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 June 28, 1997.
[ ] 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 July 25, 1997
---------------------------- ----------------------------
Common Stock, $.01 par value 50,222,450
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMOQUEST CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
June 28, December 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $221,004 $174,978
Available-for-sale investments, at quoted
market value (amortized cost of $1,709
and $7,430) 1,713 7,452
Accounts receivable, less allowances of
$4,572 and $4,459 103,206 73,669
Inventories:
Raw materials and supplies 21,145 10,923
Work in process and finished goods 51,145 43,089
Prepaid expenses 3,238 1,003
Prepaid income taxes 12,343 11,469
-------- --------
413,794 322,583
-------- --------
Property, Plant, and Equipment, at Cost 87,822 67,225
Less: Accumulated depreciation and
amortization 19,038 16,297
-------- --------
68,784 50,928
-------- --------
Patents and Other Assets 3,683 4,368
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 3) 265,711 157,191
-------- --------
$751,972 $535,070
======== ========
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THERMOQUEST CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 28, December 28,
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Current Liabilities:
Notes payable and current maturities of
long-term obligations $ 15,436 $ 16,732
Accounts payable 25,569 18,249
Accrued payroll and employee benefits 15,970 15,339
Accrued installation and warranty expenses 12,600 9,899
Deferred revenue 11,100 9,353
Customer deposits 3,072 6,542
Accrued income taxes 17,013 14,290
Other accrued expenses 22,130 14,475
Due to parent company and affiliates (Note 3) 166,247 839
-------- --------
289,137 105,718
-------- --------
Deferred Income Taxes 5,405 5,405
-------- --------
Accrued Pension and Other Deferred Items 15,592 16,340
-------- --------
Long-term Obligations:
5% Subordinated convertible debentures 96,250 96,250
Other 8,279 8,343
-------- --------
104,529 104,593
-------- --------
Shareholders' Investment (Note 4):
Common stock, $.01 par value, 100,000,000
shares authorized; 50,221,400 and
48,450,000 shares issued and outstanding 502 485
Capital in excess of par value 286,777 261,921
Retained earnings 56,240 39,787
Cumulative translation adjustment (6,213) 807
Net unrealized gain on available-for-sale
investments 3 14
-------- --------
337,309 303,014
-------- --------
$751,972 $535,070
======== ========
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
------------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
Revenues $116,542 $ 81,692
-------- --------
Costs and Operating Expenses:
Cost of revenues 60,937 44,724
Selling, general, and administrative
expenses 29,096 19,741
Research and development expenses 7,741 6,088
-------- --------
97,774 70,553
-------- --------
Operating Income 18,768 11,139
Interest Income 3,351 2,390
Interest Expense (includes $1,394 to parent
company in 1997; Note 3) (3,068) (1,900)
-------- --------
Income Before Provision for Income Taxes 19,051 11,629
Provision for Income Taxes 8,418 4,942
-------- --------
Net Income $ 10,633 $ 6,687
======== ========
Earnings per Share:
Primary $ .21 $ .14
======== ========
Fully diluted $ .20 $ .14
======== ========
Weighted Average Shares:
Primary 50,219 48,410
======== ========
Fully diluted 56,242 48,410
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOQUEST CORPORATION
Consolidated Statement of Income
(Unaudited)
Six Months Ended
------------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
Revenues $205,895 $148,991
-------- --------
Costs and Operating Expenses:
Cost of revenues 107,900 80,134
Selling, general, and administrative
expenses 50,256 36,816
Research and development expenses 13,963 10,783
-------- --------
172,119 127,733
-------- --------
Operating Income 33,776 21,258
Interest Income 5,955 4,009
Interest Expense (includes $1,642 to parent
company in 1997; Note 3) (5,163) (3,599)
-------- --------
Income Before Provision for Income Taxes 34,568 21,668
Provision for Income Taxes 15,052 9,139
-------- --------
Net Income $ 19,516 $ 12,529
======== ========
Earnings per Share:
Primary $ .40 $ .27
======== ========
Fully diluted $ .38 $ .27
======== ========
Weighted Average Shares:
Primary 49,403 46,903
======== ========
Fully diluted 55,426 46,903
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOQUEST CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
------------------------
June 28, June 29,
(In thousands) 1997 1996
------------------------------------------------------------------------
Operating Activities:
Net income $ 19,516 $ 12,529
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,369 4,228
Provision for losses on accounts
receivable 445 5
Other noncash expenses 616 722
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable (15,348) 10,892
Inventories (1,758) (2,444)
Other current assets (94) (472)
Accounts payable 3,646 (2,326)
Other current liabilities (2,409) 3,729
Other 473 768
--------- ---------
Net cash provided by operating activities 11,456 27,631
--------- ---------
Investing Activities:
Acquisitions, net of cash acquired - (5,113)
Cash balance of acquired businesses (Note 3) 6,107 -
Purchases of available-for-sale investments - (1,650)
Proceeds from sale and maturities of
available-for-sale investments 5,600 -
Purchases of property, plant, and equipment (1,586) (2,042)
Proceeds from sale of property, plant,
and equipment 1,897 162
Other 80 (91)
--------- ---------
Net cash provided by (used in) investing
activities 12,098 (8,734)
--------- ---------
Financing Activities:
Net proceeds from issuance of Company
common stock (Note 4) 24,873 47,778
Decrease in short-term obligations (591) (2,696)
Repayment of long-term obligations (1,017) (482)
Other - (95)
--------- ---------
Net cash provided by financing activities $ 23,265 $ 44,505
--------- ---------
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THERMOQUEST CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
-------------------------
June 28, June 29,
(In thousands) 1997 1996
------------------------------------------------------------------------
Exchange Rate Effect on Cash $ (793) $ (428)
--------- --------
Increase in Cash and Cash Equivalents 46,026 62,974
Cash and Cash Equivalents at Beginning
of Period 174,978 120,354
--------- ---------
Cash and Cash Equivalents at End of Period $ 221,004 $ 183,328
========= =========
Noncash Activities (Note 3):
Fair value of assets of acquired companies $ 187,885 $ 69,741
Due to parent company for acquisitions (160,127) (27,296)
Cash paid for acquired companies - (5,852)
--------- ---------
Liabilities assumed of acquired companies $ 27,758 $ 36,593
========= =========
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 June
28, 1997, the results of operations for the three- and six-month periods
ended June 28, 1997, and June 29, 1996, and the cash flows for the
six-month periods ended June 28, 1997, and June 29, 1996. Interim results
are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 28, 1996, 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 Annual
Report on Form 10-K, as amended, for the fiscal year ended December 28,
1996, filed with the Securities and Exchange Commission.
2. Presentation
Certain amounts in 1996 have been reclassified to conform to the
presentation in the 1997 financial statements.
3. Acquisitions
In March 1997, Thermo Instrument Systems Inc. (Thermo Instrument)
acquired approximately 95% of the outstanding shares of Life Sciences
International PLC (Life Sciences), a London Stock Exchange-listed
company. Subsequently, Thermo Instrument acquired the remaining shares of
Life Sciences' capital stock. In July 1997, the Company agreed to acquire
three business units within Life Sciences' Laboratory Products Group, as
well as Life Sciences' Hypersil operations, from Thermo Instrument for
$160.1 million, subject to a post-closing adjustment. The Laboratory
Products businesses develop, manufacture, and distribute laboratory
equipment to the research and analytical chemistry laboratory
marketplace. Hypersil manufactures liquid chromatography media and
columns used in high performance liquid chromatography in the
pharmaceutical, food and beverage, chemical production, and forensic
science markets, and for many other applications in analytical
laboratories. The aggregate purchase price of $160.1 million consists of
$107.0 million in cash and the assumption of $53.1 million of debt
payable to Thermo Instrument. The purchase price represents the sum of
the net tangible book value of the Laboratory Products businesses and
Hypersil as of June 28, 1997, plus a percentage of Thermo Instrument's
total cost in excess of net assets acquired associated with its
acquisition of Life Sciences, based on the aggregate 1996 revenues of the
Laboratory Products businesses and Hypersil relative to Life Sciences'
1996 consolidated revenues. The purchase price is subject to a
post-closing adjustment based on final determination of the net tangible
book value of the acquired businesses and a final calculation of Thermo
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THERMOQUEST CORPORATION
3. Acquisitions (continued)
Instrument's total cost in excess of net assets acquired associated with
the acquisition of Life Sciences.
The aggregate purchase price of $160.1 million is included in due to
parent company and affiliates in the accompanying 1997 balance sheet. The
Company expects to pay this amount, with interest, to Thermo Instrument
in the third quarter of 1997.
Because the Company, the Laboratory Products businesses, and Hypersil
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
1997 historical financial information has been restated to include the
results of the Laboratory Products businesses and Hypersil from March 12,
1997, the date these businesses were acquired by Thermo Instrument. The
purchase price included $3.1 million for the increase in the net book
value from the date the businesses were acquired by Thermo Instrument to
June 28, 1997. This amount was recorded as a reduction in retained
earnings.
The cost of these acquisitions exceeded the estimated fair value of
the acquired net assets by $112.4 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.
Based on unaudited data, the following table presents selected
financial information of the Company, the Laboratory Products businesses,
and Hypersil on a pro forma basis, assuming the companies had been
combined since the beginning of 1996.
Three Six
Months Ended Months Ended
------------ ---------------------
(In thousands except June 29, June 28, June 29,
per share amounts) 1996 1997 1996
------------------------------------------------------------------------
Revenues $118,353 $229,198 $218,022
Net income 8,318 18,220 12,077
Earnings per share:
Primary .17 .37 .26
Fully diluted .17 .35 .26
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of the Laboratory Products businesses and Hypersil been made
at the beginning of 1996.
