instruments and MassLab by improving product mix and
manufacturing efficiencies, although there can be no assurance that the
Company will be successful in these efforts.
Selling, general and administrative expenses as a percentage of
revenues decreased to 26.5% in the third quarter of 1996 from 27.2% in
the third quarter of 1995 primarily due to an increase in total revenues.
Research and development expenses as a percentage of revenues remained
unchanged at 7.4% in 1996 and 1995.
Interest income increased to $2.5 million in the third quarter of
1996 from $1.0 million in the third quarter of 1995 primarily as a result
of interest income earned on invested proceeds from the Company's initial
public offering of common stock in March and April 1996 (Note 3) and, to
a lesser extent, from the Company's issuance of $96.3 million principal
amount of 5% subordinated convertible debentures in August 1995. Interest
expense increased to $1.9 million in 1996 from $1.3 million in 1995
primarily due to interest on the Company's 5% subordinated convertible
debentures and the inclusion of interest expense on the debt assumed as
part of the acquisition of CE Instruments and MassLab.
The effective tax rate was 43.1% in the third quarter of 1996,
compared with 41.5% in the third quarter of 1995. The effective tax rates
exceeded the statutory federal income tax rate primarily due to the
impact of state income taxes and the nondeductible amortization of cost
in excess of net assets of acquired companies. The effective tax rate
increased in 1996 from 1995 due to the Company's anticipation of its
inability to provide a tax benefit for losses incurred at certain of its
foreign operations.
First Nine Months 1996 Compared With First Nine Months 1995
Revenues increased 32% to $227.1 million in the first nine months
of 1996 from $172.7 million in the first nine months of 1995 primarily as
a result of the inclusion of $27.1 million of revenues due to the
acquisition of CE Instruments and MassLab, an increase of $26.7 million
of revenues from the Company's existing mass spectrometry business, the
inclusion of $5.2 million of revenues due to the acquisition of the
Automass division of ATI, and the inclusion in the first quarter of 1996
of $2.6 million of revenues from the sale of products manufactured by
third parties. The increase in revenues from the Company's existing mass
spectrometry business was primarily due to the introduction of two new
products, one in the third quarter of 1995 and another in the first
quarter of 1996. These increases were offset by a decrease of $8.7
million in revenues due to the strengthening of the U.S. dollar in
relation to the Japanese yen and the German mark.
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THERMOQUEST CORPORATION
First Nine Months 1996 Compared With First Nine Months 1995 (continued)
The gross profit margin decreased to 46.9% in the first nine months
of 1996 from 49.7% in the first nine months of 1995. This decline is
primarily due to the inclusion of lower-margin revenues from CE
Instruments and MassLab and, to a lesser extent, the inclusion in the
first quarter of 1996 of the sale of products manufactured by third
parties, which had a gross profit margin of 7%. The combined gross profit
margin at CE Instruments and MassLab was 32% from March 29, 1996 through
September 28, 1996.
Selling, general and administrative expenses as a percentage of
revenues decreased to 25.3% in the first nine months of 1996 from 27.8%
in the first nine months of 1995 primarily due to an increase in total
revenues. Research and development expenses as a percentage of revenues
decreased to 7.3% in 1996 from 7.6% in 1995 primarily due to an increase
in total revenues.
Interest income increased to $6.5 million in the first nine months
of 1996 from $1.1 million in the first nine months of 1995 primarily as a
result of interest income earned on invested proceeds from the Company's
issuance of $96.3 million principal amount of 5% subordinated convertible
debentures in August 1995 and, to a lesser extent, from the Company's
initial public offering of common stock in March and April 1996. Interest
expense increased to $5.5 million in 1996 from $2.1 million in 1995
primarily due to interest on the Company's 5% subordinated convertible
debentures.
The effective tax rate was 42.5% in the first nine months of 1996,
compared with 41.5% in the first nine months of 1995. The effective tax
rates exceeded the statutory federal income tax rate due to the reasons
discussed in the results of operations for the third quarter.
Liquidity and Capital Resources
Consolidated working capital was $204.5 million at September 28,
1996, compared with $166.9 million at December 30, 1995, an increase of
$37.6 million. Included in working capital are cash, cash equivalents,
and available-for-sale investments of $167.1 million at September 28,
1996, compared with $120.4 million at December 30, 1995. Cash provided by
operating activities was $37.9 million in the first nine months of 1996.
Accounts receivable decreased $6.1 million in the first nine months of
1996 primarily due to improved collections at one of the Company's
foreign subsidiaries. Other current liabilities increased $7.4 million
primarily due to higher income taxes payable.
The Company's investing activities used $42.7 million of cash in
the first nine months of 1996. The Company expended $32.4 million, net of
cash acquired, for acquisitions, including the acquisition of CE
Instruments and MassLab from Thermo Instrument (Note 2), and $3.2 million
for purchases of property, plant and equipment.
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THERMOQUEST CORPORATION
Liquidity and Capital Resources (continued)
The Company's financing activities provided $44.8 million of cash
in the first nine months of 1996. In March and April 1996, the Company
sold 3,450,000 shares of its common stock in an initial public offering
at $15.00 per share for net proceeds of approximately $47.8 million.
During the remainder of 1996, the Company plans to expend
approximately $0.6 million for property, plant and equipment. Although
the Company expects to have positive cash flow from its existing
operations, the Company anticipates it will require significant amounts
of cash to pursue the acquisition of complementary businesses. The
Company expects that it will finance acquisitions through a combination
of internal funds, additional debt or equity financing from the capital
markets, or short-term borrowings from Thermo Instrument or Thermo
Electron Corporation (Thermo Electron), although there is no agreement
with Thermo Instrument or Thermo Electron under which such parties are
obligated to lend funds to the Company. The Company believes that its
existing resources are sufficient to meet the capital requirements of its
existing businesses for the foreseeable future.
PART II - OTHER INFORMATION
Item 5 - Other Information
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to caution
readers that the following important factors, among others, in some cases
have affected, and in the future could affect, the Company's actual
results and could cause its actual results in 1996 and beyond to differ
materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Competition; Technological Change and Industry Acceptance. The
Company encounters, and expects to continue to encounter, intense
competition in the sale of its current and future products. Some of the
Company's competitors and potential competitors have greater resources,
manufacturing and marketing capabilities, research and development staff,
and production facilities than those of the Company. No assurance can be
given that the Company's competitors will not develop products that will
be superior to the Company's products. In addition, industry acceptance
of new technologies developed by the Company may be slow to develop due
to, among other things, existing regulations written specifically for
older technologies and general unfamiliarity of users with new
technologies.
