<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1996
REGISTRATION NO. 333-03630
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THERMO OPTEK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3826 04-3283973
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
8E FORGE PARKWAY
FRANKLIN, MASSACHUSETTS 02038
(508) 528-0551
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SANDRA L. LAMBERT, SECRETARY
THERMO OPTEK CORPORATION
C/O THERMO ELECTRON CORPORATION
81 WYMAN STREET
P.O. BOX 9046
WALTHAM, MASSACHUSETTS 02254-9046
(617) 622-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
SETH H. HOOGASIAN, ESQUIRE EDWIN L. MILLER JR., ESQUIRE
GENERAL COUNSEL TESTA, HURWITZ & THIBEAULT, LLP
THERMO OPTEK CORPORATION HIGH STREET TOWER
C/O THERMO ELECTRON CORPORATION 125 HIGH STREET
81 WYMAN STREET BOSTON, MASSACHUSETTS 02110
P.O. BOX 9046
WALTHAM, MASSACHUSETTS 02254-9046
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement has become effective.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX. / /
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(b) UNDER THE SECURITIES ACT OF 1933, CHECK THE FOLLOWING
BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
REGISTRATION STATEMENT FOR THE SAME OFFERING. / /
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(c)
UNDER THE SECURITIES ACT OF 1933, CHECK THE FOLLOWING BOX AND LIST THE
SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. / /
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
CHECK THE FOLLOWING BOX. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THERMO OPTEK CORPORATION
COMMON STOCK
<TABLE>
CROSS REFERENCE SHEET
BETWEEN ITEMS OF FORM S-1 AND PROSPECTUS
<CAPTION>
ITEM LOCATION IN PROSPECTUS
- ---- ----------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front and Outside Back Cover Pages;
Additional Information; Reports to Security
Holders
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges........ Prospectus Summary; The Company; Risk
Factors
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Underwriting
6. Dilution.................................. Dilution
7. Selling Security Holders.................. Not Applicable
8. Plan of Distribution...................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered................................ Outside Front Cover Page; Description of
Capital Stock
10. Interests of Named Experts and Counsel.... Experts; Legal Matters
11. Information with Respect to the
Registrant................................ Cover Page; Prospectus Summary; The Company;
Risk Factors; Dividend Policy;
Capitalization; Selected Financial
Information; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Business; Relationship with
Thermo Electron and Thermo Instrument;
Management; Security Ownership of Certain
Beneficial Owners and Management;
Description of Capital Stock; Shares
Eligible for Future Sale; Consolidated
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED JUNE 4, 1996
PROSPECTUS
3,000,000 SHARES
[LOGO]
COMMON STOCK
------------------------
All of the shares of Common Stock offered hereby are being sold by Thermo
Optek Corporation ("Thermo Optek" or the "Company"), a wholly-owned subsidiary
of Thermo Instrument Systems Inc. ("Thermo Instrument"), which is a
majority-owned subsidiary of Thermo Electron Corporation ("Thermo Electron").
Following the offering, Thermo Instrument will own approximately 94% of the
outstanding shares of Common Stock of the Company (assuming no exercise of the
Underwriters' over-allotment option).
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $12.00 and $14.00 per share. See "Underwriting" for
information relating to the factors to be considered in determining the initial
public offering price. Application has been made to list the Common Stock on the
American Stock Exchange.
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share.............................. $ $ $
- ------------------------------------------------------------------------------------------------------
Total(3)............................... $ $ $
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
<FN>
(1) The Company, Thermo Instrument and Thermo Electron have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $611,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 450,000 shares of Common Stock solely to cover
over-allotments, if any. If this option is fully exercised, the total price
to the public would be $ , the total underwriting discounts and
commissions would be $ and the total proceeds to the Company before
estimated expenses would be $ . See "Underwriting."
</TABLE>
------------------------
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the shares
will be made in New York, New York on or about , 1996.
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS
CAZENOVE & CO.
FAHNESTOCK & CO. INC.
The date of this Prospectus is , 1996.
<PAGE> 4
The Company's Magna-IR spectrometers
feature a broad spectral range that provides
access to the far-IR, near-IR, visible, and
FT-Raman spectral domains. The
[PHOTOGRAPH OF Company offers powerful, integrated
MAGNA-IR SPECTROMETER FT-IR microscopes for microspectroscopy
APPEARS HERE] as well as an FT-Raman accessory
module that allows for the analysis
of both FT-IR and FT-Raman data. All
Magna-IR spectrometers and accessories
are controlled by the Company's
OMNIC[Trademark] software.
The Company's Charge Injection
Device (CID) uses hundreds of thousands of
electronic pixels to capture images and is
capable of randomly accessing each individ-
ual pixel. When used in the Company's [PHOTOGRAPH OF
optical spectrometers, CIDs have the CID DETECTOR
analytical advantage of providing APPEARS HERE]
simultaneous access to every
wavelength of an emission spectrum,
improving instrument throughput
and analytical accuracy.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------------
FOR UNITED KINGDOM PURCHASERS: THE COMMON STOCK MAY NOT BE OFFERED OR SOLD
IN THE UNITED KINGDOM OTHER THAN TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE
THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS, WHETHER AS
PRINCIPAL OR AGENT (EXCEPT IN CIRCUMSTANCES THAT DO NOT CONSTITUTE AN OFFER TO
THE PUBLIC WITHIN THE MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATIONS
1995 OR THE FINANCIAL SERVICES ACT 1986), AND THIS PROSPECTUS MAY ONLY BE ISSUED
OR PASSED ON TO ANY PERSON IN THE UNITED KINGDOM IF THAT PERSON IS OF A KIND
DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT
ADVERTISEMENTS) (EXEMPTIONS) ORDER 1995 OR IS A PERSON TO WHOM THE PROSPECTUS
MAY OTHERWISE LAWFULLY BE PASSED ON. ------------------------
POEMS is a registered trademark of the Company. ECO, Impact, IRIS, Magna-IR
and TRACE are trademarks of the Company. All other trademarks or tradenames
referred to in this Prospectus are the property of their respective owners.
<PAGE> 5
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Except as otherwise indicated, all information in this
Prospectus (i) assumes that the Underwriters' over-allotment option will not be
exercised, (ii) reflects a three-for-two split of the Common Stock effected on
April 11, 1996, and (iii) reflects the acquisition by the Company of Mattson
Instruments and Unicam, former divisions of Analytical Technology, Inc., as of
December 1, 1995, the date on which such companies were acquired by Thermo
Instrument. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Investors should carefully consider the information set
forth under the heading "Risk Factors."
THE COMPANY
The Company is a worldwide leader in the development, manufacture and
marketing of analytical instruments that utilize a range of optical spectroscopy
techniques. These instruments are used in the quantitative and qualitative
chemical analysis of elements and molecular compounds in a wide variety of
solids, liquids and gases. The Company's products are used by its customers for
productivity enhancement, research and development, quality control and testing
applications in the environmental testing, chemical, metallurgical, food and
beverage, pharmaceutical and petroleum industries; and by forensic laboratories,
research organizations and educational institutions. Industry sources estimate
that the total worldwide market for the Company's current optical spectroscopy
instruments is approximately $2.0 billion and the Company estimates that the
market for optical components, systems and sub-assemblies addressed by its
Thermo Vision subsidiary is approximately $0.5 billion. The total worldwide
market for analytical instruments is estimated to be approximately $11.0
billion. The Company believes that growth in the industry is driven primarily by
evolving production quality control standards, demand for higher productivity,
increased regulatory requirements, research and development expenditures by
private industry and governmental entities and by increasing demand in
developing countries.
The Company's products are used for both elemental and molecular analysis,
and are based on several optical spectroscopy techniques, including atomic
absorption (AA), atomic emission (AE), Fourier transform infrared (FT-IR) and
FT-Raman technologies. AA and AE spectrometers are used to identify trace
quantities of elements in solids and liquids based on the atomic spectra that a
sample emits or absorbs when it is excited by an energy source. These
spectrometers are used in a variety of applications, including the measurement
of toxic elements in environmental samples, metals analysis for industrial use
and product quality assurance for food, drug and cosmetic products. FT-IR and
FT-Raman spectrometers are used to determine the molecular composition of
samples by observing how they absorb or emit infrared light. Because FT-IR and
FT-Raman techniques are non-destructive to a sample, they are used in a wide
variety of applications, including forensic applications and quality assurance
and research and development applications in the pharmaceutical, chemical and
semiconductor industries. The Company has also recently established a
subsidiary, Thermo Vision Corporation, to pursue applications of the Company's
technologies for cost-effective, application-specific instruments and for
optical components, systems and sub-assemblies used in analytical
instrumentation and other broader market applications.
The Company's strategy is to build upon its position in the industry
through the continued development of technologically superior products and
through the development of new markets, applications and customers for its
products, while maintaining the operating principles that have contributed to
its success: innovative technology, efficient manufacturing capabilities and a
worldwide sales and service network. The Company believes it has built a
reputation in the industry for providing high performance instruments backed by
reliable service, while effectively controlling costs and maximizing operational
efficiencies. The Company believes that the market for analytical instruments
can be expanded by (i) increasing customer productivity through the development
of products and technologies that permit analytical instruments to be used
on-site and on-line or near-line in industrial and manufacturing settings and
(ii) applying the Company's broad technology base to the development of
cost-effective, application-specific instruments.
- -------------------------------------------------------------------------------
3
<PAGE> 6
- -------------------------------------------------------------------------------
As part of its growth strategy, the Company intends to actively seek the
acquisition of products and technologies that complement and augment its
existing product lines. The analytical instruments industry is highly fragmented
and is estimated to consist of more than 1,000 industry competitors, many of
which focus on small groups of customers, a narrow range of technologies and
applications, or limited geographic areas. Thus, it can often be more cost
effective to target an attractive market segment through the acquisition of
established, smaller, focused providers than through internal product
development. The Company has completed the acquisition of several complementary
businesses during the past two years. In addition, Thermo Instrument has
recently acquired certain businesses that have been or will likely be acquired
by the Company. See "Business -- Acquisitions." The Company targets acquisitions
that it believes will lead to enhanced profitability through manufacturing
efficiencies, the elimination of lower margin product lines, enhanced
distribution capabilities, the elimination of duplicative functions and improved
market acceptance of the acquired company's products due to affiliation with the
Company.
<TABLE>
THE OFFERING
<S> <C>
Common Stock Offered...................................................... 3,000,000
Common Stock to be Outstanding after the Offering(1)...................... 48,000,000
Proposed AMEX Symbol...................................................... TOC
Use of Proceeds........................................................... General corporate
purposes, including
acquisitions
<FN>
- ---------------
(1) Does not include 3,000,000 shares of Common Stock reserved for issuance
under the Company's stock-based compensation plans and 6,730,769 shares of
Common Stock reserved for issuance upon conversion of the Company's 5%
Convertible Subordinated Debentures due 2000 at an assumed conversion price
equal to $14.30 (based upon a conversion price equal to 110% of the initial
public offering price, as provided in the Debentures, and an assumed initial
public offering price of $13.00 per share). Options to purchase 2,355,600
shares of Common Stock had been granted and were outstanding under the
Company's stock-based compensation plans as of June 3, 1996. See
"Capitalization," "Management -- Compensation of Directors" and
"-- Compensation of Executive Officers" and Notes 3 and 9 to Consolidated
Financial Statements of the Company.
</TABLE>
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4
<PAGE> 7
- -------------------------------------------------------------------------------
<TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
PRO FORMA
COMBINED(5)
---------------------
THREE
THREE MONTHS ENDED(1) FISCAL MONTHS
YEAR ENDED
---------------------- --------- ----------
APRIL 1, MARCH 30, MARCH 30,
1991(1) 1992(1)(2) 1993 1994 1995(3)(4) 1995(3) 1996 1995 1996
--------- ---------- --------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues.............. $67,032 $102,232 $161,006 $165,398 $212,152 $50,862 $69,668 $325,628 $83,145
Gross Profit.......... 30,458 51,381 84,374 83,274 103,562 25,152 33,908 145,447 38,178
Operating Income...... 10,770 16,084 28,003 26,246 28,435 7,603 7,648 26,521 8,435
Net Income............ 5,239 7,881 15,372 14,423 16,009 4,220 4,296 10,056 3,979
Earnings per
Share(6)............ .12 .17 .34 .32 .35 .09 .10 .22 .09
Weighted Average
Shares(6)........... 45,109 45,109 45,109 45,109 45,109 45,109 45,109 45,109 45,109
</TABLE>
<TABLE>
<CAPTION>
MARCH 30, 1996
------------------------
PRO AS
FORMA(7) ADJUSTED(8)
-------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital........................................................................... $ 67,386 $103,240
Total Assets.............................................................................. 436,504 472,358
Long-term Obligations..................................................................... 100,969 100,969
Shareholders' Investment.................................................................. 187,922 223,776
<FN>
- ---------------
(1) Derived from unaudited financial statements.
(2) Includes the results of Nicolet Instrument Corporation ("Nicolet") since its
acquisition by Thermo Instrument on August 21, 1992.
(3) Includes the results of the Analytical Instruments Division of Baird
Corporation ("Baird") since its acquisition by the Company on January 1,
1995.
(4) Includes the results of the Mattson Instruments ("Mattson") and Unicam
divisions of Analytical Technology, Inc. ("ATI") since their acquisition by
Thermo Instrument on December 1, 1995.
(5) The pro forma combined statement of income data for fiscal year 1995 is
derived from the pro forma combined condensed statement of income included
elsewhere in this Prospectus, which was prepared as if the issuance of the
Company's 5% Convertible Subordinated Debentures due 2000 (the "Debentures")
in October 1995, the acquisitions of the Mattson and Unicam divisions of ATI
and the proposed acquisition of A.R.L. Applied Research Laboratories S.A.
("ARL") had occurred at the beginning of 1995. The acquisitions are assumed
to be financed by the net proceeds from the issuance of the Debentures. The
pro forma results are not necessarily indicative of future operations or the
actual results that would have occurred had the issuance of the Debentures,
the acquisitions of the Mattson and Unicam divisions of ATI and the proposed
acquisition of ARL occurred at the beginning of 1995. The pro forma combined
statement of income data for the three months ended March 30, 1996 is
derived from the pro forma combined condensed statement of income included
elsewhere in this Prospectus, which was prepared as if the proposed
acquisition of ARL had occurred at the beginning of 1995.
(6) Pursuant to Securities and Exchange Commission requirements, earnings per
share have been presented for all periods. Weighted average shares for such
periods include the 45,000,000 shares issued to Thermo Instrument in
connection with the initial capitalization of the Company and the effect of
the assumed exercise of stock options issued within one year prior to the
Company's proposed initial public offering.
(7) The pro forma combined balance sheet data as of March 30, 1996 is derived
from the pro forma combined condensed balance sheet on page F-34, which was
prepared as if the payment of $36.6 million by the Company to Thermo
Instrument in April 1996, made in consideration for the transfer of the
Mattson and Unicam divisions of ATI, had occurred on December 1, 1995 and
the proposed acquisition of ARL had occurred on March 30, 1996.
(8) Adjusted to reflect the sale by the Company of 3,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $13.00
per share, after deducting estimated underwriting discounts and commissions
and offering expenses payable by the Company.
</TABLE>
- -------------------------------------------------------------------------------
5
<PAGE> 8
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Accordingly, the following factors should be carefully
considered in evaluating the Company and its business before purchasing any of
such shares.
Risks Associated with Technological Change, Obsolescence and the
Development and Acceptance of New Products. The market for the Company's
products is characterized by rapid and significant technological change and
evolving industry standards. New product introductions responsive to these
factors require significant planning, design, development and testing at the
technological, product and manufacturing process levels, and may render existing
products and technologies uncompetitive or obsolete. There can be no assurance
that the Company's products will not become uncompetitive or obsolete. In
addition, industry acceptance of new technologies developed by the Company may
be slow to develop due to, among other things, existing regulations written
specifically for older technologies and general unfamiliarity of users with new
technologies.
Risks Associated with Acquisition Strategy; No Assurance of a Successful
Acquisition Strategy. The Company's growth strategy is to supplement its
internal growth with the acquisition of businesses and technologies that
complement or augment the Company's existing product lines. The Company has
recently acquired certain businesses within the former analytical instruments
division of ATI that were initially acquired by Thermo Instrument in December
1995, and is discussing with Thermo Instrument the terms pursuant to which the
Company would acquire ARL, a business within the former scientific instruments
division of Fisons plc, which was acquired by Thermo Instrument in March 1996.
Certain of these businesses have low levels of profitability, and businesses
that the Company may seek to acquire in the future may also be marginally
profitable or unprofitable. In order for any acquired businesses to achieve the
level of profitability desired by the Company, the Company must successfully
reduce expenses and improve market penetration. No assurance can be given that
the Company will be successful in this regard. In addition, promising
acquisitions are difficult to identify and complete for a number of reasons,
including competition among prospective buyers and the need for regulatory
approvals, including antitrust approvals. There can be no assurance that the
Company will be able to complete pending or future acquisitions. In order to
finance any such acquisitions, it may be necessary for the Company to raise
additional funds either through public or private financings. Any equity or debt
financing, if available at all, may be on terms which are not favorable to the
Company and may result in dilution to the Company's shareholders. See
"Business -- Acquisitions."
Possible Adverse Effect From Consolidation in the Environmental Market and
Changes in Environmental Regulations. One of the largest markets for the
Company's products is environmental analysis. During the past three years, there
has been a contraction in the market for analytical instruments used for
environmental analysis. This contraction has caused consolidation in the
businesses serving this market. Such consolidation may have an adverse impact on
certain of the Company's businesses. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations." In addition, most air, water
and soil analysis is conducted to comply with Federal, state, local and foreign
environmental regulations. These regulations are frequently specific as to the
type of technology required for a particular analysis and the level of detection
required for that analysis. The Company develops, configures and markets its
products to meet customer needs created by existing and anticipated
environmental regulations. These regulations may be amended or eliminated in
response to new scientific evidence or political or economic considerations. Any
significant change in environmental regulations could result in a reduction in
demand for the Company's products.
Possible Adverse Impact of Significant International Operations. Sales
outside the United States accounted for approximately 60% of the Company's
revenues in 1995, and the Company expects that international sales will continue
to account for a significant portion of the Company's revenues in the future.
Sales to customers in foreign countries are subject to a number of risks,
including the following: agreements may be difficult to enforce and receivables
difficult to collect through a foreign country's legal system; foreign customers
may have longer payment cycles; foreign countries could impose withholding taxes
or otherwise tax the Company's foreign income, impose tariffs, or adopt other
restrictions on foreign trade; fluctuations in
6
<PAGE> 9
exchange rates may affect product demand and adversely affect the profitability
in U.S. dollars of products and services provided by the Company in foreign
markets where payment for the Company's products and services is made in the
local currency; U.S. export licenses may be difficult to obtain and the
protection of intellectual property in foreign countries may be more difficult
to enforce. There can be no assurance that any of these factors will not have a
material adverse effect on the Company's business and results of operations.
Competition. The Company encounters and expects to continue to encounter
intense competition in the sale of its products. The Company believes that the
principal competitive factors affecting the market for its products include
product performance, price, reliability and customer service. The Company's
competitors include large multinational corporations and their operating units,
including Perkin-Elmer and Varian. These companies and certain of the Company's
other competitors have substantially greater financial, marketing and other
resources than those of the Company. As a result, they may be able to adapt more
quickly to new or emerging technologies and changes in customer requirements, or
to devote greater resources to the promotion and sale of their products than the
Company. In addition, competition could increase if new companies enter the
market or if existing competitors expand their product lines or intensify
efforts within existing product lines. There can be no assurance that the
Company's current products, products under development or ability to discover
new technologies will be sufficient to enable it to compete effectively with its
competitors. See "Business -- Competition."
Risks Associated with Protection, Defense and Use of Intellectual
Property. The Company holds many patents relating to various aspects of its
products, and believes that proprietary technical know-how is critical to many
of its products. Proprietary rights relating to the Company's products are
protected from unauthorized use by third parties only to the extent that they
are covered by valid and enforceable patents or are maintained in confidence as
trade secrets. There can be no assurance that patents will issue from any
pending or future patent applications owned by or licensed to the Company or
that the claims allowed under any issued patents will be sufficiently broad to
protect the Company's technology and, in the absence of patent protection, the
Company may be vulnerable to competitors who attempt to copy the Company's
products or gain access to its trade secrets and know-how. Proceedings initiated
by the Company to protect its proprietary rights could result in substantial
costs to the Company. There can be no assurance that competitors of the Company
will not initiate litigation to challenge the validity of the Company's patents,
or that they will not use their resources to design comparable products that do
not infringe the Company's patents. There may also be pending or issued patents
held by parties not affiliated with the Company that relate to the Company's
products or technologies. The Company may need to acquire licenses to, or
contest the validity of, any such patents. There can be no assurance that any
license required under any such patent would be made available on acceptable
terms or that the Company would prevail in any such contest. The Company could
incur substantial costs in defending itself in suits brought against it or in
suits in which the Company may assert its patent rights against others. If the
outcome of any such litigation is unfavorable to the Company, the Company's
business and results of operations could be materially adversely affected. In
addition, the Company relies on trade secrets and proprietary know-how which it
seeks to protect, in part, by confidentiality agreements with its collaborators,
employees and consultants. There can be no assurance that these agreements will
not be breached, that the Company would have adequate remedies for any breach or
that the Company's trade secrets will not otherwise become known or be
independently developed by competitors. See "Business -- Patents and Licenses."
Potential Conflicts of Interest. For financial reporting purposes, the
Company's financial results are included in Thermo Instrument's and Thermo
Electron's consolidated financial statements. Certain officers of the Company
are also officers of Thermo Instrument, Thermo Electron and/or other
subsidiaries of Thermo Electron. Such officers will devote only a portion of
their working time to the affairs of the Company. Further, it is an essential
element of Thermo Electron's career development program that successful
executives and managers be considered for positions of increased responsibility
anywhere within the Thermo Electron family of companies. A number of the
Company's executives and managers were promoted to their present positions under
this policy. There can be no assurance that its present executives and managers
will not assume other positions within the Thermo Electron family of companies,
causing them to be unavailable to serve the Company or to reduce the amount of
time that they devote to the affairs of the Company. The members of the
7
<PAGE> 10
Board of Directors and officers of the Company who are also affiliated with
Thermo Instrument or Thermo Electron will consider not only the short-term and
the long-term impact of operating decisions on the Company, but also the impact
of such decisions on the consolidated financial results of Thermo Instrument and
Thermo Electron. In some cases the impact of such decisions could be
disadvantageous to the Company while advantageous to Thermo Instrument or Thermo
Electron, or vice versa. For example, Thermo Instrument recently acquired a
substantial portion of the scientific instruments division of Fisons plc. The
Company expects to acquire ARL, a business within the former scientific
instruments division of Fisons, from Thermo Instrument. The purchase price to be
paid by the Company for ARL is subject to negotiation between the Company and
Thermo Instrument. These negotiations will be subject to the potential conflicts
associated with related party transactions. A similar situation arose in
connection with the Company's acquisition from Thermo Instrument of certain
portions of the former analytical instruments division of ATI, and may arise in
the future with respect to acquisitions of other businesses that fit
strategically with the Company in addition to one or more of its affiliates. The
Company is also a party to various agreements with Thermo Electron that may
limit the Company's operating flexibility. See "Business -- Acquisitions" and
"Relationship with Thermo Electron and Thermo Instrument."
Control by Thermo Instrument. The Company's shareholders do not have the
right to cumulate votes for the election of directors. Thermo Instrument, which
will own approximately 94% of the voting stock of the Company after this
offering and which currently intends to maintain at least an 80% interest in the
Company in the future, has the power to elect the entire Board of Directors of
the Company and to approve or disapprove any corporate actions submitted to a
vote of the Company's shareholders. See "Relationship with Thermo Electron and
Thermo Instrument" and "Security Ownership of Certain Beneficial Owners and
Management."
Determination of Use of Proceeds by Management and the Company's Board of
Directors. The Company intends to use the net proceeds from this offering for
general corporate purposes, including the possible acquisition of one or more
businesses, including the possible acquisition of ARL as described under the
caption "Business -- Acquisitions." However, a final determination of the use of
such proceeds has not been made. See "Use of Proceeds." Thus, after the offering
has been consummated, management and the Board of Directors of the Company will
be able to determine the specific uses for such proceeds without first seeking
approval from the Company's shareholders.
No Prior Public Market; No Assurance of an Active Trading Market. Prior to
this offering, there has been no public market for the Common Stock, and there
can be no assurance that an active trading market will develop or be sustained
after this offering. The offering price for the Common Stock will be determined
by negotiations between the Company and the Representatives of the Underwriters
and may not be indicative of future market prices. See "Underwriting" for a
discussion of the factors to be considered in determining the offering price.
Many factors, including the risk factors contained in this Prospectus and the
volatility of the overall stock market, could have a significant impact on the
future market price of the Common Stock, and there can be no assurance that the
Common Stock will trade at a level above the offering price.
Shares Eligible for Future Sale and the Potential Adverse Impact on the
Market Price for the Common Stock. The 45,000,000 shares of Common Stock owned
by Thermo Instrument will become eligible for sale under Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act") commencing
in December 1997. In addition, as long as Thermo Instrument is able to elect a
majority of the Company's Board of Directors, it will be able to cause the
Company at any time to register all or a portion of the Common Stock owned by
Thermo Instrument under the Securities Act at any time. Thermo Electron, Thermo
Instrument and the Company have agreed not to sell any shares of Common Stock
within a 180-day period after the date of this Prospectus without the consent of
the Representatives of the Underwriters, other than (i) shares of Common Stock
to be sold to the Underwriters in this offering, (ii) the issuance of options
and sales of shares of Common Stock pursuant to existing stock-based
compensation plans, (iii) shares of Common Stock which may be sold to Thermo
Instrument, and (iv) the issuance of shares of Common Stock as consideration for
the acquisition of one or more businesses (provided that such Common Stock may
not be resold prior to the expiration of the 180-day period referenced above).
As of June 3, 1996, the Company had outstanding $96,250,000 aggregate principal
amount of 5% Convertible Subordinated Debentures due 2000
8
<PAGE> 11
(the "Debentures"). The Debentures are convertible at any time after the later
of (a) 180 days after the closing of the sale of shares of Common Stock in this
offering or (b) the effectiveness of a registration statement under the
Securities Act covering the shares of Common Stock issuable upon conversion of
the Debentures. The Debentures will be convertible into an aggregate number of
shares of Common Stock equal to (i) $96,250,000, divided by (ii) 110% of the
initial public offering price of the Common Stock. The Company is obligated to
file a registration statement under the Securities Act covering these shares
promptly following the closing of the sale of shares of Common Stock in this
offering. Shares issuable upon conversion of the Debentures will be eligible for
sale in the public market after the effectiveness of such registration
statement. The Company has reserved 3,000,000 shares of Common Stock for
issuance under its stock-based compensation plans. As of June 3, 1996, options
to purchase 2,355,600 shares of Common Stock were outstanding. Additional shares
of Common Stock issuable upon exercise of options which have been or may be
granted under the Company's stock-based compensation plans will become available
for future sale in the public market at prescribed times. Sales of a significant
number of shares of Common Stock in the public market following this offering
could adversely affect the market price of the Common Stock. See "Shares
Eligible for Future Sale," "Relationship with Thermo Electron and Thermo
Instrument" and "Underwriting."
Immediate and Substantial Dilution. Purchasers of the Common Stock offered
hereby will incur an immediate and substantial dilution in the net tangible book
value per share of the Common Stock from the offering price. See "Dilution."
Lack of Dividends. The Company has never paid any cash dividends on its
Common Stock. The Board of Directors anticipates that for the foreseeable future
the Company's earnings, if any, will be retained for use in the business and
that no cash dividends will be paid on the Common Stock.
9
<PAGE> 12
THE COMPANY
Thermo Optek was incorporated in Delaware in August 1995 as a wholly owned
subsidiary of Thermo Instrument. The Company's name reflects its focus, which is
the development, manufacture and marketing of optical spectroscopy technologies
and instruments. After the formation of the Company, Thermo Instrument
transferred to the Company all of the assets, liabilities and businesses of
Nicolet, which conducts the Company's FT-IR and FT-Raman spectrometer
businesses, and Thermo Jarrell Ash Corporation ("TJA"), which conducts the
Company's AA and AE spectrometer businesses. Nicolet was acquired by Thermo
Instrument in 1992. In January 1995, the Company established a subsidiary,
Thermo Vision Corporation ("Thermo Vision"), to pursue applications of the
Company's technologies for cost-effective, application-specific instruments and
other opportunities based on optical technologies.
The Company has recently completed several acquisitions. In January 1995,
the Company acquired the analytical instruments division of Baird, a
manufacturer of arc/spark spectrometers. In February 1996, Thermo Vision
acquired both Corion Corporation ("Corion"), a manufacturer of commercial
optical filters, and Oriel Corporation ("Oriel"), a manufacturer and distributor
of electro-optical instruments and components.
Most recently, in April 1996, the Company acquired Mattson, a manufacturer
of FT-IR spectroscopy instruments, and Unicam, a manufacturer of AA and
ultraviolet/visible spectroscopy instruments, from Thermo Instrument. Both of
these businesses were formerly part of the analytical instruments division of
ATI, which Thermo Instrument acquired in December 1995. See
"Business -- Acquisitions."
Unless the context requires otherwise, references herein to the Company
refer to Thermo Optek Corporation and its subsidiaries and to the predecessor
businesses as conducted by Thermo Instrument, including acquired businesses from
their dates of acquisition. As of June 3, 1996, Thermo Instrument owned 100% of
the Company's outstanding Common Stock. The Company's principal executive
offices are located at 8E Forge Parkway, Franklin, Massachusetts 02038 and its
telephone number is (508) 528-0551.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered by the Company pursuant to this offering are estimated to be $35,854,000
($41,324,000 if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $13.00 per share and after
deducting estimated underwriting discounts and commissions and offering
expenses.
The Company intends to use the net proceeds for general corporate purposes,
including acquisitions, including the possible acquisition of ARL from Thermo
Instrument, as described below under the caption "Business -- Acquisitions."
However, a final determination of the use of such proceeds has not been made.
Pending these uses, the Company expects to invest the net proceeds primarily in
investment grade interest or dividend bearing instruments, either directly by
the Company or pursuant to a repurchase agreement with Thermo Electron. See
"Relationship with Thermo Electron and Thermo Instrument" and "Risk Factors --
Determination of Use of Proceeds by Management and the Company's Board of
Directors."
DIVIDEND POLICY
The Company anticipates that for the foreseeable future the Company's
earnings, if any, will be retained for use in the business and that no cash
dividends will be paid on the Common Stock.
10
<PAGE> 13
<TABLE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 30, 1996, on a pro forma basis as if (i) the payment of $36.6 million by
the Company to Thermo Instrument in April 1996, made in consideration for the
transfer of the Mattson and Unicam divisions of ATI, had occurred on December 1,
1995 and (ii) the proposed acquisition of ARL had occurred on March 30, 1996,
and as adjusted to give effect to the sale of the Common Stock offered hereby at
an assumed initial public offering price of $13.00 per share, after deducting
estimated underwriting discounts and commissions and offering expenses payable
by the Company.
<CAPTION>
MARCH 30, 1996
------------------------
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Short-term Obligations:
Notes payable....................................................... $ 30,359 $ 30,359
Current maturities of long-term obligations......................... 671 671
-------- --------
$ 31,030 $ 31,030
======== ========
Long-term Obligations:
5% Convertible Subordinated Debentures due 2000..................... $ 96,250 $ 96,250
Other............................................................... 4,719 4,719
-------- --------
100,969 100,969
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 100,000,000 shares authorized;
45,000,000 shares issued and outstanding and 48,000,000 shares as
adjusted(1)...................................................... 450 480
Capital in excess of par value...................................... 178,784 214,608
Retained earnings................................................... 9,558 9,558
Cumulative translation adjustment................................... (870) (870)
-------- --------
Total Shareholders' Investment................................. 187,922 223,776
-------- --------
Total Capitalization (Long-term Obligations and
Shareholders' Investment)................................. $288,891 $324,745
======== ========
<FN>
- ---------------
(1) Does not include 3,000,000 shares of Common Stock reserved for issuance
under the Company's stock-based compensation plans and 6,730,769 shares of
Common Stock reserved for issuance upon conversion of the Company's 5%
Convertible Subordinated Debentures due 2000 at an assumed conversion price
equal to $14.30 (based upon a conversion price equal to 110% of the initial
public offering price, as provided in the Debentures, and an assumed initial
public offering price of $13.00 per share). Options to purchase 2,355,600
shares of Common Stock had been granted and were outstanding under the
Company's stock-based compensation plans as of June 3, 1996. See
"Management -- Compensation of Directors" and "-- Compensation of Executive
Officers" and Notes 3 and 9 to Consolidated Financial Statements of the
Company.
</TABLE>
11
<PAGE> 14
<TABLE>
DILUTION
As of March 30, 1996, the Company had a net tangible book value of
$2,616,000, or $.06 per share, stated on a pro forma basis as if the payment of
$36,558,000 by the Company to Thermo Instrument in April 1996, made in
consideration for the transfer of the Mattson and Unicam divisions of ATI, had
occurred on December 1, 1995 and the proposed acquisition of ARL had occurred on
March 30, 1996 (see the pro forma combined condensed balance sheet on page
F-34). Net tangible book value per share is determined by dividing net tangible
book value (total tangible assets less total liabilities) of the Company by the
number of shares of Common Stock outstanding. After giving effect to the sale of
3,000,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $13.00 per share and the receipt of the estimated net proceeds
therefrom, the pro forma net tangible book value of the Common Stock as of March
30, 1996 would have been $38,470,000, or $.80 per share. This represents an
immediate increase in pro forma net tangible book value of $.74 per share to the
existing shareholder and an immediate dilution in pro forma net tangible book
value of $12.20 per share to investors purchasing Common Stock in this offering.
The following table illustrates this per share dilution:
<S> <C> <C>
Assumed price to public............................................. $13.00
Pro forma net tangible book value per share as of March 30, 1996,
before offering................................................ $ .06
Increase in pro forma net tangible book value per share
attributable to payments by new investors...................... .74
-----
Pro forma net tangible book value per share as of March 30, 1996,
after offering(1)(2).............................................. .80
------
Dilution per share to new investors(1)(2)........................... $12.20
======
<FN>
- ---------------
(1) If the Underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after the offering would be $.91,
resulting in an immediate dilution of $12.09 per share to investors
purchasing shares in this offering.
(2) If all outstanding options at June 3, 1996 to purchase an aggregate of
2,355,600 shares of Common Stock at $12.00 per share were exercised in full,
in addition to the Underwriters' exercise of the over-allotment option, the
pro forma net tangible book value per share after the offering would be
$1.42, resulting in an immediate dilution of $11.58 per share to investors
purchasing shares in this offering.
</TABLE>
<TABLE>
The following table summarizes the differences between Thermo Instrument,
the present stockholder, and new investors with respect to the number of shares
of Common Stock acquired, the total consideration paid and the average
consideration paid per share (at an assumed initial public offering price of
$13.00 per share):
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Thermo Instrument(1)......... 45,000,000 93.8% $179,234,000 82.1% $ 3.98
New investors................ 3,000,000 6.2 39,000,000 17.9 13.00
---------- ----- ------------ -----
Total.............. 48,000,000 100.0% $218,234,000 100.0%
========== ===== ============ =====
<FN>
- ---------------
(1) Represents the book value of net assets transferred by Thermo Instrument to
the Company in exchange for 45,000,000 shares of the Company's Common Stock.
</TABLE>
12
<PAGE> 15
<TABLE>
SELECTED FINANCIAL INFORMATION
The selected financial information presented below as of and for the fiscal
years ended January 1, 1994, December 31, 1994 and December 30, 1995 has been
derived from the Company's Consolidated Financial Statements, which have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report included elsewhere in this Prospectus. This information should be
read in conjunction with the Company's financial statements and related notes
included elsewhere in this Prospectus. The selected financial information for
the fiscal years ended December 28, 1991 and January 2, 1993 and for the three
months ended April 1, 1995 and March 30, 1996 have not been audited but, in the
opinion of the Company, includes all adjustments (consisting only of normal,
recurring adjustments) necessary to present fairly such information in
accordance with generally accepted accounting principles applied on a consistent
basis. The results of operations for the three months ended March 30, 1996 are
not necessarily indicative of results for the entire year.
