<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 3, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------
THERMEDICS DETECTION INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 3823 04-3106698
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
---------------
220 MILL ROAD, CHELMSFORD, MASSACHUSETTS 01824-4178
(508) 251-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
SANDRA L. LAMBERT, CLERK
THERMEDICS DETECTION INC.
C/O THERMO ELECTRON CORPORATION
81 WYMAN STREET
P. O. BOX 9046
WALTHAM, MA 02254-9046
(617) 622-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
SETH H. HOOGASIAN, ESQUIRE EDWIN L. MILLER, JR., ESQUIRE
GENERAL COUNSEL TESTA, HURWITZ & THIBEAULT, LLP
THERMEDICS DETECTION INC. 125 HIGH STREET
C/O THERMO ELECTRON CORPORATION BOSTON, MASSACHUSETTS 02110
81 WYMAN STREET (617) 248-7000
WALTHAM, MASSACHUSETTS 02254-9046
(617) 622-1000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement has become effective.
---------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE (1)
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<S> <C> <C>
Common Stock, $.10 par
value.................. $23,040,000 $6,982
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Subscription Rights..... (2) --
</TABLE>
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(1) Calculated pursuant to Rule 457(o).
(2) Evidencing the rights to subscribe to the above shares.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated January 3, 1997
PROSPECTUS
1,600,000 SHARES
THERMEDICS DETECTION INC.
COMMON STOCK
------------
Thermedics Detection Inc. ("Thermedics Detection" or the "Company"), a
privately held, majority-owned subsidiary of Thermedics Inc. ("Thermedics"),
will distribute to holders of the Company's outstanding shares of common stock,
par value $.10 per share ("TDI Common Stock"), of record at the close of
business on , 1997 (the "Thermedics Detection Record Date"), including
Thermedics, transferable subscription rights (the "Rights") to subscribe for
and purchase additional shares of TDI Common Stock for a price of $ per
share (the "Subscription Price"). Thermedics, which owns approximately 93.6% of
the outstanding TDI Common Stock, will not exercise the Rights it receives from
the Company, but is instead distributing all of such Rights to holders of
outstanding shares of its common stock, par value $.05 per share ("Thermedics
Common Stock"), of record at the close of business on , 1997 (the
"Thermedics Record Date"), including Thermo Electron Corporation ("Thermo
Electron"), which owns approximately 54% of the outstanding common stock of
Thermedics. Each holder of TDI Common Stock will receive
approximately transferable Rights for each share of TDI Common Stock held of
record on the Thermedics Detection Record Date (or one Right for approximately
every shares held). Each holder of Thermedics Common Stock will receive
transferable Rights for each share of Thermedics Common Stock held of record on
the Thermedics Record Date (or one Right for every shares held). Thermo
Electron will not distribute the Rights it receives to its stockholders, but
may exercise its Rights or sell its Rights depending on prevailing market
conditions, including in negotiated transactions with the Underwriters. No
fractional Rights or cash in lieu thereof will be distributed or paid by the
Company or Thermedics. The number of Rights distributed by the Company or
Thermedics to each holder of Thermedics Common Stock or TDI Common Stock will
be rounded up to the nearest whole number. Rights holders may purchase one
share of TDI Common Stock for each whole Right held. Each Right also carries
the right to subscribe at the Subscription Price for shares of TDI Common Stock
that are not otherwise purchased pursuant to the exercise of Rights. All
amounts received by the Subscription Agent pursuant to the exercise of Rights
will be held in escrow until the completion of the Rights Offering. See "The
Rights Offering--Subscription Privileges." The Rights are evidenced by
transferable certificates. The Underwriters have agreed, subject to the terms
and conditions of the Standby Underwriting Agreement, to purchase from the
Company on the sixth business day after the Expiration Date (as defined below)
at the Subscription Price a number of shares of TDI Common Stock equal to
1,000,000 shares less the number of shares of TDI Common Stock subscribed for
through the exercise of Rights (the "Underwritten Shares"). See "Underwriting."
The distribution of Rights by the Company and Thermedics and the sale of the
shares of TDI Common Stock upon the exercise of Rights or pursuant to the
underwriting arrangements are referred to herein as the "Rights Offering."
The Rights will expire at 5:00 p.m., Eastern time, on , 1997 unless
extended by the Company (as extended, the "Expiration Date"), except that the
Company has agreed to allow the Underwriters to exercise Rights held by them on
the business day following the Expiration Date.
Prior to this offering, there has been no public market for the TDI Common
Stock or the Rights. The TDI Common Stock and the Rights will be listed on the
American Stock Exchange. The Subscription Price will be determined by the
Company's Board of Directors after consultation with Representatives of the
Underwriters. It is currently estimated that the Subscription Price will be
between $11.00 and $12.00 per share. See "Underwriting" for a discussion of the
factors to be considered in determining the Subscription Price.
------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 9.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Subscription Underwriting Fees Proceeds to
Price (1) and Commissions (1) Company (1) (2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share (2).......... $ Max. $ $ Max.
$ Min. $ $ Min.
- ----------------------------------------------------------------------------------------------
Total (3).............. $ Max. $ $ Max.
$ Min. $ $ Min.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) In connection with the transactions contemplated hereby, the Underwriters
will receive (a) standby and management fees aggregating $ and (b)
additional fees of $ for each share of TDI Common Stock actually
purchased by the Underwriters, whether pursuant to Rights purchased and
exercised or pursuant to the Standby Underwriting Agreement; provided that
such fees in the aggregate shall not exceed 6% of the Subscription Price
for each share of TDI Common Stock purchased pursuant to the exercise of
Rights (by the Underwriters or otherwise) or pursuant to the Standby
Underwriting Agreement plus an amount equal to the aggregate purchase price
of Rights purchased by the Underwriters, up to $ . See "Underwriting."
The maximum Proceeds to the Company assumes that no shares are purchased by
the Underwriters and 1,600,000 shares are purchased upon the exercise of
Rights by persons other than the Underwriters; and the minimum Proceeds to
the Company assumes that 1,000,000 shares are purchased by the Underwriters
and no shares are purchased upon exercise of Rights by persons other than
the Underwriters.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters an option, exercisable within
30 days following the Expiration Date, to purchase up to an additional
150,000 shares of TDI Common Stock at the Subscription Price solely to
cover over-allotments, if any. If this option is fully exercised, the total
additional Proceeds to the Company would be $ and the related total
additional Underwriting Fees and Commissions would be $ . See
"Underwriting."
(cover page continued on next page)
------------
LEHMAN BROTHERS_______________________________________NATWEST SECURITIES LIMITED
, 1997
<PAGE>
(cover page continued from previous page)
Prior to the Expiration Date, the several Underwriters may offer shares of
TDI Common Stock, including shares acquired through the purchase and exercise
of Rights, at prices set from time to time by the Representatives of the
Underwriters. Each such price when set will not exceed, if applicable, the
highest price at which a dealer not participating in the distribution is then
offering the TDI Common Stock to other dealers, plus an amount equal to a
dealer's concession, and an offering price set on any calendar day will not be
increased more than once during such day. The Underwriters may offer the
Underwritten Shares and any additional shares acquired by the Underwriters,
whether pursuant to the exercise of the Rights or the purchase of TDI Common
Stock in the market, to the public at a price or prices to be determined. The
Underwriters may thus realize profits or losses independent of the
underwriting fees and commissions referred to above. Any shares of TDI Common
Stock will be offered by the Underwriters when, as and if sold to, and
accepted by, the Underwriters and will be subject to their right to reject
orders in whole or in part.
----------------
At the upper left of the page is a graphic image depicting the Company's
Alexus system. At the upper right of the page is a graphic image depicting the
Company's InScan system. Below these graphics is the following caption:
The Company's Alexus systems (left), which detect trace amounts of
constituents that affect product quality in refillable plastic soft drink,
water and other beverage containers, have been installed on more than 200
bottling lines in more than 30 countries throughout the world. The Company's
InScan system (right) uses high-speed X-ray imaging technology to detect
liquid fill-levels and leakage in containers for the beverage, food and other
industries.
Below the above caption is a graphic image depicting the Company's Flash-GC
high-speed gas chromatography system. Below this graphic is the following
caption:
The Company's Flash-GC is a high-speed gas chromatography system that can
analyze chemical samples at speeds 20 to 50 times faster than conventional gas
chromatography.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE THERMEDICS
DETECTION COMMON STOCK OR THE RIGHTS OR BOTH AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
AMERICAN STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
Alexus, EGIS and TEA Analyzer are each registered trademarks, and Flash-GC,
InScan, Micro-Quad, Quadra-Beam, Rampart and SecurScan are trademarks, of
Thermedics Detection Inc. All other trademarks or trade names referred to in
this Prospectus are the property of their respective owners.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and the notes thereto appearing
elsewhere in this Prospectus. Except as otherwise indicated, all information in
this Prospectus assumes that the Underwriters' over-allotment option will not
be exercised. Investors should carefully consider the information set forth
under the heading "Risk Factors."
THE COMPANY
Thermedics Detection Inc. (the "Company") develops, manufactures and markets
high-speed on-line detection and measurement systems used in a variety of
industrial process applications, explosives detection and laboratory analysis.
The Company's industrial process systems use ultratrace chemical detectors,
high-speed gas chromatography, X-ray imaging, near-infrared spectroscopy and
other technologies for quality assurance of in-process and finished products,
primarily in the food, beverage, pharmaceutical, forest products, chemical and
other consumer products industries. The Company's explosives-detection
equipment uses simultaneous trace particle- and vapor-detection techniques
based on its proprietary chemiluminescence and high-speed gas chromatography
technologies. Customers use the Company's explosives-detection equipment to
detect plastic and other explosives at airports and border crossings, for other
high-security screening applications and for forensics and search applications.
The Company's principal product lines include:
. Alexus systems, introduced in 1992, detect trace amounts of constituents
that affect product quality in refillable plastic soft drink, water and
other beverage containers at speeds in excess of 600 bottles per minute.
Alexus systems have been installed on more than 200 bottling lines in
more than 30 countries;
. InScan systems, introduced in 1996, detect liquid fill-levels, leakage,
foreign objects and product defects at speeds in excess of 2,400 units
per minute for the beverage, food and other industries;
. Micro-Quad, Quadra-Beam and other products of the Moisture Systems
division, acquired by the Company in 1996, measure moisture and other
product constituents, including fats, proteins, oils, flavorings,
solvents, adhesives and coatings, in the manufacturing processes of a
variety of industries;
. Flash-GC gas chromatography systems, introduced in 1996, analyze chemical
samples at speeds 20 to 50 times faster than conventional gas
chromatography systems. These systems can be used in a variety of
markets, primarily in near on-line process and quality control
applications that require high-speed results; and
. EGIS explosives detectors, first sold to commercial airports in Europe in
1991, detect and identify trace levels of explosives in carry-on bags, in
checked luggage and on people, and are also used in forensic
investigations. EGIS systems are the world's most widely used trace
particle/vapor explosives-detection systems, with an installed base of
more than 190 units in 21 countries, including more than 100 units
installed in airports.
The Company's strategy is to build upon its reputation as a technical and
market leader in applications requiring complex, high-speed or continuous
ultratrace detection and measurement. The Company holds significant patents
relating to its chemiluminescent analysis and high-speed gas chromatography
technologies, and believes that its proprietary position with respect to these
technologies affords it a competitive advantage. In addition, the Company
employs highly skilled research scientists and product development engineers
who use their intimate knowledge of their customers' production processes to
develop new products based on these technologies.
3
<PAGE>
THE RIGHTS OFFERING
Rights.................. The Company is distributing to holders of TDI Common
Stock of record at the close of business on , 1997
(the "Thermedics Detection Record Date"), including
Thermedics, transferable subscription rights (the
"Rights") to subscribe for and purchase additional
shares of TDI Common Stock. Thermedics will not
exercise the Rights it receives from the Company, but
is instead distributing all of such Rights to holders
of record of Thermedics Common Stock, including
Thermo Electron, at the close of business on ,
1997 (the "Thermedics Record Date"). Each holder of
TDI Common Stock will receive approximately
transferable Rights for each share of TDI Common
Stock held of record on the Thermedics Detection
Record Date. Each holder of Thermedics Common Stock
will receive transferable Rights for each share of
Thermedics Common Stock held of record on the
Thermedics Record Date. Thermo Electron will not
distribute the Rights it receives to its
stockholders, but may exercise its Rights or sell its
Rights depending on prevailing market conditions,
including in negotiated transactions with the
Underwriters. The number of Rights distributed by the
Company or Thermedics to each stockholder will be
rounded up to the nearest whole number. An aggregate
of approximately 1,600,000 Rights will be distributed
pursuant to the rights offering. Each Right will be
exercisable for one share of TDI Common Stock. An
aggregate of approximately 1,600,000 shares of TDI
Common Stock has been reserved for issuance upon
exercise of the Rights (the "Underlying Shares"). The
distribution of the Rights by the Company and
Thermedics and the sale of shares of TDI Common Stock
upon the exercise of Rights or pursuant to the
underwriting arrangements are referred to herein as
the "Rights Offering." See "The Rights Offering--The
Rights."
Thermedics Detection
Record Date............
, 1997
Thermedics Record , 1997
Date...................
Expiration Date......... , 1997, 5:00 p.m., Eastern time, or such
later date to which the Company may extend the
expiration of the Rights, except that the Company has
agreed to allow the Underwriters to exercise Rights
held by them on the business day following the
Expiration Date.
Basic Subscription Rights holders are entitled to purchase for the
Privilege.............. Subscription Price one share of TDI Common Stock for
each whole Right held (the "Basic Subscription
Privilege"). See "The Rights Offering--Subscription
Privileges--Basic Subscription Privilege."
Oversubscription Each holder of Rights who elects to exercise his
Privilege.............. Basic Subscription Privilege (including the
Underwriters) may also subscribe at the Subscription
Price for an unlimited number of additional
Underlying Shares that are not otherwise purchased
pursuant to the Basic Subscription Privilege (the
"Oversubscription Privilege"). If an insufficient
number of Underlying Shares is available to satisfy
fully all
4
<PAGE>
elections to exercise the Oversubscription Privilege,
the available Underlying Shares will be prorated
among holders who exercise their Oversubscription
Privilege based on the respective numbers of Rights
exercised by such holders pursuant to the Basic
Subscription Privilege. See "The Rights Offering--
Subscription Privileges--Oversubscription Privilege."
Subscription Price...... $ in cash per share of TDI Common Stock
subscribed for pursuant to the Basic Subscription
Privilege or the Oversubscription Privilege (the
"Subscription Price").
TDI Common Stock
Outstanding after
Rights Offering........
A maximum of 12,283,500 shares. This number excludes
218,180 shares issuable at a weighted average price
of $10.41 per share pursuant to stock options
outstanding at December 31, 1996 but assumes the sale
of all of the Underlying Shares. See
"Capitalization," "Management," and "Security
Ownership of Certain Beneficial Owners and
Management."
Transferability of
Rights and TDI Common
Stock.................. The Rights are transferable and will be listed on the
American Stock Exchange ("AMEX"). The TDI Common
Stock also will be listed on the AMEX. The
Subscription Agent will endeavor to sell Rights for
holders who have so requested by delivering a
Subscription Certificate (as defined below) with the
instruction for sale properly executed to the
Subscription Agent by 11:00 a.m., Eastern time, on
the date that is four AMEX trading days prior to the
Expiration Date. See "The Rights Offering--Exercise
of Rights."
Procedure for Basic Subscription Privileges and Oversubscription
Exercising Rights...... Privileges may be exercised by properly completing
the subscription certificate evidencing the Rights (a
"Subscription Certificate") and forwarding such
Subscription Certificate (or following the Guaranteed
Delivery Procedures (as described in "The Rights
Offering--Exercise of Rights")), with payment of the
Subscription Price for each Underlying Share
subscribed for pursuant to the Basic Subscription
Privilege and Oversubscription Privilege, to the
Subscription Agent on or prior to the Expiration
Date. If the mail is used to forward Subscription
Certificates, it is recommended that insured,
registered mail be used. Once a holder of Rights has
exercised the Basic Subscription Privilege or the
Oversubscription Privilege, such exercise may not be
revoked. See "The Rights Offering--Exercise of
Rights."
Procedure for
Exercising Rights by
Foreign Stockholders...
Subscription Certificates will not be mailed to
holders of Thermedics Common Stock or TDI Common
Stock whose addresses are outside the United States
or who have an APO or FPO address, but will be held
by the Subscription Agent for their account. To
exercise the Rights represented thereby, such holders
must notify the Subscription Agent by completing an
International Holder Subscription Form, which will be
delivered to such holders in lieu of a Subscription
Certificate, and sending it by mail or telecopy to
the Subscription Agent. Holders located in the United
Kingdom will not initially be provided with an
International Holder Subscription Form and, if they
are interested in participating in the
5
<PAGE>
Rights Offering, should contact Lehman Brothers
International (Europe), One Broadgate, London EC2M
7HA, England, telephone 011-44-1-71-260-2793,
telecopier 011-44-1-71-260-2635, attention: .
International Holder Subscription Forms must be
returned to the Subscription Agent on or prior to
11:00 a.m., Eastern time, on the date that is four
AMEX trading days prior to the Expiration Date, at
which time (if no instructions have been received)
such Rights will be sold, if feasible, by the
Subscription Agent and the net proceeds, if any,
remitted to such holders. Certain restrictions
applicable to the exercise and sale of Rights by
persons located outside of the United States are set
forth on the inside front cover page of this
Prospectus. See "The Rights Offering--Foreign and
Certain Other Stockholders."
Persons Holding Shares,
or Wishing to Exercise
Rights, Through
Others.................
Persons holding Thermedics Common Stock or TDI Common
Stock, and receiving the Rights distributable with
respect thereto through a broker, dealer, commercial
bank, trust company or other nominee, as well as
persons holding stock certificates personally who
would prefer to have such institutions effect
transactions relating to the Rights on their behalf,
should contact the appropriate institution or nominee
and request it to effect the transactions for them.
Such holders should be aware that brokers or other
nominee holders may establish deadlines for receiving
instructions from beneficial holders significantly in
advance of the Expiration Date. See "The Rights
Offering--Exercise of Rights."
Issuance of TDI Common Certificates representing shares of TDI Common Stock
Stock.................. purchased pursuant to the exercise of Rights will be
delivered to subscribers as soon as practicable after
the sixth business day following the Expiration Date.
The issuance of shares pursuant to the exercise of
Rights is conditioned upon the sale of at least
1,000,000 shares of TDI Common Stock in the Rights
Offering. See "The Rights Offering--Subscription
Privileges" and "--Minimum Sale of Shares."
Use of Proceeds......... Research and development activities, and for general
corporate purposes, including possible acquisitions.
See "Use of Proceeds."
Subscription Agent...... American Stock Transfer & Trust Company.
Standby Underwriting.... The Underwriters have agreed, subject to the terms
and conditions of the Standby Underwriting Agreement,
to purchase from the Company, at the Subscription
Price, on the sixth business day after the Expiration
Date a number of shares of TDI Common Stock equal to
1,000,000 shares less the number of shares of TDI
Common Stock purchased through the exercise of Rights
(the "Underwritten Shares"). Subject to certain price
and volume limitations prescribed by applicable law,
the Underwriters may acquire Rights in the secondary
market and may exercise such Rights to acquire TDI
Common Stock. All such shares may be offered to the
public at offering prices determined from time to
time by the
6
<PAGE>
Underwriters, including at prices in excess of the
Subscription Price. The Company has agreed to pay the
Underwriters the fees and commissions set forth on
the cover page hereof. The Company has agreed to
allow the Underwriters to exercise any Rights held by
them on the first business day following the
Expiration Date. See "Underwriting."
Nature of Commitment.... The obligation of the Underwriters to purchase
Underwritten Shares is subject to certain conditions
and may be terminated under certain circumstances.
See "The Rights Offering--Standby Underwriting
Commitment."
Proposed AMEX Symbols... Rights: TDX.Rt
TDI Common Stock: TDX.WI (when issued)
TDX (thereafter)
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR (1) NINE MONTHS ENDED (2) PRO FORMA COMBINED (4)
----------------------------------------- --------------------------- -------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, SEPTEMBER 28, FISCAL YEAR SEPTEMBER 28,
1991 (2) 1992 (2) 1993 1994 1995 1995 1996 (3) 1995 1996
-------- -------- ------- ------- ------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues............... $11,482 $17,361 $42,031 $50,343 $27,954 $22,188 $30,566 $46,485 $32,113
Gross Profit........... 4,242 8,032 18,272 25,437 12,718 10,209 14,261 23,181 15,298
Research and Develop-
ment Expenses.......... 547 647 1,790 3,895 2,741 1,869 3,551 3,092 3,572
Operating Income
(Loss)................. 345 3,156 8,956 9,569 2,490 2,644 (1,218) 4,498 (889)
Net Income (Loss)...... 212 1,903 5,803 6,380 1,508 1,593 (1,063) 1,796 (905)
Earnings (Loss) per
Share (5).............. .02 .19 .58 .63 .15 .16 (.11) .18 (.09)
Weighted Average
Shares (5)............. 10,069 10,069 10,069 10,069 10,069 10,069 10,069 10,069 10,069
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
-----------------------------
PRO FORMA (6) AS ADJUSTED (7)
------------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital................................... $21,696 $
Total Assets...................................... 52,378
Long-term Obligations............................. 21,200 21,200
Shareholders' Investment.......................... 19,719
</TABLE>
- ----
(1) The Company's 1991, 1992, 1993, 1994 and 1995 fiscal years, set forth in
this table and referred to elsewhere in this Prospectus, ended on December
28, 1991, January 2, 1993, January 1, 1994, December 31, 1994 and December
30, 1995, respectively.
(2) Derived from unaudited financial statements.
(3) Includes the results of Moisture Systems and Rutter since their
acquisition by the Company in January 1996. See "The Company."
(4) The pro forma combined statement of operations data was derived from the
pro forma combined condensed statement of operations included elsewhere in
this Prospectus. The pro forma combined statement of operations data sets
forth the results of operations for 1995 and the nine months ended
September 28, 1996, as if the acquisitions of Moisture Systems and Rutter
had occurred on January 1, 1995.
(5) Pursuant to Securities and Exchange Commission requirements, earnings
(loss) per share have been presented for all periods. Weighted average
shares for all periods include 10,000,000 shares issued to Thermedics in
connection with the initial capitalization of the Company, as well as the
effect of shares sold through private placements and the assumed exercise
of stock options issued within one year prior to the Company's proposed
rights offering.
(6) The pro forma combined balance sheet data as of September 28, 1996 sets
forth the financial position of the Company adjusted to reflect the
issuance on November 19, 1996 of 383,500 shares of common stock in a
private placement for net proceeds of $3,953,000.
(7) Adjusted to reflect the minimum proceeds to the Company from the Rights
Offering, which assumes the sale of 1,000,000 shares to the Underwriters
at a Subscription Price of $ per share and no purchase of shares upon
the exercise of Rights by persons other than the Underwriters, after
deduction of underwriting fees and commissions and estimated offering
expenses payable by the Company.
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RISK FACTORS
In addition to the other information in this Prospectus, investors should
carefully consider the following risk factors when evaluating an investment in
the TDI Common Stock offered hereby. This Prospectus contains forward-looking
statements that involve risks and uncertainties, such as statements of the
Company's plans, objectives, expectations and intentions. The cautionary
statements made in this Prospectus should be read as being applicable to all
forward-looking statements wherever they appear in this Prospectus. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include those
discussed below, as well as those discussed elsewhere in this Prospectus.
Uncertainty of Market Acceptance of New Products. Certain of the Company's
products represent alternatives to traditional detection and analytical
methods. As a result, such products may be slow to achieve, or may not
achieve, market acceptance, as customers may seek further validation of the
efficiency and efficacy of the Company's technology, particularly where the
purchase of the product requires a significant capital commitment. The Company
believes that, to a significant extent, its growth prospects depend on its
ability to gain acceptance of the efficiency and efficacy of the Company's
innovative technologies by a broader group of customers. The Company is
currently devoting significant resources toward the enhancement of its
existing products and the development of new products and technologies,
including the Company's Flash-GC high-speed gas chromatography system, a more
portable EGIS, SecurScan, a walk-through explosives-detection system, and
Rampart, a lower-cost EGIS unit for use in airport screening of carry-on
baggage. There can be no assurance that the Company will be successful in
obtaining such broad acceptance or that, if obtained, such acceptance will be
sustained. The failure of the Company to obtain and sustain such broad
acceptance could have a material adverse effect on the Company's business,
financial condition and results of operations.
Ongoing Product Development Efforts Required by Rapid Technological
Change. The markets for the Company's products are characterized by changing
technology, evolving industry standards and new product introductions. The
Company's future success will depend in part upon its ability to enhance its
existing products and to develop and introduce new products and technologies
to meet changing customer requirements. There can be no assurance that the
Company will successfully complete the enhancement and development of these
products in a timely fashion or that the Company's current or future products
will satisfy the needs of its markets.
Dependence of Explosives Detection Market on Government Regulation and
Airline Industry. The Company's sales of its explosives-detection systems for
use in airports has been and will continue to be dependent on governmental
initiatives to require, or support, the screening of checked luggage, carry-on
items and personnel with advanced explosives-detection equipment.
Substantially all of such systems have been installed at airports in countries
other than the United States, in which the applicable government or regulatory
authority overseeing the operations of the airport has mandated such
screening. Such mandates are influenced by many factors outside of the control
of the Company, including political and budgetary concerns of governments,
airlines and airports. Of the more than 600 commercial airports worldwide,
more than 400 are located in the United States. Accordingly, the Company
believes that the size of the market for explosives-detection equipment is,
and will increasingly be, significantly influenced by United States government
regulation. In the United States, the Aviation Security Act of 1990 directed
the Federal Aviation Administration ("FAA") to develop a standard for
explosives-detection systems and required airports in the United States to
deploy systems meeting this standard in 1993. The standard adopted by the FAA
is more comprehensive than standards adopted in most other countries. To date,
no system has demonstrated that it meets the FAA standard under realistic
airport operating conditions. As a result, the FAA has not mandated the
installation of automated explosives-detection systems, and only a limited
number of these systems have been deployed, primarily on a test basis, in the
United States. The FAA first certified a computed X-ray tomography system for
checked luggage in December 1994. However, the FAA has recognized that this
system must undergo further testing to resolve whether it can operate under
realistic airport operating conditions. The Company's systems are trace
detectors for which no FAA certification process for checked baggage, carry-on
or personal screening exists to date. In 1992, the FAA approved the Company's
EGIS system for use by airlines in screening carry-on electronic items and
luggage searches. Each airline must seek this approval for each application.
Although the FAA has provided significant funding to the
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Company in connection with the development of its explosives-detection
technology, there can be no assurance that any of the Company's systems will
ever meet this or any other United States certification standard. Any product
utilizing a technology ultimately recommended or required by the FAA will have
a significant competitive advantage in the market for explosives-detection
devices. Unless the FAA takes action with respect to a particular explosives-
detection product or technology, airlines will not be required to upgrade
existing metal detection equipment. Earnings of U.S. air carriers tends to
fluctuate significantly from time to time. Any depression in the financial
condition of such carriers would likely result in lower capital spending for
discretionary items. Moreover, there can be no assurance that additional
countries will mandate the implementation of effective explosives screening
for airline baggage, carry-on items or personnel, or that, if mandated, the
Company's systems will meet the certification or other requirements of the
applicable government authority. Even if the Company's systems were to meet
the applicable requirements, there can be no assurance that the Company would
be able to market its systems effectively. See "Business--Explosives
Detectors" and "--Government Regulation."
In October 1996, the United States enacted legislation which includes a
$144.2 million allocation to purchase explosives-detection systems and other
advanced security equipment, including trace detection equipment such as the
systems manufactured by the Company, for carry-on and checked baggage
screening. There can be no assurance that this legislation will not be
modified to reduce the funding for advanced explosives equipment, that the
necessary appropriations will be made to fund the purchases of advanced
explosives-detection equipment contemplated by the legislation, that trace
detection equipment such as the systems manufactured by the Company will be
mandated, or that, even if such appropriation is made and such equipment is
mandated, any of the Company's explosives-detection systems will be purchased
for installation at any airports in the United States. Further, there can be
no assurance that the U.S. will mandate the widespread use of these systems
after completion of the initial purchases.
Significance of Affiliated Customers. Sales of process detection instruments
to bottlers licensed by The Coca-Cola Company ("Coca-Cola Bottlers") were
$32,184,000, $8,795,000 and $3,816,000 in 1994, 1995 and the first nine months
of 1996, respectively, or 64%, 31% and 12% of the Company's revenues,
respectively, during such periods. Sales to Coca-Cola Bottlers have decreased
as these customers have substantially completed full deployment of the
Company's Alexus system in existing plant locations. Although the Company
anticipates that it will continue to derive revenues from the sale of upgrades
and new systems to new plants, as well as services to the Coca-Cola Bottlers,
the Company does not expect that revenues derived from these customers will
continue at a rate comparable to prior years. While the Company believes that
the introduction of new process detection products for the food, beverage and
other markets will continue to reduce the significance of the Coca-Cola
Bottlers to the Company's results of operations, there can be no assurance
that the Company will be successful in the introduction of new process
detection products or that any sales of these products will be sufficient to
maintain a rate of growth equivalent to prior years.
Competition; Technological Change. The Company encounters, and expects to
continue to encounter, competition in the sale of its current and future
products. Many of the Company's competitors and potential competitors have
substantially greater resources, manufacturing and marketing capabilities,
research and development staff and production facilities than those of the
Company. Some of these competitors have large existing installed bases of
products with substantial numbers of customers. In addition, other major
corporations have recently announced their intention to enter certain of the
Company's markets, including the security screening market. The Company
believes that many of its products are successful because they are
technologically superior to alternative products offered by some of the
Company's competitors. In order to continue to be successful, the Company
believes that it will be important to maintain this technological advantage.
No assurance can be given that the Company will be able to maintain such an
advantage or that competitors of the Company will not develop technological
innovations that will render products of the Company obsolete. For example,
the Company's EGIS system competes against other trace explosives detection
systems as well as systems utilizing dual energy X-ray or computed X-ray
tomography imaging technologies. There can be no assurance that such
technologies will not be enhanced to a degree that would impair the Company's
ability to market its explosives detection systems. See "Business--
Competition."
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Potential for Product Liability Claims. The Company's business involves the
risk of product liability claims inherent to the explosives detection
business, as well as the food, beverage and other industries. There are many
factors beyond the control of the Company that could result in the failure of
the Company's products to detect explosives or contaminants in food or
beverage containers, such as the reliability of a customer's operators, the
ongoing training of such operators and the maintenance of the Company's
products by its customers. For these and other reasons, there can be no
assurance that the Company's products will detect all explosives or
contaminants. The failure to detect explosives or contaminants could give rise
to product liability claims and result in negative publicity that could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company currently maintains both aviation and
general product liability insurance in amounts the Company believes to be
commercially reasonable. There can be no assurance that this insurance will be
sufficient to protect the Company from product liability claims, or that
product liability insurance will continue to be available to the Company at a
reasonable cost, if at all.
Uncertainties Associated With International Operations. In 1994, 1995 and
the first nine months of 1996, international sales accounted for 85%, 73% and
66%, respectively, of the Company's revenues, and the Company anticipates that
international sales will continue to account for a significant percentage of
the Company's revenues. International revenues are subject to a number of
uncertainties, including the following: agreements may be difficult to enforce
and receivables difficult to collect through a foreign country's legal system;
foreign customers may have longer payment cycles; foreign countries may impose
additional withholding taxes or otherwise tax the Company's foreign income,
impose tariffs or adopt other restrictions on foreign trade; fluctuations in
exchange rates may affect product demand and adversely affect the
profitability in U.S. dollars of products and services provided by the Company
in foreign markets where payment for the Company's products and services is
made in the local currency; U.S. export licenses may be difficult to obtain;
and the protection of intellectual property in foreign countries may be more
difficult to enforce. Moreover, many foreign countries have their own
regulatory approval requirements for sales of the Company's products. As a
result, the Company's introduction of new products into international markets
can be costly and time-consuming, and there can be no assurance that the
Company will be able to obtain the required regulatory approvals on a timely
basis, if at all. There can be no assurance that any of these factors will not
have a material adverse effect on the Company's business, financial condition
and results of operations.
Limited Protection of Proprietary Technology and Risks of Third-Party
Claims. Proprietary rights relating to the Company's products will be
protected from unauthorized use by third parties only to the extent that they
are covered by valid and enforceable patents or are maintained in confidence
as trade secrets. The Company owns 40 United States patents and has filed
applications for five additional patents. The Company also owns corresponding
patents, or has filed corresponding applications, in a number of jurisdictions
throughout the world. In addition, the Company has an exclusive, royalty-free
license under ten patents covering the use of near-infrared and very near-
infrared emitting diodes for on-line spectral measurements. There can be no
assurance, however, that any patents now or hereafter owned by the Company
will afford protection against competitors, or as to the likelihood that
patents will issue from pending patent applications. Proceedings initiated by
the Company to protect its proprietary rights could result in substantial
costs to the Company. Although the Company believes that its products and
technology do not infringe any existing proprietary rights of others, there
can be no assurance that third parties will not assert such claims against the
Company in the future or that such future claims will not be successful. The
Company could incur substantial costs and diversion of management resources
with respect to the defense of any claims relating to proprietary rights,
which could have a material adverse effect on the Company's business,
financial condition and results of operations. Furthermore, parties making
such claims could secure a judgment awarding substantial damages, as well as
injunctive or other equitable relief, which could effectively block the
Company's ability to make, use, sell, distribute or market its products and
services in the U.S. or abroad. Such a judgment could have a material adverse
effect on the Company's business, financial condition and results of
operations. In the event that a claim relating to proprietary technology or
information is asserted against the Company, the Company may seek licenses to
such intellectual property. There can be no assurance, however, that such a
license could be obtained on commercially reasonable terms, if at all, or that
the terms of any offered licenses will be acceptable to the Company. The
failure to obtain the necessary licenses or other rights could preclude the
sale, manufacture or distribution of the Company's
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products and, therefore, could have a material adverse effect on the Company's
business, financial condition and results of operations. The cost of
responding to any such claim may be material, whether or not the assertion of
such claim is valid. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate to prevent
misappropriation of its technology or independent development by others of
similar technology. In addition, the laws of some jurisdictions do not protect
the Company's proprietary rights to the same extent as the laws of the U.S.
There can be no assurance that these protections will be adequate. See
"Business--Intellectual Property."
Risks Associated with Acquisition Strategy. The Company's strategy includes
the acquisition of businesses and technologies that complement or augment the
Company's existing product lines. For example, in January 1996 the Company
acquired Moisture Systems. Promising acquisitions are difficult to identify
and complete for a number of reasons, including competition among prospective
buyers and the need for regulatory approvals, including antitrust approvals.
Any acquisitions completed by the Company may be made at substantial premiums
over the fair value of the net assets of the acquired companies. There can be
no assurance that the Company will be able to complete future acquisitions or
that the Company will be able to successfully integrate any acquired
businesses. In order to finance such acquisitions, it may be necessary for the
Company to raise additional funds through public or private financings. Any
equity or debt financing, if available at all, may be on terms which are not
favorable to the Company and, in the case of equity financing, may result in
dilution to the Company's stockholders.
Difficulties in Managing Rapid Growth. Due to the level of technical and
marketing expertise necessary to support its existing and new customers, the
Company must attract and retain highly qualified and well-trained personnel.
There are a limited number of persons with the requisite skills to serve in
these positions, and it may become increasingly difficult for the Company to
hire such personnel. Further rapid expansion may also significantly strain the
Company's administrative, operational and financial personnel, management
information systems, manufacturing operations and other resources. There can
be no assurance that the Company's systems, procedures and controls will be
adequate to support the Company's operations. Failure to manage growth
properly could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Management."
Potential Fluctuations in Quarterly Performance. Significant annual and
quarterly fluctuations in the Company's results of operations may be caused
by, among other factors, the overall demand for, and market acceptance of, the
Company's products, the timing of regulatory approvals for certain of the
Company's products, government initiatives to promote the use of explosives
detection systems such as those manufactured and sold by the Company, the
timing of the announcement, introduction and delivery of new products and
product enhancements by the Company and its competitors, variations in the
Company's product mix and component costs, timing of customer orders,
adjustments of delivery schedules to accommodate customers programs, the
availability of components from suppliers, the timing and level of
expenditures in anticipation of future sales, the mix of products sold by the
Company, and pricing and other competitive conditions. Because certain of the
Company's products require significant capital expenditures and other
commitments by its customers, the Company has experienced extended sales
cycles. Delays in anticipated purchase orders could have a material adverse
effect on the Company's business, financial condition and results of
operations. Customers may also cancel or reschedule shipments and product
difficulties could delay shipments. Because the Company's operating expenses
are based on anticipated revenue levels and a high percentage of the Company's
expenses are fixed for the short term, a small variation in the timing of
recognition of revenue can cause significant variations in operating results
from quarter to quarter. The Company believes that period to period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
Dependence on Key Personnel. The Company is highly dependent on the members
of its senior management, research and engineering, manufacturing, marketing
and sales staff, the loss of one or more of whom could have a material adverse
effect on the Company. In addition, the Company believes that its future
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success will depend in part on whether it can attract and retain highly
qualified engineering, management, manufacturing, marketing and sales
personnel, particularly as the Company expands its business activities. The
Company faces significant competition for the services of such personnel from
other companies. There can be no assurance that the Company will be able to
continue to attract and retain the personnel it requires for continued growth.
The failure to hire and retain such personnel could materially adversely
affect the Company. See "Management."
Lack of Voting Control; Control by Thermedics. The Company's stockholders do
not have the right to cumulate votes for the election of directors. After
giving effect to the Rights Offering, assuming the exercise of all of the
Rights, Thermedics will beneficially own approximately 81.4% of the
outstanding TDI Common Stock. Accordingly, Thermedics will have the power to
elect the entire Board of Directors of the Company and to approve or
disapprove any corporate actions submitted to a vote of the Company's
stockholders. See "Relationship with Thermo Electron and Thermedics" and
"Security Ownership of Certain Beneficial Owners and Management."
Potential Conflicts of Interest. The Company may be subject to potential
conflicts of interest from time to time as a result of its relationship with
Thermo Electron and Thermedics. See "Relationship with Thermo Electron and
Thermedics." Certain officers of the Company are also officers of Thermedics,
Thermo Electron and/or other subsidiaries of Thermo Electron, and are full-
time employees of Thermedics or Thermo Electron. Such officers will devote
only a portion of their working time to the affairs of the Company. For
financial reporting purposes, the Company's financial results are included in
the consolidated financial statements of Thermedics and Thermo Electron. The
members of the Board of Directors of the Company who are also affiliated with
Thermo Electron or Thermedics will consider not only the short-term and the
long-term impact of operating decisions on the Company, but also the impact of
such decisions on the consolidated financial results of Thermedics and Thermo
Electron. In some instances the impact of such decisions could be
disadvantageous to the Company while advantageous to Thermedics or Thermo
Electron, or vice versa. The Company is a party to various agreements with
Thermo Electron that may limit the Company's operating flexibility. See
"Relationship with Thermo Electron and Thermedics."
Significant Additional Shares Eligible for Sale After the Offering. At the
conclusion of the 120-day period following the closing of the Rights Offering,
the Company will file a registration statement pursuant to the Securities Act
covering the resale of 683,500 shares of TDI Common Stock held by existing
investors other than Thermedics. The 10,000,000 shares of TDI Common Stock
owned by Thermedics are eligible for resale under Rule 144. In addition,
subject to certain limitations described below under "Shares Eligible for
Future Sale," as long as Thermedics is able to elect a majority of the
Company's Board of Directors, it will have the ability to cause the Company at
any time to register for resale all or a portion of the TDI Common Stock owned
by Thermedics.
Additional shares of TDI Common Stock issuable upon exercise of options
granted under the Company's stock-based compensation plans will become
available for future sale in the public market at prescribed times. Sales of a
significant number of shares of TDI Common Stock in the public market
following the Rights Offering could adversely affect the market price of the
TDI Common Stock. See "Relationship with Thermo Electron and Thermedics" and
"Shares Eligible for Future Sale."
Immediate and Substantial Dilution. Purchasers of the TDI Common Stock
offered hereby will incur an immediate and substantial dilution in the net
tangible book value per share of the TDI Common Stock from the Subscription
Price. Dilution per share to investors in the Rights Offering will be $ and
$ assuming minimum and maximum proceeds to the Company, respectively.
Additional dilution is likely to occur upon the exercise of outstanding stock
options. See "Dilution."
No Prior Public Market for TDI Common Stock; Potential Volatility of Stock
Price. Prior to this offering, there has been no public market for the TDI
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained after this offering. The Subscription Price will be
determined by negotiations
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among the Company and the Representatives of the Underwriters. See
"Underwriting" for a discussion of the factors to be considered in determining
the Subscription Price. Many factors, including fluctuations in the Company's
operating results, announcements of technological innovations or new contracts
or products by the Company or its competitors, government regulation and
approvals, developments in patent or other proprietary rights and market
conditions for stocks of companies similar to the Company, could have a
significant impact on the market price of the TDI Common Stock, and there can
be no assurance that the market price of the TDI Common Stock will not decline
below the Subscription Price.
Lack of Dividends. The Company anticipates that for the foreseeable future
the Company's earnings, if any, will be retained for use in the business and
that no cash dividends will be paid on the TDI Common Stock. Declaration of
dividends on the TDI Common Stock will depend upon, among other things, future
earnings, the operating and financial condition of the Company, its capital
requirements and general business conditions. See "Dividend Policy."
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THE COMPANY
The Company operated as a division of Thermedics until its incorporation as
a Massachusetts corporation in December 1990. In connection with the Company's
incorporation, Thermedics transferred to the Company its TEA Analyzer and
certain other trace detection technologies in exchange for 10,000,000 shares
of the Company's Common Stock. In January 1996, the Company acquired
substantially all of the assets of Moisture Systems Corporation and the stock
of Rutter & Co. B.V. (collectively, "Moisture Systems"). Unless the context
otherwise requires, references in this Prospectus to the Company or Thermedics
Detection Inc. refer to Thermedics Detection Inc. and its subsidiaries and
predecessors. As of December 31, 1996, Thermedics beneficially owned 93.6% of
the outstanding TDI Common Stock. The Company's principal executive offices
are located at 220 Mill Road, Chelmsford, Massachusetts 01824-4178, and its
telephone number is (508) 251-2000.
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THE RIGHTS OFFERING
THE RIGHTS
The Company is distributing transferable Rights, at no cost, to holders of
outstanding shares of TDI Common Stock of record on the Thermedics Detection
Record Date. Thermedics Detection stockholders will receive approximately
Rights for each share of TDI Common Stock held by them of record on the
Thermedics Detection Record Date. Each Right will be exercisable for one share
of TDI Common Stock.
Thermedics, which currently owns approximately 93.6% of the outstanding TDI
Common Stock, will not exercise the Rights it receives from the Company, but
is instead distributing all of such Rights to holders of outstanding shares of
Thermedics Common Stock of record on the Thermedics Record Date (collectively,
with the holders of TDI Common Stock on the Thermedics Detection Record Date,
other than Thermedics, referred to as the "Holders"), including Thermo
Electron. Thermedics stockholders will receive Rights for each share of
Thermedics Common Stock held by them of record on the Thermedics Record Date.
Each Right will be exercisable for one share of TDI Common Stock. No
fractional Rights or cash in lieu thereof will be issued or paid by the
Company or Thermedics. The number of Rights distributed to each Holder will be
rounded up to the nearest whole number.
Thermo Electron will not distribute the Rights it receives to its
stockholders but may exercise its Rights or sell its Rights, including in
negotiated transactions with the Underwriters.
EXPIRATION DATE
The Rights will expire at 5:00 p.m., Eastern time, on , 1997 unless
extended by the Company. After the Expiration Date, unexercised Rights will be
null and void. The Company will not be obligated to honor any purported
exercise of Rights received by the Subscription Agent after the Expiration
Date, regardless of when the documents relating to such exercise were sent,
except pursuant to the Guaranteed Delivery Procedures described below. Notice
of any extension of the Expiration Date will be made through a press release
issued by the Company. Notwithstanding the foregoing, the Company has agreed
to allow the Underwriters to exercise any Rights held by them on the business
day following the Expiration Date.
SUBSCRIPTION PRIVILEGES
Basic Subscription Privilege. Each Right will entitle the holder thereof to
receive, upon payment of the Subscription Price, one share of TDI Common Stock
(the "Basic Subscription Privilege"). Certificates representing shares of TDI
Common Stock purchased pursuant to the Basic Subscription Privilege will be
delivered to subscribers as soon as practicable after the sixth business day
following the Expiration Date.
Oversubscription Privilege. Subject to the allocation described below, each
Right also carries the right to subscribe at the Subscription Price for
Underlying Shares that are not otherwise purchased pursuant to the exercise of
Rights (the "Oversubscription Privilege").
Underlying Shares will be available for purchase pursuant to the
Oversubscription Privilege only to the extent that any Underlying Shares are
not subscribed for through the Basic Subscription Privilege. If the Underlying
Shares not subscribed for through the Basic Subscription Privilege ("Excess
Shares") are not sufficient to satisfy all subscriptions pursuant to the
Oversubscription Privilege, the Excess Shares will be allocated pro rata
(subject to the elimination of fractional shares) among those holders of
Rights exercising the Oversubscription Privilege, in proportion, not to the
number of shares requested pursuant to the Oversubscription Privilege, but to
the number of shares of TDI Common Stock each beneficial holder exercising the
Oversubscription Privilege has purchased pursuant to the Basic Subscription
Privilege; provided, however, that if such pro rata allocation results in any
Rights holder being allocated a greater number of Excess Shares than such
holder subscribed for pursuant to the exercise of such holder's
Oversubscription Privilege, then such holder will be allocated only such
number of Excess Shares as such holder subscribed for and the remaining Excess
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Shares will be allocated among all other holders exercising the
Oversubscription Privilege. All beneficial holders who exercise the Basic
Subscription Privilege, including Underwriters, will be entitled to exercise
the Oversubscription Privilege. Certificates representing shares of TDI Common
Stock purchased pursuant to the Oversubscription Privilege will be delivered
to subscribers as soon as practicable after the sixth business day following
the Expiration Date and after all prorations have been effected.