4. Sale of Shares
In March 1997, the Company sold 1,768,500 shares of its common stock
for net proceeds of approximately $24.8 million. Following the sale,
Thermo Instrument owned 90% of the Company's outstanding common stock.
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THERMOQUEST CORPORATION
5. Litigation
The Company's Finnigan Corporation (Finnigan) subsidiary has filed
complaints against Bruker-Franzen Analytik GmbH and its U.S. affiliate
(Bruker), and Hewlett-Packard Company (Hewlett-Packard), for alleged
violation of two key U.S. patents owned by Finnigan. The patents pertain
to methods used in ion-trap mass spectrometers.
One of Finnigan's complaints was filed in the United States District
Court for the District of Massachusetts and the other was filed with the
United States International Trade Commission (ITC) in Washington, DC.
Finnigan has asked for damages to compensate for the infringements, for
injunctions against further infringement, and for an order excluding
further imports into the U.S. of ion-trap mass spectrometers that use the
patented methods.
The ITC has instituted an investigation in response to Finnigan's
complaint, and is expected to complete that investigation by April 1998.
The District Court action has, at the request of Hewlett-Packard and
Bruker, been stayed pending completion of the ITC investigation.
Bruker has presented counterclaims in the ITC investigation. The
counterclaims, which Bruker has indicated it will seek to remove to the
District Court in Massachusetts, allege that the Finnigan patents are
invalid and unenforceable and are not infringed by the mass spectrometers
co-marketed by Bruker. They also allege that Finnigan has violated U.S.
and Massachusetts antitrust laws and engaged in unfair competition by
attempting to maintain a monopoly position and restrain trade through
enforcement of allegedly fraudulently obtained patents. Bruker has asked
for judgment consistent with its counterclaims, and for three times the
antitrust damages (including attorneys' fees) it has sustained.
There can be no assurance as to the outcome of these matters.
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.
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 under the caption "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K, as amended,
for the year ended December 28, 1996, filed with the Securities and
Exchange Commission.
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THERMOQUEST CORPORATION
Overview
The Company develops, manufactures, and sells analytical products
including 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 analytical products are
used primarily by pharmaceutical 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
silicon chips, and for quality control; by food and beverage companies
for quality control and to test for product contamination; and in
forensic applications.
Effective March 12, 1997, the Company acquired three business units
within the Laboratory Products Group of Life Sciences International (Life
Sciences), as well as Life Sciences' Hypersil operations, from Thermo
Instrument Systems Inc. (Thermo Instrument; Note 3). The Laboratory
Products businesses develop, manufacture, and sell scientific equipment
including centrifuges, ultra-low temperature freezers, incubators,
orbital shakers, vacuum concentrators, and electrophoresis equipment.
These products are used in a variety of laboratories, including
pharmaceutical, medical, industrial, and environmental laboratories
worldwide. Hypersil develops, manufactures, and sells liquid
chromatography media and columns used in high performance liquid
chromatography. These products are sold to a variety of laboratories
worldwide, including pharmaceutical, industrial, research, and to the
food and beverage industry.
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. Where
appropriate, the Company uses forward contracts to reduce its exposure to
currency fluctuations.
Results of Operations
Second Quarter 1997 Compared With Second Quarter 1996
Revenues increased 43% to $116.5 million in the second quarter of
1997 from $81.7 million in the second quarter of 1996. Revenues increased
$36.3 million due to the acquisition of three business units within Life
Sciences' Laboratory Products Group, as well as Life Sciences' Hypersil
operations, from Thermo Instrument, effective March 12, 1997 (Note 3). In
addition, revenues from the Company's existing mass spectrometry business
increased $6.0 million, partly due to the continued success of a liquid
chromatograph/ion-trap mass spectrometer instrument introduced in the
first quarter of 1996. These increases were offset in part by a decrease
of $4.3 million in revenues due to the strengthening of the U.S. dollar
relative to foreign currencies in countries in which the Company operates
and a decrease of $3.4 million in revenues at CE Instruments, primarily
due to the discontinuation of distributing products for businesses of
11PAGE
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THERMOQUEST CORPORATION
Second Quarter 1997 Compared With Second Quarter 1996 (continued)
Fisons plc that were acquired by Thermo Instrument in March 1996.
The gross profit margin increased to 47.7% in the second quarter of
1997 from 45.3% in the second quarter of 1996. The increase in the gross
profit margin was primarily due to the increase in sales of higher-margin
mass spectrometry products, offset in part by the inclusion of
lower-margin revenues from the Laboratory Products businesses. The gross
profit margin for the Laboratory Products businesses was 41% in the
second quarter of 1997. The Company's goal is to increase the gross
profit margin at the Laboratory Products businesses 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 remained relatively unchanged at 25.0% in the second quarter of
1997, compared with 24.2% in the second quarter of 1996. Research and
development expenses as a percentage of revenues decreased to 6.6% in
1997 from 7.5% in 1996, primarily due to lower research and development
expenditures as a percentage of revenues at the Laboratory Products
businesses.
Interest income increased to $3.4 million in the second quarter of
1997 from $2.4 million in the second quarter of 1996, primarily as a
result of interest income earned on invested proceeds from the Company's
sale of its common stock in March 1997 (Note 4) and, to a lesser extent,
the inclusion of interest income from the Laboratory Products businesses.
The increases in interest income were offset in part by a reduction in
cash as a result of the acquisition of CE Instruments and MassLab
Instruments (MassLab) in 1996. The Company's interest income will
decrease as a result of the cash payment of $160.1 million it expects to
make to Thermo Instrument in the third quarter of 1997 for the purchase
of the Laboratory Products businesses and Hypersil operations of Life
Sciences. Interest expense increased to $3.1 million in 1997 from $1.9
million in 1996, primarily due to the inclusion of interest expense on
the debt assumed as part of the acquisition of the Laboratory Products
businesses and Hypersil. The Company expects to repay this debt to Thermo
Instrument in the third quarter of 1997.
The effective tax rate was 44.2% in the second quarter of 1997,
compared with 42.5% in the second quarter of 1996. 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 1997 from 1996, primarily due to higher nondeductible
amortization of cost in excess of net assets of acquired companies in
1997 compared with 1996.
The Company is involved in a patent infringement proceeding relating
to its ion-trap mass spectrometers (Note 5).
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THERMOQUEST CORPORATION
First Six Months Compared With First Six Months 1996
Revenues increased 38% to $205.9 million in the first six months of
1997 from $149.0 million in the first six months of 1996. Revenues
increased $47.4 million due to the acquisition of three business units
within Life Sciences' Laboratory Products Group, as well as Life
Sciences' Hypersil operations, from Thermo Instrument, effective March
12, 1997 (Note 3). In addition, revenues increased $16.8 million at the
Company's existing mass spectrometry business, partly due to the
continued success of a liquid chromatograph/ion-trap mass spectrometer
instrument introduced in the first quarter of 1996, and increased $9.2
million due to the inclusion for the full six months of 1997 of CE
Instruments and MassLab, which were acquired from Thermo Instrument
effective March 29, 1996. These increases were offset in part by a
decrease of $9.1 million in revenues due to the strengthening of the U.S.
dollar relative to foreign currencies in countries in which the Company
operates, primarily the German deutsche mark and the Japanese yen, and,
to a lesser extent, a decrease in revenues at CE Instruments in the
second quarter of 1997, primarily due to the reason discussed in the
results of operations for the second quarter. In addition, revenues in
the first quarter of 1996 included $2.6 million from the sale of products
manufactured by third parties.
The gross profit margin increased to 47.6% in the first six months of
1997 from 46.2% in the first six months of 1996. The increase in the
gross profit margin was primarily due to the increase in sales of
higher-margin mass spectrometry products, offset in part by the inclusion
of lower-margin revenues from the Laboratory Products businesses, which
recorded an adjustment to expense of $1.0 million in the first quarter of
1997 relating to the revaluation of the finished goods inventories
acquired by the Company. The gross profit margin for the Laboratory
Products businesses was 38% in the first six months of 1997.
Selling, general, and administrative expenses as a percentage of
revenues remained relatively unchanged at 24.4% in the first six months
of 1997, compared with 24.7% in the first six months of 1996. Research
and development expenses as a percentage of revenues decreased to 6.8% in
1997 from 7.2% in 1996, primarily due to the reason discussed in the
results of operations for the second quarter.
Interest income increased to $6.0 million in the first six months of
1997 from $4.0 million in the first six months of 1996, 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 and sale
of common stock in March 1997 and, to a lesser extent, the inclusion of
interest income from the Laboratory Products businesses. The increase in
interest income was offset in part by a reduction in cash as a result of
the acquisition of CE Instruments and MassLab. Interest expense increased
to $5.2 million in 1997 from $3.6 million in 1996, primarily due to the
inclusion of interest expense on the debt assumed as part of the
acquisition of the Laboratory Products businesses and Hypersil.
The effective tax rate was 43.5% in the first six months of 1997,
compared with 42.2% in the first six months of 1996. The effective tax
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THERMOQUEST CORPORATION
First Six Months Compared With First Six Months 1996 (continued)
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 1997 from 1996, primarily due to the reason discussed in the
results of operations for the second quarter.
Liquidity and Capital Resources
Consolidated working capital was $124.7 million at June 28, 1997,
compared with $216.9 million at December 28, 1996. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$222.7 million at June 28, 1997, compared with $182.4 million at December
28, 1996. Cash provided by operating activities was $11.5 million in the
first six months of 1997. Accounts receivable increased $15.3 million
primarily due to increased shipments at the end of the second quarter.