<CAPTION>
PRO FORMA COMBINED(5)
-------------------------
THREE MONTHS
THREE MONTHS ENDED FISCAL YEAR ENDED
------------------- ----------- ------------
APRIL 1, MARCH 30, MARCH 30,
1991 1992(1) 1993 1994 1995(2)(3)(4) 1995(2) 1996 1995 1996
-------- -------- -------- -------- ------------- -------- --------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................... $67,032 $102,232 $161,006 $165,398 $212,152 $ 50,862 $ 69,668 $325,628 $ 83,145
------- -------- -------- -------- -------- -------- -------- -------- --------
Costs and Operating
Expenses:
Cost of revenues......... 36,574 50,851 76,632 82,124 108,590 25,710 35,760 180,181 44,967
Selling, general and
administrative
expenses............... 15,788 28,121 45,778 46,532 62,109 14,338 21,326 97,532 23,917
Research and development
expenses............... 3,900 7,176 10,593 10,496 13,018 3,211 4,934 21,394 5,826
------- -------- -------- -------- -------- -------- -------- -------- --------
56,262 86,148 133,003 139,152 183,717 43,259 62,020 299,107 74,710
------- -------- -------- -------- -------- -------- -------- -------- --------
Operating Income........... 10,770 16,084 28,003 26,246 28,435 7,603 7,648 26,521 8,435
Interest Income............ -- 12 58 89 1,514 13 1,541 1,956 525
Interest Expense........... (957) (1,367) (2,249) (1,672) (2,450) (403) (1,591) (7,740) (1,703)
Other Expense, Net......... -- -- -- -- -- -- -- (896) (64)
------- -------- -------- -------- -------- -------- -------- -------- --------
Income Before Provision for
Income Taxes............. 9,813 14,729 25,812 24,663 27,499 7,213 7,598 19,841 7,193
Provision for Income
Taxes.................... 4,574 6,848 10,440 10,240 11,490 2,993 3,302 9,785 3,214
------- -------- -------- -------- -------- -------- -------- -------- --------
Net Income................. $ 5,239 $ 7,881 $ 15,372 $ 14,423 $ 16,009 $ 4,220 $ 4,296 $ 10,056 $ 3,979
======= ======== ======== ======== ======== ======== ======== ======== ========
Earnings per Share(6)...... $ .12 $ .17 $ .34 $ .32 $ .35 $ .09 $ .10 $ .22 $ .09
======= ======== ======== ======== ======== ======== ======== ======== ========
Weighted Average
Shares(6)................ 45,109 45,109 45,109 45,109 45,109 45,109 45,109 45,109 45,109
======= ======== ======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END
OF PERIOD):
Working Capital............ $20,234 $ 34,148 $ 31,448 $ 33,429 $144,541 $ 40,731 $140,393 $ 67,386
Total Assets............... 52,250 226,130 229,034 230,606 432,882 260,504 441,787 436,504
Long-term Obligations...... 944 9,106 8,589 1,037 101,079 1,103 100,969 100,969
Shareholder's Investment... 28,192 149,304 146,918 156,175 220,988 173,168 224,480 187,922
<FN>
- ---------------
(1) Includes the results of Nicolet since its acquisition by Thermo Instrument
in August 1992.
(2) Includes the results of Baird since its acquisition by the Company in
January 1995.
(3) Includes the results of the Mattson and Unicam divisions of ATI since their
acquisition by Thermo Instrument in December 1995.
(4) Reflects the issuance in October 1995 of $96,250,000 principal amount of
Debentures.
(5) The pro forma combined statement of income data for fiscal year 1995 is
derived from the pro forma combined condensed statement of income included
elsewhere in this Prospectus, which was prepared as if the issuance of the
Debentures in October 1995, the acquisitions of the Mattson and Unicam
divisions of ATI and the proposed acquisition of ARL had occurred at the
beginning of 1995. The acquisitions are assumed to be financed by the net
proceeds from the issuance of the Debentures. The pro forma results are not
necessarily indicative of future operations or the actual results that would
have occurred had the issuance of the Debentures, the acquisitions of the
Mattson and Unicam divisions of ATI and the proposed acquisition of ARL
occurred at the beginning of 1995. The pro forma combined statement of
income data for the three months ended March 30, 1996 is derived from the
pro forma combined condensed statement of income included elsewhere in this
Prospectus, which was prepared as if the proposed acquisition of ARL had
occurred at the beginning of 1995. The pro forma combined balance sheet data
as of March 30, 1996 is derived from the pro forma combined condensed
balance sheet on page F-34, which was prepared as if the payment of $36.6
million by the Company to Thermo Instrument in April 1996, made in
consideration for the transfer of the Mattson and Unicam divisions of ATI,
had occurred on December 1, 1995 and the proposed acquisition of ARL had
occurred on March 30, 1996.
(6) Pursuant to Securities and Exchange Commission requirements, earnings per
share have been presented for all periods. Weighted average shares for such
periods include the 45,000,000 shares issued to Thermo Instrument in
connection with the initial capitalization of the Company and the effect of
the assumed exercise of stock options issued within one year prior to the
Company's proposed initial public offering.
</TABLE>
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's principal operating units include TJA, a manufacturer and
distributor of AA and AE spectrometry products based in Franklin, Massachusetts,
and Nicolet, a manufacturer and distributor of FT-IR and FT-Raman spectrometry
products based in Madison, Wisconsin. Both TJA and Nicolet have worldwide sales
and service organizations with a strong overseas presence in Europe, Japan and
China.
The Company's strategy is to supplement its internal growth with the
acquisition of businesses and technologies that complement and augment its
existing product lines. In January 1995, the Company acquired the analytical
instruments division of Baird, a manufacturer of arc/spark spectrometers, and
subsequently consolidated its operations with TJA. In December 1995, Thermo
Instrument acquired the assets of the analytical instruments division (the
"Division") of ATI. In April 1996, the Company acquired the Division's Mattson
and Unicam businesses. Mattson is a manufacturer of FT-IR spectroscopy
instruments, and Unicam is a manufacturer of AA and ultraviolet/visible
spectroscopy instruments. Because, as of December 30, 1995, the Company, Mattson
and Unicam were deemed for accounting purposes to be under control of their
common owner, Thermo Instrument, the accompanying 1995 historical financial
information includes the results of operations of Mattson and Unicam from
December 1, 1995, the date these businesses were acquired by Thermo Instrument.
Because the Company had not disbursed the funds in connection with the
acquisition of Mattson and Unicam at December 30, 1995, the transfer of these
businesses has been reflected as a contribution of capital in excess of par
value as of December 1, 1995. The $36.6 million payment from the Company to
Thermo Instrument will be accounted for as a reduction of capital in excess of
par value as of April 11, 1996. Combined sales for Mattson and Unicam were $57.8
million for the eleven months ended November 30, 1995. In February 1996, the
Company acquired Oriel, a manufacturer and distributor of electro-optical
instruments and components and Corion, a manufacturer of commercial optical
filters. Oriel and Corion reported sales of $18.8 million and $8.5 million,
respectively, in 1995. See "Business -- Acquisitions."
In March 1996, Thermo Instrument completed the acquisition of a substantial
portion of the businesses comprising the scientific instruments division of
Fisons. The Company is discussing with Thermo Instrument the terms pursuant to
which the Company would acquire ARL, a Switzerland-based former subsidiary of
Fisons that manufactures arc/spark AE spectrometers and wavelength dispersive
X-ray fluorescence instruments. ARL had revenues of $55.7 million and $13.5
million for the year ended December 30, 1995 and for the three months ended
March 30, 1996, respectively. Although the Company believes it will acquire ARL
from Thermo Instrument, no assurance can be given that such acquisition will be
completed. See "Business -- Acquisitions."
Certain of the businesses the Company has acquired historically have had
low levels of profitability, and businesses that the Company may acquire in the
future may also be marginally profitable or unprofitable. In general, the
businesses the Company seeks to acquire have a strong reputation in the markets
in which they compete but relatively poor operating results due to high
manufacturing and operating costs. The Company believes it can gradually reduce
these expenses and improve the acquired businesses' profitability, although
there can be no assurance that the Company will be successful in such efforts.
As a result of the acquisition of the Mattson and Unicam businesses from Thermo
Instrument and the potential ARL acquisition, the Company expects that its
operating margins will be reduced until such time as the Company has improved
the profitability of these businesses to levels comparable with those of the
Company's other businesses.
RESULTS OF OPERATIONS
First Quarter 1996 Compared With First Quarter 1995
Revenues were $69.7 million in the first quarter of 1996, compared with
$50.9 million in the first quarter of 1995, an increase of 37.0%. Revenues
increased $13.5 million and $3.5 million due to the acquisitions of Mattson and
Unicam in December 1995 and Oriel and Corion in February 1996, respectively. In
addition,
14
<PAGE> 17
revenues increased $2.7 million in Japan primarily as a result of sales to the
Japanese government by Nicolet, offset in part by the unfavorable effects of
currency translation due to the strengthening of the U.S. dollar in relation to
the Japanese yen.
The gross profit margin declined to 48.7% in the first quarter of 1996 from
49.5% in the first quarter of 1995 primarily due to the inclusion of
lower-margin revenues at Mattson and Unicam. An increase in the gross profit
margin at Nicolet as a result of improved margins for products introduced in
1995 was offset by a decline in the gross profit margin at TJA due to increased
competition resulting from the contraction of the environmental market. The U.S.
environmental market has been consolidating, which has negatively affected sales
of several of TJA's products.
Selling, general and administrative expenses as a percentage of revenues
increased to 30.6% in the first quarter of 1996 from 28.2% in the first quarter
of 1995 primarily due to higher costs as a percentage of revenues at Mattson and
Unicam, specifically higher Unicam international selling and administrative
costs. The Company is in the process of consolidating certain international
selling and administrative functions of Unicam with existing TJA and Nicolet
entities. Research and development expenses as a percentage of revenues
increased to 7.1% in 1996 from 6.3% in 1995 primarily due to higher research and
development costs as a percentage of revenues at Mattson and Unicam.
Interest income increased to $1.5 million in the first quarter of 1996 from
$13,000 in the first quarter of 1995 as a result of interest income earned on
the invested proceeds from the Company's $96.3 million principal amount of 5%
Convertible Subordinated Debentures, which were issued in October 1995. Interest
expense increased to $1.6 million in 1996 from $0.4 million in 1995 primarily
due to interest on these debentures.
The effective tax rate was 43.5% in the first quarter of 1996, compared
with 41.5% in the first quarter of 1995. These rates exceed the statutory
federal income tax rate due to the impact of state income taxes, nondeductible
amortization of cost in excess of net assets of acquired companies and the
inability in 1995 to provide a tax benefit on foreign losses, offset in part by
the tax benefit associated with a foreign sales corporation. The effective tax
rate increased in 1996 primarily as a result of higher nondeductible
amortization of cost in excess of net assets of acquired companies.
The Company has established reserves totaling $11.6 million for certain
exit and other related costs in connection with the acquisitions of Mattson and
Unicam. These exit and other related costs are expected to include primarily
severance obligations and excess facility costs. The Company began reducing
staffing levels at the acquired businesses during the first quarter of 1996 and
is continuing these actions during the second quarter of 1996. The Company
expects to substantially complete its restructuring of Mattson and Unicam by
December 1996. The Company's results of operations will be substantially
unaffected by the payment of these restructuring costs because the reserves were
established as part of the cost of acquiring these businesses. In the fiscal
periods following such restructuring activities, the Company expects that its
results of operations will benefit from lower costs at these acquired
businesses, offset in part by amortization of cost in excess of net assets of
acquired companies.
As a result of the Unicam acquisition and potential ARL acquisition
referred to above, it is expected that the Company's international business will
continue to increase in 1996. Inherent in international operations are risks
such as greater difficulties in collecting accounts receivable due to longer
payment cycles and possible difficulties in enforcing agreements and legal
claims in foreign jurisdictions. Tax rates in certain foreign countries exceed
that of the U.S. and foreign earnings may be subject to withholding requirements
or the imposition of tariffs, exchange controls or other restrictions. In
addition, currency exchange fluctuations affecting the relationship of the U.S.
dollar and foreign currencies may adversely affect the Company's results of
operations and cash flows.
1995 Compared With 1994
Revenues were $212.2 million in 1995, compared with $165.4 million in 1994,
an increase of 28.3%. Revenues increased $25.9 million and $9.2 million due to
the acquisition of Baird in January 1995 and
15
<PAGE> 18
Mattson and Unicam in December 1995, respectively. In addition, revenues from
Nicolet increased $10.4 million due to increased demand for its products,
particularly in Japan and the Pacific Rim and, to a lesser extent, due to
currency fluctuations. Overall, revenues increased $5.7 million in 1995 due to
the weakness of the U.S. dollar in relation to foreign currencies.
The gross profit margin declined to 48.8% in 1995 from 50.3% in 1994. This
decline was primarily due to the inclusion of lower-margin products from Baird
and disruption in operations caused by the consolidation of the manufacturing
operations of Baird and TJA into a new facility in mid-1995. In addition,
increased competition due to the contraction of the environmental market as
discussed in the results of operations for the first quarter had a negative
impact on the margins of TJA in 1995. The declines at Baird and TJA were offset
in part due to improved margins at Nicolet resulting primarily from the weakness
of the U.S. dollar in relation to foreign currencies, in particular the Japanese
yen and German mark, as well as improved margins for its newly introduced
products.
Selling, general and administrative expenses as a percentage of revenues
increased to 29.3% in 1995 from 28.1% in 1994 as a result of higher expenses at
Baird prior to the consolidation of Baird's operations with TJA and expanded
selling efforts in China and Brazil. Research and development expenses as a
percentage of revenues were relatively unchanged at 6.1% in 1995, compared with
6.3% in 1994.
Interest income increased to $1.5 million in 1995 as a result of interest
income earned on the invested proceeds from the Company's $96.3 million
principal amount of 5% Convertible Subordinated Debentures. Interest expense
increased to $2.5 million in 1995 from $1.7 million in 1994 primarily due to
interest on these debentures.
The effective tax rate was 41.8% in 1995 and 41.5% in 1994. These rates
exceed the statutory federal income tax rate due to the impact of state income
taxes, nondeductible amortization of cost in excess of net assets of acquired
companies and the inability in 1995 to provide a tax benefit on foreign losses,
offset in part by the tax benefit associated with a foreign sales corporation.
1994 Compared With 1993
Revenues were $165.4 million in 1994, compared with $161.0 million in 1993.
An increase in revenues at TJA due to increased demand, a $4.6 million increase
in revenues due to the acquisitions of Hilger Analytical in July 1993 and CID
Technologies Inc. in October 1994, and a $3.3 million increase in revenues due
to the weakness of the U.S. dollar in relation to foreign currencies were offset
in part by a decline in revenues at Nicolet due to two large orders that were
shipped during 1993.
The gross profit margin declined to 50.3% in 1994 from 52.4% in 1993 due to
lower margins at TJA resulting from changes in product mix and lower margins on
sales in Europe due to the European recession.
Selling, general and administrative expenses as percentages of revenues
were 28.1% in 1994, compared with 28.4% in 1993. Research and development
expenses as a percentage of revenues remained relatively unchanged at 6.3% in
1994, compared with 6.6% in 1993.
Interest expense declined to $1.7 million in 1994 from $2.2 million in 1993
due to the repayment of borrowings by Nicolet in September 1994 and reduced
working capital borrowings at the Company's European subsidiaries.
The effective tax rate was 41.5% in 1994, compared with 40.4% in 1993.
These rates exceed the statutory federal income tax rate due primarily to the
impact of state income taxes and the nondeductible amortization of cost in
excess of net assets of acquired companies, offset in part by the tax benefit
associated with a foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $140.4 million at March 30, 1996, compared
with $144.5 million at December 30, 1995. Included in working capital are cash
and cash equivalents of $109.8 million at March 30, 1996, compared with $116.9
million at December 30, 1995. During the first three months of 1996, $10.2
million of cash was provided by operating activities. Other current liabilities
increased $5.5 million
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primarily as a result of higher income taxes payable and an increase in payables
to Thermo Electron and affiliated companies. Accounts receivable increased to
$62.6 million at March 30, 1996 from $62.3 million and $40.4 million at December
30, 1995 and December 31, 1994, respectively. The increase from December 31,
1994 to December 30, 1995 resulted from $13.5 million of receivables at Mattson
and Unicam, as well as higher receivables due to the acquisition of Baird and
higher international receivables, which typically have longer payment cycles.
Inventories increased from $43.0 million at December 30, 1995 to $51.1 million
at March 30, 1996 primarily due to an increase of $6.0 million as a result of
acquisitions.
The Company's investing activities used $17.0 million of cash in the first
three months of 1996. The Company expended $15.5 million, net of cash acquired,
for the acquisitions of Oriel and Corion and $1.6 million for the purchase of
property, plant and equipment.
The Company's financing activities used $90,000 of cash in the first three
months of 1996 for the repayment of long-term obligations.
In April 1996, the Company expended $36.6 million for the acquisitions of
Mattson and Unicam. During the remainder of 1996, the Company plans to make
expenditures of approximately $1.4 million for property, plant and equipment. As
discussed in the results of operations for the first quarter, the Company has
established reserves of $11.6 million for exit and other related costs in
connection with the acquisitions of Mattson and Unicam. The Company expects that
the cash impact of the reserves will affect the Company primarily in 1996 and
1997, as the Company makes payments for severance and excess facilities.
Though the Company expects 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 and subsequently restructure the operations of such acquired businesses
through a combination of internal funds, including the net proceeds from the
sale of the shares of Common Stock offered hereby, additional debt or equity
financing from capital markets, or short-term borrowings from Thermo Instrument
or Thermo Electron, although there is no agreement with Thermo Instrument or
Thermo Electron under which such parties are obligated to lend funds to the
Company. For the potential ARL acquisition, if consummated, the Company expects
to expend between $28 million and $38 million and assume debt of approximately
$12 million. The Company anticipates funding the purchase price for ARL from
existing cash balances. The purchase of Mattson and Unicam in April 1996 and the
potential purchase of ARL are not expected to have a material adverse impact on
the Company's short-term liquidity. The Company believes that its existing
resources are sufficient to meet the capital requirements of its existing
businesses for at least the next 24 months.
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BUSINESS
The Company is a worldwide leader in the development, manufacture and
marketing of analytical instruments that utilize a range of optical spectroscopy
techniques. These instruments are used in the quantitative and qualitative
chemical analysis of elements and molecular compounds in a wide variety of
solids, liquids and gases. The Company's products are used by its customers for
productivity enhancement, research and development, quality control and testing
applications in the environmental testing, chemical, metallurgical, food and
beverage, pharmaceutical and petroleum industries; and by forensic laboratories,
research organizations and educational institutions. Industry sources estimate
that the total worldwide market for the Company's current optical spectroscopy
instruments is approximately $2.0 billion and the Company estimates that the
market for optical components, systems and sub-assemblies addressed by its
Thermo Vision subsidiary is approximately $0.5 billion. The total worldwide
market for analytical instruments is estimated to be approximately $11.0
billion. The Company believes that growth in the industry is driven primarily by
evolving production quality control standards, demand for higher productivity,
increased regulatory requirements, research and development expenditures by
private industry and governmental entities and by increasing demand in
developing countries.
The Company's products are used for both elemental and molecular analysis,
and are based on several optical spectroscopy techniques, including atomic
absorption (AA), atomic emission (AE), Fourier transform infrared (FT-IR) and
FT-Raman technologies. AA and AE spectrometers are used to identify trace
quantities of elements in solids and liquids based on the atomic spectra that a
sample emits or absorbs when it is excited by an energy source. These
spectrometers are used in a variety of applications, including the measurement
of toxic elements in environmental samples, metals analysis for industrial use
and product quality assurance for food, drug and cosmetic products. FT-IR and
FT-Raman spectrometers are used to determine the molecular composition of
samples by observing how they absorb or emit infrared light. Because FT-IR and
FT-Raman techniques are non-destructive to a sample, they are used in a wide
variety of applications, including forensic applications and quality assurance
and research and development applications in the pharmaceutical, chemical and
semiconductor industries. The Company has also recently established a
subsidiary, Thermo Vision Corporation, to pursue applications of the Company's
optical technologies for cost-effective, application-specific instruments and
for components, systems and subassemblies used in analytical instrumentation and
other broader market applications.
The Company's strategy is to build upon its position in the industry
through the continued development of technologically superior products and
through the development of new markets, applications and customers for its
products, while maintaining the operating principles that have contributed to
its success: innovative technology, efficient manufacturing capabilities and a
worldwide sales and service network. The Company believes it has built a
reputation in the industry for providing high performance instruments backed by
reliable service, while effectively controlling costs and maximizing operational
efficiencies. The Company believes that the market for analytical instruments
can be expanded by (i) increasing customer productivity through the development
of products and technologies that permit analytical instruments to be used
on-site and on-line or near-line in industrial and manufacturing settings and
(ii) applying the Company's broad technology base to the development of
cost-effective, application-specific instruments.
As part of its growth strategy, the Company intends to actively seek the
acquisition of products and technologies that complement and augment its
existing product lines. The analytical instruments industry is highly fragmented
and is estimated to consist of more than 1,000 industry competitors, many of
which focus on small groups of customers, a narrow range of technologies and
applications, or limited geographic areas. Thus, it can often be more cost
effective to target an attractive market segment through the acquisition of
established, smaller, focused providers than through internal product
development. The Company has completed the acquisition of several complementary
businesses during the past two years. In addition, Thermo Instrument has
recently acquired certain businesses that have been or will likely be acquired
by the Company. See "-- Acquisitions." The Company targets acquisitions that it
believes will lead to enhanced profitability through manufacturing efficiencies,
the elimination of lower margin product lines, enhanced distribution
capabilities, the elimination of duplicative functions and improved market
acceptance of the acquired company's products due to affiliation with the
Company.
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LINES OF BUSINESS
Analytical instruments are generally classified by their principal
operating technologies. The Company's AE and AA spectrometers comprise its
elemental analysis product line, and FT-IR and FT-Raman spectrometers comprise
the Company's molecular analysis product line. Through its Thermo Vision
Corporation ("Thermo Vision") subsidiary, the Company also develops and
manufactures cost-effective application-specific instruments, as well as
components, systems and subassemblies for analytical instruments.
ELEMENTAL ANALYSIS -- AE AND AA SPECTROMETERS
The Company produces a range of AE and AA spectrometers that are used to
detect and measure metals and other elements in solid and liquid samples from
ultratrace (parts per billion) to major concentrations. In AE spectrometers, the
samples are excited by an energy source, causing the sample atoms to emit
radiation. The radiation is then dispersed by a grating into its component light
wavelengths, which are detected by a photo multiplier tube or a solid state
detector. Because each element has a characteristic wavelength that acts as a
"fingerprint" for that element, the instrument compares the detected wavelengths
against a library of spectra for identification. The resulting data may then be
stored and manipulated with a personal computer. AE spectrometers use either an
electrical discharge ("arc/spark") or a high frequency inductively coupled
plasma ("ICP") as the energy source. Arc/spark instruments are used primarily
for solid samples and ICP instruments are used for both solid and liquid
samples. ICP instruments can be coupled with a mass spectrometer ("ICP/MS") to
provide better detection limits. In an AA spectrometer, a graphite furnace or
flame is used to heat the sample. The AA spectrometer incorporates a hollow
cathode lamp that contains the element to be measured. Because the hollow
cathode lamp radiates at the same wavelength as the sample atoms, the sample
atoms absorb radiation from the lamp and the detector measures this absorption.
AE and AA spectrometers are distinguished based on sensitivity, speed,
flexibility and cost. The Company's AA spectrometers are sold at prices ranging
from approximately $15,000 to $65,000. While an AA spectrometer, when configured
with a graphite furnace, is capable of highly sensitive analysis, it can only
measure one element at a time and must be adjusted to measure each element. The
Company's AE spectrometers, which range in price from approximately $50,000 to
$150,000, combine ultratrace detection capabilities with the ability to detect
multiple elements simultaneously. While the purchase price for these instruments
is higher than for AA spectrometers, ICP spectrometers are easier to use and the
cost of associated consumables is greatly reduced. Consequently, analytical
instrument customers are increasingly using ICP spectrometers for applications
historically performed by AA spectrometers. An ICP/MS instrument provides parts
per trillion sensitivity, but ranges in price from $150,000 to $250,000, and is
slower than an AE because it cannot measure multiple elements simultaneously.
The Company's AE and AA instruments are used in a wide variety of
applications, which include testing of environmental samples such as soil and
water, food and drug testing, analysis of blood, urine and animal tissue, and
process control and product quality assurance testing. The Company sells its
products to a wide range of customers in manufacturing industries such as
producers of aircraft, automobiles and trucks, computers, chemicals, food,
pharmaceuticals and primary metals; service industries such as waste management
companies and commercial testing laboratories; and government and university
laboratories.
The Company derived revenues of $72.9 million, $81.2 million and $112.3
million from sales of elemental analysis instruments in 1993, 1994 and 1995,
respectively.
In April 1996, the Company acquired Unicam, a manufacturer of AA and
ultraviolet/visible ("UV/Vis") spectroscopy instruments, from Thermo Instrument.
The Company believes that this acquisition will increase its product base in AA
spectrometers, as well as its presence in the European market. In addition, the
Company is currently discussing with Thermo Instrument the terms of the
potential acquisition of A.R.L. Applied Research Laboratories S.A. ("ARL"), a
manufacturer of arc/spark instruments used in elemental solids analysis and
wavelength dispersive x-ray fluorescence instruments. See "-- Acquisitions."
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Elemental Liquids Analysis
Atomic Emission Spectrometers. The principal type of AE spectrometer
used for elemental analysis of liquids is the ICP spectrometer, which allows
for simultaneous multi-element testing. The largest users of ICP instruments
are public and private environmental laboratories, which must test for multiple
elements but which have well defined testing objectives. All of these users
test for compliance with applicable environmental regulations, which prescribe
the specific pollutants and concentrations to be tested for. As a result,
growth in the demand for ICP spectrometers is largely a function of the pace
and extent of enactment and enforcement of environmental regulations worldwide.
Currently, growth is concentrated in developing nations while sales have been
declining in the U.S., principally due to consolidation in the environmental
industry.
ICP spectrometers are also used in research and development and quality
control applications in a variety of industries, including the chemical,
pharmaceutical, food and beverage and petroleum industries. For example, ICP
spectrometers are used to determine the content of certain elements in food
oils prior to sale.
The Company believes it is a market and technology leader in ICP
spectrometry. Within the last three years, the Company has developed the first
ultratrace ICP spectrometer that incorporates a solid state detector and the
first combined optical emission/mass spectrometer. The Company's
TRACE[Trademark] ICP analyzer is used primarily for environmental testing. The
Company's IRIS[Trademark] ICP spectrometer replaces the photo multiplier tube
used in the TRACE with the Company's charge injection device ("CID") solid
state detector, allowing customers to perform with one instrument analyses that
would previously have required multiple AA and ICP instruments. In addition,
the IRIS incorporates Windows[Trademark]-based software that facilitates use of
the instrument with relatively minimal training.
Atomic Absorption Spectrometers. Due to their sensitivity and relative
low cost, AA spectrometers were historically the instrument of choice for
environmental applications. While the market for AA spectrometers is declining
due to advancements in the sensitivity and flexibility of ICP spectrometers, AA
spectrometers are still used for certain well-defined applications. Certain of
the EPA's protocols for the determination of toxic metals in water and wastes
are written for AA spectrometers. In addition to environmental testing, AA
spectrometers are also used in biological testing and for testing in the
agricultural and petroleum industries.
ICP/MS. When used in tandem with a mass spectrometer, an ICP is
capable of detecting elements at the part per trillion level. This high level
of sensitivity is often required by semiconductor, pharmaceutical and chemical
companies in both research and development and quality control functions. For
example, manufacturers of semiconductors use ICP/MS instruments to increase
manufacturing yield by testing for the presence of trace contaminants that can
destroy the functionality of a chip. In addition, ICP/MS is used in several
environmental applications.
The Company has recently introduced the second generation of its
POEMS[Registered Trademark] ICP/MS, which incorporates several significant
advances, including automated sample preparation and Windows-based software. In
addition, POEMS is the first ICP/MS instrument to integrate a CID detector,
which enhances the flexibility of the instrument.
Elemental Solids Analysis
Arc/spark instruments are used primarily in highly capital intensive
processes such as steel and other primary metal production, foundries that
fabricate raw metals, and production of products such as pipe and machine
parts. Customers in these industries use the arc/spark instrument in near line
quality control as part of the production process. Due to the high cost of
these processes, the minimization of downtime and the maintenance of quality
control are critical. For these reasons, reliability is frequently the most
important feature to an arc/spark user. The Company believes it has built a
reputation as an industry leader by offering rugged, dependable instruments and
by emphasizing customer service. Sales of arc/spark instruments are tied to the
addition of metal production capacity. Consequently, the principal areas of
growth for this type of instrument are in developing nations, particularly
China, South Korea and Brazil, where the need for new infrastructure is
increasing.
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The Company offers different arc/spark instruments for different
applications and budgets, from a laboratory grade instrument with the capability
to analyze 60 different elements to a durable mobile unit for use in small
foundries. Prices for these instruments range from $50,000 to $150,000. A
modified version of the arc/spark spectrometer is used in the analysis of engine
oils and fuels to determine engine wear. Such measurements enable better
prediction of engine failure, help schedule routine maintenance and extend
engine life.
MOLECULAR ANALYSIS -- FT-IR AND FT-RAMAN SPECTROMETERS
The Company is among the world's largest manufacturers of molecular
analysis instruments that utilize FT-IR and FT-Raman spectroscopic techniques.
Using these "vibrational" spectroscopic techniques, customers are able to
non-destructively analyze liquids and solids for their molecular composition.
These techniques also permit the analysis of samples in their packaging, which
eliminates much of the time involved with sample preparation.
The Company's FT-IR and FT-Raman spectrometers are used principally in
research and development and quality control in a variety of industries.
Chemical and pharmaceutical companies use FT-IR and FT-Raman spectrometers for
verification, identification and quantification of chemical materials and
mixtures because of the superior ability of these instruments to provide
detailed structural information. Other applications involve analysis of total
petroleum hydrocarbon content and other contamination in soil and water, and
monitoring of industrial waste streams.
The Company believes it has built a reputation as a technology leader, and
has pioneered many of the developments of modern FT-IR, including development of
the first commercial analytical FT-IR instruments and sampling technologies,
including infrared microscopy. The Company has also developed spectral databases
for use in the identification of samples in FT-IR and FT-Raman analysis.
The Company derived revenues of $86.2 million, $81.2 million and $93.8
million from sales of molecular analysis instruments in 1993, 1994 and 1995,
respectively.
In April 1996, the Company acquired Mattson Instruments ("Mattson"), a
Madison, Wisconsin based manufacturer of FT-IR instruments, from Thermo
Instrument. The Company believes that this acquisition will increase its FT-IR
product base, particularly through the addition of several value product lines.
See "-- Acquisitions."
FT-IR Spectrometers. An FT-IR spectrometer utilizes infrared spectroscopy
to obtain precise qualitative and quantitative information regarding the
molecules in a sample. In an infrared ("IR") spectrometer, an infrared beam of
light is directed at a sample, which will absorb certain frequencies and
transmit others unchanged. Because each molecule has a characteristic
"fingerprint" based upon its absorption and transmission characteristics,
molecules can be identified by comparison to a library of spectra. The FT-IR
technique provides quantitative and qualitative information across the entire
infrared spectrum simultaneously, which permits rapid multi-component analysis
without the need for sample separation.
The major advantage of an FT-IR spectrometer is its ability to
non-destructively analyze samples. The ability to preserve the sample is
critical in many applications, including forensics, drug development and
semiconductor analysis. FT-IR spectrometers are also capable of providing
structural information regarding a particular molecule that cannot be provided
by other types of analytical instruments. This type of information is extremely
valuable in chemical and pharmaceutical research and development applications,
where the structure of the molecule can be as important as the quantification
and identification of the components of a complex sample.
The Company offers several lines of FT-IR spectrometers that range in
performance and price based upon the needs of its customers. The Company's FT-IR
spectrometers range in price from approximately $25,000 to $200,000. The Company
believes the Magna-IRTM line of spectrometers offers the highest level of
analytical capability available in a FT-IR spectrometer. The Magna-IR is
engineered to be flexible and expandable in order to accommodate all of the
analytical requirements of the most demanding users in the chemical,
pharmaceutical and semiconductor industries and in academic and research
environments. The
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Magna-IR incorporates the first digital signal processor-controlled
interferometer, which allows the customer greater control and flexibility in the
design of advanced experiments.
The Company's Impact[Trademark] line of FT-IR spectrometers
incorporates many of the design features of the Magna-IR line in a rugged,
reliable, lower cost instrument. The Impact is generally used for routine
measurement by environmental testing laboratories, law enforcement
laboratories, industrial quality control laboratories and other customers that
require reliability, high-throughput and ease of use but do not need the most
advanced analytical capabilities.
In response to the unique requirements of customers in the
semiconductor industry, the Company has developed the ECO[Trademark] line of
dedicated quality inspection instruments. This instrument utilizes IR analysis
on-line to determine the physical parameters and uniformity of silicon wafers
used in the manufacture of integrated circuits, memory and application specific
devices.
The Company also offers several lines of infrared microscopes and micro
imaging accessories. The Company believes it is the leading supplier of
infrared microscopes and micro imaging spectroscopic devices in the world.
These products are utilized, individually or in conjunction with FT-IR
spectrometers, to obtain the infrared spectrum of small samples in the range
from 20 to 1000 microns. The products combine both the function of visual
location and imaging with infrared spectral analysis, thus allowing the user to
quickly locate and focus the infrared probe beam on the exact micro area of
interest. The top of the line Irus product is an integrated system, fully
comprising both infrared spectrometer and microscopic analysis station in one
unit.
FT-Raman Spectrometers. FT-Raman spectroscopy is a technique similar
to FT-IR that utilizes a laser to excite the sample. While FT-IR spectrometers
measure the transmission and absorption characteristics of a sample, FT-Raman
spectrometers measure the emission characteristics of the sample. When the
sample absorbs the energy from the laser beam, a modified wavelength is emitted
by the sample. This emission fingerprint is compared to a library of spectra to
determine molecular structure. Many samples that produce weak or non-specific
responses in the infrared produce strong, unique signatures in the Raman, and
vice versa. As a result the two techniques are highly complementary for many
applications.
The Company has been responsible for many innovations in FT-Raman
spectroscopy, including the first stand-alone FT-Raman instrument and
Windows-driven spectrometer and the only searchable Raman library in digital
format. The Company's current line of FT-Raman spectrometers incorporates many
of the design features of the Company's FT-IR spectrometers, while offering
certain advantages over FT-IR spectrometers, including easier sampling and data
analysis. The Company has also developed an FT-Raman module for use with its
Magna-IR spectrometer. FT-Raman spectrometers are attractive for use in
pharmaceutical analysis, remote monitoring of chemicals and quality assurance
of materials within their packaging because of the transparency of the
packaging to the Raman signal. This capability permits on line analysis of
finished products.
THERMO VISION CORPORATION
In January 1995, the Company established a subsidiary, Thermo Vision,
to pursue applications of the Company's technologies for cost-effective,
application-specific instruments and for optical components, systems and
subassemblies for analytical instrumentation and other applications. The
Company believes that there is a trend in the market for analytical instruments
toward the development of lower cost instruments that are easy to use and
capable of performing discrete analyses accurately and reliably. Thermo Vision
is also building a sales and service channel for lower cost instruments and
components that cannot be effectively or profitably sold or serviced through
the channels used for larger, higher performance analytical instruments.
As part of its strategy, Thermo Vision is pursuing various applications
for the Company's CID solid state optical detectors. The Company acquired
rights to the CID technology through its acquisition of CID Technologies Inc.
in October 1994. The Company believes that the CID detector has several
advantages over other solid state detectors. Like CCDs (charge coupled devices)
currently used in most consumer products, CIDs use multiple electronic pixels
to capture images. However, unlike CCDs, CIDs are capable of randomly accessing
the individual pixels, which improves the speed and quality of imaging and
permits pixels to be read
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non-destructively. In addition, CIDs have superior resistance to radiation,
which is an advantage for use in environments such as nuclear power plants.
Thermo Vision is currently under contract to provide the CID detector outside
the analytical instrument field, including dental imaging and nuclear
inspection.
For the year ended December 30, 1995, the Company derived revenues of $6.1
million from its Thermo Vision businesses.
In February 1996, Thermo Vision acquired Corion Corporation ("Corion"), a
manufacturer of commercial optical filters, for $5.1 million and Oriel
Corporation ("Oriel"), a manufacturer and distributor of electro-optical
instruments and components, for $11.8 million. Corion and Oriel reported
revenues of $8.5 and $18.8 million, respectively, in 1995. The Company believes
that the acquisition of Corion and Oriel will further Thermo Vision's strategic
move into the subassembly and end product markets, including the manufacture of
cost-effective instruments used for a specific purpose. Optical filters, such as
those manufactured by Corion, are a cost-effective method of screening all but a
specific wavelength of interest. The Company believes that components such as
these will be increasingly important in improving the performance of
cost-effective, targeted systems such as fluorometers and UV/Vis spectrometers.
