SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended June 28, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-11757
THERMO OPTEK CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-3283973
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8E Forge Parkway
Franklin, Massachusetts 02038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter
period that the Registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of
the issuer's classes of Common Stock, as of the
latest practicable date.
Class Outstanding at July 25, 1997
---------------------------- ----------------------------
Common Stock, $.01 par value 48,450,638
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO OPTEK CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
June 28, December 28,
(In thousands) 1997 1996
-----------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 81,771 $ 66,292
Accounts receivable, less allowances of
$5,793 and $4,997 95,062 88,559
Inventories:
Raw materials and supplies 39,955 34,381
Work in process 15,194 13,557
Finished goods 27,534 26,354
Prepaid expenses 6,909 6,371
Prepaid income taxes 15,238 15,254
-------- --------
281,663 250,768
-------- --------
Property, Plant, and Equipment, at Cost 90,161 83,296
Less: Accumulated depreciation and
amortization 27,267 23,271
-------- --------
62,894 60,025
-------- --------
Patents and Other Assets 9,412 10,232
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 263,340 234,447
-------- --------
$617,309 $555,472
======== ========
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THERMO OPTEK CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 28, December 28,
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Current Liabilities:
Notes payable and current maturities of
long-term obligations $ 21,178 $ 27,736
Accounts payable 26,277 28,920
Accrued payroll and employee benefits 11,930 12,809
Accrued installation and warranty expenses 21,034 21,088
Accrued income taxes 18,801 14,379
Deferred revenue 19,921 15,331
Other accrued expenses (Note 2) 36,828 45,379
Due to affiliated companies (Note 2) 85,197 28,167
-------- --------
241,166 193,809
-------- --------
Deferred Income Taxes 13,805 13,865
-------- --------
Other Deferred Items 3,233 3,413
-------- --------
Long-term Obligations:
5% Subordinated convertible debentures 96,250 96,250
Other 1,792 528
-------- --------
98,042 96,778
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 100,000,000
shares authorized; 48,450,000 shares
issued and outstanding 485 485
Capital in excess of par value 222,123 222,123
Retained earnings (Note 2) 41,688 24,773
Cumulative translation adjustment (3,233) 226
-------- --------
261,063 247,607
-------- --------
$617,309 $555,472
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO OPTEK CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
-----------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
Revenues $117,017 $107,888
-------- --------
Costs and Operating Expenses:
Cost of revenues 63,159 62,053
Selling, general, and administrative
expenses 28,649 28,334
Research and development expenses 6,568 6,779
-------- --------
98,376 97,166
-------- --------
Operating Income 18,641 10,722
Interest Income 912 1,143
Interest Expense (2,091) (1,718)
-------- --------
Income Before Provision for Income Taxes 17,462 10,147
Provision for Income Taxes 7,683 4,090
-------- --------
Net Income $ 9,779 $ 6,057
======== ========
Earnings per Share:
Primary $ .20 $ .13
======== ========
Fully diluted $ .19 $ .13
======== ========
Weighted Average Shares:
Primary 48,450 45,758
======== ========
Fully diluted 54,949 45,758
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO OPTEK CORPORATION
Consolidated Statement of Income
(Unaudited)
Six Months Ended
-----------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
Revenues $223,192 $177,556
-------- --------
Costs and Operating Expenses:
Cost of revenues 119,943 97,813
Selling, general, and administrative
expenses 55,428 49,660
Research and development expenses 12,975 11,713
-------- --------
188,346 159,186
-------- --------
Operating Income 34,846 18,370
Interest Income 1,805 2,684
Interest Expense (3,884) (3,309)
-------- --------
Income Before Provision for Income Taxes 32,767 17,745
Provision for Income Taxes 14,090 7,392
-------- --------
Net Income $ 18,677 $ 10,353
======== ========
Earnings per Share:
Primary $ .39 $ .23
======== ========
Fully diluted $ .37 $ .23
======== ========
Weighted Average Shares:
Primary 48,450 45,458
======== ========
Fully diluted 54,983 45,458
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO OPTEK CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
----------------------
June 28, June 29,
(In thousands) 1997 1996
------------------------------------------------------------------------
Operating Activities:
Net income $ 18,677 $ 10,353
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,947 6,006
Provision for losses on accounts
receivable 114 781
Other noncash expenses 827 979
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable (5,260) 4,789
Inventories (8,036) 503
Other current assets 4 (339)
Accounts payable (4,535) (7,960)
Due to affiliated companies 17,738 (5,322)
Other current liabilities 540 925
Other 264 233
-------- --------
Net cash provided by operating activities 28,280 10,948
-------- --------
Investing Activities:
Acquisitions, net of cash acquired (2,161) (12,074)
Purchases of property, plant, and equipment (3,624) (3,005)
Cash payment to parent company for
acquisition of Mattson and Unicam - (36,558)
Other (136) (40)
-------- --------
Net cash used in investing activities (5,921) (51,677)
-------- --------
Financing Activities:
Net proceeds from issuance of Company
common stock - 37,255
Decrease in short-term obligations, net (6,620) (5,639)
Repayment of long-term obligations (210) (386)
-------- --------
Net cash provided by (used in) financing
activities (6,830) 31,230
-------- --------
Exchange Rate Effect on Cash (50) (405)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents 15,479 (9,904)
Cash and Cash Equivalents at Beginning of
Period 66,292 116,890
-------- --------
Cash and Cash Equivalents at End of Period $ 81,771 $106,986
======== ========
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THERMO OPTEK CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
----------------------
June 28, June 29,
(In thousands) 1997 1996
------------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired companies $ 46,659 $186,889
Cash paid for acquired companies (3,017) (16,869)
Due to affiliated company for
acquired companies (40,319) (100,742)
-------- --------
Liabilities assumed of acquired companies $ 3,323 $ 69,278
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO OPTEK CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Optek Corporation (the Company) without audit and, in
the opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at June
28, 1997, the results of operations for the three- and six-month periods
ended June 28, 1997, and June 29, 1996, and the cash flows for the
six-month periods ended June 28, 1997, and June 29, 1996. Interim results
are not necessarily indicative of results for a full year.
Historical financial results have been restated to include VG Systems
Limited (VG Systems) and Spectronic Instruments Inc. (Spectronic), which
were acquired in transactions similar to poolings of interests (Note 2).
The consolidated financial statements and notes are presented as
permitted by Form 10-Q and do not contain certain information included in
the annual financial statements and notes of the Company. The
consolidated financial statements and notes included herein should be
read in conjunction with the financial statements and notes included in
the Company's Annual Report on Form 10-K for the fiscal year ended
December 28, 1996, filed with the Securities and Exchange Commission.
2. Acquisitions
On March 29, 1996, Thermo Instrument Systems Inc. (Thermo
Instrument), the Company's majority shareholder, acquired a substantial
portion of the businesses comprising the Scientific Instruments Division
of Fisons plc (Fisons), a wholly owned subsidiary of Rhone-Poulenc Rorer,
Inc. In July 1997, the Company agreed to acquire VG Systems, a business
formerly part of Fisons, from Thermo Instrument for $45,546,000 in cash,
subject to a post-closing adjustment. The purchase price was determined
based on the net tangible book value of VG Systems and a pro rata
allocation of Thermo Instrument's total cost in excess of net assets of
acquired companies recorded in connection with the acquisition of the
Fisons businesses. VG Systems manufactures instrumentation and equipment
for material and surface science analysis. This U.K.-based company
consists of four major operating divisions: VG Scientific (analytical
instruments for elemental, chemical, and spatial analysis), VG Semicon
(molecular beam epitaxy systems for semiconductor production), VG
Microtech (ultrahigh-vacuum surface science instruments), and Vacuum
Generators (vacuum components and systems). In addition to these four
divisions, VG Systems includes VG Broadcast, a supplier of teletext
systems for closed-caption television applications. VG Systems reported
1996 revenues of $62 million.
Because the Company and VG Systems were deemed for accounting
purposes to be under control of their common majority owner, Thermo
Instrument, the transaction has been accounted for in a manner similar to
a pooling of interests. Accordingly, the Company's historical financial
statements have been restated to include the results of VG Systems from
March 29, 1996, the date the business was acquired by Thermo Instrument.
The purchase price included $6,902,000 for the increase in net book value
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THERMO OPTEK CORPORATION
2. Acquisitions (continued)
from the date the business was acquired by Thermo Instrument to June 28,
1997. This amount was recorded as a reduction in retained earnings as of
December 28, 1996. The cost of this acquisition exceeded the estimated
fair value of the acquired net assets by $36,353,000, which is being
amortized over 40 years.
In March 1997, Thermo Instrument acquired approximately 95% of the
outstanding shares of Life Sciences International PLC (LSI), a London
Stock Exchange-listed company. Subsequently, Thermo Instrument acquired
the remaining shares of LSI capital stock. In July 1997, the Company
agreed to acquire Spectronic, a former LSI subsidiary, from Thermo
Instrument. Spectronic is a Rochester, New York-based supplier of UV/VIS
spectrophotometers and accessories, fluorescence instruments, and
precision-ruled and holographic gratings for industrial and educational
markets worldwide, and had 1996 revenues of approximately $30 million.
The purchase price for Spectronic consists of $20,760,000 in cash and the
assumption of $19,559,000 in debt, subject to a post-closing adjustment.
The purchase price represents the sum of the net tangible book value of
Spectronic as of June 28, 1997, plus a percentage of Thermo Instrument's
total cost in excess of net assets acquired associated with its
acquisition of LSI, based on the aggregate 1996 revenues of Spectronic
relative to LSI's 1996 consolidated revenues. The purchase price is
subject to a post-closing adjustment based on final determination of the
net tangible book value of the acquired business and a final calculation
of Thermo Instrument's total cost in excess of net assets acquired
associated with the acquisition of LSI.
Because the Company and Spectronic were deemed for accounting
purposes to be under control of their common majority owner, Thermo
Instrument, the transaction has been accounted for in a manner similar to
a pooling of interests. Accordingly, the accompanying financial
statements include the results of Spectronic from March 12, 1997, the
date the business was acquired by Thermo Instrument. The purchase price
included $1,762,000 for the increase in net book value from the date the
business was acquired by Thermo Instrument to June 28, 1997. This amount
was recorded as a reduction in retained earnings. The cost of this
acquisition exceeded the estimated fair value of the acquired net assets
by $28,507,000, which is being amortized over 40 years.