At June 28, 1997, $19.2 million of the Company's cash and cash
equivalents were held by its foreign subsidiaries. While this cash can be
used outside of the United States, including for acquisitions,
repatriation of this cash into the United States would be subject to
foreign withholding taxes and could also be subject to a United States
tax.
The Company's investing activities provided $12.1 million of cash in
the first six months of 1997. In July 1997, the Company agreed to
purchase three business units within Life Sciences' Laboratory Products
Group, as well as Life Sciences' Hypersil operations, from Thermo
Instrument for approximately $160.1 million, subject to a post-closing
adjustment (Note 3). The aggregate purchase price of $160.1 million,
which consists of $107.0 million in cash and the assumption of $53.1
million of debt payable to Thermo Instrument, is included in due to
parent company and affiliates in the accompanying 1997 balance sheet. The
Company expects to pay this amount, with interest, to Thermo Instrument
in the third quarter of 1997. During the first six months of 1997, the
Company expended $1.6 million for purchases of property, plant, and
equipment and recorded $1.9 million in proceeds from the sale of
property, plant, and equipment, primarily from the sale of a building
acquired in connection with the acquisition of the Laboratory Products
businesses. During the remainder of 1997, the Company plans to expend
approximately $3.5 million for property, plant, and equipment.
The Company's financing activities provided $23.3 million of cash in
the first six months of 1997. In March 1997, the Company sold 1,768,500
shares of its common stock for net proceeds of approximately $24.8
million (Note 4). During the first six months of 1997, the Company used
cash of $1.6 million for the repayment of short- and long-term
borrowings.
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
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THERMOQUEST CORPORATION
Liquidity and Capital Resources (continued)
the capital markets, or short-term borrowings from Thermo Instrument or
Thermo Electron Corporation, although there is no agreement with these
companies to ensure that funds will be available on acceptable terms or
at all. The Company believes that its existing resources are sufficient
to meet the capital requirements of its existing businesses for the
foreseeable future.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
On June 2, 1997, at the Annual Meeting of Shareholders, the
shareholders elected seven incumbent directors to a one-year term
expiring in 1998. The Directors elected at the meeting were: Dr. Richard
W.K. Chapman, Dr. George N. Hatsopoulos, Frank Jungers, Earl R. Lewis,
Anthony J. Pellegrino, Dr. Michael E. Porter, and Arvin H. Smith. Each
director, except Dr. Chapman, received 48,372,377 shares voted in favor
of his election and 3,963 shares voted against. Dr. Chapman received
48,372,177 shares voted in favor of his election and 4,163 shares voted
against. No abstentions or broker nonvotes were recorded on the election
of directors.
The shareholders also approved a proposal to adopt an employees'
stock purchase program and to reserve 100,000 shares of the Company's
common stock for issuance thereunder as follows: 48,354,827 shares voted
in favor, 9,500 shares voted against, 11,600 shares abstained, and 413
broker nonvotes recorded.
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 6th day of August
1997.
THERMOQUEST CORPORATION
Paul F. Kelleher
--------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
--------------------
John N. Hatsopoulos
Vice President and Chief
Financial Officer
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THERMOQUEST CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
2 Asset and Share Purchase Agreement dated as of
July 30, 1997, between the Company and Thermo
Instrument Systems Inc.
11 Statement re: Computation of Earnings per Share.
27 Financial Data Schedule.
Exhibit 2
ASSET AND SHARE PURCHASE AGREEMENT
BETWEEN
THERMOQUEST CORPORATION
AND
THERMO INSTRUMENT SYSTEMS INC.
_____________________________
Dated as of July 30, 1997
_____________________________
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ASSET AND SHARE PURCHASE AGREEMENT
THIS ASSET AND SHARE PURCHASE AGREEMENT (this "Agreement")
dated as of July 30, 1997 is between ThermoQuest Corporation
("TMQ"), a Delaware corporation, and Thermo Instrument Systems
Inc. ("THI"), a Delaware corporation.
Preliminary Statement
1. Life Sciences International Limited ("LSI"), which is a
majority-owned subsidiary of THI, owns, directly or through
wholly-owned subsidiaries, all of the issued and outstanding
shares (the "Forma Shares") of Forma Scientific Inc. ("Forma"), a
Delaware corporation; all of the issued and outstanding shares
(the "German Shares") of Life Sciences International GmbH ("LSI
GmbH"), a company organized under the laws of Germany; all of the
issued and outstanding shares (the "Denley Shares") of Denley
Instruments Limited ("Denley"), a private limited liability
company organized under the laws of the United Kingdom; all of
the issued and outstanding shares (the "English Shares") of Life
Sciences International (UK) Limited ("LSI UK"), a private limited
liability company organized under the laws of the United Kingdom;
99% of the issued and outstanding shares (the "Hong Kong Shares")
of Life Sciences International (Hong Kong) Limited ("LSI HK");
all of the issued and outstanding shares (the "E-C Shares") of
E-C Apparatus Limited ("E-C"), a private limited liability
company organized under the laws of the United Kingdom; all of
the issued and outstanding shares (the "Savant UK Shares") of
Savant Instruments Limited ("Savant UK"), a private limited
liability company organized under the laws of the United Kingdom;
all of the issued and outstanding shares (the "Hypersil Shares")
of Hypersil Limited ("Hypersil UK"), a private limited liability
company organized under the laws of the United Kingdom; and all
of the issued and outstanding shares (the "Forma UK Shares") of
Forma Scientific Limited ("Forma UK"), a private limited
liability company organized under the laws of the United Kingdom.
2. LSI owns, directly or through wholly-owned
subsidiaries, all of the issued and outstanding shares of Life
Sciences International (Europe) Limited ("LSI Europe"), a private
limited liability company organized under the laws of the United
Kingdom. LSI Europe is the sole owner and operator of the assets
used in LSI's Hypersil high-performance liquid chromatography
division ("Hypersil").
3. The Forma Shares, the German Shares, the Denley Shares,
the English Shares, the Hong Kong Shares, the E-C Shares, the
Savant UK Shares, the Hypersil Shares and the Forma UK Shares are
referred to collectively as the "Shares". THI, LSI, those of
LSI's wholly-owned subsidiaries that own Shares and LSI Europe
(with respect to the assets of the Hypersil division (the
"Hypersil Assets")) are referred to individually as a "Seller"
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and collectively as the "Sellers". Forma, LSI GmbH, Denley, LSI
UK, LSI HK, E-C, Savant UK, Hypersil UK, Forma UK and, except
where the context otherwise requires, Hypersil, are referred to
collectively as the "Companies" and individually as a "Company".
4. TMQ desires to purchase, or cause its wholly-owned
subsidiaries to purchase, and THI desires to sell, or to cause
its subsidiaries to sell, the Shares and the Hypersil Assets for
the consideration set forth below, subject to the terms and
conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual promises
hereinafter set forth and other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereby
agree as follows:
SECTION 1 - PURCHASE AND SALE OF THE SHARES
1.1 Purchase of the Shares and Hypersil Assets from the
Sellers. Subject to and upon the terms and conditions of this
Agreement, at the closing of the transactions contemplated by
this Agreement (the "Closing"), THI shall cause its subsidiaries
to sell, transfer, convey, assign and delivery to TMQ, or its
wholly-owned subsidiaries, and TMQ or its wholly-owned
subsidiaries shall purchase, acquire and accept the Shares and
the Hypersil Assets.
1.2 Further Assurances. At any time and from time to time
after the Closing, at TMQ's request and without further
consideration, each Seller shall promptly execute and deliver
such instruments of sale, transfer, conveyance, assignment and
confirmation, and take all such other action as TMQ may
reasonably request, more effectively to transfer, convey and
assign to TMQ, and to confirm TMQ's title to, all of the Shares
and the Hypersil Assets owned by such Seller, to put TMQ in
actual possession and operating control of the assets, properties
and business of the Companies and Hypersil, to assist in
exercising all rights with respect thereto and to carry out the
purpose and intent of this Agreement.
1.3 Purchase Price for the Shares and the Hypersil Assets.
(a) The purchase price to be paid by TMQ for the
Shares and the Hypersil Assets (the "Purchase Price") shall
consist of (i) $106,977,400 in cash and (ii) 1,000 shares of
common stock of TMQ (the "TMQ Shares").
(b) TMQ and THI acknowledge and agree that the
Purchase Price represents an estimate of the sum of (i) the net
operating assets of the Companies as of June 28, 1997, plus (ii)
a percentage of the total goodwill associated with THI's
acquisition of LSI equal to the sales of the Companies for the
1996 fiscal year relative to the total sales of LSI during such
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period (the "Goodwill Percentage"). Promptly following the
Closing Date, but in any event no later than September 30, 1997,
THI will prepare a draft statement of the net operating assets of
the Companies (the "Companies Net Asset Statement"), and a draft
calculation of THI's total goodwill associated with the
acquisition of LSI (the "THI Goodwill Statement") in each case as
of June 28, 1997. TMQ will review such statements and provide
THI with any objections thereto within 30 days after TMQ's
receipt thereof. If TMQ does not object within such 30-day
period, then the THI Goodwill Statement and the Companies Net
Asset Statement shall be deemed to be accepted by TMQ and shall
become final. If TMQ does object to either statement, then the
parties will use best efforts to resolve any such objections
within 30 days. If the parties are unable to resolve such
objections within such 30-day period, then any disputed items
will be resolved by an accounting firm designated jointly by TMQ
and THI and the statements shall be finalized in accordance with
the determination of such firm. Upon finalization of the
Companies Net Asset Statement and the THI Goodwill Statement as
provided above, the Purchase Price shall be increased or
decreased, as the case may be, by (A) the amount by which the
net operating assets of the Companies as shown on the Companies
Net Asset Statement are greater than or less than $48,288,000 and
(B) the amount by which the Goodwill Percentage of THI's total
goodwill as shown on the THI Goodwill Statement is greater than
or less than $111,840,000. Any payment due by TMQ or THI to the
other under this section 1.3(b) shall be accompanied by interest
from the date hereof at a rate equal to the Commercial Paper
Composite Rate plus 25 basis points. For purposes of this
section 1.3(b), "goodwill" means cost in excess of net tangible
assets acquired, and does not include any restructuring or
similar costs or reserves accrued in connection with actions
taken by the businesses of LSI after June 28, 1997 to reduce
costs or enhance profitability, and "net operating assets" means
tangible assets minus total liabilities, determined in accordance
with THI's accounting policies.