In addition, Oriel publishes a series of widely distributed catalogues which the
Company believes will assist in the distribution of many Thermo Vision products,
as well as products offered by other Thermo Optek businesses.
ACQUISITIONS
An element of the Company's strategy is to combine its internal growth with
the acquisition of complementary products and technologies. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." In
addition to the acquisitions of Oriel and Corion described above, recently
completed and pending acquisitions by the Company are described below.
RECENTLY COMPLETED ACQUISITIONS
MATTSON AND UNICAM. In December 1995, Thermo Instrument acquired the
assets of the analytical instruments division of ATI (the "Division"), a
manufacturer of analytical instruments, for $42.5 million. In April 1996, the
Company acquired the Division's Mattson and Unicam businesses from Thermo
Instrument for an aggregate purchase price of $36.6 million. Mattson is a
Wisconsin-based manufacturer of FT-IR spectroscopy instruments and Unicam is a
Cambridge, UK-based manufacturer of AA and UV/Vis spectroscopy instruments. The
purchase price represents the sum of (i) the net tangible book value of Mattson
and Unicam as of the date of acquisition by Thermo Instrument, plus (ii) a
percentage of the total goodwill associated with Thermo Instrument's acquisition
of the Division equal to sales of Mattson and Unicam for the eleven-month period
ended November 30, 1995 relative to total sales of the Division for such period.
Mattson and Unicam reported aggregate revenues of approximately $57.8 million
for the eleven months ended November 30, 1995.
Mattson's FT-IR products are primarily used in high through-put
applications requiring certified and validated methods and automation, such as
quality assurance and control and educational markets. Prices for Mattson's
products range from $20,000 to $60,000.
Unicam's AA product line covers a complete range of applications, from
cost-effective systems to high-capability ultimate detection capacity systems,
and are well-suited to environmental, clinical and industrial chemical analyses.
These products offer a higher degree of automation than that offered by
comparable competitive products. All of Unicam's AA products utilize
Windows-based operating software, with product prices ranging from $18,000 to
$80,000.
Unicam also manufactures UV/Vis spectrometers. A UV/Vis spectrometer
utilizes ultra-violet and visible light to obtain precise qualitative and
quantitative information regarding the molecules in a sample. In UV/Vis
spectrometers, a beam of light, either ultra-violet or visible, is directed at a
sample, which absorbs certain frequencies and transmit others unchanged. Because
each molecule has characteristic absorption and transmission features, both
quantitative and qualitative measurements can be made. The UV/Vis permits rapid
multi-component analysis without the need for sample separation. Unicam's
systems range from low-end non-scanning products priced at under $4,000 to a
mid-range scanning series priced at $24,000. These
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products are targeted at teaching laboratories, life science research,
pharmaceutical and environmental markets. The Company believes that Unicam's
UV/Vis products will complement its other products and presence in the
environmental, life science research, pharmaceutical and chemical markets.
PENDING ACQUISITION
ARL. In March 1996, Thermo Instrument completed the acquisition of a
substantial portion of the businesses comprising the scientific instruments
division of Fisons for approximately $223 million, subject to a post-closing
adjustment. The Company is discussing with Thermo Instrument the terms pursuant
to which the Company would acquire ARL, a Switzerland-based, former subsidiary
of Fisons that manufactures arc/spark AE spectrometers and x-ray fluorescence
instruments. ARL had revenues of approximately $55.7 million in 1995. The final
terms of the acquisition of ARL by the Company have not yet been determined;
however, the Company believes that the purchase price for ARL will range from
$40 million to $50 million, including the assumption of debt. The purchase price
is expected to be based upon the sum of (i) the net tangible book value of ARL
as of the date of acquisition by Thermo Instrument, plus (ii) a percentage of
the total goodwill associated with Thermo Instrument's acquisition of the
acquired portions of the scientific instruments division of Fisons equal to
sales of ARL relative to total sales of the portion of Fisons' scientific
instruments division acquired by Thermo Instrument. Although the Company
believes that it will acquire ARL, no assurance can be given that such
acquisition will be completed. In any event, the timing and terms of the
acquisition of ARL, including price, will be subject to a final determination
between the Company and Thermo Instrument.
ARL was founded in 1934 and acquired by Fisons in 1986. In recent years,
all of its manufacturing operations have been consolidated in its Ecublens,
Switzerland facilities. ARL developed and commercialized the first commercial
grating spectrograph and is now a worldwide supplier of spectrochemical
instrumentation based on arc/spark optical emission spectrometry and wavelength
dispersive x-ray fluorescence ("WDXRF") spectrometry. As further described above
under the caption "Lines of Business -- Elemental Solids Analysis," arc/spark
spectrometers are used extensively in the metals industries where a precise
determination of metallurgical content is required. WDXRF spectrometers offer
elemental analysis of a wide variety of materials in a highly precise and
generally nondestructive manner. The technique, which has been available for
over 40 years, is widely accepted as a mechanism for achieving high precision
for major element analysis. ARL's product offering is targeted to the
simultaneous detection segment of the market and has traditionally been the
technology leader in this area.
ARL's arc/spark and WDXRF products range in price from $60,000 to $120,000.
During 1995, approximately 39% and 21% of ARL's sales were in Europe and North
America, respectively.
Certain of the businesses recently acquired by the Company or which the
Company expects to acquire in the future have low levels of profitability or are
unprofitable. No assurance can be given that the Company will be successful in
reducing expenses and improving operations of these businesses so that the
levels of profitability desired by the Company are achieved. The Company expects
that its operating margins will be reduced due to the acquisition of the Mattson
and Unicam businesses and the potential ARL acquisition until such time as the
Company has improved the profitability of these businesses to levels comparable
with those of the Company's other businesses. See "Risk Factors -- Risks
Associated with Acquisition Strategy; No Assurance of a Successful Strategy" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RESEARCH AND DEVELOPMENT
The Company maintains active programs for the development of new
technologies and the enhancement of existing products. In addition, the Company
seeks to develop new applications for its products and technologies. Research
and development expenses for the Company were $10.6 million, $10.5 million and
$13.0 million in 1993, 1994 and 1995, respectively, or 6.6%, 6.3% and 6.1%,
respectively, of the Company's revenues for such periods.
A significant portion of the Company's development effort is directed
toward developing instruments that can be used outside of the laboratory in
industrial and manufacturing settings such as near line quality control
24
<PAGE> 27
applications. The Company believes that developing instruments that can be used
by non-scientists is critical to the success of this program. The Company has a
Cooperative Research and Development Agreement (CRADA) with the U.S. Navy to
develop an ICP instrument for the continuous monitoring of heavy metals in
smokestack emissions. The Company will have the right to use any proprietary
technology developed through this agreement. Through Thermo Vision, the Company
is directing its efforts toward applying the Company's technology to the
development of affordable application-specific instruments and cost-effective
components, systems and subassemblies. The Company is also pursuing various
applications of its CID technology, including dental imaging and nuclear
inspection.
COMPETITION
The Company competes in each of its markets primarily on performance,
reliability, customer service and price. In the market for AE and AA
spectrometers and ICP/MS instruments, the Company competes primarily with
Perkin-Elmer and, to a lesser extent, Varian. The Company competes in the
arc/spark market primarily with Spectro. In the FT-IR and FT-Raman markets the
Company competes primarily with Perkin-Elmer, Hewlett-Packard, the Digilab
division of Bio-Rad, Bruker and Bomem. Industry sources have estimated that the
Company held the competitive position noted in parentheses below in 1995 for
each of the following markets based on 1995 revenues: AE spectrometers (2), AA
spectrometers (3), ICP/MS instruments (4), arc/spark instruments (2), FT-IR
instruments (1) and FT-Raman instruments (2). The Company recently entered the
market for UV/Vis instruments with its acquisition of Unicam in April 1996. The
primary competitors in this market are Perkin-Elmer, Shimadzu and Life Sciences.
SALES AND MARKETING
The Company markets its instruments internationally through its own
worldwide sales force and through a network of dealers and distributors. In
addition, the Company sells certain components and instruments pursuant to OEM
arrangements under which third parties purchase and resell the Company's
products. The Company's sales force is supported throughout the world by a
customer support group which provides training, instrument servicing and parts
replacement. The Company believes that its sales and distribution channels in
the Pacific Rim provide it with a competitive advantage.
BACKLOG
The Company's backlog was $56.6 million as of March 30, 1996, compared with
$50.1 million as of December 30, 1995. The Company includes in its backlog only
orders confirmed with a purchase order for products and related services
scheduled to be shipped or rendered within one year. The Company does not
believe that the level of, or changes in the level of, its backlog is
necessarily a meaningful indication of future results of operations.
PATENTS AND LICENSES
The Company's policy is to protect its intellectual property rights,
including applying for and obtaining patents when appropriate. The Company holds
numerous patents relating to its technologies, with additional patents pending.
The Company also enters into licensing agreements with other companies and
government agencies in which it grants or receives rights to specific patents
and technical know-how. The Company also considers technical know-how, trade
secrets and trademarks to be important to its business.
PERSONNEL
As of March 30, 1996, the Company had a total of 1,667 employees. To date,
the Company has been able to attract and retain the personnel required by its
business, but there can be no assurance that additional skilled personnel
necessary to successfully expand the Company's business and operations can be
recruited and retained. The Company believes that its relationship with
employees is good.
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<PAGE> 28
<TABLE>
FACILITIES
The Company's various businesses are operated from separate facilities, as
set forth in the table below.
<CAPTION>
APPROXIMATE OWNED/ EXPIRATION
LOCATION SQUARE FEET LEASED OF LEASE USE
-------- ----------- ------ ---------- ---
<S> <C> <C> <C> <C>
Franklin,
Massachusetts.......... 110,000 Leased 2005 Manufacturing, Sales and Administrative
Franklin,
Massachusetts.......... 70,000 Leased 2006 Manufacturing, Sales and Administrative
Madison, Wisconsin....... 330,000(1) Owned -- Manufacturing, Sales and Administrative
Madison, Wisconsin....... 24,000 Leased 2006 Sales and Administrative
Middleton, Wisconsin..... 18,000 Leased 2004 Manufacturing
Grand Junction,
Colorado............... 41,000 Owned -- Manufacturing
Grand Junction,
Colorado............... 3,600 Owned -- Manufacturing and Sales
Delta, Colorado.......... 25,000 Owned -- Manufacturing
Shelton, Connecticut..... 55,000(2) Leased 2004 Manufacturing, Sales and Administrative
Stratford, Connecticut... 50,000 Leased 1998 Manufacturing, Sales and Administrative
Liverpool, New York...... 16,000 Leased 1996 Manufacturing, Sales and Administrative
Margate, England......... 100,000 Owned -- Manufacturing, Sales and Administrative
Cambridge, England(3).... 216,000 Leased 1996 Manufacturing, Sales and Administrative
<FN>
- ---------------
(1) Of such amount, 160,000 square feet is leased to other companies.
(2) Of such amount, 18,000 square feet is subleased to other companies.
(3) Of such amount, 86,000 square feet is subleased to other companies.
</TABLE>
LEGAL PROCEEDINGS
Prior to Nicolet's acquisition by the Company, the Wisconsin Department of
Natural Resources ("DNR") notified Nicolet that the DNR had begun a remedial
investigation to determine the extent of releases of hazardous substances from
the Refuse Hideaway Landfill located in Middleton, Wisconsin (the "Landfill"),
and that Nicolet was a potential responsible party ("PRP") with regard to the
Landfill. Approximately 50 other parties were also notified of their potential
PRP status. The Environmental Protection Agency ("EPA") subsequently added the
Landfill to its National Priorities List under the Comprehensive Environmental
Response Compensation and Liability Act of 1980 ("CERCLA"). In February 1995,
the EPA and the DNR recommended that various remediation efforts be made at the
Landfill at an estimated cost of approximately $5.2 million, and the Company
expects that such agencies will also seek to recover their oversight costs and
expenses related to the site. Under CERCLA, responsible parties can include
current and previous owners of a site, generators of hazardous substances
disposed of at a site, and transporters of hazardous substances to a site. Each
responsible party can be jointly and severally liable, without regard to fault
or negligence, for all costs associated with the remediation of the site.
Although the Company believes that the quantity of materials generated by
Nicolet and transported to the Landfill is relatively small in comparison to
that of other named PRPs, there can be no assurance as to the exact amount, if
any, for which Nicolet will be held responsible by the EPA and the DNR for costs
associated with remediation of the Landfill.
In connection with the organization of the Company, Thermo Instrument
agreed to indemnify the Company for any and all cash damages incurred by the
Company, including with respect to the Landfill, relating to certain contingent
liabilities associated with the operations of Nicolet and TJA prior to August
1995, when such businesses were transferred to the Company. Notwithstanding this
indemnification, the Company would be required to report any such damages as an
expense in its results of operations, with any indemnification payment it
receives from Thermo Instrument being treated as a contribution to shareholders'
investment.
26
<PAGE> 29
RELATIONSHIP WITH THERMO ELECTRON
AND THERMO INSTRUMENT
The Company was organized in August 1995 as a wholly owned subsidiary of
Thermo Instrument. Thermo Instrument has contributed all of the assets,
liabilities and business of Nicolet and TJA to the Company in exchange for
45,000,000 shares of Common Stock of the Company.
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Electron and certain of its
subsidiaries have created publicly and/or privately held majority owned
subsidiaries. (The Company and the other Thermo Electron subsidiaries are
hereinafter referred to as the "Thermo Subsidiaries.")
Thermo Instrument develops, manufactures, and markets instruments used to
detect and monitor air pollution, radioactivity, complex chemical compounds,
toxic metals, and other elements in a broad range of liquids and solids. For its
fiscal year ended December 30, 1995 and for the three months ended March 30,
1996, Thermo Instrument had consolidated revenues of $782,662,000 and
$225,571,000, respectively, and consolidated net income of $79,306,000 and
$34,043,000, respectively.
Thermo Electron and its subsidiaries develop, manufacture and market
environmental monitoring and analysis instruments and manufacture biomedical
products including heart-assist devices and mammography systems, paper-recycling
and papermaking equipment, alternative-energy systems, industrial process
equipment and other specialized products. Thermo Electron and its subsidiaries
also provide environmental and metallurgical services and conduct advanced
technology research and development. For its fiscal year ended December 30, 1995
and for the three months ended March 30, 1996, Thermo Electron had consolidated
revenues of $2,207,417,000 and $635,094,000, respectively, and consolidated net
income of $140,080,000 and $40,442,000, respectively.
THE THERMO ELECTRON CORPORATE CHARTER
Thermo Electron and the Thermo Subsidiaries, including the Company,
recognize that the benefits and support that derive from their affiliation are
essential elements of their individual performance. Accordingly, Thermo Electron
and each of the Thermo Subsidiaries, including the Company, has adopted the
Thermo Electron Corporate Charter (the "Charter") to define the relationships
and delineate the nature of such cooperation among themselves. The purpose of
the Charter is to ensure that (1) all of the companies and their stockholders
are treated consistently and fairly, (2) the scope and nature of the cooperation
among the companies, and each company's responsibilities, are adequately
defined, (3) each company has access to the combined resources and financial,
managerial and technological strengths of the others, and (4) Thermo Electron
and the Thermo Subsidiaries, in the aggregate, are able to obtain the most
favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit services. Pursuant to
the Charter, Thermo Electron may also provide guarantees of debt obligations of
the Thermo Subsidiaries or may obtain external financing at the parent level for
the benefit of the Thermo Subsidiaries. In certain instances, the Thermo
Subsidiaries may provide credit support to, or on behalf of, the consolidated
entity or may obtain financing directly from external financing sources. Under
the Charter, Thermo Electron is responsible for determining that the Thermo
Group remains in compliance with all covenants imposed by external financing
sources, including covenants related to borrowings of Thermo Electron or other
members of the Thermo Group, and for apportioning such constraints within the
Thermo Group. In addition, Thermo Electron establishes certain internal policies
and procedures applicable to members of the Thermo Group. The cost of the
services provided by Thermo Electron to the Thermo
27
<PAGE> 30
Subsidiaries is covered under existing corporate services agreements between
Thermo Electron and each of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Company, can withdraw from participation in the Charter upon 30
days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement in effect between the
withdrawing company and Thermo Electron. The withdrawal from participation does
not terminate outstanding commitments to third parties made by the withdrawing
company, or by Thermo Electron or other members of the Thermo Group, prior to
the withdrawal. However, a withdrawing company is required to continue to comply
with all policies and procedures applicable to the Thermo Group and to provide
certain administrative functions mandated by Thermo Electron so long as the
withdrawing company is controlled by or affiliated with Thermo Electron.
CORPORATE SERVICES AGREEMENT
As provided in the Charter, the Company and Thermo Electron have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including certain legal advice and services, risk management, employee benefit
administration, tax advice and preparation of tax returns, centralized cash
management and certain financial and other services to the Company. In 1994 and
1995, Thermo Electron assessed the Company an annual fee for these services
equal to 1.25% and 1.20%, respectively, of the Company's revenues. Effective
fiscal 1996, the fee has been reduced to 1.0% of the Company's revenues. The fee
may be changed by mutual agreement of the Company and Thermo Electron. During
fiscal 1994 and 1995, Thermo Electron assessed the Company $2,067,000 and
$2,546,000, respectively, in fees under the Services Agreement. Management
believes that the charges under the Services Agreement are reasonable and that
the terms of the Services Agreement are representative of the expenses the
Company would have incurred on a stand-alone basis. For additional items such as
employee benefit plans, insurance coverage and other identifiable costs, Thermo
Electron charges the Company based on charges attributable to the Company. The
Services Agreement automatically renews for successive one-year terms, unless
canceled by the Company upon 30 days' prior notice. In addition, the Services
Agreement terminates automatically in the event the Company ceases to be a
member of the Thermo Group or ceases to be a participant in the Charter. In the
event of a termination of the Services Agreement, the Company will be required
to pay a termination fee equal to the fee that was paid by the Company for
services under the Services Agreement for the nine-month period prior to
termination. Following termination, Thermo Electron may provide certain
administrative services on an as-requested basis by the Company or as required
in order to meet the Company's obligations under Thermo Electron's policies and
procedures. Thermo Electron will charge the Company a fee equal to the market
rate for comparable services if such services are provided to the Company
following termination.
TAX ALLOCATION AGREEMENT
The Tax Allocation Agreement between the Company and Thermo Electron
outlines the terms under which the Company is to be included in Thermo
Electron's consolidated Federal and state income tax returns. Under current law,
the Company will be included in such tax returns so long as Thermo Electron owns
at least 80% of the outstanding common stock of Thermo Instrument and Thermo
Instrument owns at least 80% of the outstanding Common Stock of the Company. In
years in which the Company has taxable income, it will pay to Thermo Electron
amounts comparable to the taxes the Company would have paid if it had filed its
own separate company tax returns. If Thermo Instrument's equity ownership of the
Company were to drop below 80%, the Company would file its own tax returns.
MASTER GUARANTEE REIMBURSEMENT AGREEMENTS
The Company has entered into a Master Guarantee Reimbursement Agreement
with Thermo Electron which provides that the Company will reimburse Thermo
Electron for any costs it incurs in the event it is required to pay third
parties pursuant to any guarantees it issues on the Company's behalf. Thermo
Instrument
28
<PAGE> 31
has entered into a similar agreement with Thermo Electron pursuant to which
Thermo Instrument has guaranteed the Company's obligation to so reimburse Thermo
Electron. The Company has also entered into a Master Guarantee Reimbursement
Agreement with Thermo Instrument which provides that the Company will reimburse
Thermo Instrument for any costs it incurs in the event that Thermo Instrument is
required to pay Thermo Electron or any other party pursuant to any guarantees
Thermo Instrument issues on the Company's behalf.
RELATED PARTY TRANSACTIONS
The Company leases office and manufacturing space to ThermoSpectra
Corporation ("ThermoSpectra"), a subsidiary of Thermo Instrument, and Nicolet
Biomedical Inc. ("Nicolet Biomedical"), a wholly-owned subsidiary of Thermo
Electron, pursuant to an arrangement whereby the Company charges ThermoSpectra
and Nicolet Biomedical their allocated share of the occupancy expenses of the
Company's principal Wisconsin facility, based on the space ThermoSpectra and
Nicolet Biomedical utilize. The Company recorded operating lease income of
$1,305,000, $1,120,000 and $898,000 in 1993, 1994 and 1995, respectively. These
leases are effective until December 31, 1998, but may be terminated by
ThermoSpectra and Nicolet Biomedical upon 30 days' prior notice to the Company.
Thermo Instruments Australia Pty. Ltd. ("Thermo Australia"), a wholly-owned
subsidiary of ThermoQuest Corporation ("ThermoQuest"), a subsidiary of Thermo
Instrument, acts as a sales representative for the Company in Australia. In
1995, the Company sold $237,000 of products to Thermo Australia. A wholly-owned
subsidiary of the Company acts as a sales representative for ThermoQuest in
Canada. In 1995, that subsidiary purchased $938,000 of products from ThermoQuest
pursuant to this arrangement.
The Company purchases and sells products in the ordinary course of business
with other companies affiliated with Thermo Electron. In 1995 the Company sold
$489,000 of printed circuit boards to ThermoSpectra and sold $4,554,000 of
components to ThermoQuest. In 1995 the Company purchased $321,000 of components
from Thermo Electron's Tecomet division, $375,000 of products from Thermo
Instrument and $86,000 of products from ThermoTrex Corporation.
In October 1995, Thermo Electron purchased $10,000,000 principal amount of
the Debentures, at par and on terms identical to those offered to unaffiliated
investors. See "Shares Eligible for Future Sale."
In connection with its recent acquisition of a substantial portion of the
businesses comprising the scientific instruments division of Fisons plc, Thermo
Instrument may restructure certain sales and service activities of the acquired
businesses. This restructuring may include closure of certain existing sales and
service offices and the termination of certain employees engaged in these
activities or the transfer of such employees to various subsidiaries of Thermo
Instrument, including the Company. Costs associated with any such closures,
terminations and transfers would be allocated to the relevant Thermo Instrument
subsidiary. The Company does not expect its share of any such costs to
materially affect its future results of operations or liquidity.
MISCELLANEOUS
Currently, Thermo Instrument beneficially owns 100% of the outstanding
shares of Common Stock. Thermo Instrument intends to maintain at least an 80%
ownership of the Company. This may require the purchase by Thermo Instrument of
additional shares of Common Stock from time to time as the number of outstanding
shares issued by the Company increases. These purchases may be made either on
the open market or directly from the Company.
The Company's cash equivalents may be invested in a repurchase agreement
with Thermo Electron, pursuant to which the Company in effect lends cash to
Thermo Electron, which Thermo Electron collateralizes with investments
principally consisting of corporate notes, United States government agency
securities, money market funds, commercial paper, and other marketable
securities, in the amount of at least 103% of such obligation. The Company's
funds subject to the repurchase agreement will be readily convertible into cash
by the Company and have an original maturity of three months or less. The
repurchase agreement earns a rate based on the 90-day Commercial Paper Composite
Rate plus 25 basis points, set at the beginning of each quarter.
29
<PAGE> 32
MANAGEMENT
<TABLE>
The Directors and executive officers of the Company are as follows:
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Earl R. Lewis.......................... 52 Chief Executive Officer, President and Director
Dr. Robert J. Rosenthal................ 39 Senior Vice President
John N. Hatsopoulos.................... 61 Vice President, Chief Financial Officer and Director
Kristine A. Langdon.................... 37 Vice President
Paul F. Kelleher....................... 53 Chief Accounting Officer
Arvin H. Smith......................... 66 Chairman of the Board and Director
Dr. George N. Hatsopoulos.............. 69 Director
Stephen R. Levy(1)..................... 55 Director
Robert A. McCabe(1).................... 61 Director
<FN>
- ---------------
(1) Member of the Audit and Human Resources Committees.
</TABLE>
All of the Company's Directors are elected annually and hold office until
their respective successors are elected and qualified. Executive officers are
elected annually by the Board of Directors and serve at its discretion. Mr.
Hatsopoulos and Mr. Kelleher are employees of Thermo Electron and certain of its
subsidiaries other than the Company, but devote such time to the affairs of the
Company as the Company's needs reasonably require from time to time. Mr. Lewis
is also Executive Vice President and Chief Operating Officer of Thermo
Instrument, and is responsible for certain operations within Thermo Instrument
that are not related to the Company's operations.
Earl R. Lewis has been Chief Executive Officer, President and a Director of
the Company since its inception in August 1995. He served as President of Thermo
Jarrell Ash through December 1995, and for more than five years prior to that
date. Mr. Lewis was named Executive Vice President and Chief Operating Officer
of Thermo Instrument in January 1996, having served as a Vice President of that
company from 1990 to 1995.
Robert J. Rosenthal has been Senior Vice President of the Company since its
inception in August 1995. Since 1984 he has served in various capacities at
Nicolet, and was named President of that company in 1993.
John N. Hatsopoulos has been a Vice President, Chief Financial Officer and
a Director of the Company since its inception in August 1995. Mr. Hatsopoulos
has been a Vice President and Chief Financial Officer of Thermo Instrument since
1988, the Chief Financial Officer of Thermo Electron since 1988 and an Executive
Vice President of Thermo Electron since 1986. He is also a Director of Lehman
Brothers Funds, Inc., Thermo Ecotek Corporation, Thermo Fibertek Inc., Thermo
Instrument, Thermo Power Corporation, ThermoQuest Corporation, Thermo Sentron
Inc., Thermo TerraTech Inc. and ThermoTrex Corporation. Mr. Hatsopoulos is the
brother of Dr. George N. Hatsopoulos, a Director of the Company.
Kristine A. Langdon has been Vice President of the Company since its
inception in August 1995. She was named President of Thermo Jarrell Ash in
January 1996 and has served as Chief Executive Officer and President of Thermo
Vision since its inception in January 1995. Ms. Langdon was Special Assistant to
the Presidents of Thermo Electron and Thermo Instrument from August 1991 to
April 1994 and Director of Business Development of Thermo Jarrell Ash from April
1994 until being named President of Thermo Vision. From 1987 to 1991, Ms.
Langdon was employed by McKinsey & Co., a management consulting firm, most
recently as an engagement manager.
Paul F. Kelleher has been the Chief Accounting Officer of the Company since
its inception in August 1995. Mr. Kelleher has been Vice President, Finance of
Thermo Electron since 1987 and served as its Controller from 1982 to January
1996. He is a director of ThermoLase Corporation.
Arvin H. Smith has been a Director of the Company since its inception in
August 1995. Mr. Smith has been a Director and the President and Chief Executive
Officer of Thermo Instrument since 1986, and
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<PAGE> 33
Executive Vice President of Thermo Electron since November 1991. He was Senior
Vice President of Thermo Electron from 1986 to 1991. Mr. Smith is also a
Director of Thermo Instrument, Thermedics Inc., ThermoQuest Corporation and
ThermoSpectra Corporation.
George N. Hatsopoulos has been a Director of the Company since its
inception in August 1995, and has served as President and Chief Executive
Officer of Thermo Electron since he founded that company in 1956. Dr.
Hatsopoulos is also a director of Bolt, Beranek & Newman, Inc., Thermo Ecotek
Corporation, Thermo Electron, Thermo Fibertek Inc., Thermo Instrument,
Thermedics Inc., ThermoQuest Corporation, Thermo TerraTech Inc. and ThermoTrex
Corporation. Dr. Hatsopoulos is the brother of John N. Hatsopoulos, a Vice
President, Director, and the Chief Financial Officer of the Company.
Stephen R. Levy has been a Director of the Company since November 1995.
Since November 1995, Mr. Levy has been president of The Apogee Group, Inc., a
private venture capital company that he founded. Mr. Levy served as chairman of
the board and chief executive officer of BBN Corporation, a high technology
company, from 1983 to 1994 and was president and chief executive officer of BBN
Corporation from 1976 to 1983. He retired from BBN Corporation in 1995 and is
currently its Chairman Emeritus.
Robert A. McCabe has been a Director of the Company since March 1996. He
has served as President of Pilot Capital Corporation, which is engaged in
private investments and provides acquisition services, since 1987. Prior to that
time, Mr. McCabe was a Managing Director of Lehman Brothers Inc., an investment
banking firm. Mr. McCabe is also a director of Borg-Warner Security Corporation,
Church & Dwight Company, Morrison-Knudsen Corporation, Thermo Electron and
Thermo Instrument.
COMPENSATION OF DIRECTORS
Commencing January 1, 1996, Directors who are not employees of the Company,
Thermo Instrument or Thermo Electron receive an annual retainer of $4,000 and a
fee of $1,000 per day for attending meetings of the Board of Directors and $500
per day for participating in meetings of the Board of Directors held by means of
conference telephone and for participating in certain meetings of committees of
the Board of Directors. Payment of Directors fees is made quarterly.
Dr. G. Hatsopoulos and Messrs. J. Hatsopoulos, Lewis and Smith are all
employees of Thermo Electron companies and do not receive any cash compensation
from the Company for their services as Directors. Directors are also reimbursed
for reasonable out-of-pocket expenses incurred in attending such meetings.
Directors Deferred Compensation Plan. Under the Company's Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan"), a Director
has the right to defer receipt of his fees until he ceases to serve as a
Director, dies or retires from his principal occupation. In the event of a
change in control or proposed change in control of the Company that is not
approved by the Board of Directors, deferred amounts become payable immediately.
Either of the following is deemed to be a change of control: (a) the occurrence,
without the prior approval of the Board of Directors, of the acquisition,
directly or indirectly, by any person of 50% or more of the outstanding Common
Stock or the outstanding common stock of Thermo Electron; or (b) the failure of
the persons serving on the Board of Directors immediately prior to any contested
election of directors or any exchange offer or tender offer for the Common Stock
or the common stock of Thermo Electron to constitute a majority of the Board of
Directors at any time within two years following any such event. Amounts
deferred pursuant to the Deferred Compensation Plan are valued at the end of
each quarter as units of Common Stock. When payable, amounts deferred may be
disbursed solely in shares of Common Stock accumulated under the Deferred
Compensation Plan. The Company has reserved 75,000 shares under this plan. The
Deferred Compensation Plan will not become effective until completion of an
initial public offering. No units have been accumulated under this plan.
Directors Stock Option Plan. The Company has adopted a directors stock
option plan (the "Plan") providing for the grant of stock options to purchase
shares of the Common Stock to outside Directors (Directors who are not employees
of the Company or any of its affiliates) as additional compensation for their
service as Directors. The Plan provides for the grant of stock options upon a
Director's initial appointment and, beginning in 2000, awards options to
purchase 1,000 shares annually to eligible Directors, provided the
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<PAGE> 34
Company's Common Stock is then publicly traded. A total of 225,000 shares of
Common Stock have been reserved for issuance under the Plan.
Under the Plan, each eligible Director will be granted an option to
purchase 45,000 shares of Common Stock upon the later of the Director's
appointment or election, or the completion of an initial public offering or
private placement of shares of Common Stock of the Company primarily to
independent investors. In addition, each new director initially joining the
Board of Directors in 1996 will be granted an option to purchase 45,000 shares
of Common Stock. The size of the award to new Directors appointed to the Board
of Directors after 1996 is reduced by 11,250 shares in each subsequent year.
Directors initially joining the Board of Directors after 1999 would not receive
an option grant upon their appointment or election to the Board of Directors,
but would be eligible to participate in the annual option awards described
below. Options evidencing initial grants to Directors vest and are exercisable
upon the fourth anniversary of the grant date, unless the Common Stock
underlying the option grant is registered under Section 12 of the Securities
Exchange Act of 1934, as amended ("Section 12 Registration") prior to the fourth
anniversary of the grant date. In the event that the effective date of Section
12 Registration occurs prior to the fourth anniversary of the grant date, then
the option becomes exercisable (on the later of 90 days after Section 12
Registration or six months after the grant date) and the shares acquired upon
exercise will be subject to restrictions on transfer and the right of the
Company to repurchase such shares at the exercise price in the event the
Director ceases to serve as a Director of the Company or any other Thermo
Electron company. In such event, the restrictions and repurchase rights shall
lapse or be deemed to have lapsed in equal annual installments of 11,250 shares,
starting with the first anniversary of the grant date, provided the Director has
continuously served as a Director of the Company or any other Thermo Electron
company since the grant date. These options expire on the fifth anniversary of
the grant date, unless the Director dies or otherwise ceases to serve as a
Director of the Company or any other Thermo Electron company prior to that date.
Commencing in 2000, eligible Directors will also receive an annual grant of
options to purchase 1,000 shares of Common Stock provided the Common Stock is
then publicly traded. The annual grant would be made at the close of business on
the date of each annual meeting of stockholders of the Company to each Director
then holding office, commencing with the annual meeting to be held in 2000.
Options evidencing annual grants may be exercised at any time from and after the
six-month anniversary of the grant date of the option and prior to the
expiration of the option on the third anniversary of the grant date. Shares
acquired upon exercise of the options would be subject to repurchase by the
Company at the exercise price if the recipient ceased to serve as a Director of
the Company or any other Thermo Electron company prior to the first anniversary
of the grant date.
The exercise price for options granted under the Plan is determined by the
average of the closing prices reported by the American Stock Exchange (or other
principal exchange in which the Common stock is then traded) for the five
trading days immediately preceding and including the date the option is granted
or, if the shares underlying the option are not so traded, at the last price
paid per share by independent investors in an arms-length transaction with the
Company prior to the option grant.
As of June 3, 1996, no options to purchase Common Stock had been granted
under the Plan.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table summarizes compensation for services to the Company in
all capacities awarded to, earned by or paid to the Company's chief executive
officer and two other executive officers for the fiscal year ended December 30,
1995. No other executive officer of the Company who held office at the end of
fiscal 1995 met the definition of "highly compensated" within the meaning of the
Securities and Exchange Commission's executive compensation disclosure rules for
this period.
The Company is required to appoint certain executive officers and full-time
employees of Thermo Electron as executive officers of the Company, in accordance
with the Thermo Electron Corporate Charter. The compensation for these executive
officers is determined and paid entirely by Thermo Electron. The time
32
<PAGE> 35
and effort devoted by these individuals to the Company's affairs is provided to
the Company under the Services Agreement between the Company and Thermo
Electron. Accordingly, the compensation for these individuals is not reported in
the following table. See "Relationship with Thermo Electron and Thermo
Instrument."
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
FISCAL -------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1)(4) COMPENSATION(2)
- ------------------------------ ------ -------- ------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Earl R. Lewis................. 1995 $145,000 $90,000 225,000 (TOC) $6,750
President and CEO(3)
Dr. Robert J. Rosenthal....... 1995 $119,945 $97,000 112,500 (TOC) $4,500
Senior Vice President 2,000 (TBA)
15,000 (TMO)
Kristine A. Langdon........... 1995 $ 93,000 $35,000 75,000 (TOC) $5,198
Vice President
<FN>
- ---------------
(1) All options to purchase shares of the Company's Common Stock shown in the
table were granted after the end of fiscal 1995 but are included in the
table for clarity of presentation. In addition to grants of options to
purchase Common Stock of the Corporation (designated in the table as TOC),
executive officers of the Corporation have been granted options to purchase
common stock of Thermo Electron and certain of its other subsidiaries as
part of Thermo Electron's stock option program. Options have been granted
during the last fiscal year to Dr. Rosenthal in the following Thermo
Electron companies: Thermo Electron (designated in the table as TMO) and
Thermo BioAnalysis Corporation (designated in the table as TBA). In
addition, Mr. Lewis has been granted options to purchase common stock of
Thermo Electron and certain of its subsidiaries other than the Company.
These options are not reported here as they were granted as compensation for
service to Thermo Electron companies in capacities other than in his
capacity as Chief Executive Officer of the Company.
(2) Represents the amount of matching contributions made by the individual's
employer on behalf of executive officers participating in the Thermo
Electron 401(k) Plan or the Nicolet Retirement Savings Plan.
(3) Mr. Lewis is an Executive Vice President and Chief Operating Officer of
Thermo Instrument as well as the President and Chief Executive Officer of
the Company. Reported in the table under "Annual Compensation" and "All
Other Compensation" are the total amounts paid to Mr. Lewis for his service
in all capacities to Thermo Electron companies. The Human Resources
Committee of the Board of Directors of the Company reviewed total annual
compensation to be paid to Mr. Lewis from all sources within the Thermo
Electron organization and approves the allocation of a percentage of annual
compensation (salary and bonus) for the time he devotes to the affairs of
the Company. For 1995, 85% of Mr. Lewis' annual compensation was allocated
to the Company. In addition, Mr. Lewis has been granted options to purchase
common stock of Thermo Electron and certain of its subsidiaries other than
the Company from time to time by Thermo Electron or such other subsidiaries.