Banks, brokers and other nominee holders of Rights who exercise the Basic
Subscription Privilege and the Oversubscription Privilege on behalf of
beneficial owners of Rights will be required to certify to the Subscription
Agent and the Company, in connection with the exercise of the Oversubscription
Privilege, as to the aggregate number of Rights that have been exercised and
the number of Underlying Shares that are being subscribed for pursuant to the
Oversubscription Privilege by each beneficial owner of Rights on whose behalf
such nominee holder is acting.
Minimum Sale of Shares. The issuance of shares of TDI Common Stock pursuant
to the exercise of the Basic Subscription Privilege and the Oversubscription
Privilege is conditioned upon the sale of at least 1,000,000 shares of TDI
Common Stock in the Rights Offering. All amounts received by the Subscription
Agent pursuant to the exercise of Rights will be held in escrow until the
completion of the Rights Offering. The Underwriters have agreed to purchase
from the Company on the sixth business day after the Expiration Date at the
Subscription Price a number of shares of TDI Common Stock equal to 1,000,000
shares less the number of shares of TDI Common Stock subscribed for through
the exercise of Rights. However, the obligations of the Underwriters are
subject to certain conditions contained in the Standby Underwriting Agreement.
See "Underwriting." If fewer than 1,000,000 shares are purchased through the
exercise of Rights and the conditions to the obligations of the Underwriters
contained in the Standby Underwriting Agreement are not duly satisfied or
waived, the Rights Offering will not be completed. If the Rights Offering is
not completed, all funds received by the Subscription Agent in payment of the
Subscription Price and held in escrow by the Subscription Agent will be
returned by mail without interest or deduction as soon as practicable
following the termination or expiration of the Standby Underwriting Agreement.
EXERCISE OF RIGHTS
Rights may be exercised by delivering to American Stock Transfer & Trust
Company (the "Subscription Agent"), at or prior to 5:00 p.m., Eastern time, on
the Expiration Date, the properly completed and executed Subscription
Certificate evidencing such Rights with any required signatures guaranteed,
together with payment in full of the Subscription Price for each Underlying
Share subscribed for pursuant to the Basic Subscription Privilege and the
Oversubscription Privilege. Such payment in full must be by (a) check or bank
draft drawn upon a United States bank or postal, telegraphic or express money
order payable to American Stock Transfer & Trust Company, as Subscription
Agent, or (b) wire transfer of funds to the account maintained by the
Subscription Agent for such purpose at Chemical Bank, 55 Water Street, New
York, New York 10041, Account No. ; ABA No. 021 000 128. Any wire transfer
of funds should clearly indicate the identity of the subscriber who is paying
the Subscription Price by the wire transfer. The Subscription Price will be
deemed to have been received by the Subscription Agent only upon (i) clearance
of any uncertified check, (ii) receipt by the Subscription Agent of any
certified check or bank draft drawn upon a United States bank or of any
postal, telegraphic or express money order or (iii) receipt of good funds in
the Subscription Agent's account designated above. IF PAYING BY UNCERTIFIED
PERSONAL CHECK, PLEASE NOTE THAT THE FUNDS PAID THEREBY MAY TAKE UP TO FIVE
BUSINESS DAYS TO CLEAR. ACCORDINGLY, HOLDERS OF RIGHTS WHO WISH TO PAY THE
SUBSCRIPTION PRICE BY MEANS OF UNCERTIFIED PERSONAL CHECK ARE URGED TO MAKE
PAYMENT SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO ENSURE THAT SUCH
PAYMENT IS RECEIVED AND CLEARS BY SUCH DATE AND ARE URGED TO CONSIDER PAYMENT
BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF
FUNDS.
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<PAGE>
The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Telephone: (718) 921-8200
If a Rights holder wishes to exercise Rights, but time will not permit such
holder to cause the Subscription Certificate or Subscription Certificates
evidencing such Rights to reach the Subscription Agent on or prior to the
Expiration Date, such Rights may nevertheless be exercised if all of the
following conditions (the "Guaranteed Delivery Procedures") are met:
(i) such holder has caused payment in full of the Subscription Price for
each Underlying Share being subscribed for pursuant to the Basic
Subscription Privilege and the Oversubscription Privilege to be received
(in the manner set forth above) by the Subscription Agent on or prior to
the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration Date,
a guarantee notice (a "Notice of Guaranteed Delivery"), substantially in
the form provided with the Instructions as to Use of Thermedics Detection
Inc. Subscription Certificates and International Holder Subscription Forms
(the "Instructions") distributed with the Subscription Certificates, from a
member firm of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. (the "NASD"), or from a
commercial bank or trust company having an office or correspondent in the
United States (each, an "Eligible Institution"), stating the name of the
exercising Rights holder, the number of Rights represented by the
Subscription Certificate or Subscription Certificates held by such
exercising Rights holder, the number of Underlying Shares being subscribed
for pursuant to the Basic Subscription Privilege and the number of
Underlying Shares, if any, being subscribed for pursuant to the
Oversubscription Privilege, and guaranteeing the delivery to the
Subscription Agent of any Subscription Certificate evidencing such Rights
within five American Stock Exchange ("AMEX") trading days following the
date of the Notice of Guaranteed Delivery; and
(iii) the properly completed Subscription Certificate evidencing the
Rights being exercised, with any required signatures guaranteed, is
received by the Subscription Agent within five AMEX trading days following
the date of the Notice of Guaranteed Delivery relating thereto. The Notice
of Guaranteed Delivery may be delivered to the Subscription Agent in the
same manner as Subscription Certificates at the address set forth above, or
may be transmitted to the Subscription Agent by telegram or facsimile
transmission (telecopy no. (718) 234-5001). Additional copies of the form
of Notice of Guaranteed Delivery are available upon request from the
Subscription Agent, at the address set forth above.
Funds received in payment of the Subscription Price for Excess Shares
subscribed for pursuant to the Oversubscription Privilege will be held in a
segregated account pending issuance of such Excess Shares. If a Rights holder
exercising the Oversubscription Privilege is allocated less than all of the
shares of TDI Common Stock which such holder wished to subscribe for pursuant
to the Oversubscription Privilege, the excess funds paid by such holder in
respect of the Subscription Price for shares not issued will be returned by
mail without interest or deduction as soon as practicable after the Expiration
Date.
A holder of Rights who purchases less than all of the shares of TDI Common
Stock represented by his Subscription Certificate will receive from the
Subscription Agent a new Subscription Certificate representing the balance of
the unsubscribed Rights, to the extent the Subscription Agent is able to
reissue a Subscription Certificate prior to the Expiration Date.
Unless a Subscription Certificate (i) provides that the shares of TDI Common
Stock to be issued pursuant to the exercise of Rights represented thereby are
to be delivered to the record holder of such Rights or (ii) is submitted for
the account of an Eligible Institution, signatures on such Subscription
Certificate must be guaranteed by an Eligible Institution.
18
<PAGE>
Holders who hold shares of TDI Common Stock or Thermedics Common Stock for
the account of others, such as brokers, trustees or depositaries for
securities, should provide a copy of this Prospectus to the respective
beneficial owners of such shares as soon as possible, ascertain such
beneficial owners' intentions and obtain instructions with respect to the
Rights. If the beneficial owner so instructs, the record holder of such Rights
should complete Subscription Certificates and submit them to the Subscription
Agent with the proper payment. In addition, beneficial owners of TDI Common
Stock or Thermedics Common Stock or Rights held through such a holder should
contact the holder and request the holder to effect transactions in accordance
with the beneficial owner's instructions. Beneficial holders should be aware
that brokers or other record holders may establish deadlines for receiving
instructions from beneficial holders significantly in advance of the
Expiration Date.
The instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE
COMPANY, THERMEDICS, OR THERMO ELECTRON, BUT RATHER SEND THEM TO AMERICAN
STOCK TRANSFER & TRUST COMPANY AS REFERENCED ABOVE.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK
OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT AT OR PRIOR
TO 5:00 P.M., EASTERN TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED,
PERSONAL CHECKS MAY TAKE UP TO FIVE BUSINESS DAYS TO CLEAR, HOLDERS OF RIGHTS
ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR
CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company in its sole discretion may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Company determines in its sole discretion. The Company reserves the right to
reject any purchases not properly submitted or the acceptance of which would,
in the opinion of its counsel, be unlawful. Neither the Company nor the
Subscription Agent will be under any duty to give notification of any defect
or irregularity in connection with the submission of Subscription Certificates
or incur any liability for failure to give such notification.
Any questions or requests for assistance concerning the method of exercising
Rights or requests for additional copies of this Prospectus, the Instructions
or the Notice of Guaranteed Delivery should be directed to the Subscription
Agent.
NO REVOCATION
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE
AND/OR THE OVERSUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED.
METHOD OF TRANSFERRING RIGHTS
Rights may be purchased or sold through usual investment channels, including
banks and brokers. The Rights and TDI Common Stock will be listed on the AMEX.
The Rights evidenced by a single Subscription Certificate may be transferred
in whole by endorsing the Subscription Certificate for transfer in accordance
with the accompanying instructions. A portion of the Rights evidenced by a
single Subscription Certificate (but not fractional Rights) may be transferred
by delivering to the
19
<PAGE>
Subscription Agent a Subscription Certificate properly endorsed for transfer,
with instructions to register such portion of the Rights evidenced thereby in
the name of the transferee (and to issue a new Subscription Certificate to the
transferee evidencing such transferred Rights). In such event, a new
Subscription Certificate evidencing the balance of the Rights will be issued
to the Rights holder or, if the Rights holder so instructs, to an additional
transferee. However, notwithstanding the foregoing, the Subscription Agent
will reissue Subscription Certificates for the transferred Rights to the
transferee, and will reissue Subscription Certificates for the balance, if
any, to the holder of the Rights, only to the extent it is able to do so
before the Expiration Date. To transfer Rights to any person other than a bank
or broker, signatures on the Subscription Certificate must be guaranteed by an
Eligible Institution.
Holders wishing to transfer all or a portion of their Rights (but not
fractional Rights) should allow a sufficient amount of time prior to the
Expiration Date for (i) the transfer instructions to be received and processed
by the Subscription Agent, (ii) a new Subscription Certificate to be issued
and transmitted to the transferee or transferees with respect to transferred
Rights, and to the transferor with respect to retained Rights, if any, and
(iii) the Rights evidenced by such new Subscription Certificates to be
exercised or sold by the recipients thereof. None of the Company, Thermedics,
nor the Subscription Agent will have any liability to a transferee or
transferor of Rights if Subscription Certificates are not received in time for
exercise or sale prior to the Expiration Date.
The Rights evidenced by a Subscription Certificate also may be sold, in
whole or in part, through the Subscription Agent by delivering to the
Subscription Agent such Subscription Certificate properly executed for sale by
the Subscription Agent. If only a portion of the Rights evidenced by a single
Subscription Certificate are to be sold by the Subscription Agent, such
Subscription Certificate must be accompanied by instructions setting forth the
action to be taken with respect to the Rights that are not to be sold.
Promptly following such sale, the Subscription Agent will send the Rights
holder a check for the net proceeds from the sale of any Rights sold. If the
proceeds from the sale of Rights are to be paid or delivered to anyone other
than the registered holder of the Rights, signatures on the Subscription
Certificate must be guaranteed by an eligible guarantor institution which is a
participant in a securities transfer association recognized program (otherwise
known as the Medallion Signature Guarantee Program). ANY SIGNATURE GUARANTEE
NOT MADE IN ACCORDANCE WITH THE MEDALLION SIGNATURE GUARANTEE PROGRAM WILL NOT
BE ACCEPTED BY THE SUBSCRIPTION AGENT. If the Rights can be sold by the
Subscription Agent, sales of such Rights will be deemed to have been effected
at the weighted average price received by the Subscription Agent on the day
such Rights are sold, less any applicable brokerage commissions, taxes and
other direct expenses of sale. Orders to sell Rights must be received prior to
11:00 a.m., Eastern time, on the date that is four AMEX trading days prior to
the Expiration Date, and the Subscription Agent's obligation to execute orders
is subject to its ability to find buyers at a price that would result in net
proceeds to the holder of the Rights.
Except for the fees charged by the Subscription Agent (which will be paid by
the Company), all commissions, fees and other expenses (including brokerage
commissions and transfer taxes) incurred in connection with the purchase, sale
or exercise of Rights will be for the account of the transferor of the Rights,
and none of such commissions, fees or expenses will be paid by the Company or
the Subscription Agent.
The Company anticipates that the Rights will be eligible for transfer
through, and that the exercise of the Basic Subscription Privilege (but not
the Oversubscription Privilege) may be effected through, the facilities of The
Depository Trust Company ("DTC"). Rights exercised through DTC are referred to
as "DTC Exercised Rights." The holder of a DTC Exercised Right may exercise
the Oversubscription Privilege in respect of such DTC Exercised Right by
properly executing and delivering to the Subscription Agent, at or prior to
5:00 p.m., Eastern time, on , a DTC Participant Oversubscription Exercise
Form, together with payment of the appropriate Subscription Price for the
number of Underlying Shares for which the Oversubscription Privilege is to be
exercised. Copies of the DTC Participant Oversubscription Exercise Form may be
obtained from the Subscription Agent.
20
<PAGE>
FOREIGN AND CERTAIN OTHER STOCKHOLDERS
Subscription Certificates will not be mailed to Holders whose addresses are
outside the United States or who have an APO or FPO address, but will be held
by the Subscription Agent for their account. To exercise or sell Rights, such
Holders must notify the Subscription Agent by completing an International
Holder Subscription Form, which will be delivered to such Holders (except
those located in the United Kingdom) in lieu of a Subscription Certificate,
and sending it by mail or telecopy to the Subscription Agent at the address
and telecopy number specified above. Holders located in the United Kingdom
will not initially be provided with International Holder Subscription Forms.
Such Holders who are interested in participating in the Rights Offering should
contact Lehman Brothers International (Europe), One Broadgate, London EC2M
7HA, England, telephone 011-44-1-71-260-2793, telecopier 011-44-1-71-260-2635,
attention: . International Holder Subscription Forms must be
returned to the Subscription Agent at or prior to 11:00 a.m., Eastern time, on
the date that is four AMEX trading days prior to the Expiration Date, at which
time (if no instructions have been received) the Rights represented thereby
will be sold, if feasible, by the Subscription Agent and the net proceeds, if
any, remitted to such Holders. If the Rights can be sold by the Subscription
Agent, sales of such Rights will be deemed to have been effected at the
weighted average price received by the Subscription Agent on the day such
Rights are sold, less any applicable brokerage commissions, taxes and other
expenses. Certain restrictions upon the transfer and exercise of Rights by
persons located outside of the United States are set forth on the inside front
cover page of this Prospectus.
STANDBY UNDERWRITING COMMITMENT
As set forth under "Underwriting" and except as provided in the following
paragraph, the Underwriters will be required to purchase from the Company on
the sixth business day after the Expiration Date at the Subscription Price a
number of shares of TDI Common Stock equal to 1,000,000 shares less the number
of shares of TDI Common Stock that have been properly subscribed for as of the
Expiration Date ("Underwritten Shares"). If Rights to purchase at least
1,000,000 shares are exercised, the Underwriters will not be required to
purchase any of the TDI Common Stock issuable upon the exercise of the Rights.
The Company has also granted the Underwriters an option, exercisable within 30
days after the Expiration Date, to purchase up to an additional 150,000 shares
of TDI Common Stock at the Subscription Price solely to cover over-allotments,
if any.
The obligation of the Underwriters under the Standby Underwriting Agreement
to purchase Underwritten Shares is subject to the following conditions, among
others: that the Registration Statement of which this Prospectus is a part
shall have been declared effective, and that no stop order with respect
thereto shall have been issued; that satisfactory opinions of counsel to the
Company and to the Underwriters, and certain assurances from the Company's
independent public accountants, shall have been received; and that the Company
shall not have experienced any material adverse change in its business
(including the results of operations or management) or properties and that the
Company affirm as correct certain representations and warranties made to the
Underwriters. In addition, the Underwriters in their absolute discretion may,
in the event of the occurrence of any of the following, elect to terminate
their obligations under the Standby Underwriting Agreement: if trading in the
TDI Common Stock has been suspended by the AMEX or trading in securities
generally on the AMEX, the New York Stock Exchange or the International Stock
Exchange of the United Kingdom has been suspended, limited or subject to the
establishment of minimum prices; if a banking moratorium has been declared by
banking authorities of the United States, the United Kingdom or New York
State; if there has occurred any outbreak or escalation of hostilities,
declaration by the United States or the United Kingdom of a national emergency
or war, or other calamity or crisis the effect of which on the financial
markets is such as to make it, in the judgment of the Underwriters,
impracticable or inadvisable to proceed with the Rights Offering or delivery
of the Underwritten Shares as contemplated hereby.
FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material United States federal income
tax considerations affecting holders of TDI Common Stock and Thermedics Common
Stock receiving Rights in the Rights Offering. This
21
<PAGE>
summary is based upon laws, regulations, rulings, and decisions currently in
effect. This summary does not discuss all aspects of federal taxation that may
be relevant to a particular investor or to certain types of investors subject
to special treatment under the federal tax laws (for example, banks, dealers
in securities, life insurance companies, tax-exempt organizations, and foreign
persons), nor does it discuss any aspect of state, local, or foreign tax laws.
HOLDERS OF TDI COMMON STOCK AND THERMEDICS COMMON STOCK SHOULD THEREFORE
CONSULT THEIR OWN TAX ADVISORS CONCERNING THEIR INDIVIDUAL TAX SITUATIONS AND
THE TAX CONSEQUENCES OF THE RIGHTS OFFERING UNDER THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, AND UNDER ANY APPLICABLE STATE, LOCAL, OR FOREIGN TAX LAWS.
Distribution of the Rights to Holders of TDI Common Stock. A holder of TDI
Common Stock will not recognize taxable income for federal income tax purposes
as a result of the issuance to such holder of Rights in respect of the TDI
Common Stock. Except as provided in the following sentence, the basis of such
Rights will be zero. If either (i) the fair market value of the Rights on the
date of distribution is 15% or more of the fair market value of the TDI Common
Stock in respect of which they are received on such date, or (ii) the
stockholder elects, in the stockholder's federal income tax return for the
taxable year in which the Rights are received, to allocate part of the basis
of such TDI Common Stock to the Rights, then the stockholder's basis in such
TDI Common Stock will be allocated between such TDI Common Stock and such
Rights in proportion to their respective fair market values on the date of
distribution. The holding period of a stockholder with respect to Rights
received as a distribution on such stockholder's TDI Common Stock will include
the stockholder's holding period for the TDI Common Stock in respect of which
the Rights were issued.
Distribution of the Rights to Holders of Thermedics Common Stock. The
distribution of the Rights by Thermedics to holders of Thermedics Common Stock
will constitute a taxable distribution of property, and accordingly, each such
holder will be required to include as ordinary taxable income an amount equal
to the fair market value (if any) of the Rights as of the date of the
distribution (subject, to the extent available, to the 70% dividends-received
deduction currently allowed to certain corporate stockholders). The tax basis
of the Rights in the hands of the recipient Thermedics stockholder will be
equal to the amount so included in income.
Thermedics is required annually to notify the holders of Thermedics Common
Stock, on Internal Revenue Service Form 1099, of the amount of dividends
aggregating $10 or more paid to such holders during the prior year, including,
for 1997, the fair market value of the Rights (if any) on the date of
distribution. Thermedics and the Company will determine the fair market value
of the Rights on that date, after consultation with the Underwriters. It is
anticipated that the per share value of the TDI Common Stock represented by
the Rights at the date of commencement of the Rights Offering will approximate
the Subscription Price, with the result that the Rights should have nominal
value for federal income tax purposes. Holders of Thermedics Common Stock
should be aware, however, that the Internal Revenue Service will not be bound
by Thermedics' and the Company's determination.
Tax Basis in Rights. A holder of Rights that purchased the Rights will have
a tax basis in the Rights equal to the holder's cost of the Rights. A
Thermedics shareholder that received the Rights as a dividend with respect to
the stock of Thermedics will have a tax basis in the Rights equal to the
amount of the dividend (without taking into account any dividends-received
deduction for corporate shareholders). A holder of TDI Common Stock that
received the Rights with respect to the TDI Common Stock will allocate its
previous tax basis in the TDI Common Stock between the TDI Common Stock and
the Rights in proportion to their respective fair market values on the date of
the distribution, provided, however, that no such allocation of basis shall be
made if (i) the fair market value of the Rights so acquired is less than 15%
of the fair market value of the holder's TDI Common Stock immediately prior to
the distribution (unless the holder elects to make an allocation), or (ii) the
Rights so acquired are neither sold nor exercised.
22
<PAGE>
Exercise of Rights. A holder of Rights will not recognize gain or loss upon
the exercise of the Rights. A holder of Rights who receives shares of TDI
Common Stock upon such exercise will acquire a tax basis in those shares equal
to the sum of the price paid on exercise and the holder's tax basis in the
Rights. The holding period of TDI Common Stock received on exercise of the
Rights will begin on the date the Rights are exercised.
Transfer of Rights. A holder of Rights that sells Rights prior to exercise
will recognize gain or loss equal to the difference between the sale proceeds
and such holder's adjusted tax basis in the Rights sold. Such gain or loss
will be capital gain or loss if gain or loss from a sale of TDI Common Stock
held by such stockholder would be characterized as capital gain or loss at the
time of such sale. Capital gain or loss recognized on a sale of Rights by a
Thermedics Detection stockholder will be long-term capital gain or loss if the
TDI Common Stock for which the Rights were distributed was held by such
stockholder for more than one year; otherwise such gain or loss will be short-
term capital gain or loss. Any capital gain or loss recognized on a sale of
Rights by a Thermedics stockholder will be a short-term capital gain or loss.
Lapse of Rights. A holder of Rights that fails either to exercise or to
transfer the Rights prior to the Expiration Date will be deemed to have sold
his rights on that date for an amount equal to zero. Accordingly, if such
unexercised Rights were held as capital assets, the holder would recognize a
capital loss equal to the amount of such holder's adjusted tax basis in the
Rights. Any such capital loss for a Thermedics Detection stockholder
(although, as stated above, such holders will have a tax basis of zero in the
Rights) would be a long-term capital loss if the TDI Common Stock for which
the Rights were distributed was held by such stockholder for more than one
year; otherwise such loss will be a short-term capital loss. Such a capital
loss for a Thermedics stockholder will be a short-term capital loss.
23
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the Rights Offering
depends on the number of Rights exercised. The maximum and minimum net
proceeds to be received by the Company are estimated to be $ and $ ,
respectively (a maximum of $ if the Underwriters' over-allotment option is
exercised in full) after deducting the underwriting fees and commissions and
estimated offering expenses payable by the Company.
The Company expects to use the net proceeds from the Rights Offering to fund
research and development with respect to new products and for general
corporate purposes, including the possible acquisition of one or more
businesses. The Company, however, is not currently engaged in negotiations
with any companies and it has no agreements, understanding or commitments with
respect to any specific acquisitions that would be material to the Company.
Pending these uses, the Company expects to invest the net proceeds from the
Rights Offering primarily in investment grade interest bearing or dividend
bearing instruments, either directly by the Company or pursuant to a
repurchase agreement with Thermo Electron. See "Relationship with Thermo
Electron and Thermedics--Miscellaneous."
DIVIDEND POLICY
The Company has never paid any cash dividends on the TDI Common Stock. The
Company anticipates that for the foreseeable future the Company's earnings, if
any, will be retained for use in the business and that no cash dividends will
be paid on the TDI Common Stock.
24
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 28, 1996 stated on a pro forma basis to reflect the issuance of
383,500 shares of TDI Common Stock in a private placement on November 19,
1996, and as adjusted to reflect the issuance and sale of 1,000,000 shares of
TDI Common Stock in the Rights Offering, after deducting underwriting
discounts and commissions and estimated offering expenses payable by the
Company.
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
-------------------------
PRO FORMA AS ADJUSTED (1)
--------- ---------------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Long-term Obligation:
Promissory Note to Parent Company............... 21,200 21,200
------- ------
Shareholders' Investment:
Common stock, $.10 par value, 15,000,000 shares
authorized; 10,683,500 shares issued and
outstanding, x,xxx,xxx shares, as adjusted for
the Rights Offering (2)........................ 1,068
Capital in excess of par value.................. 13,119
Retained earnings............................... 5,711 5,841
Cumulative translation adjustment............... (179) (179)
------- ------
Total Shareholders' Investment................ 19,719
------- ------
Total Capitalization (Long-term Obligation
and Shareholders' Investment).............. $40,919 $
======= ======
</TABLE>
- --------
(1) Adjusted to reflect the minimum proceeds to the Company from the Rights
Offering, which assumes the sale of 1,000,000 shares to the Underwriters
at a Subscription Price of $ per share and no purchase of shares upon
the exercise of Rights by persons other than the Underwriters, after
deduction of underwriting fees and commissions and estimated offering
expenses payable by the Company. See "The Rights Offering" and
"Underwriting."
(2) Does not include 358,333 shares of TDI Common Stock reserved for issuance
under the Company's stock-based compensation plans. Options to purchase
218,180 shares of TDI Common Stock had been granted and were outstanding
under the Company's stock-based compensation plans as of December 31,
1996. See "Management--Compensation of Directors" and "--Compensation of
Executive Officers" and Notes 3 and 8 of Notes to the Company's
Consolidated Financial Statements.
25
<PAGE>
DILUTION
As of September 28, 1996, the Company had a net tangible book value of
$2,520,000, or $.24 per share, stated on a pro forma basis to reflect the
issuance of 383,500 shares of TDI Common Stock in a private placement on
November 19, 1996. Net tangible book value per share is determined by dividing
the net tangible book value (total tangible assets less total liabilities) of
the Company by the number of shares of TDI Common Stock outstanding. After
giving effect to the Rights Offering, assuming the minimum proceeds to the
Company, which assumes the sale of 1,000,000 shares to the Underwriters at a
Subscription Price of $ per share and the sale of no shares upon the
exercise of Rights by persons other than the Underwriters, and the application
of the estimated net proceeds, the pro forma net tangible book value of the
Company as of September 28, 1996 would have been $ or $ per share. This
represents an immediate increase in such net tangible book value of $ per
share to present stockholders and an immediate dilution of $ per share to
the investors purchasing shares in the Rights Offering. See "Risk Factors--
Immediate and Substantial Dilution." The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Subscription Price per share........................................ $
Pro forma net tangible book value per share as of September 28,
1996 before the Rights Offering.................................. $
----
Increase in net tangible book value per share attributable to the
Rights Offering..................................................
Pro forma net tangible book value per share as of September 28,
1996, after the Rights Offering(1).................................
----
Dilution per share to investors in the Rights Offering(1)........... $
====
</TABLE>
- --------
(1) If all options outstanding as of September 28, 1996 to purchase an
aggregate of 218,180 shares of TDI Common Stock at a weighted average
exercise price of $10.41 per share were exercised in full, the pro forma
net tangible book value per share after the Rights Offering would be $ ,
resulting in an immediate dilution of $ per share to investors
purchasing shares in the Rights Offering.
The following table sets forth on a pro forma basis as of September 28, 1996
to reflect the differences between the present stockholders and the investors
in the Rights Offering with respect to the number of shares of TDI Common
Stock acquired, the total consideration paid and the average consideration
paid per share, assuming the minimum proceeds to the Company from the Rights
Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Thermedics (1).......... 10,000,000 85.6% % $
Other existing investors
(2).................... 683,500 5.9%
Investors in the Rights
Offering............... 1,000,000 8.5%
---------- ----- -------- ----------
Total................. 11,683,500 100.0% 100.0%
========== ===== ======== ==========
</TABLE>
- --------
(1) Calculated on the basis of the book value of net assets transferred by
Thermedics to the Company, adjusted by subsequent capital contributions
and distributions, in exchange for 10,000,000 shares of TDI Common Stock.
See "Relationship with Thermo Electron and Thermedics."
(2) Represents the consideration paid for shares of TDI Common Stock purchased
for cash.
After giving effect to the Rights Offering, assuming the maximum proceeds to
the Company, which assumes the sale of 1,600,000 shares upon the exercise of
Rights by persons other than the Underwriters and the sale of no shares to the
Underwriters, and the application of the estimated net proceeds, the pro forma
net tangible book value of the Company as of September 28, 1996 would have
been $ , or $ per share. This represents an immediate increase in such
net tangible book value of $ per share to present stockholders
26
<PAGE>
and an immediate dilution of $ per share to the investors purchasing shares
in the Rights Offering. See "Risk Factors--Immediate and Substantial
Dilution." The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Subscription Price per share.......................................... $
Pro forma net tangible book value per share as of September 28, 1996
before the Rights Offering......................................... $
---
Increase in net tangible book value per share attributable to the
Rights Offering....................................................
Pro forma net tangible book value per share as of September 28, 1996,
after the Rights Offering (1)(2).....................................
---
Dilution per share to investors in the Rights Offering(1)(2).......... $
===
</TABLE>
- --------
(1) If the Underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after the Rights Offering would be
$ , resulting in an immediate dilution of $ per share to investors
purchasing shares in the Rights Offering.
(2) If all options outstanding as of September 28, 1996 to purchase an
aggregate of 218,180 shares of TDI Common Stock at a weighted average
exercise price of $10.41 per share were exercised in full in addition to
the Underwriters' exercise of the over-allotment option, the pro forma net
tangible book value per share after the Rights Offering would be $ ,
resulting in an immediate dilution of $ per share to investors
purchasing shares in the Rights Offering.
The following table sets forth on a pro forma basis as of September 28, 1996
to reflect the differences between the present stockholders and the investors
in the Rights Offering with respect to the number of shares of TDI Common
Stock acquired, the total consideration paid and the average consideration
paid per share, assuming the maximum proceeds to the Company from the Rights
Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Thermedics (1).......... 10,000,000 81.4% % $
Other existing investors
(2).................... 683,500 5.6%
Investors in the Rights
Offering............... 1,600,000 13.0%
---------- ----- -------- ----------
Total................. 12,283,500 100.0% 100.0%
========== ===== ======== ==========
</TABLE>
- --------
(1) Calculated on the basis of the book value of net assets transferred by
Thermedics to the Company in exchange for 10,000,000 shares of TDI Common
Stock. See "Relationship with Thermo Electron and Thermedics."
(2) Represents the consideration paid for shares of TDI Common Stock purchased
for cash.
27
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected financial information below for the fiscal year ended January
1, 1994 and as of and for the fiscal years ended December 31, 1994 and
December 30, 1995 has been derived from the Company's Consolidated Financial
Statements, which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report included elsewhere in this
Prospectus. This information should be read in conjunction with the Company's
Consolidated Financial Statements and related notes included elsewhere in this
Prospectus. The selected financial information for the fiscal years ended
December 28, 1991 and January 2, 1993, as of January 1, 1994 and for the nine
month periods ended September 30, 1995 and September 28, 1996 has not been
audited but, in the opinion of the Company, includes all adjustments
(consisting only of normal, recurring adjustments) necessary to present fairly
such information in accordance with generally accepted accounting principles
applied on a consistent basis. The results of operations for the nine months
ended September 28, 1996 are not necessarily indicative of results for the
entire year.
<TABLE>
<CAPTION>
PRO FORMA COMBINED (2)
---------------------------
FISCAL YEAR NINE MONTHS ENDED NINE MONTHS
------------------------------------------- --------------------------- FISCAL ENDED
SEPTEMBER 30, SEPTEMBER 28, YEAR SEPTEMBER 28,
1991 1992 1993 1994 1995 1995 1996 (1) 1995 1996
------- ------- ------- ------- ------- ------------- ------------- ----------- --------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $11,482 $17,361 $42,031 $50,343 $27,954 $22,188 $30,566 $ 46,485 $ 32,113
------- ------- ------- ------- ------- ------- ------- ----------- -----------
Costs and Operating
Expenses:
Cost of revenues....... 7,240 9,329 23,759 24,906 15,236 11,979 16,305 23,304 16,815
Selling, general and
administrative
expenses............... 3,350 4,229 7,526 11,973 7,487 5,696 11,928 15,591 12,615
Research and
development expenses... 547 647 1,790 3,895 2,741 1,869 3,551 3,092 3,572
------- ------- ------- ------- ------- ------- ------- ----------- -----------
11,137 14,205 33,075 40,774 25,464 19,544 31,784 41,987 33,002
------- ------- ------- ------- ------- ------- ------- ----------- -----------
Operating Income
(Loss).................. 345 3,156 8,956 9,569 2,490 2,644 (1,218) 4,498 (889)
Interest and Other
Expense, Net............ -- -- -- -- (72) (54) (495) (1,580) (551)
------- ------- ------- ------- ------- ------- ------- ----------- -----------
Income (Loss) Before
Income Taxes............ 345 3,156 8,956 9,569 2,418 2,590 (1,713) 2,918 (1,440)
Income Tax (Provision)
Benefit................. (133) (1,253) (3,153) (3,189) (910) (997) 650 (1,122) 535
------- ------- ------- ------- ------- ------- ------- ----------- -----------
Net Income (Loss)....... $ 212 $ 1,903 $ 5,803 $ 6,380 $ 1,508 $ 1,593 $(1,063) $ 1,796 $ (905)
======= ======= ======= ======= ======= ======= ======= =========== ===========
Earnings (Loss) per
Share (3)............... $ .02 $ .19 $ .58 $ .63 $ .15 $ .16 $ (.11) $ .18 $ (.09)
======= ======= ======= ======= ======= ======= ======= =========== ===========
Weighted Average Shares
(3)..................... 10,069 10,069 10,069 10,069 10,069 10,069 10,069 10,069 10,069
======= ======= ======= ======= ======= ======= ======= =========== ===========
BALANCE SHEET DATA (AT
END OF PERIOD):
Working Capital......... $ 5,975 $ 5,593 $ 447 $ 6,116 $11,273 $11,410 $17,743 $ 21,696
Total Assets............ 9,626 12,126 25,544 17,793 20,322 20,648 48,425 52,378
Long-term Obligations... -- -- -- -- -- -- 21,200 21,200
Shareholders'
Investment.............. 7,112 7,282 3,822 9,208 13,773 14,085 15,766 19,719
</TABLE>
- ----
(1) Includes the results of Moisture Systems and Rutter since their
acquisition by the Company in January 1996.
(2) The pro forma combined statement of operations data was derived from the
pro forma combined condensed statement of operations included elsewhere in
this Prospectus. The pro forma combined statement of operations data sets
forth the results of operations for fiscal year 1995 and the nine months
ended September 28, 1996, as if the acquisitions of Moisture Systems and
Rutter had occurred on January 1, 1995. The pro forma combined balance
sheet sets forth the financial position of the Company adjusted to reflect
the issuance on November 19, 1996 of 383,500 shares of the Company's
common stock in a private placement for net proceeds of $3,953,000.
(3) Pursuant to Securities and Exchange Commission requirements, earnings
(loss) per share have been presented for all periods. Weighted average
shares for all periods include 10,000,000 shares issued to Thermedics in
connection with the initial capitalization of the Company, as well as the
effect of shares sold through private placements and the assumed exercise
of stock options issued within one year prior to the Company's proposed
rights offering.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Thermedics Detection Inc. (the "Company") develops, manufactures and markets
high-speed on-line detection and measurement systems used in a variety of
industrial process applications, explosives detection and laboratory analysis.
The Company's industrial process systems use ultratrace chemical detectors,
high-speed gas chromatography, X-ray imaging, near-infrared spectroscopy and
other technologies for quality assurance of in-process and finished products,
primarily in the food, beverage, pharmaceutical, forest products, chemical and
other consumer products industries. The Company's explosives-detection
equipment uses simultaneous trace particle- and vapor-detection techniques
based on its proprietary chemiluminescence and high-speed gas chromatography
technologies. Customers use the Company's explosives-detection equipment to
detect plastic and other explosives at airports and border crossings, for
other high-security screening applications and for forensics and search
applications.
Historically, the Company's principal product lines were process detection
systems, including Alexus systems, and EGIS explosives detectors. The Company
expanded its product lines to include moisture analysis equipment through its
acquisition of Moisture Systems and Rutter in January 1996, and also
introduced its InScan systems and Flash-GC gas chromatography systems in 1996.
The Company also performs contract research and development services for
government and industry customers and generates service revenues through long-
term contracts.
The Company's strategy has been to develop proprietary, high-speed
analytical technologies to meet the needs of its customers, introduce those
technologies to new markets, and finally, employ the process knowledge gained
from customers in these markets to develop new proprietary technologies. In
1992, based on technologies used in its EGIS systems and TEA Analyzer, the
Company developed its line of Alexus systems, which detect trace amounts of
contaminants in refillable plastic bottles for the soft-drink industry. The
Coca-Cola Bottlers elected to retrofit all of their existing refillable
plastic bottling lines outside of the U.S. with this device, creating a
dramatic increase in sales in 1993 through 1994. Sales of Alexus systems to
the Coca-Cola Bottlers were $32,184,000, or 64% of the Company's revenues, in
1994. By 1995, the Coca-Cola Bottlers had substantially completed their
retrofit, and sales of the Alexus systems substantially declined. Sales of
Alexus systems to the Coca-Cola Bottlers were $8,795,000 and $3,816,000, or
31% and 12% of the Company's revenues, in 1995 and the first nine months of
1996, respectively. These revenues represent product line upgrades by the
Company's installed base, and new bottling lines added by the Coca-Cola
Bottlers. The Company has sought to expand its customer base and continues to
develop Alexus upgrades and new applications and products. The Company also
introduced several new product lines over the last 12 months, including its
InScan and Flash-GC product lines. As the Company begins marketing these and
other products, including its EGIS explosives-detection equipment, the Company
believes that it will become less dependent on its traditional revenue base.
No assurance can be given, however, that the Company will be able to
significantly broaden the markets for its process detection systems.
The Company's sales of its explosives-detection systems for use in airports
has been and will continue to be dependent on governmental initiatives to
require, or support, the screening of checked luggage, carry-on items and
personnel with advanced explosives-detection equipment. Significant terrorist
acts, such as the downing of Pan American Flight 103, the World Trade Center
bombing and the bombing in Oklahoma City have sparked renewed government
initiatives in the screening of people, baggage and packages at high-
sensitivity locations such as airports. In October 1996, in response to the
explosion of TWA Flight 800, the United States enacted legislation which
included $144.2 million allocated for the purchase of explosives-detection
systems and other advanced security equipment, including trace equipment, such
as the systems manufactured by the Company for carry-on and checked baggage
screening. The Company believes that this legislation and potential follow-on
legislation will generate significant growth in the market for explosives-
detection instruments, including trace detection systems.
29
<PAGE>
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly financial
information for each of the seven quarters in the period ended September 28,
1996. The Company believes that this information has been presented on the
same basis as the audited financial statements appearing elsewhere in this
Prospectus and in the opinion of the Company, includes all adjustments
(consisting only of normal, recurring adjustments) necessary to present fairly
the unaudited quarterly results when read in conjunction with the audited
financial statements of the Company and related notes thereto included
elsewhere in the Prospectus. The operating results for any quarter are not
necessarily indicative of the operating results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------
APRIL 1, JULY 1, SEPT. 30, DEC. 30, MARCH 30, JUNE 29, SEPT. 28,
1995 1995 1995 1995 1996 1996 1996
-------- ------- --------- -------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $9,050 $7,140 $5,998 $5,766 $9,345 $10,104 $11,117
Cost of Revenues........ 4,390 3,866 3,723 3,257 4,946 6,123 5,236
------ ------ ------ ------ ------ ------- -------
Gross Profit............ 4,660 3,274 2,275 2,509 4,399 3,981 5,881
Operating Expenses...... 2,687 2,531 2,347 2,663 5,191 5,933 4,355
------ ------ ------ ------ ------ ------- -------
Operating Income
(Loss)................. 1,973 743 (72) (154) (792) (1,952) 1,526
Net Income (Loss)....... 1,202 426 (35) (85) (524) (1,244) 705
Gross Profit Margin..... 51% 46% 38 % 44 % 47 % 39 % 53%
Operating Income (Loss)
Margin................. 22% 10% (1)% (3)% (8)% (19)% 14%
Net Income (Loss) Mar-
gin.................... 13% 6% (1)% (1)% (6)% (12)% 6%
</TABLE>
The presentation of the Company's historical quarterly results reflects
lower revenues from process detection instruments in the first quarter of
1996, compared with the first quarter of 1995, as described above. This
decrease was offset by an increase in revenues in the first quarter of 1996
due to the inclusion of revenues from Moisture Systems and Rutter, which were
acquired January 1996. In the first half of 1996, gross profit margin from
process detection instruments decreased due to lower sales volume, offset by
higher-margin revenues from Moisture Systems and Rutter in 1996. In addition,
in the first and second quarters of 1996, the Company recorded significant
nonrecurring charges, including those discussed in the results of operations.
These write-offs included a reserve for obsolete inventory due to planned
product changes, as well as costs for severance and a reduction of leased
facilities and other adjustments. The Company's operating results for the
first half of 1996 were adversely affected as a result of these charges and
the Company incurred an operating loss of $2.7 million for that period. The
Company was profitable in the period subsequent to these write-offs, with
operating income of $1.5 million recorded in the third quarter of 1996.
RESULTS OF OPERATIONS
First Nine Months 1996 Compared With First Nine Months 1995(/1/)
Total revenues increased to $30.6 million in the first nine months of 1996
from $22.2 million in the first nine months of 1995, primarily due to the
inclusion of $12.1 million in revenues from Moisture Systems and Rutter, which
were acquired in January 1996. Product revenues increased 41% to $21.3 million
in 1996 from $15.1 million in 1995. Revenues from the Company's process
detection instruments decreased to $10.7 million in 1996 from $14.6 million in
1995, primarily due to a decrease in demand from the Coca-Cola Bottlers, which
have substantially completed their initial deployment of Alexus systems.
Revenues from the Company's EGIS explosives-detection systems increased to
$6.0 million in 1996 from $3.6 million in 1995, primarily due to the
- --------
(1) References to the first nine months of 1996 and the first nine months of
1995 herein are for the nine month periods ended September 28, 1996 and
September 30, 1995, respectively.
30
<PAGE>
sale of eight EGIS units to the U.S. government to provide counterterrorism
support in Israel. Service revenues increased 31% to $9.2 million in 1996 from
$7.1 million in 1995 as a result of the addition of service revenues from
Moisture Systems and Rutter. This increase was offset in part by a decrease in
research and development contract revenues of $2.2 million to $1.1 million in
1996 due to the completion of a commercial contract with the Miller Brewing
Company for the InScan system and, to a lesser extent, the completion of
various phases of government contracts, which have since been renewed.
The gross profit margin increased to 47% in the first nine months of 1996
from 46% in the first nine months of 1995. The gross profit margin on product
revenues decreased to 45% in 1996 from 47% in 1995, primarily due to an
inventory write-down of $0.8 million in the second quarter of 1996 due to
obsolescence created by planned product changes. In addition, gross profit
margin on process detection instruments decreased in 1996 due to lower sales
volume, offset by higher-margin revenues from Moisture Systems and Rutter. The
gross profit margin on service revenues increased to 51% in 1996 from 44% in
1995, primarily due to the inclusion of higher-margin revenues from Moisture
Systems and, to a lesser extent, the impact of cost reductions implemented in
late 1995 and early 1996.
Selling, general and administrative expenses as a percentage of revenues
increased to 39% in the first nine months of 1996 from 26% in the first nine
months of 1995, primarily due to higher expenses as a percentage of revenues
at Moisture Systems and Rutter and, to a lesser extent, $0.4 million of costs
incurred in the second quarter of 1996 related to reductions in personnel and
a reduction in leased space in response to the lower sales volume of process
detection instruments.
Research and development expenses increased to $3.6 million in the first
nine months of 1996 from $1.9 million in the first nine months of 1995,
primarily due to research and development relating to the Company's Flash-GC
gas chromatograph and its InScan high-speed X-ray imaging system. These
projects are nearing completion and the Company expects that its research and
development expenses as a percentage of revenues will decline in 1997. In
addition, the Company recorded a nonrecurring charge of $0.2 million in the
second quarter of 1996 for the write-off of certain research and development
equipment no longer of use.
Interest expense, related party of $0.6 million in the first nine months of
1996 reflects the issuance of a $21.2 million promissory note to Thermedics in
connection with the January 1996 acquisitions of Moisture Systems and Rutter.
This note is due March 1998, and bears interest at the 90-day Commercial Paper
Composite Rate plus 25 basis points, set at the beginning of each quarter. See
"Relationship with Thermo Electron and Thermedics."
1995 Compared With 1994(/2/)
Total revenues were $28.0 million in 1995, compared with $50.3 million in
1994. Product revenues decreased 54% to $18.5 million in 1995 from $40.4
million in 1994. Revenues from the Company's process detection instruments
decreased to $16.2 million in 1995 from $38.0 million in 1994, primarily due
to a decrease in demand from the Coca-Cola Bottlers, which have substantially
completed their initial deployment of Alexus systems. Revenues from the
Company's EGIS explosives-detection systems declined to $8.0 million in 1995
from $10.1 million in 1994. During 1993 and 1994, large orders from BAA plc,
which oversees airports in the United Kingdom, and the German government
accounted for a significant portion of EGIS sales. Service revenues decreased
4% to $9.5 million in 1995 from $9.9 million in 1994, primarily due to a
decline in revenues from process detection systems. This decrease was more
than offset by an increase in research and development contract revenues of
$2.1 million to $4.0 million in 1995 due to an increase in government contract
revenue and, to a lesser extent, revenue from a commercial contract with
Miller Brewing Company in 1995.
The gross profit margin declined to 45% in 1995 from 51% in 1994. The gross
profit margin on product revenues decreased to 46% in 1995 from 55% in 1994
due to the lower sales volume and, to a lesser extent, the
- --------
(2) References to 1995, 1994 and 1993 herein are for the fiscal years ended
December 30, 1995, December 31, 1994 and January 1, 1994, respectively.
31
<PAGE>
inclusion of lower-margin research and development contract revenues. The
gross profit margin on service revenues increased to 44% in 1995 from 31% in
1994 due to higher margins on recent service contracts.
Selling, general and administrative expenses as a percentage of revenues
increased to 27% in 1995 from 24% of revenues in 1994, primarily due to the
lower sales volume in 1995.
Research and development expenses decreased to $2.7 million in 1995 from
$3.9 million in 1994 due to a shift in the allocation of resources to
externally funded research and development contracts.