Due to affiliated companies in the accompanying 1997 balance sheet
includes $85.9 million payable to Thermo Instrument for the acquistion of
VG Systems and Spectronic. The Company expects to repay this debt, with
interest, in the third quarter of 1997. In August 1997, the Company
borrowed $40.0 million from Thermo Electron Corporation (Thermo Electron)
pursuant to a promissory note due July 1998 and bearing interest at the
90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter. The Company will use the proceeds from the
note and available cash to pay Thermo Instrument for the acquisitions.
During 1997, the Company acquired two additional companies, for an
aggregate $2,161,000 in cash, net of cash acquired, which were accounted
for using the purchase method of accounting. Allocation of the purchase
9PAGE
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THERMO OPTEK CORPORATION
2. Acquisitions (continued)
price for these acquisitions was based on an estimate of the fair value
of the net assets acquired.
Based on unaudited data, the following table presents selected
financial information of the Company, VG Systems, and Spectronic on a pro
forma basis, assuming the companies had been combined since the beginning
of 1996. The effect of the acquisitions not included in the pro forma
data was not material to the Company's results of operations.
Three Months Six Months
Ended Ended
------------ -------------------
June 29, June 28, June 29,
(In thousands except per share amounts) 1996 1997 1996
-----------------------------------------------------------------------
Revenues $115,669 $227,838 $204,857
Net income 6,041 16,928 7,176
Earnings per share:
Primary .13 .35 .16
Fully diluted .13 .33 .16
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisitions of VG Systems and Spectronic been made at the beginning of
1996.
During 1996, the Company undertook a restructuring in connection with
its acquisitions of VG Systems, A.R.L. Applied Research Laboratories S.A.
(ARL), and VG Elemental, effective March 1996, and the Mattson
Instruments and Unicam divisions of ATI, effective December 1995. During
the first six months of 1997, the Company expended $1,249,000 at its
Mattson and Unicam subsidiaries and $3,027,000 at its VG Systems, ARL,
and VG Elemental subsidiaries for restructuring costs. These expenditures
consisted primarily of severance and abandoned-facility payments. The
Company finalized its restructuring plans for Mattson and Unicam in 1996
and for VG Systems, ARL, and VG Elemental in the first quarter of 1997.
In connection with finalizing its restructuring plan for VG Systems, ARL,
and VG Elemental, the Company reduced acquisition reserves by $1,073,000
in 1997. This amount was recorded as a decrease in cost in excess of net
assets of acquired companies. The remaining reserve balance as of June
28, 1997, of $5,872,000 for all of the businesses referred to above is
for ongoing severance and abandoned facility payments. As of June 28,
1997, the Company had accrued a total of $7,041,000 for restructuring
costs for all of its acquisitions, including those discussed above. These
reserves are included in other accrued expenses in the accompanying 1997
balance sheet.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
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THERMO OPTEK CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the caption "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996, filed with the Securities and Exchange
Commission.
Overview
Prior to 1996, the Company's principal operating units included
Thermo Jarrell Ash Corporation (TJA), a manufacturer and distributor of
atomic absorption (AA) and atomic emission (AE) spectrometry products
based in Franklin, Massachusetts, and Nicolet Instrument Corporation
(Nicolet), a manufacturer and distributor of Fourier Transform Infrared
(FT-IR) and FT-Raman spectrometry products based in Madison, Wisconsin.
During 1996 and 1997, the Company acquired several companies, summarized
below, which significantly increased its operations.
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 February 1996, the Company acquired Oriel
Corporation, a manufacturer and distributor of electro-optical
instruments and components, and Corion Corporation, a manufacturer of
commercial optical filters. Effective March 29, 1996, the Company
acquired A.R.L. Applied Research Laboratories S.A. (ARL), a manufacturer
of wavelength-dispersive X-ray fluorescence instruments and arc/spark
atomic emission spectrometers; VG Elemental, a manufacturer of
inductively coupled plasma/mass spectrometers; and VG Systems Limited (VG
Systems), a manufacturer of instrumentation and equipment for material
and surface science analysis, from Thermo Instrument Systems Inc. (Note
2). Effective March 12, 1997, the Company acquired Spectronic Instruments
Inc. (Spectronic), a supplier of UV/VIS spectrophotometers and
accessories, fluorescence instruments, and precision-ruled and
holographic gratings, from Thermo Instrument (Note 2).
Through its Thermo Vision Corporation subsidiary, the Company
addresses the photonics marketplace for optical components, imaging
systems, analytical instruments, and lasers. Thermo Vision is pursuing
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. In
1996, the Company announced its intent to spin out Thermo Vision through
a distribution of 100 percent of its outstanding capital stock in the
form of a dividend to the Company's shareholders. The Company anticipates
completing the spinout in 1997. The Company is seeking a Letter Ruling
from the Internal Revenue Service stating that this proposed spinout
would have no current tax effect on the Company or its shareholders. The
Company would distribute the shares upon receipt of the Letter Ruling and
satisfaction of other conditions, including the listing of the Thermo
11PAGE
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THERMO OPTEK CORPORATION
Overview (continued)
Vision shares on the American Stock Exchange. Thermo Vision, which
includes Oriel and Corion, had revenues of $30.4 million in 1996.
The Company sells its products on a worldwide basis. Although the
Company seeks to charge its customers in the same currency as its
operating costs, the Company's financial performance and competitive
position can be affected by currency exchange rate fluctuations. Where
appropriate, the Company uses forward contracts to reduce its exposure to
currency fluctuations.
Results of Operations
Second Quarter 1997 Compared With Second Quarter 1996
Revenues increased 8% to $117.0 million in the second quarter of 1997
from $107.9 million in the second quarter of 1996, primarily due to the
acquisition of Spectronic, effective March 12, 1997 (Note 2).
Acquisitions added revenues of $13.8 million in 1997. This increase was
offset in part by a $2.4 million decrease, due to the unfavorable effects
of currency translation as a result of the strengthening in value of the
U.S. dollar relative to currencies in foreign countries in which the
Company operates, and a $2.3 million decrease, primarily due to the
elimination of certain unprofitable product lines at companies acquired
in late 1995 and 1996.
The gross profit margin increased to 46% in the second quarter of
1997 from 42% in the second quarter of 1996, primarily due to margin
improvements at ARL and VG Systems and the inclusion of higher-margin
Spectronic revenues, specifically from its gratings products.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 24% in the second quarter of 1997 from 26% in the
second quarter of 1996, primarily due to efforts to reduce selling and
administrative costs at Mattson and Unicam and the integration of ARL and
VG Elemental products into the Company's existing North American and
European distribution channels.
Research and development expenses as a percentage of revenues were
unchanged at 6% in the second quarter of 1997 and 1996.
Interest income decreased to $0.9 million in the second quarter of
1997 from $1.1 million in the second quarter of 1996 due to lower
balances as a result of cash used to fund acquisitions. Interest expense
increased to $2.1 million in 1997, from $1.7 million in 1996, due to the
inclusion of interest on short- and long-term borrowings at acquired
businesses. Interest income will decrease and interest expense will
increase as a result of the cash payment the Company expects to make and
the short-term borrowings the Company made in August 1997 in connection
with the acquisitions of VG Systems and Spectronic (Note 2).
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THERMO OPTEK CORPORATION
Second Quarter 1997 Compared With Second Quarter 1996 (continued)
The effective tax rate was 44% in the second quarter of 1997,
compared with 40% in the second quarter of 1996. The effective tax rates
exceeded the statutory federal income tax rate primarily due to the
impact of state income taxes, nondeductible amortization of cost in
excess of net assets of acquired companies, and the inability to provide
a tax benefit on foreign losses, offset in part by the tax benefit
associated with a foreign sales corporation. The increase in the
effective rate in 1997 was primarily due to higher nondeductible
amortization of cost in excess of net assets of acquired companies.
First Six Months 1997 Compared With First Six Months 1996
Revenues increased 26% to $223.2 million in the first six months of
1997 from $177.6 million in the first six months of 1996, primarily due
to the acquisitions of ARL, VG Elemental, and VG Systems, effective March
29, 1996, and Spectronic, effective March 12, 1997 (Note 2). Acquisitions
added revenues of $56.7 million in 1997. This increase was offset in part
by the inclusion in 1996 of several large nonrecurring sales to the
Chinese and Japanese governments and the elimination of certain
unprofitable product lines at companies acquired in late 1995 and 1996.
In addition, revenues decreased $3.8 million due to the unfavorable
effects of currency translation as a result of the strengthening in value
of the U.S. dollar relative to currencies in foreign countries in which
the Company operates.
The gross profit margin increased to 46% in the first six months of
1997 from 45% in the first six months of 1996, primarily due to the
reasons discussed in the results of operations for the second quarter.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 25% in the first six months of 1997 from 28% in the
first six months of 1996, primarily due to the reasons discussed in the
results of operations for the second quarter.
Research and development expenses as a percentage of revenues
decreased to 6% in the first six months of 1997 from 7% in the first six
months of 1996, primarily due to the completion of certain research
projects at TJA and Unicam.
Interest income decreased to $1.8 million in the first six months of
1997 from $2.7 million in the first six months of 1996 due to lower
invested balances as a result of cash used to fund acquisitions. Interest
expense increased to $3.9 million in 1997, from $3.3 million in 1996, due
to the inclusion of interest on short- and long-term borrowings at
acquired businesses.
The effective tax rate was 43% in the first six months of 1997,
compared with 42% in the first six months of 1996. The effective tax
rates exceeded the statutory federal income tax rate primarily due to the
impact of state income taxes, nondeductible amortization of cost in
excess of net assets of acquired companies, and the inability to provide
a tax benefit on foreign losses, offset in part by the tax benefit
associated with a foreign sales corporation.
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THERMO OPTEK CORPORATION
Liquidity and Capital Resources
Consolidated working capital was $40.5 million at June 28, 1997,
compared with $57.0 million at December 28, 1996. Included in working
capital are cash and cash equivalents of $81.8 million at June 28, 1997,
compared with $66.3 million at December 28, 1996. Cash provided by
operating activities was $28.3 million for the first six months of 1997.