Risks Associated with Intellectual Property. The Company holds many
patents relating to various aspects of its products, including a
significant patent relating to ion trap mass spectrometers. In addition,
the Company believes that proprietary technical know-how is critical to
many of its products. Proprietary rights relating to the Company's
products are protected from unauthorized use by third parties only to the
extent that they are covered by valid and enforceable patents or are
maintained in confidence as trade secrets. There can be no assurance that
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THERMOQUEST CORPORATION
Item 5 - Other Information (continued)
any patents now or hereafter owned by the Company will afford protection
against competitors and, in the absence of patent protection, the Company
may be vulnerable to competitors who attempt to copy the Company's
products or gain access to its trade secrets and know-how. Proceedings
initiated by the Company to protect its proprietary rights could result
in substantial costs to the Company. There can be no assurance that
competitors of the Company will not initiate litigation to challenge the
validity of the Company's patents, or that they will not use their
resources to design comparable products that do not infringe the
Company's patents. There may also be pending or issued patents of which
the Company is not aware held by parties not affiliated with the Company
that relate to the Company's products or technologies. The Company may
need to acquire licenses to, or contest the validity of, any such
patents. It is likely that significant funds would be required to contest
the validity of any such patents. There can be no assurance that any
license required under any such patent would be made available on
acceptable terms or that the Company would prevail in any such contest.
Risks Associated with Acquisition Strategy. The Company's growth
strategy is to supplement its internal growth with the acquisition of
businesses and technologies that complement or augment the Company's
existing product lines. The Company has acquired certain portions of
several businesses which have been acquired by Thermo Instrument Systems
Inc., the Company's parent (Thermo Instrument), and may acquire
additional businesses from Thermo Instrument in the future. Certain of
the businesses acquired from Thermo Instrument have low levels of
profitability and businesses that the Company may seek to acquire in the
future may also be marginally profitable or unprofitable. In order for
any acquired businesses to achieve the level of profitability desired by
the Company, the Company must successfully reduce expenses and improve
operations. No assurance can be given that the Company will be successful
in this regard. 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 or Thermo
Instrument will be able to complete pending or future acquisitions. In
order to finance any such acquisitions, it may be necessary for the
Company to raise additional funds either through public or private
financings. Any equity or debt financing, if available at all, may be on
terms which are not favorable to the Company.
Dependence on the Pharmaceutical Industry. The largest single
market for the Company's mass spectrometers and liquid chromatographs is
the pharmaceutical industry. Although the Company's existing products are
not subject to regulation by the U.S. Food and Drug Administration (the
FDA), FDA regulations apply to the processes and production facilities
used to manufacture pharmaceutical products. Any material change by a
pharmaceutical company in its manufacturing process or equipment could
necessitate additional FDA review and approval. Such requirements may
make it more difficult for the Company to sell its products to
pharmaceutical customers that have already applied for or obtained
approval for production processes using different equipment and supplies.
Any changes in the regulations that apply to the processes and production
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THERMOQUEST CORPORATION
Item 5 - Other Information (continued)
facilities used to manufacture pharmaceutical products may adversely
affect the market for the Company's products. In addition, from time to
time as a result of industry consolidation and other factors, the
pharmaceutical industry has reduced its capital expenditures for
equipment such as that manufactured by the Company, and there can be no
assurance that further changes in the pharmaceutical industry will not
adversely affect demand for the Company's products.
Possible Adverse Effect from Changes in Environmental Regulations.
One of the largest markets for the Company's products is environmental
analysis. Most air, water, and soil analysis is conducted to comply with
Federal, state, local, and foreign environmental regulations. These
regulations are frequently specific as to the type of technology required
for a particular analysis and the level of detection required for that
analysis. The Company develops, configures, and markets its products to
meet customer needs created by existing and anticipated environmental
regulations. These regulations may be amended or eliminated in response
to new scientific evidence or political or economic considerations. Any
significant change in environmental regulations could result in a
reduction in demand for the Company's products.
Possible Adverse Impact of Significant International Operations.
International sales accounted for approximately 69% of the Company's
revenues in 1995, and the Company expects that international sales will
continue to account for a significant portion of the Company's revenues
in the future. Sales to customers in foreign countries 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; and
foreign countries could impose withholding taxes or otherwise tax the
Company's foreign income, impose tariffs, embargoes or exchange controls
or adopt other restrictions on foreign trade. Additionally, the U.S.
dollar value of the Company's net sales varies with currency exchange
rate fluctuations. Significant increases in the value of the U.S. dollar
relative to certain foreign currencies could have a material adverse
effect on the Company's competitive position and results of operations.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
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THERMOQUEST CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized as of the 5th day of
November 1996.
THERMOQUEST CORPORATION
Paul F. Kelleher
--------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
--------------------
John N. Hatsopoulos
Chief Financial Officer
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THERMOQUEST CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit Page
------------------------------------------------------------------------
2.1 Stock Purchase Agreement dated as of November 4, 1996
between SID Instruments Inc. and the Company.
2.2 Stock Purchase Agreement dated as of November 4, 1996
among SID Instruments Inc., Thermo Instrument Systems
Inc., and Finnigan MAT (Nevada) Inc.
10.1 Indemnification Agreement dated as of November 4, 1996
between Thermo Instrument Systems Inc. and the
Company.
10.2 Stock Holdings Assistance Plan and Form of Promissory
Note.
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as
of November 4, 1996, between Sid Instruments, Inc., a company
registered under the laws of Delaware, U.S.A., (the "Seller) and
ThermoQuest Corporation, a company registered under the laws of
Delaware, U.S.A. (the "Buyer").
WHEREAS , the Buyer desires to purchase from the Seller
and the Seller desires to sell to the Buyer ,all of the issued
and outstanding shares of capital stock of Fisons Instruments
S.p.A., a company registered under the laws of Italy which,
subject to the Italian court approval, has changed its corporate
name into ThermoQuest Italia S.p.A. (the "Company") owned by the
Seller, upon the terms and subject to the conditions set forth
herein (the "Stock Purchase");
WHEREAS, the Company is engaged in the import, export
and marketing of reagents instruments to be used for chemical
analysis and other applications as more accurately described in
article 5 of the Company by-laws (the "Business") and has already
transferred its ARL and ELEMENTAL businesses to Unicam Italia
S.p.A.;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the
following respective meanings:
"Closing" means the consummation of the Stock Purchase.