These options are not reported here as they were granted as compensation for
service to Thermo Electron companies in capacities other than in his
capacity as Chief Executive Officer of the Company.
(4) Options to purchase shares of the common stock of Thermo Electron reflect a
three-for-two stock split effected on June 5, 1996.
</TABLE>
33
<PAGE> 36
STOCK OPTIONS GRANTED DURING FISCAL 1995
The following table sets forth information concerning individual grants of
stock options made during fiscal 1995 to the Company's Chief Executive Officer
and the other named executive officers. It has not been the Company's policy in
the past to grant stock appreciation rights, and no rights were granted during
fiscal 1995.
<TABLE>
OPTION GRANTS IN FISCAL 1995
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED(1) 1995 SHARE DATE 5% 10%
- ------------------------- ------------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Earl R. Lewis(3)......... 225,000 (TOC) 14.0% $12.00 4/11/08 $2,148,750 $5,773,500
Dr. Robert J.
Rosenthal.............. 112,500 (TOC) 7.0% $12.00 4/11/08 $1,074,375 $2,886,750
2,000 (TBA) 2.6%(4) $10.00 9/21/05 $ 12,580 $ 31,880
15,000 (TMO) 1.2%(4) $30.27 9/22/07 $ 361,300 $ 970,800
Kristine A. Langdon...... 75,000 (TOC) 4.7% $12.00 4/11/08 $ 716,250 $1,924,500
<FN>
- ---------------
(1) All options to purchase shares of the Common Stock of the Company
(designated in the table as TOC) were granted after the end of fiscal 1995
but are included in the table for clarity of presentation. Options to
purchase shares of the common stock of Thermo BioAnalysis Corporation
(designated in the table as TBA) and of Thermo Electron (designated in the
table as TMO) were granted in 1995 to the named executive officers. The
options to purchase shares of the common stock of Thermo Electron are
immediately exercisable while the options to purchase shares of the Common
Stock of the Company and the common stock of Thermo BioAnalysis Corporation
are not exercisable until the earlier of (i) 90 days after the effective
date of the registration of the Company's Common Stock under Section 12 of
the Securities Exchange Act of 1934 and (ii) nine years after the grant
date. In all cases, the shares acquired upon exercise are subject to
repurchase by the granting corporation at the exercise price if the optionee
ceases to be employed by such corporation or another Thermo Electron
company. The granting corporation may exercise its repurchase rights within
six months after the termination of the optionee's employment. For publicly
traded companies, the repurchase rights generally lapse ratably over a five-
to ten-year period, depending on the option term which may vary from seven
to twelve years, provided that the optionee continues to be employed by the
granting corporation or another Thermo Electron company. For companies that
are not publicly traded, the repurchase rights lapse in their entirety on
the ninth anniversary of the grant date. The granting corporation may permit
the holders of all such options to exercise options and satisfy tax
withholding obligations by surrendering shares equal in fair market value to
the exercise price or withholding obligation.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10%, compounded annually from the date the respective options were granted
to their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock, the optionholders'
continued employment through the option period and the date on which the
options are exercised.
(3) Mr. Lewis has been granted options to purchase shares of the common stock of
Thermo Electron and its subsidiaries other than the Company. These options
are not reported in the table as they were granted as compensation for
service in capacities other than Mr. Lewis' capacity as President and Chief
Executive Officer of the Company.
(4) These options (a) were granted under a stock option plan maintained by
Thermo Electron and accordingly are reported as a percentage of total
options granted to employees of Thermo Electron and its subsidiaries and (b)
reflect a three-for-two stock split of the common stock of Thermo Electron
effected on June 5, 1996.
</TABLE>
34
<PAGE> 37
STOCK OPTIONS EXERCISED DURING FISCAL 1995 AND FISCAL YEAR-END OPTION VALUES
The following table reports certain information regarding stock option
exercises during fiscal 1995 and outstanding stock options held at the end of
fiscal 1995 by the Company's chief executive and the other named executive
officers. No stock appreciation rights were exercised or were outstanding during
fiscal 1995.
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND
FISCAL 1995 YEAR-END OPTION VALUES
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE- MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT FISCAL FISCAL
SHARES YEAR-END YEAR-END
ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISABLE/
NAME COMPANY EXERCISE REALIZED UNEXERCISABLE)(1) UNEXERCISABLE)
---- ------- ----------- -------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Earl R. Lewis(2)............ Thermo Optek -- -- 0/225,000 --/--(5)
Dr. Robert J.
Rosenthal(3).............. Thermo Optek -- -- 0/112,500 --/--(5)
Thermo Instrument -- -- 60,890/ 0 $707,242/ 0
Thermo BioAnalysis -- -- 0/ 2,000 --/--(5)
Thermo Electron -- -- 30,750/ 0 $296,265/ 0
ThermoSpectra -- -- 2,500/ 0 $ 14,063/ 0
Kristine A. Langdon(4)...... Thermo Optek -- -- 0/ 75,000 --/--(5)
ThermoSpectra -- -- 400/ 0 $ 2,250/ 0
<FN>
- ---------------
(1) All options to purchase shares of the Common Stock of the Company were
granted after the end of fiscal 1995 but are included in the table for
clarity of presentation. All of the options reported outstanding at the end
of the fiscal year were immediately exercisable, except for options to
purchase shares of the common stock of the Company and of Thermo
BioAnalysis, which are not exercisable until the earlier of (i) 90 days
after the effective date of the registration of such company's common stock
under Section 12 of the Securities Exchange Act and (ii) nine years after
the grant date. In all cases, the shares acquired upon exercise of the
options reported in the table are subject to repurchase by the granting
corporation at the exercise price if the optionee ceases to be employed by
such corporation or another Thermo Electron company. The granting
corporation may exercise its repurchase rights within six months after the
termination of the optionee's employment. For companies whose shares are not
publicly traded, the repurchase rights lapse in their entirety on the ninth
anniversary of the grant date. For publicly traded companies, the repurchase
rights generally lapse ratably over a five- to ten-year period, depending on
the option term which may vary from seven to twelve years, provided that the
optionee continues to be employed by the granting corporation or another
Thermo Electron company.
(2) Mr. Lewis has been granted options to purchase shares of the common stock of
Thermo Electron and its subsidiaries other than the Company. These options
are not reported here as they were granted as compensation for service to
other Thermo Electron companies in capacities other than in Mr. Lewis'
capacity as President and Chief Executive Officer of the Company.
(3) Options to purchase 15,750 shares of the common stock of Thermo Electron
granted to Dr. Rosenthal are subject to the same terms as described in
footnote (1), except that the repurchase rights of the granting corporation
generally do not lapse until the tenth anniversary of the grant date. In the
event of the optionee's death or involuntary termination prior to the tenth
anniversary of the grant date, the repurchase rights of the granting
corporation shall be deemed to have lapsed ratably over a five-year period
commencing with the fifth anniversary of the grant date. Options to purchase
shares of the common stock of Thermo Electron reflect a three-for-two stock
split effected on June 5, 1996.
(4) Prior to April 1, 1994, when Ms. Langdon was named President of Thermo
Vision, she was granted options to purchase shares of the common stock of
Thermo Electron and its subsidiaries other than the Company. These options
are not reported here as they were granted as compensation for service to
other Thermo Electron companies other than in Ms. Langdon's capacity as a
Vice President of the Company.
(5) No public market existed for the shares underlying these options as of
December 30, 1995. Accordingly, no value in excess of exercise price has
been attributed to these options.
</TABLE>
35
<PAGE> 38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
PRINCIPAL STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of December 31, 1995 with respect to each person
who was known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock.
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ---------------------------------------------------------- ----------------------- ----------------
<S> <C> <C>
Thermo Instrument Systems Inc.(1)......................... 45,000,000 100%
1275 Hammerwood Avenue
Sunnyvale, California 94089
<FN>
- ---------------
(1) The shares of the Common Stock beneficially owned by Thermo Instrument are
held by Optek-Nicolet Holdings Inc., a wholly owned subsidiary of Thermo
Instrument. Thermo Instrument is a majority-owned subsidiary of Thermo
Electron and, therefore, Thermo Electron may be deemed to be a beneficial
owner of the shares of Common Stock beneficially owned by Thermo Instrument.
Thermo Electron disclaims beneficial ownership of these shares. After the
sale of the Common Stock in this offering, Thermo Instrument will own
approximately 94% of the outstanding Common Stock (93% if the Underwriters'
over-allotment option is exercised in full).
</TABLE>
<TABLE>
MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of December 31, 1995 as well as information
regarding the beneficial ownership of the Common Stock and the common stock of
Thermo Instrument and Thermo Electron, as of December 31, 1995, with respect to
(i) each Director, (ii) each executive officer named in the summary compensation
table above, and (iii) all Directors and current executive officers as a group.
<CAPTION>
THERMO OPTEK THERMO INSTRUMENT THERMO ELECTRON
NAME(1) CORPORATION(2) SYSTEMS INC.(3) CORPORATION(4)
- ---------------------------------------------- -------------- ----------------- ---------------
<S> <C> <C> <C>
Earl R. Lewis................................. 0 128,578 143,776
Dr. Robert J. Rosenthal....................... 0 63,390 33,300
John N. Hatsopoulos........................... 0 93,122 462,334
Kristine A. Langdon........................... 0 7,130 19,164
Arvin H. Smith................................ 0 431,653 533,944
Dr. George N. Hatsopoulos..................... 0 143,100 3,492,312
Stephen R. Levy............................... 0 0 0
Robert A. McCabe.............................. 0 39,804 46,015
All Directors and current executive
officers as a group (9 persons)............. 0 931,768 4,870,801
<FN>
- ---------------
(1) Except as reflected in the footnotes to this table, shares of Common Stock
and common stock of Thermo Instrument and Thermo Electron beneficially owned
include shares owned by the indicated person and by that person for the
benefit of minor children, and all share ownership involves sole voting and
investment power.
(2) No Director or executive officer beneficially owned more than 1% of the
Common Stock outstanding as of such date, and all Directors and executive
officers as a group beneficially owned less than 1% of the Common Stock
outstanding as of such date.
(3) The shares of common stock of Thermo Instrument have been adjusted to
reflect a three-for-two stock split effected on April 14, 1995 and a
five-for-four stock split effected on December 29, 1995. Shares of the
common stock of Thermo Instrument beneficially owned by Mr. Lewis, Dr.
Rosenthal, Mr. J. Hatsopoulos, Ms. Langdon, Mr. Smith, Dr. G. Hatsopoulos,
Mr. McCabe and all Directors and
</TABLE>
36
<PAGE> 39
executive officers as a group include 112,500, 60,890, 83,750, 7,124,
234,375, 93,750, 10,995 and 618,384 shares, respectively, that such person
or group has the right to acquire within 60 days of March 31, 1996, through
the exercise of stock options. Shares beneficially owned by Mr. McCabe and
all Directors and executive officers as a group include 7,126 shares
allocated through December 31, 1995 to Mr. McCabe's account maintained under
Thermo Instrument's deferred compensation plan for directors. Shares
beneficially owned by Mr. Lewis, Mr. J. Hatsopoulos, Ms. Langdon, Mr. Smith,
Dr. G. Hatsopoulos and all Directors and executive officers as a group
include 345, 515, 6, 516, 315, and 2,080 full shares, respectively,
allocated through July 1, 1995 to their respective accounts maintained
pursuant to Thermo Electron's employee stock ownership plan ("ESOP"). The
trustees of the ESOP as of December 31, 1995, who have investment power over
its assets, are Mr. John N. Hatsopoulos and Mr. Peter Pantazelos. Shares
beneficially owned by Dr. G. Hatsopoulos include 21,368 shares held by Dr.
G. Hatsopoulos' spouse. Shares beneficially owned by Mr. Lewis include 2,390
shares held by Mr. Lewis' spouse. No Director or executive officer
beneficially owned more than 1% of the common stock of Thermo Instrument
outstanding as of December 31, 1995; all Directors and executive officers as
a group beneficially owned 1.0% of such common stock outstanding as of such
date.
(4) The shares of common stock of Thermo Electron have been adjusted to reflect
three-for-two stock splits effected on May 25, 1995 and June 5, 1996. Shares
of the common stock of Thermo Electron beneficially owned by Mr. Lewis, Dr.
Rosenthal, Mr. J. Hatsopoulos, Ms. Langdon, Mr. Smith, Dr. G. Hatsopoulos,
Mr. McCabe and all Directors and executive officers as a group include
138,750, 30,750, 342,735, 18,450, 213,412, 1,653,000, 7,875 and 2,497,597
shares, respectively, that such person or group has the right to acquire
within 60 days of December 31, 1995, through the exercise of stock options.
Shares beneficially owned by Mr. McCabe and all Directors and executive
officers as a group include 34,725 shares allocated through December 31,
1995 to Mr. McCabe's account maintained under Thermo Electron's deferred
compensation plan for directors. Shares beneficially owned by Mr. Lewis, Mr.
J. Hatsopoulos, Ms. Langdon, Mr. Smith, Dr. G. Hatsopoulos and all Directors
and executive officers as a group include 925, 1,837, 243, 1,621, 2,221 and
8,077 full shares, respectively, allocated through July 1, 1995 to their
respective accounts maintained pursuant to Thermo Electron's ESOP. The
trustees of the ESOP as of December 31, 1995, who have investment power over
its assets, are Mr. John N. Hatsopoulos and Mr. Peter Pantazelos. Shares
beneficially owned by Dr. G. Hatsopoulos include 89,601 shares held by Dr.
Hatsopoulos' spouse, 168,750 shares held by a QTIP trust of which Dr. G.
Hatsopoulos' spouse is a trustee and 39,937 shares held by a family trust of
which Dr. G. Hatsopoulos' spouse is the trustee. Shares beneficially owned
by Mr. J. Hatsopoulos include 652 shares each held by family trusts for the
benefit of two of Mr. J. Hatsopoulos' children and 168,750 shares held by a
QTIP trust of which Mr. J. Hatsopoulos is a trustee. Dr. G. Hatsopoulos
beneficially owned approximately 2.5% of the common stock of Thermo Electron
outstanding as of December 31, 1995; no other Director or executive officer
beneficially owned more than 1% of such common stock as of such date. All
Directors and executive officers as a group beneficially owned 3.5% of the
common stock of Thermo Electron outstanding as of December 31, 1995.
37
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
The Company has 100,000,000 shares of Common Stock authorized for issuance,
of which 45,000,000 are issued and outstanding. Each share of Common Stock is
entitled to pro rata participation in distributions upon liquidation and to one
vote on all matters submitted to a vote of stockholders. Dividends may be paid
to the holders of Common Stock when and if declared by the Board of Directors
out of funds legally available therefor. Holders of Common Stock have no
preemptive or similar rights. The outstanding shares of Common Stock are, and
the shares offered hereby when issued will be, legally issued, fully paid and
nonassessable.
The shares of Common Stock have noncumulative voting rights, which means
that the holders of more than 50% of the shares voting can elect all the
Directors if they so choose, and in such event, the holders of the remaining
shares cannot elect any Directors. Prior to this offering, Thermo Instrument
owned 45,000,000 shares of Common Stock, which represented 100% of the
outstanding Common Stock. Upon completion of this offering, Thermo Instrument
(and Thermo Electron through its majority ownership of Thermo Instrument) will
continue to beneficially own at least a majority of the outstanding Common
Stock, and will have the power to elect all of the members of the Company's
Board of Directors.
The Company's Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of Directors. The provisions eliminate a Director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts or omissions, which involve intentional misconduct or a
knowing violation of law. The Company's Certificate of Incorporation also
contains provisions to indemnify the Directors and officers of the Company to
the fullest extent permitted by the General Corporation Law of Delaware. The
Company believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as Directors and officers.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, there will be 48,000,000 shares of Common
Stock of the Company outstanding (assuming no exercise of the Underwriters'
over-allotment option). The shares issued in this offering will be freely
tradable without restriction or further registration under the Securities Act,
except that any shares purchased by affiliates of the Company, as that term is
defined in Rule 144 under the Securities Act, may generally only be resold in
compliance with applicable provisions of Rule 144.
Of such 48,000,000 outstanding shares, 45,000,000 will be owned by Thermo
Instrument. Each of Thermo Electron, Thermo Instrument and the Company has
agreed that, without the prior written consent of the Representatives (as
defined below under the caption "Underwriters"), it will not offer, sell, grant
any option to purchase or otherwise dispose of any shares of the Common Stock
within 180 days after the date of this Prospectus, other than (i) shares of
Common Stock to be sold to the Underwriters in this offering, (ii) the issuance
of options and sales of shares of Common Stock pursuant to existing stock-based
compensation plans, (iii) shares of Common Stock which may be sold to Thermo
Instrument, and (iv) the issuance of shares of Common Stock as consideration for
the acquisition of one or more businesses (provided that such Common Stock may
not be resold prior to the expiration of the 180-day period referenced above).
Upon expiration of this lock-up agreement, Thermo Instrument may sell the shares
of Common Stock it currently holds in an offering registered under the
Securities Act or pursuant to an exemption from such registration. So long as
Thermo Instrument is able to elect a majority of the Board of Directors it will
be able to cause the Company at any time to register under the Securities Act
all or a portion of the Common Stock owned by Thermo Instrument or its
affiliates, in which case it would be able to sell such shares without
restriction upon effectiveness of the registration statement.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for at
least two years is entitled to sell, within any three-month period, a number of
such shares that does not exceed the greater of (i) 1% of the then outstanding
shares of Common Stock or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the date of the notice filed
pursuant to Rule 144. Sales under Rule 144 are also subject to certain
38
<PAGE> 41
manner of sale restrictions and notice requirements and to the availability of
current public information about the Company. In addition, a person who is
deemed an "affiliate" of the Company must comply with Rule 144 in any sale of
shares of Common Stock not covered by a registration statement (except, in the
case of registered shares acquired by the affiliate on the open market, for the
holding period requirement). A person (or person whose shares are aggregated)
who is not deemed an "affiliate" of the Company and who has beneficially owned
restricted shares for at least three years is entitled to sell such shares under
Rule 144(k) without regard to the volume, notice and other limitations of Rule
144. In meeting the two and three year holding periods described above, a holder
of restricted shares can include the holding periods of a prior owner who was
not an affiliate.
The Company has reserved 3,000,000 shares for grants under its existing
stock-based compensation plans. As of June 3, 1996, the Company had options
outstanding to purchase up to 2,355,600 shares of Common Stock to its employees
and Directors at an exercise price of $12.00 per share. None of such options are
currently exercisable. Ninety days after the completion of the Company's initial
public offering, such options will become immediately exercisable, subject to
repurchase at the exercise price if the optionee ceases to be employed by the
Company. This repurchase right lapses ratably (on an annual basis) over a five
to ten year period depending upon the term of the option. As of June 3, 1996,
the repurchase rights had not lapsed with respect to any shares issuable upon
exercise of outstanding options. The Company intends to file registration
statements under the Securities Act to register all shares of Common Stock
issuable under such plans. Shares covered by these registration statements will
be eligible for sale in the public market after the effective date of such
registration statements.
As of June 3, 1996, the Company had outstanding $96,250,000 in aggregate
principal amount of 5% Convertible Subordinated Debentures due 2000 (the
"Debentures"). Of such amount, $10,000,000 in aggregate principal amount of
Debentures is held by Thermo Electron. The Debentures are convertible at any
time after the later of (a) 180 days after the closing of the sale of shares of
Common Stock in this offering or (b) the effectiveness of a registration
statement under the Securities Act covering the shares of Common Stock issuable
upon conversion of the Debentures. The Debentures will be convertible into an
aggregate number of shares of Common Stock equal to (i) $96,250,000, divided by
(ii) 110% of the initial public offering price of the Common Stock. The Company
is obligated to file a registration statement under the Securities Act covering
these shares promptly following the closing of the sale of shares of Common
Stock in this offering. Shares issuable upon conversion of the Debentures will
be eligible for sale in the public market after the effectiveness of such
registration statement.
Prior to this offering there has been no public market for the Common
Stock. The effect, if any, of public sales or the availability of shares for
sale at prevailing market prices cannot be predicted. Nevertheless, sales of
substantial amounts of shares in the public market could adversely affect
prevailing market prices.
39
<PAGE> 42
UNDERWRITING
<TABLE>
Subject to the terms and conditions set forth in the Underwriting
Agreement, each of the Underwriters named below, for whom NatWest Securities
Limited, Lehman Brothers Inc., Cazenove & Co. and Fahnestock & Co. Inc. are
acting as Representatives (the "Representatives"), has severally agreed to
purchase from the Company the following respective number of shares of Common
Stock at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
NatWest Securities Limited...........................................
Lehman Brothers Inc. ................................................
Cazenove & Co. ......................................................
Fahnestock & Co. Inc. ...............................................
---------
Total...................................................... 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent. The nature of the
Underwriters' obligations is that they are committed to purchase all shares of
Common Stock offered hereby if any such shares are purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer shares of Common Stock directly to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
selected dealers (who may include the Underwriters) at such price less a selling
concession not in excess of $ per share. The Underwriters may allow and such
dealers may re-allow a concession not in excess of $ per share to certain
other dealers (who may include the Underwriters). After commencement of the
offering to the public, the public offering price and other selling terms may be
changed by the Representatives. The Representatives have informed the Company
that the Underwriters do not intend to confirm sales of shares of Common Stock
to any accounts over which they exercise discretionary authority.
The Company has granted to the several Underwriters an option, exercisable
not later than 30 days after the date of this Prospectus, to purchase up to
450,000 additional shares of Common Stock at the public offering price, less the
aggregate underwriting discounts and commissions, set forth on the cover page of
this Prospectus, solely to cover over-allotments. To the extent that the
Underwriters exercise such option, each of the Underwriters will be committed,
subject to certain conditions, to purchase a number of option shares
proportionate to such Underwriter's initial commitment.
The Underwriting Agreement provides that the Company, Thermo Instrument and
Thermo Electron will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the Underwriters may be required to make in respect thereof.
The Company, Thermo Instrument and Thermo Electron have also agreed that
they will not, without the Representatives' prior written consent, offer, sell,
grant any options to purchase or otherwise dispose of any shares of Common Stock
within 180 days after the date of this Prospectus, other than (i) the shares of
Common Stock to be sold to the Underwriters in this offering, (ii) the issuance
of options and sales of Common Stock pursuant to currently existing stock-based
compensation plans, (iii) sales of shares to Thermo Instrument, and (iv) the
issuance of shares of Common Stock as consideration for the acquisition of one
or more businesses (provided that such Common Stock may not be resold prior to
the expiration of the 180-day period referenced above). See "Shares Eligible for
Future Sale" and "Risk Factors -- Shares Eligible for Future Sale."
Certain of the Underwriters from time to time have performed various
investment banking services for Thermo Electron and its subsidiaries.
NatWest Securities Limited, a United Kingdom broker-dealer and a member of
the Securities and Futures Authority Limited, has agreed that, as part of the
distribution of the shares of Common Stock offered hereby and subject to certain
exceptions, it will not offer or sell any shares of Common Stock within the
United States, its territories or possessions or to persons who are citizens
thereof or residents therein. The
40
<PAGE> 43
Underwriting Agreement does not limit sales of shares of Common Stock offered
hereby outside of the United States.
NatWest Securities Limited has also represented and agreed that (i) it has
not offered or sold and will not offer or sell any Common Stock to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, managing, holding or disposing of investments (as principal or agent)
for the purpose of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 or the
Financial Services Act 1986 (the "Act"), (ii) it has complied and will comply
with all applicable provisions of the Act with respect to anything done by it in
relation to the Common Stock in, from or otherwise involving the United Kingdom;
(iii) it has only issued or passed on and will only issue or pass on, in the
United Kingdom any document received by it in connection with the issue of the
Common Stock, other than any document which consists of or any part of listing
particulars, supplementary listing particulars or any other document or
instrument required or permitted to be published by listing rules under Part IV
of the Act, to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995
or is a person to whom the document may otherwise be lawfully issued or passed
on.
Prior to this offering there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price will be
prevailing market and economic conditions, estimates of the business potential
and prospects of the Company, the state of the Company's business operations, an
assessment of the Company's management, the consideration of the above factors
in relation to market valuations of companies in related businesses and other
factors deemed relevant. The estimated initial public offering price range set
forth on the cover page of this preliminary prospectus is subject to change as a
result of market conditions and other factors.
LEGAL OPINIONS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Seth H. Hoogasian, Esq., General Counsel of
Thermo Electron, Thermo Instrument and the Company, and certain legal matters
will be passed upon for the Underwriters by Testa, Hurwitz & Thibeault, LLP,
Boston, Massachusetts. Mr. Hoogasian owns or has the right to acquire 6,000
shares of Common Stock, 16,738 shares of common stock of Thermo Instrument and
117,577 shares of common stock of Thermo Electron.
EXPERTS
The financial statements of the Company and the Mattson Instruments and
Unicam Divisions of Analytical Technology, Inc. included in this Prospectus and
the financial statement schedule included in the Registration Statement of which
this Prospectus forms a part have been audited by Arthur Andersen LLP,
independent public accountants, to the extent and for the periods as indicated
in their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
The financial statements of A.R.L. Applied Research Laboratories S.A.
included in this Prospectus have been audited by Price Waterhouse S.A.,
independent public accountants, to the extent and for the period as indicated in
their report with respect thereto, and are included herein in reliance upon the
reports of said firm and the authority of said firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended, with respect to the securities offered hereby. This
41
<PAGE> 44
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to the
Registration Statement, copies of which may be obtained upon payment of the fees
prescribed by the Commission from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, New York, New York 10048
and at 500 West Madison Street, Chicago, Illinois 60661.
REPORTS TO SECURITY HOLDERS
The Company intends to furnish holders of the Common Stock offered hereby
with annual reports containing financial statements audited by an independent
public accounting firm and with quarterly reports containing unaudited summary
financial statements for each of the first three quarters of each fiscal year.
42
<PAGE> 45
<TABLE>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
THERMO OPTEK CORPORATION
Report of Independent Public Accountants.......................................... F-2
Consolidated Statement of Income for the years ended January 1, 1994, December 31,
1994 and December 30, 1995 and for the three months ended April 1, 1995 and March
30, 1996......................................................................... F-3
Consolidated Balance Sheet as of December 31, 1994, December 30, 1995 and March
30, 1996 and Pro Forma Consolidated Balance Sheet as of March 30, 1996........... F-4
Consolidated Statement of Cash Flows for the years ended January 1, 1994, December
31, 1994 and December 30, 1995 and for the three months ended April 1, 1995 and
March 30, 1996................................................................... F-5
Consolidated Statement of Shareholder's Investment for the years ended January 1,
1994, December 31, 1994 and December 30, 1995 and for the three months ended
March 30, 1996................................................................... F-6
Notes to Consolidated Financial Statements........................................ F-7
MATTSON INSTRUMENTS AND UNICAM DIVISIONS OF ANALYTICAL TECHNOLOGY, INC.
Report of Independent Public Accountants.......................................... F-18
Combined Statement of Operations for the period from January 1, 1995 through
November 30, 1995............................................................... F-19
Combined Statement of Cash Flows for the period from January 1, 1995 through
November 30, 1995............................................................... F-20
Combined Statement of Shareholder's Investment for the period from January 1, 1995
through November 30, 1995........................................................ F-21
Notes to Combined Financial Statements............................................ F-22
A.R.L. APPLIED RESEARCH LABORATORIES S.A.
Report of the Statutory Auditors.................................................. F-26
Statement of Operations and Unappropriated Retained Earnings for the year ended
December 31, 1995 and for the three months ended March 31, 1995 and 1996........ F-27
Balance Sheet as of December 31, 1995 and March 31, 1996.......................... F-28
Notes to Financial Statements..................................................... F-29
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION OF THERMO OPTEK CORPORATION, THE
MATTSON INSTRUMENTS AND UNICAM DIVISIONS OF ANALYTICAL TECHNOLOGY, INC. AND A.R.L.
APPLIED RESEARCH LABORATORIES S.A. (UNAUDITED)
Pro Forma Combined Condensed Statement of Income for the year ended December 30,
1995............................................................................. F-31
Pro Forma Combined Condensed Statement of Income for the three months ended
March 30, 1996.................................................................. F-33
Pro Forma Combined Condensed Balance Sheet as of March 30, 1996................... F-34
Notes to Pro Forma Combined Condensed Financial Statements........................ F-35
</TABLE>
F-1
<PAGE> 46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Optek Corporation:
We have audited the accompanying consolidated balance sheets of Thermo
Optek Corporation (a Delaware corporation and 100%-owned subsidiary of Thermo
Instrument Systems Inc.) and subsidiaries as of December 31, 1994 and December
30, 1995, and the related consolidated statements of income, cash flows and
shareholder's investment for each of the three years in the period ended
December 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Thermo Optek
Corporation and subsidiaries as of December 31, 1994 and December 30, 1995 and
the results of their operations and their cash flows for each of the three years
in the period ended December 30, 1995, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 12, 1996
F-2
<PAGE> 47
THERMO OPTEK CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
THREE MONTHS ENDED
-----------------------
APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
-------- -------- -------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues (Note 10).................. $161,006 $165,398 $212,152 $ 50,862 $69,668
-------- -------- -------- -------- -------
Costs and Operating Expenses:
Cost of revenues.................. 76,632 82,124 108,590 25,710 35,760
Selling, general and
administrative
expenses (Note 8).............. 45,778 46,532 62,109 14,338 21,326
Research and development
expenses....................... 10,593 10,496 13,018 3,211 4,934
-------- -------- -------- -------- -------
133,003 139,152 183,717 43,259 62,020
-------- -------- -------- -------- -------
Operating Income.................... 28,003 26,246 28,435 7,603 7,648
Interest Income..................... 58 89 1,514 13 1,541
Interest Expense.................... (2,249) (1,672) (2,450) (403) (1,591)
-------- -------- -------- -------- -------
Income Before Provision for Income
Taxes............................. 25,812 24,663 27,499 7,213 7,598
Provision for Income Taxes (Note
6)................................ 10,440 10,240 11,490 2,993 3,302
-------- -------- -------- -------- -------
Net Income.......................... $ 15,372 $ 14,423 $ 16,009 $ 4,220 $ 4,296
======== ======== ======== ======== =======
Earnings per Share.................. $ .34 $ .32 $ .35 $ .09 $ .10
======== ======== ======== ======== =======
Weighted Average Shares............. 45,109 45,109 45,109 45,109 45,109
======== ======== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 48
THERMO OPTEK CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<CAPTION>
PRO
FORMA
MARCH
MARCH 30,
30, 1996
1994 1995 1996 --------
-------- -------- --------
(NOTE 2)
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................... $ 3,258 $116,890 $109,789 $ 73,231
Accounts receivable, less allowances of $2,783, $5,669 and
$6,261.................................................... 40,363 62,250 62,638 62,638
Unbilled contract costs and fees............................. 1,519 1,130 875 875
Inventories.................................................. 34,914 42,986 51,117 51,117
Prepaid expenses............................................. 2,625 4,221 4,451 4,451
Prepaid income taxes (Note 6)................................ 9,178 11,955 12,103 12,103
-------- -------- -------- --------
91,857 239,432 240,973 204,415
-------- -------- -------- --------
Property, Plant and Equipment, at Cost, Net.................... 38,252 42,001 43,949 43,949
-------- -------- -------- --------
Patents and Other Assets....................................... 10,233 11,400 11,719 11,719
-------- -------- -------- --------
Cost in Excess of Net Assets of Acquired
Companies (Notes 2 and 6).................................... 90,264 140,049 145,146 145,146
-------- -------- -------- --------
$230,606 $432,882 $441,787 $405,229
======== ======== ======== ========
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities:
Notes payable and current maturities of long-term
obligations (Note 9)...................................... $ 17,739 $ 18,041 $ 17,706 $ 17,706
Accounts payable............................................. 10,868 19,657 18,085 18,085
Accrued payroll and employee benefits........................ 5,457 7,551 7,983 7,983
Accrued commissions.......................................... 1,951 5,301 4,958 4,958
Accrued income taxes......................................... 1,801 5,401 7,384 7,384
Deferred revenue............................................. 4,441 8,858 9,372 9,372
Other accrued expenses....................................... 12,322 30,027 32,492 32,492
Due to Thermo Electron Corporation and affiliated
companies................................................. 3,849 55 2,600 2,600
-------- -------- -------- --------
58,428 94,891 100,580 100,580
-------- -------- -------- --------
Deferred Income Taxes (Note 6)................................. 12,353 12,293 12,271 12,271
-------- -------- -------- --------
Other Deferred Items........................................... 2,613 3,631 3,487 3,487
-------- -------- -------- --------
Long-term Obligations (Note 9)................................. 1,037 101,079 100,969 100,969
-------- -------- -------- --------
Commitments and Contingency (Note 7)
Shareholder's Investment (Notes 3 and 4):
Net parent company investment................................ 155,661 -- -- --
Common stock, $.01 par value, 100,000,000 shares authorized;
45,000,000 shares issued and outstanding.................. -- 450 450 450
Capital in excess of par value............................... -- 215,342 215,342 178,784
Retained earnings............................................ -- 5,262 9,558 9,558
Cumulative translation adjustment............................ 514 (66) (870) (870)
-------- -------- -------- --------
156,175 220,988 224,480 187,922
-------- -------- -------- --------
$230,606 $432,882 $441,787 $405,229
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 49
THERMO OPTEK CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
THREE MONTHS ENDED
-----------------------
APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
-------- -------- -------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income....................................... $ 15,372 $ 14,423 $ 16,009 $ 4,220 $ 4,296
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................. 3,929 3,693 3,962 1,033 1,282
Amortization................................. 2,365 2,294 2,760 655 957
Provision for losses on accounts
receivable................................ 833 521 378 170 642
Other noncash expenses....................... 994 1,201 1,231 283 501
Increase (decrease) in deferred income
taxes..................................... 3,932 (93) (290) -- --
Changes in current accounts, excluding the
effects of acquisitions:
Accounts receivable..................... (2,992) (1,828) (5,856) (1,799) 2,128
Inventories and unbilled contract costs
and fees.............................. 4,519 (35) 3,158 (2,339) (1,388)
Other current assets.................... (273) 2,795 (876) 473 334
Accounts payable........................ (6,149) 3,990 (896) 453 (4,182)
Other current liabilities............... 480 (9,152) 2,350 1,747 5,478
Other........................................ 38 26 383 -- 110
-------- -------- -------- -------- --------
Net cash provided by operating
activities............................ 23,048 17,835 22,313 4,896 10,158
-------- -------- -------- -------- --------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (Note 2)...... (2,925) -- (12,593) (12,593) (15,477)
Purchases of property, plant and equipment....... (1,565) (1,804) (2,681) (349) (1,595)
Other............................................ (434) (1,049) 1,028 (81) 91
-------- -------- -------- -------- --------
Net cash used in investing activities... (4,924) (2,853) (14,246) (13,023) (16,981)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES:
Net proceeds from issuance of subordinated
convertible debentures (Note 9)................ -- -- 93,895 -- --
Repayment of long-term obligations............... (1,606) (7,278) (618) (19) (90)
Transfer from parent company to fund acquisition
of Baird....................................... -- -- 12,926 12,926 --
Net transfer to parent company................... (18,479) (9,054) (100) (968) --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities............................ (20,085) (16,332) 106,103 11,939 (90)
-------- -------- -------- -------- --------
Exchange Rate Effect on Cash....................... 362 160 (538) 135 (188)
-------- -------- -------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents... (1,599) (1,190) 113,632 3,947 (7,101)
Cash and Cash Equivalents at Beginning of Period... 6,047 4,448 3,258 3,258 116,890
-------- -------- -------- -------- --------
Cash and Cash Equivalents at End of Period......... $ 4,448 $ 3,258 $116,890 $ 7,205 $109,789
======== ======== ======== ======== ========
CASH PAID (REFUNDED) FOR:
Interest......................................... $ 2,007 $ 1,676 $ 1,285 $ 207 $ 374
======== ======== ======== ======== ========
Income taxes..................................... $ 50 $ 335 $ 187 $ (118) $ 657
======== ======== ======== ======== ========
NONCASH ACTIVITIES:
Transfer of acquired businesses from parent
company........................................ $ -- $ 3,401 $ 36,558 $ -- $ --
======== ======== ======== ======== ========
Fair value of assets of acquired companies....... $ 7,311 $ -- $ 20,901 $ 20,901 $ 22,510
Cash paid for acquired companies................. (2,937) -- (12,926) (12,926) (16,870)
-------- -------- -------- -------- --------
Liabilities assumed of acquired companies...... $ 4,374 $ -- $ 7,975 $ 7,975 $ 5,640
======== ======== = ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 50
THERMO OPTEK CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDER'S INVESTMENT
(IN THOUSANDS)
<CAPTION>
COMMON
NET PARENT STOCK, CAPITAL IN CUMULATIVE
COMPANY $.01 PAR EXCESS OF RETAINED TRANSLATION
INVESTMENT VALUE PAR VALUE EARNINGS ADJUSTMENT
---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 2, 1993............ $ 149,998 $ -- $ -- $ -- $(694)
Net income......................... 15,372 -- -- -- --
Net transfer to parent company..... (18,479) -- -- -- --
Translation adjustment............. -- -- -- -- 721
--------- ---- -------- ------ -----
BALANCE JANUARY 1, 1994............ 146,891 -- -- -- 27
Net income......................... 14,423 -- -- -- --
Transfer of acquired business from
parent company................... 3,401 -- -- -- --
Net transfer to parent company..... (9,054) -- -- --
Translation adjustment............. -- -- -- -- 487
--------- ---- -------- ------ -----
BALANCE DECEMBER 31, 1994.......... 155,661 -- -- -- 514
Net income prior to capitalization
of Company....................... 10,747 -- -- -- --
Transfer from parent company to
fund acquisition of Baird........ 12,926 -- -- -- --
Net transfer to parent company..... (100) -- -- -- --
Capitalization of Company.......... (179,234) 300 178,934 -- --
Net income after capitalization of
Company.......................... -- -- -- 5,262 --
Transfer of acquired businesses
from parent company.............. -- -- 36,558 -- --
Effect of three-for-two stock
split............................ -- 150 (150) -- --
Translation adjustment............. -- -- -- -- (580)
--------- ---- -------- ------ -----
BALANCE DECEMBER 30, 1995.......... -- 450 215,342 5,262 (66)
(UNAUDITED)
Net income......................... -- -- -- 4,296 --
Translation adjustment............. -- -- -- -- (804)
--------- ---- -------- ------ -----
BALANCE MARCH 30, 1996............. $ -- $450 $215,342 $9,558 $(870)
========= ==== ======== ====== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 51
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Thermo Optek Corporation (the "Company") develops, manufactures and markets
analytical instruments that utilize a range of optical spectroscopy techniques.