During this period, the Company used $8.0 million of cash to fund an
increase in inventories, primarily to support the distribution of ARL and
VG Elemental products through certain of the Company's existing
distribution channels. This change in distribution channels also
contributed to a reduction in amounts due from affiliated companies of
$17.8 million and an increase in accounts receivable of $5.3 million. The
Company's investing activities used $5.9 million of cash in the first six
months of 1997. During this period, the Company used $2.2 million of cash
for acquisitions, net of cash acquired. The Company expended $3.6 million
for the purchase of property, plant, and equipment and plans to expend an
additional $4.0 million for such purchases in the remainder of 1997.
In July 1997, the Company agreed to purchase two businesses from
Thermo Instrument, VG Systems for $45.5 million in cash, and Spectronic
for $20.8 million in cash and the assumption of $19.6 million in debt
(Note 2). Due to affiliated companies in the accompanying 1997 balance
sheet includes $85.9 million payable to Thermo Instrument for these
acquired companies. The Company expects to repay this debt, with
interest, in the third quarter of 1997. In August 1997, the Company
borrowed $40.0 million from Thermo Electron pursuant to a promissory note
due July 1998 and bearing interest at the 90-day Commercial Paper
Composite Rate plus 25 basis points, set at the beginning of each
quarter. The Company will use the proceeds from the note and available
cash to pay Thermo Instrument for the acquisitions.
The Company used $6.8 million of cash in the first six months of 1997
for the repayment of short- and long-term borrowings.
Although the Company expects to have positive cash flow from its
existing operations, the Company may require significant amounts of cash
for any acquisition of complementary businesses. The Company expects that
it will finance any such acquisitions through a combination of internal
funds, additional debt or equity financing from capital markets, or
short-term borrowings from Thermo Instrument or Thermo Electron, although
it has no agreement with these companies to ensure that funds will be
available on acceptable terms or at all, except as described above. The
Company believes its existing resources are sufficient to meet the
capital requirements of its existing operations for the foreseeable
future.
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THERMO OPTEK CORPORATION
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
On June 2, 1997, at the Annual Meeting of Stockholders, the
Stockholders elected five incumbent directors to a one-year term expiring
in 1998. The Directors elected at the meeting were: Dr. George N.
Hatsopoulos, Mr. Stephen R. Levy, Mr. Earl R. Lewis, Mr. Robert A.
McCabe, and Mr. Arvin H. Smith. Dr. Hatsopoulos, Mr. Lewis, and Mr. Smith
each received 47,485,658 shares voted in favor of his election and 3,600
shares voted against. Mr. Levy and Mr. McCabe each received 47,486,158
shares voted in favor of his election and 3,100 shares voted against. No
abstentions or broker nonvotes were recorded on the election of
directors.
At the Annual Meeting of Stockholders, the Stockholders also approved
a proposal to adopt an employees' stock purchase plan and to reserve
100,000 shares of the Company's common stock for issuance thereunder as
follows: 47,458,708 shares voted in favor of the proposal, 6,200 shares
voted against the proposal, and 24,350 shares abstained. No broker
nonvotes were recorded on the proposal.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
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THERMO OPTEK CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 6th day of August
1997.
THERMO OPTEK CORPORATION
Paul F. Kelleher
--------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
--------------------
John N. Hatsopoulos
Vice President and Chief
Financial Officer
16PAGE
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THERMO OPTEK CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
2 Share purchase agreement dated as of July 30, 1997,
between the Company and Thermo Instrument Systems Inc.
10 $40,000,000 Promissory Note dated as of August 5, 1997,
issued by the Company to Thermo Electron Corporation.
11 Statement re: Computation of Earnings per Share.
27 Financial Data Schedule.
Exhibit 2
SHARE PURCHASE AGREEMENT
BETWEEN
THERMO OPTEK CORPORATION
AND
THERMO INSTRUMENT SYSTEMS INC.
_____________________________
Dated as of July 30, 1997
_____________________________
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") dated as of
July 30, 1997 is between Thermo Optek Corporation ("TOC"), a
Delaware corporation, and Thermo Instrument Systems Inc. ("THI"),
a Delaware corporation.
Preliminary Statement
1. Life Sciences International Limited ("LSI"), which is a
majority-owned subsidiary of THI, owns, directly or through
wholly-owned subsidiaries, all of the issued and outstanding
shares (the "Spectronic Shares") of Spectronic Instruments Inc.
("Spectronic"), a corporation organized under the laws of the
State of Delaware. THI also owns, directly or through
wholly-owned subsidiaries, all of the issued and outstanding
shares (the "VG Shares") of VG Systems Limited ("VG"), a private
limited liability company organized under the laws of the United
Kingdom. The Spectronic Shares and the VG Shares are referred to
collectively as the "Shares". THI, LSI and those of THI's and
LSI's wholly-owned subsidiaries that own Shares are referred to
individually as a "Seller" and collectively as the "Sellers".
Spectronic and VG are referred to collectively as the "Companies"
and individually as a "Company".
2. TOC desires to purchase, or cause its wholly-owned
subsidiaries to purchase, and THI desires to sell, or to cause
its subsidiaries to sell, the Shares for the consideration set
forth below, subject to the terms and conditions of this
Agreement.
NOW THEREFORE, in consideration of the mutual promises
hereinafter set forth and other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereby
agree as follows:
SECTION 1 - PURCHASE AND SALE OF THE SHARES
1.1 Purchase of the Shares from the Sellers. Subject to
and upon the terms and conditions of this Agreement, at the
closing of the transactions contemplated by this Agreement (the
"Closing"), THI shall cause its subsidiaries to sell, transfer,
convey, assign and delivery to TOC, or its wholly-owned
subsidiaries, and TOC or its wholly-owned subsidiaries shall
purchase, acquire and accept the Shares.
1.2 Further Assurances. At any time and from time to time
after the Closing, at TOC's request and without further
consideration, each Seller shall promptly execute and deliver
such instruments of sale, transfer, conveyance, assignment and
confirmation, and take all such other action as TOC may
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reasonably request, more effectively to transfer, convey and
assign to TOC, and to confirm TOC's title to, all of the Shares
owned by such Seller, to put TOC in actual possession and
operating control of the assets, properties and business of the
Companies, to assist in exercising all rights with respect
thereto and to carry out the purpose and intent of this
Agreement.
1.3 Purchase Price for the Shares.
(a) The purchase price to be paid by TOC for the
Spectronic Shares (the "Spectronic Purchase Price") shall consist
of (i) $20,745,450 in cash and (ii) 1,000 shares of common stock
of TOC (the "TOC Shares").
(b) TOC and THI acknowledge and agree that the
Spectronic Purchase Price represents an estimate of the sum of
(i) the net operating assets of Spectronic as of June 28, 1997,
plus (ii) a percentage of the total goodwill associated with
THI's acquisition of LSI equal to the sales of Spectronic for the
1996 fiscal year relative to the total sales of LSI during such
period (the "Goodwill Percentage"). Promptly following the
Closing Date, but in any event no later than September 30, 1997,
THI will prepare a draft statement of the net operating assets of
Spectronic (the "Spectronic Net Asset Statement"), and a draft
calculation of THI's total goodwill associated with the
acquisition of LSI (the "THI Goodwill Statement") in each case as
of June 28, 1997. TOC will review such statements and provide
THI with any objections thereto within 30 days after TOC's
receipt thereof. If TOC does not object within such 30-day
period, then the THI Goodwill Statement and the Spectronic Net
Asset Statement shall be deemed to be accepted by TOC and shall
become final. If TOC does object to either statement, then the
parties will use best efforts to resolve any such objections
within 30 days. If the parties are unable to resolve such
objections within such 30-day period, then any disputed items
will be resolved by an accounting firm designated jointly by TOC
and THI and the statements shall be finalized in accordance with
the determination of such firm. Upon finalization of the
Spectronic Net Asset Statement and the THI Goodwill Statement as
provided above, the Spectronic Purchase Price shall be increased
or decreased, as the case may be, by (A) the amount by which the
net operating assets of Spectronic as shown on the Spectronic Net
Asset Statement are greater than or less than $14,686,000 and (B)
the amount by which the Goodwill Percentage of THI's total
goodwill as shown on the THI Goodwill Statement is greater than
or less than $28,303,000. For purposes of this section 1.3(b),
"goodwill" means cost in excess of net tangible assets acquired,
and does not include any restructuring or similar costs or
reserves accrued in connection with actions taken by the
businesses of LSI after June 28, 1997 to reduce costs or enhance
profitability, and "net operating assets" means tangible assets
minus total liabilities, determined in accordance with THI's
accounting policies.
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(c) The purchase price to be paid by TOC for the VG
Shares (the "VG Purchase Price") shall consist of $45,546,000 in
cash.
(d) TOC and THI acknowledge and agree that the VG
Purchase Price represents an estimate of the sum of (i) THI's
investment in VG plus (ii) the cumulative retained earnings of VG
for the period commencing on March 29, 1996 (the date of THI's
acquisition of VG as part of the acquisition by THI and its
subsidiaries of certain businesses of Fisons plc (the "Fisons
Businesses") pursuant to the Amended and Restated Asset and Stock
Purchase Agreement dated as of March 29, 1996 among THI, Thermo
Electron Corporation and Fisons plc (the "Restated Agreement"),
and ending as of June 28, 1997. THI and TOC further acknowledge
and agree that the purchase price paid by THI for the Fisons
Businesses is subject to a post-closing adjustment based on the
difference between the value of the net tangible assets of the
Fisons Businesses as shown on the closing balance sheet dated as
of March 29, 1996 (the "Fisons Closing Balance Sheet") and the
target net tangible asset value provided for in the Restated
Agreement. In the event of any such adjustment, the VG Purchase
Price shall be recalculated to account for any adjustment in
THI's investment in VG. If any such recalculation results in an
increase in the VG Purchase Price, TOC shall pay the amount of
such increase to THI, and if any such recalculation results in a
decrease in the VG Purchase Price, THI shall pay the amount of
such decrease to TOC.