" Shares" means all of the 366,671 shares of capital stock of the
Company, par value Lit. 20,000 per share, representing all of the
issued and outstanding share capital of the Company.
ARTICLE 2
SALE OF STOCK
2.1 Stock Purchase. On the basis of the representations and
warranties, covenants and agreements set forth herein, the Seller
hereby sells to the Buyer, and the Buyer hereby purchases from
the Seller, the Shares with all dividend and other economic
rights attached thereto, if any, effective as from October 1,
1996. The Buyer will wire transfer, in immediately available
funds, to the account specified by the Seller the amount of
$20,478,000 with respect to the Shares (the "Purchase Price").
As soon as possible upon payment of the Purchase Price, the
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2
Seller will cause (a) its respective duly authorised
representative to (i) endorse the Shares to the Buyer according
to the formalities provided by Italian Law; and (ii) deliver such
duly endorsed Shares to the Buyer or its representatives; and (b)
a director of the Company to make an annotation in the
shareholders book of the Company of the Buyer as the new
shareholder of the Company.
2.2. Price Adjustment . The Buyer and Seller acknowledge and
agree that the Purchase Price represents the sum of (i) the net
tangible assets of the Company (assumed to be $7,095,000 ) as of
the date of the Seller's acquisition of the Shares as part of the
acquisition on March 29, 1996 by the Thermo Instrument Systems
Inc. ("THI") and its subsidiaries of certain businesses of Fisons
plc (the "Fisons Businesses") pursuant to the Amended and
Restated Asset and Stock Purchase Agreement dated as of March 29,
1996 among the THI, Thermo Electron Corporation and Fisons plc
(the "Restated Agreement"), plus (ii) a percentage of the total
goodwill associated with THI's acquisition of the Fisons
Businesses equal to the sales of the Carlo Erba chromatography
business of the Company for the 1994 and 1995 fiscal years
relative to the total sales of the Fisons Businesses for such
years (the "CE Percentage"), plus (iii) the CE Percentage of the
total costs incurred by THI in acquiring the Fisons Businesses
and in restructuring the sales and service organization of the
Fisons Businesses (the "Restructuring Costs") . The parties
acknowledge that the purchase price paid by the THI for the
Fisons Businesses is subject to a post-closing adjustment based
on the difference between the value of the net tangible assets of
the Fisons Businesses as shown on the closing balance sheet dated
as of March 29, 1996 (the "Closing Balance Sheet") and the target
net tangible asset value provided for in the Restated Agreement.
In the event of such adjustment, the Purchase Price shall be
recalculated in accordance with the third sentence of this
paragraph to account for (A) any adjustment in the net tangible
assets (other than cash) of the Company as shown on the Closing
Balance Sheet from $7,095,000, and (B) any adjustment in
total goodwill associated with THI's acquisition of the Fisons
Businesses. In addition, the purchase price shall be subject to
recalculation in accordance with the third sentence of this
paragraph in the event that the Restructuring Costs incurred are
less than $1,686,000. If any recalculation made pursuant to this
paragraph results in an increase in the Purchase Price, the Buyer
shall pay the amount of such increase to the Seller, and if any
such recalculation results in a decrease in the Purchase Price,
the Seller shall pay the amount of such decrease to the Buyer.
Any payment made pursuant to the preceding sentence shall be made
within ten days after the Closing Balance Sheet has become final
(in the case of an adjustment related to the Closing Balance
Sheet) and no later than March 29, 1997 (in the case of an
adjustment related to the Restructuring Costs) and shall also be
accompanied by interest from the date hereof calculated as
provided in Section 4.1 of the Restated Agreement which is known
to the parties.
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3
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller makes the following representations and warranties and
acknowledges that the Buyer is relying upon such representations
and warranties in connection with the purchase by it of the
Shares.
3.1 Due Incorporation. The Seller and the Company are
corporations duly constituted, validly existing and in good
standing under the laws of their respective jurisdictions of
organization.
3.2 Approval of Transactions . The Seller has obtained all
necessary corporate authorizations and approvals, and has taken
all actions required for the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby.
3.3 No conflict. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions herein
contemplated, nor the fulfilment of or compliance with the terms
and provisions hereof will (1) conflict with the Certificate of
Incorporation or By-laws of the Seller or the Company, (2)
violate any current provisions of law, administrative regulation,
or court decree applicable to the Seller or the Company or (3)
conflict with or result in a breach of any of the terms,
conditions or provisions of or constitute default under any
material agreement or instrument to which the Seller or the
Company is a party or by which either of them is bound.
3.4 Authorized Capital . The Company has an authorized and
issued capital stock of Lit. 7,333,420,000 and all the Shares
have been duly and validly issued and are fully paid.
3.5 Title to Shares. The Shares are owned by the Seller with a
good and valid title thereto and are free and clear of any liens,
options, charges and encumbrances of any kind.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer makes the following representations and warranties and
acknowledges that the Seller is relying upon such representations
and warranties in connection with the sale by it of the Shares.
4.1 Due Incorporation. The Buyer is a corporation duly
incorporated, validly existing and in good standing under the
laws of Delaware, U.S.A.
4.2 Approval of Transactions . The Buyer has obtained all
necessary corporate authorizations and approvals, and has taken
all actions required for the execution and delivery of this
Agreement and the consummation of the transactions contemplated
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4
hereby.
4.3 No Conflict . Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions herein
contemplated, nor the fulfillment of or compliance with the terms
and provisions hereof will (1) conflict with the Certificate of
Incorporation or By-laws of the Buyer, (2) violate any current
provisions of law, administrative regulation, or court decree
applicable to the Buyer or (3) conflict with or result in a
breach of any of the terms, conditions or provisions of or
constitute default under any material agreement or instrument to
which the Buyer is a party or by which it is bound.
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification by the Seller . The Seller agrees to
indemnify and hold harmless the Buyer from any and all damages,
losses liabilities, costs and expenses (including, without
limitation, settlement costs and any reasonable legal, accounting
or other expenses for investigating or defending any actions or
threatened actions) incurred by the Buyer as a result of (i) the
inaccuracy of any representation or warranty contained in Section
3 hereof; (ii) the breach by the Seller of any provision hereof;
or (iii) any third party claim arising due to the act of
omissions of the Seller or the Company from March 29, 1996 and
prior to the date hereof.