1994 Compared With 1993
Total revenues increased to $50.3 million in 1994 from $42.0 million in
1993. Product revenues increased 7% to $40.4 million in 1994 from $37.6
million in 1993. Revenues from the Company's process detection instruments,
primarily from the Coca-Cola Bottlers, were $38.0 million in 1994, compared
with $34.4 million in 1993. Revenues from the Company's EGIS explosives-
detection systems increased to $10.1 million in 1994 from $6.0 million in
1993, primarily due to a large order in 1994 from BAA plc and the German
government. Service revenues more than doubled to $9.9 million in 1994 from
$4.4 million in 1993. In early 1994, the Company completed development of its
worldwide customer service infrastructure, enabling it to provide customer
service from multiple locations.
The gross profit margin increased to 51% in 1994 from 43% in 1993. The gross
profit margin on product revenues increased to 55% in 1994 from 44% in 1993
due to the higher sales volume. The gross profit margin on service revenues
decreased to 31% in 1994 from 35% in 1993, primarily due to the introduction
of enhanced product warranties in 1994.
Selling, general and administrative expenses as a percentage of revenues
increased to 24% in 1994 from 18% in 1993, primarily as a result of increased
expenses to market the Company's process detection instruments.
Research and development expenses increased to $3.9 million in 1994 from
$1.8 million in 1993, primarily due to increased expenses to upgrade the
Company's process detection instruments and to develop new applications for
its technology.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $17.7 million at September 28, 1996,
compared with $11.3 million at December 30, 1995. Included in working capital
are cash and cash equivalents of $8.1 million at September 28, 1996. During
the first nine months of 1996, cash of $5.0 million was provided by operating
activities.
During the first nine months of 1996, cash of $22.5 million was used in
investing activities. In January 1996, the Company acquired the assets of
Moisture Systems and certain affiliated companies, and the stock of Rutter for
a total of $22.0 million in cash, net of cash acquired and including
repayments of approximately $1.8 million of indebtedness. In connection with
this acquisition, the Company borrowed $21.2 million from Thermedics pursuant
to a promissory note due March 1998, and bearing interest at the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter. See "Relationship with Thermo Electron and Thermedics."
Thermedics has indicated its intention to require the repayment of the
principal amount of this note only to the extent that the Company's liquidity
and cash flow permit.
In March 1996, the Company issued and sold 300,000 shares of the Company's
common stock in a private placement for net proceeds of $3.0 million. In
November 1996, the Company issued and sold 383,500 shares of the Company's
common stock in a private placement for net proceeds of $4.0 million.
In December 1996, the Company acquired certain moisture detection product
lines for approximately $0.3 million in cash, plus a percentage of the
revenues earned by the Company from such product lines. The Company currently
has no other plans, arrangements, commitments or pending negotiations with
respect to any acquisition that would be material to the Company.
During the first nine months of 1996, the Company expended $0.5 million on
purchases of machinery, equipment and leasehold improvements. During the
remainder of 1996, the Company made capital expenditures in an amount less
than $0.2 million. The Company believes that its existing resources are
sufficient to meet the capital requirements of its existing businesses for the
foreseeable future, including at least the next 24 months.
32
<PAGE>
BUSINESS
OVERVIEW
Thermedics Detection Inc. develops, manufactures and markets high-speed on-
line detection and measurement systems used in a variety of industrial process
applications, explosives detection and laboratory analysis. The Company's
industrial process systems use ultratrace chemical detectors, high-speed gas
chromatography, X-ray imaging, near-infrared spectroscopy and other
technologies for quality assurance of in-process and finished products,
primarily in the food, beverage, pharmaceutical, forest products, chemical and
other consumer products industries. The Company's explosives-detection
equipment uses simultaneous trace particle- and vapor-detection techniques
based on its proprietary chemiluminescence and high-speed gas chromatography
technologies. Customers use the Company's explosives-detection equipment to
detect plastic and other explosives at airports and border crossings, for
other high-security screening applications and for forensics and search
applications.
The Company's principal product lines include:
.Alexus systems, introduced in 1992, detect trace amounts of constituents
that affect product quality in refillable plastic soft drink, water and
other beverage containers at speeds in excess of 600 bottles per minute.
Alexus systems have been installed on more than 200 bottling lines in more
than 30 countries;
.InScan systems, introduced in 1996, detect liquid fill-levels, leakage,
foreign objects and product defects at speeds in excess of 2,400 units per
minute for the beverage, food and other industries;
.Micro-Quad, Quadra-Beam and other products of the Moisture Systems
division, acquired by the Company in 1996, measure moisture and other
product constituents, including fats, proteins, oils, flavorings,
solvents, adhesives and coatings, in the manufacturing processes of a
variety of industries;
.Flash-GC gas chromatography systems, introduced in 1996, analyze chemical
samples at speeds 20 to 50 times faster than conventional gas
chromatography systems. These systems can be used in a variety of markets,
primarily in near on-line process and quality control applications that
require high-speed results; and
.EGIS explosives detectors, first sold to commercial airports in Europe in
1991, detect and identify trace levels of explosives in carry-on bags, in
checked luggage and on people, and are also used in forensic
investigations. EGIS systems are the world's most widely used trace
particle/vapor explosives-detection systems, with an installed base of
more than 190 units in 21 countries, including more than 100 units
installed in airports.
The Company's historical growth has resulted primarily from a strategy of
developing proprietary high-speed analytical technologies to meet the needs of
its customers, introducing those technologies to new markets and, finally,
employing the process knowledge gained from the customers in these markets to
develop new proprietary technologies. For example, the Company's TEA Analyzer
was the first instrument to use chemiluminescent analysis to reliably detect
nitrogen-based carcinogens in foods, beverages and other consumer products.
Enhanced TEA Analyzer technology is used in the Company's EGIS explosives-
detection systems as well as in the Alexus systems used in the beverage
industry. In 1995, in response to the needs of its beverage customers for more
sensitive, high-speed fill-level and leakage detectors, the Company developed
its InScan system based on a proprietary X-ray technology. The Company is
currently enhancing InScan to detect foreign objects and product defects in
the broader packaged goods markets for the food, consumer products and other
industries.
The Company's strategy is to build upon its reputation as a technical and
market leader in applications requiring complex, high-speed or continuous
ultratrace detection and measurement by continuing the technology development
and market-application cycle on which its growth has been based to date. The
Company holds significant patents relating to its chemiluminescent analysis
and high-speed gas chromatography technologies, and believes that its
proprietary position with respect to these technologies affords it a
competitive advantage. In
33
<PAGE>
addition, the Company employs highly skilled research scientists and product
development engineers who use their intimate knowledge of their customers'
production processes to develop new products based on these technologies.
The Company's customers are characterized by the need to improve product
quality and consistency while reducing production costs. Effective quality
control requires high-speed systems that can test samples on-line, or near on-
line, so that adjustments to the manufacturing process can be made quickly and
frequently. More effective sampling reduces the amount of unacceptable product
produced. Similarly, airports and other security checkpoints are required to
screen increasing volumes of passengers and baggage with a high degree of
accuracy without causing undue inconvenience and delays. Consequently, the
time between the initiation of the testing process and the completion of the
analysis must be reduced to the greatest practical extent. The Company
believes that its high-speed detection and measurement systems meet the
requirements of these demanding applications and, as a result, systems based
on its high-speed analytical techniques will become increasingly employed in a
wider variety of applications.
PROCESS DETECTION SYSTEMS
The Company designs, manufactures and markets high-speed on-line trace
(parts-per-trillion) measurement, detection and rejection equipment that uses
particle-detection, vapor-detection and other technologies for product quality
and productivity applications. The Company believes that the current total
annual worldwide market for process detection equipment and systems is in
excess of $2 billion. The Company currently addresses an approximately $250
million segment of this market, focusing on product content and packaging.
Alexus. The Company's Alexus systems detect trace amounts of constituents
that affect product quality in refillable plastic soft drink, water and other
beverage containers. The Company is the world's largest supplier of quality
assurance systems for refillable plastic containers to the beverage industry.
The Company's Alexus systems, introduced in 1992, have been installed on more
than 200 bottling lines in more than 30 countries throughout the world,
primarily in Europe and Latin and South America, by the Coca-Cola Bottlers,
Perrier and other major beverage producers. Alexus systems sell for between
$150,000 and $500,000 per unit.
The Company believes that its Alexus systems are the most accurate, cost-
effective and easily maintained systems of their kind. The Alexus A100 system
obtains vapor samples from refillable plastic bottles of up to two liters
passing along a production line at speeds in excess of 600 bottles per minute.
Alexus operates by sending a small burst of air into each bottle and then
capturing some of the displaced vapor. Each vapor sample is sent through three
different channels for analysis: two chemiluminescence detectors are used to
search for both nitrogen-based compounds, such as ammonia and nitrogen
organics, and for volatile organic compounds. The third channel, strobe
analysis, is used to detect gasoline and other hydrocarbons. In addition, an
optical detection module is used to detect nonvolatile compounds such as soaps
and detergents. Optical detection is also used to inspect refillable water
bottles for fruit juices and other flavor substances. Once the analysis is
completed, an electronic signal is sent from the Alexus to indicate the bottle
status. Each bottle is tracked and a rejecter module then automatically
separates the acceptable and rejected bottles onto separate tracks. The Alexus
W10, introduced in 1994, incorporates strobe analysis and a chemiluminescence
detector to detect similar compounds in refillable three-, five- and six-
gallon water bottles at speeds of up to 3,600 bottles per hour.
Refillable plastic bottles are widely used for soft drinks, water and other
beverages. The United States permits the reuse of large plastic water bottles
used in commercial water dispensers. Certain countries, including Denmark,
Holland and Norway, require the reuse of refillable plastic bottles and many
countries, including Germany, Finland and Sweden, place a high tax on the use
of nonrecyclable containers. In addition, bottlers and consumers often prefer
plastic bottles because they are lighter, less breakable and easier to
transport than glass bottles. Refillable plastic bottles also provide a
significant economic advantage to beverage companies because they may be
returned for reuse as many as 30 times. Industry sources estimate that as many
as 1% of the returned bottles cannot be reused, even after cleaning, because
they contain foreign substances that can chemically bond with the plastic
container. Refilling a bottle that contains a foreign substance is of major
concern to beverage producers
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because the publicity associated with an abused bottle can severely damage a
brand name and a bottler's reputation. The Company believes that demand for
Alexus systems will increase as its current customers expand into new markets
around the world, as the technology is accepted by additional beverage
producers and as the Company provides upgrades to its installed customer base.
InScan. The Company's InScan system uses high-speed X-ray imaging technology
to detect liquid fill-levels and leakage in containers for the beverage, food
and other industries. InScan uses a low-power X-ray to capture data both
vertically and horizontally. This data produces an instant, detailed image of
each container that InScan's proprietary software automatically compares to a
predetermined profile and generates mathematical algorithms to determine
whether the container is acceptable. InScan incorporates a sophisticated,
high-speed rejection system that automatically removes unacceptable containers
from the line. The Company shipped its first InScan units in 1996 and believes
that the current total annual worldwide beverage market for these systems is
approximately $60 million. The Company also believes that these systems have
applications in the broader packaging inspection market, which industry
sources estimate to be approximately $190 million per year. InScan systems
currently sell for an average of $35,000 per unit.
Bottlers have traditionally detected fill-level and leakage by shooting a
pinpoint gamma ray through a bottle or can on a production line. The principal
disadvantages of gamma-based systems are their limitations in both accuracy
and the scope of detection, as well as their potential for radioactive
contamination of personnel and machinery. The wider image generated by
InScan's X-ray imaging technology means that accuracy is unaffected by the
speed of the line, acceleration or deceleration of the line, sloshing of
contents or vibration. Consequently, InScan can be used on lines running at
speeds of up to 2,400 units per minute, with an accuracy of +/-0.5 millimeters
over the entire range of inspection speeds. Moreover, because the system is
designed to image a portion of a can or bottle, rather than a pinpoint, InScan
can be used to detect improper or missing lids, caps or tabs, as well as the
integrity of the container from the shape of the lid or cap. Other advantages
of InScan include reduced health hazards due to the elimination of potential
radioactive gamma hazards, simple positioning anywhere on a production line
and quick adjustability to fit packages of varying shapes.
The Company believes that its InScan X-ray imaging technology is
significantly more accurate than traditional single-point gamma-based systems.
The Company also believes that the increased accuracy of InScan systems can
result in substantially fewer short-filled or over-filled containers,
permitting an InScan system to pay for itself in as few as nine months.
The Company's InScan systems are currently used by major beer and soft drink
companies in the U.S. and overseas, including Miller, Molson, Coors and the
Coca-Cola Bottlers. Industry sources estimate that there are currently
approximately 5,000 beer and soft drink bottling lines throughout the world,
and that the number of such lines is increasing at a rate of approximately 5%
per year. The Company believes that demand for InScan systems will increase as
additional bottlers perceive the benefits of the technology.
The Company is currently developing new applications for InScan, including
the detection of foreign objects such as bone fragments and plastic in baby
food, and product defects in packaged goods for the food, consumer products
and other industries.
Moisture Systems. The Company's Moisture Systems division, acquired in 1996,
designs, manufactures and markets equipment that uses near-infrared
spectroscopy to measure moisture and other product constituents, including
fats, proteins, oils, flavorings, solvents, adhesives and coatings, in a
variety of manufacturing processes. The Company's systems are used across the
food, pharmaceutical, chemical, petrochemical, tobacco, forest products, pulp
and paper, paper converting, plastics, textiles, corrugating and other
industries. The Company believes that it is the world's largest supplier of
near-infrared on-line constituent-measurement products, with an installed base
of more than 10,000 units. Principal customers include Nabisco, Nestle, Merck,
Hoechst Celanese, Akzo Nobel, Philip Morris, Georgia Pacific, Avery Dennison,
Reynolds Aluminum and other major manufacturers of consumer and industrial
products. With a large installed base over a wide range of applications, the
Company has built a base of knowledge and experience that it believes to be a
competitive advantage. The Company's systems generally sell for between
$10,000 and $100,000 per unit.
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The Company's moisture-analysis equipment determines the amount of near-
infrared light absorbed by a sample at each given wavelength to precisely
identify and measure the content of the sample's constituent molecules. The
Company's principal products include the Quadra-Beam and Micro-Quad, which are
designed to precisely measure moisture and other product constituents at fixed
points on a variety of solid materials. Quadra-Beam instruments operate with
either one or two sensors, and measure a single constituent per sensor. Micro-
Quad instruments operate with up to five sensors, and are capable of measuring
multiple constituents per sensor. Both Quadra-Beam and Micro-Quad products can
be incorporated into more complex systems. For example, the Company's Profile
Video Display Systems measure product constituents across webs for
applications in the paper, paper converting, sheet metal, textile and other
industries. Similarly, the Company's liquid and gas systems are designed to
measure product constituents in liquid or gas streams moving through pipes.
Customers for these systems include the petrochemical, chemical, food,
beverage, plastics and polymer industries.
Manufacturers need to perform precise measurements of moisture and other
product constituents to ensure product quality and consistency while reducing
production costs. Manufacturers have historically performed such measurements
on samples taken from production lines for laboratory analysis. The Company's
moisture-analysis products provide continuous, nondestructive analysis,
without requiring sample preparation or contact, making information instantly
available to the operator or computer controlling the production process. In
certain applications, these instruments can be incorporated into closed-loop
systems. For example, an instrument detecting insufficient moisture in a
product can relay an electronic signal to an oven elsewhere on the production
line to decrease the amount of moisture to be extracted during the drying
process.
Industry analysts estimate that the annual worldwide market for on-line
moisture measurement products is approximately $60 million. The Company
believes that approximately $35 to $40 million of this market is for near-
infrared measurement products. Approximately 60% of the Company's sales are to
new manufacturing facilities, facilities expanding by adding new production
lines and facilities incorporating on-line systems for the first time, and
approximately 40% are to replace existing on-line equipment. The Company sells
its moisture-analysis equipment primarily in the United States and in Europe.
The Company expects that certain geographical markets for this equipment,
including the Asia/Pacific region and Latin America, will grow significantly
over the next several years as countries in that region accelerate their
industrialization and their production of consumer products and industrial
goods, such as paper and cardboard.
FLASH-GC GAS CHROMATOGRAPHY SYSTEMS
The Company designs, manufactures and markets high-speed gas chromatography
systems that can analyze chemical samples at speeds 20 to 50 times faster than
conventional gas chromatography. Industry sources estimate that the
conventional gas chromatography laboratory and process instrument market is
currently $850 million annually. The Company currently markets its systems
under the trade name "Flash-GC" to analytical services and quality
laboratories and for near on-line process and quality control applications
that require high-speed results. The Company also intends to target certain
other segments of the conventional gas chromatography market in which access
to high-speed analysis would be advantageous.
As in traditional gas chromatography, a sample is introduced into the Flash-
GC and is separated into its chemical constituents in a chromatograph column
under heat and pressure. Traditional gas chromatographs place the column in a
heated oven. In contrast, the Flash-GC uses patented or patent-pending
technology to dynamically heat the column itself rather than the large mass of
air in the oven. Coupled with the Flash-GC's intermediate controlled-
temperature trap zones, this technology permits the Flash-GC to separate a
sample into its constituents 20 to 50 times faster than a conventional gas
chromatograph in certain applications. As in conventional gas chromatography,
the chemical constituents enter a detector at the end of the Flash-GC column,
which gives off an electric signal corresponding to the identity of each
constituent. The Flash-GC is not suitable for all applications because some
detectors used with conventional gas chromatographs cannot respond rapidly
enough to the output of the Flash-GC. The Company believes, however, that with
the detectors currently available with the Flash-GC, and with detectors
currently under development, this technology can serve a significant portion
of the conventional gas chromatography market in which speed is important.
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The Company believes that the Flash-GC has potential applications in the
food, flavors, fragrance, chemical, pharmaceutical, forensics and automotive
industries, as well as for medical and environmental laboratories. The Company
believes that the market for high-speed gas chromatography is only beginning
to develop and the Company intends to target only those sectors of the
laboratory and process gas chromatography market that are expected to place a
premium on near-instant analysis. For example, food processors subject to the
Food Quality Protection Act use gas chromatography to ensure that packaged
foods contain the correct ingredients and in the proper proportions. Today, a
typical gas chromatography analysis of the ingredients in packaged foods may
require 40 minutes, a time frame in which the food processor continues to
produce a large volume of its product that must ultimately be disposed of if
the analysis demonstrates nonconformity to applicable standards. The Flash-GC
permits food processors to perform the same analysis in less than two minutes.
Other customers using the Flash-GC include an automobile manufacturer
performing on-line emissions testing, a company evaluating its wastewater
during discharge and a beverage company evaluating production ingredients at
the point of mixing. In each case, these customers have reported analyses 20
to 50 times faster than with the conventional gas chromatographs currently in
use, with significant improvements in both productivity and quality.
The Flash-GC, a new technology introduced in 1996, received both the Pittcon
Editors' Gold Award for the best new product exhibited at Pittcon '96, a major
U.S. analytical instrument conference, and the Most Innovative New Product
Award at the Het Instrument '96 Conference, a major European analytical
instrument conference. The Company shipped ten Flash-GC units for beta testing
in 1996. The Company is currently building a sales and marketing organization
to support the Flash-GC, and expects to begin shipping production units in the
first quarter of 1997. The Company expects that the Flash-GC systems will be
priced at between $60,000 and $75,000 per unit. The Company is continuing to
develop the Flash-GC to configure it with additional detectors and to
introduce a process-oriented version for additional on-line applications.
EXPLOSIVES DETECTORS
The Company designs, manufactures and markets explosives-detection equipment
that uses trace particle- and vapor-detection techniques for forensics, search
and screening applications under the direction of police, border police,
transportation authorities and carriers. The Company's principal explosives-
detection system is EGIS, a highly sensitive particle- and vapor-detection
system for screening people, baggage, packages, freight, and electronic
equipment such as personal computers for the presence of a wide range of
explosives, including plastic explosives that have proven difficult to detect
using conventional methods. The EGIS system is designed for stand-alone use in
the detection of explosives in carry-on items and on personnel, and can be
used in conjunction with enhanced X-ray and other advanced imaging systems to
provide a comprehensive explosives-detection system for checked luggage.
Explosives-detection equipment used in security screening applications
comprises two distinct categories that are generally combined into a single
system: enhanced X-ray technologies, such as computed tomography ("CT") and
dual energy X-ray systems, and trace detection technologies, such as the EGIS
system. Because of its medium- to high-throughput rate, enhanced X-ray
equipment is generally used in the initial screening of checked luggage in
multi-tiered systems, with trace equipment placed at the end of the process.
X-ray technology, however, is relatively capital intensive and generally
requires significant engineering to fit into existing luggage systems. Trace
equipment is sensitive to minute quantities of explosive particles, and is
generally physically smaller, more portable and less expensive than X-ray
equipment. Trace equipment that combines gas chromatography with a detector
can simultaneously detect more types of explosives than units employing only a
detector. Trace systems currently require hand-held sample collectors. This
typically manual process results in a throughput level below that of enhanced
X-ray. Trace systems can be used effectively to manually screen checked
baggage rejected by X-ray systems, which have a relatively high false positive
rate. Trace systems have throughput rates that allow them to be used
effectively on a stand-alone basis in carry-on and walk-through screening
applications.
In response to the crash of TWA Flight 800 in July 1996, President Clinton
formed the White House Commission on Aviation Safety and Security, chaired by
Vice President Gore (the "Gore Commission"), to
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review airline and airport security and oversee aviation safety. Both the Gore
Commission and the Baseline Working Group, a government/industry panel that
was established prior to the crash of TWA Flight 800 to recommend an airport
security plan for the United States, have recommended that trace detection
equipment be used in series with enhanced X-ray systems for screening checked
luggage. The Gore Commission and the Baseline Working Group also recommended
the use of trace detection equipment for screening passengers and carry-on
baggage.
The Company believes that EGIS is the most accurate and most sensitive high-
speed trace explosives-detection equipment available today. EGIS utilizes the
Company's Flash-GC high-speed gas chromatography technology combined with
chemiluminescent detection techniques to detect ultratrace quantities of
certain explosives and taggants, and indicate the concentration and type of
explosive detected. Because EGIS' chemiluminescent detector responds only to
compounds of certain structures in the sample, rather than the thousands of
compounds that may be contained in the sample, EGIS is more selective than
competing trace detection systems, with fewer false-positive detections. A
processor in EGIS compares the chemical profile of the sample to the known
profiles of various explosives, including TNT, nitroglycerin, PETN, Semtex and
C-4. Within seconds of the introduction of the sample into EGIS, the system
determines whether explosives are present, and, if so, identifies the type and
amount.
The Company believes that it is the worldwide leader in providing explosives
trace detection equipment. Initially developed with internal funds and
contract funding from the FAA and the U.S. Department of State, more than 190
EGIS units have been deployed to date. The EGIS system is currently
operational in 21 countries and is in use in carry-on and checked luggage
screening at more than 42 international airports. EGIS is also used in
government buildings and embassies, and at border crossings and other
locations where there is a high degree of concern for security. The EGIS
system has assisted in identifying explosives used in terrorist bombings,
including those in Federal Building in Oklahoma City and the World Trade
Center in New York, as well as in Israel, Buenos Aires and the United Kingdom.
In March 1996, the Company supplied the U.S. government with eight EGIS
systems to provide counter-terrorism support in Israel. Most recently, the
Bureau of Alcohol, Tobacco and Firearms and the Federal Bureau of
Investigation used EGIS systems in their attempt to identify the cause of the
crash of TWA Flight 800.
Of the more than 600 commercial airports worldwide, more than 400 are
located in the United States, 150 are in Europe and 50 are in the Asia/Pacific
region. Following the bombing of Pan American Flight 103, various European
governments mandated the use of, and purchased, advanced explosives-detection
systems. The FAA has approved the use of several trace systems for various
applications, and approved the EGIS system for voluntary use by airlines in
screening carry-on electronic items and luggage searches in 1992. Although the
FAA certified a CT-based system for screening checked baggage in 1994, no CT-
based system has yet demonstrated compliance with FAA standards under
realistic airport operating conditions. To date, the FAA has not mandated the
use of any explosives-detection system. In October 1996, the United States
enacted legislation that includes a $144.2 million allocation for the initial
purchase of explosives-detection systems and other advanced security
equipment. This legislation specifically requires the purchase of 79 advanced
X-ray imaging devices for screening checked luggage, together with one trace
detection system to be used with each such X-ray imaging system. An additional
410 trace detection systems are to be purchased for use in screening carry-on
baggage. The Company believes that approximately $32 million has been
allocated to purchases of trace detection equipment such as the systems
manufactured by the Company.
In December 1996, the Baseline Working Group recommended the expenditure of
$1.8 billion between 1997 and 2000 for carry-on and checked luggage and
personal screening at larger U.S. airports, and recommended the expenditure of
an additional $3.9 billion between 2001 and 2005 to complete the U.S. system.
The Company believes that if the United States mandates the installation of
explosives-detection equipment in a substantial number of domestic commercial
airports, then the market for trace detection systems such as the Company's
EGIS system will grow rapidly for several years. There can be no assurance,
however, that the Company's systems would meet any applicable FAA requirements
or that, even if the Company's systems were to meet applicable requirements,
that the Company would be able to market its systems effectively. See "Risk
Factors--Dependence of Explosives Detection Market on Government Regulation
and Airline Industry."
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The EGIS system sells for between $160,000 and $200,000. In September 1996,
the Company entered into a development contract with the FAA to develop EGIS
II, a lower-cost EGIS unit for use in more portable applications such as
remote security checkpoints and counter-terrorism activities. In November
1996, the Company introduced its new SecurScan, a prototype of a walk-through
trace detector designed to screen 10 passengers per minute, and announced that
it intends to introduce Rampart, a lower-cost unit for airport applications,
in 1997. SecurScan and Rampart are expected to cost approximately $300,000 and
$55,000, respectively.
MARKETING, SALES AND SERVICE
The Company employs a variety of sales methods for its products and services
that are designed to fit the needs of particular customer groups. The Company
sells and services Alexus systems, principally outside of the United States,
with a small, specialized direct sales force supported by a broader service
organization. Alexus systems are also sold through Krones GmbH, a large German
turnkey plant contractor for new bottling lines. The Company sells and
services both its InScan and Moisture Systems and equipment through a mix of
direct sales, manufacturers representatives and original equipment
manufacturer relationships around the world. The Company also operates factory
service centers for these products.
The Company's Flash-GC systems are sold through a direct sales and services
organization. The Company is currently attempting to recruit additional direct
sales representatives for certain regions of the United States. In addition,
the Company intends to use specialized manufacturers representatives in other
territories. The Company currently has such representatives in Europe and in
the Southern United States.
EGIS explosives-detection systems are sold to a few key decision-makers
around the world, primarily government agencies or private companies
fulfilling government regulations. Accordingly, EGIS sales are made by a
small, specialized direct sales force, supported by a broader service
organization, from offices shared with Alexus sales and service organizations.
The Company's existing sales and service organizations are located in North
and South America and Europe. The Company also has distribution and service
capabilities in Asia through a combination of direct sales, manufacturers
representatives and original equipment manufacturer relationships.
INTELLECTUAL PROPERTY
The Company's policy is to protect its intellectual property rights,
including applying for patents when appropriate. The Company also enters into
licensing agreements with other companies in which it grants or receives
rights to specific patents and technical know-how. The Company owns 40 United
States patents, more than 60% of which were issued after 1990, and has filed
applications for five additional United States patents. The Company also owns
corresponding patents, or has filed corresponding applications, in a number of
jurisdictions throughout the world. In addition, the Company has an exclusive,
royalty-free license under ten patents covering the use of near-infrared and
very near-infrared emitting diodes for on-line spectral measurements. The
Company owns several patents covering certain aspects of its chemiluminescent
analysis technology and high-speed gas chromatography technology. The Company
believes that these patents provide the Company with competitive advantages in
the markets for certain of its products. The Company also considers technical
know-how, trade secrets and trademarks to be important to its business. See
"Risk Factors--Limited Protection of Proprietary Technology and Risks of
Third-Party Claims."
COMPETITION
The markets for the Company's products are highly competitive. Competitors
may develop superior products or products of similar quality for sale at the
same or lower prices. Moreover, there can be no assurance that the Company's
products will not be rendered obsolete by new industry standards or changing
technology. There can be no assurance that the Company will be able to compete
successfully with existing or new competitors. See "Risk Factors--Ongoing
Product Development Efforts Required by Rapid Technological Change" and "--
Competition; Technological Change."
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Process Detection Systems and Flash-GC. The Company's product quality
assurance systems compete with detection systems manufactured by numerous
companies. The Company believes, however, that these companies are generally
focused on particular niches in the process detection systems market, only in
some of which does the Company compete. The Alexus system encounters
competition throughout the world, but primarily in the German-speaking areas
of Europe, with products offered by Walter Grassle GmbH of Germany and
Sudtronics S.A. of Switzerland. InScan competes with gamma-based beverage
fill-height detectors offered by a number of companies, including Industrial
Dynamics Company, based in California, and Heuft Systemtechnik GmbH, based in
Germany. Competition in the moisture-detection market is highly fragmented.
The Company's principal competitor in this market is Infrared Engineering
Limited, based in England.
The Flash-GC is a new technology competing in the developing high-speed gas
chromatography market segment. The Company's Flash-GC competes principally
against high-speed gas chromatographs offered by ChromFast, based in Michigan.
Competition in the markets for each of the Company's process detection
systems and the Flash-GC is based primarily on performance, durability,
service and, to a lesser extent, price. The Company believes that its systems'
performance and speed, as well as the Company's reputation for developing
superior new technologies and for the innovative application of existing
technologies to a variety of high-speed production environments and product
quality assurance problems, are competitive advantages.
Explosives Detection Systems. In the explosives-detection market, the
Company competes with a small number of companies, including other makers of
chemical trace detection instruments, and, to a lesser degree, makers of
enhanced X-ray detectors. Competition in this market is based primarily on
performance, including speed, accuracy and the range of explosives that can be
detected; ease of use; service; and price. The Company's principal competitor
in the trace detection market is Barringer Technologies Inc., a Canadian firm
that has placed several trace detectors in airport applications. To date, no
other manufacturers have placed trace detection systems in airports, but the
Company expects that the FAA will purchase trace systems from Barringer and
such other manufacturers as part of the initial deployment of explosives-
detection systems in the U.S. The Company believes that the companies, if any,
whose devices are ultimately required by the FAA will have a substantial
competitive advantage in the United States.
GOVERNMENT REGULATION
The explosives-detection systems manufactured and marketed by the Company
for use in airports are subject to regulation by the FAA, corresponding
foreign governmental authorities and The International Civil Aviation
Organization, the United Nations organization for establishing standard
practices for the aviation industry on a worldwide basis. Sales of the
Company's explosives-detection systems for use in airports have been and will
continue to be dependent upon governmental initiatives to require or support
the screening of baggage, carry-on items and people with advanced explosives-
detection equipment. Substantially all of such systems have been installed at
airports in countries in which the applicable government or regulatory
authority overseeing the operations of the airport has mandated such
screening. Such mandates are influenced by many factors outside of the control
of the Company, including political and budgetary concerns of governments,
airlines and airports. To date, the FAA has not mandated the use of any
explosives-detection system. See "Risk Factors--Dependence of Explosives
Detection Market on Government Regulation and Airline Industry."
RESEARCH AND DEVELOPMENT
The Company maintains active programs for the development and introduction
of new products and improvements to existing products. The Company also seeks
to develop new applications for its existing products and technology. The
Company is currently devoting significant resources toward the enhancement of
its existing products and the development of new products and technologies,
including: enhancing InScan to detect foreign objects and, in some
applications, product defects in packaged goods for the food, consumer
products and other industries; developing an advanced generation of moisture-
detection products to address recently identified
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customers needs; adding auto-calibration capabilities to its Alexus system;
completing production units of the Flash-GC, as well as beginning to enhance
the Flash-GC to broaden its applications; and the development of Rampart, a
lower-cost unit for use in airport screening of carry-on baggage.
The Company also performs contract engineering and/or development on behalf
of its customers. Recent contracts have included funding by the FAA of the
development of the SecurScan walk-through explosives-detection system as well
as feasibility studies and initial development work for EGIS II. The Company
believes that its reputation for being able to apply its core technologies to
solve production problems of its customers provides the Company with a
significant competitive advantage.
Company-funded research and development expenses were $1,790,000,
$3,895,000, $2,741,000 and $3,551,000 in fiscal 1993, 1994, 1995 and the nine
months ended September 28, 1996, respectively. Contract research and
development revenues were $2,844,000, $1,923,000, $3,987,000 and $1,102,000,
respectively, during the same periods.
EMPLOYEES
As of September 30, 1996, the Company had 233 fulltime employees, of which 6
were engaged in senior management, 28 in administration and accounting, 45 in
research and development, 47 in sales and marketing, 49 in product support and
58 in manufacturing. None of the Company's employees are represented by a
labor union, and the Company considers its relations with its employees to be
good. To date, the Company has been able to attract and retain the personnel
required by its business, but there can be no assurance that additional
skilled personnel necessary to successfully expand the Company's business and
operations can be recruited and retained.
BACKLOG
At September 30, 1995 and September 30, 1996, the Company's backlog of firm
orders was approximately $2,761,000 and $9,009,000, respectively. The Company
includes in backlog only those orders for which it has received completed
purchase orders and for which delivery has been specified within twelve
months. Most orders are subject to cancellation by the customer. Because of
the possibility of customer changes in delivery schedules, cancellation of
orders and potential delays in product shipments, the Company's backlog as of
any particular date may not be representative of actual sales for any
succeeding period.
FACILITIES
The Company operates from two principal facilities: a 113,000-square foot
office, research and development, and manufacturing facility in Chelmsford,
Massachusetts occupied under a lease expiring in 2006, subject to one five-
year renewal option at the election of the Company; and a 40,000-square foot
office and manufacturing facility in Hopkinton, Massachusetts occupied under a
lease expiring in 1998. The Company also leases approximately 9,000 square
feet in Enschede, Holland occupied under a lease expiring in 2000. In
addition, the Company leases office space throughout the world for its sales
and service operations. The Company believes that these facilities are
adequate for its present operations.
LEGAL PROCEEDINGS
The Company is not a party to any litigation that it believes could
reasonably be expected to have a material adverse effect on the Company or its
business.
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RELATIONSHIP WITH THERMO ELECTRON AND THERMEDICS
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermedics has created the Company as a
privately held subsidiary, and Thermedics and Thermo Electron, and certain of
its subsidiaries, have created several other privately and publicly held
subsidiaries. From time to time, Thermo Electron and its subsidiaries will
create other majority-owned subsidiaries as part of its spin-out strategy.
(The Company and the other Thermo Electron subsidiaries are hereinafter
referred to as the "Thermo Subsidiaries.")
Thermedics develops, manufactures, and markets product quality assurance
systems, precision-weighing and inspection equipment, electrochemistry and
micro-weighing products, electronic-test instruments, explosives-detection
devices, and moisture-analysis systems, as well as implantable heart-assist
devices and other biomedical products. For its fiscal year ended December 30,
1995, and the nine months ended September 28, 1996, Thermedics had
consolidated revenues of $175,754,000 and $188,624,000, respectively, and
consolidated net income of $15,121,000 and $19,694,000, respectively.
Thermo Electron and its subsidiaries develop, manufacture and market
environmental monitoring and analysis instruments, papermaking and recycling
equipment, biomedical products such as heart-assist devices and mammography
systems, biomass electric power generation, and other specialized products and
technologies. Thermo Electron and its subsidiaries also provide environmental
and metallurgical services and conduct advanced technology research and
development. For its fiscal year ended December 30, 1995, and the nine months
ended September 28, 1996, Thermo Electron had consolidated revenues of
$2,270,291,000 and $2,138,125,000, respectively, and consolidated net income
of $139,582,000 and $137,184,000, respectively. See "Risk Factors--Potential
Conflicts of Interest."
THE THERMO ELECTRON CORPORATE CHARTER
Thermo Electron and the Thermo Subsidiaries, including the Company,
recognize that the benefits and support that derive from their affiliation are
essential elements of their individual performance. Accordingly, Thermo
Electron and each of the Thermo Subsidiaries adopted the Thermo Electron
Corporate Charter (the "Charter") to define the relationships and delineate
the nature of such cooperation among themselves. The purpose of the Charter is
to ensure that (1) all of the companies and their shareholders are treated
consistently and fairly, (2) the scope and nature of the cooperation among the
companies, and each company's responsibilities, are adequately defined, (3)
each company has access to the combined resources and financial, managerial
and technological strengths of the others, and (4) Thermo Electron and the
Thermo Subsidiaries, in the aggregate, are able to obtain the most favorable
terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members,
coordinating the access of Thermo Electron and the Thermo Subsidiaries (the
"Thermo Group") to external financing sources, ensuring compliance with
external financial covenants and internal financial policies, assisting in the
formulation of long-range planning and providing other banking and credit
services. Pursuant to the Charter, Thermo Electron may also provide guarantees
of debt obligations of the Thermo Subsidiaries or may obtain external
financing at the parent level for the benefit of the Thermo Subsidiaries. In
certain instances, the Thermo Subsidiaries may provide credit support to, or
on behalf of, the consolidated entity or may obtain financing directly from
external financing sources. Under the Charter, Thermo Electron is responsible
for determining that the Thermo Group remains in compliance with all covenants
imposed by external financing sources, including covenants related to
borrowings of Thermo Electron or other members of the Thermo Group, and for
apportioning such constraints within the Thermo Group. In addition, Thermo
Electron is also responsible for ensuring that members comply with internal
policies and procedures. The cost of
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<PAGE>
the services provided by Thermo Electron to the Thermo Subsidiaries is covered
under existing corporate services agreements between Thermo Electron and each
of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participates. The Charter
may be amended at any time by agreement of the participants. Any Thermo
Subsidiary, including the Company, can withdraw from participation in the
Charter upon 30 days' prior notice. In addition, Thermo Electron may terminate
a subsidiary's participation in the Charter in the event the subsidiary ceases
to be controlled by Thermo Electron or ceases to comply with the Charter or
the policies and procedures applicable to the Thermo Group. A withdrawal from
the Charter automatically terminates the corporate services agreement in
effect between the withdrawing company and Thermo Electron. The withdrawal
from participation does not terminate outstanding commitments to third parties
made by the withdrawing company, or by Thermo Electron or other members of the
Thermo Group, prior to the withdrawal. However, a withdrawing company is
required to continue to comply with all policies and procedures applicable to
the Thermo Group and to provide certain administrative functions mandated by
Thermo Electron so long as the withdrawing company is controlled by or
affiliated with Thermo Electron.
CORPORATE SERVICES AGREEMENT
As provided in the Charter, the Company and Thermo Electron have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including certain legal advice and services, risk management, certain employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and financial and other services to the Company. The Company
was assessed an annual fee equal to 1.2% of the Company's revenues for these
services for calendar 1995. Beginning January 1, 1996, the fee has been
reduced to 1.0% of the Company's revenues. The fee is reviewed annually and
may be changed by mutual agreement of the Company and Thermo Electron. During
1995 and the first nine months of 1996, Thermo Electron assessed the Company
$335,000 and $306,000, respectively, in fees under the Services Agreement.
Management believes that the service fees charged under the Services
Agreement are reasonable and that the terms of the Services Agreement are fair
to the Company. For items such as employee benefit plans, insurance coverage
and other identifiable costs, Thermo Electron charges the Company based on
charges directly attributable to the Company. The Services Agreement
automatically renews for successive one-year terms, unless canceled by the
Company upon 30 days' prior written notice. In addition, the Services
Agreement terminates automatically in the event the Company ceases to be a
member of the Thermo Group or ceases to be a participant in the Charter. In
the event of a termination of the Services Agreement, the Company will be
required to pay a termination fee equal to the fee that was paid by the
Company for services under the Services Agreement for the nine-month period
prior to termination. Following termination, Thermo Electron may provide
certain administrative services on an as-requested basis by the Company or as
required in order to meet the Company's obligations under Thermo Electron's
policies and procedures. Thermo Electron will charge the Company a fee equal
to the market rate for comparable services if such services are provided
following termination.
TAX ALLOCATION AGREEMENT
The Tax Allocation Agreement between the Company and Thermedics outlines the
terms under which the Company is to be included in Thermedics' consolidated
Federal and state income tax returns. Under current law, the Company will be
included in such tax returns so long as Thermedics owns at least 80% of the
Company's outstanding TDI Common Stock. In years in which the Company has
taxable income it will pay to Thermedics amounts comparable to the taxes it
would have paid if it had filed its own separate company tax returns.
MISCELLANEOUS
As of September 28, 1996, $4,954,000 of the Company's cash equivalents were
invested in a repurchase agreement with Thermo Electron. Under this agreement,
the Company in effect lends excess cash to Thermo
43
<PAGE>
Electron, which Thermo Electron collateralizes with investments principally
consisting of corporate notes, United States government agency securities,
money market funds, commercial paper, and other marketable securities, in the
amount of at least 103% of such obligation. The Company's funds subject to the
repurchase agreement are readily convertible into cash by the Company and have
an original maturity of three months or less. The repurchase agreement earns a
rate based on the Commercial Paper Composite Rate plus 25 basis points, set at
the beginning of each quarter.
In January 1996, the Company acquired Moisture Systems for a total of $22.8
million in cash, including repayments of approximately $1.8 million of
indebtedness. In connection with this acquisition, the Company borrowed $21.2
million from Thermedics pursuant to a promissory note due March 1998, and
bearing interest at the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter. Thermedics has indicated its
intention to require the repayment of the principal amount of this note only
to the extent that the Company's liquidity and cash flow permit.
Pursuant to a subcontract entered into in October 1993, the Company performs
research and development services for Coleman Research Corporation
("Coleman"), which is the prime contractor under a contract with the U.S.
Department of Energy. Coleman is a wholly owned subsidiary of Thermo Electron
and was acquired by Thermo Electron in March 1995. Coleman paid the Company
$829,000 and $280,000 for services rendered in 1995 and in the first nine
months of 1996, respectively.
The Company purchases an X-ray source that is used as a component in its
InScan systems from Trex Medical Corporation, a publicly traded, majority-
owned subsidiary of ThermoTrex Corporation, which is itself a publicly-traded,
majority-owned subsidiary of Thermo Electron. Each of such X-ray sources is
purchased pursuant to written purchase orders. The Company paid Trex Medical
Corporation $285,000 and $198,000 under this arrangement in 1995 and in the
first nine months of 1996, respectively.
The Company has subleased approximately 8,000 square feet of space in its
Chelmsford, Massachusetts, facility to Thermo Cardiosystems Inc., a publicly
held subsidiary of Thermedics ("Thermo Cardiosystems"), under a two-year
sublease agreement. Under this sublease, Thermo Cardiosystems will pay the
Company base rent of $40,000 in the first year and $44,000 in the second year,
in each case, together with an amount equal to approximately $33,200 per year,
representing Thermo Cardiosystem's pro rata allocation of the facility's
aggregate operating costs, real estate taxes and utilities.
The Company believes that the arrangements set forth above are on terms
comparable to those the Company would receive from unaffiliated parties.
44
<PAGE>
MANAGEMENT
The Directors and executive officers of the Company and their ages as of
November 30, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John W. Wood Jr....... 52 Chairman of the Board and Director
Jeffrey J. Langan..... 51 Chief Executive Officer, President and Director
David H. Fine......... 54 Senior Vice President
John N. Hatsopoulos... 62 Vice President, Chief Financial Officer and Director
Paul F. Kelleher...... 54 Chief Accounting Officer
</TABLE>
All of the Company's Directors are elected annually and hold office until
their respective successors are elected and qualified. Executive officers are
elected annually by the Board of Directors and serve at its discretion.
Messrs. Wood, Hatsopoulos and Kelleher are full-time employees of Thermo
Electron or Thermedics, but these individuals devote such portions of their
time to the Company's affairs as the Company's needs reasonably require from
time to time.
Mr. Wood has been Chairman of the Board and Director of the Company since
its inception in 1990. Mr. Wood also served as the Company's Chief Executive
Officer from December 1995 until December 27, 1996. Mr. Wood has been
President and Chief Executive Officer of Thermedics since 1984. Mr. Wood has
been Senior Vice President of Thermo Electron since December 1995, and, prior
to that promotion, was a Vice President of Thermo Electron from September 1994
to December 1995. Mr. Wood is also a director of Thermedics, Thermo
Cardiosystems Inc., Thermo Sentron Inc. and Thermo Voltek Corp.
Mr. Langan has been President of the Company since April 1996, a Director of
the Company since November 1996, and Chief Executive Officer of the Company
since December 27, 1996. Prior to joining the Company, Mr. Langan held a
number of positions at Hewlett-Packard Company in both its Medical and
Analytical Products Groups. He served as General Manager of the Healthcare
Information Management Division, and also of the Clinical Systems Business
Unit within the Medical Group. In the late 1980s, Mr. Langan was General
Manager of the Gas Chromatography/Workstations Division of Hewlett-Packard's
Analytical Products Group. Mr. Langan is also a Vice President of Thermedics.
Dr. Fine has been Senior Vice President of the Company since 1992 and had
been a Vice President of the Company since its inception in 1990 until 1992.
Dr. Fine joined Thermo Electron in 1972 and has held the following positions
at Thermo Electron prior to 1990: Head of the Cancer Research Department,
Director of Special Projects for the Research and Development Center, and
Manager and Director of Research for Instrument Research Development. Dr. Fine
is also a Vice President of Thermedics.
Mr. Hatsopoulos has been Vice President and Chief Financial Officer of the
Company since its inception in 1990 and has been a Director of the Company
since December 1995. Mr. Hatsopoulos was appointed Chairman of the Board of
Thermedics in March 1995, and has served as Thermedics' Chief Financial
Officer since 1988 and its Vice President since 1986. In September 1996, Mr.
Hatsopoulos was appointed President of Thermo Electron effective January 1997.
Mr. Hatsopoulos has been the Chief Financial Officer of Thermo Electron since
1988 and had been an Executive Vice President of Thermo Electron since 1986.
He is also a director of Thermedics, Thermo Ecotek Corporation, Thermo
Fibergen Inc., Thermo Fibertek Inc., Thermo Instrument Systems Inc., Thermo
Power Corporation, Thermo TerraTech Inc. and ThermoTrex Corporation.