(e) Any payment due by TOC or THI to the other under
Section 1.3(b) and/or 1.3(d) shall be accompanied by interest
from the date hereof at a rate equal to the Commercial Paper
Composite Rate plus 25 basis points.
1.4 Closing. The Closing shall take place at the offices
of THI at 81 Wyman Street, Waltham, Massachusetts. At the
Closing THI shall deliver, or cause its subsidiaries to deliver,
certificates evidencing the Shares duly endorsed in blank or with
stock powers duly executed. At the Closing TOC shall deliver the
Spectronic Purchase Price (including the TOC Shares) and the VG
Purchase Price to THI or to such of its subsidiaries as may be
Sellers, together with interest from June 29, 1997, accrued at a
rate equal to the 90-day Commercial Paper Deposit Rate plus 25
basis points, set as of June 29, 1997 and at the beginning of
each fiscal quarter thereafter.
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SECTION 2 - REPRESENTATIONS AND WARRANTIES OF THI
Except as set forth on the disclosure schedule delivered to
TOC on the date hereof (the "Disclosure Schedule"), THI
represents and warrants to TOC as follows. The term "knowledge,"
when used in this Agreement, shall mean actual knowledge after
reasonable investigation.
2.1 Organization and Qualification. Each of the Sellers
and the Companies is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation and has full corporate power and authority to
own, lease and operate its assets and to carry on its business as
now being and as heretofore conducted. Each of the Sellers and
the Companies is qualified or otherwise authorized to transact
business as a foreign corporation in all jurisdictions in which
such qualification or authorization is required by law, except
for jurisdictions in which the failure to be so qualified or
authorized would not have a material adverse effect on the
assets, properties, business, results of operations, condition
(financial or otherwise) or prospects of the Companies taken as a
whole.
2.2 Authority. THI has full right, power, capacity and
authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby and each of the
Sellers has full right, power, capacity and authority to
consummate the transactions contemplated hereby to be performed
by such Seller. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary
corporate action on the part of THI. This Agreement has been duly
and validly executed and delivered by THI and constitutes the
valid and binding obligation of THI, enforceable against it in
accordance with the terms hereof. Neither the execution,
delivery and performance of this Agreement, nor the consummation
of the transactions contemplated hereby will (i) conflict with or
result in a violation, breach, termination or acceleration of, or
default under (or would result in a violation, breach,
termination, acceleration or default with the giving of notice or
passage of time, or both) any of the terms, conditions or
provisions of the organizational documents of any Seller or
Company, or of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which any of
Seller or Company is a party or by which any Seller or Company or
any of their respective properties or assets may be bound or
affected; (ii) result in the violation of any order, writ,
injunction, decree, statute, rule or regulation applicable to any
Seller or Company or any of their respective properties or
assets; (iii) result in the imposition of any lien, encumbrance,
charge or claim upon any assets of any of the Companies; or (iv)
entitle any employee of any of the Companies to severance or
other payments or create any other obligation to an employee. No
consent or approval by, or notification to or filing with, any
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court, governmental authority or third party is required in
connection with the execution, delivery and performance of this
Agreement by any Seller or the consummation of the transactions
contemplated hereby.
2.3 Capitalization and Title to Shares.
(a) The authorized share capital of the Companies is
set forth on Exhibit A hereto. With respect to each Company, the
Seller set forth opposite the name of such Company on Exhibit A
is the record and beneficial owner of all of the issued and
outstanding shares of such Company. All of the Shares are duly
authorized and are validly issued, fully paid, nonassessable and
free of preemptive rights.
(b) Except as set forth on Exhibit A, there are not
any other shares of capital stock of any Company authorized or
outstanding or any subscriptions, options, conversion or exchange
rights, warrants, repurchase or redemption agreements, or other
agreements or commitments obligating any Company to issue,
transfer, sell, repurchase or redeem any shares of its capital
stock or other securities of any Company. There are no written
shareholder agreements, voting trusts, proxies or other
agreements, instruments or understandings with respect to the
voting of the capital stock of any Company. The books and
records of each Company, including without limitation the books
of account, minute books, stock certificate books and stock
ledgers, are complete and correct and accurately reflect the
conduct of the business and affairs of such Company.
2.4 Subsidiaries and Other Affiliates.
(a) The Disclosure Schedule sets forth all
Subsidiaries of the Companies and the jurisdiction in which each
is incorporated. All shares of the capital stock of each
Subsidiary owned by the Companies are owned free and clear of any
charges, liens, encumbrances, security interests or adverse
claims. As used in this Agreement, "Subsidiary" means any
corporation or other legal entity of which a party to this
Agreement owns, directly or indirectly, fifty percent (50%) or
more of the stock or other equity interest entitled to vote for
the election of directors and representations, warranties and
covenants referring to any Company contained herein shall be
deemed to mean such Company and each of its Subsidiaries, both
separately and together as a consolidated whole, unless and
except to the extent expressly indicated otherwise.
(b) There are not any other shares of capital stock of
any Subsidiary of any Company authorized or outstanding or any
subscriptions, options, conversion or exchange rights, warrants,
repurchase or redemption agreements, or other agreements or
commitments obligating any Subsidiary of any Company to issue,
transfer, sell, repurchase or redeem any shares of its capital
stock or other securities. There are no shareholder agreements,
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voting trusts, proxies or other agreements, instruments or
understandings with respect to the voting of the capital stock of
any Subsidiary of any Company.
(c) Except for its Subsidiaries, none of the
Companies, directly or indirectly, owns any material equity
interest in any corporation, partnership, joint venture or other
entity.
2.5 Financial Statements. THI has delivered to TOC prior
to the execution of this Agreement true and complete copies of:
the unaudited consolidated balance sheets of each of the
Companies as at June 28, 1997 (with respect to each Company, the
"Balance Sheet"), and the unaudited consolidated statements of
earnings of each of the Companies for the six-month period ended
June 28, 1997 (collectively, with respect to each Company, the
"Financial Statements"). The Financial Statements have been
prepared from, and are in accordance with, the books and records
of LSI or Fisons, as the case may be, and fairly present the
financial condition, results of operations, and cash flows of the
Companies as at the dates and for the periods indicated, in each
case in accordance with U.K. generally accepted accounting
principles applied on a basis consistent with previous years
subject to normal year-end adjustments and footnote disclosures,
which in the aggregate are not material.
2.6 Absence of Undisclosed Liabilities; No Dealings with
Affiliates. As of the date of its respective Balance Sheet, none
of the Companies had any material liabilities or obligations of
any nature, whether accrued, absolute, contingent or otherwise
and whether due or to become due (including without limitation,
liabilities as guarantor or otherwise with respect to obligations
of others or liabilities for taxes due or then accrued or to
become due), required to be reflected or disclosed on such
Balance Sheet that were not adequately reflected or reserved
against on the such Balance Sheet. None of the Companies has any
liabilities of the type required to be reflected or disclosed on
a balance sheet in accordance with U.K. generally accepted
accounting principles, other than liabilities (i) adequately
reflected or reserved against on its respective Balance Sheet,
(ii) incurred since the date of such Balance Sheet in the
ordinary course of business and consistent with past practice,
(iii) that would not, in the aggregate, have a material adverse
effect on the Companies taken as a whole, or (iv) disclosed in
this Agreement. None of the Companies has any contractual
arrangement with or commitment to or from any of its
stockholders, officers, management, directors or employees (or
their family members) other than such as may have been entered
into in the normal course of employment, including, without
limiting the generality of the foregoing, being directly or
indirectly a joint investor or coventurer with respect to, or
owner, lessor, lessee, licenser or licensee of, any real or
personal property, tangible or intangible, owned or used by, or a
lender to or debtor of, such Company.
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2.7 Taxes. Each of the Companies has accurately prepared
and duly and timely filed all federal, state, local, provincial
or foreign tax and other returns and reports which were required
to be filed, in respect of all income, franchise, excise, sales,
use, property (real and personal), VAT, payroll and other taxes,
levies, imports, duties, license and registration fees, charges
or withholdings of any nature whatsoever (collectively "Taxes"),
and to the extent the liabilities of the Companies for Taxes have
not been fully discharged, adequate reserves have been
established on its respective Balance Sheet. None of the
federal, state, local, provincial or foreign Tax returns of the
Companies has been audited or examined by the governmental
authority having jurisdiction. No waivers of any statutes of
limitation are in effect in respect of any Taxes. None of the
Companies is in default in the payment of any Taxes due and
payable or on any assessments received in respect thereof, and
there are no claims pending or, to the best knowledge of the
Companies and the Sellers, threatened, against any of the
Companies for past due Taxes. All Taxes incurred but not yet due
have been fully accrued on the books of the Companies or full
reserves have been established therefor; the reserves indicated
on the respective Balance Sheets are also adequate to cover all
Taxes that may become payable by the Companies in future periods
in respect of any transactions or sales occurring on or prior to
the date of the Balance Sheets. Without limiting the generality
of the foregoing, the Companies have withheld or collected from
each payment made to each of their employees, consultants or
non-U.S. payees, the amount of all Taxes required to be withheld
or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositories.
2.8 Properties. Each Company owns and has good title to
all of the assets and properties reflected as owned by it on its
respective Balance Sheet or acquired by such Company since the
date of such Balance Sheet (except personal property sold or
otherwise disposed of in the ordinary course of business since
the date of such Balance Sheet), free and clear of any lien,
claim or other encumbrance, except for (i) the liens, claims or
other encumbrances reflected on such Balance Sheet, (ii) assets
and properties disposed of, or subject to purchase or sales
orders, in the ordinary course of business since the date of such
Balance Sheet, (iii) liens, claims or other encumbrances securing
the liens of materialmen, carriers, landlords and like persons,
all of which are not yet due and payable, (iv) liens for taxes
not yet delinquent and (v) liens, claims, other encumbrances or
defects in title that, in the aggregate, are not material to the
Companies taken as a whole. The Companies own or have a valid
leasehold interest in all of the buildings, structures, leasehold
improvements, equipment and other tangible property material to
the Companies taken as a whole, all of which are in good and
sufficient operating condition and repair, ordinary wear and tear
excepted and none of the Companies has received any notice that
any such property is in violation in any material respect of any
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existing law or any building, zoning, health, safety or other
ordinance, code or regulation.