5.2 Indemnification by the Buyer. The Buyer agrees to indemnify
and hold harmless the Seller from any and all damages, losses,
liabilities, costs and expenses (including, without limitation,
settlement costs and any reasonable legal, accounting or other
expenses for investigating or defending any actions or threatened
actions) incurred by the Seller as a result of (i) the inaccuracy
of any representation or warranty contained in Section 4 hereof,
or (ii) the breach of the Buyer of any provision hereof.
5.3 Notice of Claim. Whenever any claim shall arise
indemnification hereunder, the party seeking indemnification (the
"Indemnified Party") shall promptly notify the other party (the
"Indemnifying Party") of the claim and, when known the facts
constituting the basis for such claim. In the event of any such
claim for indemnification hereunder resulting from or in
connection with any claim or legal proceedings by a third party,
the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising
therefrom. The Indemnified Party shall not settle or compromise
any claim by a third party for which the Indemnified Party is
entitled to indemnification hereunder without the prior consent
of the Indemnifying Party, unless suit shall have been instituted
against the Indemnified Party and Indemnifying Party shall not
have taken control of such suit after notification thereof as
provided in Section 6.4 of this Agreement.
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5
5.4 Defense of the claim . In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any
claim or legal proceeding by a person who is not a party to this
Agreement, the Indemnifying Party at its sole cost and expense
may, upon notice to the Indemnified Party, assume the defense of
any such claim or legal proceeding to the extent permitted by
applicable law, if it acknowledges to the Indemnified Party its
obligations to indemnify the Indemnified Party with respect to
all elements of such claim. The Indemnified Party shall be
entitled to participate in (but not control) the defense of any
such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim
or litigation resulting therefrom within 30 days after the date
the Indemnifying Party is notified of such claim pursuant to
paragragh 5.3 hereof, (i) the Indemnified Party may defend
against such claim or litigation, after giving notice of the same
to the Indemnifying Party, on such terms as are appropriate in
the Indemnified Party's reasonable judgemen , and (ii) the
Indemnifying Party shall be entitled to participate in (but not
control) the defense of such action, with its counsel and at its
own expense.
ARTICLE 6
MISCELLANEOUS
6.1 Amendment-Modification-Waiver. No amendment, modification,
or waiver of this Agreement will be binding or effective for any
purpose unless it is made in writing signed by the party against
whom enforcement of such amendment, modification, or waiver is
sought.
6.2 Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same
agreement, and will become effective when one or more
counterparts have been signed by each party and delivered to the
other party.
6.3 Governing Law, Jurisdiction. This Agreement
governed by and construed in accordance with the laws of Italy
without reference to the choice of law principles thereof. The
Court of Milan shall have exclusive jurisdiction over any dispute
which may arise from this Agreement.
6.4 Notices. Every notice or other communication
contemplated, or permitted by this Agreement by any party shall
be in writing and shall be delivered either by personal delivery,
telegram, facsimile, private courier service, or by certified or
registered mail, postage prepaid, return receipt requested,
addressed to the party to whom intended at the following address:
(a) If to the Seller, to:
SID INSTRUMENTS INC.
81 Wyman Street
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6
Waltham, MA
01921 U.S.A.
Attention: General Counsel
Telephone: 001 617 622 1000
Fax: 001 622 1283
(b) If to Buyer, to:
THERMOQUEST CORPORATION
81 Wyman Street
Waltham, MA
01921 U.S.A.
Attention: General Counsel
Telephone: 001 617 622 1000
Fax: 001 622 1283
or at such other address as the intended recipient shall from
time to time designate by written notice delivered in accordance
herewith. Notice by courier or certified or registered mail
shall be effective on the date it is sent. All notices and
communications required, contemplated, or permitted by this
Agreement to be delivered in person shall be deemed to have been
delivered to and received by the addressee, and shall be
effective, on the date of personal delivery. Any notice
transmitted by telegram or facsimile shall be deemed to have been
delivered to and received by the addressee, and shall be
effective, on the date said notice is delivered to the telegram
company or facsimile operator for transmission.
6.5 Assignment . No party hereto may assign its rights
delegate its obligations under this Agreement without the written
consent of the other party thereto.
6.6 Burden and Benefit. This Agreement will be binding upon,
and inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
6.7 Interpretation. Article and Section headings contained in
this Agreement are inserted for convenience of reference only and
are not a part of, and will not affect the meaning or
interpretation of, this Agreement. The references herein to
Articles and Sections, unless otherwise indicated, refer to
Articles and Sections of this Agreement.
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7
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties as of the day first above written.
SELLER BUYER
SID INSTRUMENTS, INC. THERMOQUEST CORPORATION
By: Earl R. Lewis By: Richard W.K. Chapman
------------------ ------------------------
Name: Earl R. Lewis Name: Richard W.K. Chapman
Title: President Title: President
DATED November 4, 1996
----------------------
(1) SID INSTRUMENTS INC.
(2) FINNIGAN MAT (NEVADA) INC.
(3) THERMO INSTRUMENT SYSTEMS INC.
__________________________________________
AGREEMENT
for the sale and purchase of the whole
of the issued share capital of
Masslab Limited
--------------------------------------------
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THIS AGREEMENT is made the 4th day of November 1996
BETWEEN:
(1) SID INSTRUMENTS INC. (the "Vendor") a Delaware corporation
whose principal office is at 81 Wyman Street, Waltham, MA
02254, USA; and
(2) FINNIGAN MAT (NEVADA) INC. ("the Purchaser"), a Nevada
corporation whose principal office is 355 River Oaks
Parkway, San Jose, CA 95134, USA; and
(3) THERMO INSTRUMENT SYSTEMS INC. ("Thermo"), a Delaware
corporation whose principal office is at 81 Wyman Street,
Waltham, MA 02254, USA
WHEREAS:
(A) Masslab Limited, ("the Company") is a private company
incorporated with limited liability in England further
particulars of which are set out in Schedule 2.
(B) The Vendor has agreed to sell and the Purchaser has agreed
to buy the Shares (as defined) on the terms and subject to
the conditions contained in this Agreement.
AGREED as follows:
1. INTERPRETATION
1.1 In this Agreement and the Schedules to it the following
expressions shall, unless the context otherwise requires,
have the following meanings:
"the Effective Date" 29 September 1996;
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"the Shares" the shares in the capital of
the Company set out in Column (2)
of Schedule 1;
1.2 The headings in this Agreement are for ease of reference
only and shall not be taken into account in construing this
Agreement.
1.3 References to Clauses and Schedules are to clauses and
schedules of this Agreement.