Mr. Kelleher has been the Chief Accounting Officer of the Company since its
inception in 1990. Mr. Kelleher has been Vice President, Finance of Thermo
Electron since 1987 and served as its Controller from 1982 to January 1996. He
is a director of ThermoLase Corporation.
45
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company, Thermo Electron or any other
companies affiliated with Thermo Electron (also referred to as "outside
directors") receive an annual retainer of $2,000 and a fee of $1,000 per day
for attending regular meetings of the Board of Directors and $500 per day for
participating in meetings of the Board of Directors held by means of
conference telephone and for participating in certain meetings of committees
of the Board of Directors. Payment of director fees is made quarterly. Messrs.
Wood, Langan and Hatsopoulos are employees of Thermo Electron companies and do
not receive any cash compensation from the Company for their services as
Directors. Directors are also reimbursed for reasonable out-of-pocket expenses
incurred in attending such meetings.
Directors Deferred Compensation Plan. Under the Company's Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan"), a Director
has the right to defer receipt of his or her fees until he or she ceases to
serve as a Director, dies or retires from his or her principal occupation. In
the event of a change in control or proposed change in control of the Company
that is not approved by the Board of Directors, deferred amounts become
payable immediately. For purposes of the Deferred Compensation Plan, a change
of control is defined as: (a) the occurrence, without the prior approval of
the Board of Directors, of the acquisition, directly or indirectly, by any
person of 50% or more of the outstanding TDI Common Stock or the outstanding
common stock of Thermedics or 25% or more of the outstanding common stock of
Thermo Electron or (b) the failure of the persons serving on the Board of
Directors immediately prior to any contested election of directors or any
exchange offer or tender offer for the TDI Common Stock or the common stock of
Thermedics or Thermo Electron to constitute a majority of the Board of
Directors at any time within two years following any such event. Amounts
deferred pursuant to the Deferred Compensation Plan are valued at the end of
each quarter as units of TDI Common Stock. When payable, amounts deferred may
be disbursed solely in shares of TDI Common Stock accumulated under the
Deferred Compensation Plan. The Company has reserved 25,000 shares under this
Plan. The Deferred Compensation Plan will not become effective until
completion of the Rights Offering. As of the date of this Prospectus, no units
had been accumulated under the Deferred Compensation Plan.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table summarizes compensation for services to the Company in
all capacities awarded to, earned by or paid to the Company's Chief Executive
Officer, former Chief Executive Officer and one other executive officer for
the fiscal year ended December 28, 1996 (the Chief Executive Officer, the
former Chief Executive Officer and such other executive officer being
hereinafter referred to as the "Named Executive Officers"). No other executive
officer of the Company met the definition of "highly compensated" within the
meaning of the Securities and Exchange Commission's executive compensation
disclosure rules during this period.
The Company is required to appoint certain executive officers and full-time
employees of Thermo Electron as executive officers of the Company in
accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron.
The time and effort devoted by these individuals to the Company's affairs is
provided to the Company under the Services Agreement between the Company and
Thermo Electron. Accordingly, the compensation for these individuals is not
reported in the following table. See "Relationship with Thermo Electron and
Thermedics."
46
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ---------------------
SECURITIES UNDERLYING
OPTIONS
(NO. OF SHARES) ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS(1) AND COMPANY(2) COMPENSATION(3)
- --------------------------- ----------- ---------- --------------------- ---------------
<S> <C> <C> <C> <C>
John W. Wood Jr.
Former Chief Executive
Officer(4)............. $ 195,000 $ -- $6,750
Jeffrey J. Langan
Chief Executive Officer
and President(5)....... $ 165,000 $ -- 50,000 (TDI) $ --
75,000 (TMD)
15,000 (TMO)
David H. Fine
Senior Vice President.. $ 128,000 $ -- 20,000 (TDI) $6,381
3,000 (TMD)
1,950 (TMO)
7,500 (TSR)
30,000 (TLZ)
</TABLE>
- --------
(1) Bonus compensation for fiscal 1996 is not calculable as of the date of
this Preliminary Prospectus.
(2) In addition to receiving options to purchase TDI Common Stock (designated
in the table as TDI), Mr. Langan and Dr. Fine have been granted options to
purchase the common stock of Thermo Electron and certain of its other
subsidiaries as part of Thermo Electron's stock option program. Options
have been granted during the last fiscal year in the following Thermo
Electron companies: Thermedics (designated in the table as TMD), Thermo
Electron (designated in the table as TMO), Thermo Sentron Inc. (designated
in the table as TSR) and ThermoLase Corporation (designated in the table
as TLZ).
(3) Represents the amount of matching contributions made by the individual's
employer on behalf of the Named Executive Officers under the Thermo
Electron 401(k) plan.
(4) Mr. Wood is a senior vice president of Thermo Electron and the president
and chief executive officer of Thermedics, and also served as the
Company's chief executive officer until December 27, 1996. Reported in the
table under "Annual Compensation" and "All Other Compensation" are total
amounts paid to Mr. Wood for his service in all capacities to Thermo
Electron companies. The total annual compensation paid to Mr. Wood from
all sources within the Thermo Electron organization is allocated among the
companies based on the time he devotes to their businesses. For 1996, 50%
of Mr. Wood's annual compensation was allocated to Thermedics, and
included his managerial assignment on behalf of the Company. None of Mr.
Wood's annual compensation in 1996 was separately allocated to or paid by
the Company. In addition, Mr. Wood has been granted options to purchase
common stock of Thermo Electron and certain of its subsidiaries other than
the Company from time to time by Thermo Electron or such other
subsidiaries. These options are not reported here as they were granted as
compensation for service to Thermo Electron companies in capacities other
than in his capacity as chief executive officer of the Company.
(5) Mr. Langan was appointed President of the Company on April 2, 1996 and
Chief Executive Officer on December 27, 1996.
47
<PAGE>
Stock Options Granted During Fiscal 1996
The following table sets forth certain information concerning grants of
stock options by the Company and other Thermo Electron companies made during
fiscal 1996 to the Named Executive Officers. No options to purchase shares of
the Common Stock of the Company were granted to Mr. Wood during fiscal 1996.
It has not been the Company's policy in the past to grant stock appreciation
rights, and no such rights were granted during fiscal 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SHARES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -------------------
NAME GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
---- ------------ ------------ --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
John W. Wood Jr.(3)..... -- -- -- -- -- --
Jeffrey J. Langan....... 50,000 (TDI) 24.2% $10.00 04/02/06 $314,500 $ 797,000
75,000 (TMD)(4) 22.9% $28.13 04/02/03 $858,750 $2,001,750
15,000 (TMO)(4) 1.0% $42.79 05/22/03 $261,300 $ 609,000
David H. Fine........... 20,000 (TDI) 9.7% $10.75 12/17/06 $135,200 $ 342,600
3,000 (TMD)(4) 0.9% $28.13 02/09/99 $ 13,290 $ 27,930
1,950 (TMO)(4) 0.1% $42.79 05/22/99 $ 13,143 $ 27,612
7,500 (TSR)(4) 1.5% $14.00 02/09/08 $ 83,550 $ 224,550
30,000 (TLZ)(4)(5) 7.5% $23.55 09/12/08 $562,200 $1,510,800
</TABLE>
- --------
(l) The options to purchase shares of the common stock of Thermedics
(designated in the table as TMD), Thermo Electron (designated in the table
as TMO), Thermo Sentron Inc. (designated in the table as TSR) and
ThermoLase Corporation (designated in the table as TLZ) are immediately
exercisable, while the options to purchase shares of TDI Common Stock
(designated in the table as TDI) are not exercisable until the earlier of
(i) 90 days after the effective date of the registration of the TDI Common
Stock under Section 12 of the Exchange Act and (ii) nine years after the
grant date. In all cases, the shares acquired upon exercise are subject to
repurchase by the granting corporation at the exercise price if the
optionee ceases to be employed by the granting corporation or another
Thermo Electron company. The granting corporation may exercise its
repurchase rights within six months after the termination of the
optionee's employment. The repurchase rights generally lapse ratably over
a five- to ten-year period, depending on the option term, which may vary
from seven to twelve years, provided the optionee continues to be employed
by the Company or another Thermo Electron company. Certain options granted
as a part of Thermo Electron's stock option program have three-year terms,
and the repurchase rights lapse in their entirety on the second
anniversary of the grant date. As to the options to purchase shares of TDI
Common Stock, the repurchase rights lapse in their entirety on the ninth
anniversary of the grant date, unless the TDI Common Stock becomes
publicly-traded before that date, in which event the repurchase rights are
deemed to have lapsed 20% per year commencing on the fifth anniversary of
the grant date. The granting corporation may permit the holders of all
options to exercise options and satisfy tax withholding obligations by
surrendering shares equal in fair market value to the exercise price or
withholding obligation.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the underlying TDI
Common Stock, the optionholders' continued employment through the option
period and the date on which the options are exercised.
(3) Mr. Wood has also served as an officer of Thermo Electron since 1994 and
the chief executive officer of Thermedics since 1984 and has been granted
options to purchase common stock of Thermo Electron and certain of its
subsidiaries other than the Company. These options are not reported in
this table as they were granted as compensation for service to other
Thermo Electron companies in capacities other than his capacity as the
chief executive officer of the Company.
(4) These options were granted under stock option plans maintained by Thermo
Electron or its public subsidiaries as part of Thermo Electron's
compensation program and, accordingly, are reported as a percentage of
total options granted to employees of Thermo Electron and its public
subsidiaries.
(5) The options to purchase shares of the common stock of ThermoLase
Corporation granted to Dr. Fine are subject to the same terms as described
in footnote (1), except that the repurchase rights are deemed to lapse 20%
per year commencing on the fifth anniversary of the grant date.
48
<PAGE>
Stock Options Exercised During Fiscal Year 1996 and Fiscal Year-End Option
Values
The following table sets forth certain information concerning each exercise
of a stock option during fiscal 1996 and outstanding stock options held at the
end of fiscal 1996 by the Named Executive Officers. No stock appreciation
rights were exercised or outstanding during fiscal 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT FISCAL
FISCAL YEAR-END YEAR-END
NUMBER OF ---------------- -----------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME COMPANY ON EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE
---- ----------------------- --------------- -------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
John W. Wood Jr.(2)..... Themedics Detection(4) -- -- 0/23,333 $ 0/$268,330(3)
Jeffrey J. Langan....... Thermedics Detection -- -- 0/50,000 $ 0/$575,000(3)
Thermedics -- -- 75,000/0 $ 0/0
Thermo Electron -- -- 15,000/0 $ 0/0
David H. Fine........... Thermedics Detection(4) -- -- 0/61,667 $ 0/$709,171(3)
Thermedics -- -- 87,600/0 $616,979/0
Thermo Cardiosystems 2,445 103,546 1,530/0 $ 42,229/0
Thermo Ecotek -- -- 1,500/0 $ 17,625/0
Thermo Electron(5) 3,038 114,098 54,637/0 $956,232/0
Thermo Fibertek -- -- 4,500/0 $ 27,000/0
Thermo Sentron -- -- 7,500/0 $ 0/0
ThermoLase(6) -- -- 30,000/0 $ 0/0
ThermoSpectra -- -- 1,000/0 $ 1,875/0
ThremoTrex 360 17,838 --
</TABLE>
- --------
(1) All of the options reported outstanding at the end of the fiscal year were
immediately exercisable, except the options to purchase shares of TDI
Common Stock which are not exercisable until the earlier of (i) 90 days
after the effective date of the registration of the TDI Common Stock under
Section 12 of the Exchange Act and (ii) nine years after the grant date.
In all cases, the shares acquired upon exercise of the options reported in
the table are subject to repurchase by the granting corporation at the
exercise price if the optionee ceases to be employed by such corporation
or another Thermo Electron company. The granting corporation may exercise
its repurchase rights within six months after the termination of the
optionee's employment. For companies whose shares are not publicly traded,
the repurchase rights lapse in their entirety on the ninth anniversary of
the grant date. For publicly traded companies, the repurchase rights
generally lapse ratably over a five to ten year period, depending on the
option term, which may vary from seven to twelve years, provided that the
optionee continues to be employed by the granting corporation or another
Thermo Electron company. Certain options granted as a part of Thermo
Electron's stock option program have three-year terms, and the repurchase
rights lapse in their entirety on the second anniversary of the grant
date.
(2) Mr. Wood also holds unexercised options to purchase common stock of Thermo
Electron and its subsidiaries other than the Company. These options are
not reported here as they were granted as compensation for service to
other Thermo Electron companies in capacities other than his capacity as
chief executive officer of the Company.
(3) No public market existed for the shares underlying the options as of
December 28, 1996. Accordingly, this value has been calculated on the
basis of an assumed market value of $11.50 per share, which is the mid-
point of the estimated public offering price range.
(4) Options to purchase 23,333 and 41,667 shares of TDI Common Stock granted
to Mr. Wood and Dr. Fine, respectively, were granted pursuant to a
nonqualified stock option plan of Thermedics.
(5) Options to purchase 45,000 shares of the common stock of Thermo Electron
granted to Dr. Fine are subject to the same terms described in footnote
(1), except that the repurchase rights of the granting corporation
generally do not lapse until the tenth anniversary of the grant date. In
the event of the employee's death or involuntary termination prior to the
tenth anniversary of the grant date, the repurchase rights of the granting
corporation shall be deemed to have lapsed ratably over a five-year period
commencing with the fifth anniversary of the grant date.
(6) The options to purchase shares of the common stock of ThermoLase
Corporation granted to Dr. Fine are subject to the same terms described in
footnote (1), except the repurchase rights are deemed to lapse 20% per
year commencing on the fifth anniversary of the grant date.
49
<PAGE>
CERTAIN TRANSACTIONS
On March 22, 1996 and November 19, 1996, the Company completed private
placements primarily to outside investors of minority investments in shares of
TDI Common Stock at purchase prices of $10.00 and $10.75 per share,
respectively. Mr. Langan and Dr. Fine each purchased 10,000 shares of TDI
Common Stock in such private placements.
50
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership of the TDI Common Stock as of November 30, 1996, and as adjusted to
reflect the sale of the shares of TDI Common Stock offered in the Rights
Offering, by Thermedics, which is the only person or entity that owns
beneficially more than 5% of the outstanding shares of TDI Common Stock. See
"Risk Factors--Control by Thermedics."
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
- ------------------------------------ ------------------ -------------------------
<S> <C> <C>
Thermedics Inc.(1)................ 10,000,000 93.6%
470 Wildwood Street
Woburn, Massachusetts 01888
</TABLE>
- --------
(l) Thermedics is a majority-owned subsidiary of Thermo Electron and,
therefore, Thermo Electron may be deemed a beneficial owner of the shares
of TDI Common Stock beneficially owned by Thermedics. Thermo Electron
disclaims beneficial ownership of these shares. After giving effect to the
Rights Offering, assuming the exercise of all of the Rights, Thermedics
will beneficially own approximately 81.4% of the outstanding TDI Common
Stock.
Thermedics has adopted a stock option plan with respect to the TDI Common
Stock that it beneficially owns. Under this plan, options to purchase up to
333,333 shares of such stock may be granted to any person within the
discretion of the human resources committee of the Board of Directors of
Thermedics, including officers and key employees of Thermedics.
MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the TDI Common Stock as of November 30, 1996 as well as
information regarding the beneficial ownership of the common stock of
Thermedics and Thermo Electron, as of November 30, 1996, with respect to (i)
each of the Company's Directors, (ii) the Chief Executive Officer, and (iii)
all Directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
THERMEDICS THERMO ELECTRON
NAME(1) DETECTION INC.(2) THERMEDICS INC.(3) CORPORATION(4)
------- ----------------- ------------------ ---------------
<S> <C> <C> <C>
John W. Wood Jr........... 0 175,347 263,909
Jeffrey J. Langan......... 10,000 75,000 15,300
David H. Fine............. 10,000 110,568 70,003
John N. Hatsopoulos....... 0 65,618 506,768
All Directors and
executive officers
as a group (5) persons... 20,000 446,758 1,000,978
</TABLE>
- --------
(l) Except as reflected in the footnotes to this table, shares of TDI Common
Stock and common stock of Thermedics and Thermo Electron beneficially
owned consist of shares owned by the indicated person or by that person
for the benefit of minor children, and all share ownership involves sole
voting and investment power.
(2) Certain officers and directors have been granted options to purchase
135,000 shares of TDI Common Stock; however, these options will not become
exercisable until 90 days after the Rights Offering. No Director or
executive officer beneficially owned more than 1% of the TDI Common Stock
outstanding as of November 30, 1996, and all directors and executive
officers as a group beneficially owned less than 1% of the TDI Common
Stock outstanding as of such date.
51
<PAGE>
(3) Shares of the common stock of Thermedics beneficially owned by Mr. Wood,
Mr. Langan, Mr. Hatsopoulos, Dr. Fine and by all Directors and executive
officers as a group include 125,500, 75,000, 50,000, 87,600 and 357,100
shares, respectively, that such person or group has the right to acquire
within 60 days of November 30, 1996, through the exercise of stock
options. Shares beneficially owned by Mr. Hatsopoulos and by all Directors
and executive officers as a group include 1,602 and 2,761 full shares,
respectively, allocated through November 30, 1996 to their respective
accounts maintained pursuant to Thermo Electron's Employee Stock Ownership
Plan of which the trustees, who have investment power over its assets, are
executive officers of Thermo Electron (the "ESOP"). Shares beneficially
owned by Mr. Wood include 2,600 shares held in a trust of which Mr. Wood's
spouse is the trustee. No director or executive officer beneficially owned
more than 1% of the common stock of Thermedics outstanding as of November
30, 1996; all Directors and executive officers as a group beneficially
owned 1.2% of such common stock outstanding as of such date.
(4) The shares of common stock of Thermo Electron have been adjusted to
reflect a three-for-two stock split effected on May 22, 1996. Shares of
the common stock of Thermo Electron beneficially owned by Mr. Wood, Mr.
Langan, Mr. Hatsopoulos, Dr Fine and by all Directors and executive
officers as a group include 227,658, 15,000, 379,685, 54,637 and 774,554
shares, respectively, that such person or group has the right to acquire
within 60 days of November 30, 1996, through the exercise of stock
options. Shares beneficially owned by Mr. Hatsopoulos and by all Directors
and executive officers as a group include 1,934 and 3,258 full shares,
respectively, allocated through November 30, 1996 to their respective
accounts maintained pursuant to the ESOP. No director or executive officer
beneficially owned more than 1% of the common stock of Thermo Electron
outstanding as of November 30, 1996; all directors and executive officers
as a group beneficially owned less than 1% of the common stock of Thermo
Electron outstanding as of such date.
52
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following is a brief description of the principal terms applicable to
the authorized shares of TDI Common Stock.
As of the date of this Prospectus, the Company had 50,000,000 shares of TDI
Common Stock authorized for issuance, of which 10,683,500 were issued and
outstanding. Each share of TDI Common Stock is entitled to pro rata
participation in distributions upon liquidation and to one vote on all matters
submitted to a vote of shareholders. Dividends may be paid to the holders of
TDI Common Stock when and if declared by the Board of Directors out of funds
legally available therefor. Holders of TDI Common Stock have no preemptive,
subscription, redemption, conversion or similar rights. The outstanding shares
of TDI Common Stock are, and the shares offered hereby when issued will be,
legally issued, fully paid and nonassessable.
The shares of TDI Common Stock have noncumulative voting rights. As a
result, the holders of more than 50% of the shares voting can elect all the
directors if they so choose, and in such event, the holders of the remaining
shares cannot elect any directors. Upon completion of the Rights Offering,
Thermedics will continue to beneficially own at least a majority of the
outstanding TDI Common Stock, and will have the power to elect all of the
members of the Company's Board of Directors. Thermedics is a majority-owned
subsidiary of Thermo Electron and, therefore, Thermo Electron may be deemed a
beneficial owner of the shares of TDI Common Stock beneficially owned by
Thermedics. Thermo Electron disclaims beneficial ownership of these shares.
The Company's Articles of Organization, as amended, contain certain
provisions permitted under the Business Corporation Law of the Commonwealth of
Massachusetts relating to the liability of directors. These provisions
eliminate a director's liability for monetary damages for a breach of
fiduciary duty, except in certain circumstances involving wrongful acts, such
as the breach of a director's duty of loyalty or acts or omissions which
involve intentional misconduct or a knowing violation of law. The Company's
By-Laws also contains provisions to indemnify the directors and officers of
the Company to the fullest extent permitted by the Business Corporation Law of
the Commonwealth of Massachusetts. The Company believes that these provisions
will assist the Company in attracting and retaining qualified individuals to
serve as directors and officers.
The transfer agent and registrar for the TDI Common Stock is American Stock
Transfer & Trust Company.
53
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Rights Offering, there will be a maximum of
12,283,500 shares of TDI Common Stock outstanding, assuming that all of the
Underlying Shares are purchased. The shares issued in the Rights Offering will
be freely tradable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), except that any
shares purchased in the Rights Offering by affiliates of the Company, as that
term is defined in Rule 144 under the Securities Act (an "Affiliate"), may
generally only be resold in compliance with applicable provisions of Rule 144.
The Company has agreed, pursuant to Stock Purchase Agreements with the
shareholders of the Company other than Thermedics, to file a registration
statement under the Securities Act covering the sale of the 683,500 shares of
TDI Common Stock owned by them (the "Registrable Shares") within 120 days of
the closing of the Rights Offering. All fees, costs and expenses of the
registration of the Registrable Shares will be paid by the Company. See "Risk
Factors--Significant Additional Shares Eligible for Sale After the Offering."
As of December 31, 1996, Thermedics owned 10,000,000 of the outstanding
shares of TDI Common Stock. Thermo Electron, Thermedics and the Company have
agreed, without the prior written consent of the Representatives of
Underwriters, not to offer, sell or otherwise dispose of any shares of TDI
Common Stock within a 180-day period after the date of this Prospectus, other
than (i) shares of TDI Common Stock to be issued in the Rights Offering, (ii)
the issuance of options and sales of shares of TDI Common Stock pursuant to
existing stock-based compensation plans, (iii) shares of TDI Common Stock
which may be sold to Thermedics and Thermo Electron, (iv) the issuance of
shares of TDI Common Stock as consideration for the acquisition of one or more
businesses (provided that such TDI Common Stock may not be resold prior to the
expiration of the 180-day period referenced above) and (v) the sale of Rights
by Thermo Electron. So long as Thermedics is able to elect a majority of the
Board of Directors it will be able to cause the Company at any time to
register under the Securities Act all or a portion of the TDI Common Stock
owned by Thermedics or its affiliates, in which case it would be able to sell
such shares without restriction upon effectiveness of the registration
statement.
In general, under Rule 144 as currently in effect, beginning approximately
90 days after the effective date of the Registration Statement of which this
Prospectus is a part, a stockholder, including an Affiliate, who has
beneficially owned his or her restricted securities (as that term is defined
in Rule 144) for at least two years from the later of the date such securities
were acquired from the Company or (if applicable) the date they were acquired
from an Affiliate is entitled to sell, within any three-month period, a number
of such shares that does not exceed the greater of (i) 1% of the then
outstanding shares of TDI Common Stock or (ii) the average weekly trading
volume in the TDI Common Stock during the four calendar weeks preceding the
date on which notice of such sale was filed pursuant to Rule 144 provided
certain requirements concerning availability of public information, manner of
sale and notice of sale are satisfied. In addition, under Rule 144(k), if a
period of at least three years has elapsed between the later of the date
restricted securities were acquired from the Company or (if applicable) the
date they were acquired from an Affiliate of the Company, a stockholder who is
not an Affiliate of the Company at the time of sale and has not been an
Affiliate of the Company for at least three months prior to the sale is
entitled to sell the shares immediately without compliance with the foregoing
requirements under Rule 144. The Securities and Exchange Commission has
proposed an amendment to Rule 144 which would reduce the holding period
required for shares subject to Rule 144 to become eligible for sale in the
public market from two years to one year, and from three years to two years in
the case of Rule 144(k).
The Company has reserved 358,333 shares of TDI Common Stock for grants under
its existing stock-based compensation plans. As of December 31, 1996 the
Company had options outstanding to purchase up to 218,180 shares of TDI Common
Stock to certain of its officers and directors at a weighted average exercise
price of $10.41 per share. Ninety days after the completion of the Rights
Offering such options will become immediately exercisable, subject to the
right of the Company to repurchase shares at the exercise price if the
optionee ceases to be employed by the Company. This repurchase right lapses
ratably (on an annual basis) over a five to ten year period depending upon the
term of the option. As of December 31, 1996, the repurchase right had lapsed
as to
54
<PAGE>
16,502 shares issuable upon exercise of outstanding options. The Company has
reserved 140,153 shares remaining for future grant under plans. The Company
intends to file registration statements under the Securities Act to register
all shares of TDI Common Stock issuable under such plans. Shares covered by
these registration statements that are not subject to transferability
restrictions will be eligible for sale in the public market immediately upon
the filing of such registration statements, subject to Rule 144 limitations
applicable to Affiliates as noted above.
Prior to the Rights Offering, there has been no public market for the TDI
Common Stock, and no prediction can be made as to the effect, if any, that
market sales of shares of TDI Common Stock or the availability of shares for
sale will have on the market price of the TDI Common Stock prevailing from
time to time. Nevertheless, sales of significant numbers of shares of the TDI
Common Stock in the public market could adversely affect the market price of
the TDI Common Stock and could impair the Company's future ability to raise
capital through an offering of its equity securities. See "Risk Factors--
Significant Additional Shares Eligible for Sale After the Offering."
55
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Standby Underwriting
Agreement, each of the Underwriters named below, for whom Lehman Brothers Inc.
and NatWest Securities Limited are acting as Representatives (the
"Representatives") has severally agreed to purchase from the Company at the
Subscription Price the respective percentage set forth opposite its name below
of a number of shares of TDI Common Stock equal to 1,000,000 shares less the
number of shares purchased upon the exercise of Rights (the "Underwritten
Shares"):
<TABLE>
<CAPTION>
PERCENTAGE OF
UNDERWRITER UNDERWRITTEN SHARES
----------- -------------------
<S> <C>
Lehman Brothers Inc. .................................
NatWest Securities Limited............................
---
Total............................................... 100%
===
</TABLE>
In the Standby Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Underwritten Shares if any Underwritten Shares are purchased. In the event of
a default by any Underwriter, the Standby Underwriting Agreement provides
that, in certain circumstances, purchase commitments of the non-defaulting
Underwriter may be increased or the Standby Underwriting Agreement may be
terminated. The Company has been advised by the Representatives that the
several Underwriters propose to offer shares to certain dealers at a
concession initially equal to $ per share. Such concession may be changed
by the Underwriters to an amount not in excess of $ per share. The
Representatives have informed the Company that the Underwriters do not intend
to confirm sales of shares of TDI Common Stock to any accounts over which they
exercise discretionary authority.
The Company has granted the several Underwriters an option, exercisable not
later than 30 days after the Expiration Date, to purchase up to 150,000
additional shares of TDI Common Stock at the Subscription Price. To the extent
that the Underwriters exercise such option, each of the Underwriters severally
will have a firm commitment to purchase the same percentage thereof as is
shown in the above table. The Underwriters may exercise such option only to
cover over-allotments made in connection with the sale of the shares of TDI
Common Stock offered hereby.
Under applicable law, the Underwriters may bid for and purchase Rights for
certain purposes. Such purchases will be subject to certain price and volume
limitations when the TDI Common Stock is being stabilized by the Underwriters
or when the Underwriters own Rights without an offsetting short position in
the TDI Common Stock. Such limitations provide, among other things, that
subject to certain exceptions, not more than one bid to purchase Rights may be
maintained in any one market at the same price at the same time and that the
initial bid for or purchase of Rights may not be made at a price higher than
the highest current independent bid price on the AMEX. Any such price may not
be increased, subject to certain exceptions, unless the Underwriters have not
purchased any Rights for a full business day or the independent bid price for
such Rights on the American Stock Exchange has exceeded such price for a full
business day.
From the date hereof, the Underwriters may offer and sell TDI Common Stock
at prices set from time to time by the Representatives, which prices may be
higher or lower than the Subscription Price. Prior to the Expiration Date,
each such price when set will not exceed, if applicable, the highest price at
which a dealer not participating in the distribution is then offering the TDI
Common Stock to other dealers, plus an amount equal to
56
<PAGE>
a dealer's concession, and any such offering price set on any calendar day
will not be increased more than once during that day. Any such offering may
include TDI Common Stock acquired or to be acquired through the exercise of
the Rights or may be made in anticipation of the purchase of Underwritten
Shares. As a result of such offerings, the Underwriters may realize profits or
losses independent of the underwriting commissions and fees described below.
The Company has agreed to pay a management fee equal to $ to the
Representatives, a standby fee of $ to the Underwriters and additional fees
of $ per share to the Underwriters for each share of TDI Common Stock
actually purchased by the Underwriters, whether pursuant to Rights purchased
and exercised by the Underwriters or pursuant to the Standby Underwriting
Agreement; provided that such fees in the aggregate shall not exceed 6% of the
Subscription Price for each share of TDI Common Stock purchased pursuant to
the exercise of Rights (by the Underwriters or otherwise) or pursuant to the
Standby Underwriting Agreement plus an amount equal to the aggregate purchase
price of Rights purchased by the Underwriters, up to $ . The Company has
agreed to allow the Underwriters to exercise any Rights held by them on the
first business day following the Expiration Date. The Company has also agreed
to reimburse the Underwriters for their out-of-pocket expenses in connection
with the Rights Offering.
The Standby Underwriting Agreement provides that the Company, Thermedics and
Thermo Electron will indemnify the Underwriters against certain liabilities
incurred in connection with the Rights Offering, including liabilities under
the Securities Act, or contribute to payments the Underwriters may be required
to make in respect thereof.
The Company, Thermedics and Thermo Electron have also agreed that they will
not, without the Representatives' prior written consent, offer, sell, grant
any options to purchase or otherwise dispose of any TDI Common Stock within
180 days after the date of this Prospectus, other than (i) sales of shares of
TDI Common Stock to be issued in the Rights Offering, (ii) the issuance of
options and sales of shares of TDI Common Stock pursuant to existing stock-
based compensation plans, (iii) shares of TDI Common Stock which may be sold
to Thermedics and Thermo Electron, (iv) the issuance of shares of TDI Common
Stock as consideration for the acquisition of one or more businesses (provided
that such TDI Common Stock may not be resold prior to the expiration of the
180-day period referenced above) and (v) the sale of Rights by Thermo
Electron. See "Shares Eligible for Future Sale."
Thermo Electron may sell its Rights from time to time prior to the
Expiration Date in transactions on the American Stock Exchange, in negotiated
transactions, including transactions with the Underwriters, or a combination
of such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Such transactions may be effected by the sale
of the Rights to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
Thermo Electron and/or the purchasers of the Rights for whom such broker-
dealers may act as agent or to whom they sell as principal, or both (which
compensation to a particular broker-dealer might be in excess of customary
commissions). Thermo Electron and any broker-dealer who acts in connection
with the sale of Rights by Thermo Electron may be deemed to be "underwriters"
as that term is defined in the Securities Act, and any commission received by
them and profit on any resale of the Rights as principal might be deemed to be
underwriting discounts and commissions under the Securities Act.
Each of the Underwriters from time to time has performed various investment
banking services for Thermo Electron and its subsidiaries.
NatWest Securities Limited, a United Kingdom broker-dealer and a member of
the Securities and Futures Authority Limited, has agreed that, as part of the
distribution of the TDI Common Stock offered hereby and subject to certain
exceptions, it will not offer or sell any TDI Common Stock within the United
States, its territories or possessions or to persons who are citizens thereof
or residents therein. The Standby Underwriting Agreement does not limit sales
of TDI Common Stock offered hereby outside of the United States.
57
<PAGE>
NatWest Securities Limited has also represented and agreed that as a part of
the distribution of the TDI Common Stock offered hereby, (i) it has not
offered or sold and will not offer or sell any TDI Common Stock to persons in
the United Kingdom except to persons whose ordinary activities involve them in
aquiring, managing, holding or disposing of investments (as principal or
agent) for the purpose of their businesses or otherwise in circumstances which
have resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995
or the Financial Services Act 1986 (the "Act"), (ii) it has complied and will
comply with all applicable provisions of the Act with respect to anything done
by it in relation to the TDI Common Stock in, from or otherwise involving the
United Kingdom; (iii) it has only issued or passed on and will only issue or
pass on, in the United Kingdom any document received by it in connection with
the issue of the TDI Common Stock, other than any document which consists of
or any part of listing particulars, supplementary listing particulars or any
other document or instrument required or permitted to be published by listing
rules under Part IV of the Act, to a person who is of a kind described in
Article 11 (3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) (No. 2) Order 1995 or is a person to whom the document may
otherwise be lawfully issued or passed on.
Prior to the Rights Offering there has been no public market for the TDI
Common Stock. The Subscription Price for the TDI Common Stock will be
determined by the Company in consultation with the Representatives. Among the
factors to be considered in determining the Subscription Price will be
prevailing market and economic conditions, estimates of the business potential
and prospects of the Company, the state of the Company's business operations,
an assessment of the Company's management, the consideration of the above
factors in relation to market valuations of companies in related businesses
and other factors deemed relevant.
LEGAL OPINIONS
The validity of the issuance of the TDI Common Stock offered hereby will be
passed upon for the Company by Seth H. Hoogasian, Esq., General Counsel of
Thermo Electron, Thermedics and the Company, and certain legal matters will be
passed upon for the Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston,
Massachusetts. Mr. Hoogasian owns or has the right to acquire 8,900 shares of
common stock of Thermedics and 115,927 shares of common stock of Thermo
Electron.
EXPERTS
The Consolidated Financial Statements of the Company and the Combined
Financial Statements of Moisture Systems Corporation and Moisture Systems
Limited included in this Prospectus and the financial statement schedule
included in the Registration Statement of which this Prospectus forms a part
have been audited by Arthur Andersen LLP, independent public accountants, to
the extent and for the periods as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
The Consolidated Financial Statements of Rutter & Co. B.V. included in this
Prospectus have been audited by Deloitte & Touche, independent auditors and
registeraccountants, as stated in their reports appearing herein, and are
included in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall include all
amendments, exhibits and schedules thereto) on Form S-1 under the Securities
Act with respect to the securities offered hereby. This Prospectus, which
constitutes a part of the
58
<PAGE>
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission, to which Registration
Statement reference is hereby made. Although statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to set forth all material elements of such documents, such statements
are not necessarily complete. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved,
and each such statement, although setting forth all material elements of such
documents, shall be deemed qualified by such reference. The Registration
Statement and the exhibits thereto may be inspected and copied at prescribed
rates at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The Commission also maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company. The address of such site is http://www.sec.gov.
The distribution of this Prospectus and the offering of the Rights and the
shares of TDI Common Stock in certain jurisdictions may be restricted by law.
No action has been taken by the Company, Thermedics or the Underwriters that
would permit an offering of the Rights or such shares or the circulation or
distribution of this Prospectus or any offering material in relation to the
Company, the Rights or such shares in any country outside the United States
where action for that purpose is required. Persons into whose possession this
Prospectus comes are required by the Company and the Underwriters to inform
themselves about and to observe any such restrictions, including the
following:
The TDI Common Stock may not be offered for sale in the United Kingdom
except in circumstances that do not constitute an offer to the public within
the meaning of the Companies Act 1985 and therefore offers may not be made
other than to persons who, at the date of this document, are (i) persons whose
ordinary business is to buy or sell shares or debentures, whether as principal
or agent, (ii) existing registered holders of TDI Common Stock, or (iii)
existing registered holders of Thermedics Common Stock, and in the case of
(iii), such persons will only be eligible to subscribe for such shares if in
so doing they represent that they are subscribing with a view to holding the
shares as an investment and that they have no immediate intention to resell
the shares. In addition, persons who receive Rights by way of dividend from
Thermedics but who do not fall within the categories described in (i) or (ii)
above shall, in taking such Rights, be construed as representing that they
will not transfer them to a third party.
This document may only be issued or passed on to any person in the United
Kingdom if at the date of issue hereof such person is either (i) a person who
is reasonably believed to be of the kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995, as amended, or (ii) a person who is reasonably believed to be an
existing registered stockholder of either Thermedics or the Company and
therefore a person of the kind described in Article 8(1) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1995.
The Rights may not be sold, transferred or exercised by any person located
in Canada. The Subscription Agent will sell the Rights for the account of each
Thermedics or Thermedics Detection stockholder located in Canada and mail the
proceeds of such sale to each such stockholder. See "The Rights Offering--
Method of Transferring Rights."
No application has been made to the French Commission des Operations de
Bourse in respect of this Prospectus or any part hereof. The Company hereby
represents and agrees, and each French recipient, by his acceptance of this
Prospectus agrees, that neither this Prospectus nor any part hereof
constitutes a public offering of Rights or shares of Thermedics Detection
Common Stock in France. The Company and Thermedics further confirm that they
have not, and each French recipient, by his acceptance of this Prospectus,
confirms that such recipient has neither offered for sale nor sold nor will
offer for sale or sell (whether by use of this Prospectus or any part hereof,
any information contained herein or any connected or related document or
otherwise) any of the Rights or shares of Thermedics Detection Common Stock to
the public in France.
59
<PAGE>
REPORTS TO SECURITY HOLDERS
The Company intends to furnish holders of the TDI Common Stock offered
hereby with annual reports containing financial statements audited by an
independent public accounting firm and with quarterly reports containing
unaudited summary financial statements for each of the first three quarters of
each fiscal year.
60
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
THERMEDICS DETECTION INC.
Report of Independent Public Accountants................................ F-2
Consolidated Statement of Operations for the years ended January 1,
1994, December 31, 1994 and December 30, 1995 and for the nine months
ended September 30, 1995 andSeptember 28, 1996......................... F-3
Consolidated Balance Sheet as of December 31, 1994, December 30, 1995
and
September 28, 1996..................................................... F-4
Consolidated Statement of Cash Flows for the years ended January 1,
1994, December 31, 1994 and December 30, 1995 and for the nine months
ended September 30, 1995 and September 28, 1996........................ F-5
Consolidated Statement of Shareholders' Investment for the years ended
January 1, 1994,
December 31, 1994 and December 30, 1995 and for the nine months ended
September 28, 1996..................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
MOISTURE SYSTEMS CORPORATION AND MOISTURE SYSTEMS LIMITED
Report of Independent Public Accountants................................ F-15
Combined Statement of Income for the years ended December 31, 1994 and
December 30, 1995...................................................... F-16
Combined Balance Sheet as of December 31, 1994 and December 30, 1995.... F-17
Combined Statement of Cash Flows for the years ended December 31, 1994
and
December 30, 1995...................................................... F-18
Combined Statement of Owners' Investment for the years ended December
31, 1994 and
December 30, 1995...................................................... F-19
Notes to Combined Financial Statements.................................. F-20
RUTTER & CO. B.V.
Auditor's Report........................................................ F-24
Consolidated Balance Sheets at December 31, 1995 and 1994............... F-25
Consolidated Profit and Loss Accounts for the years ended December 31,
1995 and 1994.......................................................... F-26
Notes to the Consolidated Balance Sheets and the Consolidated Profit and
Loss Accounts.......................................................... F-27
Parent Company Balance Sheets at December 31, 1995 and 1994............. F-31
Parent Company Profit and Loss Accounts for the years ended December 31,
1995 and 1994.......................................................... F-32
Notes to the Parent Company Balance Sheets and the Parent Company Profit
and Loss Accounts...................................................... F-33
Supplementary Information............................................... F-36
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION OF THERMEDICS DETECTION
INC., MOISTURE SYSTEMS AND RUTTER & CO. B.V. (UNAUDITED)
Pro Forma Combined Condensed Statement of Operations for the year ended
December 30, 1995...................................................... F-40
Pro Forma Combined Condensed Statement of Operations for the nine months
ended September 28, 1996............................................... F-41
Notes to Pro Forma Combined Condensed Statement of Operations........... F-42
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermedics Detection Inc.:
We have audited the accompanying consolidated balance sheet of Thermedics
Detection Inc. (a Massachusetts corporation and 100%-owned subsidiary of
Thermedics Inc.) and subsidiaries as of December 31, 1994 and December 30,
1995, and the related consolidated statements of operations, cash flows and
shareholders' investment for the years ended January 1, 1994, December 31,
1994 and December 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Thermedics
Detection Inc. and subsidiaries as of December 31, 1994 and December 30, 1995
and the results of their operations and their cash flows for the years ended
January 1, 1994, December 31, 1994 and December 30, 1995, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
January 2, 1997
F-2
<PAGE>
THERMEDICS DETECTION INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
------- ------- ------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues (Note 7)
Product............... $37,637 $40,436 $18,457 $15,121 $21,338
Service............... 4,394 9,907 9,497 7,067 9,228
------- ------- ------- ------- -------
42,031 50,343 27,954 22,188 30,566
------- ------- ------- ------- -------
Costs and Operating
Expenses:
Cost of product
revenues............. 20,903 18,052 9,895 8,044 11,821
Cost of service
revenues............. 2,856 6,854 5,341 3,935 4,484
Selling, general and
administrative
expenses (Note 6).... 7,526 11,973 7,487 5,696 11,928
Research and
development
expenses............. 1,790 3,895 2,741 1,869 3,551
------- ------- ------- ------- -------
33,075 40,774 25,464 19,544 31,784
------- ------- ------- ------- -------
Operating Income
(Loss)................. 8,956 9,569 2,490 2,644 (1,218)
Interest Income......... -- -- -- -- 117
Interest Expense,
Related Party (Note
8)..................... -- -- -- -- (596)
Other Expense........... -- -- (72) (54) (16)
------- ------- ------- ------- -------
Income (Loss) Before
Income Taxes........... 8,956 9,569 2,418 2,590 (1,713)
Income Tax (Provision)
Benefit (Note 4)....... (3,153) (3,189) (910) (997) 650
------- ------- ------- ------- -------
Net Income (Loss)....... $ 5,803 $ 6,380 $ 1,508 $ 1,593 $(1,063)
======= ======= ======= ======= =======
Earnings (Loss) per
Share.................. $ .58 $ .63 $ .15 $ .16 $ (.11)
======= ======= ======= ======= =======
Weighted Average
Shares................. 10,069 10,069 10,069 10,069 10,069
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
THERMEDICS DETECTION INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 28,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................... $ 806 $ 1,282 $ 8,089
Accounts receivable, less allowances of $547,
$516 and $854............................... 5,768 4,619 8,905
Unbilled contract costs and fees............. 221 1,152 876
Inventories.................................. 6,188 8,991 8,529
Prepaid and refundable income taxes (Note
4).......................................... 1,402 1,530 2,158
Prepaid expenses............................. 235 208 605
------- ------- -------
14,620 17,782 29,162
------- ------- -------
Property, Plant and Equipment, at Cost, Net.... 2,519 2,230 2,004
------- ------- -------
Cost in Excess of Net Assets of Acquired
Companies (Note 8)............................ -- -- 17,199
------- ------- -------
Other Assets................................... 654 310 60
------- ------- -------
$17,793 $20,322 $48,425
======= ======= =======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable............................. $ 1,376 $ 1,558 $ 2,414
Accrued payroll and employee benefits........ 2,049 681 1,566
Accrued installation and warranty expenses... 1,812 1,414 1,596
Deferred revenue............................. 1,732 1,324 1,870
Customer deposits............................ 514 446 573
Other accrued expenses....................... 907 1,086 2,673
Due to parent company and affiliates......... 114 -- 727
------- ------- -------
8,504 6,509 11,419
------- ------- -------
Deferred Income Taxes (Note 4)................. 81 40 40
------- ------- -------
Promissory Note to Parent Company (Note 8)..... -- -- 21,200
------- ------- -------
Commitments (Note 5)
Shareholders' Investment (Notes 3 and 8):
Common stock, $.10 par value, 15,000,000
shares authorized; 10,000,000 shares issued
and outstanding in 1994 and 1995 and
10,300,000 shares issued and outstanding in
1996........................................ 1,000 1,000 1,030
Capital in excess of par value............... 2,814 6,114 9,204
Retained earnings............................ 5,396 6,774 5,711
Cumulative translation adjustment............ (2) (115) (179)
------- ------- -------
9,208 13,773 15,766
------- ------- -------
$17,793 $20,322 $48,425
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
THERMEDICS DETECTION INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
------- -------- ------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)..... $ 5,803 $ 6,380 $ 1,508 $ 1,593 $ (1,063)
Adjustments to
reconcile net income
(loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization....... 610 1,060 1,159 874 2,034
Provision for losses
on accounts
receivable......... (36) 128 98 68 187
Other noncash
expenses........... 1,504 1,127 727 608 1,347
Increase (decrease)
in deferred income
taxes.............. -- 81 (40) -- --
Changes in current
accounts, excluding
the effects of
acquisitions:
Accounts
receivable....... (1,853) 1,862 1,051 284 (892)
Unbilled contract
costs and fees... (1,406) 1,687 (931) (1,065) 276
Inventories....... (8,379) 4,649 (3,213) (2,005) 1,525
Other current
assets........... (702) (934) (116) (17) (713)
Accounts payable.. 1,784 (2,977) 182 165 139
Other current
liabilities...... 14,768 (11,147) (2,392) (2,396) 2,197
------- -------- ------- ------- --------
Net cash provided
by (used in)
operating
activities...... 12,093 1,916 (1,967) (1,891) 5,037
------- -------- ------- ------- --------
INVESTING ACTIVITIES:
Acquisitions, net of
cash acquired (Note
8)................... -- -- -- -- (21,975)
Purchases of
machinery, equipment
and leasehold
improvements......... (2,059) (722) (608) (502) (543)
Proceeds from sale of
machinery, equipment
and leasehold
improvements......... 154 448 19 -- 34
Purchase of other
assets............... (400) (471) -- (5) --
------- -------- ------- ------- --------
Net cash used in
investing
activities...... (2,305) (745) (589) (507) (22,484)
------- -------- ------- ------- --------
FINANCING ACTIVITIES:
Net proceeds from
private placement of
Company common stock
(Note 8)............. -- -- -- -- 3,000
Proceeds from issuance
of promissory note to
parent company (Note
8)................... -- -- -- -- 21,200
Dividends, return of
capital and
additional capital
contributions, net .. (9,275) (984) 3,170 3,300 120
Other................. -- -- -- -- 21
------- -------- ------- ------- --------
Net cash provided
by (used in)
financing
activities...... (9,275) (984) 3,170 3,300 24,341
------- -------- ------- ------- --------
Exchange Rate Effect on
Cash.................. 21 14 (138) (29) (87)
------- -------- ------- ------- --------
Increase in Cash and
Cash Equivalents...... 534 201 476 873 6,807
Cash and Cash
Equivalents at
Beginning of Period... 71 605 806 806 1,282
------- -------- ------- ------- --------
Cash and Cash
Equivalents at End of
Period................ $ 605 $ 806 $ 1,282 $ 1,679 $ 8,089
======= ======== ======= ======= ========
CASH PAID FOR:
Income taxes.......... $ 7 $ 338 $ 152 $ 107 $ 246
======= ======== ======= ======= ========
NONCASH ACTIVITIES:
Fair value of assets
of acquired
companies............ $ -- $ -- $ -- $ -- $ 25,207
Cash paid for acquired
companies............ -- -- -- -- (22,798)
------- -------- ------- ------- --------
Liabilities assumed
of acquired
companies......... $ -- $ -- $ -- $ -- $ 2,409
======= ======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
THERMEDICS DETECTION INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON CAPITAL IN CUMULATIVE
STOCK, $.10 EXCESS OF RETAINED TRANSLATION
PAR VALUE PAR VALUE EARNINGS ADJUSTMENT
----------- ---------- -------- -----------
<S> <C> <C> <C> <C>
BALANCE JANUARY 2, 1993....... $1,000 $4,171 $2,115 $ (4)
Net income.................... -- -- 5,803 --
Dividend...................... -- -- (7,918) --
Return of capital............. -- (1,357) -- --
Translation adjustment........ -- -- -- 12
------ ------ ------ -----
BALANCE JANUARY 1, 1994....... 1,000 2,814 -- 8
Net income.................... -- -- 6,380 --
Dividend...................... -- -- (984) --
Translation adjustment........ -- -- -- (10)
------ ------ ------ -----
BALANCE DECEMBER 31, 1994..... 1,000 2,814 5,396 (2)
Net income.................... -- -- 1,508 --
Additional capital
contribution................. -- 3,300 -- --
Dividend...................... -- -- (130) --
Translation adjustment........ -- -- -- (113)
------ ------ ------ -----
BALANCE DECEMBER 30, 1995..... 1,000 6,114 6,774 (115)
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
Net loss...................... -- -- (1,063) --
Additional capital
contribution................. -- 120 -- --
Net proceeds from private
placement of Company common
stock (Note 8)............... 30 2,970 -- --
Translation adjustment........ -- -- -- (64)
------ ------ ------ -----
BALANCE SEPTEMBER 28, 1996.... $1,030 $9,204 $5,711 $(179)
====== ====== ====== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
THERMEDICS DETECTION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Thermedics Detection Inc. ("the Company") develops, manufactures and markets
high-speed on-line detection and measurement systems used in a variety of
industrial process applications, explosives detection and laboratory analysis.