2.9 Hazardous Materials.
(a) There has been no generation, use, handling,
storage or disposal of any Hazardous Materials in violation of
common law or any applicable environmental law at any site owned
or premises leased by any of the Companies during the period of
such Company's ownership or lease that could have a material
adverse effect on the Companies taken as a whole. Nor has there
been or is there threatened any release of any Hazardous
Materials on or at any such site or premises during such period
in violation of common law or any applicable environmental law or
which created or will create an obligation to report or remediate
such release, which release or failure to report or remediate
could have a material adverse effect on the Companies taken as a
whole. For purposes of this Agreement, "Hazardous Material"
means any medical waste, flammable, explosive or radioactive
material, or any hazardous or toxic waste, substance or material,
including substances defined as "hazardous substances,"
"hazardous materials," "solid waste" or "toxic substances" under
any applicable laws or ordinances relating to hazardous or toxic
materials and substances, air pollution (including noise and
odors), water pollution, liquid and solid waste, pesticides,
drinking water, community and employee health, environmental land
use management, stormwater, sediment control, nuisances,
radiation, wetlands, endangered species, environmental
permitting, petroleum products, and all rules and regulations
promulgated pursuant to any such laws and ordinances.
(b) THI has previously made available to TOC copies of
all documents concerning any environmental or health and safety
matter that could have a material adverse effect on the Companies
taken as a whole, if any, and copies of any environmental audits
or risk assessments, site assessments, documentation regarding
off-site disposal of Hazardous Materials, spill control plans and
material correspondence with any governmental authority regarding
the foregoing.
2.10 Accounts Receivable. All accounts and notes receivable
of the Companies shown on the Balance Sheets and all accounts and
notes receivable acquired by the Companies subsequent to the date
of the Balance Sheets have arisen in the ordinary course of
business and have been collected, or are in the process of
collection and are collectible in the ordinary course of business
and in any event within nine months from the Closing Date, in the
aggregate recorded amounts thereof, less the applicable
allowances reflected on the Balance Sheets with respect to the
accounts and notes receivable shown thereon, or set up consistent
with past practice on the books of the Companies with respect to
the accounts and notes receivable acquired subsequent to the date
of the Balance Sheets.
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2.11 Inventories. All Inventories (as defined below) of the
Companies are of a quality and quantity usable and saleable in
the ordinary course of business, except for obsolete items and
items of below-standard quality, all of which are in the
aggregate immaterial to the Companies taken as a whole. Items
included in such Inventories are carried on the books of the
Companies, and are valued on the Balance Sheets, at the lower of
cost or market. The value of obsolete materials and materials of
below-standard quality or quantity has been written down on the
books of account of the Companies to realizable market value.
The term "Inventories" includes all stock of raw materials,
work-in-process and finished goods, including but not limited to
finished goods purchased for resale, held the Companies for
manufacturing, assembly, processing, finishing, sale or resale to
others, from time to time in the ordinary course of business of
the Companies in the form in which such inventories then are held
or after manufacturing, assembling, finishing, processing,
incorporating with other goods or items, refining or the like.
2.12 Purchase and Sale Commitments. No outstanding purchase
commitments by any of the Companies are in excess of the normal,
ordinary and usual requirements of such Company, and the
aggregate of the contract prices to which the Companies have
agreed in any outstanding purchase commitments is not so
excessive when compared with current market prices for the
relevant commodities or services that a material loss is likely
to result. No outstanding sales commitment by any of the
Companies obligates such Company to sell any product or service
at a price which, because of currently prevailing and projected
costs of materials or labor, is likely to result, when all such
sales commitments are taken in the aggregate, in a material loss
to the Companies taken as a whole. There are no material
suppliers to any of the Companies of significant goods or
services with respect to which practical alternative sources of
supply, or comparable products, are not available on comparable
terms and conditions.
2.13 Governmental Authorizations. The Companies have all
governmental permits, licenses, franchises, concessions, zoning
variances and other approvals, authorizations and orders
(collectively "Permits") material to the Companies taken as a
whole. All such Permits are presently in full force and effect,
the Companies are in compliance with the requirements thereof, no
suspension or cancellation of any of them is threatened so far as
is known to the Sellers or the Companies, and the sale of the
Shares as contemplated hereby will not adversely affect the
validity or effectiveness of, and will not require, for retention
thereof after such sale, the consent or approval of any party to,
or any other person or governmental authority having jurisdiction
of, any such Permit. None of the Companies or the Sellers has
any knowledge of any fact or circumstance which would prevent,
limit or restrict it from continuing to operate its business in
the present manner, and no new requirements pertaining to the
manner of operating its business have been issued or announced by
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any governmental authority during the past year nor are there any
disputes pending between any of the Companies and any
governmental authority relating to such Company's operations as
presently being conducted or actively considered.
2.14 Intellectual Property. Each of the Companies owns, or
is licensed to use, or otherwise has the right to use all
patents, trademarks, service marks, trade names, trade secrets,
franchises, and copyrights, and all applications for any of the
foregoing, and all technology, know-how and processes necessary
for the conduct of its businesses as now conducted (collectively,
the "Proprietary Rights"). A list of all such copyrights,
trademarks, tradenames and patents, and all applications
therefor, has been furnished or made available to TOC. None of
the Companies or the Sellers is aware of any claim by any third
party that the business of any of the Companies as currently
conducted or proposed to be conducted infringes upon the
unlicensed Proprietary Rights of others, nor have any of the
Companies or any of the Sellers received any notice or claim from
any third party of such infringement by any of the Companies.
None of the Companies or the Sellers is aware of any infringement
by any third party on, or any competing claim of right to use or
own any of, the Proprietary Rights of any of the Companies. Each
of the Companies has the right to use, free and clear of claims
or rights of others, all customer lists and computer software
material to its business as presently conducted. To the best
knowledge of the Companies and the Sellers, none of the
activities of the employees of any of the Companies on behalf of
such Company violates any agreements or arrangements which any
such employees have with former employers in a way which is
materially adverse to the business of the Companies taken as a
whole.
2.15 Insurance. None of the Companies is in default with
respect to any provisions of any policy of general liability,
fire, title or other form of insurance held by it, each of the
Companies is current in the payment of all premiums due on such
insurance and none of the Companies has failed to give any notice
or present any claim thereunder in due and timely fashion, except
for claims that are immaterial in both the nature of the claim
and in the amount of such claim. The Companies maintain
insurance on all of their assets and business (including products
liability insurance) from insurers which are financially sound
and reputable, in amounts and coverages and against the kinds of
risks and losses reasonably prudent to be insured against by
corporations engaged in the same or similar businesses. No basis
exists which would jeopardize the coverage under any such
insurance. No such insurance will be terminated or canceled by
reason of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated
hereby. THI has previously furnished or made available to TOC
all policies of general liability, fire, title or other forms of
insurance applicable to the Companies and a description of all
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claims pending thereunder other than health or dental insurance
claims.
2.16 Employee Benefit Plans.
(a) THI has made available or furnished to TOC true
and complete copies of each pension, profit-sharing, deferred
compensation, incentive compensation, severance pay, retirement,
welfare benefit or other plan or arrangement providing benefits
to employees or retirees, including both those that do and do not
constitute employee benefit plans within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended (the "ERISA"), currently maintained or contributed to by
THI or any of its affiliates for the benefit of the employees or
retirees of the Companies (each, a "Plan").
(b) Except as set forth on the Disclosure Schedule,
(i) each such Plan that is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA is being operated and
administered in compliance with Section 401(a) of the Code, a
favorable determination letter has been obtained from the
Internal Revenue Service (the "IRS") for such Plan, and there is
no accumulated funding deficiency, as defined in Section
302(a)(2) of ERISA or Section 412 of the Code, with respect to
such Plan; (ii) there has been no non-exempt "prohibited
transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Code involving the assets of any Plan nor any
"reportable event" within the meaning of Section 4043 of ERISA
with respect to any Plan; (iii) all required employer
contributions to such Plan have been made (or, in the case of
contributions not yet due, have been accrued on the Balance
Sheet); (iv) THI has made available to TOC as to each such Plan a
true and correct copy of (w) the annual report (Form 5500) filed
with the IRS for each of the three most recent plan years, (x)
each plan, trust agreement, group annuity contract and insurance
contract, if any, relating to such Plan, (y) each actuarial
report prepared for each of the last three years for each Plan
and (z) each summary plan description distributed to participants
in each Plan and each summary of material modifications to each
Plan (as defined in ERISA); and (v) each such Plan is, and at all
relevant times has been, in compliance with ERISA, the Code and
the terms of such Plan. None of the Sellers or the Companies or
their respective affiliates has ever participated in a
"multiemployer pension plan" as defined in Section 3(37) of
ERISA.
(c) Except as set forth on the Disclosure Schedule,
none of the Companies has any has no obligation to provide any
welfare benefits to retired or former employees other than
continuation of welfare benefits as required by applicable law.
(d) None of the Companies has any liability under or
with respect to any employee benefit plans or arrangements that
it no longer maintains or in which it no longer participates.
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2.17 Agreements and Documents. THI has previously furnished
or made available to TOC true, correct and complete copies of
each document that is referred to or otherwise related to any of
the following items referred to in this Section 2.17:
(a) each document related to interests in real
property owned, leased or otherwise used or claimed by any of the
Companies;
(b) (i) each agreement of any of the Companies made in
the ordinary course of business which involves aggregate future
payments by or to any of the Companies of more than one hundred
fifty thousand dollars ($150,000) or any agreement made in the
ordinary course of business whose term extends beyond one year
after the date hereof; (ii) each agreement containing any
covenant restricting the freedom of any of the Companies to
compete in any line of business or with any person; and (iii)
each agreement of any of the Companies not made in the ordinary
course of business which is or was to be performed after July 30,
1997;
(c) all employment or similar compensation agreements
of any of the Companies which may not be terminated by such
Company without penalty within thirty days after the Closing;
(d) all bonus, incentive compensation, deferred
compensation, profit-sharing, stock option, retirement, pension,
severance, indemnification, insurance, death benefit or other
fringe benefit plans, agreements or arrangements of any of the
Companies (or applying to any of the Companies) in effect, or
under which any amounts remain unpaid, on the date hereof or to
become effective after the date hereof;
(e) all labor unions or other organizations
representing, purporting to represent or attempting to represent
any employees of any of the Companies, and all collective
bargaining agreements of any of the Companies with any labor
unions or other representatives or employees;
(f) each agreement or other instrument or arrangement
defining the terms on which any indebtedness of any of the
Companies (or a guarantee by any of the Companies of
indebtedness) is or may be issued; and
(g) the names and addresses of all banks in which any
of the Companies has accounts or lines of credit, and with
respect to each such account or line of credit, the names of all
persons authorized to drawn thereon.