2. SALE AND PURCHASE
2.1 The Vendor agrees to sell with full title guarantee, the
Shares and the Purchaser agrees to purchase the Shares with
effect on and from the Effective Date free from any liens,
claims, charges, encumbrances and equities and together with
all rights of any nature whatsoever now or after the date of
this Agreement attaching or accruing to them.
2.2 The aggregate consideration for the purchase of the Shares
shall be the sum set out in Column (3) of Schedule 1 receipt
of which the Vendor hereby acknowledges. The Purchaser and
Vendor acknowledge and agree that such Consideration
represents the sum of (i) the net tangible assets of the
Company (assumed to be $2,597,000) as of the date of the
Vendor's acquisition of the Shares as part of the
acquisition on March 29, 1996 by Thermo and its subsidiaries
of certain businesses of Fisons plc (the "Fisons
Businesses") pursuant to the Amended and Restated Asset and
Stock Purchase Agreement dated as of March 29, 1996 among
Thermo, Thermo Electron Corporation and Fisons plc (the
"Restated Agreement"), plus (ii) a percentage of the total
goodwill associated with Thermo's acquisition of the Fisons
Businesses equal to the sales of the Company for the 1994
and 1995 fiscal years relative to the total sales of the
Fisons Businesses for such years (the "Company Percentage"),
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plus (iii) the Company Percentage of the total costs
incurred by Thermo in acquiring the Fisons Businesses and in
restructuring the sales and service organization of the
Fisons Businesses (the "Restructuring Costs"). The parties
acknowledge that the purchase price paid by Thermo for the
Fisons Businesses is subject to a post-closing adjustment
based on the difference between the value of the net
tangible assets of the Fisons Businesses as shown on the
closing balance sheet dated as of March 29, 1996 (the
"Closing Balance Sheet") and the target net tangible asset
value provided for in the Restated Agreement. In the event
of any such adjustment, the Consideration shall be
recalculated in accordance with the second sentence of this
paragraph to account for (A) any adjustment in the net
tangible assets (other than cash) of the Company as shown on
the Closing Balance Sheet from $2,597,000 and (B) any
adjustment in the total goodwill associated with Thermo's
acquisition of the Fisons Businesses. In addition, the
Consideration shall be subject to recalculation in
accordance with the fourth sentence of this paragraph in the
event that the Restructuring Costs incurred are less than
$532,000. If the recalculation made pursuant to this
paragraph results in an increase in the Consideration, the
Purchaser shall pay the amount of such increase to the
Vendor, and if any such recalculation results in a decrease
in the Consideration, the Vendor shall pay the amount of
such decrease to the Purchaser. Any payment made pursuant
to the preceding sentence shall be made within ten days
after the Closing Balance Sheet has become final (in the
case of any adjustment related to the Closing Balance Sheet)
and no later than March 29, 1997 (in the case of an
adjustment related to the Restructuring Costs) and shall
also be accompanied by interest from the date hereof
calculated as provided in Section 4.1 of the Restated
Agreement.
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3. FURTHER ASSURANCE
The Vendor shall on or at any time after the date of this
Agreement execute and do all such deeds, documents, acts and
things as the Purchaser shall reasonably require to give
effect to this Agreement.
4. WARRANTIES
4.1 The Vendor represents, warrants and undertakes to and with
the Purchaser in the terms contained in Schedule 3.
4.2 The representations, warranties and undertakings contained
in Schedule 3 shall continue in full force and effect after
the date of this Agreement.
5. COMPLETION
Completion of the sale and purchase of the Shares shall take
place on the date of this Agreement at such time and place
as the parties shall agree when:
(a) the Vendor shall hand to the Purchaser duly executed
transfers in favor of the Purchaser and the share
certificates in respect of the Shares;
(b) the Vendor shall, if required, hand to the Purchaser
the certificate of incorporation, statutory books and
common seal of the Company;
(c) the Purchaser shall pay in cash the Consideration in
accordance with Clause 2.2.
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6. INDEMNITY
6.1 The Vendor agrees to indemnify and hold harmless the
Purchaser from any and all damages, losses, liabilities,
costs and expenses (including, without limitation,
settlement costs and any reasonable legal, accounting or
other expenses for investigating or defending any actions or
threatened actions) incurred by the Purchaser as a result of
(i) the inaccuracy of any representation or warranty
contained in Schedule 3 hereof; (ii) the breach by the
Vendor of any provision hereof; or (iii) any third party
claim arising due to the act of omission of the Vendor or
the Company from March 29, 1996 and prior to the date
hereof.
6.2 The Purchaser agrees to indemnify and hold harmless the
Vendor from any and all damages, losses, liabilities, costs
and expenses (including, without limitation, settlement
costs and any reasonable legal, accounting or other expenses
for investigating or defending any actions or threatened
actions) incurred by the Vendor as a result of the breach by
the Purchaser of any provision hereof.
6.3 Whenever any claim shall arise or indemnification under this
Agreement, the party seeking indemnification (the
"Indemnified Party"), shall promptly notify the other party
(the "Indemnifying Party"), of the claim and, when known,
the facts constituting the basis for such claim. In the
event of any such claim for indemnification hereunder
resulting from or in connection with any claim or legal
proceedings by a third party, the notice to the Indemnifying
Party shall specify, if known, the amount or an estimate of
the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim
by a third party for which the indemnified Party is entitled
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to indemnification hereunder without the prior consent of
the Indemnifying Party, unless proceedings have been
commenced against the Indemnified Party and the Indemnifying
Party shall not have taken control of such proceedings after
notification thereof as provided in Clause 6.4 of this
Agreement.
6.4 In connection with any claim giving rise to indemnity
hereunder resulting from or arising out of a claim or legal
proceedings by a person who is not a party to this
Agreement, the Indemnifying Party at its sole cost and
expense may, on notice to the Indemnified party, assume the
defense of any such claim or legal proceedings if it
acknowledges to the Indemnified Party its obligations to
indemnify the Indemnified Party with respect to all elements
of such claim. The Indemnified Party shall be entitled to
participate in (but not control), the defense of any such
action, with Solicitors of its own choice and its own
expense. If the Indemnifying Party does not assume the
defense of any such claim or litigation resulting therefrom
within 30 days after the date the Indemnifying Party is
notified of such claim pursuant to Clause 8.1 hereof, (i)
the Indemnified Party may defend against such claim or
litigation, after giving notice of the same to the
Indemnifying Party, on such terms as are appropriate in the
Indemnified Party's reasonable judgment, and (ii) the
Indemnifying Party shall be entitled to participate in (but
not control) the defense of such action, with Solicitors of
its own choice and at its own expense.