1.4 Closing. The Closing shall take place at the offices
of THI at 81 Wyman Street, Waltham, Massachusetts. At the
Closing THI shall deliver, or cause its subsidiaries to deliver,
certificates evidencing the Shares duly endorsed in blank or with
stock powers duly executed and such deeds, bills of sale and
other instruments of conveyance, transfer and assignment as shall
be sufficient to vest in TMQ or its assignee all of the right,
title and interest in and to the Hypersil Assets. At the Closing
TMQ shall deliver the Purchase Price to THI or to such of its
subsidiaries as may be Sellers, together with interest from June
29, 1997, accrued at a rate equal to the 90-day Commercial Paper
Deposit Rate plus 25 basis points, set as of June 29, 1997 and at
the beginning of each fiscal quarter thereafter.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF THI
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Except as set forth on the disclosure schedule delivered to
TMQ on the date hereof (the "Disclosure Schedule"), THI
represents and warrants to TMQ as follows. The term "knowledge,"
when used in this Agreement, shall mean actual knowledge after
reasonable investigation.
2.1 Organization and Qualification. Each of the Sellers
and the Companies is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation and has full corporate power and authority to
own, lease and operate its assets and to carry on its business as
now being and as heretofore conducted. Each of the Sellers and
the Companies is qualified or otherwise authorized to transact
business as a foreign corporation in all jurisdictions in which
such qualification or authorization is required by law, except
for jurisdictions in which the failure to be so qualified or
authorized would not have a material adverse effect on the
assets, properties, business, results of operations, condition
(financial or otherwise) or prospects of the Companies taken as a
whole.
2.2 Authority. THI has full right, power, capacity and
authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby and each of the
Sellers has full right, power, capacity and authority to
consummate the transactions contemplated hereby to be performed
by such Seller. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary
corporate action on the part of THI. This Agreement has been duly
and validly executed and delivered by THI and constitutes the
valid and binding obligation of THI, enforceable against it in
accordance with the terms hereof. Neither the execution,
delivery and performance of this Agreement, nor the consummation
of the transactions contemplated hereby will (i) conflict with or
result in a violation, breach, termination or acceleration of, or
default under (or would result in a violation, breach,
termination, acceleration or default with the giving of notice or
passage of time, or both) any of the terms, conditions or
provisions of the organizational documents of any Seller or
Company, or of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which any of
Seller or Company is a party or by which any Seller or Company or
any of their respective properties or assets may be bound or
affected; (ii) result in the violation of any order, writ,
injunction, decree, statute, rule or regulation applicable to any
Seller or Company or any of their respective properties or assets
(including without limitation the Hypersil Assets); (iii) result
in the imposition of any lien, encumbrance, charge or claim upon
any assets of any of the Companies; or (iv) entitle any employee
of any of the Companies to severance or other payments or create
any other obligation to an employee. No consent or approval by,
or notification to or filing with, any court, governmental
authority or third party is required in connection with the
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execution, delivery and performance of this Agreement by any
Seller or the consummation of the transactions contemplated
hereby.
2.3 Capitalization and Title to Shares and the Hypersil
Assets.
(a) The authorized share capital of the Companies is
set forth on Exhibit A hereto. With respect to each Company, the
Seller set forth opposite the name of such Company on Exhibit A
is the record and beneficial owner of all of the issued and
outstanding shares of such Company. All of the Shares are duly
authorized and are validly issued, fully paid, nonassessable and
free of preemptive rights.
(b) Except as set forth on Exhibit A, there are not
any other shares of capital stock of any Company authorized or
outstanding or any subscriptions, options, conversion or exchange
rights, warrants, repurchase or redemption agreements, or other
agreements or commitments obligating any Company to issue,
transfer, sell, repurchase or redeem any shares of its capital
stock or other securities of any Company. There are no written
shareholder agreements, voting trusts, proxies or other
agreements, instruments or understandings with respect to the
voting of the capital stock of any Company. The books and
records of each Company, including without limitation the books
of account, minute books, stock certificate books and stock
ledgers, are complete and correct and accurately reflect the
conduct of the business and affairs of such Company.
(c) Except as set forth on Exhibit A, LSI Europe has
good, full and marketable title to, or a valid and continuing
leasehold interest in, all of the properties and assets, real and
personal that comprise the Hypersil Assets, free and clear of all
mortgages, liens, attachments, pledges, encumbrances or security
interests of any nature whatsoever.
2.4 Subsidiaries and Other Affiliates.
(a) The Disclosure Schedule sets forth all
Subsidiaries of the Companies and the jurisdiction in which each
is incorporated. All shares of the capital stock of each
Subsidiary owned by the Companies are owned free and clear of any
charges, liens, encumbrances, security interests or adverse
claims. As used in this Agreement, "Subsidiary" means any
corporation or other legal entity of which a party to this
Agreement owns, directly or indirectly, fifty percent (50%) or
more of the stock or other equity interest entitled to vote for
the election of directors and representations, warranties and
covenants referring to any Company contained herein shall be
deemed to mean such Company and each of its Subsidiaries, both
separately and together as a consolidated whole, unless and
except to the extent expressly indicated otherwise.
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(b) There are not any other shares of capital stock of
any Subsidiary of any Company authorized or outstanding or any
subscriptions, options, conversion or exchange rights, warrants,
repurchase or redemption agreements, or other agreements or
commitments obligating any Subsidiary of any Company to issue,
transfer, sell, repurchase or redeem any shares of its capital
stock or other securities. There are no shareholder agreements,
voting trusts, proxies or other agreements, instruments or
understandings with respect to the voting of the capital stock of
any Subsidiary of any Company.
(c) Except for its Subsidiaries, none of the
Companies, directly or indirectly, owns any material equity
interest in any corporation, partnership, joint venture or other
entity.
2.5 Financial Statements. THI has delivered to TMQ prior
to the execution of this Agreement true and complete copies of:
the unaudited consolidated balance sheet of the Companies as at
June 28, 1997 (the "Balance Sheet"), and the unaudited
consolidated statements of earnings of the Companies for the
six-month period ended June 28, 1997 (collectively, the
"Financial Statements"). The Financial Statements have been
prepared from, and are in accordance with, the books and records
of LSI and fairly present the financial condition, results of
operations, and cash flows of the Companies as at the dates and
for the periods indicated, in each case in accordance with U.K.
generally accepted accounting principles applied on a basis
consistent with previous years subject to normal year-end
adjustments and footnote disclosures, which in the aggregate are
not material.
2.6 Absence of Undisclosed Liabilities; No Dealings with
Affiliates. As of the date of the Balance Sheet, none of the
Companies had any material liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise and
whether due or to become due (including without limitation,
liabilities as guarantor or otherwise with respect to obligations
of others or liabilities for taxes due or then accrued or to
become due), required to be reflected or disclosed on the Balance
Sheet that were not adequately reflected or reserved against on
the Balance Sheet. None of the Companies has any liabilities of
the type required to be reflected or disclosed on a balance sheet
in accordance with U.K. generally accepted accounting principles,
other than liabilities (i) adequately reflected or reserved
against on the Balance Sheet, (ii) incurred since the date of the
Balance Sheet in the ordinary course of business and consistent
with past practice, (iii) that would not, in the aggregate, have
a material adverse effect on the Companies taken as a whole, or
(iv) disclosed in this Agreement. None of the Companies has any
contractual arrangement with or commitment to or from any of its
stockholders, officers, management, directors or employees (or
their family members) other than such as may have been entered
into in the normal course of employment, including, without
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limiting the generality of the foregoing, being directly or
indirectly a joint investor or coventurer with respect to, or
owner, lessor, lessee, licenser or licensee of, any real or
personal property, tangible or intangible, owned or used by, or a
lender to or debtor of, such Company.
2.7 Taxes. Each of the Companies has accurately prepared
and duly and timely filed all federal, state, local, provincial
or foreign tax and other returns and reports which were required
to be filed, in respect of all income, franchise, excise, sales,
use, property (real and personal), VAT, payroll and other taxes,
levies, imports, duties, license and registration fees, charges
or withholdings of any nature whatsoever (collectively "Taxes"),
and to the extent the liabilities of the Companies for Taxes have
not been fully discharged, adequate reserves have been
established on the Balance Sheet. None of the federal, state,
local, provincial or foreign Tax returns of the Companies has
been audited or examined by the governmental authority having
jurisdiction. No waivers of any statutes of limitation are in
effect in respect of any Taxes. None of the Companies is in
default in the payment of any Taxes due and payable or on any
assessments received in respect thereof, and there are no claims
pending or, to the best knowledge of the Companies and the
Sellers, threatened, against any of the Companies for past due
Taxes. All Taxes incurred but not yet due have been fully accrued
on the books of the Companies or full reserves have been
established therefor; the reserves indicated on the Balance Sheet
are also adequate to cover all Taxes that may become payable by
the Companies in future periods in respect of any transactions or
sales occurring on or prior to the date of the Balance Sheet.