None of the Companies is a party to any oral contract
or agreement which would be required to have been furnished or
made available to TOC under this Section 2.17 had such contract
or agreement been committed to writing.
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2.18 Validity. There is no default or claimed or purported
or alleged default, or basis on which with notice or lapse of
time or both (including notice of this Agreement), a default
would exist, in any obligation on the part of any party
(including any of the Companies) to be performed under any lease,
contract, plan, policy or other instrument or arrangement
referred to in Section 2.17 or otherwise in this Agreement.
2.19 No Changes. Since the date of the Balance Sheets there
has not been:
(a) any material adverse change in the business of the
Companies taken as a whole;
(b) any material damage, destruction or loss (whether
or not covered by insurance) adversely affecting the business of
the Companies taken as a whole;
(c) any declaration, setting aside or payment of any
dividend, or other distribution, in respect of any capital stock
of any of the Companies or any direct or indirect redemption,
purchase or other acquisition of such stock;
(d) any option to purchase any capital stock of any of
the Companies granted to any person, or any employment or
deferred compensation agreement entered into between any Company
and any of its stockholders, officers, directors, employees or
consultants;
(e) any issuance or sale by any of the Companies of
any stock, bonds or other corporate securities, or any partial or
complete formation, acquisition, disposition or liquidation of
any of the Companies;
(f) any labor union activity (including without
limitation any negotiation, or request for negotiation, with
respect to any union representation or any labor contract)
respecting any of the Companies;
(g) any statute, rule or regulation, or, to the best
knowledge of the Companies and the Sellers, any government
policy, adopted which may materially and adversely affect the
business of any of the Companies;
(h) any mortgage, lien, attachment, pledge,
encumbrance or security interest created on any asset, tangible
or intangible, of any of the Companies, or assumed, either by any
Company or by others, with respect to any such assets, except for
liens permitted under Section 2.8;
(i) any indebtedness or other liability or obligation
(whether absolute, accrued, contingent or otherwise) incurred, or
other transaction (except that reflected in this Agreement)
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engaged in, by any of the Companies, except those in the ordinary
course of business that are individually, or in the aggregate to
one group of related parties, less than fifty thousand dollars
($50,000);
(j) any obligation or liability discharged or
satisfied by any of the Companies, except items included in
current liabilities shown on the Balance Sheets and current
liabilities incurred since the date of the Balance Sheets in the
ordinary course of business which are individually, or in the
aggregate to one group of related parties, less than twenty five
thousand dollars ($25,000) in amount;
(k) any sale, assignment, lease, transfer or other
disposition of any tangible asset of any of the Companies, except
in the ordinary course of business, or any sale, assignment,
lease, transfer or other disposition of any of its patents,
trademarks, trade names, brand names, copyrights, licenses or
other intangible assets;
(l) any amendment, termination or waiver of any
material right belonging to any of the Companies;
(m) any increase in the compensation or benefits
payable or to become payable by any of the Companies to any of
its officers or employees;
(n) any other action or omission by any of the
Companies, or the passage of any resolution, other than in the
ordinary course of business.
2.20 Litigation or Proceedings. None of the Companies is
engaged in, or a party to, or, to the best of the Sellers' and
the Companies' knowledge, threatened with, any claim or legal
action or other proceeding before any court, any arbitrator of
any kind or any governmental authority, nor does any basis for
any claim or legal action or other proceeding or governmental
investigation exist. There are no orders, rulings, decrees,
judgments or stipulations to which any of the Companies is a
party by or with any court, arbitrator or governmental authority
affecting the Companies.
2.21 Compliance with Laws. Each Company (i) has not been
and is not in violation of any applicable building, zoning,
occupational safety and health, pension, export control,
environmental or other federal, state, local or foreign law,
ordinance, regulation, rule, order or governmental policy
applicable to it; (ii) has not received any complaint from any
governmental authority, and to the best knowledge of the Sellers
and the Companies, none is threatened, alleging that such Company
has violated any such law, ordinance, regulation, rule, order or
governmental policy; (iii) has not received any notice from any
governmental authority of any pending proceedings to take all or
any part of the properties of such Company (whether leased or
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owned) by condemnation or right of eminent domain and, to the
best knowledge of the Sellers and the Companies, no such
proceeding is threatened; and (iv) is not a party to any
agreement or instrument, or subject to any charter or other
corporate restriction or judgment, order, writ, injunction, rule,
regulation, code or ordinance, which materially and adversely
affects, or might reasonably be expected materially and adversely
to affect the business of the Companies taken as a whole.
2.22 Labor Matters. There are no labor organizing
activities, election petitions or proceedings, labor strikes,
disputes, slowdowns, work stoppages or unfair labor practice
complaints pending or, to the best knowledge of the Sellers and
the Companies, threatened against any of the Companies or between
any of the Companies and any of its employees.
2.23 Recalls. There is no basis for the recall, withdrawal
or suspension of any approval by any governmental authority with
respect to any product sold or proposed to be sold by any of the
Companies. None of the products of any of the Companies is
subject to any recall proceedings and to the best of its
knowledge no such proceedings have been threatened.
2.24 Brokers and Finders. None of the Sellers or the
Companies has employed any broker, agent or finder or incurred
any liability on behalf of any of the Sellers or the Companies or
for any brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated hereby.
2.25 Powers of Attorney. None of the Companies has any
powers of attorney or similar authorizations outstanding.
2.26 No Termination of Relationship. As of the date hereof,
none of the Sellers or the Companies has any reason to expect
that any relationship between any Company and a material
distributor, customer, supplier, lender, employee or other person
will be terminated or adversely affected as a result of the
transactions contemplated by this Agreement.
2.27 All Information. TOC has been furnished in writing
prior to the execution of this Agreement all information as to
the business of the Companies material to a reasonable buyer's
determination to enter into this Agreement and to consummate the
transactions contemplated hereby.
2.28 Statements True and Correct. The statements contained
herein or in any written documents prepared and delivered by or
on behalf of THI pursuant to the terms hereof are true, complete
and correct in all material respects, and such documents do not
omit any material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not
misleading.
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SECTION 3 - REPRESENTATIONS AND WARRANTIES OF TOC
TOC represents and warrants to THI as follows.
3.1 Organization. TOC is a corporation duly organized,
validly existing and in good standing under the laws of the state
of Delaware and has full corporate power and authority to own,
lease and operate its assets and to carry on its business as now
being and as heretofore conducted.
3.2 Authority. TOC has full right, power, capacity and
authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part
of TOC. This Agreement has been duly and validly executed and
delivered by TOC and constitutes the valid and binding obligation
of TOC, enforceable against it in accordance with the terms
hereof. Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated
hereby will (i) conflict with or result in a violation, breach,
termination or acceleration of, or default under (or would result
in a violation, breach, termination, acceleration or default with
the giving of notice or passage of time, or both) any of the
terms, conditions or provisions of the Certificate of
Incorporation or By-laws of TOC, as amended, or of any note,
bond, mortgage, indenture, license, agreement or other instrument
or obligation to which TOC is a party or by which TOC or any of
its properties or assets may be bound or affected; (ii) result in
the violation of any order, writ, injunction, decree, statute,
rule or regulation applicable to TOC or any of its properties or
assets; or (iii) result in the imposition of any lien,
encumbrance, charge or claim upon any of its assets. Except for
the listing of the TOC Shares for trading on the AMEX, no consent
or approval by, or notification to or filing with, any court,
governmental authority or third party is required in connection
with the execution, delivery and performance of this Agreement by
TOC or the consummation of the transactions contemplated hereby.
The TOC Shares will be, when issued in accordance with this
Agreement, duly authorized, validly issued, fully paid,
nonassessable and free of pre-emptive rights.
3.3 Statements True and Correct. The statements contained
herein or in any written documents prepared and delivered by or
on behalf of TOC pursuant to the terms hereof are true, complete
and correct in all material respects, and such documents do not
omit any material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not
misleading.
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SECTION 4 - COVENANTS AND AGREEMENTS
4.1 Conduct of Business. Except with the prior written
consent of TOC, which will not be unreasonably withheld or
delayed, and except as otherwise contemplated herein, during the
period from the date hereof to the Closing Date, THI shall cause
the Sellers and the Companies to observe the following covenants:
(a) Affirmative Covenants Pending Closing. The
Sellers and the Companies shall:
(i) Preservation of Personnel. Use all
reasonable efforts to preserve intact the business organization
of each Company and keep available the services of the present
employees of each Company, in each case in accordance with past
practice, it being understood that the termination of employees
with poor performance ratings shall not constitute a violation of
this covenant;
(ii) Insurance. Use all reasonable efforts to
keep in effect casualty, public liability, worker's compensation
and other insurance policies applicable to the Companies in
coverage amounts not less than those in effect at the date of
this Agreement;
(iii) Preservation of the Business; Maintenance
of Properties. Use all reasonable efforts to preserve the
business of the Companies, advertise, promote and market its
products and services in accordance with past practices over the
last twelve months, keep their properties intact, preserve their
goodwill, maintain all physical properties in such operating
condition as will permit the conduct of such business on a basis
consistent with past practice;
(iv) Intellectual Property Rights. Use all
reasonable efforts to preserve and protect the Proprietary Rights
of the Companies; and
(v) Ordinary Course of Business. Operate the
business of the Companies solely in the ordinary course.