The Company's products are used by its customers for productivity enhancement,
research and development, quality control and testing applications in the
environmental testing, chemical, metallurgical, food and beverage,
pharmaceutical and petroleum industries; and by forensic laboratories, research
organizations and educational institutions.
Relationship with Thermo Instrument Systems Inc. and Thermo Electron
Corporation
The Company was incorporated in August 1995 as a wholly owned subsidiary of
Thermo Instrument Systems Inc. ("Thermo Instrument"). After the formation of the
Company, Thermo Instrument transferred to the Company all of the assets,
liabilities and businesses of Nicolet Instrument Corporation ("Nicolet") and
Thermo Jarrell Ash Corporation ("TJA") in exchange for 45,000,000 shares of the
Company's common stock. As of December 30, 1995, Thermo Instrument was an
86%-owned subsidiary of Thermo Electron Corporation ("Thermo Electron").
The accompanying financial statements include the assets, liabilities,
income and expenses of the Company as included in Thermo Instrument's
consolidated financial statements. The accompanying financial statements do not
include Thermo Instrument's general corporate debt, which is used to finance
operations of all of its respective business segments, or an allocation of
Thermo Instrument's interest expense. The Company has had positive cash flows
from operations since 1993.
Principles of Consolidation
The accompanying financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest December
31. References to 1993, 1994 and 1995 are for the fiscal years ended January 1,
1994, December 31, 1994 and December 30, 1995, respectively.
Revenue Recognition
The Company recognizes revenues upon shipment of its products and
recognizes service contract revenues ratably over the term of the contract. The
Company provides a reserve for its estimate of warranty and installation costs
at the time of shipment. Deferred revenue in the accompanying balance sheets
consists primarily of unearned revenue on service contracts. Substantially all
of the deferred revenue included in the accompanying 1995 balance sheet will be
recognized within one year.
Income Taxes
The Company and Thermo Instrument have a tax allocation agreement under
which both the Company and Thermo Instrument are included in Thermo Electron's
consolidated federal and certain state income tax returns. The agreement
provides that in years in which the Company has taxable income, it will pay to
Thermo Electron amounts comparable to the taxes the Company would have paid if
it had filed separate tax returns. If Thermo Instrument's equity ownership of
the Company were to drop below 80%, the Company would be required to file its
own income tax returns.
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," the Company recognizes deferred income taxes
based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in which the
differences are expected to be reflected in the tax return.
F-7
<PAGE> 52
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Earnings per Share
Pursuant to Securities and Exchange Commission requirements, earnings per
share have been presented for all periods. Weighted average shares for such
periods include the 45,000,000 shares issued to Thermo Instrument in connection
with the initial capitalization of the Company and the effect of the assumed
exercise of stock options issued within one year prior to the Company's proposed
initial public offering. Fully diluted earnings per share have not been
presented because the assumed conversion of the Company's subordinated
convertible debentures would be antidilutive.
Cash and Cash Equivalents
Prior to its incorporation, the cash receipts and disbursements of the
Company's domestic operations were combined with other Thermo Instrument
corporate cash transactions and balances. Therefore, cash of the Company's
domestic operations is not included in the accompanying 1994 balance sheet.
As of December 30, 1995, $106,055,000 of the Company's cash equivalents
were invested in a repurchase agreement with Thermo Electron. Under this
agreement, the Company in effect lends excess cash to Thermo Electron, which
Thermo Electron collateralizes with investments principally consisting of U.S.
government agency securities, corporate notes, commercial paper, money market
funds and other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company and have an original maturity of three
months or less. The repurchase agreement earns a rate based on the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter. As of December 30, 1995, the Company's cash equivalents also
include investments in commercial paper and short-term certificates of deposit
of the Company's foreign operations, which have an original maturity of three
months or less. Cash equivalents are carried at cost, which approximates market
value.
<TABLE>
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out or
weighted average basis) or market value and include materials, labor and
manufacturing overhead. The components of inventories are as follows:
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies....................................... $23,758 $29,523
Work in process.................................................. 3,919 4,632
Finished goods................................................... 7,237 8,831
------- -------
$34,914 $42,986
======= =======
</TABLE>
<TABLE>
Property, Plant and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives of the property as follows: buildings, 16 to 40 years; machinery
and equipment, 3 to 10 years; and leasehold improvements, the shorter of the
term of the lease or the life of the asset. Property, plant and equipment
consist of the following:
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................. $ 5,175 $ 5,051
Buildings........................................................ 25,203 25,404
Machinery, equipment and leasehold improvements.................. 21,486 28,191
------- -------
51,864 58,646
Less: Accumulated depreciation and amortization.................. 13,612 16,645
------- -------
$38,252 $42,001
======= =======
</TABLE>
F-8
<PAGE> 53
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Patents and Other Assets
Patents and other assets in the accompanying balance sheets include the
costs of acquired patents that are amortized using the straight-line method over
their estimated useful lives, which range from 12 to 13 years. These assets were
$9,721,000 and $8,592,000, net of accumulated amortization of $3,704,000 and
$4,833,000, at year-end 1994 and 1995, respectively. Patents and other assets in
the accompanying balance sheets also include deferred debt costs of $2,254,000,
net of accumulated amortization of $102,000, at year-end 1995. Deferred debt
costs are being amortized through the maturity of the related debt, which occurs
in 2000.
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired companies
is amortized using the straight-line method over 40 years. Accumulated
amortization was $6,173,000 and $8,932,000 at year-end 1994 and 1995,
respectively. The Company assesses the future useful life of this asset whenever
events or changes in circumstances indicate that the current useful life has
diminished. The Company considers the future undiscounted cash flows of the
acquired companies in assessing the recoverability of this asset.
Environmental Liabilities
The Company accrues for costs associated with the remediation of
environmental pollution when it is probable that a liability has been incurred
and the Company's proportionate share of the amount can be reasonably estimated.
Any recorded liabilities have not been discounted.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are translated
at average exchange rates for the year in accordance with SFAS No. 52, "Foreign
Currency Translation." Resulting translation adjustments are reflected as a
separate component of shareholder's investment titled "Cumulative translation
adjustment." Foreign currency transaction gains and losses are included in the
accompanying statement of income and are not material for the three years
presented.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, notes payable and current maturities of
long-term obligations, accounts payable, due to parent company and long-term
obligations. The carrying amounts of the Company's cash and cash equivalents,
accounts receivable, notes payable and current maturities of long-term
obligations, accounts payable and due to parent company approximate fair value
due to their short-term nature. See Note 9 for fair value information pertaining
to the Company's long-term obligations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-9
<PAGE> 54
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Split
On April 11, 1996, the Company declared a three-for-two stock split in the
form of a 50% stock dividend distributed to the shareholder of record as of
April 11, 1996. All share and per share information has been restated to reflect
the stock split.
Interim Financial Statements
The financial statements as of March 30, 1996 and for the three-month
periods ended April 1, 1995 and March 30, 1996 are unaudited but, in the opinion
of management, reflect all adjustments of a normal, recurring nature necessary
for a fair presentation of results for these interim periods. The results of
operations for the three-month period ended March 30, 1996 are not necessarily
indicative of the results to be expected for the entire year.
2. ACQUISITIONS
On January 1, 1995, TJA acquired the Analytical Instruments Division of
Baird Corporation ("Baird"), a wholly owned subsidiary of IMO Industries Inc.,
for $12.9 million in cash. Baird is a manufacturer of arc/spark and other
spectrometers. The acquisition of Baird has been accounted for using the
purchase method of accounting, and its results of operations have been included
in the accompanying financial statements from the date of acquisition.
On December 1, 1995, Thermo Instrument acquired the assets of the
analytical instruments division of Analytical Technology, Inc. ("ATI"). On April
11, 1996, the Company acquired the Mattson Instruments ("Mattson") and Unicam
divisions of ATI from Thermo Instrument for $36.6 million in cash. Mattson is a
manufacturer of Fourier transform infrared ("FT-IR") spectroscopy instruments
and Unicam is a manufacturer of atomic absorption and ultraviolet/visible
spectroscopy instruments. Because, as of December 30, 1995, the Company, Mattson
and Unicam were deemed for accounting purposes to be under control of their
common owner, Thermo Instrument, the accompanying 1995 historical financial
information includes the results of operations of Mattson and Unicam from
December 1, 1995, the date these businesses were acquired by Thermo Instrument.
Because the Company had not disbursed the funds in connection with the
acquisitions of Mattson and Unicam as of December 30, 1995, the transfer of
these businesses has been reflected as a contribution of capital in excess of
par value as of December 1, 1995. The $36.6 million payment from the Company to
Thermo Instrument will be accounted for as a reduction of capital in excess of
par value as of April 11, 1996. The accompanying unaudited pro forma balance
sheet as of March 30, 1996, has been prepared as if the Company had completed
the purchase of Mattson and Unicam on March 30, 1996.
The cost of the acquisitions of Baird, Mattson and Unicam exceeded the
estimated fair value of the acquired net assets by $53.8 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, for
Mattson and Unicam, is subject to adjustment upon finalization of the purchase
price allocation. To date, no information has been gathered that would cause the
Company to believe that the final allocation of the purchase price will be
materially different than the preliminary estimate.
<TABLE>
Based on unaudited data, the following table presents selected financial
information for the Company, Baird, Mattson and Unicam on a pro forma basis,
assuming the companies had been combined since the beginning of 1994.
<CAPTION>
1994 1995
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues....................................................... $263,892 $269,954
Net income..................................................... 6,620 11,877
Earnings per share............................................. .15 .26
</TABLE>
F-10
<PAGE> 55
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The pro forma results are not necessarily indicative of future operations
or the actual results that would have occurred had the acquisitions of Baird,
Mattson and Unicam been made at the beginning of 1994.
In connection with the acquisitions of Mattson and Unicam, the Company
established reserves totaling $11.6 million for estimated severance, excess
facilities and other exit costs associated with the acquisitions, none of which
was expended during 1995. The Company expects to substantially complete its
review and restructuring of Mattson's and Unicam's operations over the one-year
period following the acquisitions. Any changes in estimates of these costs will
be recorded as adjustments to cost in excess of net assets of acquired
companies. These reserves are included in other accrued expenses in the
accompanying 1995 balance sheet.
3. STOCK-BASED COMPENSATION PLANS
In November 1995, the Company adopted a stock-based compensation plan for
its key employees, directors, and others, which permits the grant of a variety
of stock and stock-based awards as determined by the human resources committee
of the Company's Board of Directors (the "Board Committee"), including
restricted stock, stock options, stock bonus shares or performance-based shares.
To date, only nonqualified stock options have been awarded under this plan. The
option recipients and the terms of options granted under this plan are
determined by the Board Committee. Options granted to date generally vest and
become immediately exercisable on the ninth anniversary of the grant date,
unless the Company's common stock becomes publicly traded prior to such date. In
such an event, options become exercisable 90 days after the Company becomes
subject to the Securities Exchange Act of 1934, but are subject to certain
transfer restrictions and the right of the Company to repurchase shares issued
upon exercise of the options at the exercise price, upon certain events. The
restrictions and repurchase rights generally are deemed to have lapsed ratably
over periods ranging from five to ten years after the first anniversary of the
grant date, depending on the term of the option, which generally ranges from ten
to twelve years. Nonqualified stock options may be granted at any price
determined by the Board Committee, although incentive stock options must be
granted at not less than the fair market value of the Company's stock on the
date of grant. To date, all options have been granted at fair market value. As
of April 11, 1996, options to purchase 2,355,600 shares of the Company's common
stock exercisable at $12.00 per share were outstanding under this plan. As of
April 11, 1996, no options have been exercised and no options are exercisable
under the stock-based compensation plan described above. The Company also has a
directors' stock option plan, adopted in November 1995, that provides for the
grant of stock options to outside directors pursuant to a formula approved by
the Company's shareholders. Options granted under this plan will have the same
general terms as options granted to date under the stock-based compensation plan
described above, except that the restrictions and repurchase rights generally
are deemed to have lapsed ratably over a four-year period and the option term is
five years. As of April 11, 1996, no options to purchase shares of the Company's
common stock have been granted under this plan. In addition to the Company's
stock-based compensation plans, certain officers and key employees may also
participate in the stock-based compensation plans of Thermo Electron or its
majority-owned subsidiaries.
No accounting recognition is given to options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity.
4. COMMON STOCK
At December 30, 1995, the Company had reserved 9,730,769 unissued shares of
its common stock for possible issuance under stock-based compensation plans and
for issuance upon possible conversion of the Company's subordinated convertible
debentures.
5. EMPLOYEE BENEFIT PLANS
Employee Stock Purchase Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in an employee stock purchase plan sponsored by Thermo Instrument.
Prior to the November 1995 plan year, shares of Thermo Instrument's and Thermo
Electron's common stock could be purchased at the end of a 12-month plan
F-11
<PAGE> 56
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
year at 85% of the fair market value at the beginning of the plan year, and the
shares purchased were subject to a one-year resale restriction. Effective
November 1, 1995, the applicable shares of common stock may be purchased at 95%
of the fair market value at the beginning of the plan year, and the shares
purchased are subject to a six-month resale restriction. Shares are purchased
through payroll deductions of up to 10% of each participating employee's gross
wages.
401(k) Savings Plans
Substantially all of the Company's full-time U.S. employees are eligible to
participate in Thermo Electron's or Nicolet's 401(k) savings plans and, prior to
1995, in Thermo Electron's employee stock ownership plan ("ESOP"). Contributions
to the 401(k) savings plans are made by both the employee and the Company.
Company contributions are based upon the level of employee contributions. For
these plans, the Company contributed and charged to expense $967,000, $1,005,000
and $1,106,000 in 1993, 1994 and 1995, respectively. Effective December 31,
1994, the ESOP was split into two plans: ESOP I, covering employees of Thermo
Electron's corporate office and its wholly owned subsidiaries and ESOP II,
covering employees of Thermo Electron's majority-owned subsidiaries. Also,
effective December 31, 1994, the ESOP II plan was terminated and as a result,
the Company's employees are no longer eligible to participate in an ESOP.
6. INCOME TAXES
<TABLE>
The components of income before provision for income taxes are as follows:
<CAPTION>
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic.............................................. $22,492 $22,877 $23,205
Foreign............................................... 3,320 1,786 4,294
------- ------- -------
$25,812 $24,663 $27,499
======= ======= =======
</TABLE>
<TABLE>
The components of the provision for income taxes are as follows:
<CAPTION>
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal............................................. $ 3,281 $ 5,687 $ 8,227
State............................................... 788 1,412 1,658
Foreign............................................. 1,558 997 1,975
------- ------- -------
5,627 8,096 11,860
------- ------- -------
Net deferred (prepaid):
Federal............................................. 4,033 1,898 (435)
State............................................... 1,042 474 (92)
Foreign............................................. (262) (228) 157
------- ------- -------
4,813 2,144 (370)
------- ------- -------
$10,440 $10,240 $11,490
======= ======= =======
</TABLE>
The provision for income taxes that is currently payable does not reflect
$1,000,000 of tax benefits used to reduce cost in excess of net assets of
acquired companies in 1995.
F-12
<PAGE> 57
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
The provision for income taxes in the accompanying statement of income
differs from the provision calculated by applying the statutory federal income
tax rate of 35% to income before provision for income taxes due to the
following:
<CAPTION>
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory rate.......... $ 9,034 $ 8,632 $ 9,625
Increases (decreases) resulting from:
State income taxes, net of federal benefit.......... 1,190 1,226 1,018
Net foreign losses not benefited and tax rate
differential..................................... 134 144 629
Tax benefit of foreign sales corporation............ (385) (642) (659)
Amortization of cost in excess of net assets of
acquired companies............................... 825 767 894
Other, net.......................................... (358) 113 (17)
------- ------- -------
$10,440 $10,240 $11,490
======= ======= =======
</TABLE>
<TABLE>
Prepaid income taxes and deferred income taxes in the accompanying balance
sheets consist of the following:
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
Reserves and accruals.......................................... $ 3,533 $ 3,378
Inventory basis difference..................................... 4,384 3,592
Accrued compensation........................................... 532 1,010
Foreign net operating loss carryforwards....................... -- 11,220
Other, net..................................................... 729 3,975
------- -------
9,178 23,175
Less: Valuation allowance...................................... -- 11,220
------- -------
$ 9,178 $11,955
======= =======
Deferred income taxes:
Depreciation................................................... $ 8,419 $ 8,427
Intangible assets.............................................. 3,244 3,019
Other, net..................................................... 690 847
------- -------
$12,353 $12,293
======= =======
</TABLE>
As of November 30, 1995, Unicam had net operating loss carryforwards in the
U.K. of $34,000,000 that are subject to review and adjustment by the U.K. Inland
Revenue Service as a result of the acquisition of the analytical instruments
division of ATI by Thermo Instrument. The Mattson and Unicam divisions also have
net operating loss carryforwards in several other European countries. These
foreign net operating loss carryforwards may only be used to offset taxable
income generated in such European countries.
The year-end 1995 valuation allowance relates to the uncertainty
surrounding the realization of Unicam's foreign net operating loss
carryforwards, the realization of which is limited to the future income of
certain subsidiaries. The net operating loss carryforwards do not expire and any
resulting benefit will be used to reduce cost in excess of net assets of
acquired companies.
A provision has not been made for U.S. or additional foreign taxes on
$7,003,000 of undistributed earnings of foreign subsidiaries that could be
subject to taxation if remitted to the U.S. because the Company plans to keep
these amounts permanently reinvested overseas. The Company believes that any
additional U.S. tax liability due upon remittance of such earnings would be
immaterial due to available U.S. foreign tax credits.
F-13
<PAGE> 58
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCY
Commitments
The Company leases portions of its office and operating facilities under
various operating lease arrangements. The accompanying statement of income
includes expenses from operating leases of $3,056,000, $2,989,000 and $3,154,000
in 1993, 1994 and 1995, respectively. Future minimum payments due under
noncancellable operating leases at December 30, 1995, are $4,357,000 in 1996;
$3,175,000 in 1997; $2,271,000 in 1998; $1,911,000 in 1999; $1,829,000 in 2000;
and $7,543,000 in 2001 and thereafter. Total future minimum lease payments are
$21,086,000.
Contingency
Prior to Nicolet's acquisition by the Company, the Wisconsin Department of
Natural Resources ("DNR") notified Nicolet that the DNR had begun a remedial
investigation to determine the extent of releases of hazardous substances from
the Refuse Hideaway Landfill located in Middleton, Wisconsin (the "Landfill"),
and that Nicolet was a potential responsible party ("PRP") with regard to the
Landfill. Approximately 50 other parties were also notified of their potential
PRP status. The Environmental Protection Agency ("EPA") subsequently added the
Landfill to its National Priorities List under the Comprehensive Environmental
Response Compensation and Liability Act of 1980 ("CERCLA"). In February 1995,
the EPA and the DNR recommended that various remediation efforts be made at the
Landfill at an estimated cost of approximately $5.2 million, and the Company
expects that such agencies will also seek to recover their oversight costs and
expenses related to the site. Under CERCLA, responsible parties can include
current and previous owners of a site, generators of hazardous substances
disposed of at a site, and transporters of hazardous substances to a site. Each
responsible party can be jointly and severally liable, without regard to fault
or negligence, for all costs associated with the remediation of the site.
Although the Company believes that the quantity of materials generated by
Nicolet and transported to the Landfill is relatively small in comparison to
that of other named PRPs, there can be no assurance as to the exact amount, if
any, for which Nicolet will be held responsible by the EPA and the DNR for costs
associated with remediation of the Landfill.
In connection with the organization of the Company, Thermo Instrument
agreed to indemnify the Company for any cash damages resulting from this matter.
Any payments received under such indemnity would be recorded as capital
contributions. In the opinion of management, resolution of this matter will not
have a material adverse effect on the Company's financial position or results of
operations.
8. RELATED PARTY TRANSACTIONS
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management, and certain financial and other services, for which
the Company paid Thermo Electron annually an amount equal to 1.25% of the
Company's revenues in 1993 and 1994 and 1.20% of the Company's revenues in 1995.
For these services, the Company was charged $2,013,000, $2,067,000 and
$2,546,000 in 1993, 1994 and 1995, respectively. Beginning in 1996, the Company
will pay an annual fee equal to 1.0% of the Company's revenues. The annual fee
is reviewed and adjusted annually by mutual agreement of the parties. Management
believes that the service fee charged by Thermo Electron is reasonable and that
such fees are representative of the expenses the Company would have incurred on
a stand-alone basis. The corporate services agreement is renewed annually but
can be terminated upon 30 days' prior notice by the Company or upon the
Company's withdrawal from the Thermo Electron Corporate Charter (the Thermo
Electron Corporate Charter defines the relationship among Thermo Electron and
its majority-owned subsidiaries). For additional items such as employee benefit
plans, insurance coverage and other identifiable costs, Thermo Electron charges
the Company based upon costs attributable to the Company.
F-14
<PAGE> 59
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Related Party Services
Prior to 1995, the Company provided certain services to ThermoSpectra
Corporation ("ThermoSpectra"), a majority-owned subsidiary of Thermo Instrument,
and to Nicolet Biomedical Inc. ("Nicolet Biomedical"), a wholly owned subsidiary
of Thermo Electron. The costs of such services were allocated based on the
subsidiaries' revenues attributable to their businesses operated at the
Company's Wisconsin facilities as a percentage of the total revenues of all
businesses operated at such facilities. These services included personnel
administration, accounting, data processing and general administrative
management. For these services, the Company charged $1,543,000 and $672,000 in
1993 and 1994, respectively.
Operating Leases
The Company leases office and manufacturing space to ThermoSpectra and
Nicolet Biomedical pursuant to an arrangement whereby the Company charges
ThermoSpectra and Nicolet Biomedical their allocated share of the occupancy
expenses of the Company's Wisconsin facility, based on the space ThermoSpectra
and Nicolet Biomedical utilize. The Company recorded operating lease income of
$1,305,000, $1,120,000 and $898,000 in 1993, 1994 and 1995, respectively, which
is deducted from selling, general and administrative expenses in the
accompanying statement of income. These leases are effective until December 31,
1998, but may be terminated by ThermoSpectra and Nicolet Biomedical upon 30
days' prior notice to the Company.
Other Related Party Transactions
The Company purchases and sells products in the ordinary course of business
with other companies affiliated with Thermo Electron. Sales of products to such
affiliated companies totalled $2,642,000, $3,389,000 and $5,280,000 in 1993,
1994 and 1995, respectively. Purchases of products from such affiliated
companies totalled $505,000, $1,555,000 and $1,720,000 in 1993, 1994 and 1995,
respectively.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
9. SHORT- AND LONG-TERM OBLIGATIONS
Short-term Obligations
Notes payable and current maturities of long-term obligations in the
accompanying balance sheets include $17,005,000 and $17,275,000 in 1994 and
1995, respectively, of short-term bank borrowings by the Company's foreign
subsidiaries. The weighted average interest rates for these borrowings were
5.57% and 5.80% at year-end 1994 and 1995, respectively.
Long-term Obligations
<TABLE>
Long-term obligations of the Company are as follows:
<CAPTION>
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
5% Subordinated convertible debentures, due 2000............... $ -- $ 96,250
6.9% Mortgage loan secured by property with a net book value of
$3,212, payable in quarterly installments with final payments
in 2005...................................................... 784 691
Note (Libor-based), payable in annual installments, due 2005... 739 339
Other.......................................................... 178 4,494
------ --------
1,701 101,774
Less: Current maturities of long-term obligations.............. 664 695
------ --------
$1,037 $101,079
====== ========
</TABLE>
In October 1995, the Company issued and sold $96,250,000 principal amount
of 5% subordinated convertible debentures due 2000. The debentures will be
convertible into shares of the Company's common stock at any time after the
later of (1) 180 days after the date of the closing of the Company's initial
public
F-15
<PAGE> 60
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
offering of common stock or (2) the date of the effectiveness under the
Securities Act of 1933 of a registration statement covering the resale of shares
of the Company's common stock issuable upon conversion of the debentures, and
prior to redemption and maturity. The conversion price of the debentures will be
set on the date of the closing of the Company's initial public offering of
common stock and will be equal to 110% of the initial public offering price of
the Company's common stock. If the Company's initial public offering has not
occurred by October 12, 1996, this percentage will decrease by 2.5% on such date
and on each anniversary of such date prior to the Company's initial public
offering. If the Company's initial public offering has not occurred by October
1, 1996, the rate of interest borne by the debentures will increase by 0.5% on
such date and on each anniversary of such date prior to the Company's initial
public offering. The debentures are guaranteed on a subordinated basis by Thermo
Electron. Thermo Instrument and the Company have agreed to reimburse Thermo
Electron in the event Thermo Electron is required to make a payment under the
guarantee. In addition, the Company has agreed to reimburse Thermo Instrument in
the event Thermo Instrument is required to make a payment under the guarantee.
The fair value of the Company's 5% subordinated convertible debentures was
$100,100,000 as of December 30, 1995. The carrying amount of the Company's other
long-term obligations approximates fair value as of December 30, 1995.
The annual requirements of long-term obligations as of December 30, 1995,
are $695,000 in 1996; $301,000 in 1997; $299,000 in 1998; $315,000 in 1999;
$96,619,000 in 2000; and $3,545,000 in 2001 and thereafter. Total future
requirements of long-term obligations are $101,774,000.
F-16
<PAGE> 61
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
10. GEOGRAPHICAL INFORMATION
<TABLE>
The Company is engaged in one business segment: developing, manufacturing
and selling atomic, FT-IR and FT-Raman spectrometers. The following table shows
data for the Company by geographical area.
<CAPTION>
1993 1994 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
United States................................. $125,427 $124,634 $152,282
United Kingdom................................ 15,437 15,718 20,013
Japan......................................... 15,555 18,559 26,377
Other......................................... 31,117 29,203 46,188
Transfers among geographical areas (a)........ (26,530) (22,716) (32,708)
-------- -------- --------
$161,006 $165,398 $212,152
======== ======== ========
Income before provision for income taxes:
United States (b)............................. $ 25,097 $ 23,169 $ 22,834
United Kingdom................................ 1,575 589 951
Japan......................................... 622 894 1,543
Other......................................... 709 1,594 3,107
-------- -------- --------
Total operating income........................ 28,003 26,246 28,435
Interest expense, net......................... (2,191) (1,583) (936)
-------- -------- --------
$ 25,812 $ 24,663 $ 27,499
======== ======== ========
Identifiable assets:
United States (c)............................. $184,477 $182,967 $340,566
United Kingdom................................ 13,758 13,568 45,208
Japan......................................... 12,183 14,020 15,895
Other......................................... 18,616 20,051 31,213
-------- -------- --------
$229,034 $230,606 $432,882
======== ======== ========
Export revenues included in United States revenues
above (d):
Europe........................................ $ 25,015 $ 18,504 $ 22,001
Asia.......................................... 16,289 15,991 31,654
Other......................................... 8,129 6,540 13,433
-------- -------- --------
$ 49,433 $ 41,035 $ 67,088
======== ======== ========
<FN>
- ---------------
(a) Transfers among geographical areas are accounted for at prices that are
representative of transactions with unaffiliated parties.
(b) Includes corporate general and administrative expenses.
(c) Includes $93.9 million in net proceeds from the October 1995 issuance of 5%
subordinated convertible debentures.
(d) In general, export sales are denominated in U.S. dollars.
</TABLE>
F-17
<PAGE> 62
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Mattson Instruments and Unicam Divisions of Analytical Technology, Inc.:
We have audited the accompanying combined statements of operations, cash
flows and shareholder's investment of the Mattson Instruments and Unicam
Divisions of Analytical Technology, Inc. for the period from January 1, 1995
through November 30, 1995. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
the Mattson Instruments and Unicam Divisions of Analytical Technology, Inc. for
the period from January 1, 1995 through November 30, 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 10, 1996
F-18
<PAGE> 63
MATTSON INSTRUMENTS AND UNICAM DIVISIONS OF ANALYTICAL TECHNOLOGY, INC.
<TABLE>
COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH NOVEMBER 30, 1995
(IN THOUSANDS)
<S> <C>
Revenues (Note 6)...................................................... $57,802
-------
Costs and Operating Expenses:
Cost of revenues..................................................... 31,649
Selling, general and administrative expenses......................... 22,613
Research and development expenses.................................... 4,845
-------
59,107
-------
Operating Loss......................................................... (1,305)
Interest Income........................................................ 50
Interest Expense....................................................... (501)
-------
Loss Before Income Tax Benefit......................................... (1,756)
Income Tax Benefit (Note 3)............................................ (216)
-------
Net Loss............................................................... $(1,540)
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-19
<PAGE> 64
MATTSON INSTRUMENTS AND UNICAM DIVISIONS OF ANALYTICAL TECHNOLOGY, INC.
<TABLE>
COMBINED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH NOVEMBER 30, 1995
(IN THOUSANDS)
<S> <C>
OPERATING ACTIVITIES:
Net loss....................................................................... $ (1,540)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation.............................................................. 1,117
Amortization.............................................................. 303
Deferred interest......................................................... 362
Changes in current accounts:
Accounts receivable.................................................... 3,922
Inventories............................................................ 1,165
Other current assets................................................... 232
Accounts payable....................................................... (238)
Other current liabilities.............................................. (2,470)
Other..................................................................... (32)
-------
Net cash provided by operating activities.............................. 2,821
-------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment..................................... (437)
-------
FINANCING ACTIVITIES:
Repayment of long-term obligations............................................. (71)
Payments of capital lease obligations.......................................... (430)
Net transfers to Analytical Technology, Inc. .................................. (1,405)
-------
Net cash used in financing activities.................................. (1,906)
-------
Exchange Rate Effect on Cash..................................................... (17)
-------
Increase in Cash and Cash Equivalents............................................ 461
Cash and Cash Equivalents at Beginning of Period................................. 704
-------
Cash and Cash Equivalents at End of Period....................................... $ 1,165
=======
CASH PAID FOR:
Interest....................................................................... $ 178
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-20
<PAGE> 65
MATTSON INSTRUMENTS AND UNICAM DIVISIONS OF ANALYTICAL TECHNOLOGY, INC.
<TABLE>
COMBINED STATEMENT OF SHAREHOLDER'S INVESTMENT
FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH NOVEMBER 30, 1995
(IN THOUSANDS)
<CAPTION>
NET PARENT CUMULATIVE
COMPANY TRANSLATION
INVESTMENT ADJUSTMENT
---------- ----------
<S> <C> <C>
BALANCE JANUARY 1, 1995............................................... $12,438 $(2,269)
Net transfers to Analytical Technology, Inc. ......................... (1,405) --
Net loss.............................................................. (1,540) --
Translation adjustment................................................ -- 114
------- -------
BALANCE NOVEMBER 30, 1995............................................. $ 9,493 $(2,155)
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-21
<PAGE> 66
MATTSON INSTRUMENTS AND UNICAM DIVISIONS OF ANALYTICAL TECHNOLOGY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Combination
The accompanying financial statements include the accounts of the Mattson
Instruments ("Mattson") and Unicam businesses (collectively, the "Company") of
the analytical instruments division of Analytical Technology, Inc. ("ATI").
Mattson, based in Wisconsin, manufactures Fourier transform infrared
spectroscopy instruments and Unicam, based in the U.K., manufactures atomic
absorption and ultraviolet/visible spectroscopy instruments and has a
European-based national sales organization. All material intercompany accounts
and transactions have been eliminated.
On December 1, 1995, Thermo Instrument Systems Inc. ("Thermo Instrument")
acquired the Company in connection with its acquisition of the analytical
instruments division of ATI. Thermo Instrument is an 86%-owned subsidiary of
Thermo Electron Corporation. No adjustments have been made to the accompanying
financial statements due to or as a result of the acquisition of the Company by
Thermo Instrument.
Fiscal Year
The Company's fiscal year is the 52-53 week period ending the Saturday
nearest December 31. The accompanying financial statements are for the period
from January 1, 1995 through November 30, 1995.
Revenue Recognition
The Company recognizes revenues upon shipment of its products and provides
a reserve for its estimate of warranty and installation costs at the time of
shipment.
Depreciation and Amortization
Equipment and improvements are carried at cost. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives of the property as follows: production and research equipment, 3 to
10 years; office furniture and equipment, 3 to 10 years; leased property, 3 to
20 years; and leasehold improvements, the shorter of the term of the lease or
the life of the asset.
Income Taxes
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," the Company recognizes deferred income taxes
based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in which the
differences are expected to be reflected in the tax return.
During the period presented Mattson and Unicam were included in the
consolidated tax returns of a controlled group in the U.S. and U.K.,
respectively. The accompanying financial statements reflect a benefit allocated
to Unicam related to losses arising in the U.K. under the provisions of a
corporate tax sharing arrangement.
Goodwill
The Company amortizes goodwill using the straight-line method and accounts
for goodwill at the lower of amortized cost or fair value. On an ongoing basis,
management reviews the value and period of amortization of goodwill. During this
review, the Company reevaluates significant assumptions made in determining the
original cost of acquired companies and related goodwill. Such assumptions
generally include revenue growth, operating results, cash flows and other
indicators of value. Management then determines whether there has been a
permanent impairment of the value of goodwill based upon events or circumstances
which have occurred since acquisition.
F-22
<PAGE> 67
MATTSON INSTRUMENTS AND UNICAM DIVISIONS OF ANALYTICAL TECHNOLOGY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign Currency
All revenues and expenses of the Company's foreign subsidiaries are
translated at average exchange rates for the period in accordance with SFAS No.
52, "Foreign Currency Translation." Resulting translation adjustments are
reflected as a separate component of shareholder's investment titled "Cumulative
translation adjustment." Foreign currency transaction gains and losses are
included in the accompanying statement of operations and are not material for
the period presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. COMMITMENTS AND RELATED PARTY TRANSACTION
Mattson leases an office and manufacturing facility under an agreement
accounted for as a capital lease. Certain key employees of ATI are investors in
the partnership which owns the facility. The present value of future minimum
lease payments under this agreement is approximately $3,209,000. Lease payments
were $347,000 for the period from January 1, 1995 through November 30, 1995.
The Company also leases equipment and facilities under operating leases and
certain equipment under capital leases. The accompanying statement of operations
includes expense from operating leases of $2,502,000 for the period from January
1, 1995 through November 30, 1995.