Without limiting the generality of the foregoing, the Companies
have withheld or collected from each payment made to each of
their employees, consultants or non-U.S. payees, the amount of
all Taxes required to be withheld or collected therefrom, and has
paid the same to the proper tax receiving officers or authorized
depositories.
2.8 Properties. Each Company owns and has good title to
all of the assets and properties reflected as owned by it on the
Balance Sheet or acquired by such Company since the date of the
Balance Sheet (except personal property sold or otherwise
disposed of in the ordinary course of business since the date of
the Balance Sheet), free and clear of any lien, claim or other
encumbrance, except for (i) the liens, claims or other
encumbrances reflected on the Balance Sheet, (ii) assets and
properties disposed of, or subject to purchase or sales orders,
in the ordinary course of business since the date of the Balance
Sheet, (iii) liens, claims or other encumbrances securing the
liens of materialmen, carriers, landlords and like persons, all
of which are not yet due and payable, (iv) liens for taxes not
yet delinquent and (v) liens, claims, other encumbrances or
defects in title that, in the aggregate, are not material to the
Companies taken as a whole. The Companies own or have a valid
leasehold interest in all of the buildings, structures, leasehold
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improvements, equipment and other tangible property material to
the Companies taken as a whole, all of which are in good and
sufficient operating condition and repair, ordinary wear and tear
excepted and none of the Companies has received any notice that
any such property is in violation in any material respect of any
existing law or any building, zoning, health, safety or other
ordinance, code or regulation.
2.9 Hazardous Materials.
(a) There has been no generation, use, handling,
storage or disposal of any Hazardous Materials in violation of
common law or any applicable environmental law at any site owned
or premises leased by any of the Companies during the period of
such Company's ownership or lease that could have a material
adverse effect on the Companies taken as a whole. Nor has there
been or is there threatened any release of any Hazardous
Materials on or at any such site or premises during such period
in violation of common law or any applicable environmental law or
which created or will create an obligation to report or remediate
such release, which release or failure to report or remediate
could have a material adverse effect on the Companies taken as a
whole. For purposes of this Agreement, "Hazardous Material"
means any medical waste, flammable, explosive or radioactive
material, or any hazardous or toxic waste, substance or material,
including substances defined as "hazardous substances,"
"hazardous materials," "solid waste" or "toxic substances" under
any applicable laws or ordinances relating to hazardous or toxic
materials and substances, air pollution (including noise and
odors), water pollution, liquid and solid waste, pesticides,
drinking water, community and employee health, environmental land
use management, stormwater, sediment control, nuisances,
radiation, wetlands, endangered species, environmental
permitting, petroleum products, and all rules and regulations
promulgated pursuant to any such laws and ordinances.
(b) THI has previously made available to TMQ copies of
all documents concerning any environmental or health and safety
matter that could have a material adverse effect on the Companies
taken as a whole, if any, and copies of any environmental audits
or risk assessments, site assessments, documentation regarding
off-site disposal of Hazardous Materials, spill control plans and
material correspondence with any governmental authority regarding
the foregoing.
2.10 Accounts Receivable. All accounts and notes receivable
of the Companies shown on the Balance Sheet and all accounts and
notes receivable acquired by the Companies subsequent to the date
of the Balance Sheet have arisen in the ordinary course of
business and have been collected, or are in the process of
collection and are collectible in the ordinary course of business
and in any event within nine months from the Closing Date, in the
aggregate recorded amounts thereof, less the applicable
allowances reflected on the Balance Sheet with respect to the
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accounts and notes receivable shown thereon, or set up consistent
with past practice on the books of the Companies with respect to
the accounts and notes receivable acquired subsequent to the date
of the Balance Sheet.
2.11 Inventories. All Inventories (as defined below) of the
Companies are of a quality and quantity usable and saleable in
the ordinary course of business, except for obsolete items and
items of below-standard quality, all of which are in the
aggregate immaterial to the Companies taken as a whole. Items
included in such Inventories are carried on the books of the
Companies, and are valued on the Balance Sheet, at the lower of
cost or market. The value of obsolete materials and materials of
below-standard quality or quantity has been written down on the
books of account of the Companies to realizable market value.
The term "Inventories" includes all stock of raw materials,
work-in-process and finished goods, including but not limited to
finished goods purchased for resale, held the Companies for
manufacturing, assembly, processing, finishing, sale or resale to
others, from time to time in the ordinary course of business of
the Companies in the form in which such inventories then are held
or after manufacturing, assembling, finishing, processing,
incorporating with other goods or items, refining or the like.
2.12 Purchase and Sale Commitments. No outstanding purchase
commitments by any of the Companies are in excess of the normal,
ordinary and usual requirements of such Company, and the
aggregate of the contract prices to which the Companies have
agreed in any outstanding purchase commitments is not so
excessive when compared with current market prices for the
relevant commodities or services that a material loss is likely
to result. No outstanding sales commitment by any of the
Companies obligates such Company to sell any product or service
at a price which, because of currently prevailing and projected
costs of materials or labor, is likely to result, when all such
sales commitments are taken in the aggregate, in a material loss
to the Companies taken as a whole. There are no material
suppliers to any of the Companies of significant goods or
services with respect to which practical alternative sources of
supply, or comparable products, are not available on comparable
terms and conditions.
2.13 Governmental Authorizations. The Companies have all
governmental permits, licenses, franchises, concessions, zoning
variances and other approvals, authorizations and orders
(collectively "Permits") material to the Companies taken as a
whole. All such Permits are presently in full force and effect,
the Companies are in compliance with the requirements thereof, no
suspension or cancellation of any of them is threatened so far as
is known to the Sellers or the Companies, and the sale of the
Shares as contemplated hereby will not adversely affect the
validity or effectiveness of, and will not require, for retention
thereof after such sale, the consent or approval of any party to,
or any other person or governmental authority having jurisdiction
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of, any such Permit. None of the Companies or the Sellers has
any knowledge of any fact or circumstance which would prevent,
limit or restrict it from continuing to operate its business in
the present manner, and no new requirements pertaining to the
manner of operating its business have been issued or announced by
any governmental authority during the past year nor are there any
disputes pending between any of the Companies and any
governmental authority relating to such Company's operations as
presently being conducted or actively considered.
2.14 Intellectual Property. Each of the Companies owns, or
is licensed to use, or otherwise has the right to use all
patents, trademarks, service marks, trade names, trade secrets,
franchises, and copyrights, and all applications for any of the
foregoing, and all technology, know-how and processes necessary
for the conduct of its businesses as now conducted (collectively,
the "Proprietary Rights"). A list of all such copyrights,
trademarks, tradenames and patents, and all applications
therefor, has been furnished or made available to TMQ. None of
the Companies or the Sellers is aware of any claim by any third
party that the business of any of the Companies as currently
conducted or proposed to be conducted infringes upon the
unlicensed Proprietary Rights of others, nor have any of the
Companies or any of the Sellers received any notice or claim from
any third party of such infringement by any of the Companies.
None of the Companies or the Sellers is aware of any infringement
by any third party on, or any competing claim of right to use or
own any of, the Proprietary Rights of any of the Companies. Each
of the Companies has the right to use, free and clear of claims
or rights of others, all customer lists and computer software
material to its business as presently conducted. To the best
knowledge of the Companies and the Sellers, none of the
activities of the employees of any of the Companies on behalf of
such Company violates any agreements or arrangements which any
such employees have with former employers in a way which is
materially adverse to the business of the Companies taken as a
whole.
2.15 Insurance. None of the Companies is in default with
respect to any provisions of any policy of general liability,
fire, title or other form of insurance held by it, each of the
Companies is current in the payment of all premiums due on such
insurance and none of the Companies has failed to give any notice
or present any claim thereunder in due and timely fashion, except
for claims that are immaterial in both the nature of the claim
and in the amount of such claim. The Companies maintain
insurance on all of their assets and business (including products
liability insurance) from insurers which are financially sound
and reputable, in amounts and coverages and against the kinds of
risks and losses reasonably prudent to be insured against by
corporations engaged in the same or similar businesses. No basis
exists which would jeopardize the coverage under any such
insurance. No such insurance will be terminated or canceled by
reason of the execution, delivery and performance of this
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Agreement or the consummation of the transactions contemplated
hereby. THI has previously furnished or made available to TMQ
all policies of general liability, fire, title or other forms of
insurance applicable to the Companies and a description of all
claims pending thereunder other than health or dental insurance
claims.
2.16 Employee Benefit Plans.
(a) THI has made available or furnished to TMQ true
and complete copies of each pension, profit-sharing, deferred
compensation, incentive compensation, severance pay, retirement,
welfare benefit or other plan or arrangement providing benefits
to employees or retirees, including both those that do and do not
constitute employee benefit plans within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended (the "ERISA"), currently maintained or contributed to by
THI or any of its affiliates for the benefit of the employees or
retirees of the Companies (each, a "Plan").