(b) Negative Covenants Pending Closing. THI shall
cause each of the Sellers and the Companies not to:
(i) Disposition of Assets. Sell or transfer, or
mortgage, pledge or create or permit to be created any lien on,
any of the assets of any of the Companies other than sales or
transfers in the ordinary course of business or the creation of
liens under existing arrangements disclosed hereunder and liens
permitted under Section 2.8;
(ii) Liabilities. Permit any of the Companies to
(A) incur any obligation or liability other than in the ordinary
course of business, (B) incur any indebtedness for borrowed money
in excess of $100,000 or (C) enter into any contracts or
commitments involving payments by any of the Companies of
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$100,000 or more other than purchase orders and commitments for
inventory, materials and supplies in the ordinary course of
business;
(iii) Compensation. Except as required by
applicable law or any existing employment or severance agreement,
(A) change the compensation or fringe benefits of any officer,
director, employee or agent of any of the Companies, except for
ordinary merit increases for employees other than officers based
on periodic reviews in accordance with past practices, or (B)
enter into or modify any employment, severance or other agreement
with any officer, director or employee of any of the Companies or
any benefit plan (it being understood that hiring of at will
employees in the ordinary course of business shall not constitute
a violation of this covenant) or (C) enter into or modify any
agreement with any consultant, except for agreements terminable
upon not more than one year's notice that are consistent with
past practices with respect to consulting agreements.
(iv) Capital Stock. Make any change in the
number of shares of capital stock of any of the Companies
authorized, issued or outstanding or grant any option, warrant or
other right to purchase, or to convert any obligation into,
shares of capital stock of any of the Companies, or declare or
pay any dividend or other distribution with respect to any shares
of capital stock of any of the Companies, or sell or transfer
any shares of its capital stock;
(v) Organizational Documents. Amend the
organizational documents of any of the Companies;
(vi) Acquisitions. Make any material acquisition
of property other than in the ordinary course of the business of
the Companies;
(vi) License Agreements. Enter into or modify
any license, technology development or technology transfer
agreement between any of the Companies and any other person or
entity.
4.2 Corporate Examinations and Investigations. Prior to
the Closing Date, TOC shall be entitled, through its employees
and representatives, to have such access to the assets,
properties, business and operations of the Companies, as is
reasonably necessary or appropriate in connection with its
investigation of the Companies with respect to the transaction
contemplated hereby. Any such investigation and examination
shall be conducted at reasonable times and under reasonable
circumstances so as to minimize any disruption to or impairment
of the business and each party shall cooperate fully therein. No
investigation by TOC shall diminish or obviate any of the
representations, warranties, covenants or agreements of THI
contained in this Agreement. In order that TOC may have full
opportunity to make such investigation, THI shall furnish the
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representatives of TOC with all such information and copies of
such documents concerning the affairs of the Companies as TOC may
reasonably request and cause its officers, employees,
consultants, agents, accountants and attorneys to cooperate fully
with TOC's representatives in connection with such investigation.
4.3 Expenses. TOC and THI shall bear their respective
expenses incurred in connection with the preparation, execution
and performance of this Agreement and the transactions
contemplated hereby, including without limitation, all fees and
expenses of agents, representatives, counsel and accountants.
4.4 Authorization from Others. Prior to the Closing Date,
the parties shall use all reasonable efforts to obtain all
authorizations, consents and permits of others required to permit
the consummation of the transactions contemplated by this
Agreement.
4.5 Consummation of Agreement. Each party shall use all
reasonable efforts to perform and fulfill all conditions and
obligations to be performed and fulfilled by it under this
Agreement and to ensure that to the extent within its control or
capable of influence by it, no breach of any of its respective
representations, warranties and agreements hereunder occurs or
exists on or prior to the Closing Date, all to the end that the
transactions contemplated by this Agreement shall be fully
carried out in a timely fashion.
4.6 Further Assurances. Each of the parties shall execute
such documents, further instruments of transfer and assignment
and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions
hereof and the transactions contemplated hereby.
4.7 Public Announcements and Confidentiality. Any press
release or other information to the press or any third party with
respect to this Agreement or the transactions contemplated hereby
shall require the prior approval of TOC and THI, which approval
shall not be unreasonably withheld, provided that a party shall
not be prevented from making such disclosure as it shall be
advised by counsel is required by law.
4.8 No Solicitation. None of the Sellers or the Companies
will (i) solicit or initiate discussions with any person, other
than TOC, relating to the possible acquisition of any of the
Companies or all or a material portion of the assets or any of
the capital stock of any of the Companies or any merger or other
business combination with any of the Companies (an "Acquisition
Transaction") or (ii) except to the extent reasonably required by
fiduciary obligations under applicable law as advised by legal
counsel, participate in any negotiations regarding, or furnish to
any other person information with respect to, any effort or
attempt by any other person to do or to seek any Acquisition
Transaction. THI agrees to inform TOC within one business day of
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its receipt of any offer, proposal or inquiry relating to any
Acquisition Transaction.
4.9 Indemnification.
(a) Right to Indemnification. TOC and THI (as the
case may be, the "Indemnitee") shall be indemnified on its
respective demand made to the other (the "Indemnitor") for the
full amount of all damages (as defined below) suffered by it as a
direct or indirect result of:
(i) the inaccuracy of any representation or
warranty made by the Indemnitor in or pursuant to this Agreement;
and
(ii) any failure by the Indemnitor to perform any
obligation or comply with any covenant or agreement specified in
this Agreement.
For the purpose of this Section 4.9, (a) the term "damages" shall
be determined and computed by reference to the effect of the
compensable event on the Indemnitee, and shall be deemed to
include (i) all losses, liabilities, expenses or costs incurred
by the Indemnitee, including reasonable attorneys' fees, and (ii)
interest at a rate per annum equal to that announced from time to
time by First National Bank of Boston as its "base rate" (or the
legal rate of interest, if lower) from the date 30 days after
notice of any such claim for indemnification is given to the
Indemnitor, or if an unliquidated claim, from such later date as
the claim is liquidated, to the date full indemnification is made
therefor; and (b) damages shall not include any amounts for which
the Indemnitee actually receives payment under an insurance
policy, excluding self-insured amounts and deductible amounts.
(b) Indemnification Procedures. The Indemnitee shall
give the Indemnitor notice of any claim, action or proceeding by
a third party which is reasonably likely to result in a claim for
indemnification under this Section 4.9. The Indemnitor shall
have the right, at its expense, to defend, contest, protest,
settle and otherwise control the resolution of any such claim,
action or proceeding. The Indemnitee shall have the right to
participate in any such legal proceeding, subject to the
Indemnitor's right of control thereof, at the expense of the
Indemnitee and with counsel selected by the Indemnitee.
(c) Limitations on Indemnification. The rights of TOC
and THI to be indemnified pursuant to Section 4.9 shall survive
the Closing Date for a period of two years.
4.10 Listing of Shares. Promptly after the date hereof, TOC
shall take all action necessary to list the TOC Shares for
trading upon the American Stock Exchange ("AMEX").
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SECTION 5 - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF TOC
The obligation of TOC to acquire the Shares is subject to
the satisfaction or waiver, at or before the Closing Date, of the
following conditions:
5.1 Representations, Warranties and Covenants. The
representations and warranties of THI contained in this Agreement
shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though made on
and as of the Closing Date (with such exceptions as may be
permitted under or contemplated by this Agreement) and there
shall not have been any material adverse change in the business
of the Companies taken as a whole since the date hereof. THI
shall have performed and complied in all material respects with
all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing Date
and shall have obtained all required consents and approvals. THI
shall have delivered to TOC a certificate, dated the Closing
Date, to the foregoing effect.
5.2 Certificates. THI shall have furnished TOC with such
certificates of public officials and of the Sellers' or the
Companies' officers as may be reasonably requested by TOC.
SECTION 6 - CONDITIONS PRECEDENT TO THE OBLIGATION OF THI
The obligation of THI to sell the Shares is subject to the
satisfaction or waiver, at or before the Closing Date, of the
following conditions:
6.1 Representations, Warranties and Covenants. The
representations and warranties of TOC contained in this Agreement
shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though made on
and as of the Closing Date (with such exceptions as may be
permitted under or contemplated by this Agreement). TOC shall
have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing Date
and shall have obtained all required consents and approvals,
including approval of the listing of the TOC Shares on the AMEX.
TOC shall have delivered to LSI a certificate, dated the Closing
Date, to the foregoing effect.
6.2 Certificates. TOC shall have furnished THI with such
certificates of public officials and of TOC's officers as may be
reasonably requested by THI.
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SECTION 7 - TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any
time prior to the Closing Date as follows:
(a) by THI upon written notice to TOC if TOC has
materially breached any representation, warranty, covenant or
agreement contained herein and has not cured such breach within
ten (10) business days of receipt of written notice from THI;
(b) by TOC upon written notice to THI if THI has
materially breached any representation, warranty, covenant or
agreement contained herein and has not cured such breach within
ten (10) business days of receipt of written notice from TOC;
(c) by either party if any court of competent
jurisdiction or United States or foreign governmental body shall
have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the sale of any
of the Shares and such order, decree or ruling shall have become
final and nonappealable; or
(d) at any time with the written consent of TOC and
THI.
7.2 Effect of Termination. If this Agreement is terminated
as provided in Section 7.1, this Agreement shall forthwith become
void and have no effect, without liability on the part of any
party, its directors, officers or stockholders, other than the
provisions of this Section 7.2, Section 4.3 relating to expenses
and Section 4.7 relating to publicity and confidentiality to the
extent provided therein. Nothing contained in this Section 7.2
shall relieve any party from liability for any breach of this
Agreement occurring before such termination.
7.3 Amendment. This Agreement may not be amended except by
an instrument signed by each of the parties hereto.
7.4 Waiver. At any time, any party hereto may (a) extend
the time for the performance of any of the obligations or other
acts of any other party hereto or (b) waive compliance with any
of the agreements of any other party or any conditions to its own
obligations, in each case only to the extent such obligations,
agreements and conditions are intended for its benefit; provided
that any such extension or waiver shall be binding upon a party
only if such extension or waiver is set forth in a writing
executed by such party.
SECTION 8 - MISCELLANEOUS
8.1 Notices. All notices, requests, demands, consents and
other communications which are required or permitted hereunder
shall be in writing, and shall be deemed given when actually
received or if earlier, one day after deposit with a nationally
recognized air courier or express mail, charges prepaid or three
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days after deposit in the U.S. mail by certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to THI:
Thermo Instrument Systems Inc.