3. INCOME TAXES
<TABLE>
The components of loss before income tax benefit are as follows (In
thousands):
<S> <C>
Domestic................................................................... $(1,068)
Foreign.................................................................... (688)
-------
$(1,756)
=======
</TABLE>
<TABLE>
The components of the income tax benefit are as follows (In thousands):
<S> <C>
Current foreign benefit.................................................... $ (216)
Deferred provision......................................................... --
-------
$ (216)
=======
</TABLE>
<TABLE>
The income tax benefit in the accompanying statement of operations differs
from the amount calculated by applying the statutory income tax rate of 34% to
loss before income tax benefit due to the following (In thousands):
<S> <C>
Income tax benefit at statutory rate....................................... $ (597)
Changes resulting from:
Foreign losses with no benefit........................................... 265
Nondeductible amortization of goodwill and other expenses................ 162
Decrease in valuation allowance.......................................... (27)
Other, net............................................................... (19)
-------
$ (216)
=======
</TABLE>
F-23
<PAGE> 68
MATTSON INSTRUMENTS AND UNICAM DIVISIONS OF ANALYTICAL TECHNOLOGY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
As of November 30, 1995, Unicam had net operating loss carryforwards in the
U.K. of $34,000,000 that are subject to review and adjustment by the U.K. Inland
Revenue Service as a result of the acquisition of the analytical instruments
division of ATI by Thermo Instrument. The Company also has net operating loss
carryforwards in several other European countries. These foreign net operating
loss carryforwards may only be used to offset taxable income generated in such
European countries.
4. EMPLOYEE RETIREMENT PLANS
Employee Tax Deferred Savings Plan
The Company participates in ATI's tax deferred employee benefit plan for
its U.S. employees under the provisions of Internal Revenue Code section 401(k).
The Company, at its discretion, can match up to 50% or more of employee
contributions up to 6% of the employee's salary. Matching contributions are 100%
vested immediately. The cost of the plan, including matching and administrative
fees, was $97,000 for the period from January 1, 1995 through November 30, 1995.
Unicam Employees Pension Plan
As part of the original purchase of the Unicam business by ATI from Philips
N.V. ("Philips") in 1991, ATI negotiated an arrangement whereby Unicam U.K.
employees would participate in their former employer's pension plan until
December 31, 1994. Effective January 1, 1995, the Company established the ATI
Unicam Pension Plan (the "Plan") for all U.K. employees. Under the terms of the
Philips arrangement, employees could no longer continue as contributing members
in the Philips plan, but they could choose to keep their funds in the Philips
plan and receive benefits frozen at the current actuarial liability and either
ignore the new Plan or join it as a new starter. Alternatively, they could
transfer their accrued pension benefits to the new Plan without suffering any
loss in entitlement.
<TABLE>
A major feature of the Plan is that members have the option of accruing
benefits on a defined benefit or defined contribution basis. Net periodic
pension costs for the Plan included the following components for the period from
January 1, 1995 through November 30, 1995 (In thousands):
<S> <C>
Service cost.............................................................. $ 557
Interest cost on projected benefit obligation............................. 819
Return on plan assets..................................................... (941)
Amortization of unrecognized net transition asset......................... (43)
-----
$ 392
=====
</TABLE>
F-24
<PAGE> 69
MATTSON INSTRUMENTS AND UNICAM DIVISIONS OF ANALYTICAL TECHNOLOGY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONCLUDED)
5. BANKING RELATIONSHIP WITH ATI
For the period from January 1, 1995 through November 30, 1995, the
Company's domestic divisions participated in a cash management program whereby
all cash receipts and disbursements were concentrated in one single ATI
corporate office account. The accompanying financial statements do not include
an allocation of interest expense. The Company had positive cash flow from
operations for the period from January 1, 1995 through November 30, 1995.
6. GEOGRAPHICAL INFORMATION
<TABLE>
The Company operates and is engaged in one business segment: developing,
manufacturing and marketing of analytical instruments that utilize a range of
optical spectroscopy techniques. The following table shows data for the Company
by geographical area for the period from January 1, 1995 through November 30,
1995 (In thousands):
<S> <C>
Revenues:
United States........................................................... $ 15,349
United Kingdom.......................................................... 37,168
Germany................................................................. 8,327
Other Europe............................................................ 10,565
Other................................................................... 1,352
Transfers among geographical areas (a).................................. (14,959)
--------
$ 57,802
========
Income (loss) before income tax benefit:
United States........................................................... $ 6
United Kingdom.......................................................... (605)
Germany................................................................. 76
Other Europe............................................................ (814)
Other................................................................... 32
--------
Total operating loss.................................................... (1,305)
Interest expense, net................................................... (451)
--------
$ (1,756)
========
<FN>
- ---------------
(a) Transfers among geographical areas are accounted for at prices that are
representative of transactions with affiliated parties.
</TABLE>
F-25
<PAGE> 70
Report of the statutory auditors to the General Meeting
of A.R.L. Applied Research Laboratories S.A.
As statutory auditors of your company we have audited the books of account
and the financial statements presented by the Board of Directors for the year
ended December 31, 1995 in accordance with the provisions of the Swiss Code of
Obligations. Our audit was conducted in accordance with auditing standards
promulgated by the profession in Switzerland. We confirm that we comply with the
legal requirements concerning professional qualification and independence.
Based on our audit we conclude that the books of account, the financial
statements and the proposed appropriation of retained earnings are in accordance
with the law and the articles of incorporation.
We recommend that the financial statements submitted to you be approved.
PRICE WATERHOUSE S.A.
Lausanne, Switzerland
April 2, 1996
F-26
<PAGE> 71
A.R.L. APPLIED RESEARCH LABORATORIES S.A.
<TABLE>
STATEMENT OF OPERATIONS AND UNAPPROPRIATED RETAINED EARNINGS
(IN SWISS FRANCS)
<CAPTION>
YEAR THREE MONTHS ENDED
ENDED -------------------------
DECEMBER 31, MARCH 31, MARCH 31,
1995 1995 1996
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Income:
Sales....................................... 65,691,641 12,647,942 16,037,949
Cost of sales............................... 48,210,533 11,209,394 12,063,813
---------- ---------- ----------
Gross margin................................ 17,481,108 1,438,548 3,974,136
---------- ---------- ----------
Expenditures:
Marketing and selling expenses.............. 6,981,153 1,636,736 1,579,721
Commissions................................. 1,616,605 208,619 386,927
Research and development.................... 4,166,056 1,142,363 1,060,938
Administration.............................. 2,870,992 693,913 736,963
---------- ---------- ----------
15,634,806 3,681,631 3,764,549
---------- ---------- ----------
Other Income (Expenses):
Interest income............................. 26,763 1,468 --
Interest expense............................ (714,923) (239,460) (133,518)
Net gain (loss) on exchange................. (94,200) -- 6,917
Capital tax................................. (39,832) (9,958) (10,070)
Other....................................... (922,267) 121,991 (73,413)
---------- ---------- ----------
(1,744,459) (125,959) (210,084)
---------- ---------- ----------
Net Income (Loss)............................. 101,843 (2,369,042) (497)
Unappropriated Retained Earnings at Beginning
of Period................................... 4,042,219 4,042,219 4,111,062
Appropriation of Retained Earnings as Resolved
by General Meeting:
Appropriations to general legal
reserve................................ (33,000) -- --
---------- ---------- ----------
Unappropriated Retained Earnings at End
of Period................................... 4,111,062 1,673,177 4,110,565
========== ========== ==========
Proposal of the Board of Directors for
Appropriation of Retained Earnings at End of
Period:
Transfer to legal reserve................ 5,100 -- --
Balance to be carried forward............ 4,105,962 1,673,177 4,110,565
---------- ---------- ----------
4,111,062 1,673,177 4,110,565
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 72
A.R.L. APPLIED RESEARCH LABORATORIES S.A.
<TABLE>
BALANCE SHEET
(IN SWISS FRANCS)
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and banks.................................................. 1,535,132 1,344,715
Trade receivables:
Customers' accounts (less provision for doubtful accounts of
SFr 586,746 and SFr 642,733)............................... 3,720,853 4,884,377
Intercompany current accounts................................ 16,039,333 15,471,042
Sundry receivables........................................... 1,516,479 1,443,076
Inventories:
Raw materials, supplies, prefabricated parts, work-in-process
and finished products....................................... 11,698,569 11,009,061
Prepaid expenses................................................ 58,709 123,485
----------- -----------
34,569,075 34,275,756
----------- -----------
Fixed Assets:
Financial fixed assets:
Investments in and loans to wholly owned subsidiaries........ 2,731,502 2,738,419
----------- -----------
Tangible fixed assets:
Land, buildings and machinery and equipment, at cost......... 23,994,260 24,093,714
Less: Accumulated depreciation............................... 15,564,227 15,810,805
----------- -----------
8,430,033 8,282,909
----------- -----------
11,161,535 11,021,328
----------- -----------
45,730,610 45,297,084
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Advances and overdrafts from banks.............................. 15,768,469 15,856,622
Accounts payable:
Suppliers.................................................... 4,230,669 2,897,206
Others....................................................... 2,194,251 1,834,055
Intercompany................................................. 1,022,680 1,011,085
Accrued charges................................................. 6,610,282 5,915,363
Deferred income................................................. 3,597,778 4,089,659
Other instrument provisions..................................... 1,435,910 1,305,558
General inventory provision..................................... 1,770,000 2,877,000
Customers' deposits............................................. 686,378 1,096,840
----------- -----------
37,316,417 36,883,388
----------- -----------
Stockholders' Equity:
Capital stock:
Authorized, issued and fully paid 4,000 bearer shares of SFr
1,000 each.................................................. 4,000,000 4,000,000
General reserve -- Legal........................................ 303,131 303,131
Unappropriated retained earnings per statement attached......... 4,111,062 4,110,565
----------- -----------
8,414,193 8,413,696
----------- -----------
45,730,610 45,297,084
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 73
A.R.L. APPLIED RESEARCH LABORATORIES S.A.
NOTES TO FINANCIAL STATEMENTS
1. NOTE DISCLOSURES REQUIRED BY THE LAW
<TABLE>
1.1 Contingent Liabilities
<CAPTION>
1995
SFr
----------
<S> <C>
Performance and export insurance guarantees and discounted bills......... 2,008,923
==========
</TABLE>
<TABLE>
1.2 Commitments
<CAPTION>
1995
SFr
----------
<S> <C>
Unprovided lease commitments............................................. 128,232
==========
</TABLE>
<TABLE>
1.3 Fire Insurance Values
<CAPTION>
1995
SFr
----------
<S> <C>
Insured value of tangible fixed assets................................... 44,321,806
==========
</TABLE>
<TABLE>
1.4 Liabilities to Pension Funds
<CAPTION>
1995
SFr
----------
<S> <C>
Current liabilities...................................................... 3,300
==========
</TABLE>
<TABLE>
1.5 Investments
<CAPTION>
COST IN
COMPANY COUNTRY % INTEREST SFr
- ------------ ------------- ---------- ----------
<S> <C> <C> <C>
ARL Austria Austria 100% 665,095
ARL RSA South Africa 100% 227,240
ARL Suede Sweden 100% 113,543
---------
1,005,878
=========
</TABLE>
1.6 Statement of Operations
<TABLE>
The statement of operations has been prepared using the operational format.
The costs of sales and expenditures include the following costs:
<CAPTION>
1995
SFr
----------
<S> <C>
Materials used........................................................... 28,681,000
Payroll costs............................................................ 19,618,202
Depreciation............................................................. 1,650,290
Gain on disposal of fixed assets......................................... (31,250)
</TABLE>
1.7 Interim Financial Statements
The financial statements as of March 31, 1996 and for the three-month
periods ended March 31, 1995 and March 31, 1996 are unaudited but, in the
opinion of management, reflect all adjustments of a normal, recurring nature
necessary for a fair presentation of results for these interim periods. The
results of operations for the three-month period ended March 31, 1996 are not
necessarily indicative of the results to be expected for the entire year.
F-29
<PAGE> 74
A.R.L. APPLIED RESEARCH LABORATORIES S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONCLUDED)
2. OTHER NOTE DISCLOSURES
2.1 Significant Accounting Policies
1) Trade receivables and intercompany current accounts are stated at face
value (less specific provisions for doubtful accounts).
2) Inventories are stated at the lower of cost or net realizable value. A
general inventory provision is carried under current liabilities as is
allowed by Swiss taxation law. This provision is not required for known
or expected losses.
3) Investments in and loans to wholly owned subsidiaries are stated at cost
less provisions for permanent impairment in value based on the basket
valuation method, which allows impairment to be measured on an aggregate
basis among wholly owned subsidiaries.
4) Tangible fixed assets are stated at cost less depreciation, which is
provided over the estimated useful lives of the assets using the
straight line method.
5) Full provision has been made for all taxes on income earned up to the
balance sheet date. For Swiss taxation purposes, accounting income is
considered to be taxable income. Deferred taxes do not arise as
reversing timing differences do not exist.
6) Income from the sale of instruments is recognized on date of shipment.
Revenues in respect of installation and after sales services such as
training, warranty and contracted maintenance is deferred and recognized
as income when the related costs are incurred. Additional noncontractual
repair and after sales services are provided for under other instrument
provisions, once these are known or expected to arise.
7) Transactions in foreign currencies are recorded in Swiss francs using
the rate of exchange applicable at the time of the transaction. Monetary
assets and liabilities in foreign currencies are converted into Swiss
francs using the year end rates of exchange. Net unrealized exchange
gains are deferred under current liabilities. Net unrealized losses and
realized exchange gains and losses are taken to income. No unrealized
exchange gains have been deferred in these financial statements.
F-30
<PAGE> 75
THERMO OPTEK CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 30, 1995
(UNAUDITED)
<TABLE>
On December 1, 1995, Thermo Instrument Systems Inc. ("Thermo Instrument")
acquired the assets of the analytical instruments division of Analytical
Technology, Inc. ("ATI"). On April 11, 1996, the Company acquired the Mattson
Instruments ("Mattson") and Unicam divisions of ATI from Thermo Instrument for
$36.6 million in cash. Because, as of December 30, 1995, the Company, Mattson
and Unicam were deemed for accounting purposes to be under control of their
common owner, Thermo Instrument, the Company's 1995 historical financial
information includes the results of operations of Mattson and Unicam from
December 1, 1995, the date these businesses were acquired by Thermo Instrument.
Because the Company had not disbursed the funds in connection with the
acquisitions of Mattson and Unicam as of December 30, 1995, the transfer of
these businesses has been reflected as a contribution of capital in excess of
par value as of December 1, 1995. The purchase price for Mattson and Unicam was
allocated as follows (in thousands):
<S> <C>
Current assets..................................................... $22,801
Property, plant and equipment...................................... 4,452
Other assets....................................................... 17
Cost in excess of net assets acquired.............................. 44,277
-------
Assets acquired............................................... 71,547
-------
Current liabilities (including $11,634 of accrued restructuring
expenses)........................................................ (29,348)
Other deferred items............................................... (1,299)
Capital lease obligations.......................................... (4,342)
-------
Liabilities assumed........................................... (34,989)
-------
Cash paid for purchase of Mattson and Unicam....................... $36,558
=======
</TABLE>
In March 1996, Thermo Instrument completed the acquisition of a substantial
portion of the businesses comprising the scientific instruments division of
Fisons plc ("Fisons"). The Company is discussing with Thermo Instrument the
terms pursuant to which the Company would acquire A.R.L. Applied Research
Laboratories S.A. ("ARL"), a Switzerland-based former subsidiary of Fisons. The
final terms of the acquisition of ARL by the Company have not yet been
determined; however, the Company believes that the purchase price for ARL will
range from $40 million to $50 million, including the assumption of approximately
$12 million of debt. Although the Company believes that it will acquire ARL, no
assurance can be given that such acquisition will be completed. In any event,
the timing and terms of the acquisition of ARL, including price, will be subject
to a final determination between the Company and Thermo Instrument. The Company
has begun development of a plan to restructure certain activities of ARL in the
event that the acquisition is completed. Management has begun identifying what
it believes would be an appropriate staffing level for ARL and additionally has
determined that an existing product line will be discontinued. The Company
expects to establish reserves to provide for these restructuring costs as part
of the cost of acquiring ARL, and has reflected the estimate of such costs in
the accompanying pro forma combined condensed financial statements.
F-31
<PAGE> 76
THERMO OPTEK CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME -- (CONTINUED)
YEAR ENDED DECEMBER 30, 1995
(UNAUDITED)
<TABLE>
The following unaudited pro forma combined condensed statement of income
sets forth the results of operations for the year ended December 30, 1995, as if
the issuance of the Company's 5% subordinated convertible debentures (the
"Debentures") in October 1995, the acquisitions of the Mattson and Unicam
divisions of ATI on December 1, 1995 and the proposed acquisition of ARL had
occurred at the beginning of 1995. The acquisitions are assumed to be financed
by the net proceeds from the issuance of the Debentures. The pro forma results
of operations are not necessarily indicative of future operations or the actual
results that would have occurred had the issuance of the Debentures, the
acquisitions of the Mattson and Unicam divisions of ATI and the proposed
acquisition of ARL occurred at the beginning of 1995. This statement should be
read in conjunction with the accompanying notes, the pro forma combined
condensed balance sheet, and the respective historical financial statements and
related notes of the Company, the Mattson and Unicam divisions of ATI and ARL
appearing elsewhere in this Prospectus.
<CAPTION>
HISTORICAL
-----------------------------------
MATTSON
AND UNICAM PRO FORMA
THERMO DIVISIONS -----------------------
OPTEK OF ATI ARL ADJUSTMENTS COMBINED
-------- ----------- -------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues.............................. $212,152 $57,802 $55,674 $ -- $325,628
-------- ------- ------- ------- --------
Costs and Operating Expenses:
Cost of revenues.................... 108,590 31,649 40,858 (916) 180,181
Selling, general and administrative
expenses......................... 62,109 22,613 9,720 3,090 97,532
Research and development expenses... 13,018 4,845 3,531 -- 21,394
-------- ------- ------- ------- ------
183,717 59,107 54,109 2,174 299,107
-------- ------- ------- ------- --------
Operating Income (Loss)............... 28,435 (1,305) 1,565 (2,174) 26,521
Interest Income....................... 1,514 50 23 369 1,956
Interest Expense...................... (2,450) (501) (606) (4,183) (7,740)
Other Expense, Net.................... -- -- (896) -- (896)
-------- ------- ------- ------- --------
Income (Loss) Before Income Tax
Provision (Benefit)................. 27,499 (1,756) 86 (5,988) 19,841
Income Tax Provision (Benefit)........ 11,490 (216) -- (1,489) 9,785
-------- ------- ------- ------- --------
Net Income (Loss)..................... $ 16,009 $(1,540) $ 86 $(4,499) $ 10,056
======== ======= ======= ======= ========
Earnings per Share.................... $ .35 $ .22
======== ========
Weighted Average Shares............... 45,109 45,109
======== ========
</TABLE>
F-32
<PAGE> 77
THERMO OPTEK CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME -- (CONTINUED)
THREE MONTHS ENDED MARCH 30, 1996
(UNAUDITED)
<TABLE>
The following unaudited pro forma combined condensed statement of income
sets forth the results of operations for the three months ended March 30, 1996,
as if the proposed acquisition of ARL had occurred at the beginning of 1995. The
pro forma results of operations are not necessarily indicative of future
operations or the actual results that would have occurred had the proposed
acquisition of ARL occurred at the beginning of 1995. This statement should be
read in conjunction with the accompanying notes, the pro forma combined
condensed balance sheet, and the respective historical financial statements and
related notes of the Company and ARL appearing elsewhere in this Prospectus.
<CAPTION>
HISTORICAL
------------------- PRO FORMA
THERMO ------------------------
OPTEK ARL ADJUSTMENTS COMBINED
------- ------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues......................................... $69,668 $13,477 $ -- $83,145
------- ------- ------- -------
Costs and Operating Expenses:
Cost of revenues............................... 35,760 10,137 (930) 44,967
Selling, general and administrative expenses... 21,326 2,272 319 23,917
Research and development expenses.............. 4,934 892 -- 5,826
------- ------- ------- -------
62,020 13,301 (611) 74,710
------- ------- ------- -------
Operating Income................................. 7,648 176 611 8,435
Interest Income.................................. 1,541 -- (1,016) 525
Interest Expense................................. (1,591) (112) -- (1,703)
Other Expense, Net............................... -- (64) -- (64)
------- ------- ------- -------
Income Before Provision for Income Taxes......... 7,598 -- (405) 7,193
Provision for Income Taxes....................... 3,302 -- (88) 3,214
------- ------- ------- -------
Net Income....................................... $ 4,296 $ -- $ (317) $ 3,979
======= ======= ======= =======
Earnings per Share............................... $ .10 $ .09
======= =======
Weighted Average Shares.......................... 45,109 45,109
======= =======
</TABLE>
F-33
<PAGE> 78
THERMO OPTEK CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 30, 1996
(UNAUDITED)
<TABLE>
The following unaudited pro forma combined condensed balance sheet sets
forth the financial position as of March 30, 1996, as if the payment of $36.6
million by the Company to Thermo Instrument in April 1996, made in consideration
for the transfer of the Mattson and Unicam divisions of ATI, had occurred on
December 1, 1995 and the proposed acquisition of ARL had occurred on March 30,
1996. This statement should be read in conjunction with the accompanying notes,
the pro forma combined condensed statements of income and the respective
historical financial statements and related notes of the Company and ARL
appearing elsewhere in this Prospectus.
<CAPTION>
HISTORICAL PRO FORMA
----------------------- ----------------------
THERMO OPTEK ARL ADJUSTMENTS COMBINED
------------ -------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................. $109,789 $ 1,130 $(69,364) $ 41,555
Accounts receivable, net.................. 62,638 18,317 -- 80,955
Inventories............................... 51,117 9,251 (1,170) 59,198
Other current assets...................... 17,429 104 -- 17,533
-------- -------- -------- --------
240,973 28,802 (70,534) 199,241
-------- -------- -------- --------
Property, Plant and Equipment, at Cost,
Net....................................... 43,949 6,960 -- 50,909
-------- -------- -------- --------
Patents and Other Assets.................... 11,719 2,301 (2,301) 11,719
-------- -------- -------- --------
Cost in Excess of Net Assets of Acquired
Companies................................. 145,146 -- 29,489 174,635
-------- -------- -------- --------
$441,787 $ 38,063 $(43,346) $436,504
======== ======== ======== ========
LIABILITIES AND SHAREHOLDER'S
INVESTMENT
Current Liabilities:
Notes payable and current maturities of
long-term obligations.................. $ 17,706 $ 13,324 $ -- $ 31,030
Accounts payable.......................... 18,085 4,825 -- 22,910
Accrued payroll and employee benefits..... 7,983 -- -- 7,983
Deferred revenue.......................... 9,372 3,437 -- 12,809
Other current liabilities................. 47,434 9,407 282 57,123
-------- -------- -------- --------
100,580 30,993 282 131,855
-------- -------- -------- --------
Deferred Income Taxes....................... 12,271 -- -- 12,271
-------- -------- -------- --------
Other Deferred Items........................ 3,487 -- -- 3,487
-------- -------- -------- --------
Long-term Obligations....................... 100,969 -- -- 100,969
-------- -------- -------- --------
Shareholder's Investment:
Common stock.............................. 450 3,361 (3,361) 450
Capital in excess of par value............ 215,342 -- (36,558) 178,784
Retained earnings......................... 9,558 3,709 (3,709) 9,558
Cumulative translation adjustment......... (870) -- -- (870)
-------- -------- -------- --------
224,480 7,070 (43,628) 187,922
-------- -------- -------- --------
$441,787 $ 38,063 $(43,346) $436,504
======== ======== ======== ========
</TABLE>
F-34
<PAGE> 79
THERMO OPTEK CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The historical financial statements of ARL, which are denominated in Swiss
francs, have been translated into U.S. dollars for the pro forma combined
condensed financial statements. The statements of operations have been
translated at the average exchange rate of .848 and .840 Swiss franc per U.S.
dollar for the year ended December 30, 1995 and for the three months ended March
30, 1996, respectively. The balance sheet has been translated at the exchange
rate of .840 Swiss franc per U.S. dollar, which was the rate in effect at the
end of the period shown.
<TABLE>
NOTE 2 -- PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
INCOME FOR THE YEAR ENDED DECEMBER 30, 1995 (IN THOUSANDS, EXCEPT IN
TEXT)
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
COST OF REVENUES
Elimination of general inventory provision allowed for under Swiss taxation law
and included in ARL's historical statement of operations for the year ended
December 31, 1995............................................................ $(1,246)
Increase in the finished goods inventory of ARL to the estimated selling price,
less the sum of the costs of disposal and a reasonable profit allowance for
the Company's selling efforts................................................ 330
-------
(916)
-------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Service fee of 1.20% of the revenues of Mattson, Unicam and ARL for services
provided under a services agreement between the Company and Thermo
Electron..................................................................... 1,362
Amortization over 40 years of $44,018,000 and $29,489,000 of cost in excess of
net assets of acquired companies created by the acquisitions of Mattson and
Unicam and ARL, respectively................................................. 1,728
-------
3,090
-------
INTEREST INCOME
Increase in interest income earned on the investment of the net proceeds from
the assumed issuance at the beginning of 1995 of $96,250,000 principal amount
of 5% subordinated convertible debentures, offset in part by the purchase of
Mattson, Unicam and ARL, calculated using an average interest rate of
6.37%........................................................................ (369)
-------
INTEREST EXPENSE
Record interest expense and amortization of deferred debt expense on the
Company's 5% subordinated convertible debentures for the period from January
1, 1995 through October 12, 1995, the date on which these debentures were
issued....................................................................... 4,183
-------
INCOME TAX PROVISION (BENEFIT)
Income tax benefit associated with the adjustments above (excluding service fee
attributable to Unicam due to existence of net operating loss carryforwards
and amortization of cost in excess of net assets of acquired companies),
calculated at the Company's statutory income tax rate of 40%................. (1,489)
-------
</TABLE>
F-35
<PAGE> 80
THERMO OPTEK CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
<TABLE>
NOTE 3 -- PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
INCOME FOR THE THREE MONTHS ENDED MARCH 30, 1996 (IN THOUSANDS, EXCEPT
IN TEXT)
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
COST OF REVENUES
Elimination of general inventory provision allowed for under Swiss taxation law
and included in ARL's historical statement of operations for the three months
ended March 31, 1996......................................................... $ (930)
------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Service fee of 1.0% of the revenues of ARL for services provided under a
services agreement between the Company and Thermo Electron................... 135
Amortization over 40 years of $29,489,000 of cost in excess of net assets of
acquired companies created by the acquisition of ARL......................... 184
------
319
------
INTEREST INCOME
Decrease in interest income earned on the investment of the net proceeds from
the issuance of the Company's 5% subordinated convertible debentures as a
result of the purchase of Mattson, Unicam and ARL, calculated using an
average interest rate of 5.86%............................................... 1,016
------
PROVISION FOR INCOME TAXES
Income tax benefit associated with the adjustments above (excluding
amortization of cost in excess of net assets of acquired companies),
calculated at the Company's statutory income tax rate of 40%................. (88)
------
</TABLE>
F-36
<PAGE> 81
THERMO OPTEK CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS -- (CONCLUDED)
(UNAUDITED)
<TABLE>
NOTE 4 -- PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
CASH AND CASH EQUIVALENTS
Cash payment to acquire Mattson and Unicam..................................... $(36,558)
Estimated cash payment to acquire ARL, using the mid-point of the purchase
price range net of debt assumed and including cash acquired.................. (32,806)
--------
(69,364)
--------
INVENTORIES
Increase in the finished goods inventory of ARL to the estimated selling price,
less the sum of the costs of disposal and a reasonable profit allowance for
the Company's selling efforts................................................ 330
Reserve for product line of ARL to be discontinued............................. (1,500)
--------
(1,170)
--------
PATENTS AND OTHER ASSETS
Eliminate assets not acquired as part of the acquisition of ARL................ (2,301)
--------
COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES
Excess of cost over the fair value of the net assets acquired of ARL........... 29,489
--------
OTHER CURRENT LIABILITIES
Elimination of general inventory provision allowed for under Swiss taxation law
and included in ARL's historical balance sheet as of March 31, 1996.......... 2,418
Estimated severance, relocation and other accrued acquisition expenses......... (2,700)
--------
(282)
--------
SHAREHOLDER'S INVESTMENT
Record cash payment to Thermo Instrument for the purchase of Mattson and
Unicam....................................................................... 36,558
Elimination of ARL's equity accounts........................................... 7,070
--------
43,628
--------
</TABLE>
F-37
<PAGE> 82
The Company's IRIS[Trademark] ICP
spectrometer incorporates
the Company's charge injection
device (CID) solid state detector.
The Company believes that the IRIS
is among the most versatile,
highest performance atomic emission [PHOTOGRAPH OF IRIS ICP
instruments available today, SPECTROMETER APPEARS HERE]
allowing customers to perform
with one instrument analyses that
would previously have required
multiple AA and ICP instruments.
In addition, the IRIS incorporates
Windows[Trademark]-based software
that facilitates use of the
instrument by technicians with
relatively minimal training.
The Company's recently
introduced POEMS[Registered
Trademark] II (Plasma Optical
Emission Mass Spectrometer)
combines a highly sensitive
mass spectrometer
detector with a
powerful optical emission
detector to form a complete
[PHOTOGRAPH OF POEMS II elemental analysis
SPECTROMETER APPEARS HERE] instrument. POEMS II
incorporates several
significant technological
advances in both the optical
emission and mass
spectrometer portions of
the instrument and features
automated sample preparation,
and Windows[Trademark]-based
software.
<PAGE> 83
-------------------------------------------------------
-------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary..................... 3
Risk Factors........................... 6
The Company............................ 10
Use of Proceeds........................ 10
Dividend Policy........................ 10
Capitalization......................... 11
Dilution............................... 12
Selected Financial Information......... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 14
Business............................... 18
Relationship with Thermo Electron and
Thermo Instrument.................... 27
Management............................. 30
Security Ownership of Certain
Beneficial Owners and Management..... 36
Description of Capital Stock........... 38
Shares Eligible for Future Sale........ 38
Underwriting........................... 40
Legal Opinions......................... 41
Experts................................ 41
Additional Information................. 41
Reports to Security Holders............ 42
Index to Financial Statements.......... F-1
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
3,000,000 SHARES
[LOGO]
COMMON STOCK
------------------------
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS
CAZENOVE & CO.
FAHNESTOCK & CO. INC.
PROSPECTUS
, 1996
-------------------------------------------------------
-------------------------------------------------------
<PAGE> 84
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
The expenses incurred by the Company in connection with the issuance and
distribution of the securities being registered are as follows. All amounts are
estimated except the Securities and Exchange Commission registration fee, NASD
filing fee and American Stock Exchange listing fee.
<CAPTION>
AMOUNT
--------
<S> <C>
Securities and Exchange Commission registration fee....................... $ 19,986
NASD filing fee........................................................... 6,296
American Stock Exchange listing fee....................................... 50,000
Legal fees and expenses................................................... 20,000
Accounting fees and expenses.............................................. 321,000
Blue Sky fees and expenses (including legal fees)......................... 10,000
Printing and engraving expenses........................................... 120,000
Transfer agent and subscription agent fees................................ 5,000
Miscellaneous............................................................. 58,718
--------
Total........................................................... $611,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and the Company's Certificate of
Incorporation and By-Laws limit the monetary liability of directors to the
Company and to its stockholders and provide for indemnification of the Company's
officers and directors for liabilities and expenses that they may incur in such
capacities. In general, officers and directors are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be in, or not
opposed to, the best interests of the Company, and with respect to any criminal
action or proceeding, actions that the indemnitee had no reasonable cause to
believe were unlawful. The Company also has indemnification agreements with its
directors and officers that provide for the maximum indemnification allowed by
law. Reference is made to the Company's Certificate of Incorporation, By-Laws
and form of Indemnification Agreement for Officers and Directors incorporated by
reference as Exhibits 3.1, 3.2 and 10.9 hereto, respectively.
Thermo Electron Corporation has an insurance policy which insures the
directors and officers of Thermo Electron and its subsidiaries, including the
Company, against certain liabilities which might be incurred in connection with
the performance of their duties.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In December 1995, the businesses of a wholly owned subsidiary of Thermo
Instrument were contributed to the Company in exchange for 44,998,500 shares of
Common Stock; in August 1995, the Company issued 1,500 shares of Common Stock to
such subsidiary for $.01 per share at the time of the incorporation of the
Company. Exemption from registration for these transactions is claimed under
Section 4(2) of the Securities Act.
In October 1995, the Company issued $96,250,000 principal amount of 5%
Convertible Subordinated Debentures due 2000 (the "Debentures") at par pursuant
to a subscription agreement with Lehman Brothers International (Europe), NatWest
Securities Limited and Raymond James & Associates Inc. $57,300,000 principal
amount of Debentures was sold to non-U.S. persons in reliance upon Regulation S
under the Securities Act and $38,950,000 principal amount of Debentures was sold
pursuant to Regulation D under the Securities Act.
II-1
<PAGE> 85
ITEM 16. EXHIBITS.
(a) See the Exhibit Index included immediately preceding the exhibits to
this Registration Statement.
(b) Financial Statement Schedule and the Report of Independent Public
Accountants on such Schedule are included in this Registration Statement as of
December 30, 1995. All other schedules are omitted as not applicable or not
required under Regulation S-X.
ITEM 17. UNDERTAKINGS.
(a) The Registrant hereby undertakes to provide the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4), or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 86
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Waltham, Commonwealth of Massachusetts, on this 3rd day of June, 1996.
THERMO OPTEK CORPORATION
By: /s/ PAUL F. KELLEHER
------------------------------------
PAUL F. KELLEHER
CHIEF ACCOUNTING OFFICER
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------- --------------
<C> <S> <C>
EARL R. LEWIS* President, Chief Executive June 3, 1996
- ------------------------------------------ Officer and Director
Earl R. Lewis (Principal Executive Officer)
JOHN N. HATSOPOULOS* Vice President, Chief Financial June 3, 1996
- ------------------------------------------ Officer and Director
John N. Hatsopoulos (Principal Financial Officer)
/s/ PAUL F. KELLEHER Chief Accounting Officer June 3, 1996
- ------------------------------------------ (Principal Accounting
Paul F. Kelleher Officer)
ARVIN H. SMITH* Chairman of the Board and June 3, 1996
- ------------------------------------------ Director
Arvin H. Smith
DR. GEORGE N. HATSOPOULOS* Director June 3, 1996
- ------------------------------------------
Dr. George N. Hatsopoulos
STEPHEN R. LEVY* Director June 3, 1996
- ------------------------------------------
Stephen R. Levy
ROBERT A. MCCABE* Director June 3, 1996
- ------------------------------------------
Robert A. McCabe
<FN>
* The undersigned, Paul F. Kelleher, by signing his name hereto, does hereby
execute this Amendment No. 2 to Registration Statement on behalf of each of
the above-named persons pursuant to powers of attorney executed by such
persons and filed with the Securities and Exchange Commission.
</TABLE>
/s/ PAUL F. KELLEHER
-----------------------------------
PAUL F. KELLEHER
ATTORNEY-IN-FACT
II-3
<PAGE> 87
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Optek Corporation:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Thermo Optek Corporation included in
Thermo Optek Corporation's Form S-1 and have issued our report thereon dated
April 12, 1996. Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. Thermo Optek
Corporation's schedule of Valuation and Qualifying Accounts, included in
Schedule II on page S-2, is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic consolidated financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 12, 1996
S-1
<PAGE> 88
SCHEDULE II
THERMO OPTEK CORPORATION
<TABLE>
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND ACCOUNTS ACCOUNTS BALANCE AT
OF YEAR EXPENSES RECOVERED WRITTEN OFF OTHER(A) END OF YEAR
----------- ---------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 1, 1994
Allowance for Doubtful
Accounts...................... $3,305 $833 $ 8 $(801) $ (696) $2,649
YEAR ENDED DECEMBER 31, 1994
Allowance for Doubtful
Accounts...................... $2,649 $521 $69 $(373) $ (83) $2,783
YEAR ENDED DECEMBER 30, 1995
Allowance for Doubtful
Accounts...................... $2,783 $378 $32 $(788) $3,264 $5,669
<FN>
- ---------------
(a) Includes allowance of business acquired during the year as described in Note
2 to Consolidated Financial Statements of the Company and the effect of
foreign currency translation.
</TABLE>
S-2
<PAGE> 89
<TABLE>
EXHIBIT INDEX
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ----------- ---------------------------------------------------------------------- ----------
<S> <C> <C>
1 Form of Underwriting Agreement........................................
3.1# Certificate of Incorporation, as amended, of the Company..............
3.2# By-laws of the Company................................................
4 Specimen Common Stock Certificate.....................................
5 Opinion of Seth H. Hoogasian, Esq.....................................
10.1# Corporate Services Agreement dated as of August 18, 1995 between
Thermo Electron and the Company.......................................
10.2 Thermo Electron Corporate Charter, as amended and restated effective
January 3, 1993 (incorporated by reference herein from Exhibit 10.1 to
Thermo Electron's Annual Report on Form 10-K for the fiscal year ended
January 2, 1993 (File No. 1-8002))....................................