The Company's industrial process systems use ultratrace chemical-concentration
detectors, high-speed gas chromatography, x-ray imaging, near-infrared
spectroscopy and other technologies for quality assurance of in-process and
finished products, primarily in the food, beverage, pharmaceutical, forest
products, chemical and other consumer products industries. The Company's
explosives-detection equipment uses trace particle- and vapor-detection
techniques based on its proprietary chemiluminescene and high-speed gas
chromatography technologies. Customers use the Company's explosive detection
equipment to detect plastic and other explosives at airports and border
crossings, for other high-security screening applications and for forensics
and search applications.
Relationship with Thermedics Inc. and Thermo Electron Corporation
The Company operated as a division of Thermedics Inc. ("Thermedics") until
its incorporation as a Massachusetts corporation in December 1990. In
connection with the Company's incorporation, Thermedics transferred to the
Company its TEA Analyzer and certain other trace detection technologies in
exchange for 10,000,000 shares of the Company's common stock. As of December
30, 1995, Thermedics is a 51%-owned subsidiary of Thermo Electron Corporation
("Thermo Electron").
The accompanying financial statements include the assets, liabilities,
income and expenses of the Company as included in Thermedics' consolidated
financial statements.
Principles of Consolidation
The accompanying financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest December
31. References to 1993, 1994 and 1995 are for the fiscal years ended January
1, 1994, December 31, 1994 and December 30, 1995, respectively.
Revenue Recognition
The Company recognizes product revenues upon shipment of its products. The
Company provides a reserve for its estimate of warranty and installation costs
at the time of shipment. The Company recognizes service revenues over the term
of the contract. Deferred revenue in the accompanying balance sheet consists
of unearned revenue on service contracts which is recognized over the life of
the service contract. Substantially all of the deferred revenue included in
the accompanying balance sheet as of December 30, 1995, will be recognized
within one year. Revenues and profits on long-term contracts are recognized
using the percentage-of-completion method. Revenues recorded under the
percentage-of-completion method, including revenues from long-term research
and development contracts, were $2,844,000 in 1993, $1,923,000 in 1994 and
$3,987,000 in 1995. The percentage of completion is determined by relating the
actual costs incurred to date to management's estimate of total costs to be
incurred on each contract. If a loss is indicated on any contract in process,
a provision is made currently for the entire loss. Contracts generally provide
for the billing of customers on a cost-plus-fixed-fee basis as costs are
incurred. Revenues earned on contracts in process in excess of billings are
classified as unbilled contract costs and fees in the accompanying balance
sheet. There are no significant amounts included in the accompanying balance
sheet that are not expected to be recovered from existing contracts at current
contract values, or that are not expected to be collected within one year,
including amounts that are billed but not paid under retainage provisions.
F-7
<PAGE>
THERMEDICS DETECTION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company and Thermedics have a tax allocation agreement under which the
Company is included in Thermedics' consolidated federal and certain state
income tax returns. The agreement provides that in years in which the Company
has taxable income, it will pay to Thermedics amounts comparable to the taxes
the Company would have paid had it filed separate tax returns. If Thermedics'
equity ownership of the Company were to drop below 80%, the Company would be
required to file its own income tax returns.
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," the Company recognizes deferred income
taxes based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in which the
differences are expected to be reflected in the tax return.
Earnings (Loss) per Share
Pursuant to Securities and Exchange Commission requirements, earnings (loss)
per share have been presented for all periods. Weighted average shares for all
periods include 10,000,000 shares issued to Thermedics in connection with the
initial capitalization of the Company, the effect of shares sold through
private placements and the assumed exercise of stock options issued within one
year prior to the Company's proposed initial public offering. Because the
effect of the assumed exercise of stock options issued more than one year
prior to the Company's proposed initial public offering would be immaterial,
they have been excluded from the earnings per share calculation.
Stock Split
In March 1996, the Company declared and effected a two-for-three reverse
stock split. All share and per share information has been restated to reflect
the stock split.
Cash and Cash Equivalents
Cash receipts and cash disbursements of the Company's domestic operations
were combined with other Thermedics corporate cash transactions and balances
prior to the Company's March 1996 private placement of common stock.
Therefore, cash of the Company's domestic operations is not included in the
accompanying balance sheet as of December 31, 1994 and December 30, 1995. The
Company's cash equivalents include investments in commercial paper and short-
term certificates of deposit of the Company's foreign operations, which have
an original maturity of three months or less. Cash and cash equivalents are
carried at cost, which approximates market value.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out basis)
or market value and include materials, labor and manufacturing overhead. The
components of inventories are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw material and supplies................................... $ 5,044 $ 7,089
Work in process and finished goods.......................... 1,144 1,902
------- -------
$ 6,188 $ 8,991
======= =======
</TABLE>
Property, Plant and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the
estimated useful lives of the property as follows: machinery and equipment,
three to ten years and
F-8
<PAGE>
THERMEDICS DETECTION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
leasehold improvements, the lesser of the term of the lease or the life of the
asset. Property, plant and equipment is comprised of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Machinery, equipment and leasehold improvements............. $ 4,332 $ 4,874
Less: Accumulated depreciation and amortization............. 1,813 2,644
------- -------
$ 2,519 $ 2,230
======= =======
</TABLE>
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are
translated at average exchange rates for the year in accordance with SFAS
No. 52, "Foreign Currency Translation." Resulting translation adjustments are
reflected as a separate component of shareholders' investment titled
"Cumulative translation adjustment." Foreign currency transaction gains and
losses are included in the accompanying statement of operations and are not
material for the three years presented.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable, and due to parent company
and affiliates. Their respective carrying amounts in the accompanying balance
sheet approximate fair value due to their short-term nature.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Statements
The financial statements as of September 28, 1996 and for the nine-month
periods ended September 30, 1995 and September 28, 1996, are unaudited but, in
the opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair presentation of results for these interim periods.
The results of operations for the nine-month period ended September 28, 1996
are not necessarily indicative of the results to be expected for the entire
year.
2. EMPLOYEE BENEFIT PLANS
Employee Stock Purchase Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in an employee stock purchase plan sponsored by Thermedics. Under
this plan, shares of Thermedics and Thermo Electron's common stock may be
purchased at the end of a 12-month plan year at 95% of the fair market value
at the beginning of the plan year, and the shares purchased are subject to a
six-month resale restriction. Prior to November 1, 1995, the applicable shares
of common stock could be purchased at 85% of the fair market value at the
beginning of the plan year, and the shares purchased were subject to a one-
year resale restriction. Shares are purchased through payroll deductions of up
to 10% of each participating employee's gross wages.
F-9
<PAGE>
THERMEDICS DETECTION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
401(k) Savings Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in Thermo Electron's 401(k) savings plan. Contributions to the
401(k) savings plan are made by both the employee and the Company. Company
contributions are based upon the level of employee contributions. For this
plan, the Company contributed and charged to expense $108,000, $159,000 and
$233,000 in 1993, 1994 and 1995, respectively.
3. STOCK-BASED COMPENSATION PLAN
On November 1, 1994, the Company adopted a stock-based compensation plan for
its key employees, directors and others, which permits the grant of a variety
of stock and stock-based awards as determined by the human resources committee
of the Company's Board of Directors (the "Board Committee"), including
restricted stock, stock options, stock bonus shares or performance-based
shares. The option recipients and the terms of options granted under this plan
are determined by the Board Committee. Options granted generally vest and
become immediately exercisable on the ninth anniversary of the grant date,
unless the Company's common stock becomes publicly traded prior to such date.
In such an event, options become exercisable 90 days after the Company becomes
subject to the Securities Exchange Act of 1934, but will be subject to certain
transfer restrictions and the right of the Company to repurchase shares issued
upon exercise of the options at the exercise price, upon certain events. The
restrictions and repurchase rights generally will be deemed to have lapsed
ratably over periods ranging from five to ten years after the first
anniversary of the grant date, depending on the term of the option, which will
generally range from ten to twelve years. Nonqualified stock options may be
granted at any price determined by the Board Committee, although incentive
stock options must be granted at not less than the fair market value of the
Company's common stock on the date of grant. Options to purchase 25,668 shares
and 2,000 shares of the Company's common stock at $9.75 per share were granted
under this plan in 1994 and 1995, respectively. To date, all options have been
granted at fair market value. As of December 31, 1995, no options are
exercisable or have been exercised under this plan. Options to purchase 3,334
shares of the Company's common stock at $9.75 per share lapsed during 1995.
In addition to the Company's stock-based compensation plan, certain officers
and key employees may also participate in the stock-based compensation plans
of Thermo Electron or its majority-owned subsidiaries.
No accounting recognition is given to options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity.
At December 30, 1995, the Company had reserved 333,333 unissued shares of
its common stock for possible issuance under the stock-based compensation
plan.
4. INCOME TAXES
The components of income before income taxes are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic................................................ $7,871 $9,379 $2,197
Foreign................................................. 1,085 190 221
------ ------ ------
$8,956 $9,569 $2,418
====== ====== ======
</TABLE>
F-10
<PAGE>
THERMEDICS DETECTION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ----
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal.............................................. $2,565 $2,736 $681
State................................................ 539 568 166
Foreign.............................................. 385 116 94
------ ------ ----
3,489 3,420 941
------ ------ ----
Net prepaid:
Federal.............................................. (274) (188) (25)
State................................................ (62) (43) (6)
------ ------ ----
(336) (231) (31)
------ ------ ----
$3,153 $3,189 $910
====== ====== ====
</TABLE>
Provision for income taxes in the accompanying statement of operations
differs from the provision calculated by applying the statutory federal income
tax rate of 34% to income before provision for income taxes due to the
following:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ -----
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory rate.......... $3,045 $3,253 $ 822
Increases (decreases) resulting from:
State income taxes, net of federal tax.............. 315 346 106
Foreign tax rate and tax law differential........... 16 51 19
Tax benefit of foreign sales corporation............ (256) (499) (133)
Deemed dividend from foreign subsidiary............. -- -- 80
Other, net.......................................... 33 38 16
------ ------ -----
$3,153 $3,189 $ 910
====== ====== =====
</TABLE>
Prepaid income taxes and deferred income taxes in the accompanying balance
sheet consist of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
Reserves and other accruals............................... $ 668 $ 556
Inventory basis difference................................ 492 675
Accrued compensation...................................... 242 133
Other, net................................................ -- 28
------- -------
$ 1,402 $ 1,392
======= =======
Deferred income taxes:
Depreciation.............................................. $ 81 $ 40
======= =======
</TABLE>
5. COMMITMENTS
The Company leases portions of its office and operating facilities under
various operating lease arrangements. The accompanying statement of operations
includes expenses from operating leases of $150,000,
F-11
<PAGE>
THERMEDICS DETECTION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$413,000 and $542,000 in 1993, 1994 and 1995, respectively. Total future
minimum payments due under noncancelable operating leases at December 30,
1995, are $444,000 in 1996; $444,000 in 1997; and $222,000 in 1998.
6. RELATED PARTY TRANSACTIONS
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management,
certain employee benefit administration, tax advice and preparation of tax
returns, centralized cash management, and certain financial and other
services, for which the Company paid Thermo Electron annually an amount equal
to 1.25% of the Company's revenues in 1993 and 1994 and 1.20% of the Company's
revenues in 1995. Beginning in 1996, the Company will pay an annual fee equal
to 1.0% of the Company's revenues. The annual fee is reviewed and adjusted
annually by mutual agreement of the parties. For these services, the Company
was charged $525,000, $629,000 and $335,000 in 1993, 1994 and 1995,
respectively. Management believes that the service fee charged by Thermo
Electron is reasonable and that such fees are representative of the expenses
the Company would have incurred on a stand-alone basis. The corporate services
agreement is renewed annually but can be terminated upon 30 days' prior notice
by the Company or upon the Company's withdrawal from the Thermo Electron
Corporate Charter (the Thermo Electron Corporate Charter defines the
relationship among Thermo Electron and its majority-owned subsidiaries). For
additional items such as employee benefit plans, insurance coverage and other
identifiable costs, Thermo Electron charges the Company based upon costs
attributable to the Company.
F-12
<PAGE>
THERMEDICS DETECTION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. SIGNIFICANT CUSTOMER AND GEOGRAPHICAL INFORMATION
Sales to one customer accounted for 82%, 64% and 31% of the Company's total
revenues in 1993, 1994 and 1995, respectively.
The Company is engaged in one business segment: developing, manufacturing
and marketing of high-speed on-line detection and measurement systems used in
a variety of industrial process applications, explosives detection and
laboratory analysis. The following table shows data for the Company by
geographical area.
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
United States................................. $43,595 $47,098 $22,571
Europe........................................ 3,630 7,454 4,057
Other......................................... 2,225 2,042 2,600
Transfers among geographical areas (a)........ (7,419) (6,251) (1,274)
------- ------- -------
$42,031 $50,343 $27,954
======= ======= =======
Income before provision for income taxes:
United States................................. $ 8,396 $10,007 $ 2,604
Europe........................................ 201 317 (127)
Other......................................... 884 (126) 348
Corporate (b)................................. (525) (629) (335)
------- ------- -------
Total operating income........................ 8,956 9,569 2,490
Other expense................................. -- -- (72)
------- ------- -------
$ 8,956 $ 9,569 $ 2,418
======= ======= =======
Identifiable assets:
United States................................. $21,846 $14,369 $15,806
Europe........................................ 2,549 2,509 2,850
Other......................................... 1,149 915 1,666
------- ------- -------
$25,544 $17,793 $20,322
======= ======= =======
Export revenues included in United States
revenues above (c):
Mexico........................................ $11,453 $10,416 $ 1,363
Germany....................................... 4,608 6,028 3,914
Other Europe.................................. 5,089 9,200 3,995
Argentina..................................... 7,933 3,730 134
Other South America........................... 6,786 7,162 3,137
Other......................................... 236 3,139 2,341
------- ------- -------
$36,105 $39,675 $14,884
======= ======= =======
</TABLE>
- --------
(a) Transfers among geographical areas are accounted for at prices that are
representative of transactions with unaffiliated parties.
(b) Primarily general and administrative expenses.
(c) In general, export sales are denominated in U.S. dollars.
F-13
<PAGE>
THERMEDICS DETECTION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
8. SUBSEQUENT EVENTS
Acquisitions
On January 25, 1996, the Company acquired the assets of Moisture Systems
Corporation and certain affiliated companies (collectively, "Moisture
Systems"), and the stock of Rutter & Co. B.V. ("Rutter") for a total purchase
price of $22,798,000 in cash, which included the repayment of $1,830,000 of
debt. Moisture Systems and Rutter design, manufacture and sell instruments
that use infrared X-ray imaging techniques to measure moisture in the
manufacturing process for the food, forest, paper, pharmaceutical and chemical
industries. To finance these acquisitions, the Company borrowed $21,200,000
from Thermedics pursuant to a promissory note due March 1998, bearing interest
at the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter.
These acquisitions have been accounted for using the purchase method of
accounting and their results of operations have been included in the
accompanying financial statements from their respective dates of acquisition.
The aggregate cost of these acquisitions exceeded the estimated fair value of
the acquired net assets by $17,451,000, which is being amortized over 40
years. Allocation of the purchase price for these acquisitions was based on
estimates of the fair value of the net assets acquired and is subject to
adjustment upon finalization of the purchase price allocation. To date, no
information has been gathered that would cause the Company to believe that the
final allocation of the purchase price will be materially different than the
preliminary estimate.
Pro forma information for the Company, Moisture Systems and Rutter is
available elsewhere in this Prospectus.
In December 1996, the Company acquired certain moisture detection product
lines for approximately $300,000 in cash, subject to certain post closing
adjustments, plus a percentage of the revenues earned by the Company from such
product lines. The purchase of the product lines have been accounted for using
the purchase method of accounting and the results of operations have been
included in the accompanying financial statements from the date of
acquisition. Allocation of the purchase price was based on an estimate of the
fair value of assets purchased.
Private Placements of Common Stock
In March 1996, the Company issued 300,000 shares of its common stock in a
private placement at $10.00 per share, for net proceeds of $3,000,000.
In November 1996, the Company issued 383,500 shares of its common stock in a
private placement at $10.75 per share, for net proceeds of approximately
$3,953,000.
Stock-based Compensation Plans
In 1996, the Company granted options to purchase 83,734 shares of the
Company's common stock at $10.00 per share and options to purchase 123,280
shares of the Company's common stock at $10.75 per share. To date, all options
have been granted at fair market value. Options to purchase 10,834 shares and
2,334 shares of the Company's common stock at $9.75 per share and $10.00 per
share, respectively, lapsed during 1996.
F-14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Moisture Systems Corporation and Moisture Systems Limited:
We have audited the accompanying combined balance sheet of Moisture Systems
Corporation and Moisture Systems Limited (collectively, the Company) as of
December 31, 1994 and December 30, 1995, and the related combined statements
of income, cash flows and owners' investment for the years ended December 31,
1994 and December 30, 1995. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Moisture Systems
Corporation and Moisture Systems Limited as of December 31, 1994 and December
30, 1995 and the results of their operations and their cash flows for the
years ended December 31, 1994 and December 30, 1995, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
January 2, 1997
F-15
<PAGE>
MOISTURE SYSTEMS CORPORATION AND MOISTURE SYSTEMS LIMITED
COMBINED STATEMENT OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Revenues (Note 6)............................................. $11,565 $12,075
------- -------
Costs and Operating Expenses:
Cost of revenues............................................ 5,478 5,805
Selling, general and administrative expenses................ 5,352 5,423
------- -------
10,830 11,228
------- -------
Operating Income.............................................. 735 847
Interest Income............................................... 45 24
Interest Expense (Note 4)..................................... (239) (189)
------- -------
Income Before Provision for Income Taxes...................... 541 682
Provision for Income Taxes (Note 3)........................... 26 47
------- -------
Net Income.................................................... $ 515 $ 635
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-16
<PAGE>
MOISTURE SYSTEMS CORPORATION AND MOISTURE SYSTEMS LIMITED
COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................... $ 525 $ 297
Accounts receivable, less allowances of $53 and $86.......... 2,792 2,264
Inventories.................................................. 1,492 1,978
Prepaid expenses............................................. 111 26
------ ------
4,920 4,565
------ ------
Property, Plant and Equipment, at Cost, Net.................... 1,433 1,006
------ ------
Other Assets................................................... -- 22
------ ------
$6,353 $5,593
====== ======
LIABILITIES AND OWNERS' INVESTMENT
Current Liabilities:
Notes payable and current portion of capital lease obligation
(Note 4).................................................... $1,487 $1,157
Accounts payable............................................. 1,196 1,008
Accrued payroll and employee benefits........................ 104 191
Dividends payable (Note 5)................................... 381 120
Other accrued expenses....................................... 517 597
------ ------
3,685 3,073
------ ------
Long-term Obligations:
Capital lease obligation (Note 4)............................ 667 233
Other........................................................ 35 42
------ ------
702 275
------ ------
Owners' Investment (Note 5):
Common Stock................................................. -- --
Capital in excess of par value............................... 3,128 3,128
Accumulated deficit.......................................... (866) (587)
Treasury stock, at cost...................................... (296) (296)
------ ------
1,966 2,245
------ ------
$6,353 $5,593
====== ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-17
<PAGE>
MOISTURE SYSTEMS CORPORATION AND MOISTURE SYSTEMS LIMITED
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income................................................. $ 515 $ 635
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................. 466 445
Provision for losses on accounts receivable.............. 53 33
Other noncash expenses................................... 85 (2)
Changes in current accounts:
Accounts receivable.................................... (1,171) 495
Inventories............................................ (15) (486)
Other current assets................................... (83) 85
Accounts payable....................................... 363 (188)
Other current liabilities.............................. (2) 256
------- -------
Net cash provided by operating activities............ 211 1,273
------- -------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment................. (383) (112)
Proceeds from sale of property, plant and equipment........ -- 96
Increase in other assets................................... -- (22)
------- -------
Net cash used in investing activities................ (383) (38)
------- -------
FINANCING ACTIVITIES:
Net proceeds from line of credit (Note 4).................. -- 723
Repayment of note payable (Note 4)......................... (48) (1,071)
Repayment of capital lease obligation...................... (393) (409)
Repayment of related party debt (Note 7)................... (53) (89)
Dividends paid............................................. -- (617)
Capital contribution....................................... 889 --
------- -------
Net cash provided by (used in) financing activities.. 395 (1,463)
------- -------
Increase (decrease) in Cash and Cash Equivalents............. 223 (228)
Cash and Cash Equivalents at Beginning of Year............... 302 525
------- -------
Cash and Cash Equivalents at End of Year..................... $ 525 $ 297
======= =======
CASH PAID FOR:
Interest................................................... $ 239 $ 189
======= =======
Income Taxes............................................... $ 4 $ 36
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-18
<PAGE>
MOISTURE SYSTEMS CORPORATION AND MOISTURE SYSTEMS LIMITED
COMBINED STATEMENT OF OWNERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL IN
COMMON EXCESS OF ACCUMULATED TREASURY
STOCK PAR VALUE DEFICIT STOCK
------ ---------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE JANUARY 1, 1994.................. $ -- $2,239 $(1,000) $(296)
Net income............................... -- -- 515 --
Dividends declared (Note 5).............. -- -- (381) --
Capital contribution..................... -- 889 -- --
----- ------ ------- -----
BALANCE DECEMBER 31, 1994................ -- 3,128 (866) (296)
Net income............................... -- -- 635 --
Dividends declared (Note 5).............. -- -- (356) --
----- ------ ------- -----
BALANCE DECEMBER 30, 1995................ $ -- $3,128 $ (587) $(296)
===== ====== ======= =====
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-19
<PAGE>
MOISTURE SYSTEMS CORPORATION AND MOISTURE SYSTEMS LIMITED
NOTES TO COMBINED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination and Nature of Operations
The accompanying combined financial statements include the accounts of
Moisture Systems Corporation (a Massachusetts corporation) and Moisture
Systems Limited (a United Kingdom corporation) (collectively, "the Company"),
companies under common control. The Company designs, manufactures and sells
instruments that use near infrared spectroscopy to measure moisture and other
product constituents, including fats, proteins, oils, flavorings, solvents,
adhesives and coatings, in a variety of manufacturing processes. The Company's
systems are used across the food, pharmaceutical, chemical, petrochemical,
tobacco, forest products, pulp and paper, converting, plastics, textiles,
corrugating and other industries. All material intercompany accounts and
transactions have been eliminated.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest December
31. References to 1994 and 1995 are for the fiscal years ended December 31,
1994 and December 30, 1995, respectively.
Revenue Recognition
The Company recognizes revenues upon shipment of its products. The Company
provides a reserve for its estimate of warranty and installation costs at the
time of shipment.
Cash and Cash Equivalents
The Company considers liquid investments with original maturity of three
months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out basis)
or market value and include materials, labor and manufacturing overhead. The
components of inventories are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw material and supplies................................... $ 1,317 $ 1,812
Work in process and finished goods.......................... 175 166
------- -------
$ 1,492 $ 1,978
======= =======
</TABLE>
Property, Plant and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the
estimated useful lives of the property as follows: building--30 years;
building under capital lease--ten years; and machinery and equipment--three to
ten years. Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Building.................................................... $ 213 $ 213
Building under capital lease................................ 3,058 3,058
Machinery and equipment..................................... 1,538 1,506
------- -------
4,809 4,777
Less: Accumulated depreciation and amortization............. 3,376 3,771
------- -------
$ 1,433 $ 1,006
======= =======
</TABLE>
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, notes payable and current portion of capital
lease obligation, accounts payable, and long-term obligations. The
F-20
<PAGE>
MOISTURE SYSTEMS CORPORATION AND MOISTURE SYSTEMS LIMITED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
carrying amounts of these financial instruments, with the exception of long-
term obligations, approximate fair value due to their short-term nature. The
carrying amount of long-term obligations approximates fair value based on the
borrowing rates currently available to the Company.
Foreign Currency
All assets and liabilities of the Company's foreign operations are
translated at year-end exchange rates, and revenues and expenses are
translated at average exchange rates for the year in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency
Translation." Foreign currency transaction gains and losses are included in
the accompanying statement of income and are not material for the two years
presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. EMPLOYEE BENEFIT PLANS
Profit Sharing Retirement Plan
Substantially all of the Company's full-time U.S. employees were eligible to
participate in a noncontributory profit sharing retirement plan sponsored by
the Company through 1994. Profit sharing expense amounted to $30,000 in 1994.
As of December 31, 1994, contributions from the Company were discontinued.
401(k) Savings Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in the Company's 401(k) savings plan. Contributions to the 401(k)
savings plan are made by the employee. The Company does not contribute to this
plan.
3. INCOME TAXES
Moisture Systems Corporation has elected to be taxed as an S corporation for
federal and state income tax purposes. As an S corporation, taxable income of
Moisture Systems Corporation is reported on the individual income tax returns
of its stockholders, although certain states require a corporate-level tax.
Moisture Systems Limited is taxable at U.K. tax rates. The Company provides
for state and foreign income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes."
Under SFAS No. 109, deferred tax assets or liabilities are computed based on
the differences between the financial reporting basis and income tax basis of
assets and liabilities as measured by the enacted tax laws and rates expected
to be applicable when the differences reverse.
F-21
<PAGE>
MOISTURE SYSTEMS CORPORATION AND MOISTURE SYSTEMS LIMITED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The components of income before provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Domestic..................................................... $ 531 $ 580
Foreign...................................................... 10 102
------- -------
$ 541 $ 682
======= =======
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Currently payable:
State..................................................... $ 36 $ 12
Foreign................................................... -- 21
------- ------
36 33
------- ------
Net deferred (prepaid):
State..................................................... (10) 14
------- ------
$ 26 $ 47
======= ======
</TABLE>
The provision for income taxes differs from the provision calculated by
applying the statutory federal income tax rate of 34% to income before
provision for income taxes due to the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Income tax provision at statutory rate..................... $ 184 $ 232
Increases (decreases) resulting from:
Income taxed to shareholders............................. (181) (197)
State income taxes....................................... 26 26
Foreign tax differential ................................ (3) (14)
------- -------
$ 26 $ 47
======= =======
</TABLE>
Prepaid income taxes and deferred income taxes in the accompanying balance
sheet consist of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
U.K. building indexation.................................. $ 90 $ 90
U.K. loss carryforward.................................... 13 --
Various reserves and accruals............................. 26 12
------- ------
129 102
Less: Valuation allowance................................... (103) (90)
------- ------
$ 26 $ 12
======= ======
Deferred income taxes:
Capital lease............................................. $ 17 $ 17
======= ======
</TABLE>
The valuation allowance was established by Moisture Systems Limited due to
the uncertainty of the realizability of the U.K. building indexation value and
the ability to use U.K. loss carryforwards. Moisture Systems Limited was able
to utilize all of its loss carryforwards in 1995, and accordingly, reversed its
tax valuation allowance relating to this matter in the period.
F-22
<PAGE>
MOISTURE SYSTEMS CORPORATION AND MOISTURE SYSTEMS LIMITED
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONCLUDED)
4. LONG-TERM OBLIGATION AND OTHER FINANCING ARRANGEMENTS
The Company entered into a building lease that met the requirements for
treatment as a capital lease. The future minimum lease payments under the
agreement are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996.......................................................... $480
1997.......................................................... 240
----
720
Less: amount representing interest............................ 53
----
Present value of minimum lease payments....................... 667
Less: current portion......................................... 434
----
Long-term capital lease obligation............................ $233
====
</TABLE>
As of December 31, 1994, the Company had $1,071,000 outstanding under a note
payable with a bank. Borrowings bore interest at the prime rate plus 1%, which
was 9.5% at December 31, 1994, and were secured by the assets of the Company.
The outstanding balance on this note was paid in June 1995.
In June 1995, the Company entered into a line of credit agreement with a
bank. Borrowings bore interest at the prime rate plus 1%, were secured by the
assets of the Company and were due in April 1996. As of December 30, 1995, the
Company had $723,000 principal amount outstanding under this agreement,
bearing interest at 9.5%. Maximum borrowings during the period were
$1,400,000. The outstanding balance on this agreement was paid upon the sale
of the Company (Note 8).
5. OWNERS' INVESTMENT
Dividends to owners of the Company of $381,000 and $356,000 were declared in
1994 and 1995, respectively.
6. SIGNIFICANT CUSTOMER AND EXPORT SALES
Sales to two customers accounted for 10% and 11% of the Company's total
revenues in 1994. Sales to one customer accounted for 11% of the Company's
total revenues in 1995.
The Company's export sales to the Netherlands were 10% and 12% of total
revenues in 1994 and 1995, respectively. All other export sales were 34% and
32% of total revenues in 1994 and 1995, respectively.
7. RELATED PARTY TRANSACTIONS
The Company has entered into certain transactions with its owners and
affiliated companies. These transactions include sales, purchases, leasing and
short-term borrowings. Any amounts related to these related party
transactions, which have not been eliminated, have been separately presented
or are not material to the financial statements taken as a whole.
8. SUBSEQUENT EVENT
On January 25, 1996, the Company was sold to Thermedics Detection Inc.
F-23
<PAGE>
AUDITOR'S REPORT
Introduction
We have audited the accompanying 1995 and 1994 consolidated and parent
company financial statements of Rutter & Co. B.V. at Enschede. Our audit
procedures also included the disclosures included in the supplementary
information under the caption "United States Generally Accepted Accounting
Principles (U.S. GAAP)". These financial statements and such supplementary
information are the responsibility of the entity's management. Our
responsibility is to express an opinion on these financial statements and such
supplementary information based on our audits.
Scope
We conducted our audit in accordance with auditing standards generally
accepted in the Netherlands and the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
Opinion
In our opinion, the above mentioned financial statements of Rutter & Co.
B.V. give a true and fair view of the financial position of the entity as of
December 31, 1995 and 1994 and of the result for the years then ended in
accordance with accounting principles generally accepted in the Netherlands
and comply with the legal requirements for financial statements as included in
Part 9, Book 2 of the Netherlands Civil Code.
Generally accepted accounting principles in the Netherlands vary in certain
significant respects from generally accepted accounting principles in the
United States of America. Application of generally accepted accounting
principles in the United States of America would have affected net income for
each of the two years in the period ended December 31, 1995 and stockholders'
equity as of December 31, 1995 and 1994, to the extent summarized in the
supplementary information under the caption "United States Generally Accepted
Accounting Principles (U.S. GAAP)". In our opinion, such supplementary
information when considered in relationship to the basic financial statements
taken as a whole presents fairly in all material respects the information set
forth therein.
Deloitte & Touche Registeraccountants
Almelo, The Netherlands
March 13, 1996, except for the supplementary information under the caption
"United States Generally Accepted Accounting Principles (U.S. GAAP)", as to
which the date is December 20, 1996.
F-24
<PAGE>
RUTTER & CO. B.V.
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1995 AND 1994
(EXPRESSED IN NETHERLANDS GUILDERS)
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
NLG NLG
<S> <C> <C> <C> <C>
ASSETS
Fixed assets
Tangible fixed assets
Office furniture and equipment....... 128,504 119,565
Leasehold improvements............... 152,720 5,200
Other fixed assets................... 28,000 309,224 11,630 136,395
--------- ---------
Financial fixed assets
Participations in group companies.... -- 839,241
Other receivables.................... 17,539 17,539 17,381 856,622
--------- ---------
Current assets
Inventories............................ 1,430,415 1,548,100
Receivables
Accounts receivable, net of allow-
ances of NLG 32,640 in 1995 and NLG
33,360 in 1994...................... 2,389,051 1,886,393
Other receivables and prepayments.... 383,728 288,090
--------- ---------
2,772,779 2,174,483
Cash at bank and in hand............... 1,061,735 819,783
--------- ---------
5,591,692 5,535,383
========= =========
GROUP EQUITY, PROVISIONS AND LIABILI-
TIES
Group equity
Legal entity share in group equity..... 1,795,569 1,259,669
Minority interest...................... 22,063 12,471
--------- ---------
1,817,632 1,272,140
PROVISIONS
Pensions............................... 286,313 245,625
Short-term liabilities
Accounts payable....................... 1,078,612 831,278
Taxes and social security.............. 121,995 100,899
Other payables and accrued liabili-
ties.................................. 2,287,140 3,085,441
--------- ---------
3,487,747 4,017,618
--------- ---------
5,591,692 5,535,383
========= =========
</TABLE>
F-25
<PAGE>
RUTTER & CO. B.V.
CONSOLIDATED PROFIT AND LOSS ACCOUNTS FOR THE YEARS ENDED DECMEBER 31, 1995 AND
1994
(EXPRESSED IN NETHERLANDS GUILDERS)
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
NLG NLG
<S> <C> <C> <C> <C>
Net sales......................... 13,707,261 11,293,027
Cost of materials................. 6,785,566 5,688,601
---------- ----------
Gross margin...................... 6,921,695 5,604,426
Wages and salaries................ 1,937,551 1,862,455
Social security costs............. 450,089 493,875
Depreciation and amortization..... 101,537 80,154
Other operating expenses.......... 1,476,502 1,448,109
--------- ---------
Total operating expenses.......... 3,965,679 3,884,593
---------- ----------
Operating result.................. 2,956,016 1,719,833
Interest income................... 37,771 26,450
Interest charges.................. 57,729 85,288
---------- ----------
Result on ordinary activities be-
fore taxation.................... 2,936,058 1,660,995
Taxation on result of ordinary
activites........................ 1,057,674 572,478
---------- ----------
Result on ordinary activities af-
ter taxation..................... 1,878,384 1,088,517
Minority interest................. 10,522 (7,302)
---------- ----------
1,888,906 1,081,215
Result non-consolidated companies,
after taxation................... (689) 346,467
---------- ----------
Net income........................ 1,888,217 1,427,682
========== ==========
</TABLE>
F-26
<PAGE>
RUTTER & CO. B.V.
NOTES TO THE CONSOLIDATED BALANCE SHEETSAND THE CONSOLIDATED PROFIT AND LOSS
ACCOUNTS
ACTIVITIES
The principal operations of Rutter & Co. B.V. (the "Company") are the
trading in automatic control systems and machinery-equipment for various
branches in Western Europe as well as the development of equipment. The
Company is also trading agent in the Netherlands for a number of foreign
suppliers.
The Company was wholly owned by Rutter Holdings B.V. during the periods
covered by these financial statements. On January 25, 1996, Thermedics
Detection Inc. purchased all of the outstanding shares of the Company.
ACCOUNTING POLICIES
General
The Company's financial statements are prepared in accordance with
accounting principles generally accepted in the Netherlands, which differ in
certain material respects from U.S. GAAP as summarized in the supplementary
information.
The accounting principles are based on the historical cost convention.
Assets and liabilities are stated at face value if not mentioned otherwise at
the applicable sheet item. Exchange rate differences due to transactions in
currencies other than the Netherlands guilder ("foreign currencies") are
reflected in the consolidated profit and loss account. From time-to-time, the
Company enters into foreign exchange contracts as a hedge against accounts
payable denominated in foreign currencies. The financial statements of foreign
subsidiaries have been translated into Netherlands guilders at the exchange
rate in effect on the respective balance sheet dates.
Consolidation
The following companies are included in the consolidation:
<TABLE>
<CAPTION>
NAME PERCENTAGE STATUTORY DOMICILE
---- ---------- ------------------
<S> <C> <C>
Rutter & Co. B.V................... 100 Enschede (The Netherlands)
SARL Rutter Instrumentation........ 90 Perreux-sur-Marne (France)
Systech Instruments B.V............ 50 Enschede (The Netherlands)
During 1995 the Company signed a letter of intent with Thermedics Detection
Inc., a U.S. company. The letter of intent stated that three of the Company's
subsidiaries would be sold before the date of purchase of the Company's
shares. Since each of the following such subsidiaries were sold by the Company
prior to December 31, 1995, due to the temporary control of these
subsidiaries, the Company has accounted for such subsidiaries using the equity
method:
<CAPTION>
NAME PERCENTAGE STATUTORY DOMICILE
---- ---------- ------------------
<S> <C> <C>
Unitron Systems Terneuzen B.V...... 72 Terneuzen (The Netherlands)
Rutter & Eichholzer AG............. 100 Zug (Switzerland)
Rutter & Co. GmbH.................. 100 Ahaus (Germany)
</TABLE>
All significant intercompany profits, transactions and balances have been
eliminated in consolidation.
F-27
<PAGE>
RUTTER & CO. B.V.
VALUATION OF ASSETS AND LIABILITIES AND DETERMINATION OF RESULTS
VALUATION OF ASSETS AND LIABILITIES
Tangible fixed assets
The tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method based on the
estimated useful lives of the related assets. In the case of leasehold
improvements, the estimated useful lives of the related assets do not exceed
the remaining term of the corresponding lease. The following table presents
the assigned economic lives of the Company's equipment and other fixed assets:
<TABLE>
<CAPTION>
CATEGORY ASSIGNED ECONOMIC LIFE
-------- ----------------------
<S> <C>
Leasehold improvements........................... 6 years
Office furniture and equipment................... 3-5 years
Other fixed assets............................... 3-5 years
</TABLE>
Financial fixed assets
Other receivables are stated at face value.
Inventories
Equipment inventories are stated at the lower of cost or market (first-in,
first-out method). Allowances are made for slow-moving, obsolete or unsaleable
stock.
Receivables
Receivables are stated at nominal value, less an allowance for possible
uncollectible amounts. Other receivables at December 31, 1995 include the sold
participations Rutter & Eichholzer AG at Zug (Switzerland) and Rutter & Co.
GmbH at Ahaus (Germany).
Provisions
The provision for pension liabilities concerns a past-service liability. The
past-service liability is calculated proportionally based on market rate and
actuarial principles.
DETERMINATION OF CONSOLIDATED RESULTS
Determination of the consolidated results is based on the accrual method of
accounting. Profits are recognized as far as they are realized at balance
sheet date, losses and risks are recognized at the moment they can be
ascertained. Sales include the fees charged to customers for delivered goods
or services excluding value added tax.
The cost of materials sold consist of the purchase price of the goods
combined with freight, import duties and realized exchange differences on the
purchase transactions in foreign currencies. The Company is included in a
fiscal unity for corporate income taxes and value added taxes with its parent
company Rutter Holdings B.V. and Pover Gemeenschappelijk Bezit B.V. For these
financial statements, income and value added tax effects for the Company have
been calculated on a stand-alone basis.
F-28
<PAGE>
RUTTER & CO. B.V.
NOTES TO SPECIFIC ITEMS OF THE CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED
STATEMENT OF OPERATIONS
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
OFFICE OTHER
FURNITURE OPERATING
LEASEHOLD AND FIXED
IMPROVEMENTS EQUIPMENT ASSETS TOTAL
------------ --------- --------- --------
NLG NLG NLG NLG
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible fixed assets
Book value at January 1, 1994......... 9,695 98,362 19,391 127,448
Additions............................. -- 70,480 -- 70,480
------- ------- ------- --------
9,695 168,842 19,391 197,928
Book value of disposals............... -- -- -- --
Depreciation.......................... 4,495 48,974 7,761 61,230
Foreign currency differences.......... -- (303) -- (303)
------- ------- ------- --------
Book value at December 31, 1994....... 5,200 119,565 11,630 136,395
Additions............................. 180,659 66,825 37,395 284,879
------- ------- ------- --------
185,859 186,390 49,025 421,274
Book value of disposals............... -- 890 11,630 12,520
Depreciation.......................... 33,139 59,003 9,395 101,537
Foreign currency differences.......... -- 2,007 -- 2,007
------- ------- ------- --------
Book value at December 31, 1995....... 152,720 128,504 28,000 309,224
======= ======= ======= ========
Accumulated depreciation at December
31, 1994............................. 83,203 467,416 19,396 570,015
======= ======= ======= ========
Accumulated depreciation at December
31, 1995............................. 116,342 524,344 9,395 650,081
======= ======= ======= ========
FINANCIAL FIXED ASSETS
Participations in group companies
Balance at January 1, 1994............ 600,199
Net income from subsidiaries.......... 346,467
Dividends............................. (107,425)
--------
Balance at December 31, 1994.......... 839,241
Net loss from subsidiaries............ (689)
--------
838,552
Less:
Sale 72%-participation in Unitron
Systems Terneuzen B.V. at
Terneuzen.......................... 742,144
Sale 100%-participation Rutter &
Eichholzer AG at Zug............... 41,233
Sale 100%-participation Rutter & Co.
GmbH at Ahaus...................... 55,175 838,552
------- --------
Balance at December 31, 1995.......... --
========
<CAPTION>
1995 1994
--------- --------
<S> <C> <C> <C> <C>
Other receivables NLG NLG
Balance at January 1.................. 17,381 24,489
Addition.............................. 158 (7,108)
------- --------
Balance at December 31................ 17,539 17,381
======= ========
</TABLE>
F-29
<PAGE>
RUTTER & CO. B.V.
CURRENT ASSETS
Inventories
The inventories consist of purchased equipment and components.
Cash at bank and in hand
This item includes cash and bank balances.
CONTINGENT LIABILITIES
. The companies are mostly accomodated in rented premises. Expiration dates
are varying.
. At balance sheet dates there were no forward purchase contracts in U.S.
dollars.
. On the basis of operational lease a number of cars is rented. The yearly
charges are NLG 222,480 (1994: NLG 257,700).
. The Company has a line of credit with a bank which provides up to a
maximum of NLG 2,500,000. As security for borrowings under the line of
credit, (assignment of) right of lien is given against:
--receivables;
--equipment;
--company inventories and merchandise inventories;
--shares Unitron Systems Terneuzen B.V.
At the balance sheet dates, the Company did not draw on these facilities.
The Company, Rutter Holdings B.V., Rutter & Co. GmbH and Pover
Gemeenschappelijk Bezit B.V. are severally liable.
. The company is severally liable for tax liabilities which result from the
fiscal unity with group companies for the value added tax and corporate
tax.
. At December 31, 1995 and 1994, bank guarantees (letters of credit) to the
amount of NLG 123,320 and NLG 181,404 were outstanding. The guarantees,
originally expressed in foreign currencies, are converted at the rates of
exchange at the balance sheet dates.
. A former Italian agent has claimed an amount of NLG 200,000 because of
the termination of the commercial agency relationship. The concerning
contracts were closed by Rutter & Eichholzer AG. No guarantees are given
for this subsidiary by Rutter & Co. B.V. Since Eichholzer AG was sold
during 1995, management does not believe this matter will materially
affect results of operations or the financial position of the Company.
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
Net-sales
The sales have increased by 22.6%.
Wages and salaries
In 1995, the Company employed 25 people (1994: 24). Under article 383, Book
2 Civil Code disclosure of the remuneration of the manager is omitted.
Director's fee
Paid director's fees amounted to NLG 10,000 (1994: NLG 20,000).
Social security costs
The social security costs include pension expenses in the amount of NLG
161,041 (1994: NLG 193,863).
F-30
<PAGE>
RUTTER & CO. B.V.