(b) Except as set forth on the Disclosure Schedule,
(i) each such Plan that is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA is being operated and
administered in compliance with Section 401(a) of the Code, a
favorable determination letter has been obtained from the
Internal Revenue Service (the "IRS") for such Plan, and there is
no accumulated funding deficiency, as defined in Section
302(a)(2) of ERISA or Section 412 of the Code, with respect to
such Plan; (ii) there has been no non-exempt "prohibited
transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Code involving the assets of any Plan nor any
"reportable event" within the meaning of Section 4043 of ERISA
with respect to any Plan; (iii) all required employer
contributions to such Plan have been made (or, in the case of
contributions not yet due, have been accrued on the Balance
Sheet); (iv) THI has made available to TMQ as to each such Plan a
true and correct copy of (w) the annual report (Form 5500) filed
with the IRS for each of the three most recent plan years, (x)
each plan, trust agreement, group annuity contract and insurance
contract, if any, relating to such Plan, (y) each actuarial
report prepared for each of the last three years for each Plan
and (z) each summary plan description distributed to participants
in each Plan and each summary of material modifications to each
Plan (as defined in ERISA); and (v) each such Plan is, and at all
relevant times has been, in compliance with ERISA, the Code and
the terms of such Plan. None of the Sellers or the Companies or
their respective affiliates has ever participated in a
"multiemployer pension plan" as defined in Section 3(37) of
ERISA.
(c) Except as set forth on the Disclosure Schedule,
none of the Companies has any has no obligation to provide any
welfare benefits to retired or former employees other than
continuation of welfare benefits as required by applicable law.
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(d) None of the Companies has any liability under or
with respect to any employee benefit plans or arrangements that
it no longer maintains or in which it no longer participates.
2.17 Agreements and Documents. THI has previously furnished
or made available to TMQ true, correct and complete copies of
each document that is referred to or otherwise related to any of
the following items referred to in this Section 2.17:
(a) each document related to interests in real
property owned, leased or otherwise used or claimed by any of the
Companies;
(b) (i) each agreement of any of the Companies made in
the ordinary course of business which involves aggregate future
payments by or to any of the Companies of more than one hundred
fifty thousand dollars ($150,000) or any agreement made in the
ordinary course of business whose term extends beyond one year
after the date hereof; (ii) each agreement containing any
covenant restricting the freedom of any of the Companies to
compete in any line of business or with any person; and (iii)
each agreement of any of the Companies not made in the ordinary
course of business which is or was to be performed after July 30,
1997;
(c) all employment or similar compensation agreements
of any of the Companies which may not be terminated by such
Company without penalty within thirty days after the Closing;
(d) all bonus, incentive compensation, deferred
compensation, profit-sharing, stock option, retirement, pension,
severance, indemnification, insurance, death benefit or other
fringe benefit plans, agreements or arrangements of any of the
Companies (or applying to any of the Companies) in effect, or
under which any amounts remain unpaid, on the date hereof or to
become effective after the date hereof;
(e) all labor unions or other organizations
representing, purporting to represent or attempting to represent
any employees of any of the Companies, and all collective
bargaining agreements of any of the Companies with any labor
unions or other representatives or employees;
(f) each agreement or other instrument or arrangement
defining the terms on which any indebtedness of any of the
Companies (or a guarantee by any of the Companies of
indebtedness) is or may be issued; and
(g) the names and addresses of all banks in which any
of the Companies has accounts or lines of credit, and with
respect to each such account or line of credit, the names of all
persons authorized to drawn thereon.
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None of the Companies is a party to any oral contract
or agreement which would be required to have been furnished or
made available to TMQ under this Section 2.17 had such contract
or agreement been committed to writing.
2.18 Validity. There is no default or claimed or purported
or alleged default, or basis on which with notice or lapse of
time or both (including notice of this Agreement), a default
would exist, in any obligation on the part of any party
(including any of the Companies) to be performed under any lease,
contract, plan, policy or other instrument or arrangement
referred to in Section 2.17 or otherwise in this Agreement.
2.19 No Changes. Since the date of the Balance Sheet there
has not been:
(a) any material adverse change in the business of the
Companies taken as a whole;
(b) any material damage, destruction or loss (whether
or not covered by insurance) adversely affecting the business of
the Companies taken as a whole;
(c) any declaration, setting aside or payment of any
dividend, or other distribution, in respect of any capital stock
of any of the Companies or any direct or indirect redemption,
purchase or other acquisition of such stock;
(d) any option to purchase any capital stock of any of
the Companies granted to any person, or any employment or
deferred compensation agreement entered into between any Company
and any of its stockholders, officers, directors, employees or
consultants;
(e) any issuance or sale by any of the Companies of
any stock, bonds or other corporate securities, or any partial or
complete formation, acquisition, disposition or liquidation of
any of the Companies;
(f) any labor union activity (including without
limitation any negotiation, or request for negotiation, with
respect to any union representation or any labor contract)
respecting any of the Companies;
(g) any statute, rule or regulation, or, to the best
knowledge of the Companies and the Sellers, any government
policy, adopted which may materially and adversely affect the
business of any of the Companies;
(h) any mortgage, lien, attachment, pledge,
encumbrance or security interest created on any asset, tangible
or intangible, of any of the Companies, or assumed, either by any
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Company or by others, with respect to any such assets, except for
liens permitted under Section 2.8;
(i) any indebtedness or other liability or obligation
(whether absolute, accrued, contingent or otherwise) incurred, or
other transaction (except that reflected in this Agreement)
engaged in, by any of the Companies, except those in the ordinary
course of business that are individually, or in the aggregate to
one group of related parties, less than fifty thousand dollars
($50,000);
(j) any obligation or liability discharged or
satisfied by any of the Companies, except items included in
current liabilities shown on the Balance Sheet and current
liabilities incurred since the date of the Balance Sheet in the
ordinary course of business which are individually, or in the
aggregate to one group of related parties, less than twenty five
thousand dollars ($25,000) in amount;
(k) any sale, assignment, lease, transfer or other
disposition of any tangible asset of any of the Companies, except
in the ordinary course of business, or any sale, assignment,
lease, transfer or other disposition of any of its patents,
trademarks, trade names, brand names, copyrights, licenses or
other intangible assets;
(l) any amendment, termination or waiver of any
material right belonging to any of the Companies;
(m) any increase in the compensation or benefits
payable or to become payable by any of the Companies to any of
its officers or employees;
(n) any other action or omission by any of the
Companies, or the passage of any resolution, other than in the
ordinary course of business.
2.20 Litigation or Proceedings. None of the Companies is
engaged in, or a party to, or, to the best of the Sellers' and
the Companies' knowledge, threatened with, any claim or legal
action or other proceeding before any court, any arbitrator of
any kind or any governmental authority, nor does any basis for
any claim or legal action or other proceeding or governmental
investigation exist. There are no orders, rulings, decrees,
judgments or stipulations to which any of the Companies is a
party by or with any court, arbitrator or governmental authority
affecting the Companies.
2.21 Compliance with Laws. Each Company (i) has not been
and is not in violation of any applicable building, zoning,
occupational safety and health, pension, export control,
environmental or other federal, state, local or foreign law,
ordinance, regulation, rule, order or governmental policy
applicable to it; (ii) has not received any complaint from any
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governmental authority, and to the best knowledge of the Sellers
and the Companies, none is threatened, alleging that such Company
has violated any such law, ordinance, regulation, rule, order or
governmental policy; (iii) has not received any notice from any
governmental authority of any pending proceedings to take all or
any part of the properties of such Company (whether leased or
owned) by condemnation or right of eminent domain and, to the
best knowledge of the Sellers and the Companies, no such
proceeding is threatened; and (iv) is not a party to any
agreement or instrument, or subject to any charter or other
corporate restriction or judgment, order, writ, injunction, rule,
regulation, code or ordinance, which materially and adversely
affects, or might reasonably be expected materially and adversely
to affect the business of the Companies taken as a whole.
2.22 Labor Matters. There are no labor organizing
activities, election petitions or proceedings, labor strikes,
disputes, slowdowns, work stoppages or unfair labor practice
complaints pending or, to the best knowledge of the Sellers and
the Companies, threatened against any of the Companies or between
any of the Companies and any of its employees.
2.23 Recalls. There is no basis for the recall, withdrawal
or suspension of any approval by any governmental authority with
respect to any product sold or proposed to be sold by any of the
Companies. None of the products of any of the Companies is
subject to any recall proceedings and to the best of its
knowledge no such proceedings have been threatened.
2.24 Brokers and Finders. None of the Sellers or the
Companies has employed any broker, agent or finder or incurred
any liability on behalf of any of the Sellers or the Companies or
for any brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated hereby.
2.25 Powers of Attorney. None of the Companies has any
powers of attorney or similar authorizations outstanding.
2.26 No Termination of Relationship. As of the date hereof,
none of the Sellers or the Companies has any reason to expect
that any relationship between any Company and a material
distributor, customer, supplier, lender, employee or other person
will be terminated or adversely affected as a result of the
transactions contemplated by this Agreement.
2.27 All Information. TMQ has been furnished in writing
prior to the execution of this Agreement all information as to
the business of the Companies material to a reasonable buyer's
determination to enter into this Agreement and to consummate the
transactions contemplated hereby.
2.28 Statements True and Correct. The statements contained
herein or in any written documents prepared and delivered by or
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on behalf of THI pursuant to the terms hereof are true, complete
and correct in all material respects, and such documents do not
omit any material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not
misleading.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF TMQ
TMQ represents and warrants to THI as follows.
3.1 Organization. TMQ is a corporation duly organized,
validly existing and in good standing under the laws of the state
of Delaware and has full corporate power and authority to own,
lease and operate its assets and to carry on its business as now
being and as heretofore conducted.