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7. GENERAL
The provisions of this Agreement shall enure to the benefit
of the successors and assigns of the Vendor and the
Purchaser.
8. NOTICES
8.1 A notice or other communication under or in connection with
this Agreement shall be in writing and shall be delivered
personally or sent by first class pre-paid recorded delivery
post or by fax to the party due to receive the notice or
communication, at its address set out in this Agreement or
at such other address as either party may specify by notice
in writing to the other.
8.2 In the absence of evidence of earlier receipt, a notice or
communication is deemed given:
8.2.1 if delivered personally, when left at the address
referred to in the introduction hereto;
8.2.2 if sent by post, the second business day after its
posting;
8.2.3 if sent by fax, on completion of its transmission.
9. GUARANTEE
Thermo hereby unconditionally guarantees the obligations of
the Vendor arising under this Agreement.
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10. GOVERNING LAW
This Agreement shall be governed by and construed in all
respects in accordance with English Law and the parties
agree to submit to the exclusive jurisdiction of the English
Courts as regards any claim or matter arising in relation to
this Agreement.
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SCHEDULE 1
Particulars of Shares and Consideration
(1) (2) (3)
Name of the Company Particulars of Shares Consideration
------------------- --------------------- -------------
Masslab Limited 2 Ordinary Shares $6,817,000
of 1 British Pound
Sterling each
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SCHEDULE 2
Particulars of the Company
Date of Incorporation: 31/01/96
Registered Office: Pickfords Wharf
Clink Street
London SE1 9DG
Number of registration: 3153082
Authorised Share Capital: 1,000
Issued Share Capital: 2
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SCHEDULE 3
1. The Vendor has full power and authority to enter into and
perform its obligations under this Agreement and the signing
of this Agreement does not violate any provision of the
Vendor's Certificate of Incorporation.
2. The Vendor is a company duly incorporated under the laws of
the State of Delaware, USA.
3. The execution of this Agreement, nor the consummation of the
transaction herein contemplated, nor the fulfillment of or
compliance with the terms and provisions hereof will breach
any current provisions of English law nor conflict with or
result in a breach of any of the terms, conditions or
provisions of or constitute default under any material
agreement or instrument to which the Vendor is a party or by
which it is bound.
PAGE
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SID INSTRUMENTS INC.
By: Earl R. Lewis
-------------------
Earl R. Lewis
President
FINNIGAN MAT (NEVADA) INC.
By: Philip L. Warren
----------------------
Philip L. Warren
President
THERMO INSTRUMENT SYSTEMS INC.
By: Earl R. Lewis
------------------
Earl R. Lewis
Executive Vice President
INDEMNIFICATION AGREEMENT
This Agreement is made as of November 4, 1996 between Thermo
Instrument Systems Inc., a Delaware corporation ("THI"), and
ThermoQuest Corporation, a Delaware corporation ("TMQ").
WHEREAS, on March 29, 1996 THI, directly and through its
subsidiaries, purchased certain businesses of Fisons plc (the
"Fisons Businesses") pursuant to an Amended and Restated Asset
and Stock Purchase Agreement dated as of such date (the "Restated
Agreement"); and
WHEREAS, THI and TMQ have agreed that the Masslab and CE
Instruments Fisons Businesses (the "TMQ Businesses") shall be
sold by THI to TMQ; and
WHEREAS, the sale by THI, and the purchase by TMQ, of the
TMQ Businesses shall be made pursuant to a number of purchase and
sale agreements among subsidiaries of TMQ, THI and subsidiaries
of THI (the "Transfer Agreements"); and
WHEREAS, THI and TMQ desire to make certain provisions for
(i) THI's indemnification of TMQ and its subsidiaries for certain
liabilities of the TMQ Businesses and (ii) TMQ's indemnification
of THI and its subsidiaries for certain liabilities of the TMQ
Businesses.
NOW, THEREFORE, THI and TMQ hereby agree as follows:
1. Indemnification.
(a) THI shall indemnify and hold harmless TMQ and its
subsidiaries from any and all damages, losses, liabilities, costs
and expenses (including, without limitation, settlement costs and
any reasonable legal, accounting or other expenses for
investigating or defending any actions or threatened actions)
incurred by TMQ or any of its subsidiaries as a result of:
(i) any third party claims based on the acts or
omissions of THI or any of its subsidiaries (including any
subsidiaries subsequently sold to TMQ) on or after March 29, 1996
and prior to the date hereof; or
(ii) the breach by THI or any of its subsidiaries
of any representation, warranty, covenant or agreement contained
in any of the Transfer Agreements.
(b) TMQ shall indemnify and hold harmless THI and its
subsidiaries form any and all damages, losses, liabilities, costs
and expenses (including, without limitation, settlement costs and
any reasonable legal, accounting or other expenses for
PAGE
<PAGE>
investigating or defending any actions or threatened actions)
incurred by THI or any of its subsidiaries (other than
subsidiaries acquired by TMQ) as a result of any liability of the
TMQ Businesses other than a liability (i) as to which TMQ and its
subsidiaries are entitled to indemnification by THI hereunder or
(ii) that is expressly retained by THI or any of its subsidiaries
pursuant to any Transfer Agreement.
(c) Whenever any claim shall arise for indemnification
hereunder, the party seeking indemnification (the "Indemnified
Party") shall promptly notify the other party (the "Indemnifying
Party") of the claim and, when known, the facts constituting the
basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with
any claim or legal proceedings by a third party, the notice to
the Indemnifying Party shall specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a
third party for which the Indemnified Party is entitled to
indemnification hereunder without the prior consent of the
Indemnifying Party, unless suit shall have been instituted
against the Indemnified Party and the Indemnifying Party shall
not have taken control of such suit after notification thereof as
provided in Section 2(d) of this Agreement.
(d) In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or
legal proceeding by a person who is not a party to this
Agreement, the Indemnifying Party at its sole cost and expense
may, upon notice to the Indemnified Party, assume the defense of
any such claim or legal proceeding if it acknowledges to the
Indemnified Party its obligations to indemnify the Indemnified
Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not
control) the defense of any such action, with its counsel and at
its own expense. If the Indemnifying Party does not assume the
defense of any such claim or litigation resulting therefrom
within 30 days after the date the Indemnifying Party is notified
of such claim pursuant to Paragraph 2(c) hereof, (i) the
Indemnified Party may defend against such claim or litigation,
after giving notice of the same to the Indemnifying Party, on
such terms as are appropriate in the Indemnified Party's
reasonable judgment, and (ii) the Indemnifying Party shall be
entitled to participate in (but not control) the defense of such
action, with its counsel and at its own expense.