10.3# Tax Allocation Agreement dated as of August 18, 1995 between Thermo
Electron and the Company..............................................
10.4# Master Repurchase Agreement dated as of August 18, 1995 between Thermo
Electron and the Company..............................................
10.5# Master Guarantee Reimbursement Agreement dated as of August 18, 1995
among Thermo Electron, Thermo Instrument and the Company..............
10.5A# Master Guarantee Reimbursement Agreement dated as of August 18, 1995
between the Company and Thermo Instrument.............................
10.6# Equity Incentive Plan of the Company..................................
10.7# Deferred Compensation Plan for Directors of the Company...............
10.8# Directors Stock Option Plan of the Company............................
10.9# Form of Indemnification Agreement for Officers and Directors..........
10.10# Fiscal Agency Agreement dated as of October 12, 1995 between the
Company and Chemical Bank.............................................
10.11# Stock Purchase Agreement dated as of April 11, 1996 between the
Company and Thermo Instrument.........................................
10.12 Asset Transfer Agreement dated as of December 31, 1995 by and among
the Company, Nicolet Instrument Corporation and Thermo Instrument.....
In addition to the stock-based compensation plans of the Registrant,
the executive officers of the Registrant may be granted awards under
stock-based compensation plans of the Registrant's parent, Thermo
Electron Corporation, and its subsidiaries, for services rendered to
the Registrant or to such affiliated corporations. Such plans were
filed as Exhibits 10.15 through 10.17 and 10.19 through 10.74 to the
Registration Statement on Form S-1 (Registration No. 333-2924) of Trex
Medical Corporation filed March 29, 1996 and are incorporated herein
by reference.
11# Computation of Earnings per Share.....................................
21# Subsidiaries of the Company...........................................
23.1 Consent of Arthur Andersen LLP........................................
23.2 Consent of Arthur Andersen LLP........................................
23.3 Consent of Price Waterhouse S.A.......................................
23.4 Consent of Seth H. Hoogasian, Esq. (contained in Exhibit 5)...........
24# Power of Attorney (See Signature Page of this Registration
Statement)............................................................
<FN>
- ---------------
# Previously filed.
</TABLE>
<PAGE> 1
3,000,000 Shares
THERMO OPTEK CORPORATION
Common Stock
($.01 par value)
UNDERWRITING AGREEMENT
____________,1996
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS INC.
CAZENOVE & CO.
FAHNESTOCK & CO. INC.
As Representatives of the several
Underwriters named in Schedule I hereto
c/o NatWest Securities Limited
135 Bishopsgate
London EC2M3UR
England
Dear Sirs:
Thermo Optek Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to the several underwriters named in Schedule I
hereto (the "Underwriters") 3,000,000 shares (the "Firm Shares") of Common
Stock, $.01 par value (such class of stock being herein called the "Common
Stock"), of the Company. In addition, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, the Company
proposes to grant to the Underwriters an option to purchase up to an additional
450,000 shares (the "Option Shares") of Common Stock. The Firm Shares and any
Option Shares purchased pursuant to this Agreement are referred to herein as the
"Shares."
This is to confirm the agreement concerning the purchase of the Shares
from the Company by the Underwriters. You represent and warrant that you are
acting as the
<PAGE> 2
- 2 -
representatives (the "Representatives") of the Underwriters and that you have
been authorized by each of the other Underwriters to enter into this
Underwriting Agreement on its behalf and to act for it in the manner herein
provided.
The Company currently is a wholly-owned subsidiary of Thermo Instrument
Systems Inc., a Delaware corporation ("Thermo Instrument"), which is, in turn, a
majority-owned subsidiary of Thermo Electron Corporation, a Delaware corporation
("Thermo Electron"). To the extent provided herein and for good and valuable
consideration, each of Thermo Instrument and Thermo Electron has become a party
to this Underwriting Agreement.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THERMO INSTRUMENT AND
THERMO ELECTRON. The Company, Thermo Instrument and Thermo Electron jointly and
severally represent and warrant to, and agree with, each Underwriter as follows.
The following representations, warranties and agreements shall be deemed to
apply to each Subsidiary (as defined in Section 13) of the Company, unless the
context does not permit:
(a) A registration statement on Form S-1 (File No. 333- ) with respect
to the Shares (i) has been prepared by the Company in material conformity
with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, (ii) has been filed with the Commission under the Securities
Act and (iii) has become effective under the Securities Act. If any
post-effective amendment to such registration statement has been filed
with the Commission prior to the execution and delivery of this Agreement,
the most recent such amendment has been declared effective by the
Commission. Copies of such registration statement as amended to date have
been delivered by the Company to the Representatives and, to the extent
applicable, were identical to the electronically transmitted copies
thereof filed with the Commission pursuant to the Commission's Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR"), except to the
extent permitted by Regulation S-T.. For purposes of this Agreement,
"Effective Time" means the date and the time as of which such registration
statement, or the most recent post-effective amendment thereto, if any,
was declared effective by the Commission; "Effective Date" means the date
of the Effective Time; "Preliminary Prospectus" means each prospectus
included in such registration statement, or amendments thereof, before it
became effective under the Securities Act and any prospectus filed with
the Commission by the Company pursuant to Rule 424(a) of the Rules and
Regulations; "Registration Statement" means such registration statement,
as amended at the Effective Time, including all information deemed to be a
part thereof as of the Effective Time pursuant to paragraph (b) of Rule
430A of the Rules and Regulations together with any registration statement
filed by the Company pursuant to Rule 462(b) of the Rules and Regulations;
and "Prospectus" means (i) the form of prospectus relating to the Shares,
as first filed pursuant to paragraph (1) or (4) of Rule 424(b) of the
Rules and Regulations or (ii) the term sheet or abbreviated term sheet
described in Rule 434(b) of the Rules and Regulations, as first filed
pursuant to paragraph (7) of Rule 424(b) of the Rules and Regulations
together with the last preliminary prospectus included in the Registration
Statement filed prior to the Effective Time or filed pursuant to Rule
424(a) of the Rules and
<PAGE> 3
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Regulations that is delivered by the Company to the Underwriters for
delivery to purchasers of the Shares. The Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus or
the Prospectus. For purposes of this Agreement, all references to the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement to any of the foregoing, shall be deemed to
include the respective copies thereof filed with the Commission pursuant
to EDGAR.
(b) The Registration Statement contains, and any post-effective
amendment to the Registration Statement filed with the Commission after
the Effective Time, the Prospectus and the Prospectus as amended or
supplemented will contain, all statements which are required by the
Securities Act and the Rules and Regulations; at the time of filing
thereof, any Preliminary Prospectus did not, and on the Effective Date,
the Registration Statement did not, and any post-effective amendment to
the Registration Statement filed with the Commission after the Effective
Time, the Prospectus and the Prospectus as amended or supplemented will
not, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided that the Company, Thermo
Instrument and Thermo Electron make no representation or warranty as to
information contained in or omitted from the Registration Statement, the
Preliminary Prospectus or the Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by you, or
by any Underwriter through you, specifically for inclusion therein. There
is no contract or document required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement which is not described or filed as required.
(c) The accounting firm whose report appears in the Prospectus are
independent certified public accountants as required by the Securities Act
and the Rules and Regulations. The financial statements and schedules
(including the related notes) included in the Registration Statement, any
Preliminary Prospectus or the Prospectus present fairly, in all material
respects, the financial condition, results of operations and cash flows of
the entities purported to be shown thereby at the dates and for the
periods indicated and have been prepared in accordance with generally
accepted accounting principles.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus, and is
duly qualified to do business and is in good standing in each jurisdiction
in which the character of the business conducted by it or the location of
the properties owned or leased by it makes such qualification necessary
except where the failure to so qualify or be in good standing would not
have a material adverse effect on the Company and its Subsidiaries taken
as a whole; and, except as described in the Prospectus, the Company holds
all material licenses, certificates and permits from governmental
authorities necessary for the conduct of its business as described in the
Prospectus.
(e) All of the outstanding shares of Common Stock have been, and the
Shares, upon issuance and delivery and payment therefor in the manner
herein described, will be, duly
<PAGE> 4
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authorized, validly issued, fully paid and nonassessable. Other than as
described in the Prospectus, there are no preemptive rights or other
rights to subscribe for or to purchase, or any restriction upon the voting
or transfer of, any shares of Common Stock pursuant to the Company's
corporate charter, by-laws or other governing documents or any agreement
or other instrument to which the Company is a party or by which it may be
bound. Neither the filing of the Registration Statement nor the offering
or sale of the Shares as contemplated by this Agreement gives rise to any
rights, other than those which have been waived or satisfied and other
than as described in the Prospectus, for or relating to the registration
of any shares of Common Stock or other securities of the Company. The
capitalization of the Company as of __________ is as set forth in the
Prospectus and the Common Stock conforms to the description thereof
contained in the Prospectus. All of the outstanding shares of capital
stock of each Subsidiary (as defined in Section 13) of the Company have
been duly authorized and validly issued, are fully paid and nonassessable
and are owned directly or indirectly by the Company, free and clear of any
claim, lien, encumbrance, security interest, restriction upon voting or
transfer or any other claim of any third party.
(f) Except as described in or contemplated by the Registration
Statement and the Prospectus, there has not been any material adverse
change in, or any adverse development which materially affects, the
condition (financial or other), results of operations, business or
prospects of the Company and its Subsidiaries on a consolidated basis from
the date as of which information is given in the Prospectus.
(g) The Company is not, and would not be with the giving of notice or
lapse of time or both, in violation of or in default under, nor will the
execution or delivery hereof or consummation of the transactions
contemplated hereby result in a violation of, or constitute a default
under, the corporate charter, by-laws or other governing documents of the
Company, or any material agreement, indenture or other instrument to which
the Company is a party or by which it is bound, or to which any of its
properties is subject, nor will the performance by the Company of its
obligations hereunder violate any existing law, rule, administrative
regulation or decree of any court or any governmental agency or body
having jurisdiction over the Company or any of its properties, or result
in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of the Company, which would be material to the
Company and its Subsidiaries taken as a whole. Except for permits and
similar authorizations required under the Securities Act and the
securities or "Blue Sky" laws of certain jurisdictions and for such
permits and authorizations as have been obtained, no consent, approval,
authorization or order of any U.S. court, governmental agency or body or
any financial institution is required in connection with the consummation
by the Company of the transactions contemplated by this Agreement.
(h) This Agreement has been duly authorized, executed and delivered
by the Company.
(i) The Company owns, or has valid rights to use, all items of real and
personal property which are material to the business of the Company and
its Subsidiaries taken as a whole, free and clear of all liens,
encumbrances and claims which may materially interfere
<PAGE> 5
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with the business, properties, financial condition or results of
operations of the Company on a consolidated basis.
(j) Except as described in the Prospectus, there is no litigation or
governmental proceeding to which the Company or Thermo Instrument or
Thermo Electron is a party or to which any property of the Company is
subject or which is pending or, to the knowledge of the Company, Thermo
Instrument or Thermo Electron, contemplated against the Company or Thermo
Instrument that is required to be disclosed in the Prospectus and that is
not so disclosed.
(k) The Company is not in violation of any law, ordinance, governmental
rule or regulation or court decree to which it is subject, which violation
could have a material adverse effect on the condition (financial or
other), results of operations, business or prospects of the Company and
its Subsidiaries on a consolidated basis.
(l) The Company owns or possesses adequate licenses or other rights to
use all intellectual property rights, including patents and trademarks,
necessary to conduct its business as described or referred to in the
Prospectus, except where such failure, singularly or in the aggregate
would not have a material adverse effect on the Company and its
Subsidiaries on a consolidated basis, and, except as disclosed in the
Prospectus, neither Thermo Electron, Thermo Instrument nor the Company has
received any notice of infringement of or conflict with (or knows of any
such infringement of or conflict with) rights or claims of others with
respect to any patents, trademarks, service marks, trade names, copyrights
or know-how, that if the subject of an unfavorable decision, ruling or
finding, would result in a material adverse effect upon the Company and
its Subsidiaries on a consolidated basis, and, except as disclosed in the
Prospectus, all products or processes referred to in the Prospectus and
relating to the business of the Company now conducted by it do not
infringe upon or conflict with any right or patent, or with any discovery,
invention, product or process which is the subject of any patent
application known to the Company or Thermo Electron, in a manner which
would materially and adversely affect the Company and its Subsidiaries on
a consolidated basis.
(m) Each of the Corporate Services Agreement between the Company and
Thermo Electron (the "Services Agreement"), and the other agreements
between the Company and Thermo Instrument or Thermo Electron pursuant to
which the Company was initially organized and capitalized (collectively,
the "Organization Agreements"), and the Tax Allocation Agreement between
Thermo Electron and the Company (all of the foregoing agreements being
referred to herein as the "Inter-corporate Agreements") has been duly and
validly authorized, executed and delivered by the Company and is the valid
and binding agreement of the Company enforceable in accordance with its
terms, except as provided by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally and subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) (collectively, "applicable
bankruptcy laws"). The execution, delivery and performance of the
Inter-corporate Agreements by the Company, the consummation of the
transactions therein contemplated and compliance with
<PAGE> 6
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the terms thereof do not and will not result in a violation of, or
constitute a default under, the corporate charter, by-laws or other
governing documents of the Company, or any agreement, indenture or other
instrument to which the Company is a party or by which it is bound, or to
which any of its properties is subject, and do not and will not violate
any existing law, rule, administrative regulation or decree of any court
or any governmental agency or body having jurisdiction over the Company or
any of its properties, or result in the creation or imposition of any
lien, charge, claim or encumbrance upon any property or asset of the
Company, which would be material to the Company and its Subsidiaries taken
as a whole. No consent, approval, authorization or order of any court,
governmental agency or body or financial institution is required in
connection with the consummation of the transactions contemplated by such
Inter-corporate Agreements.
(n) Neither the Company nor Thermo Electron nor Thermo Instrument or
any other Subsidiary of Thermo Electron has taken and none of such
companies shall take, directly or indirectly, any action designed to cause
or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of
the shares of Common Stock to facilitate the sale or resale of the Shares.
(o) The Shares have been approved for listing on the American Stock
Exchange, subject only to official notice of issuance.
1A. REPRESENTATIONS AND WARRANTIES OF THERMO INSTRUMENT AND THERMO
ELECTRON. Thermo Instrument and Thermo Electron each represent and warrant to,
and agree with, each Underwriter that:
(a) Each of Thermo Instrument and Thermo Electron has been duly
organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, with full power and
authority (corporate and other) to own or lease its properties and conduct
its business, and is duly qualified to do business and is in good standing
in each jurisdiction in which the character of the business conducted by
it or the location of the properties owned or leased by it makes such
qualification necessary, except where the failure to so qualify or be in
good standing would not have a material adverse effect on Thermo Electron
and its Subsidiaries taken as a whole.
(b) There has not been any material adverse change in, or any adverse
development which materially affects, the condition (financial or other),
results of operations, business or prospects of Thermo Electron and its
Subsidiaries taken as a whole, from the date as of which information is
given in the most recent quarterly or annual report filed by Thermo
Electron pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except any as may have been disclosed to the public.
(c) Except as described in their filings with the Commission under the
Exchange Act, neither Thermo Instrument nor Thermo Electron is, nor with
the giving of notice or lapse of time or both would be, in violation of or
in default under, nor will the execution or delivery hereof or
consummation of the transactions contemplated hereby result in a violation
of, or
<PAGE> 7
- 7 -
constitute a default under, the corporate charter, by-laws or other governing
documents of Thermo Instrument or Thermo Electron, or any material agreement,
indenture or other instrument to which Thermo Instrument or Thermo Electron is a
party or by which any of them is bound, or to which any of their properties is
subject, nor will the performance by Thermo Instrument or Thermo Electron of its
obligations hereunder violate any existing law, rule, administrative regulation
or decree of any court or any governmental agency or body having jurisdiction
over Thermo Instrument or Thermo Electron or any of their respective properties,
or result in the creation or imposition of any lien, charge, claim or
encumbrance upon any property or asset of Thermo Instrument or Thermo Electron,
which would be material to Thermo Electron and its Subsidiaries taken as a
whole. Except for permits and similar authorizations required under the
Securities Act and the securities or "Blue Sky" laws of certain jurisdictions
and for such permits and authorizations as have been obtained, no consent,
approval, authorization or order of any court, governmental agency or body or
financial institution is required in connection with the consummation by Thermo
Instrument and Thermo Electron of the transactions contemplated by this
Agreement.
(d) This Agreement has been duly authorized, executed and delivered by
Thermo Instrument and Thermo Electron.
(e) Thermo Instrument owns, and will own as of each Closing Date (as
defined below), of record and beneficially, the number of shares of Common
Stock of the Company set forth in the Prospectus, free and clear of any
liens, encumbrances, claims or restrictions, except that certain of such
shares are reserved for issuance pursuant to stock option and other
benefit plans under which options to purchase Common Stock of the Company
owned by Thermo Instrument are granted to certain employees, directors or
consultants of Thermo Electron and its Subsidiaries.
(f) The most recent Annual Report on Form 10-K of Thermo Instrument and
of Thermo Electron and any subsequent reports filed pursuant to the
Exchange Act complied as of the date thereof in all material respects with
the Exchange Act and the rules and regulations thereunder.
(g) The transfer by Thermo Instrument to the Company of certain stock
and/or assets, as described in the Prospectus and in the Organization
Agreements, has been completed by all required corporate and other action.
Each of the Inter-corporate Agreements to which Thermo Instrument is a
party has been duly and validly authorized, executed and delivered by
Thermo Instrument and is the valid and binding agreement of Thermo
Instrument enforceable in accordance with its terms, except as provided by
applicable bankruptcy laws. The execution, delivery and performance of
each of the Inter-corporate Agreements to which Thermo Instrument is a
party by Thermo Instrument, the consummation of the transactions therein
contemplated and compliance with the terms thereof do not and will not
result in a violation of, or constitute a default under, the corporate
charter, by-laws or other governing documents of Thermo Instrument, or any
agreement, indenture or other instrument to which Thermo Instrument is a
party or by which it is bound, or to which any
<PAGE> 8
- 8 -
of its properties is subject, and do not and will not violate any existing law,
rule, administrative regulation or decree of any court or any governmental
agency or body having jurisdiction over Thermo Instrument or any of its
properties, or result in the creation or imposition of any lien, charge, claim
or encumbrance upon any property or asset of Thermo Instrument, which would be
material to Thermo Instrument. No consent, approval, authorization or order of
any court, governmental agency or body or financial institution is required in
connection with the consummation by Thermo Instrument of the transactions
contemplated by the Inter-corporate Agreements to which Thermo Instrument is a
party, except such as have been obtained.
(h) The Services Agreement has been duly and validly authorized,
executed and delivered by Thermo Electron and is the valid and binding
agreement of Thermo Electron, enforceable in accordance with its terms.
1B. REPRESENTATIONS AND WARRANTIES OF NATWEST SECURITIES LIMITED.
NatWest Securities Limited represents and agrees that (i) it has not offered or
sold and will not offer or sell any Shares to persons in the United Kingdom
prior to admission of the Shares to listing in accordance with Part IV of the
Financial Services Act 1986 (the "Act") except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purpose of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 or the Act, (ii) it has complied and will
comply with all applicable provisions of the Act with respect to anything done
by it in relation to the Shares in, from or otherwise involving the United
Kingdom and (iii) it has only issued or passed on, and will only issue or pass
on, in the United Kingdom any document received by it in connection with the
issue of the Shares, other than any document which consists of or any part of
listing particulars, supplementary listing particulars or any other document
required or permitted to be published by listing rules under Part IV of the Act,
to a person who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom the document may otherwise lawfully be issued or passed on.
2. PURCHASE OF THE SHARES BY THE UNDERWRITERS. (a) Subject to the terms
and conditions and upon the basis of the representations and warranties herein
set forth, the Company agrees to issue and sell to the Underwriters the Firm
Shares and each of the Underwriters agrees, severally and not jointly, to
purchase at a price of $_____ per Share, the number of Firm Shares set forth
opposite such Underwriter's name in Schedule I hereto. The Underwriters agree to
offer the Firm Shares to the public as set forth in the Prospectus.
(b) The Company hereby grants to the Underwriters an option to
purchase from the Company, solely for the purpose of covering over-allotments in
the sale of Firm Shares, all or any portion of the Option Shares for a period of
thirty (30) days from the date hereof at the purchase price per Share set forth
above. Option Shares shall be purchased from the Company, severally and not
jointly, for the accounts of the several Underwriters in proportion to the
number of Firm Shares set forth opposite such Underwriter's name in Schedule I
hereto, except that the
<PAGE> 9
- 9 -
respective purchase obligations of each Underwriter shall be adjusted by the
Representatives so that no Underwriter shall be obligated to purchase Option
Shares other than in 100-share quantities.
3. DELIVERY OF AND PAYMENT FOR THE SHARES. Delivery of certificates for
the Firm Shares and certificates for the Option Shares, if the option to
purchase the same is exercised on or before the second Business Day (as defined
in Section 13 hereof) prior to the First Closing Date (as defined below), to be
purchased by the Underwriters from the Company and payment therefor shall be
made at the offices of Testa, Hurwitz & Thibeault, 125 High Street, Boston,
Massachusetts 02110 (or such other place as mutually may be agreed upon), at
10:00 A.M., Eastern time, on the [______] business day after the date of this
Agreement (the "First Closing Date").
The option to purchase Option Shares from the Company granted in
Section 2 hereof may be exercised during the term thereof by written notice to
the Company from the Representatives. Such notice shall set forth the aggregate
number of Option Shares as to which the option is being exercised and the time
and date, not earlier than either the First Closing Date or the second Business
Day after the date on which the option shall have been exercised nor later than
the third Business Day after the date of such exercise, as determined by the
Representatives, when the Option Shares are to be delivered (the "Option Closing
Date"). Delivery and payment for such Option Shares are to be at the offices set
forth above for delivery and payment of the Firm Shares. (The First Closing Date
and the Option Closing Date are herein individually referred to as a "Closing
Date" and collectively referred to as the "Closing Dates.")
Delivery of certificates for the Shares shall be made by or on behalf
of the Company to you, for the respective accounts of the Underwriters, against
payment by you, for the several accounts of the Underwriters, of the purchase
price therefor by certified or official bank check payable in New York Clearing
House funds to the order of the Company. The certificates for the Shares shall
be registered in such names and denominations as you shall have requested at
least two full Business Days prior to the applicable Closing Date, and shall be
made available for checking and packaging at a location in New York, New York as
may be designated by you at least one full Business Day prior to such Closing
Date. Time shall be of the essence and delivery at the time and place specified
in this Agreement is a further condition to the obligations of each Underwriter.
4. COVENANTS OF THE COMPANY, THERMO INSTRUMENT AND THERMO ELECTRON. The
Company, Thermo Instrument and Thermo Electron, jointly and severally, covenant
and agree with each Underwriter that:
(a) The Company shall comply with the provisions of, and make all
requisite filings with the Commission pursuant to, Rule 430A and Rule
424(b) of the Rules and Regulations and shall notify you promptly (in
writing, if requested) of all such filings. The Company shall notify you
promptly of any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for
additional information; the Company shall prepare and file with the
Commission, promptly upon your request, any
<PAGE> 10
- 10 -
amendments or supplements to the Registration Statement or the Prospectus
which, in your opinion, may be necessary or advisable in connection with
the distribution of the Shares; and the Company shall not file any
amendment or supplement to the Registration Statement or the Prospectus,
which filing is not consented to by you after reasonable notice thereof,
such consent not to be unreasonably withheld or delayed. The Company shall
advise you promptly of its receipt of notice of the issuance by the
Commission or any state or other regulatory body of any stop order or
other order suspending the effectiveness of the Registration Statement,
suspending or preventing the use of any Preliminary Prospectus or the
Prospectus or suspending the qualification of the Shares for offering or
sale in any jurisdiction, or of the institution of any proceedings for any
such purpose; and the Company shall use its best efforts to prevent the
issuance of any stop order or other such order and, should a stop order or
other such order be issued, to obtain as soon as possible the lifting
thereof.
(b) The Company shall furnish to each of the Representatives and to
counsel for the Underwriters a signed copy of the Registration Statement
as originally filed and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith, and shall furnish to
the Underwriters such number of conformed copies of the Registration
Statement, as originally filed and each amendment thereto (excluding
exhibits other than this Agreement), the Prospectus and all amendments and
supplements to any of such documents in each case as soon as available and
in such quantities as the Representatives may from time to time reasonably
request. To the extent applicable, the copies of the Registration
Statement and each amendment thereto (including all exhibits filed
therewith), any Preliminary Prospectus or Prospectus (in each case, as
amended or supplemented) furnished to the Representative and counsel to
the Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(c) Within the time during which a prospectus relating to the Shares is
required to be delivered under the Securities Act, the Company shall
comply with all requirements imposed upon it by the Securities Act, as now
and hereafter amended, and by the Rules and Regulations, as from time to
time in force, so far as is necessary to permit the continuance of sales
of or dealings in the Shares as contemplated by the provisions hereof and
by the Prospectus. If during such period any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances then existing, not misleading, or if during such period it
is necessary to amend the Registration Statement or to supplement the
Prospectus in order to comply with the Securities Act or to file any
document, the Company shall promptly notify you and shall amend the
Registration Statement or supplement the Prospectus or file such document
(at the expense of the Company) so as to correct such statement or
omission or to effect such compliance.
(d) The Company shall take or cause to be taken all necessary action
and furnish to whomever you may direct such information as may be required
in qualifying the Shares for
<PAGE> 11
- 11 -
sale under the laws of such jurisdictions as you shall designate, and to
continue such qualifications in effect for as long as may be necessary for
the distribution of the Shares; except that in no event shall the Company
be obligated in connection therewith to qualify as a foreign corporation
or to execute a general consent to service of process.
(e) The Company shall make generally available to its security holders
(and shall deliver to the Representatives), in the manner contemplated by
Rule 158(b) of the Rules and Regulations or otherwise, as soon as
practicable but in any event not later than 45 days after the end of its
fiscal quarter in which the first anniversary date of the Effective Date
occurs, an earnings statement satisfying the requirements of Section 11(a)
of the Securities Act and covering a period of at least 12 consecutive
months beginning after the Effective Date.
(f) The Company, Thermo Instrument and Thermo Electron shall not,
during the 180-day period following the date of the Prospectus, except
with your prior written consent, offer for sale, sell or otherwise dispose
of, directly or indirectly, any shares of Common Stock (except for the
issuance of shares of Common Stock pursuant to existing stock option,
purchase and compensation plans, or upon conversion of any currently
outstanding convertible securities described in the Prospectus, except for
sales of shares of Common Stock by the Company to Thermo Instrument), or
sell or grant options, rights or warrants with respect to any shares of
Common Stock (other than the grant of options pursuant to existing stock
option, purchase and compensation plans), otherwise than in accordance
with this Agreement or as contemplated in the Prospectus. The Company,
Thermo Instrument and Thermo Electron will not permit any employee stock
option, director stock option or other stock option to purchase Common
Stock of the Company granted by it to be exercised, and the Common Stock
issued upon exercise of the stock option to be sold, prior to the
expiration of the 180-day period following the date of this Prospectus,
without your prior written consent. The Company will not accelerate the
date on which its outstanding convertible subordinated debentures may
first be converted into Common Stock according to their current terms,
without your prior written consent.
(g) The Company shall take such steps as shall be necessary to ensure
that neither the Company nor any Subsidiary shall become an "investment
company" within the meaning of such term under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
(h) Whether or not this Agreement is terminated or the sale of the
Shares to the Underwriters is consummated, the Company shall pay or cause
to be paid (A) all expenses (including stock transfer taxes) incurred in
connection with the delivery to the several Underwriters of the Shares,
(B) all fees and expenses (including, without limitation, fees and
expenses of the Company's accountants and counsel, but excluding fees and
expenses of counsel for the Underwriters) in connection with the
preparation, printing, filing, delivery and shipping of the Registration
Statement (including the financial statements therein and all amendments
and exhibits thereto), each Preliminary Prospectus, the Prospectus and any
amendments or supplements of the foregoing and the printing, delivery and
shipping of this Agreement and other underwriting documents, including,
but not limited to, any
<PAGE> 12
- 12 -
Underwriters' Questionnaires, Underwriters' Powers of Attorney, Blue Sky
Memoranda, Agreements Among Underwriters and Selected Dealer Agreements, (C) all
filing fees and fees and disbursements of counsel to the Underwriters incurred
in connection with qualification of the Shares under state securities laws as
provided in Section 4(d) hereof, (D) the filing fee of the National Association
of Securities Dealers, Inc., (E) any applicable listing or other fees, (F) the
cost of printing certificates representing the Shares, (G) the cost and charges
of any transfer agent or registrar, and (H) all other costs and expenses
incident to the performance of its obligations hereunder for which provision is
not otherwise made in this Section. It is understood, however, that, except as
provided in this Section, Section 6 and Section 8 hereof, the Underwriters shall
pay all of their own costs and expenses, including the fees of their counsel,
stock transfer taxes due upon resale of any of the Shares by them and any
advertising expenses incurred in connection with any offers they may make. If
the sale of the Shares provided for herein is not consummated by reason of any
failure, refusal or inability on the part of the Company, Thermo Instrument or
Thermo Electron to perform any agreement on its part to be performed or because
any other condition of the Underwriters' obligations hereunder is not fulfilled
or if the Underwriters shall decline to purchase the Shares for any reason
permitted under this Agreement, the Company shall reimburse the several
Underwriters for all reasonable out-of-pocket disbursements (including fees and
disbursements of counsel) incurred by the Underwriters in connection with any
investigation or preparation made by them in respect of the marketing of the
Shares or in contemplation of the performance by them of their obligations
hereunder.
(i) The Company shall on or prior to each Closing Date use its best
efforts to cause the Shares to be purchased on such date by the
Underwriters to be approved for listing on the American Stock Exchange,
subject only to official notice of issuance, and shall take such action as
shall be necessary to comply with the rules and regulations of the
American Stock Exchange with respect to such Shares.
(j) During a period of five years from the Effective Date, the Company
shall furnish to the Representatives copies of all reports or other
communications furnished to shareholders and copies of any reports or
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed. To the extent applicable, such reports or documents
shall be identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters hereunder are subject to the accuracy, as of the date
hereof and each Closing Date (as if made at such Closing Date), of the
representations and warranties of the Company, Thermo Instrument and Thermo
Electron contained herein, to the performance by the Company, Thermo Instrument
and Thermo Electron of their respective obligations hereunder and to the
following additional conditions:
<PAGE> 13
- 13 -
(a) The Prospectus shall have been filed with the Commission in a
timely fashion in accordance with Section 4(a) hereof, all post-effective
amendments to the Registration Statement shall have become effective, all
filings required by Rule 430A and Rule 424 of the Rules and Regulations
shall have been made and no such filings shall have been made without the
consent of the Representatives; no stop order suspending the effectiveness
of the Registration Statement or any amendment or supplement thereto shall
have been issued; no proceedings for the issuance of any such order shall
have been initiated or threatened; and any request of the Commission for
additional information (to be included in the Registration Statement or
the Prospectus or otherwise) shall have been disclosed to you and complied
with to your satisfaction.
(b) No Underwriter shall have been advised by the Company, Thermo
Instrument or Thermo Electron or shall have discovered and disclosed to
the Company that the Registration Statement, or the Prospectus or any
amendment or supplement thereto, contains an untrue statement of fact
which in your reasonable opinion, or in the reasonable opinion of counsel
for the Underwriters, is material, or omits to state a fact which, in your
reasonable opinion, or in the reasonable opinion of counsel to the
Underwriters, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) On or prior to each Closing Date, you shall have received from
Testa, Hurwitz & Thibeault, counsel for the Underwriters, such opinion or
opinions with respect to corporate proceedings by the Company, Thermo
Instrument and Thermo Electron, the form of the Registration Statement and
Prospectus (other than financial statements and other financial or
statistical data), the validity of the Shares, and other related matters
as you may reasonably request and such counsel shall have received such
documents and information as they reasonably request to enable them to
pass upon such matters.
(d) On each Closing Date there shall have been furnished to you the
opinion (addressed to the Underwriters) of Seth H. Hoogasian, Esq.,
General Counsel of Thermo Electron, Thermo Instrument and the Company,
dated such Closing Date and in form and substance satisfactory to counsel
for the Underwriters, to the effect that:
(i) Each of the Company and its Significant Subsidiaries has
been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with
full corporate power and authority to own or lease its properties and
conduct its business as described in the Prospectus, and is duly
qualified to do business and is in good standing in each jurisdiction
in which the character of the business conducted by it or the location
of the properties owned or leased by it makes such qualification
necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
(ii) Each of Thermo Electron and its Significant Subsidiaries
(as defined in Section 13) has been duly organized and is validly
existing as a corporation in good
<PAGE> 14
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standing under the laws of the jurisdiction of its incorporation, with
full corporate power and authority to own or lease its properties and
conduct its business as described in the Prospectus, and is duly
qualified to do business and is in good standing in each jurisdiction
in which the character of the business conducted by it or the location
of the properties owned or leased by it makes such qualification
necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on Thermo Electron
and its Subsidiaries taken as a whole.
(iii) All of the outstanding shares of Common Stock have been
and the Shares, upon issuance and delivery and payment therefor in the
manner herein described, will be, duly authorized, validly issued,
fully paid and nonassessable. There are no preemptive or other rights
to subscribe for or to purchase, or any restriction upon the voting or
transfer of, any of the Shares pursuant to the Company's corporate
charter, by-laws, other governing documents, or any agreement or other
instrument known to such counsel to which the Company or a Subsidiary
thereof is a party or by which the Company or a Subsidiary thereof may
be bound or to which any of their respective properties is subject;
and, to the best of such counsel's knowledge, neither the filing of the
Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights for or relating
to the registration of any shares of Common Stock except such as have
been waived or satisfied, other than as described in the Prospectus.
The Common Stock conforms in all material respects to the description
thereof contained in the Prospectus. All of the outstanding shares of
capital stock of each Significant Subsidiary of the Company have been
duly authorized and validly issued, are fully paid and nonassessable
and are owned directly or indirectly by the Company free and clear of
any claim, lien, encumbrance or security interest known to such counsel
(except for certain obligations of the Company pursuant to stock and
benefit plans maintained primarily for the benefit of employees,
officers, directors and consultants of the Company and its
Subsidiaries).
(iv) Each of the Company and its Significant Subsidiaries is
not, nor with the giving of notice or lapse of time or both would be,
in violation of or in default under, nor will the execution or delivery
hereof or consummation of the transactions contemplated hereby result
in a violation of, or constitute a default under, the corporate
charter, by-laws or other governing documents of the Company or any of
its Significant Subsidiaries or, to the best knowledge of such counsel,
any material agreement, indenture or other instrument to which the
Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries may be bound, or to which any of the
properties of the Company or any of its Subsidiaries is subject, nor,
to best of such counsel's knowledge, will the performance by the
Company of its obligations hereunder violate any existing law, rule,
administrative regulation or decree of any court or any governmental
agency or body having jurisdiction over the Company or any of its
Subsidiaries or the properties of the Company or any of its
Subsidiaries, or, to the best knowledge of such counsel, result in the
creation or imposition of any lien, charge, claim or encumbrance upon
the properties or assets of the Company or any of its Subsidiaries
which would be material to the Company and its Subsidiaries taken as a
whole. Except for permits and
<PAGE> 15
- 15 -
similar authorizations required under the Securities Act and the
securities or "Blue Sky" laws of certain jurisdictions and for such
permits and authorizations as have been obtained, no consent, approval,
authorization or order of any court, governmental agency or body or
financial institution is required in connection with the consummation
by the Company, Thermo Instrument or Thermo Electron of the
transactions contemplated by this Agreement.
(v) Each of Thermo Electron and its Significant Subsidiaries
is not, nor with the giving of notice or lapse of time or both would
be, in violation of or in default under, nor will the execution or
delivery hereof or consummation of the transactions contemplated hereby
result in a violation of, or constitute a default under, the corporate
charter, by-laws or other governing documents of Thermo Electron or any
of its Significant Subsidiaries or, except as described in the Exchange
Act filings of Thermo Instrument and Thermo Electron, to the best
knowledge of such counsel, any material agreement, indenture, or other
instrument to which Thermo Electron or any of its Significant
Subsidiaries is a party or by which Thermo Electron or any of it
Significant Subsidiaries may be bound, or to which any of the
properties of Thermo Electron or any of its Significant Subsidiaries is
subject, nor will the performance by Thermo Electron of its obligations
hereunder violate any existing law, rule, administrative regulation or
decree of any court or any governmental agency or body having
jurisdiction over Thermo Electron or any of its Significant
Subsidiaries or the properties of Thermo Electron or any of its
Significant Subsidiaries, or, to the best knowledge of such counsel,
result in the creation or imposition of any lien, charge, claim or
encumbrance upon the properties or assets of Thermo Electron or any of
its Significant Subsidiaries, which would be material to Thermo
Electron and its Subsidiaries taken as a whole.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company, Thermo Instrument and Thermo Electron.