PARENT COMPANY BALANCE SHEETS AT DECEMBER 31, 1995 AND 1994
(AFTER PROFIT APPROPRIATION)
(EXPRESSED IN NETHERLANDS GUILDERS)
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
NLG NLG
<S> <C> <C> <C> <C>
ASSETS
Fixed assets
Tangible fixed assets
Leasehold improvements.............. 152,720 5,200
Office furniture and equipment...... 98,220 83,146
Other operating fixed assets........ 28,000 11,630
--------- ---------
278,940 99,976
Financial fixed assets
Participations in group companies... 60,476 951,483
Current assets
Inventories
Merchandise inventory............... 1,046,160 1,162,111
Receivables
Accounts receivable................. 1,904,891 1,494,440
Group companies..................... 812,340 798,524
Other receivables and prepayments... 270,784 141,813
--------- ---------
2,988,015 2,434,777
Cash at bank and in hand.............. 879,865 662,495
--------- ---------
5,253,456 5,310,842
========= =========
SHAREHOLDERS' EQUITY, PROVISIONS AND
LIABILITIES
Shareholders' equity
Share capital paid up and called
up................................. 451,000 451,000
Legally-required reserves........... -- 440,289
Other reserves...................... 1,361,711 353,879
--------- ---------
1,812,711 1,245,168
Provisions
Pensions 286,313 245,625
Short-term liabilities
Accounts payable.................... 923,165 743,904
Group companies..................... -- 1,909,847
Taxes and social security........... 12,935 14,357
Other creditors and accrued liabili-
ties............................... 2,218,332 1,151,941
--------- ---------
3,154,432 3,820,049
--------- ---------
5,253,456 5,310,842
========= =========
</TABLE>
F-31
<PAGE>
RUTTER & CO. B.V.
PARENT COMPANY PROFIT AND LOSS ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995
AND 1994
(EXPRESSED IN NETHERLANDS GUILDERS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
NLG NLG
<S> <C> <C>
Result of participations after taxation.................... (72,455) 411,519
Balance of other profits and losses........................ 1,963,313 992,762
--------- ---------
Result after taxation...................................... 1,890,858 1,404,281
========= =========
</TABLE>
F-32
<PAGE>
RUTTER & CO. B.V.
NOTES TO THE PARENT COMPANY BALANCE SHEETS AND PARENT COMPANY PROFIT AND LOSS
ACCOUNTS
ACCOUNTING POLICIES
General
The accounting principles are mentioned in the notes to the consolidated
balance and the consolidated profit and loss account.
VALUATION OF ASSETS AND LIABILITIES AND DETERMINATION OF RESULTS
Financial fixed assets
The participations are valued on the basis of the net equity method.
Profit and loss account
The financial statements of the company are included in the consolidated
annual report. Under article 402, title 9 Civil Code it is sufficient to state
a summarized profit and loss account.
NOTES TO SPECIFIC ITEMS OF THE PARENT COMPANY BALANCE SHEETS AND PARENT
COMPANY PROFIT AND LOSS ACCOUNTS
BALANCE SHEET
<TABLE>
<CAPTION>
OFFICE OTHER
FURNITURE OPERATING
LEASEHOLD AND FIXED
IMPROVEMENTS EQUIPMENT ASSETS TOTAL
------------ --------- --------- -------
NLG NLG NLG NLG
FIXED ASSETS
<S> <C> <C> <C> <C>
Tangible fixed assets
Book value at January 1, 1994........ 9,695 76,887 19,391 105,973
Additions............................ -- 47,159 -- 47,159
------- ------- ------ -------
9,695 124,046 19,391 153,132
Book value of disposals.............. -- -- -- --
Depreciation......................... 4,495 40,900 7,761 53,156
------- ------- ------ -------
Book value at December 31, 1994...... 5,200 83,146 11,630 99,976
Additions............................ 180,659 65,341 37,395 283,395
------- ------- ------ -------
185,859 148,487 49,025 383,371
Book value of disposals.............. -- -- 11,630 11,630
Depreciation......................... 33,139 50,267 9,395 92,801
------- ------- ------ -------
Book value at December 31, 1995...... 152,720 98,220 28,000 278,940
======= ======= ====== =======
Accumulated depreciation at December
31, 1994............................ 83,203 404,863 19,396 507,462
======= ======= ====== =======
Accumulated depreciation at December
31, 1995............................ 116,342 455,130 9,395 580,867
======= ======= ====== =======
</TABLE>
F-33
<PAGE>
RUTTER & CO. B.V.
<TABLE>
<CAPTION>
NLG
--------
<S> <C> <C>
FINANCIAL FIXED ASSETS
Participations in group companies
Balance at January 1, 1994............................... 647,388
Dividends................................................ (107,424)
Results of participations after taxation................. 411,519
--------
Balance at December 31, 1994............................. 951,483
Add:
Purchase 50%-participation in Systech Instruments B.V.
at Enschede........................................... 20,000
--------
971,483
Less:
Sale 72%-participation in Unitron Systems Terneuzen
B.V. at Terneuzen (realizable value).................. 742,144
Sale 100%-participation Rutter & Eichholzer AG at Zug
(realizable value).................................... 41,233
Sale 100%-participation Rutter & Co. GmbH at Ahaus (re-
alizable value)....................................... 55,175 838,552
------- --------
132,931
Add:
Results of participations after taxation............... (72,455)
--------
Balance at December 31, 1995............................. 60,476
========
</TABLE>
Specification
<TABLE>
<CAPTION>
PART OF THE ISSUED CAPITAL NOMINAL PAID SHARE CAPITAL NAME AND DOMICILE
-------------------------- -------------------------- -----------------
%
<S> <C> <C>
90 Frfrs 900,000 SARL Rutter Instrumentation
at Perreux-sur-Marne
50 NLG 40,000 Systech Instruments B.V. at
Enschede
</TABLE>
F-34
<PAGE>
RUTTER & CO. B.V.
SHAREHOLDERS' EQUITY
Differences exist between parent company shareholders' equity and group
equity included in the consolidated financial statements. These differences
are due to intercompany profits included in the inventory of a subsidiary,
which are eliminated in the consolidation.
<TABLE>
<CAPTION>
1995 1994
--------- -------
NLG NLG
<S> <C> <C>
Share capital paid up and called up
The authorized share capital consists of
500 shares each NLG 1000,
451 shares were issued and fully paid.
Legally-required reserves
Balance at January 1.................................... 440,289 136,019
Proposed appropriation for the year..................... -- 304,270
Release in favor of the other reserve................... 440,289 --
--------- -------
Balance at December 31.................................. -- 440,289
========= =======
Other reserve
Balance at January 1.................................... 353,879 272,796
From legally-required reserves.......................... 440,289 --
Write-off goodwill...................................... -- (18,928)
Proposed appropriation for the year..................... 567,543 100,011
--------- -------
Balance at December 31.................................. 1,361,711 353,879
========= =======
</TABLE>
PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
1995 1994
------- -------
NLG NLG
<S> <C> <C>
Result of participations after taxation
Share result group companies.............................. (71,766) 65,052
Share result other participations......................... (689) 346,467
------- -------
(72,455) 411,519
======= =======
</TABLE>
The management board: L.L.A.Pover
Enschede, The Netherlands, March 13, 1996
F-35
<PAGE>
RUTTER & CO. B.V.
SUPPLEMENTARY INFORMATION
PROVISIONS OF THE ARTICLES OF ASSOCIATION ON THE SUBJECT OF PROFIT
APPROPRIATION
Article 14
1. The profits are at the disposal of the general meeting of shareholders.
2. The company can only distribute if the shareholders' equity exceeds the
share capital paid up and called up added with the legally-required
reserves.
3. Distribution of profits takes place after the adoption of the financial
statements from which it appears that distribution is allowed.
4. The general meeting of shareholders can between times decide to make a
distribution, if the requirements of Article 2 are met.
POST-BALANCE-SHEET EVENTS
Due to the sale of the shares of the Company to Thermedics Detection Inc.,
credit facilities are cancelled at the beginning of 1996. Hereby existing
securities are given free.
PROFIT APPROPRIATION 1995
The profit over the year 1995 in the amount of NLG 1,890,858 is at the
disposal of the general meeting of shareholders. The managent board proposes
to appropriate the net result as follows:
<TABLE>
<CAPTION>
NLG
---------
<S> <C>
Interim dividend................................................. 742,144
Final dividend................................................... 581,171
Allocation to other reserves (retained earnings)................. 567,543
---------
1,890,858
=========
</TABLE>
This proposal is comprehended in the financial statements.
F-36
<PAGE>
RUTTER & CO. B.V.
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP)
a. Scope of Consolidation and Related Party Transactions
The Netherlands GAAP financial statements include the accounts of three
subsidiaries using the equity method of consolidation during 1994.
Each of the three subsidiaries was spun-off by the Company to its
shareholder, Rutter Holdings B.V., during the year ended December 31, 1995.
Such transactions were undertaken in advance of the sale of the ownership
interests change in ownership of the Company in 1996. For U.S. GAAP purposes,
such subsidiaries represent a change in the reporting entity, since the
Company and the subsidiaries, which were spun-off, have been managed and
financed historically as if they were autonomous, have no more than incidental
common facilities and costs, will be operated and financed autonomously after
the spin-off, and will not have material financial commitments, guarantees, or
contingent liabilities to each other after the spin-off. Accordingly, the U.S.
GAAP financial statements are presented as if the Company never had an
investment in these subsidiaries.
The financial statements of Systech Instruments B.V. are fully consolidated
in the financial statements prepared under Netherlands GAAP. Under U.S. GAAP
this subsidiary would have been accounted for using the equity method of
accounting. Systech Instruments B.V. did not have any activities during 1995.
The balances consolidated for Systech Instruments B.V. are immaterial to the
consolidated balances.
b. Pension plans
In the Netherlands, the Company sponsors a defined benefit pension plan for
substantially all of its Netherlands employees. SFAS 87, the U.S. accounting
principles for pensions, uses accrual assumptions, including estimated future
salary increases, when calculating pension expense. For Netherlands GAAP
purposes, determination of pension expense does not take future salary
increases into account, but does consider prior back service costs and lower
discount rates.
In France, legally required retirement indemnities exist for U.S. GAAP
purposes. However, such amounts are immaterial and have not been provided.
c. Income taxes
Generally, temporary differences between financial statement and tax
reporting do not exist in the Netherlands GAAP accounts. Accordingly, deferred
income taxes which have been provided relate to the temporary differences
resulting from other U.S. GAAP reconciling items.
d. Cumulative translation adjustment
Translation adjustments for income statement items under Netherlands GAAP
were calculated using the exchange rate at the applicable balance sheet dates.
Under SFAS 52 of U.S. GAAP, the translation for income statement items is to
be calculated using the weighted average exchange rate for the year. For
purposes of applying U.S. GAAP, the SFAS 52 approach was applied starting at
January 1, 1989. Since this date, the year-end exchange rate has approximated
the average rate, resulting in no material differences in any year.
Accordingly, no cumulative translation adjustment at December 31, 1995 and
1994 has been recorded.
e. Fair value of financial instruments
The carrying amount of cash, accounts receivable and accounts payable
approximates fair value.
f. Use of estimates
The preparation of the Company's consolidated financial statements requires
management to make estimates and assumptions that could affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the balance sheet dates, and the reported amounts of revenue
and expense during the reported periods. Actual results may vary from such
estimates.
F-37
<PAGE>
RUTTER & CO. B.V.
g. Operating leases
The Company leases certain facilities and automobiles under operating
leases. As of December 31, 1995, the minimum annual rental commitments are as
follows:
<TABLE>
<CAPTION>
NLG
---------
<S> <C>
1996.................................................................. 313,230
1997.................................................................. 317,561
1998.................................................................. 233,316
1999.................................................................. 133,032
2000.................................................................. 71,629
Thereafter............................................................ --
---------
Total............................................................... 1,068,768
=========
</TABLE>
Rental expense was NLG 339,245 and NLG 306,774 for the years ended December
31, 1995 and 1994, respectively.
h. New accounting pronouncement
In March 1995, the United States Financial Accounting Standards Board issued
SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of", which is applicable to the Company beginning
in 1996. Management believes that application of SFAS 121 will not result in
any adjustments to the carrying value of the Company's long-lived assets.
i. Stockholders' equity
Differences exist between parent company shareholders' equity and group
equity included in the consolidated financial statements prepared under
Netherlands GAAP due to intercompany profits included in the inventory of a
subsidiary, which are eliminated in the consolidation. On a U.S. GAAP basis,
parent company equity would be the same as consolidated equity.
j. Dividends
Management of the Company has proposed a final dividend of NLG 581,171 and
NLG 1,000,000 at December 31, 1995 and 1994, respectively. These proposed
dividends are accrued in the financial statements prepared under Netherlands
GAAP. Since these proposed dividends are subject to the authorization of the
general meeting of shareholders, these dividends would not be presented as a
liability in the financial statements prepared under U.S. GAAP.
k. Netherlands GAAP--U.S. GAAP reconciliation
The following is a summary of the significant adjustments to net income for
the years ended December 31, 1995 and 1994 and to stockholders' equity as of
December 31, 1995 and 1994, which would be required if U.S. GAAP had been
applied instead of Netherlands GAAP in the financial statements:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
1995 1994
--------- ---------
NLG NLG
<S> <C> <C>
Net income according to the consolidated financial
statements prepared under Netherlands GAAP............. 1,888,217 1,427,682
U.S. GAAP adjustments:
Increase due to effects of applying SFAS 87,
"Employers' Accounting for Pensions"................. 156,525 177,105
Decrease due to effects of applying SFAS 109,
"Accounting for Income Taxes"........................ (54,780) (61,987)
Decrease due to elimination of net income of
subsidiaries spun-off................................ -- (346,467)
--------- ---------
Net income in accordance with U.S. GAAP............... 1,989,962 1,196,333
========= =========
</TABLE>
F-38
<PAGE>
RUTTER & CO. B.V.
A reconciliation of stockholders' equity in the balance sheet from
Netherlands GAAP reporting to U.S. GAAP reporting is as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1995 1994
--------- ---------
NLG NLG
<S> <C> <C>
Stockholders' equity according to the consolidated
financial statements prepared under Netherlands GAAP... 1,817,632 1,272,140
U.S. GAAP adjustments:
Increase due to effects of applying SFAS 87,
"Employers' Accounting for Pensions"................. 507,117 367,867
Decrease due to effects of applying SFAS 109,
"Accounting for Income Taxes"........................ (183,533) (128,753)
Increase due to accrual of proposed final dividends... 581,171 1,000,000
--------- ---------
Stockholders' equity in accordance with U.S. GAAP....... 2,722,387 2,511,254
========= =========
</TABLE>
Cash flow data is not required to be prepared under Netherlands GAAP. The
significiant captions determined under U.S. GAAP would have been:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
U.S. GAAP U.S. GAAP
1995 1994
----------------- ----------------
NLG NLG
<S> <C> <C> <C>
Summarized cash flow statements data:
Cash provided by operating activi-
ties............................... 1,419,379 368,902
Cash provided by (used in) investing
activities......................... 564,717 (308,314)
Cash used in financing activities... (1,742,144) --
Cash at bank and in hand, beginning
of year............................ 819,783 759,195
----------------- ---------------
Cash in bank and in hand, end of
year............................... 1,061,735 819,783
================= ===============
</TABLE>
F-39
<PAGE>
THERMEDICS DETECTION INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 30, 1995
(UNAUDITED)
On January 25, 1996, Thermedics Detection Inc. (the "Company") acquired the
assets of Moisture Systems Corporation and certain affiliated companies
(collectively, "Moisture Systems"), and the stock of Rutter & Co. B.V.
("Rutter") for a total purchase price of $22,798,000 in cash, which included
the repayment of $1,830,000 of debt. To finance these acquisitions, the
Company borrowed $21,200,000 from Thermedics Inc. ("Thermedics") pursuant to a
promissory note (the "promissory note") due March 1998, and bearing interest
at the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter. These acquisitions have been accounted for using
the purchase method of accounting.
The following unaudited pro forma combined condensed statement of operations
sets forth the results of operations for the year ended December 30, 1995, as
if the acquisitions of Moisture Systems and Rutter had occurred on January 1,
1995. Rutter's historical statement of operations, which is denominated in
Netherlands guilders, has been translated at the average exchange rate of
.6250 for the year ended December 30, 1995. In addition, Rutter's historical
consolidated statement of operations includes adjustments to present their
results in accordance with U.S. generally accepted accounting principles, as
described in Rutter's notes to the financial statements contained elsewhere in
this Prospectus. The pro forma results of operations are not necessarily
indicative of future operations or the actual results that would have occurred
had the acquisitions of Moisture Systems and Rutter been made on January 1,
1995. This statement should be read in conjunction with the accompanying notes
and the respective historical financial statements and related notes of the
Company, Moisture Systems and Rutter appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------- --------------------
THERMEDICS MOISTURE
DETECTION SYSTEMS RUTTER ADJUSTMENTS COMBINED
---------- -------- ------ ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues...................... $27,954 $12,075 $8,567 $(2,111) $46,485
------- ------- ------ ------- -------
Costs and Operating Expenses:
Cost of revenues............ 15,236 5,805 4,241 (1,978) 23,304
Selling, general and
administrative expenses.... 7,487 5,423 2,023 658 15,591
Research and development
expenses................... 2,741 -- 351 -- 3,092
------- ------- ------ ------- -------
25,464 11,228 6,615 (1,320) 41,987
------- ------- ------ ------- -------
Operating Income.............. 2,490 847 1,952 (791) 4,498
Interest Income............... -- 24 24 -- 48
Interest Expense.............. -- (189) (36) (1,331) (1,556)
Other Expense................. (72) -- -- -- (72)
------- ------- ------ ------- -------
Income Before Income Taxes.... 2,418 682 1,940 (2,122) 2,918
Income Tax (Provision)
Benefit...................... (910) (47) (696) 531 (1,122)
------- ------- ------ ------- -------
Net Income.................... $ 1,508 $ 635 $1,244 $(1,591) $ 1,796
======= ======= ====== ======= =======
Earnings per Share............ $ .15 $ .18
======= =======
Weighted Average Shares....... 10,069 10,069
======= =======
</TABLE>
F-40
<PAGE>
THERMEDICS DETECTION INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 28, 1996
(UNAUDITED)
The following unaudited pro forma combined condensed statement of operations
sets forth the results of operations for the nine months ended September 28,
1996, as if the acquisitions of Moisture Systems and Rutter had occurred on
January 1, 1995. Moisture Systems and Rutter's historical statement of
operations represent their results for the twenty-five day period from January
1, 1996 through January 25, 1996, the date of acquisition by the Company.
Rutter's historical consolidated statement of operations, which is denominated
in Netherlands guilders, has been translated at the average exchange rate of
.5935 for the nine months ended September 28, 1996. The pro forma results of
operations are not necessarily indicative of future operations or the actual
results that would have occurred had the acquisitions of Moisture Systems and
Rutter been made on January 1, 1995. This statement should be read in
conjunction with the accompanying notes and the respective historical
financial statements and related notes of the Company, Moisture Systems and
Rutter appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- --------------------
THERMEDICS MOISTURE
DETECTION SYSTEMS RUTTER ADJUSTMENTS COMBINED
---------- -------- ------ ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues....................... $30,566 $1,141 $593 $(187) $32,113
------- ------ ---- ----- -------
Costs and Operating Expenses:
Cost of revenues............. 16,305 563 267 (320) 16,815
Selling, general and
administrative expenses..... 11,928 495 147 45 12,615
Research and development
expenses.................... 3,551 -- 21 -- 3,572
------- ------ ---- ----- -------
31,784 1,058 435 (275) 33,002
------- ------ ---- ----- -------
Operating Income (Loss)........ (1,218) 83 158 88 (889)
Interest Income................ 117 1 1 -- 119
Interest Expense............... (596) (18) -- (83) (697)
Other Expense.................. (16) -- 43 -- 27
------- ------ ---- ----- -------
Income (Loss) Before Income
Taxes......................... (1,713) 66 202 5 (1,440)
Income Tax (Provision)
Benefit....................... 650 (6) (59) (50) 535
------- ------ ---- ----- -------
Net Income (Loss).............. $(1,063) $ 60 $143 $ (45) $ (905)
======= ====== ==== ===== =======
Earnings (Loss) per Share...... $ (.11) $ (.09)
======= =======
Weighted Average Shares........ 10,069 10,069
======= =======
</TABLE>
F-41
<PAGE>
THERMEDICS DETECTION INC.
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
NOTE 1--PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 30, 1995 (IN THOUSANDS, EXCEPT IN
TEXT)
<TABLE>
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
REVENUES
Elimination of intercompany sales between Moisture Systems and
Rutter........................................................ $2,111
------
COST OF REVENUES
Elimination of costs associated with intercompany sales between
Moisture Systems and Rutter................................... (2,111)
Increase in the work in process and finished goods inventories
of Moisture Systems and Rutter to the estimated selling price,
less the sum of the costs of disposal and a reasonable profit
allowance for the Company's selling efforts................... 133
------
(1,978)
------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Service fee of 1.20% of the revenues of Moisture Systems and
Rutter for services provided under a services agreement
between the Company and Thermo Electron....................... 222
Amortization over 40 years of $11,589,000 and $5,862,000 of
cost in excess of net assets of acquired companies created by
the acquisitions of Moisture Systems and Rutter,
respectively.................................................. 436
------
658
------
INTEREST EXPENSE
Interest expense on the $21,200,000 promissory note issued to
Thermedics to finance the acquisitions of Moisture Systems and
Rutter, calculated at an average interest rate of 6.28%....... 1,331
------
INCOME TAX (PROVISION) BENEFIT
Income tax benefit associated with the adjustments above
(excluding nondeductible amortization of cost in excess of net
assets of acquired companies relating to Rutter), calculated
at the Company's statutory income tax rate of 38%............. (751)
Income tax provision associated with the earnings of Moisture
Systems Corporation, an S corporation, calculated at the
Company's statutory income tax rate of 38%.................... 220
------
(531)
------
</TABLE>
F-42
<PAGE>
THERMEDICS DETECTION INC.
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENT OF OPERTAIONS--(CONCLUDED)
(UNAUDITED)
NOTE 2--PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1996 (IN THOUSANDS,
EXCEPT IN TEXT)
<TABLE>
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
REVENUES
Elimination of intercompany sales between Moisture Systems and Rutter........................... $187
----
COST OF REVENUES
Elimination of costs associated with intercompany sales between Moisture Systems and Rutter..... (187)
Reversal of the increase in the work in process and finished goods inventories of Moisture
Systems and Rutter to the estimated selling price, less the sum of the costs of disposal and a
reasonable profit allowance for the Company's selling efforts.................................. (133)
----
(320)
----
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Service fee of 1.0% of the revenues of Moisture Systems and Rutter for services provided under a
services agreement between the Company and Thermo Electron..................................... 15
Amortization over 40 years of $11,589,000 and $5,862,000 of cost in excess of net assets of
acquired companies created by the acquisitions of Moisture Systems and Rutter, respectively.... 30
----
45
----
INTEREST EXPENSE
Interest expense on the $21,200,000 promissory note issued to Thermedics to finance the
acquisitions of Moisture Systems and Rutter, calculated at an average interest rate of 5.74%... 83
----
INCOME TAX (PROVISION) BENEFIT
Income tax provision associated with the adjustments above (excluding nondeductible amortization
of cost in excess of net assets of acquired companies relating to Rutter), calculated at the
Company's statutory income tax rate of 38%..................................................... 6
Income tax provision associated with the earnings of Moisture Systems Corporation, an S
corporation, calculated at the Company's statutory income tax rate of 38%...................... 44
----
50
----
</TABLE>
F-43
<PAGE>
At the upper right of the page is a graphic image depicting the Company's
EGIS system. At the upper left of the page is a graphic image of the Company's
SecurScan system. Below these graphics is the following caption:
The Company's EGIS system (right), which is a highly sensitive trace
particle- and vapor-detection system for screening people, baggage, packages,
freight, and electronic equipment for explosives, has an installed base of
more than 190 units in 21 countries, including more than 100 units in
airports. The Company recently introduced a prototype of its new SecurScan
system (left) for screening people for traces of explosives.
Below the above caption is a graphic image depicting a number of moisture
analysis instruments manufactured by the Company's Moisture Systems division.
Below this graph is the following caption:
Equipment manufactured by the Company's Moisture Systems division uses near-
infrared spectroscopy to measure moisture and other product constituents in
manufacturing processes for the food, pharmaceutical, chemical and other
industries.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesman or any other person has been authorized to give any in-
formation or to make any representations not contained in this Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company. This Prospectus does not con-
stitute an offer of any securities other than those to which it relates or an
offer to sell, or a solicitation of an offer to buy, to any person in any ju-
risdiction where such an offer or solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any cir-
cumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date hereof.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 9
The Company.............................................................. 15
The Rights Offering...................................................... 16
Use of Proceeds.......................................................... 24
Dividend Policy.......................................................... 24
Capitalization........................................................... 25
Dilution................................................................. 26
Selected Financial Information........................................... 28
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 29
Business................................................................. 33
Relationship with Thermo Electron and Thermedics......................... 42
Management............................................................... 45
Security Ownership of Certain Beneficial Owners and Management........... 51
Description of Capital Stock............................................. 53
Shares Eligible for Future Sale.......................................... 54
Underwriting............................................................. 56
Legal Opinions........................................................... 58
Experts.................................................................. 58
Additional Information................................................... 58
Reports to Security Holders.............................................. 60
Index to Financial Statements............................................ F-1
</TABLE>
-----------------
Until , 1997 (25 days after the date of this Prospectus), all dealers ef-
fecting transactions in the registered securities, whether or not participat-
ing in this distribution, may be required to deliver a Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,600,000 SHARES
THERMEDICS DETECTION INC.
COMMON STOCK
-----------------
PROSPECTUS
, 1997
-----------------
LEHMAN BROTHERS
NATWEST SECURITIES LIMITED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered. All amounts shown
are estimates except for the Securities and Exchange Commission (the
"Commission") registration fee, the NASD filing fee and the American Stock
Exchange listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration fee.................. $6,982
NASD filing fee...................................................... 2,804
American Stock Exchange listing fee.................................. *
Legal fees and expenses.............................................. *
Accounting fees and expenses......................................... *
Blue sky fees and expenses (including legal fees and expenses)....... *
Printing and engraving expenses...................................... *
Subscription agent fees.............................................. *
Miscellaneous........................................................ *
------
Total............................................................ $ *
======
</TABLE>
- --------
*To be filed by ammendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Massachusetts Business Corporation Law and the Company's Articles of
Organization and By-Laws limit the monetary liability of directors to the
Company and to its stockholders and provide for indemnification of the
Company's officers and directors for liabilities and expenses that they may
incur in such capacities. In general, officers and directors are indemnified
with respect to actions taken in good faith in a manner reasonably believed to
be in, or not opposed to, the best interests of the Company, and with respect
to any criminal action or proceeding, actions that the indemnitee had no
reasonable cause to believe were unlawful. The Company also has
indemnification agreements with its directors and officers that provide for
the maximum indemnification allowed by law. Reference is made to the Company's
Articles of Organization, By-Laws and form of Indemnification Agreement for
Officers and Directors incorporated by reference as Exhibits 3.1, 3.2 and
10.10 hereto, respectively.
Thermo Electron Corporation has an insurance policy which insures the
directors and officers of Thermo Electron and its subsidiaries, including the
Company, against certain liabilities which might be incurred in connection
with the performance of their duties.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In March and November 1996, pursuant to Securities Purchase Agreements with
certain investors, the Registrant sold an aggregate of 685,000 shares of
Common Stock for an aggregate purchase price of $7,122,625. All of such
investors were accredited investors (as defined in Regulation D) who made
appropriate investment representations. Such sales were made in reliance upon
the exemption from the registration provisions of the Securities Act set forth
in Section 4(2) thereof and Regulation D thereunder relative to sales by an
issuer not involving any public offering.
From December 1990 through December 31, 1996, the Registrant granted options
under its stock-based compensation plans to purchase an aggregate of 218,217
shares of Common Stock at a weighted average exercise price of $10.41 per
share. None of these options have been exercised. Exemption from registration
for these grants is claimed under Section 4(2) of the Securities Act.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------------------------------------------------
<C> <S>
1 Form of Standby Underwriting Agreement
2.1 Asset Purchase Agreement dated as of January 25, 1996 among the
Registrant, Moisture Systems Corporation and certain Affiliates
of Moisture Systems Corporation. Pursuant to Item 601(b)(2) of
Regulation S-K, schedules to this Agreement have been omitted.
The Registrant hereby undertakes to furnish supplementally a
copy of such schedules to the Commission upon request.
2.2 Share Purchase Agreement dated as of January 25, 1996 among the
Registrant, Rutter Holding B.V. and certain Affiliates of Rutter
Holding B.V. Pursuant to Item 601(b)(2) of Regulation S-K,
schedules to this Agreement have been omitted. The Registrant
hereby undertakes to furnish supplementally a copy of such
schedules to the Commission upon request.
3.1 Articles of Organization of the Registrant, as amended
3.2 By-Laws of the Registrant
4.1 Specimen Common Stock Certificate
*4.2 Specimen Rights Certificate
*5 Opinion of Seth H. Hoogasian, Esq. with respect to the validity
of the securities being offered
10.1 Corporate Services Agreement dated as of March 20, 1996 between
Thermo Electron Corporation ("Thermo Electron") and the
Registrant
10.2 Thermo Electron Corporate Charter, as amended and restated
effective January 3, 1993 (incorporated by reference herein form
Exhibit 10.1 to Thermo Electron's Annual Report on Form 10-K for
the fiscal year ended January 2, 1993 (File No. 1-8002))
10.3 Tax Allocation Agreement dated as of March 20, 1996 between
Thermedics Inc. ("Thermedics") and the Registrant
10.4 Master Repurchase Agreement dated as of March 20, 1996 between
Thermo Electron and the Registrant
10.5 Master Guarantee Reimbursement Agreement dated as of March 20,
1996 among Thermo Electron, Thermedics and the Registrant
10.6 Master Guarantee Reimbursement Agreement dated as of March 20,
1996 between Thermedics and the Registrant
10.7 Equity Incentive Plan of the Registrant
10.8 Deferred Compensation Plan for Directors of the Registrant
*10.9 $21.2 Million Principal Amount Promissory Note due March 1998,
issued by the Registrant to Thermedics
10.10 Form of Indemnification Agreement for Officers and Directors
10.11 Stock Purchase Agreement dated as of March 25, 1996 between
David H. Fine and the Registrant
10.12 Stock Purchase Agreement dated as of November 19, 1996 between
Jeffrey J. Langan and the Registrant
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------------------------------------------------
<C> <S>
In addition to the stock-based compensation plans of the
Registrant, the executive officers of the Registrant may be
granted awards under stock-based compensation plans of the
Registrant's parent, Thermo Electron Corporation, and its
subsidiaries, for services rendered to the Registrant or to such
affiliated corporations. Such plans were filed as Exhibits 10.21
- 10.44 to the Annual Report on Form 10-K of Thermo Electron for
the fiscal year ended December 30, 1995 [File No. 1-8002] and as
Exhibits 10.18 - 10.19, 10.22, and 10.48 - 10.49 to the Annual
Report on Form 10-K of Thermedics for the fiscal year ended
December 30, 1995 [File No. 1-9567] and are incorporated herein
by reference.
11 Computation of Earnings per Share
21 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Deloitte & Touche
*23.4 Consent of Seth H. Hoogasian, Esq. (included in Exhibit 5)
24 Power of Attorney (see page II-5 of the Registration Statement)
27 Financial Data Schedule
*99.1 Form of Subscription Agency Agreement
*99.2 Instructions as to use of Thermedics Detection Inc. Subscription
Certificates and International Holder Subscription Forms
*99.3 International Holder Subscription Form
*99.4 Form of Letter to Thermedics Detection stockholders
*99.5 Form of Letter to Thermedics stockholders
</TABLE>
- --------
* To be filed by Amendment.
(b) FINANCIAL STATEMENT SCHEDULE
The financial Statement Schedule as of September 28, 1996 and the Report of
Independent Public Accountants on such schedule are included in this
Registration Statement. All other schedules are omitted because they are not
applicable or are not required under Regulation S-X.
ITEM 17. UNDERTAKINGS.
(a) The Registrant hereby undertakes to provide the underwriters at the
closing specified in the standby underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period, to set forth the
results of the subscription offer, the transactions by the underwriters during
the subscription period, the amount of unsubscribed securities to be purchased
by the underwriters, and the terms of any subsequent reoffering thereof. If
any public offering by the underwriters is to be made on terms differing from
those set forth on the cover page of the prospectus, a post-effective
amendment will be filed to set forth the terms of such offering.
(e) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the Registrant is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of Regulation S-X at the start of any
delayed offering or throughout a continuous offering.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHELMSFORD,
MASSACHUSETTS, ON THIS 2ND DAY OF JANUARY, 1997.
Thermedics Detection Inc.
/s/ Jeffery J. Langan
By:_________________________________
JEFFREY J. LANGAN, CHIEF EXECUTIVE
OFFICERAND PRESIDENT
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Thermedics Detection Inc.,
hereby constitute and appoint John N. Hatsopoulos, Paul F. Kelleher, Seth H.
Hoogasian, Sandra L. Lambert and Jonathan W. Painter, and each of them singly,
as our true and lawful attorneys with full power to them, and each of them
singly, to sign for us and in our names in the capacities indicated below, the
Registration Statement on Form S-1 filed herewith and any and all pre-
effective and post-effective amendments to said Registration Statement
(including any subsequent Registration Statement for the same offering which
may be filed under Rule 462(b)), and generally to do all such things in our
names and on our behalf in our capacities as officers and directors to enable
Thermedics Detection Inc. to comply with the provisions of the Securities Act
and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our
attorneys, or any of them, to said Registration Statement and any and all
amendments thereto.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Jeffery J. Langan Chief Executive January 2, 1997
- ------------------------------------- Officer, President
JEFFREY J. LANGAN and Director
(Principal
Executive Officer)
/s/ John N. Hatsopoulos Vice President, January 2, 1997
- ------------------------------------- Chief Financial
JOHN N. HATSOPOULOS Officer and
Director
/s/ Paul F. Kelleher Chief Accounting January 2, 1997
- ------------------------------------- Officer
PAUL F. KELLEHER (Principal Accounting
Officer)
/s/ John W. Wood Jr. Chairman of the January 2, 1997
- ------------------------------------- Board and Director
JOHN W. WOOD JR.
II-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermedics Detection Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Thermedics Detection Inc. included in
Thermedics Detection Inc.'s Form S-1 and have issued our report thereon dated
January 2, 1997. Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. Thermedics
Detection Inc.'s Schedule of Valuation and Qualifying Accounts, included in
Schedule II on page S-2, is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures
applied in the audits of the basic consolidated financial statements and, in
our opinion, fairly states, in all material respects, the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
January 2, 1997
S-1
<PAGE>
Schedule II
THERMEDICS DETECTION INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Balance at Charges to Balance
Beginning Costs and Accounts Accounts at end
Description of Period Expenses Recovered Written Off of Period
- ----------- ---------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended January 1, 1994
Allowance for Doubtful Accounts.......... $471 $(36) $-- $ (4) $431
Year Ended December 31, 1994
Allowance for Doubtful Accounts.......... $431 $128 $-- $ (12) $547
Year Ended December 30, 1995
Allowance for Doubtful Accounts.......... $547 $ 98 $-- $(129) $516
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
----------- --------------------------------------------------------- ----
<C> <S> <C>
1 Form of Standby Underwriting Agreement
2.1 Asset Purchase Agreement dated as of January 25, 1996
among the Registrant, Moisture Systems Corporation and
certain Affiliates of Moisture Systems Corporation.
Pursuant to Item 601(b)(2) of Regulation S-K, schedules
to this Agreement have been omitted. The Registrant
hereby undertakes to furnish supplementally a copy of
such schedules to the Commission upon request.
2.2 Share Purchase Agreement dated as of January 25, 1996
among the Registrant, Rutter Holding B.V. and certain
Affiliates of Rutter Holding B.V. Pursuant to Item
601(b)(2) of Regulation S-K, schedules to this Agreement
have been omitted. The Registrant hereby undertakes to
furnish supplementally a copy of such schedules to the
Commission upon request.
3.1 Articles of Organization of the Registrant, as amended
3.2 By-Laws of the Registrant
4.1 Specimen Common Stock Certificate
*4.2 Specimen Rights Certificate
*5 Opinion of Seth H. Hoogasian, Esq. with respect to the
validity of the securities being offered
10.1 Corporate Services Agreement dated as of March 20, 1996
between Thermo Electron Corporation ("Thermo Electron")
and the Registrant
10.2 Thermo Electron Corporate Charter, as amended and
restated effective January 3, 1993 (incorporated by
reference herein form Exhibit 10.1 to Thermo Electron's
Annual Report on Form 10-K for the fiscal year ended
January 2, 1993 (File No. 1-8002))
10.3 Tax Allocation Agreement dated as of March 20, 1996
between Thermedics Inc. ("Thermedics") and the Registrant
10.4 Master Repurchase Agreement dated as of March 20, 1996
between Thermo Electron and the Registrant
10.5 Master Guarantee Reimbursement Agreement dated as of
March 20, 1996 among Thermo Electron, Thermedics and the
Registrant
10.6 Master Guarantee Reimbursement Agreement dated as of
March 20, 1996 between Thermedics and the Registrant
10.7 Equity Incentive Plan of the Registrant
10.8 Deferred Compensation Plan for Directors of the
Registrant
*10.9 $21.2 Million Principal Amount Promissory Note due March
1998, issued by the Registrant to Thermedics
10.10 Form of Indemnification Agreement for Officers and
Directors
10.11 Stock Purchase Agreement dated as of March 25, 1996
between David H. Fine and the Registrant
10.12 Stock Purchase Agreement dated as of November 19, 1996
between Jeffrey J. Langan and the Registrant
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
----------- --------------------------------------------------------- ----
<C> <S> <C>
In addition to the stock-based compensation plans of the
Registrant, the executive officers of the Registrant may
be granted awards under stock-based compensation plans of
the Registrant's parent, Thermo Electron Corporation, and
its subsidiaries, for services rendered to the Registrant
or to such affiliated corporations. Such plans were filed
as Exhibits 10.21 - 10.44 to the Annual Report on Form
10-K of Thermo Electron for the fiscal year ended
December 30, 1995 [File No. 1-8002] and as Exhibits 10.18
- 10.19, 10.22, and 10.48 - 10.49 to the Annual Report on
Form 10-K of Thermedics for the fiscal year ended
December 30, 1995 [File No. 1-9567] and are incorporated
herein by reference.
11 Computation of Earnings per Share
21 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Deloitte & Touche
*23.4 Consent of Seth H. Hoogasian, Esq. (included in Exhibit
5)
24 Power of Attorney (see page II-5 of the Registration
Statement)
27 Financial Data Schedule
*99.1 Form of Subscription Agency Agreement
*99.2 Instructions as to use of Thermedics Detection Inc.
Subscription Certificates and International Holder
Subscription Forms
*99.3 International Holder Subscription Form
*99.4 Form of Letter to Thermedics Detection stockholders
*99.5 Form of Letter to Thermedics stockholders
</TABLE>
- --------
* To be filed by Amendment.
<PAGE>
Exhibit 1
Draft 1/2/96
------------
Thermedics Detection Inc.
Common Stock
($.10 par value)
STANDBY UNDERWRITING AGREEMENT
------------------------------
, 1997
------------
Lehman Brothers Inc.
NatWest Securities Limited
As Representatives of the several Underwriters
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Ladies and Gentlemen:
Thermedics Detection Inc., a Massachusetts corporation (the
"Company"), proposes to offer approximately 1,600,000 shares of Common Stock,
par value $.10 per share (the "Common Stock"), of the Company, initially for
subscription upon the exercise of rights (the "Rights") evidenced by
transferable subscription certificates (the "Subscription Certificates") issued
by the Company to holders of Common Stock of the Company of record at the close
of business on ____________, 1997. The Rights will expire at 5:00 P.M., Eastern
time, on ____________, 1997, unless extended by the Company with the consent of
the Representatives (as defined below) (such date and time, the "Expiration
Date"). Thermedics Inc., a Massachusetts corporation ("Thermedics"), owns
10,000,000 shares of Common Stock. Thermedics will not exercise the Rights
received by it from the Company, but will distribute such rights to the holders
of its Common Stock, $.05 par value per share (the " Thermedics Common Stock"),
of record at the close of business on ____________, 1997. The Company proposes
to sell to the underwriters named in Schedule I hereto (the "Underwriters"), for
whom you (the "Representatives") are acting as representatives, a number of
shares of Common Stock equal to: (i) 1,000,000 shares of Common Stock less (ii)
----
the number of shares of Common Stock which, as of the Expiration Date, have been
properly subscribed for by the exercise of Rights (such number of shares of
Common Stock, the "Standby Securities"). The Company also proposes to grant to
the Underwriters an option to purchase up to 150,000 additional shares of Common
Stock (the "Option Securities"; and the Standby Securities together with the
Option Securities, the "Securities"). The issuance of the Rights, the offering
of the Common Stock to be issued by the
<PAGE>
Company upon exercise of the Rights and the subscription and purchase of Common
Stock upon the terms described in the Prospectus (as hereinafter defined),
including the purchase and distribution of the Securities pursuant to this
Agreement, are herein collectively referred to as the "Rights Offering".
Thermo Electron Corporation, a Delaware corporation ("Thermo
Electron"), is the corporate parent of Thermedics. To the extent provided
herein and for good and valuable consideration, each of Thermedics and Thermo
Electron has become a party to this Agreement.
1. Representations and Warranties. (a) The Company, Thermedics
------------------------------
and Thermo Electron, jointly and severally, represent and warrant to, and agree
with, each Underwriter as set forth below in this Section 1(a). Certain terms
used in Section 1 are defined in paragraphs (i) and (xxii) of this Section 1(a).
The following representations, warranties and agreements shall be deemed to
apply to each Subsidiary (as defined in Section 15) of the Company, unless the
context does not permit:
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (file number
333-______), including the related preliminary prospectus, for the registration
under the Securities Act of 1933, as amended, and the rules thereunder (the
"Act") of the Rights and Common Stock to be issued in the Rights Offering. The
Company may have filed one or more amendments thereto, including the related
preliminary prospectus, each of which has previously been furnished to you.
Copies of such registration statement as amended to date have been delivered by
the Company to the Representatives and, to the extent applicable, were identical
to the electronically transmitted copies thereof filed with the Commission
pursuant to the Commission's Electronic Data Gathering, Analysis and Retrieval
System ("EDGAR"), except to the extent permitted by Regulation S-T. The Company
will next file with the Commission either (A) prior to effectiveness of such
registration statement, a further amendment to such registration statement
(including the form of final prospectus) or (B) after effectiveness of such
registration statement, a final prospectus in accordance with Rules 430A and
424(b)(1) or (4). If the Company uses the provisions of Rule 430A, such
registration statement, as amended at the Effective Date, shall include all
material information (other than Rule 430A Information) required by the Act to
be included in the Prospectus with respect to the Securities and the offering
thereof. As filed, such amendment and form of final prospectus (in the case of
clause (A)), or such final prospectus (in the case of clause (B)), shall contain
all Rule 430A Information, and, except to the extent the Representatives shall
agree in writing to a modification, shall be in all substantive respects in the
form furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific additional
information and other changes (beyond that contained in the latest Preliminary
Prospectus) as the Company has advised you, prior to the Execution Time, will be
included or made therein.
"Prospectus" means (a) the form of prospectus relating to the
Securities, as first filed pursuant to paragraph (1) or (4) of Rule 424(b), or
if no filing pursuant to Rule 424(b) is required, the form of prospectus
included in the registration statement at the Effective Date, (b) the term sheet
or abbreviated term sheet described in Rule 434(b), as first filed pursuant to
-2-
<PAGE>
paragraph (7) of Rule 424(b) together with the last preliminary prospectus
included in the registration statement filed prior to the Effective Date or
filed pursuant to Rule 424(a) that is delivered by the Company to the
Underwriters for delivery to purchasers of the Securities. The Prospectus and
any related letters from the Company, Thermedics or Thermo Electron to record or
beneficial owners of Common Stock, Thermedics Common Stock or Rights, related
letters from the Company, Thermedics, or Thermo Electron to securities dealers,
commercial banks, trust companies and other nominees and other offering
materials, in each case disseminated by the Company, Thermedics or Thermo
Electron by any of their agents, and any other information that the Company,
Thermedics or Thermo Electron may use, prepare, approve or authorize for use in
connection with the Rights Offering, are collectively referred to hereinafter as
the "Offering Materials". Notwithstanding the foregoing, any offering material
or other information that is distributed by the Underwriters in connection with
the Rights Offering shall not be deemed to be "Offering Materials" hereunder
unless the distribution thereof is approved by the Company, Thermedics or Thermo
Electron. For purposes of this Agreement, all references to the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement to any of the foregoing, shall be deemed to include the respective
copies thereof filed with the Commission pursuant to EDGAR. Capitalized terms
used herein without definition have the meanings assigned to them in the
Prospectus.
(ii) On the Effective Date, the Registration Statement did or will,
and when the Prospectus is first filed (if required) in accordance with Rule
424(b) and on each Closing Date (as hereinafter defined), the Prospectus (and
any supplements thereto) will, comply in all material respects with the
applicable requirements of the Act and, to the extent applicable, the
Securities Exchange Act of 1934, as amended, and the rules thereunder (the
"Exchange Act"); on the Effective Date, the Registration Statement did not or
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and on the Effective Date, the Prospectus, if
not required to be filed pursuant to Rule 424(b), and the Offering Materials did
not or will not, and on the date of the filing pursuant to Rule 424(b) and on
each Closing Date, the Prospectus (together with any supplement thereto) and the
Offering Materials will not, include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Company, Thermedics and Thermo Electron make no
- -------- -------
representations or warranties as to the information contained in or omitted from
the Registration Statement or the Prospectus (or any supplement thereto) in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion in the Registration Statement or the Prospectus (or
any supplement thereto). There is no contract or document required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required.
(iii) The accounting firm(s) that have reported upon the audited
financial statements and schedules included in the Registration Statement and
Prospectus are independent public accountants as required by the Act.
-3-
<PAGE>
(iv) The consolidated financial statements and the related notes of
the Company included in the Registration Statement and the Prospectus present
fairly, in all material respects, in accordance with generally accepted
accounting principles, the consolidated financial position of the entities
purported to be shown thereon, as of the dates indicated and the consolidated
results of operations and cash flows of the entities purported to be shown
thereon, for the periods specified. Such financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis throughout the periods involved, except as otherwise noted
therein and subject, in the case of interim statements, to normal year-end audit
adjustments and footnote disclosures (which comply with the Act and the Exchange
Act). The financial statement schedules included in the Registration Statement
present fairly, in all material respects, in accordance with generally accepted
accounting principles the information required to be stated therein. The pro
forma financial statements and other pro forma financial information included in
the Registration Statement and the Prospectus, if any, present fairly, in all
material respects, the information shown therein, have been prepared, in all
material respects, in accordance with applicable rules and guidelines of the
Commission, if any, with respect thereto, have been properly compiled on the pro
forma bases described therein, and, in the opinion of the Company and Thermo
Electron, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions or
circumstances referred to therein.