1851 Central Drive
Suite 314
Bedford, Texas 76021
Attention: President
With a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
Attention: General Counsel
If to TOC:
Thermo Optek Corporation
8 East Forge Parkway
Franklin, MA 02038
Attention: President
With a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
Attention: General Counsel
or to such other address as any party hereto may designate in
writing to the other parties, specifying a change of address for
the purpose of this Agreement.
8.2 Survival and Materiality of Representations. Each of
the representations, warranties and agreements made by the
parties hereto shall be deemed material and shall survive the
Closing Date and the consummation of the transactions
contemplated hereby. All statements contained in any certificates
or other instruments delivered by or on behalf of the parties
pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed material and shall constitute
representations and warranties by the person making such
statement.
8.3 Entire Agreement. This Agreement, including the
exhibits, the Disclosure Schedule and the other documents
referred to herein, supersedes any and all oral or written
agreements or understandings heretofore made relating to the
subject matter hereof and constitutes the entire agreement of the
parties relating to the subject matter hereof.
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8.4 Parties in Interest. All covenants and agreements,
representations and warranties contained in this Agreement made
by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the parties hereto, and their respective
successors, assigns, heirs, executors, administrators and
personal representatives, whether so expressed or not.
8.5 No Implied Rights or Remedies. Except as otherwise
expressly provided herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any
person, firm or corporation, other than the parties hereto, any
rights or remedies under or by reason of this Agreement.
8.6 Headings. The headings in this Agreement are inserted
for convenience of reference only and shall not be a part of or
control or affect the meaning hereof.
8.7 Severability. If any provision of this Agreement shall
be declared void or unenforceable by any judicial or
administrative authority, the validity of any other provision
shall not be affected thereby.
8.8 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
8.9 Further Assurances. THI will execute and furnish to TOC
all documents and will do or cause to be done all other things
that TOC may reasonably request from time to time in order to
give full effect to this Agreement and to effectuate the intent
of the parties.
8.10 Governing Law. This Agreement shall be governed by the
law of the State of Delaware applicable to agreements made and to
be performed wholly within such jurisdiction, without regard to
the conflicts of laws provisions thereof.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the date first written above.
THERMO OPTEK CORPORATION
[Seal] By: /s/ Robert J. Rosenthal
---------------------------
Name: Robert J. Rosenthal
Title: Senior Vice President
THERMO INSTRUMENT SYSTEMS INC.
[Seal] By: /s/ Earl R. Lewis
---------------------------
Name: Earl R. Lewis
Title: President
Exhibit 10
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, AND NOT WITH A VIEW
TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, PLEDGED,
MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE
SECURITIES OR (2) UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
THERMO OPTEK CORPORATION
Promissory Note Due August 4, 1998
Waltham, Massachusetts
August 5, 1997
For value received, Thermo Optek Corporation, a Delaware
corporation (the "Company"), hereby promises to pay to Thermo
Electron Corporation (hereinafter referred to as the "Payee"), or
registered assigns, on a subordinated basis, on August 4, 1998,
as described below, the principal sum of forty million dollars
($40,000,000) or such part thereof as then remains unpaid, to pay
interest from the date hereof on the whole amount of said
principal sum remaining from time to time unpaid at a rate per
annum equal to the rate of the Commercial Paper Composite Rate as
reported by Merrill Lynch Capital Markets, as an average of the
last five business days of the fiscal quarter, plus twenty-five
(25) basis points, such interest to be payable in arrears on the
first day of each fiscal quarter of the Company during the term
set forth herein, until the whole amount of the principal hereof
remaining unpaid shall become due and payable, and to pay
interest on all overdue principal and interest at a rate per
annum equal to the rate of interest announced from time to time
by The First National Bank of Boston at its head office in
Boston, Massachusetts as its "base rate" plus one percent (1%).
Principal and all accrued but unpaid interest shall be repaid on
August 4, 1998. Principal and interest shall be payable in
lawful money of the United States of America, in immediately
available funds, at the principal office of the Payee or at such
other place as the legal holder may designate from time to time
in writing to the Company. Interest shall be computed on an
actual 360-day basis.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. All
prepayments shall be applied first to accrued interest and then
to principal.
1PAGE
<PAGE>
The then unpaid principal amount of, and interest
outstanding on, this Note shall be and become immediately due and
payable without notice or demand, at the option of the holder
hereof, upon the occurrence of any of the following events:
(a) the failure of the Company to pay any amount due
hereunder within ten (10) days of the date when due;
(b) any representation, warranty or statement made or
furnished to the Payee by the Company in connection with
this Note or the transaction from which it arises shall
prove to have been false or misleading in any material
respect as of the date when made or furnished;
(c) the failure of the Company to pay its debts as
they become due, the insolvency of the Company, the filing
by or against the Company of any petition under the U.S.
Bankruptcy Code (or the filing of any similar petition under
the insolvency law of any jurisdiction), or the making by
the Company of an assignment or trust mortgage for the
benefit of creditors or the appointment of a receiver,
custodian or similar agent with respect to, or the taking by
any such person of possession of, any property of the
Company;
(d) the sale by the Company of all or substantially
all of its assets;
(e) the merger or consolidation of the Company with or
into any other corporation in a transaction in which the
Company is not the surviving entity;
(f) the issuance of any writ of attachment, by trustee
process or otherwise, or any restraining order or injunction
not removed, repealed or dismissed within thirty (30) days
of issuance, against or affecting the person or property of
the Company or any liability or obligation of the Company to
the holder hereof; and
(g) the suspension of the transaction of the usual
business of the Company.
Upon surrender of this Note for transfer or exchange, a new
Note or new Notes of the same tenor dated the date to which
interest has been paid on the surrendered Note and in an
aggregate principal amount equal to the unpaid principal amount
of the Note so surrendered will be issued to, and registered in
the name of, the transferee or transferees. The Company may
treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all
other purposes.
2PAGE
<PAGE>
In case any payment herein provided for shall not be paid
when due, the Company further promises to pay all cost of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Payee in exercising
any right hereunder shall operate as a waiver of such right or of
any other right of the Payee, nor shall any delay, omission or
waiver on any one occasion be deemed a bar to or waiver of the
same or any other right on any future occasion. The Company
hereby waives presentment, demand, notice of prepayment, protest
and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this
Note. The undersigned hereby assents to any indulgence and any
extension of time for payment of any indebtedness evidenced
hereby granted or permitted by the Payee.
This Note shall be governed by and construed in accordance
with, the laws of the Commonwealth of Massachusetts and shall
have the effect of a sealed instrument.
THERMO OPTEK CORPORATION
By:
__________________________________
Earl R. Lewis
Chairman and Chief Executive Officer
[Corporate Seal]
Attest:
____________________________
Sandra L. Lambert
Secretary
cc: Seth Hoogasian
Maureen Jacobs
Sandra Lambert
Karen Levin
Michael Mullen
Andy Pilla
Gina Silvestri
Chris Vinchesi
aa972170025
Exhibit 11
THERMO OPTEK CORPORATION
Computation of Earnings per Share
Three Months Ended Six Months Ended
------------------------ -----------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
--------------------------------------------------------------------------
Computation of Primary
Earnings per Share:
Net Income (a) $ 9,779,000 $ 6,057,000 $18,677,000 $10,353,000
----------- ----------- ----------- -----------
Shares:
Weighted average
shares outstanding 48,450,000 45,758,242 48,450,000 45,379,121
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) - - - 78,520
----------- ----------- ----------- -----------
Weighted average
shares outstanding,
as adjusted (b) 48,450,000 45,758,242 48,450,000 45,457,641
----------- ----------- ----------- -----------
Primary Earnings per
Share (a) / (b) $ .20 $ .13 $ .39 $ .23
=========== =========== =========== ===========
PAGE
<PAGE>
Exhibit 11
THERMO OPTEK CORPORATION
Computation of Earnings per Share (continued)
Three Months Ended Six Months Ended
------------------------ -----------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
--------------------------------------------------------------------------
Computation of Fully Diluted
Earnings per Share:
Income
Net income $ 9,779,000 $ 6,057,000 $18,677,000 $10,353,000
Add: Convertible
debt interest,
net of tax 722,000 - 1,420,000 -
----------- ----------- ----------- -----------
Income applicable
to common stock
assuming full
dilution (a) $10,501,000 $ 6,057,000 $20,097,000 $10,353,000
----------- ----------- ----------- -----------
Shares:
Weighted average
shares outstanding 48,450,000 45,758,242 48,450,000 45,379,121
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) 17,858 - 51,633 78,520
Shares issuable from
assumed conversion
of subordinated
convertible
debentures 6,481,481 - 6,481,481 -
----------- ----------- ----------- -----------
Weighted average
shares outstanding,
as adjusted (b) 54,949,339 45,758,242 54,983,114 45,457,641
----------- ----------- ----------- -----------
Fully Diluted Earnings
per Share (a) / (b) $ .19 $ .13 $ .37 $ .23
=========== =========== =========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO OPTEK
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 28, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUN-28-1997
<CASH> 81,771
<SECURITIES> 0
<RECEIVABLES> 100,855
<ALLOWANCES> 5,793
<INVENTORY> 82,683
<CURRENT-ASSETS> 281,663
<PP&E> 90,161
<DEPRECIATION> 27,267
<TOTAL-ASSETS> 617,309
<CURRENT-LIABILITIES> 241,166
<BONDS> 1,792
0
0
<COMMON> 485
<OTHER-SE> 260,578
<TOTAL-LIABILITY-AND-EQUITY> 617,309
<SALES> 223,192
<TOTAL-REVENUES> 223,192
<CGS> 119,943
<TOTAL-COSTS> 119,943
<OTHER-EXPENSES> 12,975
<LOSS-PROVISION> 114
<INTEREST-EXPENSE> 3,884
<INCOME-PRETAX> 32,767
<INCOME-TAX> 14,090
<INCOME-CONTINUING> 18,677
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,677
<EPS-PRIMARY> .39
<EPS-DILUTED> .37
</TABLE>