3. Restated Agreement. THI hereby assigns to TMQ, and TMQ
hereby accepts and assumes, the rights and obligations of THI
under the Restated Agreement, and any agreements or instruments
executed by THI in connection therewith, but only to the extent
such rights and obligations relate primarily to the TMQ
Businesses. In furtherance of the foregoing, TMQ may enforce, in
its own name and in the name and on behalf of THI, any of the
rights of THI under Section 11 of the Restated Agreement, and, if
PAGE
<PAGE>
requested by TMQ, THI shall take such actions, at its own
expense, as TMQ shall reasonably request in order that TMQ shall
have the full rights and benefits granted to it under this
Section 3.
4. Captions. The captions and headings to the various
sections, paragraphs and exhibits of this Agreement are for
convenience of reference only and shall not affect or control the
meaning or interpretation of any of the provisions of this
Agreement.
5. Integration. This Agreement contains the entire
understanding of the parties hereto with respect to the subject
matter contained herein.
6. Notice of Communication. Any notice or other
communication shall be in writing and shall be personally
delivered, or sent by overnight or second day courier or by first
class mail, return receipt requested, to the party to whom such
notice or other communication is to be given or made at such
party's address set forth below, or to such other address as such
party shall designate by written notice to the other party as
follows:
If to THI:
Thermo Instrument Systems Inc.
c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02445-9046
Attn: General Counsel
If to TMQ:
Thermo Optek Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02445-9046
Attn: General Counsel
provided that any notice of change of address, and any notice or
other communication given otherwise than as specified above shall
be effective only upon receipt; and further that any presumption
of receipt by the addressee shall be inoperable during the period
of any interruption in Postal Service.
7. Governing Law; Assignment. This Agreement is to be
construed, interpreted, applied and governed in all respects in
accordance with the laws of the Commonwealth of Massachusetts,
without regard to its conflict of laws provisions, is to take
effect as a sealed instrument, is binding upon and inures to the
benefit of the parties hereto and their respect successors and
assigns and may be canceled, modified or amended only by a
PAGE
<PAGE>
written instrument executed by THI and TMQ. No party hereto may
assign its rights hereunder without prior written consent of the
other party.
PAGE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
THERMO INSTRUMENT SYSTEMS INC.
By: Earl R. Lewis
-------------------------------------
Earl R. Lewis
Executive Vice President and Chief
Operating Officer
THERMOQUEST CORPORATION
By: Richard W.K. Chapman
-------------------------------------
Richard W.K. Chapman
President
THERMOQUEST CORPORATION
STOCK HOLDINGS ASSISTANCE PLAN
SECTION 1. Purpose.
The purpose of this Plan is to benefit ThermoQuest
Corporation (the "Company") and its stockholders by encouraging
Key Employees to acquire and maintain share ownership in the
Company, by increasing such employees' proprietary interest in
promoting the growth and performance of the Company and its
subsidiaries and by providing for the implementation of the
Guidelines.
SECTION 2. Definitions.
The following terms, when used in the Plan, shall have the
meanings set forth below:
Committee: The Human Resources Committee of the Board of
Directors of the Company as appointed from time to time.
Common Stock: The common stock of the Company and any
successor thereto.
Company: ThermoQuest Corporation, a Delaware corporation.
Guidelines: The Stock Holdings Guidelines for Key Employees
of the Company, as established by the Committee from time to
time.
Key Employee: Any employee of the Company or any of its
subsidiaries, including any officer or member of the Board of
Directors who is also an employee, as designated by the
Committee, and who, in the judgment of the Committee, will be in
a position to contribute significantly to the attainment of the
Company's strategic goals and long-term growth and prosperity.
Loans: Loans extended to Key Employees by the Company
pursuant to this Plan.
Plan: The ThermoQuest Corporation Stock Holdings
Assistance Plan, as amended from time to time.
SECTION 3. Administration.
The Plan and the Guidelines shall be administered by the
Committee, which shall have authority to interpret the Plan and
the Guidelines and, subject to their provisions, to prescribe,
amend and rescind any rules and regulations and to make all other
determinations necessary or desirable for the administration
thereof. The Committee's interpretations and decisions with
regard to the Plan and the Guidelines and such rules and
regulations as may be established thereunder shall be final and
PAGE
<PAGE>
conclusive. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or the
Guidelines, or in any Loan in the manner and to the extent the
Committee deems desirable to carry it into effect. No member of
the Committee shall be liable for any action or omission in
connection with the Plan or the Guidelines that is made in good
faith.
SECTION 4. Loans and Loan Limits.
The Committee has determined that the provision of Loans
from time to time to Key Employees in such amounts as to cause
such Key Employees to comply with the Guidelines is, in the
judgment of the Committee, reasonably expected to benefit the
Company and authorizes the Company to extend Loans from time to
time to Key Employees in such amounts as may be requested by such
Key Employees in order to comply with the Guidelines. Such Loans
may be used solely for the purpose of acquiring Common Stock
(other than upon the exercise of stock options or under employee
stock purchase plans) in open market transactions or from the
Company.
Each Loan shall be full recourse and evidenced by a
non-interest bearing promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and maturing in
accordance with the provisions of Section 6 hereof, and
containing such other terms and conditions, which are not
inconsistent with the provisions of the Plan and the Guidelines,
as the Committee shall determine in its sole and absolute
discretion.
SECTION 5. Federal Income Tax Treatment of Loans.
For federal income tax purposes, interest on Loans shall be
imputed on any interest free Loan extended under the Plan. A Key
Employee shall be deemed to have paid the imputed interest to the
Company and the Company shall be deemed to have paid said imputed
interest back to the Key Employee as additional compensation.
The deemed interest payment shall be taxable to the Company as
income, and may be deductible to the Key Employee to the extent
allowable under the rules relating to investment interest. The
deemed compensation payment to the Key Employee shall be taxable
to the employee and deductible to the Company, but shall also be
subject to employment taxes such as FICA and FUTA.
SECTION 6. Maturity of Loans.
Each Loan to a Key Employee hereunder shall be due and
payable on demand by the Company. If no such demand is made,
then each Loan shall mature and the principal thereof shall
become due and payable in five equal annual installments
commencing on the first anniversary date of the making of such
Loan. Each Loan shall also become immediately due and payable in
full, without demand, upon the occurrence of any of the events
2PAGE
<PAGE>
set forth in the Note; provided that the Committee may, in its
sole and absolute discretion, authorize an extension of the time
for repayment of a Loan upon such terms and conditions as the
Committee may determine.