(vii) Each of the Inter-corporate Agreements has been duly
authorized, executed and delivered by Thermo Instrument and Thermo
Electron, as the case may be, and is the valid and binding agreement of
Thermo Instrument and Thermo Electron enforceable in accordance with
its terms except as provided by applicable bankruptcy laws. The
execution, delivery and performance of each of the Inter-corporate
Agreements by each of the parties thereto, the consummation of the
transactions therein contemplated and compliance with the terms thereof
do not and will not result in a violation of, or constitute a default
under the corporate charter, by-laws or other governing documents of
Thermo Instrument or Thermo Electron, or any material agreement,
indenture or other instrument known to such counsel to which Thermo
Instrument or Thermo Electron is a party or by which any of them is
bound, or to which any of their properties is subject and do not and
will not violate any existing law, rule, administrative regulation or
decree of any court or any governmental agency or body having
jurisdiction over Thermo Instrument or Thermo Electron or any of their
properties, or, to the best of such counsel's knowledge, result in the
creation or imposition of any lien, charge, claim or encumbrance upon
any property or asset of Thermo Instrument or Thermo Electron, which
would be
<PAGE> 16
- 16 -
material to Thermo Electron and its Subsidiaries taken as a whole.
Except for permits and similar authorizations required under the
Securities Act and the securities or "Blue Sky" laws of certain
jurisdictions and for such permits and authorizations as have been
obtained, no consent, approval, authorization or order of any court,
governmental agency or body or, to the knowledge of such counsel,
financial institution is required in connection with the consummation
of the transactions contemplated by the Inter-corporate Agreements.
(viii) The Registration Statement and all post-effective
amendments thereto have become effective under the Securities Act and,
to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending before
or contemplated by the Commission. All filings required by Rule 424 and
Rule 430A of the Rules and Regulations have been made; the Registration
Statement as of the Effective Date, and the Prospectus and any
amendment or supplement thereto as of their respective dates, complied
as to form in all material respects with the requirements of the
Securities Act and the Rules and Regulations (it being understood that
such counsel need express no opinion on the financial statements or
other financial and statistical data included therein). Such counsel
has no reason to believe that (i) the Registration Statement, as of its
Effective Date, or any amendment thereto, at the time it became
effective contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading, or (ii) the
Prospectus or any supplement or amendment thereto, or any supplement or
amendment thereto, on such Closing Date or at the time such Prospectus
or supplement or amendment thereto was issued contains or contained any
untrue statement of a material fact or omits or omitted to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading (it being understood that such counsel
need express no opinion with respect to the financial statements or
other financial and statistical data included in the Registration
Statement and the Prospectus).
(ix) To the best knowledge of such counsel, all descriptions
in the Prospectus of statutes, regulations, legal or governmental
proceedings, contracts and other documents are accurate in all material
respects, and fairly present in all material respects the information
required to be shown and such counsel does not know of any contracts or
documents of a character required to be summarized or described therein
or to be filed as exhibits thereto that are not so summarized,
described or filed, nor does such counsel know of any pending or
threatened litigation or any governmental proceeding, statute or
regulation required to be described in the Prospectus that is not so
described.
In rendering the foregoing opinion, counsel may rely, as to matters of
fact, upon certificates of officers of the Company, Thermo Instrument and
Thermo Electron and certificates of public officials. Certificates so
relied upon shall be furnished to you and shall be satisfactory to you and
your counsel.
<PAGE> 17
- 17 -
(e) There shall have been furnished to you a certificate, dated such
Closing Date and addressed to you, signed by the President or a Vice
President and by the Treasurer or Secretary of the Company to the effect
that: (i) the representations and warranties of the Company contained in
this Agreement are true and correct, as if made at and as of such Closing
Date, and the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or prior to
such Closing Date; (ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that
purpose have been initiated or, to the knowledge of the signers of such
certificate, threatened; (iii) all filings required by Rule 424 and Rule
430A of the Rules and Regulations have been made; (iv) the signers of said
certificate have carefully examined the Registration Statement and the
Prospectus, and any amendments or supplements thereto and such documents
contain all statements and information required to be included therein,
and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading; and (v) since the effective date of
the Registration Statement, there has occurred no event required to be set
forth in an amendment or supplement to the Registration Statement or the
Prospectus which has not been so set forth.
(f) There shall have been furnished to you certificates, dated such
Closing Date and addressed to you, signed by the President or a Vice
President and by the Treasurer or Secretary of each of Thermo Instrument
and Thermo Electron to the effect that: (i) the representations and
warranties of Thermo Electron or Thermo Instrument (as applicable)
contained in this Agreement are true and correct, as if made at and as of
such Closing Date, and Thermo Electron and Thermo Instrument (as
applicable) has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to such
Closing Date; (ii) the signers of said certificate have carefully examined
the Registration Statement and the Prospectus, and any amendments or
supplements thereto, and such documents contain all statements and
information required to be included therein and do not include any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading; and (iii) since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amendment or supplement to the Registration Statement or the Prospectus
which has not been so set forth.
(g) Since the Effective Time, neither the Company nor any of the
Subsidiaries of the Company shall have sustained any loss by fire, flood,
accident or other calamity, or shall have become a party to or the subject
of any litigation, which is material to the Company and its Subsidiaries
taken as a whole, nor shall there have been a material adverse change in
the general affairs, operations, business, prospects, key personnel,
capitalization, financial condition or net worth of the Company and its
Subsidiaries taken as a whole, whether or not arising in the ordinary
course of business, which loss, litigation or change, in your judgment,
shall render it inadvisable to proceed with the payment for and delivery
of the Shares.
<PAGE> 18
- 18 -
(h) On the date of this Agreement and on each Closing Date you shall
have received a letter from each accounting firm whose report appears in
the Prospectus, dated the date of this Underwriting Agreement or such
Closing Date, as the case may be, and addressed to you, confirming that
they are independent certified public accountants within the meaning of
the Securities Act and the applicable published Rules and Regulations, and
stating, as of the date of such letter (or, with respect to matters
involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus, as of a date
not more than five days prior to the date of each such letter), the
conclusions and findings of each such firm with respect to the financial
information and other matters covered by its letter delivered to you
concurrently with the execution of this Agreement, and with respect to
each letter delivered on a Closing Date confirming the conclusions and
findings set forth in such prior letter.
(i) You shall have been furnished with such additional documents and
certificates as you or counsel for the Underwriters may reasonably
request.
(j) The Shares to be purchased on such Closing Date by the Underwriters
shall be approved for listing on the American Stock Exchange, subject only
to official notice of issuance.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and to counsel for the Underwriters. The Company,
Thermo Instrument and Thermo Electron shall furnish to you such conformed copies
of such opinions, certificates, letters and other documents as you shall
reasonably request. If any of the conditions specified in this Section 5 shall
not have been fulfilled when and as required by this Agreement, this Agreement
and all obligations of the Underwriters hereunder may be canceled at, or at any
time prior to, such Closing Date, by you. Any such cancellation shall be without
liability of the Underwriters to the Company, Thermo Instrument or Thermo
Electron. Notice of such cancellation shall be given to the Company in writing,
or by telegraph or telephone and confirmed in writing.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company, Thermo Instrument and Thermo Electron, jointly and
severally, shall indemnify and hold harmless each Underwriter against any
loss, claim, damage or liability (or any action in respect thereof), joint
or several, to which such Underwriter may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage or
liability (or action in respect thereof) arises out of or is based upon
(i) any untrue statement or alleged untrue statement made by the Company,
Thermo Instrument or Thermo Electron in Section 1 hereof or by Thermo
Instrument or Thermo Electron in Section 1A hereof, or (ii) any untrue
statement or alleged untrue statement of a material fact contained (A) in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or
any amendment or supplement to any thereof, or (B) in any "Blue Sky"
application or other document executed by the Company specifically for
that purpose or based upon any written
<PAGE> 19
- 19 -
information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Shares under the
securities laws thereof (any such application, document or information
being hereinafter called "Blue Sky Information"), or (iii) the omission or
alleged omission to state in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement to any thereof,
or in any Blue Sky Information a material fact required to be stated
therein or necessary to make the statements therein not misleading or (iv)
any act or failure to act or any alleged act or failure to act by any
Underwriter in connection with, or relating in any manner to, the Shares
or the offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action arising out of
or based upon matters covered by clause (ii) or (iii) above (provided that
the Company, Thermo Instrument and Thermo Electron shall not be liable
under this clause (iv) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim,
damage, liability or action resulted directly or indirectly from any such
acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence, willful misconduct or breach of
this Agreement); and shall reimburse each Underwriter promptly after
receipt of invoices from such Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating
or defending against or appearing as a third-party witness in connection
with any such loss, claim, damage, liability or action, notwithstanding
the possibility that payments for such expenses might later be held to be
improper, in which case the person receiving them shall promptly refund
them; provided, however, that the Company, Thermo Instrument and Thermo
Electron shall not be liable in any such case to the extent, but only to
the extent, that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company through you by or on behalf
of any Underwriter specifically for use in the preparation of the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement to any thereof, or any Blue Sky Information; and
provided, further, that as to any Preliminary Prospectus this indemnity
agreement shall not inure to the benefit of any Underwriter on account of
any loss, claim, damage, liability or action arising from the sale of
Shares to any person by that Underwriter if that Underwriter failed to
send or give a copy of the Prospectus, as the same may be amended or
supplemented, to that person within the time required by the Securities
Act and the Rules and Regulations, and the untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact in such Preliminary Prospectus was corrected in the
Prospectus, unless such failure resulted from non-compliance by the
Company with Section 4(b).
(b) Each Underwriter severally, but not jointly, shall indemnify and
hold harmless the Company, Thermo Instrument and Thermo Electron against
any loss, claim, damage or liability (or action in respect thereof) to
which the Company, Thermo Instrument or Thermo Electron may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage or liability (or action in respect thereof) arises out of or
is based upon (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or
<PAGE> 20
- 20 -
supplement to any thereof, or (B) in any Blue Sky Information, or (ii) the
omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement to
any thereof, or in any Blue Sky Information a material fact required to be
stated therein or necessary to make the statements therein not misleading;
and shall reimburse any legal or other expenses reasonably incurred by the
Company, Thermo Instrument or Thermo Electron promptly after receipt of
invoices from the Company, Thermo Instrument or Thermo Electron in
connection with investigating or defending against any such loss, claim,
damage, liability or action, notwithstanding the possibility that payments
for such expenses might later be held to be improper, in which case the
Company, Thermo Instrument and Thermo Electron shall promptly refund them;
provided, however, that such indemnification shall be available in each
such case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished
to the Company through you by or on behalf of such Underwriter
specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 6 except to the extent it has been prejudiced in any material
respect by such failure or from any liability which it may have to an
indemnified party otherwise than under this Section 6. If any such claim
or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it or they wish,
jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified
party under such subsection for any legal or other expenses subsequently
incurred by the indemnified party in connection with the defense thereof
other than reasonable costs of investigation, except that the
Representatives shall have the right to employ counsel to represent you
and those other Underwriters who may be subject to liability arising out
of any claim in respect of which indemnity may be sought by the
Underwriters against the Company, Thermo Instrument or Thermo Electron
under such subsection if, in your reasonable judgment, it is advisable for
you and those Underwriters to be represented by separate counsel, and in
that event the fees and expenses of such separate counsel shall be paid by
the indemnifying party or parties; provided, however, in no event, shall
the indemnifying party or parties be responsible for the expenses of more
than one separate counsel for all such indemnified parties.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party
<PAGE> 21
- 21 -
as a result of the losses, claims, damages or liabilities referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company, Thermo Instrument
and Thermo Electron on the one hand and the Underwriters on the other from
the offering of the Shares or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company, Thermo
Instrument and Thermo Electron on the one hand and the Underwriters on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company,
Thermo Instrument and Thermo Electron on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Shares (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by one
of the parties and such parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company, Thermo Instrument, Thermo Electron and the
Underwriters agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were to be determined by pro
rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take
into account the equitable considerations referred to in the first
sentence of this subsection (d). The amount paid by an indemnified party
as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending against any action or claim
which is the subject of this subsection (d), subject to the proviso in the
last sentence of subsection (c). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their
respective underwriting obligations and not joint. Each party entitled to
contribution agrees that upon the service of a summons or other initial
legal process upon it in any action instituted against it in respect of
which contribution may be sought, it shall promptly give written notice of
such service to the party or parties from whom contribution may be sought,
but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically
provided in subsection (c) hereof).
<PAGE> 22
- 22 -
(f) The obligations of the Company, Thermo Instrument and Thermo Electron
under this Section 6 shall be in addition to any liability which the
Company, Thermo Instrument and Thermo Electron may otherwise have, and
shall extend, upon the same terms and conditions, to each person, if any,
who controls any Underwriter within the meaning of the Securities Act or
the Exchange Act; and the obligations of the Underwriters under this
Section 6 shall be in addition to any liability that the respective
Underwriters may otherwise have, and shall extend, upon the same terms and
conditions, to each director of the Company (including any person who,
with his consent, is named in the Registration Statement as about to
become a director of the Company), to each officer of the Company who has
signed the Registration Statement and to Thermo Instrument and Thermo
Electron, and each other person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act.
7. SUBSTITUTION OF UNDERWRITERS. If any Underwriter defaults in its
obligation to purchase the number of Shares which it has agreed to purchase
under this Agreement, the non-defaulting Underwriters shall be obligated to
purchase (in the respective proportions which the number of Shares set forth
opposite the name of each non-defaulting Underwriter in Schedule I hereto bears
to the total number of Shares set forth in Schedule I hereto) the Shares which
the defaulting Underwriter agreed but failed to purchase; except that the
non-defaulting Underwriters shall not be obligated to purchase any of the Shares
if the total number of Shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase exceed 9.09% of the total number of Shares, and
any non-defaulting Underwriters shall not be obligated to purchase more than
110% of the number of Shares set forth opposite its name in Schedule I hereto
plus the total number of Option Shares purchasable by it pursuant to the terms
of Section 2. If the foregoing maximums are exceeded, the non-defaulting
Underwriters, and any other underwriters satisfactory to you that so agree,
shall have the right, but shall not be obligated, to purchase (in such
proportions as may be agreed upon among them) all of the Shares. If the
non-defaulting Underwriters or the other underwriters satisfactory to you do not
elect to purchase the Shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase, the Agreement shall terminate without liability
on the part of any non-defaulting Underwriter, the Company, Thermo Instrument or
Thermo Electron except for the payment of expenses to be borne by the Company,
Thermo Instrument and Thermo Electron and the Underwriters as provided in
Section 4(h) hereof and the indemnity and contribution agreements of the
Company, Thermo Instrument, Thermo Electron and the Underwriters contained in
Section 6 hereof.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If the other
underwriters satisfactory to you are obligated or agree to purchase the Shares
of a defaulting Underwriter, either you or the Company may postpone the First
Closing Date for up to seven full Business Days in order to effect any changes
that may be necessary in the Registration Statement or the Prospectus or in any
other document or agreement, and to file promptly any amendments or any
supplements to the Registration Statement or the Prospectus which in your
opinion may thereby be made necessary.
8. TERMINATION.
<PAGE> 23
- 23 -
(a) Until the First Closing Date, this Agreement may be terminated by you
by giving notice as hereinafter provided to the Company, if (i) the
Company, Thermo Instrument or Thermo Electron shall have failed, refused
or been unable, at or prior to the First Closing Date, to perform any
agreement on its part to be performed hereunder, (ii) any other condition
of the obligations of the Underwriters hereunder is not fulfilled, (iii)
trading in securities generally on the New York Stock Exchange or the
American Stock Exchange or the International Stock Exchange of the United
Kingdom or the over-the-counter market shall have been suspended or
minimum prices shall have been established on any of such exchanges or
such market by the Commission or by such exchange or other regulatory body
or governmental authority having jurisdiction, (iv) a banking moratorium
shall have been declared by Federal, New York, United Kingdom or
Massachusetts authorities, or (v) the United States or the United Kingdom
is or becomes engaged in hostilities which result in the declaration of a
national emergency or war, or (vi) there shall have been such a material
adverse change in general economic, political or financial conditions, or
the effect of international conditions on the financial markets in the
United States or the United Kingdom shall be such, as to, in the judgment
of a majority in interest of the several Underwriters, make it inadvisable
or impracticable to proceed with the delivery of the Shares. Any
termination of this Agreement pursuant to this Section 8 shall be without
liability on the part of the Company, Thermo Instrument, Thermo Electron
or any Underwriter, except as otherwise provided in Sections 4(h) and 6
hereof.
Any notice referred to above may be given at the address specified in
Section 10 hereof in writing or by telegraph or telephone, and if by telegraph
or telephone, shall be immediately confirmed in writing.
9. SURVIVAL OF INDEMNITIES, CONTRIBUTION, WARRANTIES AND
REPRESENTATIONS. The agreements contained in Section 6 and the representations,
warranties and agreements of the Company, Thermo Instrument and Thermo Electron
in Sections 1, 1A and 4 shall survive the delivery of the Shares to the
Underwriters hereunder and shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement or any investigation made by
or on behalf of any indemnified party.
10. NOTICES. Except as otherwise provided in this Agreement, (a)
whenever notice is required by the provisions of this Agreement to be given to
the Company, Thermo Instrument or Thermo Electron, such notice shall be in
writing addressed to the Company, Thermo Instrument or Thermo Electron at 81
Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046; and (b) whenever
notice is required by the provisions of the Agreement to be given to the several
Underwriters, such notice shall be in writing addressed to you in care of
NatWest Securities Limited, 135 Bishopsgate, London EC2M3UR, England, Attention:
Syndicate Department.
11. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the outside cover page, the paragraph containing
stabilization information on the inside front cover page and the statements
under the caption "Underwriting" in any Preliminary Prospectus and in the
Prospectus, constitute the only written information furnished
<PAGE> 24
- 24 -
by or on behalf of any Underwriter referred to in paragraph (b) of Section 1
hereof and in paragraphs (a) and (b) of Section 6 hereof.
12. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters, the Company, Thermo Instrument and Thermo
Electron, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(a) the representations, warranties, indemnities and agreements of the Company,
Thermo Instrument and Thermo Electron contained in this Agreement shall also be
deemed to be for the benefit of the person or persons, if any, who control any
Underwriter within the meaning of the Securities Act or the Exchange Act and (b)
the indemnity agreement of the Underwriters contained in Section 6 hereof shall
be deemed to be for the benefit of directors of the Company, officers of the
Company who signed the Registration Statement, and any person controlling the
Company, including Thermo Instrument and Thermo Electron. Nothing in this
Agreement shall be construed to give any person, other than the persons referred
to in this paragraph, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
13. DEFINITION OF "BUSINESS DAY", "SUBSIDIARY" AND "SIGNIFICANT
SUBSIDIARY". For purposes of this Agreement, (a) "Business Day" means any day on
which the American Stock Exchange is open for trading, (b) "Subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations and (c) "Significant
Subsidiary" has the meaning set forth in Item 1-02(v) of the Regulation S-X of
the Rules and Regulations.
14. PERFORMANCE BY THE COMPANY. Thermo Electron and Thermo Instrument
agree to cause the Company to perform each of the agreements and obligations of
the Company contained in this Agreement.
15. GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
choice of law or conflict of law principles thereof.
16. COUNTERPARTS. This agreement may be signed in one or more
counterparts, each of which together shall constitute one and the same
agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 25
- 25 -
Please confirm, by signing and returning to us eight counterparts of
this Agreement, that you are acting on behalf of yourselves and the other
several Underwriters and that the foregoing correctly sets forth the agreement
among the Company, Thermo Instrument, Thermo Electron and the several
Underwriters.
Very truly yours,
THERMO OPTEK CORPORATION
By:
-----------------------------------
Title:
THERMO INSTRUMENT SYSTEMS INC.
By:
-----------------------------------
Title:
THERMO ELECTRON CORPORATION
By:
-----------------------------------
Title:
Confirmed and accepted as of the date first above mentioned:
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS INC.
CAZENOVE & CO.
FAHNESTOCK & CO. INC.
as Representatives of the several
Underwriters named in Schedule I hereto
By: NATWEST SECURITIES LIMITED
By:
-----------------------------------
Authorized Signatory
<PAGE> 26
- 26 -
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm
Shares To be
Underwriter Purchased
----------- ---------
<S> <C>
NatWest Securities Limited
Lehman Brothers Inc.
Cazenove & Co.
Fahnestock & Co. Inc.
---------
Total.................................................................. 3,000,000
=========
</TABLE>
<PAGE> 1
EXHIBIT 4
[FRONT OF STOCK CERTIFICATE]
THERMO
OPTEK CORPORATION
<TABLE>
<S> <C> <C>
TOC
COMMON STOCK PAR VALUE $.01 Incorporated under the laws of the State COMMON STOCK
of Delaware
CUSIP 883582 10 8
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
</TABLE>
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
THERMO OPTEK CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. The Certificate and the shares represented hereby are issued under and
shall be subject to the laws of the State of Delaware and all the provisions of
the Certificate of Incorporation and the By-Laws of the Corporation, and all the
amendments from time to time made thereto. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
[ Thermo Optek Corporation ]
[ Corporate Seal ]
Secretary President and Chief Executive Officer
<PAGE> 2
[BACK OF STOCK CERTIFICATE]
THERMO OPTEK CORPORATION
This Corporation will furnish without charge to each stockholder who so
requests, a copy of the designations, powers, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof, and the qualifications, limitation or restrictions of such preferences
and/or rights.
Any such requests may be addressed to the Secretary of the Corporation.
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _________ Custodian ___________
(Cust) (Minor)
TEN ENT - as tenants by the entities under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act _______________________
survivorship and not as (State)
tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
________________________________________________________________________________
____________________________________________________________ Shares of the Stock
represented by the within Certificate, and do hereby irrevocably constitute and
appoint ________________________________________________________________________
________________________________________________________________________________
Attorney to transfer the said Stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated _________________________ ___________________________________
Signature
________________________________________
THE SIGNATURES TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATSOEVER.
<PAGE> 1
EXHIBIT 5
THERMO ELECTRON CORPORATION
81 Wyman Street
Waltham, MA 02254-9046
June 4, 1996
Thermo Optek Corporation
8E Forge Parkway
Franklin, Massachusetts 02038
Re: Registration Statement on Form S-1
Relating to 3,450,000 Shares of the
Common Stock, $.01 par value, of Thermo Optek Corporation
Ladies and Gentlemen:
I am General Counsel to Thermo Optek Corporation, a Delaware
corporation (the "Company"), and have acted as counsel in connection with the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), on Form S-1 (the "Registration Statement"), of 3,450,000 shares of the
Company's Common Stock, $.01 par value per share (the "Common Stock"). Such
shares, together with any shares of Common Stock registered under a
registration statement related to the offering contemplated by the Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act (a "462(b) Registration Statement"), are collectively referred
to herein as the "Shares".
I or a member of my legal staff have reviewed the corporate proceedings
taken by the Company with respect to the authorization of the issuance of the
Shares. I or a member of my legal staff have also examined and relied upon
originals or copies, certified or otherwise authenticated to my satisfaction,
of all corporate records, documents, agreements or other instruments of the
Company and have made all investigations of law and have discussed with the
Company's representatives all questions of fact that I have deemed necessary
or appropriate.
Based upon and subject to the foregoing, I am of the opinion that:
1. The Company is a corporation duly organized, validly existing
and in corporate good standing under the laws of the State of Delaware.
2. The issuance and sale of the Shares registered pursuant to the
Registration Statement have been duly authorized by the Company and the
issuance and sale of the Shares registered pursuant to a 462(b) Registration
Statement will have been duly authorized by the Company prior to their issuance
and sale.
<PAGE> 2
Thermo Optek Corporation
June 4, 1996
Page 2
3. The Shares, when issued and sold in accordance with the
provisions of the Underwriting Agreement between the Company and the several
Underwriters named on Schedule I thereto (in the form of Exhibit 1 to the
Registration Statement) will be validly issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement or any 462(b) Registration Statement.
Very truly yours,
/s/ Seth H. Hoogasian
---------------------
Seth H. Hoogasian
General Counsel
<PAGE> 1
EXHIBIT 10.12
ASSET TRANSFER AGREEMENT
This AGREEMENT is dated as of December 31, 1995 by and among Nicolet
Instrument Corporation ("Nicolet"), a Wisconsin corporation, and Thermo Optek
Corporation ("Optek"), a Delaware corporation, and for purposes of Section 15
hereof, Thermo Instrument Systems Inc., a Delaware corporation ("Thermo").
WHEREAS, Nicolet desires and intends to transfer substantially all of
Nicolet's property and assets, real, personal and mixed, tangible and
intangible, including, without limitation, all of the outstanding shares of
capital stock of Thermo Jarrell Ash Corporation, to Optek in exchange for
29,999,000 shares of the common stock of Optek (the "Shares");
NOW, THEREFORE, in consideration of the premises and mutual promises
and agreements set forth herein, the parties hereto hereby agree as follows:
1. Transfer of Assets to Optek. Nicolet hereby assigns, transfers,
conveys, and delivers to Optek all of Nicolet's property, assets and rights,
real, personal and mixed, tangible and intangible, except for the capital stock
of Nicolet Instrument Canada, Inc., Nicolet Instruments Limited, Project Phoenix
of Madison, Inc. and ThermoSpectra Corporation (the "Excluded Subsidiaries")
(collectively, the "Assets"). The Assets include, but are not limited to, the
following:
(i) all trade and other accounts receivable and notes receivable;
(ii) all inventories of raw materials, work in process, finished
goods, supplies, packaging materials, spare parts and similar
items;
(iii) all machinery, equipment, tools and tooling, furniture,
fixtures, leasehold improvements and motor vehicles;
(iv) all real property, leaseholds and subleaseholds in real
property, and easements, rights-of-way and other appurtenants
thereto;
(v) (a) all patents, patent applications, patent disclosures and
all related continuation, continuation-in-part, divisional,
reissue, re-examination, utility, model, certificate of
invention and design patents, patent application,
registrations and applications for registrations,
(b) all trademarks, service marks, trade dress, logos, trade
names and corporate names and registrations and applications
for registration thereof,
(c) all copyrights and registrations and applications for
registration thereof, mask works and registrations and
applications for registration thereof, computer software, date
and documentation, trade secrets and confidential business
information, whether patentable or nonpatentable and whether
or not reduced to practice, know-how, manufacturing and
product processes and techniques, research and development
information, copyrightable works, financial, marketing and
business data, pricing and cost information, business and
marketing plans and customer and supplier lists and
information, other proprietary rights relating to any of the
foregoing (including without limitation remedies against
infringements thereof and rights of protection of interest
therein under the laws of all jurisdictions) and copies and
tangible embodiments thereof;
<PAGE> 2
(vi) all rights under contracts, agreements or instruments;
(vii) all claims, prepayments, refunds, causes of action, choses in
actions, rights of recovery, rights of setoff and rights of
recoupment, including all rights under warranties;
(viii) all permits, licenses, registrations, certificates,
franchises, variances and other similar rights;
(ix) all books, records, accounts, ledgers, files, documents,
correspondence, lists (customer or otherwise), product and
sales literature, drawings or specifications, employment
records, manufacturing and technical manuals, advertising and
promotional materials, studies, reports and other printed or
written materials;
(x) securities, partnership, joint venture or other equity
interests in any other business entity, except for the
Excluded Subsidiaries; and
(xi) all claims and defenses relating to any of the foregoing or to
the liabilities assumed by Optek pursuant to Section 2 below.
2. Assumption of Liabilities. From and after the date hereof, Optek
shall assume any and all liabilities, commitments and obligations of Nicolet of
any nature, kind and description except for the Excluded Liabilities (the
"Liabilities"). "Excluded Liabilities" means all liabilities, commitments and
obligations of Nicolet or any of its subsidiaries that result from any third
party claim based upon the acts or omissions of Nicolet or such subsidiaries
prior to the date hereof.
3. Further Assurances. At the request of Optek at any time on or after
the date hereof, Nicolet will execute and deliver such further instruments of
transfer and conveyance and take such other action as Optek reasonably may
request effectively to assign and transfer to Optek any of the Assets. At the
request of Nicolet at any time on or after the date hereof, Optek will execute
and deliver such further instruments of assumption and take such other action as
Nicolet may reasonably request effectively to assume the Liabilities.
4. Regarding Certain Consents. Nothing in this Agreement shall be
construed as an attempt to assign any contract, agreement, permit, franchise, or
claim included in the Assets that is, by its term or in law, nonassignable
without the consent of the other party or parties thereto, unless such consent
shall have been given, or as to which all the remedies for the enforcement
thereof enjoyed by Nicolet would not, as a matter of law, pass to Optek as an
incident of the assignments provided for by this Agreement. In order, however,
to provide Optek the full realization and value of every contract, agreement,
permit, franchise and claim of the character described in the preceding
sentence, Nicolet, on and after the date hereof by itself or by its agents,
shall, at the request and expense and under the direction of Optek, in the name
of Nicolet or otherwise as Optek shall specify and as shall be permitted by law,
take all such reasonable action (including without limitation the appointment of
Optek as an attorney-in-fact for Nicolet) and do or cause to be done all such
things as shall in the opinion of Optek be necessary or proper (a) to assure
that the rights and obligations of Nicolet under such contracts, agreements,
permits, franchises, and claims shall be preserved for the benefit of Optek and
(b) to facilitate receipt of the consideration to be received by Nicolet in and
under every such contract, agreement, permit, franchise, and claim, which
consideration Nicolet shall hold for the benefit of, and upon request of Optek
shall deliver to, Optek.
2
<PAGE> 3
5. Nicolet's Representations and Warranties. Nicolet represents
and warrants that:
(a) Organization and Standing. Nicolet is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Wisconsin.
(b) Approval of Transactions. Nicolet has obtained all
necessary corporate authorizations and approvals, and has taken all
actions required for the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby.
(c) Title to the Assets. Nicolet is the true and lawful owner
of, and has good and marketable title to, the Assets free and clear of
all liens, mortgages, leases, conditional sales agreements, title
retention agreements, or any other encumbrance. Upon consummation of
the transfer of the Assets by Nicolet to Optek, Optek will be the
lawful owner of, and have marketable title to, the Assets, free and
clear of all liens, mortgages, or other encumbrances.
(d) No Litigation. Nicolet is not engaged in, or to the
knowledge of Nicolet's management, threatened with any material legal
action or other proceeding before any court, administrative agency,
governmental department or arbitrator.
(e) Compliance with Contracts. Nicolet is in compliance in all
material respects with all unwaived terms and provisions of all
material contracts, commitments and engagements entered into prior to
or on the date hereof; and the same are in full force and effect and
constitute legal, valid and binding obligations of the respective
parties thereto, enforceable in accordance with their terms except as
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting generally the enforcement of
creditors' rights, and have not been assigned or encumbered by Nicolet.
Nicolet has performed, in all material respects, obligations required
to be performed under all such material contracts, commitments and
engagements to date and is not in default in any material respect under
any of said contracts, commitments and engagements.
(f) No Conflict. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions herein
contemplated, nor the fulfillment of or compliance with the terms and
provisions hereof will, to the best of Nicolet's knowledge, (1) violate
any current provisions of law, administrative regulation, or court
decree applicable to Nicolet or (2) conflict with or result in a breach
of any of the terms, conditions or provisions of or constitute default
under any agreement or instrument to which Nicolet is a party or by
which it is bound.
3
<PAGE> 4
6. Optek's Representations and Warranties.
(a) Organization and Standing. Optek is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) Approval of Transactions. Optek has obtained all necessary
corporate authorizations and approvals, and has taken all actions
required for the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(c) Issuance of Shares. The issuance of the Shares has been
duly authorized by all necessary corporate action, and the Shares, when issued
pursuant to the terms of this Agreement, will be fully paid, non-assessable and
not subject to any pre-emptive rights.
7. Indemnification by Nicolet.
(a) Nicolet agrees to indemnify and hold harmless Optek from
any and all damages, losses, liabilities, costs and expenses (including, without
limitation, settlement costs and any reasonable legal, accounting or other
expenses for investigating or defending any actions or threatened actions)
incurred by Optek as a result of (i) the Excluded Liabilities or (ii) the
inaccuracy of any representation or warranty contained in Section 5 hereof.
(b) Whenever any claim shall arise for indemnification
hereunder, Optek shall promptly notify Nicolet of the claim and, when known, the
facts constituting the basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice to Nicolet shall specify, if
known, the amount or an estimate of the amount of the liability arising
therefrom. Optek shall not settle or compromise any claim by a third party for
which Optek is entitled to indemnification hereunder without the prior consent
of Nicolet, unless suit shall have been instituted against Optek and Nicolet
shall not have taken control of such suit after notification thereof as provided
in Section 7(c) of this Agreement.
(c) In connection with any claim giving rise to indemnity
hereunder resulting from or arising out of any claim or legal proceeding by a
person who is not a party to this Agreement, Nicolet at its sole cost and
expense may, upon notice to Optek, assume the defense of any such claim or legal
proceeding if it acknowledges to Optek its obligations to indemnify Optek with
respect to all elements of such claim. Optek shall be entitled to participate in
(but not control) the defense of any such action, with its counsel and at its
own expense. If Nicolet does not assume the defense of any such claim or
litigation resulting therefrom within 30 days after the date Nicolet is notified
of such claim pursuant to Paragraph 7(b) hereof, (i) Optek may defend against
such claim or litigation, after giving notice of the same to Nicolet, on such
terms as are appropriate in Optek's reasonable judgment, and (ii) Nicolet shall
be entitled to participate in (but not control) the defense of such action, with
its counsel and at its own expense.
4
<PAGE> 5
8. Transfer and Sales Tax. Notwithstanding any provisions of law to the
contrary, Nicolet shall be responsible for and shall pay (a) all sales and
transfer taxes, and (b) all governmental charges, if any, upon the sale or
transfer of any of the Assets.
9. Effective Date. The transfer of the Assets shall be deemed to be
effective as of the close of business on the date first above written, for all
purposes, including federal income taxes and accounting.
10. Captions. The captions and headings to the various sections,
paragraphs and exhibits of this Agreement are for convenience of reference only
and shall not affect or control the meaning or interpretation of any of the
provisions of this Agreement.
11. Integration. This Agreement contains the entire understanding of
the parties hereto with respect to the subject matter contained herein.
12. Notice of Communication. Any notice or other communication shall be
in writing and shall be personally delivered, or sent by overnight or second day
courier or by first class mail, return receipt requested, to the party to whom
such notice or other communication is to be given or made at such party's
address set forth below, or to such other address as such party shall designate
by written notice to the other party as follows:
If to Nicolet:
Nicolet Instrument Corporation
c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02445-9046
Attn: General Counsel
If to Optek:
Thermo Optek Corporation
c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02445-9046
Attn: General Counsel
provided that any notice of change of address, and any notice or other
communication given otherwise than as specified above shall be effective only
upon receipt; and further that any presumption of receipt by the addressee shall
be inoperable during the period of any interruption in Postal Service.
5
<PAGE> 6
13. Survival of Representations and Warranties. All representations and
warranties made by Nicolet or Optek in this Agreement shall survive the
execution and delivery of this Agreement.
14. Governing Law; Assignment. This Agreement is to be construed,
interpreted, applied and governed in all respects in accordance with the laws of
the Commonwealth of Massachusetts, without regard to its conflict of laws
provisions, is to take effect as a sealed instrument, is binding upon and inures
to the benefit of the parties hereto and their respect successors and assigns
and may be canceled, modified or amended only by a written instrument executed
by Nicolet and Optek. No party hereto may assign its rights hereunder without
prior written consent of the other party.
15. Guaranty. Thermo hereby unconditionally guarantees all of the
obligations of Nicolet under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
NICOLET INSTRUMENT CORPORATION
By /s/ Robert J. Rosenthal
-----------------------------------
Robert J. Rosenthal
President
THERMO OPTEK CORPORATION
By /s/ Earl R. Lewis
-----------------------------------
Earl R. Lewis
President
THERMO INSTRUMENT SYSTEMS INC.
By: /s/ Arvin H. Smith
----------------------------------
Arvin H. Smith
President
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Optek Corporation:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
June 3, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Mattson Instruments and Unicam Divisions of Analytical Technology, Inc.:
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
June 3, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form S-1 of Thermo Optek Corporation of our report
dated April 2, 1996 relating to the statutory financial statements of A.R.L.
Applied Research Laboratories, S.A., which appears in such prospectus. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE S.A.
Lausanne, Switzerland
June 4, 1996