(v) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus, and is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the business conducted by it or the location of the properties
owned or leased by it makes such qualification necessary except where the
failure to so qualify or be in good standing would not have a material adverse
effect on the Company and its Subsidiaries taken as a whole; and, except as
described in the Prospectus, the Company holds all material licenses,
certificates and permits from governmental authorities necessary for the conduct
of its business as described in the Prospectus.
(vi) All of the outstanding shares of capital stock of the Company
have been duly authorized, validly issued, fully paid and nonassessable. Other
than as described in the Prospectus, there are no preemptive rights or other
rights to subscribe for or to purchase, or any restriction upon the voting or
transfer of, any shares of Common Stock pursuant to the Company's corporate
charter, by-laws or other governing documents or any agreement or other
instrument to which the Company is a party or by which it may be bound. The
capitalization of the Company as of ____________ __, 199_ is as set forth in the
Prospectus and the Common Stock, the Rights, the Subscription Certificates and
the Securities conform to the description thereof contained in the Prospectus.
All of the outstanding shares of capital stock of each Subsidiary (as defined in
Section 15) of the Company have been duly authorized and validly issued, are
fully paid and nonassessable and are owned directly or indirectly by the
Company, free and clear of any claim, lien, encumbrance, security interest,
restriction upon voting or transfer or any other claim of any third party.
-4-
<PAGE>
(vii) Prior to or at the Effective Date, the Company and the
Subscription Agent will have entered into a subscription agency agreement (the
"Subscription Agency Agreement"). When executed by the Company, the
Subscription Agency Agreement will have been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution and delivery
by the Subscription Agent, will constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
(A) as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law) (collectively, "applicable bankruptcy laws"), and (B) as rights to
indemnity and contribution thereunder may be limited by Federal or state
securities laws and/or public policy.
(viii) The Rights, when issued and delivered in accordance with the
terms of the Rights Offering, will be validly issued, and no holder thereof is
or will be subject to personal liability by reason of being such a holder (other
than with respect to potential tax liability as described in the Prospectus);
the shares of Common Stock issuable upon the exercise of the Rights, when issued
or delivered and paid for in accordance with the terms of the Rights Offering,
and any Securities issued pursuant to the terms of this Agreement, will be
validly issued, fully paid and nonassessable, and the issuance of the shares of
Common Stock issuable upon the exercise of the Rights and the Securities will
not be subject to the preemptive rights of any stockholder of the Company.
(ix) The Company has taken all valid corporate action to duly
reserve such number of its authorized and unissued shares of Common Stock as are
deliverable upon consummation of purchases pursuant to the Rights Offering.
(x) Except as described in or contemplated by the Registration
Statement and the Prospectus, there has not been (i) any material adverse change
in, or any adverse development which materially affects, the condition
(financial or other), results of operations, business or prospects of the
Company and its Subsidiaries on a consolidated basis from the date as of which
information is given in the Prospectus, (ii) any dividend or distribution of any
kind declared, paid or made by the Company on its capital stock other than the
Rights or (iii) any material change in the capitalization of the Company.
(xi) The Company is not, and would not be with the giving of notice
or lapse of time or both, in violation of or in default under, nor will the
execution or delivery hereof, the issuance and delivery of the Rights and the
Securities, the consummation of the Rights Offering or the consummation of the
transactions contemplated hereby result in a violation of, or constitute a
default under, the corporate charter, by-laws or other governing documents of
the Company, or any agreement, indenture or other instrument to which the
Company is a party or by which it is bound, or to which any of its properties is
subject, nor will the performance by the Company of its obligations hereunder
violate any existing law, rule, administrative regulation or decree of any court
or any governmental agency or body having jurisdiction over the Company or any
of its properties, or result in the creation or imposition of any lien, charge,
claim or encumbrance upon any property or asset of the Company, which would be
material to the Company and its
-5-
<PAGE>
Subsidiaries taken as a whole. Except for permits and similar authorizations
required under the Securities Act and the securities or "Blue Sky" laws of
certain jurisdictions and for such permits and authorizations as have been
obtained, no consent, approval, authorization or order of any court,
governmental agency or body or any financial institution is required for the
offer and sale by the Company of the Securities or the consummation of the
Rights Offering as set forth in the Registration Statement and the Prospectus or
the consummation by the Company, Thermedics or Thermo Electron of the
transactions contemplated in this Agreement and in the Registration Statement
and the Prospectus (it being understood that the Company, Thermedics and Thermo
Electron make no representation as to the distribution of the Securities by the
Underwriters outside of the United States or as to the distribution of the
Rights by the Company or Thermedics outside of the United States (except in the
United Kingdom)). Neither the filing of the Registration Statement nor the
offering or sale of its shares of Common Stock pursuant to the Rights Offering
gives rise to any rights, other than those that have been duly waived or
satisfied and other than the Company's obligations with respect to the "Resale
Registration Statement" (as defined in the Prospectus), for or relating to the
registration of any shares of Common Stock or other securities of the Company.
(xii) This Agreement has been duly authorized, executed and
delivered by the Company.
(xiii) The Company owns, or has valid rights to use, all items of
real and personal property which are material to the business of the Company and
its Subsidiaries taken as a whole, free and clear of all liens, encumbrances and
claims which may materially interfere with the business, properties, financial
condition or results of operations of the Company on a consolidated basis.
(xiv) Except as described in the Prospectus, there is no litigation
or governmental proceeding to which the Company or Thermedics or Thermo Electron
is a party or to which any property of the Company is subject or which is
pending or, to the knowledge of the Company, Thermedics or Thermo Electron,
contemplated against the Company or Thermedics that is required to be disclosed
in the Prospectus and that is not so disclosed.
(xv) The Company is not in violation of any law, ordinance,
governmental rule or regulation or court decree to which it is subject, which
violation could have a material adverse effect on the condition (financial or
other), results of operations, business or prospects of the Company and its
Subsidiaries on a consolidated basis.
(xvi) The Company is not an "investment company" or a company
"controlled by an investment company" within the meaning of such terms under the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder, and will not become such after giving effect to the transactions
contemplated in this Agreement and in the Registration Statement and the
Prospectus.
(xvii) The Company owns or possesses adequate licenses or other
rights to use all intellectual property rights, including patents and
trademarks, necessary to conduct its business
-6-
<PAGE>
as described or referred to in the Prospectus, except where such failure,
singularly or in the aggregate would not have a material adverse effect on the
Company and its Subsidiaries on a consolidated basis, and, except as disclosed
in the Prospectus, neither Thermo Electron, Thermedics nor the Company has
received any notice of infringement of or conflict with (or knows of any such
infringement of or conflict with) rights or claims of others with respect to any
patents, trademarks, service marks, trade names, copyrights or know-how, that if
the subject of an unfavorable decision, ruling or finding, would result in a
material adverse effect upon the Company and its Subsidiaries on a consolidated
basis, and, except as disclosed in the Prospectus, all products or processes
referred to in the Prospectus and relating to the business of the Company now
conducted by it do not infringe upon or conflict with any right or patent, or
with any discovery, invention, product or process which is the subject of any
patent application known to the Company or Thermo Electron, in a manner which
would materially and adversely affect the Company and its Subsidiaries on a
consolidated basis.
(xviii) Each of the Corporate Services Agreement between the Company
and Thermo Electron (the "Services Agreement"), and the other agreements between
the Company and Thermedics or Thermo Electron pursuant to which the Company was
initially organized and capitalized (collectively, the "Organization
Agreements"), and the Tax Allocation Agreement between Thermo Electron and the
Company (all of the foregoing agreements being referred to herein as the "Inter-
corporate Agreements") has been duly and validly authorized, executed and
delivered by the Company and is the valid and binding agreement of the Company
enforceable in accordance with its terms, except as provided by applicable
bankruptcy laws. The execution, delivery and performance of the Inter-corporate
Agreements by the Company, the consummation of the transactions therein
contemplated and compliance with the terms thereof do not and will not result in
a violation of, or constitute a default under, the corporate charter, by-laws or
other governing documents of the Company, or any agreement, indenture or other
instrument to which the Company is a party or by which it is bound, or to which
any of its properties is subject, and do not and will not violate any existing
law, rule, administrative regulation or decree of any court or any governmental
agency or body having jurisdiction over the Company or any of its properties, or
result in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of the Company, which would be material to the
Company and its Subsidiaries taken as a whole. No consent, approval,
authorization or order of any court, governmental agency or body or financial
institution is required in connection with the consummation of the transactions
contemplated by such Inter-corporate Agreements.
(xix) Thermo Electron and Thermedics will take all such action as
may be necessary or expedient to ensure that (A) the representations and
warranties of the Company contained in this Agreement are true and correct and
(B) the Company complies with the terms of this Agreement and meets all of its
obligations hereunder.
(xx) Neither the Company, Thermedics nor Thermo Electron or any
other Subsidiary of Thermo Electron has taken and none of such companies will
take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute,
stabilization or manipulation of the price of the Rights or the Common Stock.
-7-
<PAGE>
(xxi) The Common Stock and the Rights have been approved for listing,
subject only to official notice of issuance, on the American Stock Exchange.
(xxii) The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "the Effective Date" shall mean each date that the
Registration Statement and any post-effective amendment or amendments thereto
became or become effective. "Execution Time" shall mean the date and time that
this Agreement is executed and delivered by the parties hereto. "Preliminary
Prospectus" shall mean any preliminary prospectus with respect to the Rights
Offering referred to in paragraph (i) above and any preliminary prospectus with
respect to the Rights Offering included in the Registration Statement at the
Effective Date that omits Rule 430A Information. "Registration Statement" shall
mean the registration statement referred to in paragraph (i) above, including
exhibits and financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become effective)
and, in the event any post-effective amendment thereto becomes effective prior
to a Closing Date, shall also mean such registration statement as so amended.
Such term shall include any Rule 430A Information deemed to be included therein
at the Effective Date as provided by Rule 430A together with any registration
statement filed by the Company pursuant to Rule 462(b). "Representatives" shall
mean the Underwriters to the extent that no more than two parties are listed on
Schedule I hereto as Underwriters. "Rule 424", "Rule 430A", "Rule 434" and
"Rule 462" refer to such rules under the Act. "Rule 430A Information" means
information with respect to the Securities and the offering thereof permitted to
be omitted from the Registration Statement when it becomes effective pursuant to
Rule 430A.
(b) Each of Thermedics and Thermo Electron represents and warrants
to, and agrees with, each Underwriter as set forth below in this Section 1(b).
(i) Each of Thermedics and Thermo Electron has been duly organized and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate and
other) to own or lease its properties and conduct its business, and is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the business conducted by it or the location of the properties
owned or leased by it makes such qualification necessary, except where the
failure to so qualify or be in good standing would not have a material adverse
effect on Thermedics and its Subsidiaries taken as a whole or on Thermo Electron
and its Subsidiaries taken as a whole, as the case may be.
(ii) There has not been any material adverse change in, or any adverse
development which materially affects, the condition (financial or other),
results of operations, business or prospects of Thermo Electron and its
Subsidiaries taken as a whole, or Thermedics and its Subsidiaries taken as a
whole, from the date as of which information is given in the most recent
quarterly or annual report filed by Thermo Electron or Thermedics, as the case
may be, pursuant to the Exchange Act, except any as may have been disclosed to
the public.
(iii) Except as described in their filings with the Commission under the
Exchange Act, neither Thermedics nor Thermo Electron is, nor with the giving of
notice or lapse of time or both
-8-
<PAGE>
would be, in violation of or in default under, nor will the execution or
delivery hereof or consummation of the transactions contemplated hereby result
in a violation of, or constitute a default under, the corporate charter, by-laws
or other governing documents of Thermedics or Thermo Electron, or any material
agreement, indenture or other instrument to which Thermedics or Thermo Electron
is a party or by which any of them is bound, or to which any of their properties
is subject, nor will the performance by Thermedics or Thermo Electron of its
obligations hereunder violate any existing law, rule, administrative regulation
or decree of any court or any governmental agency or body having jurisdiction
over Thermedics or Thermo Electron or any of their respective properties, or
result in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of Thermedics or Thermo Electron, which would be
material to Thermedics and its Subsidiaries taken as a whole or to Thermo
Electron and its Subsidiaries taken as a whole, as the case may be.
(iv) This Agreement has been duly authorized, executed and delivered by
Thermedics and Thermo Electron.
(v) Thermedics owns, and will own as of each Closing Date (as defined
below), of record and beneficially, the number of shares of Common Stock of the
Company set forth in the Prospectus, free and clear of any liens, encumbrances,
claims or restrictions, except that certain of such shares are reserved for
issuance pursuant to stock option and other benefit plans under which options to
purchase Common Stock of the Company owned by Thermedics are granted to certain
employees, directors or consultants of Thermo Electron and its Subsidiaries.
(vi) The most recent Annual Report on Form 10-K of Thermedics and of
Thermo Electron and any subsequent reports filed pursuant to the Exchange Act
complied as of the date thereof in all material respects with the Exchange Act
and the rules and regulations thereunder.
(vii) The transfer by Thermedics to the Company of certain stock and/or
assets, as described in the Prospectus and in the Organization Agreements, has
been completed by all required corporate and other action. Each of the Inter-
corporate Agreements to which Thermedics is a party has been duly and validly
authorized, executed and delivered by Thermedics and is the valid and binding
agreement of Thermedics enforceable in accordance with its terms, except as
provided by applicable bankruptcy laws. The execution, delivery and performance
of each of the Inter-corporate Agreements to which Thermedics is a party by
Thermedics, the consummation of the transactions therein contemplated and
compliance with the terms thereof do not and will not result in a violation of,
or constitute a default under, the corporate charter, by-laws or other governing
documents of Thermedics, or any agreement, indenture or other instrument to
which Thermedics is a party or by which it is bound, or to which any of its
properties is subject, and do not and will not violate any existing law, rule,
administrative regulation or decree of any court or any governmental agency or
body having jurisdiction over Thermedics or any of its properties, or result in
the creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of Thermedics, which would be material to Thermedics. No
consent, approval, authorization or order of any court, governmental agency or
body or financial institution is required in connection with the consummation by
-9-
<PAGE>
Thermedics of the transactions contemplated by the Inter-corporate Agreements
to which Thermedics is a party, except such as have been obtained.
(viii) The Services Agreement has been duly and validly authorized,
executed and delivered by Thermo Electron and is the valid and binding agreement
of Thermo Electron, enforceable in accordance with its terms.
(ix) The distribution to its stockholders of the Rights to be received
by Thermedics from the Company, as described in the Prospectus, has been duly
authorized by Thermedics and all necessary corporate action has been taken by
Thermedics with respect thereto.
(x) Except for permits and similar authorizations required under the
Securities Act and the securities or "Blue Sky" laws of certain jurisdictions
and for such permits and authorizations as have been obtained, no consent,
approval, authorization or order of any court, governmental agency or body or
financial institution is required for the distribution by Thermedics to its
stockholders of the Rights to be received by it from the Company or the
consummation by Thermedics and Thermo Electron of the transactions contemplated
in this Agreement and in the Registration Statement and the Prospectus.
2. Purchase and Sale. Subject to the terms and conditions and in
-----------------
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Company at a purchase price per share equal to
$______, the percentage set forth opposite such Underwriter's name in Schedule I
hereto of the Standby Securities, if any, such percentages to be adjusted as
necessary by the Representatives so that no Underwriter shall be obligated to
purchase Standby Securities other than in 100-share quantities. The number of
Standby Securities shall be reduced by such number of shares reserved for late
subscriptions as may be agreed upon between the Company and the Representatives.
Subject to the terms and conditions and in reliance upon the representations and
warranties herein set forth, the Company grants an option to the several
Underwriters to purchase, severally and not jointly, up to 150,000 shares in the
aggregate of the Option Securities from the Company at $_____ per share. Said
option may be exercised only to cover over-allotments in the sale of the Standby
Securities and Common Stock purchased by or for the accounts of the Underwriters
upon exercise of Rights. Said option may be exercised in whole or in part at
any time on or before the thirtieth day after the Expiration Date upon written
or telegraphic notice by you to the Company, setting forth the aggregate number
of shares of the Option Securities as to which the several Underwriters are
exercising the option and the time and date for the purchase and sale thereof.
Such time and date (which may not be earlier than two or later than three
business days after the date of such notice, and which may be the same as but
may not be earlier than the First Closing Date defined in Section 3), or such
other time and date as may be agreed upon in writing by the Company and you, are
herein called the "Option Securities Closing Date". Delivery of certificates
for the shares of Option Securities, and payment therefor, shall be made as
provided in Section 3 hereof on the Option Securities Closing Date, which may be
postponed as provided in Section 9 hereof. The number of shares of the Option
Securities to be purchased by each Underwriter on the Option Securities Closing
Date shall be the same percentage of the total number of shares of the Option
Securities to be
-10-
<PAGE>
purchased by the several Underwriters on the Option Securities Closing date as
such Underwriter is committed to purchase of the Standby Securities, as adjusted
by you in such manner so that no Underwriter shall be obligated to purchase
Option Securities other than in 100-share quantities. The Representatives also
agree to provide to the Company, Thermedics and Thermo Electron such assistance
as they may reasonably request in connection with the Rights Offering.
As compensation to the Underwriters for their commitments hereunder, the
Company agrees to pay, on the First Closing Date to you, as Representatives for
the accounts of the several Underwriters as they may agree, a fee in the amount
of $________ (the "Standby Fee"). The Company also agrees to pay, on the First
Closing Date to you, as Representatives for the accounts of the several
Underwriters as they may agree, a management fee in the amount of $________ (the
"Management Fee"). In addition, in respect of the Underwriters' commission for
the purchase and resale of the Common Stock, the Company agrees to pay to you,
as Representatives for the accounts of the several Underwriters as they may
agree, on the First Closing Date, and on the Option Securities Closing Date (to
the extent not previously paid), an amount equal to ___ percent (___%) of the
aggregate Subscription Price in respect of (i) all Securities, if any, purchased
by the several Underwriters, and (ii) all Common Stock acquired by the
Representatives for the accounts of the several Underwriters through the
exercise of Rights (the "Take-Up Fee"). Notwithstanding the foregoing, the
Company shall not be obligated to pay to the Representatives or the
Underwriters, at any time, fees in respect of the Rights Offering which exceed
in the aggregate 6% of the Subscription Price (as defined in the Prospectus) for
each share of Common Stock purchased pursuant to the exercise of Rights (by the
Underwriters or otherwise) or pursuant to the terms hereof plus an amount equal
to the aggregate purchase price of Rights purchased by the Underwriters, up to
$________.
The Company and Thermo Electron acknowledge that the several Underwriters
may offer to the public Common Stock acquired by the Representatives for their
respective accounts through the purchase and exercise of Rights or pursuant to
their commitments hereunder to purchase the Securities, if any, at such price or
prices which, and at such time or times when, the Representatives in their
discretion may determine in accordance with applicable laws, rules and
regulations of the Commission, whether or not prior to the Expiration Date, and
whether or not for long or short account. Any profits or losses realized upon
such sales shall be for the accounts of the several Underwriters.
3. Delivery and Payment. Delivery of and payment for the Standby
--------------------
Securities shall be made at 10:00 A.M., Eastern time, on __________ __, 1997,
which date and time may be postponed by agreement between the Representatives
and the Company or as provided in Section 9 hereof (such date and time of
delivery and payment for the Standby Securities being herein called the "First
Closing Date"). To the extent that the option referred to in Section 2 is
exercised, delivery of and payment for the Option Securities shall be made on
the Option Securities Closing Date. The First Closing Date and the Option
Securities Closing Date are herein called, individually, a "Closing Date" and,
together, the "Closing Dates". Delivery of the Securities purchased from the
Company shall be made to the Representatives for the respective accounts of the
several Underwriters against payment by the several Underwriters through the
Representatives of the respective aggregate purchase prices of such Securities
being sold by the
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<PAGE>
Company to or upon the order of the Company, by certified or official bank check
payable in New York Clearing House funds. Delivery of such Securities shall be
made at such location as the Representatives shall reasonably designate at least
one full business day in advance of the applicable Closing Date and payment for
such Securities shall be made at the office of Testa, Hurwitz & Thibeault, LLP,
125 High Street, Boston, Massachusetts 02110 (or at such other place as mutually
may be agreed upon). Certificates for such Securities shall be registered in
such names in such denominations as you may request not less than one full
business day in advance of the applicable Closing Date.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Representatives in New York, New York, not later
than 1:00 P.M. on the business day prior to the applicable Closing Date.
4. Offering by Underwriters. NatWest Securities Limited represents and
------------------------
agrees that (i) it has not offered or sold and will not offer or sell any
Securities to persons in the United Kingdom prior to admission of the Securities
to listing in accordance with Part IV of the Financial Services Act 1986 (the
"Act") except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purpose of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 or the
Act, (ii) it has complied and will comply with all applicable provisions of the
Act with respect to anything done by it in relation to the Securities in, from
or otherwise involving the United Kingdom and (iii) it has only issued or passed
on, and will only issue or pass on, in the United Kingdom any document received
by it in connection with the issue of the Securities, other than any document
which consists of or any part of listing particulars, supplementary listing
particulars or any other document required or permitted to be published by
listing rules under Part IV of the Act, to a person who is of a kind described
in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom the document may otherwise
lawfully be issued or passed on.
5. Agreements. The Company, Thermedics and Thermo Electron, jointly and
----------
severally, agree with each Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment thereof,
including any post-effective amendment, to become effective as soon as
practicable. Prior to the termination of the offering of the Securities, the
Company will not file any amendment of the Registration Statement or supplement
to the Prospectus without your prior consent, which consent shall not be
unreasonably withheld or delayed. The Company shall prepare and file with the
Commission, promptly upon your request, any amendments or supplements to the
Registration Statement or the Prospectus which, in your opinion, may be
necessary or advisable in connection with the distribution of the Securities.
Subject to the foregoing sentence, if the Registration Statement has become or
becomes effective pursuant to Rule 430A, or filing of the Prospectus is
otherwise required under Rule 424(b), the Company will cause the Prospectus,
properly completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b)
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<PAGE>
within the time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Company and, in the case of clause
(G), Thermo Electron, will promptly advise the Representatives (A) when the
Registration Statement, if not effective at the Execution Time, and any
amendment thereto, shall have become effective, (B) when the Prospectus, and any
supplement thereto, shall have been filed (if required) with the Commission
pursuant to Rule 424(b), (C) when, prior to termination of the offering of the
Securities, any amendment to the Registration Statement shall have been filed or
become effective, (D) of any request by the Commission for any amendment of the
Registration Statement or supplement to the Prospectus or for any additional
information, (E) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose, (F) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose and (G) if any of the representations and
warranties contained in Section 1 hereof becomes inaccurate in any material
respect subsequent to the date hereof. The Company will use its best efforts to
prevent the issuance of any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
(b) Within the time during which a prospectus relating to the
Securities is required to be delivered under the Act, the Company shall comply
with all requirements imposed upon it by the Act, so far as is necessary to
permit the continuance of sales of or dealings in the Securities as contemplated
by the provisions hereof and by the Prospectus. If, at any time when a
prospectus relating to the Securities is required to be delivered under the Act,
any event occurs as a result of which the Prospectus as then supplemented would
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend the
Registration Statement or supplement the Prospectus to comply with the Act or
the rules thereunder (including to comply with Item 512(c) of Regulation S-K
under the Act), the Company promptly will prepare and file with the Commission,
subject to the second sentence of paragraph (a) of this Section 5, an amendment
or supplement which will correct such statement or omission or effect such
compliance.
(c) As soon as practicable, the Company will make generally available
to its security holders and to the Representatives an earning statement or
statements of the Company and its subsidiaries which will satisfy the provisions
of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Representatives and counsel for
the Underwriters, without charge, signed copies of the Registration Statement
(including exhibits thereto) and to each other Underwriter a copy of the
Registration Statement (without exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or a dealer may be required by the Act, as many
copies of each Preliminary Prospectus and Prospectus and any supplement thereto
as the Representatives may reasonably request. To the extent applicable, the
copies of the Registration Statement, any Preliminary Prospectus or Prospectus
(in each case, as amended or supplemented) furnished to the Representative and
counsel to the Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR,
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<PAGE>
except to the extent permitted by Regulation S-T. The Company will pay all
expenses incident to the Rights Offering and the performance of its obligations
under this Agreement.
(e) The Company will arrange for the qualification of the Securities
for distribution, offering and sale under the laws of such jurisdictions as the
Representatives may designate, and will maintain such qualifications in effect
so long as required for the distribution of the Securities, except that in no
event shall the Company be obligated in connection therewith to qualify as a
foreign corporation or to execute a general consent to service of process.
(f) The Company and Thermedics will commence mailing the Subscription
Certificates to record holders of the Common Stock and the Thermedics Common
Stock not later than two business days following the Record Date, which shall be
not later than ________ __, 1997 and shall complete such mailing expeditiously,
and will offer the Common Stock for subscription in accordance with the terms
and under the conditions set forth in the Prospectus. The Expiration Date shall
be not later than 5:00 P.M., Eastern time, on _________ __, 1997, (unless
extended by the Company with the consent of the Representatives). The Company
will advise you daily during the period when the Rights are exercisable of the
number of shares of Common Stock subscribed for, and prior to 12:00 Noon,
Eastern time, on the business day following the Expiration Date, will advise you
of the number of shares of Common Stock subscribed for and of the number of
Securities. Without your prior written consent, the Company will not change any
of the terms or conditions of the Rights or the offering of Common Stock
pursuant thereto as described in the Registration Statement except that the
Company may waive irregularities in the exercise of Rights or waive conditions
relating to the method (but not the timing, except with your prior written
consent) of the exercise of Rights. The Company will not fix any date prior to
any Closing Date as a record date for the determination of the holders of Common
Stock entitled to receive any dividend other than the Rights.
(g) Each of the Company, Thermedics and Thermo Electron shall not,
during the 180-day period following the date of this Agreement, except pursuant
to this Agreement or the Rights Offering (including sales of Rights by Thermo
Electron) or with your prior written consent, directly or indirectly, offer for
sale, sell or otherwise dispose of any shares of Common Stock (except for the
issuance of shares of Common Stock pursuant to existing stock option, purchase
and compensation plans, the sales of shares of Common Stock by the Company to
Thermedics or the issuance of shares of Common Stock as consideration for the
acquisition of one or more businesses provided that such Common Stock may not be
resold prior to the expiration of the 180-day period following the date of this
Agreement), or sell or grant options, rights or warrants with respect to any
shares of Common Stock (other than the grant of options pursuant to existing
stock option, purchase and compensation plans). The Company, Thermedics and
Thermo Electron will not permit any employee stock option, director stock option
or other stock option to purchase Common Stock of the Company granted by it to
be exercised, and the Common Stock issued upon exercise of the stock option to
be sold, prior to the expiration of the 180-day period following the date of
this Agreement, without your prior written consent. The Company will not file
the Resale Registration Statement (as defined in the Prospectus) with the
Commission until the last date it is permitted to do so under the terms of the
applicable stock purchase agreements.
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<PAGE>
(h) The Company shall at all times reserve and keep available for
issue upon the exercise of the Rights such number of authorized but unissued
shares of Common Stock deliverable upon the exercise of the Rights as will be
sufficient to permit the exercise in full of all Rights issued.
(i) The Company shall take such steps as shall be necessary to ensure
that neither the Company nor any Subsidiary shall become an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
(j) Whether or not this Agreement is terminated or the sale of the
Securities to the Underwriters is consummated, the Company shall pay or cause to
be paid, in addition to the expenses referred to in Section 7, (A) all expenses
(including stock transfer taxes) incurred in connection with the delivery to the
several Underwriters of the Securities, (B) all fees and expenses (including,
without limitation, fees and expenses of the Company's accountants and counsel)
in connection with the preparation, printing, filing, delivery and shipping of
the Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), each Preliminary Prospectus, the Prospectus
and any amendments or supplements of the foregoing, the preparation, printing,
delivery and shipping of all documents relating to the Rights Offering and the
printing, delivery and shipping of this Agreement and other underwriting
documents, including, but not limited to, any Underwriters' Questionnaires,
Underwriters' Powers of Attorney, Blue Sky Memoranda, Agreements Among
Underwriters and Selected Dealer Agreements, (C) all filing fees incurred in
connection with qualification of the Securities under state securities laws as
provided in Section 5(e) hereof, (D) the filing fee of the National Association
of Securities Dealers, Inc., (E) any applicable listing or other fees, (F) the
cost of printing certificates representing the Securities, (G) the cost and
charges of any transfer agent or registrar, and (H) all other costs and expenses
incident to the performance of its obligations hereunder for which provision is
not otherwise made in this Section.
(k) The Company shall on or prior to each Closing Date use its best
efforts to cause the Securities to be purchased on such date by the Underwriters
to be approved for listing on the American Stock Exchange, subject only to
official notice of issuance, and shall take such action as shall be necessary to
comply with the rules and regulations of the American Stock Exchange with
respect to such Securities.
(l) During a period of five years from the Effective Date, the Company
shall furnish to the Representatives copies of all reports or other
communications furnished to shareholders and copies of any reports or financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed. To the
extent applicable, such reports or documents shall be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
6. Conditions to the Obligations of the Underwriters. The obligations of
-------------------------------------------------
the several Underwriters to purchase the Securities shall be subject to the
accuracy of the
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<PAGE>
representations and warranties on the part of the Company, Thermedics and Thermo
Electron contained herein as of the Execution Time and the applicable Closing
Date, to the accuracy of the statements of the Company, Thermedics and Thermo
Electron made in any certificates pursuant to the provisions hereof, to the
performance by the Company, Thermedics and Thermo Electron of their obligations
hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives agree in writing to a later time,
the Registration Statement will become effective not later than 12:00 Noon,
Eastern time, on ______ __, 1997; if filing of the Prospectus, or any supplement
thereto, is required pursuant to Rule 424(b), the Prospectus, and any such
supplement, will be filed in the manner and within the time period required by
Rule 424(b); and no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or threatened.
(b) No Underwriter shall have been advised by the Company, Thermedics
or Thermo Electron or shall have discovered and disclosed to the Company that
the Registration Statement, or the Prospectus or any amendment or supplement
thereto, contains an untrue statement of fact which in your reasonable opinion,
or in the reasonable opinion of counsel for the Underwriters, is material, or
omits to state a fact which, in your reasonable opinion, or in the reasonable
opinion of counsel to the Underwriters, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) At the Execution Time and at the applicable Closing Date, the
Company and Thermo Electron shall have furnished to you the opinions (addressed
to the Underwriters) of Seth H. Hoogasian, Esq., General Counsel to the Company,
Thermedics and Thermo Electron, dated respectively as of the Execution Time and
the applicable Closing Date, in the form previously provided to you.
(d) At the Execution Time and at the applicable Closing Date, the
Representatives shall have received from Testa, Hurwitz & Thibeault, LLP,
counsel to the Underwriters, such opinion or opinions, dated as of the Execution
Time and the applicable Closing Date, with respect to the issuance and sale of
the Securities, the Registration Statement, the Prospectus (together with any
supplement thereto) and other related matters as the Representatives may
reasonably require, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon such
matters.
(e) At the applicable Closing Date, the Company shall have furnished
to the Representatives certificates of the Company, dated as of the applicable
Closing Date and signed by the President or a Vice President and by the
Treasurer or Secretary of the Company given in their capacities as such, to the
effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct at and as of the applicable Closing Date, with
the same effect as if made on the
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<PAGE>
applicable Closing Date, and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied at or
prior to the applicable Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to their knowledge, threatened;
(iii) all filings required by Rule 424 and Rule 430A have been made;
(iv) the signers of said certificate have carefully examined the
Registration Statement and the Prospectus, and any amendments or supplements
thereto and such documents contain all statements and information required to be
included therein, and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; and
(v) since the effective date of the Registration Statement, there
has occurred no event required to be set forth in an amendment or supplement to
the Registration Statement or the Prospectus which has not been so set forth.
(f) At the applicable Closing Date, each of Thermedics and Thermo
Electron shall have furnished to the Representatives certificates of Thermedics
and Thermo Electron, dated respectively as of the applicable Closing Date and
signed by the President or a Vice President and the Treasurer or Secretary
thereof given in their capacities as such, to the effect that:
(i) the representations and warranties of Thermedics or ThermoTrex
(as applicable) in this Agreement are true and correct at and as of the
applicable Closing Date with the same effect as if made on the applicable
Closing Date, and each of Thermo Electron or Thermedics (as applicable) has
complied with all the agreements and satisfied all the conditions on its part
to be performed or satisfied at or prior to the applicable Closing Date;
(ii) the signers of said certificate have carefully examined the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, and such documents contain all statements and information required
to be included therein and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; and
(iii) since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an amendment or
supplement to the Registration Statement or the Prospectus which has not been
so set forth.
(g) At the Execution Time and at the applicable Closing Date, each
accounting firm whose report appears in the Prospectus shall have furnished to
the Representatives letters, dated respectively as of the Execution Time and the
applicable Closing
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<PAGE>
Date, in form and substance satisfactory to the Representatives, confirming that
they are independent accountants within the meaning of the Act and the
applicable published rules and regulations thereunder and stating, as of the
date of such letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five days
prior to the date of each such letter), the conclusions and findings of each
such firm with respect to the financial information and other matters covered by
its letter delivered to you concurrently with the execution of this Agreement,
and with respect to each letter delivered on a Closing Date confirming the
conclusions and findings set forth in such prior letter.
(h) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
neither the Company nor any of the Subsidiaries of the Company shall have
sustained loss by fire, flood, accident or other calamity, or shall have become
a party to or the subject of any litigation, which is material to the Company
and its Subsidiaries taken as a whole, nor shall there have been a material
adverse change in the general affairs, operations, business, prospects, key
personnel, capitalization, financial condition or net worth of the Company and
its Subsidiaries taken as a whole, whether or not arising in the ordinary course
of business, which loss, litigation or change, in your judgment, shall render it
inadvisable to proceed with the payment for and delivery of the Securities.
(i) Prior to the applicable Closing Date, the Company shall have
furnished to the Representatives such further information, certificates and
documents as the Representatives may reasonably request.
(j) The Securities to be purchased on such Closing Date by the
Underwriters shall be approved for listing on the American Stock Exchange,
subject only to official notice of issuance.
(k) At the Execution Time, the Company shall have furnished or caused
to be furnished to the Representatives such lock-up agreements as are requested
by the Representatives.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be reasonably satisfactory in form and substance to the
Representatives and counsel for the Underwriters, this Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any time
prior to, the applicable Closing Date by the Representatives. Any such
cancellation shall be without liability of the Underwriters to the Company,
Thermedics or Thermo Electron. Notice of such cancellation shall be given to
the Company in writing or by telephone or telegraph confirmed in writing.
7. Reimbursement of Underwriters' Expenses. The Company will reimburse
---------------------------------------
the Underwriters severally upon demand for all out-of-pocket expenses (including
reasonable fees
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<PAGE>
and disbursements of Testa, Hurwitz & Thibeault, LLP ) that shall have been
incurred by them in connection with the proposed purchase of the Securities,
whether or not a Closing shall have taken place.
8. Indemnification and Contribution.
--------------------------------
(a) The Company, Thermedics and Thermo Electron, jointly and severally,
shall indemnify and hold harmless each Underwriter against any loss, claim,
damage or liability (or any action in respect thereof), joint or several, to
which such Underwriter may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement made by the Company, Thermedics or Thermo Electron in
Section 1(a) hereof or by Thermedics or Thermo Electron in Section 1(b) hereof,
or (ii) any untrue statement or alleged untrue statement of a material fact
contained (A) in the Registration Statement, any Preliminary Prospectus, or any
of the Offering Materials, the Prospectus, any of the Offering Material or any
amendment or supplement to any thereof, or (B) in any "Blue Sky" application or
other document executed by the Company specifically for that purpose or based
upon any written information furnished by the Company filed in any state or
other jurisdiction in order to qualify any or all of the Securities under the
securities laws thereof (any such application, document or information being
hereinafter called "Blue Sky Information"), or (iii) the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement to any thereof, or in any Blue Sky
Information a material fact required to be stated therein or necessary to make
the statements therein not misleading or (iv) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or relating
in any manner to, the Securities or the offering contemplated hereby, and which
is included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon matters covered by clause (ii) or (iii)
above (provided that the Company, Thermedics and Thermo Electron shall not be
liable under this clause (iv) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly or indirectly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter through
its gross negligence, willful misconduct or breach of this Agreement or to have
resulted from a violation of Rule 10b-6, 10b-7 or 10b-8 under the Exchange Act
or this Agreement (other than actions performed at the request or with the
consent of the Company); and shall reimburse each Underwriter promptly after
receipt of invoices from such Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating or
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action, notwithstanding the possibility
that payments for such expenses might later be held to be improper, in which
case the person receiving them shall promptly refund them; provided, however,
that the Company, Thermedics and Thermo Electron shall not be liable in any such
case to the extent, but only to the extent, that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company through you by or
on behalf of any Underwriter specifically for use in the preparation of the
Registration Statement, any Preliminary Prospectus, the Prospectus, any of the
Offering Material or any amendment or
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<PAGE>
supplement to any thereof, or any Blue Sky Information; and provided, further,
that as to any Preliminary Prospectus this indemnity agreement shall not inure
to the benefit of any Underwriter on account of any loss, claim, damage,
liability or action arising from the sale of Securities to any person by that
Underwriter if that Underwriter failed to send or give a copy of the Prospectus,
as the same may be amended or supplemented, to that person within the time
required by the Act, and the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact in such
Preliminary Prospectus was corrected in the Prospectus, unless such failure
resulted from non-compliance by the Company with Section 5(d)
(b) Each Underwriter severally, but not jointly, shall indemnify and
hold harmless the Company, Thermedics and Thermo Electron against any loss,
claim, damage or liability (or action in respect thereof) to which the Company,
Thermedics or Thermo Electron may become subject, under the Act or otherwise,
insofar as such loss, claim, damage or liability (or action in respect thereof)
arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in the Registration Statement, any
Preliminary Prospectus, the Prospectus, any of the Offering Material or any
amendment or supplement to any thereof, or (B) in any Blue Sky Information, (ii)
the omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, the Prospectus, any of the Offering Material or any
amendment or supplement to any thereof, or in any Blue Sky Information a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (iii) actions or omissions of such Underwriter in
connection with the services performed by it with respect to the Rights Offering
that are found in a final judgment by a court of competent jurisdiction to have
resulted from the bad faith or gross negligence of such Underwriter or related
party or to constitute a violation of Rule 10b-6, 10b-7 or 10b-8 under the
Exchange Act or this Agreement (other than actions performed at the request or
with the consent of the Company); and shall reimburse any legal or other
expenses reasonably incurred by the Company, Thermedics or Thermo Electron
promptly after receipt of invoices from the Company, Thermedics or Thermo
Electron in connection with investigating or defending against any such loss,
claim, damage, liability or action, notwithstanding the possibility that
payments for such expenses might later be held to be improper, in which case the
Company, Thermedics and Thermo Electron shall promptly refund them; provided,
however, that such indemnification referred to in clauses (i) and (ii) above
shall be available in each such case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company through you by or on behalf of such Underwriter
specifically for use in the preparation thereof. The Company, Thermedics and
Thermo Electron acknowledge that the statements set forth in the last paragraph
of the cover page and under the heading "Underwriting" in any Preliminary
Prospectus and Prospectus constitute the only information furnished in writing
by or on behalf of the several Underwriters for inclusion in any Preliminary
Prospectus or Prospectus, and you, as the Representatives, confirm that such
statements are correct.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the
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<PAGE>
indemnifying party in writing of the claim or the commencement of that action;
provided, however, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have under this Section 8 except to
the extent it has been prejudiced in any material respect by such failure or
from any liability which it may have to an indemnified party otherwise than
under this Section 8. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it or they wish, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under such
subsection for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, except that the Representatives shall have the right to
employ counsel to represent you and those other Underwriters who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the Underwriters against the Company, Thermedics or Thermo Electron
under such subsection if, in your reasonable judgment, it is advisable for you
and those Underwriters to be represented by separate counsel, and in that event
the fees and expenses of such separate counsel shall be paid by the indemnifying
party or parties; provided, however, in no event, shall the indemnifying party
or parties be responsible for the expenses of more than one separate counsel for
all such indemnified parties.
(d) If the indemnification provided for in this Section 8 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company,
Thermedics and Thermo Electron on the one hand and the Underwriters on the other
from the offering of the Securities or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, Thermedics and Thermo Electron
on the one hand and the Underwriters on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
benefits received by the Company, Thermedics and Thermo Electron shall be deemed
to be the total net proceeds from the Rights Offering (before deducting
expenses) and benefits received by the Underwriters shall be deemed to be equal
to the total compensation paid to the Underwriters hereunder. Relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by one of the parties
and such parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
Company, Thermedics, Thermo Electron and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this subsection (d) were
to be determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take into account the equitable considerations referred to in the first
sentence of this subsection (d). The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities
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<PAGE>
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending against any action or claim
which is the subject of this subsection (d), subject to the proviso in the last
sentence of subsection (c). Notwithstanding the provisions of this subsection
(d), no Underwriter shall be required to contribute any amount in excess of the
compensation paid hereunder to such Underwriter in respect of the securities
purchased by such Underwriter hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint. Each party entitled to contribution agrees that upon
the service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it shall
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except as
specifically provided in subsection (c) hereof).
(f) The obligations of the Company, Thermedics and Thermo Electron under
this Section 8 shall be in addition to any liability which the Company,
Thermedics and Thermo Electron may otherwise have, and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act or the Exchange Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability that the
respective Underwriters may otherwise have, and shall extend, upon the same
terms and conditions, to each director of the Company (including any person who,
with his consent, is named in the Registration Statement as about to become a
director of the Company), to each officer of the Company who has signed the
Registration Statement and to Thermedics and Thermo Electron, and each other
person, if any, who controls the Company within the meaning of the Act or the
Exchange Act.
9. Default by an Underwriter. If anyone or more Underwriters shall fail
-------------------------
to purchase and pay for any of the Securities agreed to be purchased by such
Underwriter or Underwriters hereunder, the non-defaulting Underwriters shall be
obligated severally to take up and pay for (in the respective proportions which
the commitment percentage of each remaining Underwriter set forth opposite its
name in Schedule I hereto bears to the aggregate of the commitment percentages
of all the non-defaulting Underwriters) the Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase; except that the non-
defaulting Underwriters shall not be obligated to purchase any of the Securities
if the total number of Securities which the defaulting Underwriter or
Underwriters agreed but failed to purchase exceed 9.09% of the total number of
Securities, and any non-defaulting Underwriters shall not be obligated to
purchase more than 110% of the percentage of the Securities set forth opposite
its name in Schedule I hereto. If the foregoing maximums are exceeded, the non-
defaulting Underwriters, and any other underwriters satisfactory to you that so
agree, shall have the right, but shall not be obligated, to purchase (in such
proportions as may be agreed upon among them) all of the Securities. If the
non-defaulting Underwriters or the other underwriters satisfactory to you do not
elect to purchase the Securities which the defaulting Underwriter or
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<PAGE>
Underwriters agreed but failed to purchase, the Agreement shall terminate
without liability on the part of any non-defaulting Underwriter, the Company,
Thermedics or Thermo Electron.
10. Termination. Until the Closing Date, this Agreement may be terminated
-----------
by you by giving notice as hereinafter provided to the Company, if (i) the
Company, Thermedics or Thermo Electron shall have failed, refused or been
unable, at or prior to the Closing Date, to perform any agreement on its part to
be performed hereunder, (ii) any other condition of the obligations of the
Underwriters hereunder is not fulfilled, (iii) trading in the Thermedics
Detection Common Stock shall have been suspended by the American Stock Exchange
or trading in securities generally on the New York Stock Exchange or the
American Stock Exchange or the International Stock Exchange of the United
Kingdom or the over-the-counter market shall have been suspended, limited or
minimum prices shall have been established on any of such exchanges or such
market by the Commission or by such exchange or other regulatory body or
governmental authority having jurisdiction, (iv) a banking moratorium shall have
been declared by Federal, New York, United Kingdom or Massachusetts authorities,
(v) the United States or the United Kingdom is or becomes engaged in hostilities
which result in the declaration of a national emergency or war, or (vi) there
shall have been such a material adverse change in general economic, political or
financial conditions, or the effect of international conditions on the financial
markets in the United States or the United Kingdom shall be such, as to, in the
judgment of a majority in interest of the several Underwriters, make it
inadvisable or impracticable to proceed with the delivery of the Securities.
11. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company, of Thermedics, of Thermo Electron and of the Underwriters set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter, the
Company, Thermedics or Thermo Electron or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of the second paragraph of
Section 2 and Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement; except that if this Agreement is terminated as a
result of the occurrence of the events described in Section 10 hereof or as a
result of a default of one or more Underwriters as set forth in Section 9
hereof, the Company shall not be liable to the Underwriters for the Management
Fee and Standby Fee specified in Section 2 hereof or expenses as provided in
Section 7 hereof.
12. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Underwriters, will be mailed,
delivered or telecopied to them c/o Lehman Brothers Inc., Three World Financial
Center, New York, New York 10285, Attention: Syndicate Department; or, if sent
to the Company, Thermedics or Thermo Electron, will be mailed, delivered or
telecopied to it at 81 Wyman Street, P.O. Box 9046, Waltham, MA 02254-9046.
13. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors. This Agreement
and the terms and provisions hereof are for the sole benefit of only those
persons, except that (a) the representations,
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<PAGE>
warranties, indemnities and agreements of the Company, Thermedics and Thermo
Electron contained in this Agreement shall also be deemed to be for the benefit
of the person or persons, if any, who control any Underwriter within the meaning
of the Act or the Exchange Act and (b) the indemnity agreement of the
Underwriters contained in Section 8 hereof shall be deemed to be for the benefit
of directors of the Company, officers of the Company who signed the Registration
Statement, and any person controlling the Company, including Thermedics and
Thermo Electron. Nothing in this Agreement shall be construed to give any
person, other than the persons referred to in this paragraph, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
14. Applicable Law. This Agreement will be governed by and construed in
--------------
accordance with the laws of the State of New York, without giving effect to the
choice of law or conflict of law principles thereof.