3PAGE
<PAGE>
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Guidelines in any respect, or terminate the Plan or the
Guidelines at any time. No such amendment or termination,
however, shall alter or otherwise affect the terms and conditions
of any Loan then outstanding to Key Employee without such Key
Employee's written consent, except as otherwise provided herein
or in the promissory note evidencing such Loan.
SECTION 8. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or
right to receive a Loan under the Plan, and no employee shall
have any right to be retained in the employ of the Company due to
his or her participation in the Plan.
(b) No Loan shall be made hereunder unless counsel for the
Company shall be satisfied that such Loan will be in compliance
with applicable federal, state and local laws.
(c) The expenses of the Plan shall be borne by the Company.
(d) The Plan shall be unfunded, and the Company shall not
be required to establish any special or separate fund or to make
any other segregation of assets to assure the making of any Loan
under the Plan.
(e) Except as otherwise provided in Section 7 hereof, by
accepting any Loan under the Plan, each Key Employee shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
or the Guidelines by the Company, the Board of Directors of the
Company or the Committee.
(f) The appropriate officers of the Company shall cause to
be filed any reports, returns or other information regarding
Loans hereunder, as may be required by any applicable statute,
rule or regulation.
SECTION 9. Effective Date.
The Plan and the Guidelines shall become effective upon
approval and adoption by the Committee.
4PAGE
<PAGE>
EXHIBIT A
THERMOQUEST CORPORATION
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to ThermoQuest Corporation (the
"Company"), or assigns, ON DEMAND, but in any case on or before
[insert date which is the fifth anniversary of date of issuance]
(the "Maturity Date"), the principal sum of [loan amount in
words] ($_______), or such part thereof as then remains unpaid,
without interest. Principal shall be payable in lawful money of
the United States of America, in immediately available funds, at
the principal office of the Company or at such other place as the
Company may designate from time to time in writing to the
Employee.
Unless the Company has already made a demand for payment in
full of this Note, the Employee agrees to repay the Company, on
each of the first four anniversary dates of the date hereof, an
amount equal to 20% of the initial principal amount of the Note.
Payment of the final 20% of the initial principal amount, if no
demand has been made by the Company, shall be due and payable on
the Maturity Date.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. The
Employee acknowledges and agrees that the Company has advanced to
the Employee the principal amount of this Note pursuant to the
Company's Stock Holdings Assistance Plan, and that all terms and
conditions of such Plan are incorporated herein by reference.
The unpaid principal amount of this Note shall be and become
immediately due and payable without notice or demand, at the
option of the Company, upon the occurrence of any of the
following events:
(a) the termination of the Employee's employment with
the Company, with or without cause, for any reason or for no
reason;
(b) the death or disability of the Employee;
(c) the failure of the Employee to pay his or her
debts as they become due, the insolvency of the Employee,
5PAGE
<PAGE>
the filing by or against the Employee of any petition under
the United States Bankruptcy Code (or the filing of any
similar petition under the insolvency law of any
jurisdiction), or the making by the Employee of an
assignment or trust mortgage for the benefit of creditors or
the appointment of a receiver, custodian or similar agent
with respect to, or the taking by any such person of
possession of, any property of the Employee; or
(d) the issuance of any writ of attachment, by trustee
process or otherwise, or any restraining order or injunction
not removed, repealed or dismissed within thirty (30) days
of issuance, against or affecting the person or property of
the Employee or any liability or obligation of the Employee
to the Company.
In case any payment herein provided for shall not be paid
when due, the Employee further promises to pay all costs of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Company in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of the Company, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion.
The Employee hereby waives presentment, demand, notice of
prepayment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note. The undersigned hereby assents to any
indulgence and any extension of time for payment of any
indebtedness evidenced hereby granted or permitted by the
Company.
This Note has been made pursuant to the Company's Stock
Holdings Assistance Plan and shall be governed by and construed
in accordance with, such Plan and the laws of the State of
Delaware and shall have the effect of a sealed instrument.
_______________________________
Employee Name: _________________
________________________
Witness
Exhibit 11
THERMOQUEST CORPORATION
Computation of Earnings per Share
Three Months Ended
----------------------------------
September 28, September 30,
1996 1995
--------------------------------------------------------------------------
Computation of Primary Earnings
per Share:
Net Income (a) $ 6,728,000 $ 4,632,000
----------- -----------
Shares:
Weighted average shares outstanding 48,450,000 45,000,000
Add: Shares issuable from assumed
exercise of options (as
determined by the application
of the treasury stock method) - 187,320
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 48,450,000 45,187,320
----------- -----------
Primary Earnings per Share (a) / (b) $ .14 $ .10
=========== ===========
PAGE
<PAGE>
THERMOQUEST CORPORATION
Computation of Earnings per Share (continued)
Nine Months Ended
----------------------------------
September 28, September 30,
1996 1995
--------------------------------------------------------------------------
Computation of Primary Earnings
per Share:
Net Income (a) $19,257,000 $13,870,000
----------- -----------
Shares:
Weighted average shares outstanding 47,418,681 45,000,000
Add: Shares issuable from assumed
exercise of options (as
determined by the application
of the treasury stock method) - 187,320
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 47,418,681 45,187,320
----------- -----------
Primary Earnings per Share (a) / (b) $ .41 $ .31
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOQUEST
CORP.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 28, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 159,553
<SECURITIES> 7,524
<RECEIVABLES> 81,155
<ALLOWANCES> 4,454
<INVENTORY> 61,197
<CURRENT-ASSETS> 315,872
<PP&E> 69,505
<DEPRECIATION> 17,513
<TOTAL-ASSETS> 532,419
<CURRENT-LIABILITIES> 111,333
<BONDS> 104,831
0
0
<COMMON> 485
<OTHER-SE> 292,923
<TOTAL-LIABILITY-AND-EQUITY> 532,419
<SALES> 227,146
<TOTAL-REVENUES> 227,146
<CGS> 120,529
<TOTAL-COSTS> 120,529
<OTHER-EXPENSES> 16,605
<LOSS-PROVISION> 56
<INTEREST-EXPENSE> 5,501
<INCOME-PRETAX> 33,495
<INCOME-TAX> 14,238
<INCOME-CONTINUING> 19,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,257
<EPS-PRIMARY> .41
<EPS-DILUTED> 0
</TABLE>