3.2 Authority. TMQ has full right, power, capacity and
authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part
of TMQ. This Agreement has been duly and validly executed and
delivered by TMQ and constitutes the valid and binding obligation
of TMQ, enforceable against it in accordance with the terms
hereof. Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated
hereby will (i) conflict with or result in a violation, breach,
termination or acceleration of, or default under (or would result
in a violation, breach, termination, acceleration or default with
the giving of notice or passage of time, or both) any of the
terms, conditions or provisions of the Certificate of
Incorporation or By-laws of TMQ, as amended, or of any note,
bond, mortgage, indenture, license, agreement or other instrument
or obligation to which TMQ is a party or by which TMQ or any of
its properties or assets may be bound or affected; (ii) result in
the violation of any order, writ, injunction, decree, statute,
rule or regulation applicable to TMQ or any of its properties or
assets; or (iii) result in the imposition of any lien,
encumbrance, charge or claim upon any of its assets. Except for
the listing of the TMQ Shares for trading on the AMEX, no consent
or approval by, or notification to or filing with, any court,
governmental authority or third party is required in connection
with the execution, delivery and performance of this Agreement by
TMQ or the consummation of the transactions contemplated hereby.
The TMQ Shares will be, when issued in accordance with this
Agreement, duly authorized, validly issued, fully paid,
nonassessable and free of pre-emptive rights.
3.3 Statements True and Correct. The statements contained
herein or in any written documents prepared and delivered by or
on behalf of TMQ pursuant to the terms hereof are true, complete
and correct in all material respects, and such documents do not
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omit any material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not
misleading.
SECTION 4 - COVENANTS AND AGREEMENTS
4.1 Conduct of Business. Except with the prior written
consent of TMQ, which will not be unreasonably withheld or
delayed, and except as otherwise contemplated herein, during the
period from the date hereof to the Closing Date, THI shall cause
the Sellers and the Companies to observe the following covenants:
(a) Affirmative Covenants Pending Closing. The
Sellers and the Companies shall:
(i) Preservation of Personnel. Use all
reasonable efforts to preserve intact the business organization
of each Company and keep available the services of the present
employees of each Company, in each case in accordance with past
practice, it being understood that the termination of employees
with poor performance ratings shall not constitute a violation of
this covenant;
(ii) Insurance. Use all reasonable efforts to
keep in effect casualty, public liability, worker's compensation
and other insurance policies applicable to the Companies in
coverage amounts not less than those in effect at the date of
this Agreement;
(iii) Preservation of the Business; Maintenance
of Properties. Use all reasonable efforts to preserve the
business of the Companies, advertise, promote and market its
products and services in accordance with past practices over the
last twelve months, keep their properties intact, preserve their
goodwill, maintain all physical properties in such operating
condition as will permit the conduct of such business on a basis
consistent with past practice;
(iv) Intellectual Property Rights. Use all
reasonable efforts to preserve and protect the Proprietary Rights
of the Companies; and
(v) Ordinary Course of Business. Operate the
business of the Companies solely in the ordinary course.
(b) Negative Covenants Pending Closing. THI shall
cause each of the Sellers and the Companies not to:
(i) Disposition of Assets. Sell or transfer, or
mortgage, pledge or create or permit to be created any lien on,
any of the assets of any of the Companies other than sales or
transfers in the ordinary course of business or the creation of
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liens under existing arrangements disclosed hereunder and liens
permitted under Section 2.8;
(ii) Liabilities. Permit any of the Companies to
(A) incur any obligation or liability other than in the ordinary
course of business, (B) incur any indebtedness for borrowed money
in excess of $100,000 or (C) enter into any contracts or
commitments involving payments by any of the Companies of
$100,000 or more other than purchase orders and commitments for
inventory, materials and supplies in the ordinary course of
business;
(iii) Compensation. Except as required by
applicable law or any existing employment or severance agreement,
(A) change the compensation or fringe benefits of any officer,
director, employee or agent of any of the Companies, except for
ordinary merit increases for employees other than officers based
on periodic reviews in accordance with past practices, or (B)
enter into or modify any employment, severance or other agreement
with any officer, director or employee of any of the Companies or
any benefit plan (it being understood that hiring of at will
employees in the ordinary course of business shall not constitute
a violation of this covenant) or (C) enter into or modify any
agreement with any consultant, except for agreements terminable
upon not more than one year's notice that are consistent with
past practices with respect to consulting agreements.
(iv) Capital Stock. Make any change in the
number of shares of capital stock of any of the Companies
authorized, issued or outstanding or grant any option, warrant or
other right to purchase, or to convert any obligation into,
shares of capital stock of any of the Companies, or declare or
pay any dividend or other distribution with respect to any shares
of capital stock of any of the Companies, or sell or transfer
any shares of its capital stock;
(v) Organizational Documents. Amend the
organizational documents of any of the Companies;
(vi) Acquisitions. Make any material acquisition
of property other than in the ordinary course of the business of
the Companies;
(vi) License Agreements. Enter into or modify any
license, technology development or technology transfer agreement
between any of the Companies and any other person or entity.
4.2 Corporate Examinations and Investigations. Prior to
the Closing Date, TMQ shall be entitled, through its employees
and representatives, to have such access to the assets,
properties, business and operations of the Companies, as is
reasonably necessary or appropriate in connection with its
investigation of the Companies with respect to the transaction
contemplated hereby. Any such investigation and examination
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shall be conducted at reasonable times and under reasonable
circumstances so as to minimize any disruption to or impairment
of the business and each party shall cooperate fully therein. No
investigation by TMQ shall diminish or obviate any of the
representations, warranties, covenants or agreements of THI
contained in this Agreement. In order that TMQ may have full
opportunity to make such investigation, THI shall furnish the
representatives of TMQ with all such information and copies of
such documents concerning the affairs of the Companies as TMQ may
reasonably request and cause its officers, employees,
consultants, agents, accountants and attorneys to cooperate fully
with TMQ's representatives in connection with such investigation.
4.3 Expenses. TMQ and THI shall bear their respective
expenses incurred in connection with the preparation, execution
and performance of this Agreement and the transactions
contemplated hereby, including without limitation, all fees and
expenses of agents, representatives, counsel and accountants.
4.4 Authorization from Others. Prior to the Closing Date,
the parties shall use all reasonable efforts to obtain all
authorizations, consents and permits of others required to permit
the consummation of the transactions contemplated by this
Agreement.
4.5 Consummation of Agreement. Each party shall use all
reasonable efforts to perform and fulfill all conditions and
obligations to be performed and fulfilled by it under this
Agreement and to ensure that to the extent within its control or
capable of influence by it, no breach of any of its respective
representations, warranties and agreements hereunder occurs or
exists on or prior to the Closing Date, all to the end that the
transactions contemplated by this Agreement shall be fully
carried out in a timely fashion.
4.6 Further Assurances. Each of the parties shall execute
such documents, further instruments of transfer and assignment
and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions
hereof and the transactions contemplated hereby.
4.7 Public Announcements and Confidentiality. Any press
release or other information to the press or any third party with
respect to this Agreement or the transactions contemplated hereby
shall require the prior approval of TMQ and THI, which approval
shall not be unreasonably withheld, provided that a party shall
not be prevented from making such disclosure as it shall be
advised by counsel is required by law.
4.8 No Solicitation. None of the Sellers or the Companies
will (i) solicit or initiate discussions with any person, other
than TMQ, relating to the possible acquisition of any of the
Companies or all or a material portion of the assets or any of
the capital stock of any of the Companies or any merger or other
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business combination with any of the Companies (an "Acquisition
Transaction") or (ii) except to the extent reasonably required by
fiduciary obligations under applicable law as advised by legal
counsel, participate in any negotiations regarding, or furnish to
any other person information with respect to, any effort or
attempt by any other person to do or to seek any Acquisition
Transaction. THI agrees to inform TMQ within one business day of
its receipt of any offer, proposal or inquiry relating to any
Acquisition Transaction.
4.9 Indemnification.
(a) Right to Indemnification. TMQ and THI (as the
case may be, the "Indemnitee") shall be indemnified on its
respective demand made to the other (the "Indemnitor") for the
full amount of all damages (as defined below) suffered by it as a
direct or indirect result of:
(i) the inaccuracy of any representation or
warranty made by the Indemnitor in or pursuant to this Agreement;
and
(ii) any failure by the Indemnitor to perform any
obligation or comply with any covenant or agreement specified in
this Agreement.
For the purpose of this Section 4.9, (a) the term "damages" shall
be determined and computed by reference to the effect of the
compensable event on the Indemnitee, and shall be deemed to
include (i) all losses, liabilities, expenses or costs incurred
by the Indemnitee, including reasonable attorneys' fees, and (ii)
interest at a rate per annum equal to that announced from time to
time by First National Bank of Boston as its "base rate" (or the
legal rate of interest, if lower) from the date 30 days after
notice of any such claim for indemnification is given to the
Indemnitor, or if an unliquidated claim, from such later date as
the claim is liquidated, to the date full indemnification is made
therefor; and (b) damages shall not include any amounts for which
the Indemnitee actually receives payment under an insurance
policy, excluding self-insured amounts and deductible amounts.
(b) Indemnification Procedures. The Indemnitee shall
give the Indemnitor notice of any claim, action or proceeding by
a third party which is reasonably likely to result in a claim for
indemnification under this Section 4.9. The Indemnitor shall
have the right, at its expense, to defend, contest, protest,
settle and otherwise control the resolution of any such claim,
action or proceeding. The Indemnitee shall have the right to
participate in any such legal proceeding, subject to the
Indemnitor's right of control thereof, at the expense of the
Indemnitee and with counsel selected by the Indemnitee.
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(c) Limitations on Indemnification. The rights of TMQ
and THI to be indemnified pursuant to Section 4.9 shall survive
the Closing Date for a period of two years.
4.10 Listing of Shares. Promptly after the date hereof, TMQ
shall take all action necessary to list the TMQ Shares for
trading upon the American Stock Exchange ("AMEX").
SECTION 5 - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF TMQ
The obligation of TMQ to acquire the Shares and the Hypersil
Assets is subject to the satisfaction or waiver, at or before the
Closing Date, of the following conditions:
5.1 Representations, Warranties and Covenants. The
representations and warranties of THI contained in this Agreement
shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though made on
and as of the Closing Date (with such exceptions as may be
permitted under or contemplated by this Agreement) and there
shall not have been any material adverse change in the business
of the Companies taken as a whole since the date hereof. THI
shall have performed and complied in all material respects with
all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing Date
and shall have obtained all required consents and approvals. THI
shall have delivered to TMQ a certificate, dated the Closing
Date, to the foregoing effect.
5.2 Certificates. THI shall have furnished TMQ with such
certificates of public officials and of the Sellers' or the
Companies' officers as may be reasonably requested by TMQ.
SECTION 6 - CONDITIONS PRECEDENT TO THE OBLIGATION OF THI
The obligation of THI to sell the Shares and the Hypersil
Assets is subject to the satisfaction or waiver, at or before the
Closing Date, of the following conditions:
6.1 Representations, Warranties and Covenants. The
representations and warranties of TMQ contained in this Agreement
shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though made on
and as of the Closing Date (with such exceptions as may be
permitted under or contemplated by this Agreement). TMQ shall
have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing Date
and shall have obtained all required consents and approvals,
including approval of the listing of the TMQ Shares on the AMEX.
TMQ shall have delivered to LSI a certificate, dated the Closing
Date, to the foregoing effect.
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6.2 Certificates. TMQ shall have furnished THI with such
certificates of public officials and of TMQ's officers as may be
reasonably requested by THI.
SECTION 7 - TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any
time prior to the Closing Date as follows:
(a) by THI upon written notice to TMQ if TMQ has
materially breached any representation, warranty, covenant or
agreement contained herein and has not cured such breach within
ten (10) business days of receipt of written notice from THI;
(b) by TMQ upon written notice to THI if THI has
materially breached any representation, warranty, covenant or
agreement contained herein and has not cured such breach within
ten (10) business days of receipt of written notice from TMQ;
(c) by either party if any court of competent
jurisdiction or United States or foreign governmental body shall
have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the sale of any
of the Shares and/or the Hypersil Assets and such order, decree
or ruling shall have become final and nonappealable; or
(d) at any time with the written consent of TMQ and
THI.
7.2 Effect of Termination. If this Agreement is terminated
as provided in Section 7.1, this Agreement shall forthwith become
void and have no effect, without liability on the part of any
party, its directors, officers or stockholders, other than the
provisions of this Section 7.2, Section 4.3 relating to expenses
and Section 4.7 relating to publicity and confidentiality to the
extent provided therein. Nothing contained in this Section 7.2
shall relieve any party from liability for any breach of this
Agreement occurring before such termination.
7.3 Amendment. This Agreement may not be amended except by
an instrument signed by each of the parties hereto.
7.4 Waiver. At any time, any party hereto may (a) extend
the time for the performance of any of the obligations or other
acts of any other party hereto or (b) waive compliance with any
of the agreements of any other party or any conditions to its own
obligations, in each case only to the extent such obligations,
agreements and conditions are intended for its benefit; provided
that any such extension or waiver shall be binding upon a party
only if such extension or waiver is set forth in a writing
executed by such party.
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SECTION 8 - MISCELLANEOUS
8.1 Notices. All notices, requests, demands, consents and
other communications which are required or permitted hereunder
shall be in writing, and shall be deemed given when actually
received or if earlier, one day after deposit with a nationally
recognized air courier or express mail, charges prepaid or three
days after deposit in the U.S. mail by certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to THI:
Thermo Instrument Systems Inc.
1851 Central Drive
Suite 314
Bedford, Texas 76021
Attention: President
With a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
Attention: General Counsel
If to TMQ:
ThermoQuest Corporation
355 River Oaks Parkway
San Jose, California 95134-1991
Attention: President
With a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
Attention: General Counsel
or to such other address as any party hereto may designate in
writing to the other parties, specifying a change of address for
the purpose of this Agreement.
8.2 Survival and Materiality of Representations. Each of
the representations, warranties and agreements made by the
parties hereto shall be deemed material and shall survive the
Closing Date and the consummation of the transactions
contemplated hereby. All statements contained in any certificates
or other instruments delivered by or on behalf of the parties
pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed material and shall constitute
representations and warranties by the person making such
statement.
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8.3 Entire Agreement. This Agreement, including the
exhibits, the Disclosure Schedule and the other documents
referred to herein, supersedes any and all oral or written
agreements or understandings heretofore made relating to the
subject matter hereof and constitutes the entire agreement of the
parties relating to the subject matter hereof.
8.4 Parties in Interest. All covenants and agreements,
representations and warranties contained in this Agreement made
by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the parties hereto, and their respective
successors, assigns, heirs, executors, administrators and
personal representatives, whether so expressed or not.
8.5 No Implied Rights or Remedies. Except as otherwise
expressly provided herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any
person, firm or corporation, other than the parties hereto, any
rights or remedies under or by reason of this Agreement.
8.6 Headings. The headings in this Agreement are inserted
for convenience of reference only and shall not be a part of or
control or affect the meaning hereof.
8.7 Severability. If any provision of this Agreement shall
be declared void or unenforceable by any judicial or
administrative authority, the validity of any other provision
shall not be affected thereby.
8.8 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
8.9 Further Assurances. THI will execute and furnish to TMQ
all documents and will do or cause to be done all other things
that TMQ may reasonably request from time to time in order to
give full effect to this Agreement and to effectuate the intent
of the parties.
8.10 Governing Law. This Agreement shall be governed by the
law of the State of Delaware applicable to agreements made and to
be performed wholly within such jurisdiction, without regard to
the conflicts of laws provisions thereof.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the date first written above.
THERMOQUEST CORPORATION
[Seal] By: /s/ Richard W. K. Chapman
--------------------------------
Name: Richard W. K. Chapman
Title: President and Chief
Executive Officer
THERMO INSTRUMENT SYSTEMS INC.
[Seal] By: /s/ Earl R. Lewis
--------------------------------
Name: Earl R. Lewis
Title: President
Exhibit 11
THERMOQUEST CORPORATION
Computation of Earnings per Share
Three Months Ended
----------------------------
June 28, June 29,
1997 1996
------------------------------------------------------------------------
Computation of Fully Diluted Earnings
per Share:
Income:
Net income $10,633,000 $ 6,687,000
Add: Convertible obligation interest,
net of tax 710,000 -
----------- -----------
Income applicable to common stock
assuming full dilution (a) $11,343,000 $ 6,687,000
----------- -----------
Shares:
Weighted average shares outstanding 50,219,138 48,410,440
Add: Shares issuable from assumed
conversion of convertible
obligations 5,833,333 -
Shares issuable from assumed
exercise of options (as determined
by the application of the treasury
stock method) 189,668 -
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 56,242,139 48,410,440
----------- -----------
Fully Diluted Earnings per Share (a)/(b) $ .20 $ .14
=========== ===========
PAGE
<PAGE>
Exhibit 11
THERMOQUEST CORPORATION
Computation of Earnings per Share
Six Months Ended
----------------------------
June 28, June 29,
1997 1996
------------------------------------------------------------------------
Computation of Fully Diluted Earnings
per Share:
Income:
Net income $19,516,000 $12,529,000
Add: Convertible obligation interest,
net of tax 1,420,000 -
----------- -----------
Income applicable to common stock
assuming full dilution (a) $20,936,000 $12,529,000
----------- -----------
Shares:
Weighted average shares outstanding 49,402,588 46,903,022
Add: Shares issuable from assumed
conversion of convertible
obligations 5,833,333 -
Shares issuable from assumed
exercise of options (as determined
by the application of the treasury
stock method) 189,668 -
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 55,425,589 46,903,022
----------- -----------
Fully Diluted Earnings per Share (a)/(b) $ .38 $ .27
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOQUEST
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 28, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUN-28-1997
<CASH> 221,004
<SECURITIES> 1,713
<RECEIVABLES> 107,778
<ALLOWANCES> 4,572
<INVENTORY> 72,290
<CURRENT-ASSETS> 413,794
<PP&E> 87,822
<DEPRECIATION> 19,038
<TOTAL-ASSETS> 751,972
<CURRENT-LIABILITIES> 289,137
<BONDS> 104,529
0
0
<COMMON> 502
<OTHER-SE> 336,807
<TOTAL-LIABILITY-AND-EQUITY> 751,972
<SALES> 205,895
<TOTAL-REVENUES> 205,895
<CGS> 107,900
<TOTAL-COSTS> 107,900
<OTHER-EXPENSES> 13,963
<LOSS-PROVISION> 445
<INTEREST-EXPENSE> 5,163
<INCOME-PRETAX> 34,568
<INCOME-TAX> 15,052
<INCOME-CONTINUING> 19,516
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,516
<EPS-PRIMARY> .40
<EPS-DILUTED> .38
</TABLE>