15. Definition of Business Day, Subsidiary and Significant Subsidiary.
-----------------------------------------------------------------
For purposes of this Agreement, (a) "business day" means any day on which the
American Stock Exchange is open for trading, (b) "Subsidiary" has the meaning
set forth in Rule 405 of the Rules and Regulations and (c) "Significant
Subsidiary" has the meaning set forth in Item 1-02(v) of the Regulation S-X of
the Rules and Regulations.
16. Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
17. Agreement Supersedes. This Agreement shall supersede all provisions
--------------------
of any other agreements, whether written or oral, of any of the parties to this
Agreement that relate to the transactions contemplated by this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicates hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the
Company, Thermedics, Thermo Electron and you.
Very truly yours,
THERMEDICS DETECTION INC.
By:___________________________
Name:
Title:
THERMEDICS INC.
By:___________________________
Name:
Title:
THERMO ELECTRON CORPORATION
By:___________________________
Name:
Title:
Confirmed and accepted as of the date first above written.
LEHMAN BROTHERS INC.
NATWEST SECURITIES LIMITED
as Representatives of the
several Underwriters named
in Schedule I hereto
By: LEHMAN BROTHERS INC.
By:____________________________
Authorized Signatory
<PAGE>
Schedule I
----------
Underwriter Percentage of Securities to be Purchased
- ----------- ----------------------------------------
Lehman Brothers Inc.
NatWest Securities Limited
Total................... 100%
<PAGE>
Exhibit 2.1
Execution Copy
--------------
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made and entered into as of the 25th
day of January, 1996, by and among Thermedics Detection Inc., a corporation
organized under the laws of Massachusetts (the "Buyer"), Moisture Systems
Corporation, a Massachusetts corporation ("MSC"), Moisture Systems Limited, a
limited company organized under the laws of England ("MSC-UK"), Anacon
Corporation, a Massachusetts corporation ("Anacon"), and the principals of MSC,
MSC-UK and Anacon whose names appear on the signature pages hereto (the
"Principals"). MSC, MSC-UK and Anacon are referred to herein individually as the
Seller and collectively as the Sellers.
The Buyer desires to purchase, and the Sellers desire to sell
substantially all of their assets, subject to the assumption by the Buyer of
certain liabilities.
NOW THEREFORE, in consideration of the premises and the mutual
covenants, agreements and provisions herein contained, the parties hereto agree
as follows:
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Accounts Receivable" -- as defined in Section 3.7.
"Assets" -- as defined in Section 2.1.
"Applicable Contract"-- any Contract (a) under which any of the Sellers
has any rights, (b) under which any of the Sellers has subject to any obligation
or liability, or (c) by which any of the Sellers or any of the assets owned or
used by any of the Sellers is bound.
"Assumed Liabilities" -- as defined in Section 2.4.
"Balance Sheet Date" -- as defined in Section 2.4.
"Best Efforts"-- the efforts that a prudent Person desirous of achieving
a result would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible; provided, however, that a Person required
to use his Best Efforts under this Agreement will not be required to take
actions that would result in a materially adverse change in the benefits to such
Person of this Agreement and the Contemplated Transactions.
<PAGE>
"Breach" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in or breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other provision, and the
term "Breach" means any such inaccuracy, breach, or failure.
"Buyer" -- as defined in the first paragraph of this Agreement.
"Closing" -- as defined in Section 2.7.
"Closing Balance Sheet" -- as defined in Section 2.5.
"Closing Date" -- as defined in Section 2.7.
"Code" -- the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"Competitive Business" -- as defined in Section 6.17.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Assets by the Sellers to Buyer;
(b) the performance by Buyer and the Sellers of their respective
covenants and obligations under this Agreement; and
(c) Buyer's acquisition and ownership of the Assets and exercise
of control over the Assets.
"Contract" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Damages" -- as defined in Section 5.2.
"Disclosure Letter" -- the disclosure letter delivered by the Sellers to
the Buyer concurrently with the execution and delivery of this Agreement and
attached hereto as Exhibit A and incorporated into this Agreement as a part
---------
hereof.
"Draft Closing Balance Sheet" -- as defined in Section 2.5.
2
<PAGE>
"Encumbrance" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting (in the case of any security), transfer, receipt of income, or exercise
of any other attribute of ownership.
"Environment" -- soil, land, surface or subsurface strata, surface
waters (including navigable waters and ocean waters), groundwater, drinking
water supply, stream sediments, ambient air (including indoor air), plant and
animal life, and any other environmental medium or natural resource.
"Environmental, Health and Safety Liabilities" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law, Occupational Safety and Health Law, a contract or other
obligation relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
remedial, or inspection costs and expenses arising under Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action" include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Sec. 9601 et seq., as amended
("CERCLA").
"Environmental Law" -- any Legal Requirement designed:
(a) to advise appropriate authorities, employees, and the public
of intended or actual releases of pollutants or hazardous substances or
materials, violations or discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have an adverse impact on the Environment;
(b) to permit or license, or to prevent or acceptably minimize
the release of pollutants or hazardous substances or materials into the
Environment;
3
<PAGE>
(c) to reduce the quantities, prevent the release, and minimize
the hazardous characteristics of wastes that are generated;
(d) to protect resources, species, or ecological amenities;
(e) to acceptably minimize the risks inherent in transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(f) to clean up pollutants that have been released, prevent the
threat of release, or pay the costs of such clean up or prevention; or
(g) to make responsible parties pay private parties, or groups
of them, for damages done to their health or Environment, or to permit self-
appointed representatives of the public interest to recover for injuries done to
public assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ERISA Affiliate" -- as defined in Section 3.9.
"Exchange Act" -- the Securities Exchange Act of 1934 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"Excluded Assets" -- as defined in Section 2.2.
"Excluded Liabilities" -- as defined in Section 2.4.
"Facilities" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by any of the Sellers (or any
predecessor Person) and any buildings, plants, structures, or equipment
currently or formerly owned, leased, or operated by any of the Sellers (or any
predecessor Person).
"FERC" -- Federal Energy Regulatory Commission
"Financial Statements" -- as defined in Section 3.4.
"GAAP" -- generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.4 were prepared.
"Governmental Authorization" -- any approval, consent, license, permit,
waiver, exemption or variance, or other authorization issued, granted, given,
or otherwise made available by or under the authority of any Governmental Body
or pursuant to any Legal Requirement.
4
<PAGE>
"Governmental Body" -- any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial (including court), legislative, police,
regulatory, or taxing authority or power of any nature.
"Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities.
"Hazardous Materials" -- any substance that is listed, deemed,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos containing materials.
"Indemnified Persons" -- as defined in Section 5.2.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the Ordinary Course of
Business or in the course of a reasonable investigation made in connection with
making representations and warranties concerning the sale of a business.
5
<PAGE>
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, employee, partner, executor, or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter; provided that, the Sellers will be
deemed to have "Knowledge" of a particular fact or other matter only if any of
Dennis Carlson, Roger Carlson, John Fordham or Phillippa Higgs has, or at any
time had, Knowledge of such fact or other matter.
"Lease" -- a lease of MSC-UK's premises at the Old School, Station Road,
Cogenhoe, Northampton England to be entered into at the Closing by MSC-UK (as
lessor) and the Buyer or the Buyer's designee (as lessee).
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational, or other constitution, law, ordinance, order,
principle of common law, regulation, statute, or treaty.
"Material Adverse Effect" -- any loss to the Sellers or, after the
Closing, to the Buyer that, taken as a whole, is in excess of $100,000.
"Net Asset Benchmark" -- as defined in Section 2.5.
"Occupational Safety and Health Law" -- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards.
"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority), is not required to be specifically authorized by the parent
company (if any) of such Person, and does not require any other separate or
special authorization of any nature; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of business as such Person.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a
6
<PAGE>
general partnership; (c) the limited partnership agreement and the certificate
of limited partnership of a limited partnership; (d) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; (e) the memorandum and articles of association of an
English company; and (f) any amendment to any of the foregoing.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or other entity or
Governmental Body.
"Plan" -- as defined in Section 3.9.
"Principals" -- as defined in the first paragraph of this Agreement.
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Purchase Price" -- as defined in Section 2.3.
"Related Person" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by any
one or more members of such individual's Family;
(c) any Person in which members of such individual's Family hold
(individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which one or more members of such
individual's Family serves as a director, officer, partner, executor, or trustee
(or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest; and
7
<PAGE>
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse and former spouses, (iii) the
brother, sister or child of the individual or the individual's spouse, and (iv)
any other natural person who resides with such individual, and (b) "Material
Interest" means direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Exchange Act) of voting securities or other voting interests
representing at least 5% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 5% of the
outstanding equity securities or equity interests in a Person.
"Release"-- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment.
"Representative"-- MSC, as representative of all of the Sellers and the
Principals.
"Restricted Employee" -- as defined in Section 6.16.
"Securities Act"-- the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Seller" and "Sellers"-- as defined in the first paragraph of this
Agreement.
"Subsidiary"-- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax"-- any tax (including without limitation any income, capital gains,
gross receipts, license, payroll, employment, excise severance, stamp,
occupation, premium, windfall profits, environmental (including without
limitation taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax or other fiscal charges of any kind whatsoever, including any fine,
interest, penalty, or addition thereto, whether disputed or not), imposed,
assessed, or collected by or under the authority of any Governmental Body or
payable pursuant to any tax-sharing agreement or any other Contract relating to
the sharing or payment of any such tax.
"Tax Return"-- any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including without limitation
any schedule or attachment thereto, and any amendment thereof.
8
<PAGE>
"Threat of Release" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exists, that would
lead a prudent Person to conclude that such a claim, Proceeding, action or other
matter is likely to be asserted, commenced, taken, or otherwise pursued in the
future.
"UK Employees" -- all employees of MSC-UK, as listed in Exhibit G
attached hereto.
2. SALE AND TRANSFER OF ASSETS; CLOSING
2.1 Sale of Assets. Subject to Section 2.2, at the Closing, the
--------------
Buyer shall purchase, acquire and accept, and the Sellers shall assign,
transfer, convey and deliver all of the Sellers' right, title and interest in
and to, the assets, properties and rights (contractual or otherwise) of every
kind, nature and description owned by the Sellers (collectively, the "Assets").
The Assets shall include, without limitation, the following:
(a) Inventories. All inventories of raw materials, work in
-----------
process, finished products and resale merchandise, scrap inventory, and
expendable manufacturing supplies.
(b) Machinery and Equipment. All machinery and equipment
-----------------------
used in the research and development, manufacture, production, assembly, test,
handling, distribution, demonstration and sale of products, together with the
spare-parts inventories and all manufacturing or production tools and
maintenance supplies pertaining thereto.
(c) Intellectual Property Rights and Trademarks. All
-------------------------------------------
patents, trademarks, service marks, copyrights, trade names and applications
therefor.
(d) Technical Information and Intangibles. All inventions,
-------------------------------------
discoveries (whether patentable or unpatentable), processes, designs, know-how,
trade secrets, proprietary data, software programs and intellectual property of
all kinds, including drawings, plans, specifications, processes, patents, dies,
designs, blue prints, records, data, product development records, production
outlines, diskettes, source code, object code, flow charts, information, media
or knowledge and procedures, and customer and supplier lists.
(e) Contracts. All real and personal property leases,
---------
licenses, sales, secrecy, confidentiality, distribution, supply and other
Contracts, purchase contracts, sales orders, prepaid items, warranties and all
causes of action and claims related thereto.
(f) Motor Vehicles. All cars, trucks and other motor
--------------
vehicles, automotive equipment and other rolling stock.
9
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(g) Books and Records. All books, records and accounts,
-----------------
correspondence, production records, technical, accounting, manufacturing and
procedural manuals, and customer lists; employment records, studies, reports or
summaries relating to any environmental conditions or consequences of any
operation, as well as all studies, reports or summaries relating directly to the
general condition of the Sellers; and any confidential information which has
been reduced to writing relating to or arising out of the business of the
Sellers.
(h) Permits and Approvals. To the extent transferable, all
---------------------
Governmental Authorizations.
(i) Claims. All claims, prepayments, refunds, causes of
------
action, choses in action, rights of recovery, rights of setoff, rights of
recoupment, rights under warranties and other similar assets.
(j) Furniture and Fixtures. All office furniture, office
----------------------
equipment and supplies and computer hardware.
(k) Accounts Receivable. All trade and other accounts and
-------------------
notes receivable and any rights of recovery or setoff of every type and
character.
(l) Miscellaneous Supplies. All catalogs, brochures, product
----------------------
literature, product-related application notes, manuals, technical papers, other
printed materials, shipping and packaging materials and labels, cartons and
shipping containers, palettes, shipping equipment, graphics, artwork,
photographic film, slides, negatives, color separations, printer's and
photographer's plates and so-called "camera-ready materials" and sales and
advertising materials.
(m) Cash and Securities. All cash, bank accounts, money
-------------------
market accounts, certificates of deposit, treasury bills, bonds, notes,
securities and similar assets.
(n) Stock in Subsidiaries. All of the Sellers' stock in any
---------------------
Subsidiaries.
2.2 Excluded Assets. Notwithstanding anything to the contrary
---------------
herein, the Assets shall not include the following assets of the Sellers (the
"Excluded Assets"):
(a) The buildings and real property located at The Old
School, Station Road, Cogenhoe, Northampton, England owned by MSC-UK.
(b) The assets described on Exhibit B attached hereto.
---------
2.3 Purchase Price for the Assets. Subject to Section 2.5, the
-----------------------------
aggregate purchase price for the Assets shall be $13,500,000 (the "Purchase
Price") payable as follows: (a) $12,225,000 to MSC, (b) $475,000 to MSC-UK and
(c) $800,000 to Anacon.
2.4 Assumption of Liabilities. At the Closing, the Buyer shall
-------------------------
assume only the following liabilities of the Sellers (the "Assumed
Liabilities"): (i) liabilities reflected on the
10
<PAGE>
September Balance Sheets, except for any such liabilities discharged since the
date of the September Balance Sheets (the "Balance Sheet Date") and except for
liabilities excluded from the Draft Closing Balance Sheet pursuant to Section
2.5(a), (ii) liabilities incurred by the Sellers in the Ordinary Course of
Business since the Balance Sheet Date, (iii) liabilities under bona fide
---- ----
warranty obligations of the Sellers outstanding as of the Closing Date, and (iv)
liabilities and obligations under any Contract assigned to the Buyer pursuant
hereto, except for any such liabilities or obligations resulting from the actual
or alleged breach by any of the Sellers of any such Contracts. In furtherance
of, but without limiting, the foregoing, except to the extent reflected on the
September Balance Sheets, the Assumed Liabilities will not include any
liabilities or obligations of the Sellers (a) for any Environmental Health and
Safety Liabilities resulting from the ownership, operation or condition of the
Facilities, or for any liabilities or obligations resulting from any Hazardous
Activity conducted on or prior to the Closing Date, (b) for any Taxes resulting
from the conduct of the business of the Sellers prior to the Closing Date, (c)
to any retired or other former employees of any of the Sellers for salaries or
benefits accrued prior to the Closing Date, (d) under any agreements with any
employees providing for severance payments in the event such employees are
terminated by Buyer after the Closing, (e) under any employee benefit plan
maintained by any of the Sellers, including, without limitation, the defined
benefit plan maintained by MSC-UK or (f) payables relating to the dust monitor
business. The Sellers and the Buyer anticipate that the United Kingdom Transfer
of Undertakings (Protection of Employment) Regulations 1981 (the "Transfer
Regulations") will apply to the sale and purchase under this Agreement in
respect of the UK Employees. The Sellers and the Buyer acknowledge and agree
that under the Transfer Regulations the contracts of employment between MSC-UK
and the UK Employees will have effect after the Closing Date as if originally
made between Buyer and the UK Employees. This shall not, however, diminish the
Sellers' obligations pursuant to Section 5.2 to indemnify the Buyer against the
liabilities specified in clauses (c), (d) and (e) of the preceding sentence or
any other liabilities not specifically assumed by the Buyer under this Section
2.4, in relation to the UK Employees or any other past or present employees of
MSC-UK or any predecessor of MSC-UK. Notwithstanding the foregoing, the Buyer
acknowledges and agrees that it will be responsible for any severance payments
imposed by statute incurred when any UK Employee is terminated by Buyer after
the Closing. Any liabilities or obligations of the Sellers that are not Assumed
Liabilities are referred to herein as "Excluded Liabilities."
2.5 Post-Closing Adjustments. The Purchase Price set forth in
------------------------
Section shall be subject to adjustment after the Closing Date as follows:
(a) Within 60 days after the Closing Date, the Buyer shall
prepare and deliver to of each prepare the Draft Closing Balance Sheets in
accordance with GAAP. For purposes of this Agreement, "net tangible assets"
shall mean tangible Assets minus Assumed Liabilities. Notwithstanding anything
to the contrary herein, the Draft Closing Balance Sheets shall not include any
liabilities for vacation time for employees of the Sellers accrued between June
1, 1995 and the Closing Date or any of the following liabilities: (i) as
described in the September Balance Sheet of MSC, (A) notes payable-officers, (B)
accrued royalties payable, (C) accrued salaries-officers and (D) accrued
dividends, (ii) as described in the September Balance Sheet of Anacon, (A) notes
payable-officers, (B) accrued rent-related, (C)
11
<PAGE>
accrued expenses-related and (D) accrued dividends, and (iii) any payables from
MSC-UK to Moisture Systems Consolidated Corporation In addition, the Draft
Closing Balance Sheets shall not include any of the following assets as
described on the September Balance Sheet of MSC: (i) notes receivable, (ii)
interest receivable and (iii) rents receivable. It is agreed that the valuation
for all inventory on the Draft Closing Balance Sheet for Anacon shall be no
greater than $150,000.
(b) The Representative shall deliver to the Buyer within 60
days after receiving the Draft Closing Balance Sheets a detailed statement
describing its objections (if any) thereto. Draft Closing Balance Sheet shall
constitute acceptance thereof, whereupon such Draft Closing Balance Sheet shall
be deemed to be a "Closing Balance Sheet". The Buyer and the Representative
shall use reasonable efforts to resolve any such objections, but if they do not
reach a final resolution within 30 days after the Buyer has received the
statement of objections, the Buyer and Representative shall select an
internationally recognized accounting firm mutually acceptable to them (the
"Neutral Auditors") to resolve any remaining objections. If the Buyer and
Representative are unable to agree on the choice of Neutral Auditors, they shall
select as Neutral Auditors an internationally recognized accounting firm by lot
(after excluding their respective regular independent accounting firms). The
Neutral Auditors shall determine whether the objections raised by the
Representative are valid. Each Draft Closing Balance Sheet that is the subject
of objections by the Representative shall be adjusted in accordance with the
Neutral Auditor's determination and, as so adjusted, shall be a Closing Balance
Sheet. Such determination by the Neutral Auditors shall be conclusive and
binding upon the Buyer and Representative. The Buyer, on one hand, and the
Sellers, on the other, shall share equally the fees and expenses of the Neutral
Auditors.
(c) If the net tangible assets as shown on the Closing
Balance Sheet applicable to any Seller is less than the Net Asset Benchmark for
such Seller, such Seller shall pay to the Buyer, by wire transfer in immediately
available funds, within ten business days after the date on which the Closing
Balance Sheet is finally determined pursuant to this Section 2.5, an amount
equal to such deficiency (plus interest thereon from the Closing Date at the
interest rate equal to the base rate of the Bank of Boston as announced from
time to time).
(d) If the net tangible assets as shown on the Closing
Balance Sheet applicable to any Seller is more than the Net Asset Benchmark for
such Seller, the Buyer shall pay to such Seller, by wire transfer in immediately
available funds, within ten business days after the date on which the Closing
Balance Sheet is finally determined pursuant to this Section 2.5, an amount
equal to such excess (plus interest thereon from the Closing Date at the
interest rate equal to the base rate of Bank of Boston as announced from time to
time).
(e) As used in this Section 2.5, "Net Asset Benchmark" means
(i) with respect to MSC, $2,415,000, (ii) with respect to MSC-UK, $313,500 and
(iii) with respect to Anacon, $250,000.
2.6 Allocation of Purchase Price. The final allocation of the
----------------------------
Purchase Price among the Assets shall reflect the book value of the Assets as
shown on the Closing Balance Sheets. The
12
<PAGE>
Buyer and the Sellers each shall report the federal, state, provincial, foreign
and local income and other tax consequences of the transaction contemplated
hereby in a manner consistent with such allocation.
2.7 The Closing. The closing of the transactions contemplated by
-----------
this Agreement (the "Closing") shall occur at the offices of Thermo Electron
Corporation, 81 Wyman Street, Waltham, Massachusetts, at 10:00 a.m. on the date
set forth in the first paragraph of this Agreement (the "Closing Date").
2.8 Deliveries by the Sellers to the Buyer. At the Closing, the
--------------------------------------
Sellers shall deliver, or cause to be delivered, to the Buyer, or any Subsidiary
of the Buyer designated by the Buyer for this purpose:
(a) such executed assignments, patent assignments, trademark
assignments, bills of sale, certificates of title, or other documents, each
dated the Closing Date, as shall be necessary, in the reasonable opinion of
Buyer and its counsel to transfer to the Buyer all of the Sellers' right, title
and interest in and to the Assets; and
(b) an opinion of Bingham, Dana & Gould, counsel to the
Sellers, in the form attached hereto as Exhibit C;
---------
(c) consents to the assignment of the Contracts listed on
Exhibit D; and
- ---------
(d) the Lease.
2.9 Deliveries by the Buyer to the Sellers. At the Closing, the
--------------------------------------
Buyer shall deliver to the Sellers:
(a) the Purchase Price less the retention described in
Section 2.10 by wire transfer to the account(s) designated by the Sellers; and
(b) an executed assumption agreement and such other
documents, each dated as of the Closing Date, as shall be necessary, in the
reasonable opinion of the Sellers and their counsel, for the assumption by the
Buyer of all of the Assumed Liabilities.
(c) an opinion of Seth H. Hoogasian, general counsel of the
Buyer, in the form attached hereto as Exhibit E.
---------
2.10 Escrow. For the purpose of providing security for the
------
obligations of the Sellers and the Principals under section 5.2, $1,350,000 (the
"Escrow Amount") shall be withheld from the Purchase Price delivered at Closing
and shall be placed in an escrow account with an escrow agent (the "Agent")
satisfactory to the parties. On the first anniversary of the Closing Date, the
Representative may withdraw for distribution to the Sellers, as their interests
appear, 50% of the Escrow Amount, together with interest earned on such portion,
less the amount of any unsatisfied claims for indemnification made by the Buyer
prior to such first anniversary. On the second
13
<PAGE>
anniversary of the Closing, the Representative may withdraw the remainder of the
Escrow Amount, together with any interest thereon, for distribution to the
Sellers, as their interests appear, less the amount of any unsatisfied claims
for indemnification made by the Buyer on or prior to such second anniversary.
Any portion of the Escrow Amount that cannot be withdrawn from the escrow
account due to pending claims by the Buyer for indemnification, shall remain in
the escrow account until the resolution of such claims by judgment of a court
from which no appeal can be made, decision of an arbitrator or agreement of the
Buyer and the Representative.
3. REPRESENTATIONS
The Sellers represent and warrant to Buyer as follows:
3.1 Organization and Good Standing.
------------------------------
(a) Each of the Sellers is a corporation duly organized,
validly existing, and in good standing under the laws of the state or other
jurisdiction of its incorporation or organization, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts. Each of the Sellers is duly qualified to
do business as a foreign corporation and is in good standing under the laws of
each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to so qualify,
individually or in the aggregate, would not have a Material Adverse Effect.
(b) Each of the Sellers has delivered to Buyer copies of its
Organizational Documents, as currently in effect.
3.2 Authority; No Conflict.
----------------------
(a) This Agreement constitutes the legal, valid, and binding
obligations of the Sellers, enforceable against them in accordance with its
terms.
(b) Except as set forth in Part 3.2 of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time): (i)
contravene, conflict with, or result in a violation of (A) any provision of the
Organizational Documents of any of the Sellers, or (B) any resolution adopted by
the board of directors or the stockholders of any of the Sellers; (ii)
contravene, conflict with, or result in a violation of, or give any Governmental
Body or other Person the right to challenge any of the Contemplated Transactions
or to exercise any remedy or obtain any relief under, any Legal Requirement or
any Order to which any of the Sellers, or any of the assets owned or used by any
of the Sellers, may be subject; (iii) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract;
(iv) result in the imposition or creation of any Encumbrance upon or with
respect to any of the assets
14
<PAGE>
owned or used by any of the Sellers; or (v) entitle any employee or other person
to severance or other payments by any of the Sellers or create any other
obligation to an employee or other person, including any increase in benefits.
(c) Except as set forth in Part 3.2 of the Disclosure Letter,
none of the Sellers will be required to give any notice to or obtain any Consent
from any Person in connection with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated Transactions.
3.3 Subsidiaries. Set forth in Part 3.3 of the Disclosure Letter is
------------
a list of all Subsidiaries of the Sellers, including, with respect to each
Subsidiary, its jurisdiction of incorporation. All of the outstanding capital
stock of each Subsidiary has been duly authorized and validly issued, is fully
paid, nonassessable and free of preemptive rights, and is owned beneficially and
of record by the respective Seller or by another Subsidiary of a Seller free and
clear of any Encumbrance or restriction of any nature, including, without
limitation, any restriction on transfer or voting. No shares of any Subsidiary's
capital stock are reserved for issuance, and there are no options, warrants,
convertible instruments or other rights, agreements or commitments, contingent
or otherwise, obligating a Subsidiary to issue, sell or purchase shares of
capital stock. None of the Sellers is a partner or joint venturer with any other
person. None of the Sellers is subject to any obligation, contingent or
otherwise, to provide funds to or make an investment (in the form of a loan,
capital contribution or otherwise) in any entity. None of the Sellers has any
equity interest in any corporation, partnership or other business entity other
than the Subsidiaries listed on the Disclosure Letter. Each Subsidiary is in
good standing under the laws of its jurisdiction of incorporation and has all
requisite power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted. The Sellers have delivered
to Buyer complete and correct copies of the Organizational Documents of each
Subsidiary, as amended. Each Subsidiary is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of the properties owned, operated or leased by it or the
nature of its activities is such that qualification is required by applicable
laws, except where the failure to so qualify would not, individually or in the
aggregate, have a Material Adverse Effect. All jurisdictions where the
Subsidiaries are qualified as foreign corporations or are required to be so
qualified are listed on Part 3.3 of the Disclosure Letter.
3.4 Financial Statements. Each Seller has delivered to Buyer: (a) an
--------------------
unaudited consolidated balance sheet of such Seller as at December 31, 1994
(each a "1994 Balance Sheet"), and the related unaudited statement of income and
cash flows for the fiscal year then ended (each a "1994 Income Statement") and
(b) an unaudited balance sheet of such Seller as at September 31, 1995 (each a
"September Balance Sheet") and the related unaudited statement of income and
cash flows for the nine months then ended (each a "September Income Statement").
The 1994 Balance Sheets, September Balance Sheets, 1994 Income Statements and
September Income Statements are referred to collectively as the "Financial
Statements". The Financial Statements fairly present the financial condition and
the results of operations and cash flows of the Sellers as at the respective
dates of and for the periods referred to therein all in accordance with GAAP,
except that the September Balance Sheets are subject to normal year-end
adjustments. The
15
<PAGE>
Financial Statements reflect the consistent application of such accounting
principles throughout the periods involved.
3.5 Books and Records. The books of account, minute books, and
-----------------
other records of the Sellers, all of which have been made available to Buyer,
are complete and correct in all material respects.
3.6 Title to Properties; Encumbrances. Except as set forth in part
---------------------------------
3.6 of the Disclosure Letter, the Sellers have valid and legally enforceable
title to all of the Assets free and clear of any Encumbrances whatsoever, and
the consummation of the Contemplated Transactions will vest in Buyer all of the
Sellers' right, title and interest in and to the Assets.
3.7 Accounts Receivable. All accounts receivable of the Sellers that
-------------------
are reflected on the September Balance Sheets (except for those collected in
full prior to the Closing Date) or on the accounting records of the Sellers as
of the Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date and except as set forth on Part 3.7 of the Disclosure Letter, to
the Knowledge of the Sellers, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective reserves shown on the
September Balance Sheets or on the accounting records of the Sellers as of the
Closing Date. Except as set forth on Part 3.7 of the Disclosure Letter, none of
the Sellers has received notice that there is any contest, claim, or right of
set-off with any maker of an Account Receivable relating to the amount or
validity of such Account Receivable. The Sellers do not have any accounts
receivable from Moisture Systems Consolidated Corporation and MSC does not have
any accounts receivable from MSC-UK which were assigned to MSC from Moisture
Systems Consolidated Corporation.
3.8 Taxes. Except as set forth in Part 3.8 of the Disclosure
-----
Letter:
Each of the Sellers has accurately prepared and duly and timely
filed all Tax Returns that it was required to file. All such Tax Returns were
correct and complete in all material respects. All Taxes owed by the Sellers
have been paid when due, other than those being contested in good faith and
where adequate reserves (determined in accordance with GAAP) have been
established therefor. All Taxes of any of the Sellers attributable to Tax
periods or portions thereof ending on or prior to the Closing Date, including
Taxes that may become payable by any of the Sellers in future periods in respect
of any transactions or sales occurring on or prior to the Closing Date, that
have not yet been paid have, in the aggregate, been adequately reflected as a
liability on the books of the Sellers in accordance with GAAP. None of the
Sellers is currently being audited or examined by any Governmental Body, nor
have any deficiencies for any Tax been asserted against any of the Sellers. No
claim or inquiry with respect to any material amount of Taxes has been made
within the past seven years by an authority in a jurisdiction where any of the
Sellers did not file Tax Returns that it is or may be subject to any Tax by that
jurisdiction. Without limiting the generality of the foregoing, each of the
Sellers has withheld or collected and duly paid all Taxes required to have been
withheld or collected and paid in connection with
16
<PAGE>
payments to foreign persons, sales and use Tax or Value Added Tax obligations,
and amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other person.
3.9 Employee Benefits. Part 3.9 of the Disclosure Letter contains a
-----------------
true, correct and complete list of all benefit plans ERISA) and all pension,
benefit, profit sharing, retirement, deferred compensation, welfare, insurance,
disability, bonus, vacation pay, severance pay and other similar plans, programs
and agreements, whether reduced to writing or not, relating to any of the
employees of any of the Sellers (the "Plans") and, except as set forth in Part
3.9 of the Disclosure Letter, none of the Sellers has any obligations,
contingent or otherwise, past or present, under applicable law or the terms of
any Plan. With respect to all Plans, each of the Sellers is in compliance with
all applicable Legal Requirements, including ERISA. Each of the Sellers has
performed all material obligations required to be performed by it under, and is
not in material violation of, and there has been no material default or
violation by any other party with respect to, any of the Plans. There are no
pending or, to the Knowledge of the Sellers, Threatened Proceedings by employees
or former employees of any of the Sellers, or beneficiaries or spouses of any of
the above, involving any Plan (other than routine, undisputed claims for
benefits). The Sellers have provided the Buyer with copies of each Plan that is
in writing and with a written summary of each oral Plan. Except for MSC's 401(k)
plan, no Plan is an "employee pension benefit plan" as such term is defined in
Section 3(2) of ERISA. None of the Sellers nor any ERISA Affiliate (as defined
below) contributes to or has an obligation to contribute to or has contributed
to or had an obligation to contribute to within the past six years, a
"multiemployer" plan as defined in Section 4001(a)(3) of ERISA. None of the
Sellers nor any ERISA Affiliate has withdrawn from a multi-employer plan in a
complete or partial withdrawal that resulted in any unsatisfied employer
liability. None of the Sellers contributes to an employee pension benefit plan
that is subject to Section 412 of the Code or Title IV of ERISA. "ERISA
Affiliate" means an entity which is a member of (i) a controlled group of
corporations (as defined in Section 414(b) of the Code), (ii) a group of trades
or businesses under common control (as defined in Section 414(c) of the Code),
or (iii) an affiliated service group (as defined in Section 414(m) of the Code
or the regulations under Section 414(o) of the Code), any of which includes any
of the Sellers.
3.10 Compliance with Legal Requirements;
----------------------------------
(a) Except as set forth in Part 3.10 of the Disclosure
Letter: (i) each of the Sellers is, and at all times since January 1, 1991 has
been, in compliance with each Legal the conduct or operation of its business or
the ownership or use of any of its assets; (ii) no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
constitute or result in a violation by any of the Sellers of, or a failure on
the part of any of the Sellers to comply with, any Legal Requirement; (iii) none
of the Sellers has received, at any time since January 1, 1991, any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible, or potential violation of,
or failure to comply with, any Legal Requirement. Notwithstanding anything
herein to the contrary, the Sellers make no representation or warranty with
respect to the applicability of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, to the Contemplated Transactions.
17
<PAGE>
(b) The Sellers have obtained all Governmental
Authorizations necessary for the conduct of their respective businesses as
currently conducted. Except as set forth in Part 3.10 of the Disclosure Letter:
(i) each of the Sellers is, and at all times since January 1, 1991 has been, in
compliance in all material respects with each such Governmental Authorization,
(ii) no event has occurred or circumstance exists that may (with or without
notice or lapse of time) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any such
Governmental Authorization; (iii) none of the Sellers has received, at any time
since January 1, 1991, any notice or other communication (whether oral or
written) from any such Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of or failure to comply with
any term or requirement of any such Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any such Governmental
Authorization; and (iv) the rights of the Sellers under such Governmental
Authorizations shall not be affected by the consummation of the Contemplated
Transactions. Notwithstanding anything herein to the contrary, the Sellers make
no representation or warranty with respect to the applicability of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, to the Contemplated
Transactions.
3.11 Legal Proceedings; Orders.
-------------------------
(a) Except as set forth in Part 3.11 of pending Proceeding:
(i) that has been commenced by or against any of the Sellers or that otherwise
relates to or may the assets owned or used by, any of the Sellers, or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To the
Knowledge of the Sellers, (A) no such Proceeding has been Threatened, and (B) no
event has occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Proceeding.
(b) Except as set forth in Part 3.11 of the Disclosure
Letter there is no Order to which any of the Sellers, or any of the assets owned
or used by any of the Sellers is subject. Each of the Sellers is in full
compliance with all of the terms and requirements of each Order to which it, or
any assets owned or used by it, is subject.
3.12 Absence of Certain Changes and Events. Except as set forth in
-------------------------------------
Part 3.12 of the Disclosure Letter, since the Balance Sheet Date, each of the
Sellers has conducted its business only in the Ordinary Course of Business and
there has not been any:
(a) except in the Ordinary Course of Business, payment or
increase by any of the Sellers of any bonuses, salaries, commissions or other
compensation to any stockholder, director, officer, or employee or entry into
any employment, severance, or similar Contract with any director, officer, or
employee;
18
<PAGE>
(b) adoption of, or, except in the Ordinary Course of
Business, increase in the payments to or benefits under, any profit sharing,
bonus, deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any employees of any of the Sellers;
(c) damage to or destruction or loss of any asset or
property of any of the Sellers, whether or not covered by insurance, having a
Material Adverse Effect;
(d) except in the Ordinary Course of Business, sale (other
than sales of inventory in the Ordinary Course of Business), lease, or other
disposition of any asset or property of any of the Sellers or mortgage, pledge,
or imposition of any Encumbrance on any asset or property of any of the Sellers;
(e) cancellation or waiver of any claims or rights with a
value to any of the Sellers in excess of $25,000;
(f) material change in the accounting methods used by any of
the Sellers;
(g) material adverse change in the financial condition,
assets, liabilities, earnings, business or prospects of the Sellers, taken as a
whole;
(h) indebtedness or other liability or obligation (whether
absolute, accrued, contingent or otherwise) incurred, or other transaction
(except that reflected in this Agreement) engaged in, by any of the Sellers,
except those in the Ordinary Course of Business which are, individually and in
the aggregate to one group of related parties, less than $25,000 in amount;
(i) acquisition of any assets other than in the Ordinary
Course of Business;
(j) any material reduction in the rate of, or gross margins
associated with, bookings or orders for the products or services of the Sellers,
taken as a whole; or
(k) agreement, whether oral or written, by any of the
Sellers to do any of the foregoing.
3.13 Contracts; No Defaults.
----------------------
(a) Part 3.13(a) of the Disclosure Letter contains a
complete and accurate list, and the Sellers have delivered to Buyer true and
complete copies of, each of the following Applicable Contracts: (i) each
agreement that involves aggregate future payments by any of the Sellers of more
than $25,000; (ii) each distributorship, sales agency, franchise, joint venture
or partnership agreement; (iii) each agreement not made in the ordinary course
of business which is to be performed after the Closing; (iv) each outstanding
commitment to make a capital expenditure, capital addition or capital
improvement involving an amount in excess of $20,000; (v) each real or personal
property lease; (vi) each agreement relating to the loan of money or
availability of credit to or from any of the Sellers; (vii) each agreement
limiting the freedom of any
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of the Sellers to compete in any line of business or with any Person; (viii)
each written agreement, contract, arrangement or understanding between any of
the Sellers and any present or former employee; (ix) each license agreement
relating to patents, trademarks, know-how or other intellectual property,
whether as licensee or licensor; (x) each collective bargaining agreement or
other contract or commitment to or with any labor union or other group of
employees; (xi) each mortgage, pledge, security, title retention, or similar
agreement encumbering any of the Assets; (xii) each agreement providing for
payments to or by any Person based on sales, purchases, revenues, profits or
assets; (xiii) each guaranty or similar undertaking with respect to the
obligations of any other Person; (xiv) each agreement relating to the
acquisition or disposition of significant assets, businesses or companies within
the past five years; and (xv) each other agreement which cannot be terminated by
the Sellers within one year after the date hereof without penalty or under which
the consequences of a default or termination would have a Material Adverse
Effect.
(b) Except as set forth in Part 3.13(b) of the Disclosure
Letter, to the Knowledge of the Sellers, each Contract identified or required to
be identified in Part 3.13(a) of the Disclosure Letter is in full force and
effect and is valid and enforceable in accordance with its terms. Except as set
forth in Part 3.13(b) of the Disclosure Letter and except where non-compliance
would not result in a Material Adverse Effect: (i) each of the Sellers is, and
at all times since January 1, 1991 has been, in compliance with all applicable
terms and requirements of each Applicable Contract; (ii) each other Person that
has any obligation or liability under any Applicable Contract is, and at all
times since January 1, 1991 has been, in compliance with all applicable terms
and requirements of such Applicable Contract; and (iii) none of the Sellers has
given to or received from any other Person, at any time since January 1, 1991,
any notice or other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach of, or default
under, any Applicable Contract.
(c) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or payable to any
of the Sellers under Applicable Contracts with any Person having the contractual
or statutory right to demand or require such renegotiation and no such Person
has made written demand for such renegotiation.
3.14 Insurance. Part 3.14 of the Disclosure Letter sets forth a list
---------
(including the name of the insurer, the name of the policyholder, the name of
each insured, the policy number and periods of coverage, and the scope of
coverage) of all policies of fire, theft, casualty, liability, burglary,
fidelity, workers compensation, business interruption, environmental, product
liability, automobile and other forms of insurance under which any of the
Sellers is the beneficiary. None of the Sellers has received notice from any
insurer under any such policy disclaiming coverage or canceling or materially
amending any such policy. Such policies or extensions or renewals thereof in
such amounts will be outstanding and in full force without interruption until
the Closing Date. The Sellers have paid all premiums due, and have otherwise
performed all of their respective obligations under, each such policy. The
Sellers have given proper and timely notice to the insurer of all claims that
may be insured under such policies.
3.15 Environmental Matters. Except as set forth in Part 3.15 of the
---------------------
Disclosure Letter:
20
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(a) To the knowledge of the Sellers, the Sellers are in full
compliance with all Environmental Laws. None of the Sellers has any basis to
expect, nor has any of them or any other Person for whose conduct they are or
may be held to be responsible received, any actual or Threatened order, notice,
or other communication from (i) any Governmental Body or private citizen acting
in the public interest, (ii) the current or prior owner or operator of any
Facilities, or (iii) any other Person, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or Threatened
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which any of the Sellers has had
an interest, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, transported or processed by any of the Sellers, or any other
Person for whose conduct they are or may be held responsible, or from which
Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of any of the
Sellers, Threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect to or affecting any of
the Facilities or any other properties and assets (whether real, personal, or
mixed) in which any of the Sellers has or had an interest.
(c) To the knowledge of the Sellers, none of the Sellers nor
any other Person for whose conduct they are or may be held responsible, has any
Environmental, Health, and Safety Liabilities with respect to the Facilities or
any other properties and assets (whether real, personal, or mixed) in which any
of the Sellers (or any predecessor) has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any such other
property or assets.
(d) To the knowledge of the Sellers, there has been no
Release or, to the Knowledge of any of the Sellers, Threat of Release, of any
Hazardous Materials at or from the Facilities or at any other locations where
any Hazardous Materials were generated, manufactured, refined, transferred,
transported, produced, imported, used, or processed from or by the Facilities,
or from or by any other properties and assets (whether real, personal, or mixed)
in which any of the Sellers has or had an interest, or to the Knowledge of any
of the Sellers any geologically or hydrologically adjoining property, whether by
the Sellers or any other Person.
(e) The Sellers have delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by any of the Sellers pertaining to Hazardous Materials
or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by any of the Sellers, or any other Person for whose conduct they are
or may be held responsible, with Environmental Laws or Occupational Safety and
Health Laws.
(f) Part 3.15 of the Disclosure Letter sets forth or
describes in reasonable detail: (i) all landfills, surface impoundments, pits,
underground injections wells, waste piles,
21
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incinerators and any other units used by any of the Sellers for the handling,
treatment, recycling, storage or disposal of Hazardous Materials at any Facility
and (ii) all underground or above-ground storage tanks at the Facilities or on
any property owned or operated at any time by any of the Sellers.
3.16 Labor Disputes; Compliance. Since January 1, 1991, none of the
--------------------------
Sellers has been a party to any collective bargaining Contract or other labor
Contract. Since January 1, 1991, there has not been, there is not presently
pending or existing, and to the Knowledge of the Sellers or the Principals
there is not Threatened any strike, slowdown, picketing, work stoppage, labor
arbitration or proceeding in respect of the grievance of any employee,
application or complaint filed by an employee or union with the National Labor
Relations Board or any comparable Governmental Body, organizational activity,
or other labor dispute against or affecting any of the Sellers or their
premises, and no application for certification of a collective bargaining agent
is pending or to the Knowledge of the Sellers is Threatened. There is no
lockout of any employees by any of the Sellers, and no such action is
contemplated by any of the Sellers. There is no recognized trade union in
respect of the UK Employees.
3.17 Intellectual Property. The Sellers own or have adequate license
---------------------
to use, free and clear of any Encumbrance or obligation of payment, all patents,
trademarks, trade names, service marks, branch names and copyrights, and
applications therefor, used in the conduct of the business or the use of which
is necessary for the conduct of the business of the Sellers as presently
conducted (the "Intangibles"). Set forth in Part 3.17 of the Disclosure Letter
is a complete list and summary description of all Intangibles and licenses or
sublicenses entered into or granted by or to the Sellers with respect thereto
and the countries of registration. The Sellers own or possess adequate rights to
use, free and clear of any Encumbrance or obligation of payment, all inventions,
technology, technical know-how, processes, designs, trade secrets, vendor and
customer lists and other confidential information required for or used in the
business of the Sellers as presently conducted ("Trade Secrets"). No person has
made any claim or demand upon any of the Sellers pertaining to, and no
proceedings are pending or to the Knowledge of the Sellers Threatened, which
challenge the rights of any of the Sellers in respect of any Intangibles or
Trade Secrets. No Intangible owned or used by any of the Sellers is subject to
any Order. To the Knowledge of the Sellers, none of the Sellers has infringed or
engaged in the unauthorized use of, or violated any confidentiality agreement
that pertains to, any patent, trademark, trade name, service mark, brand name or
copyright, or any invention, technology, technical know-how, process, design,
trade secret or other intellectual property of another Person. To the Knowledge
of the Sellers no third party is engaged in the infringement or unauthorized use
of any Intangible or Trade Secret.
3.18 Relationships with Related Persons. Except as set forth in Part
----------------------------------
3.18 of the Disclosure Letter, no Related Person of any of the Sellers has any
interest in any property (whether real, personal, or mixed and whether tangible
or intangible) used in or pertaining to the business of any of the Sellers.
Except as set forth in Part 3.18 of the Disclosure Letter, no Related Person of
any of the Sellers owns of record or as beneficial owner, an equity interest or
any other financial or profit interest in any Person that (i) has business
dealings or a financial interest in any transaction with any of the Sellers, or
(ii) engages in a Competing Business except
22
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for ownership of less than one percent of the outstanding capital stock of any
Competing Business that is publicly traded on any recognized exchange or in the
over-the-counter market. Except as set forth in Part 3.18 of the Disclosure
Letter, none of the Sellers nor any Related Person of any of the Sellers is a
party to any Contract with, or has any claim or right against, any of the
Sellers.
3.19 Brokers or Finders. None of the Sellers or the Principals or
------------------
their respective agents have incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with the Contemplated Transactions.
3.20 No Termination of Relationship. To the Knowledge of the Sellers
------------------------------
no relationship between any of the Sellers and a distributor, customer,
supplier, lender, employee or other person will be terminated or adversely
affected as a result of the execution of this Agreement or the performance of
the Contemplated Transactions.
3.21 Customers and Suppliers. No material supplier of the Sellers
-----------------------
has indicated within the past year that it will stop, or materially decrease the
rate of, supplying materials, products, or services to the Sellers and no
material customer of the Sellers has indicated within the past year that it will
stop, or materially decrease the rate of, buying materials, products or services
from the Sellers. Part 3.21 of the Disclosure Letter sets forth a list of (a)
each customer that accounted for more than 5% of the combined revenues of the
Sellers during the last fiscal year and (b) each supplier that is the sole
supplier of any significant product or component to the Sellers.
3.22 Recalls. No products of any of the Sellers have been recalled
-------
since January 1, 1991 and, to the Knowledge of the Sellers there is no basis for
any such recall.
3.23 Backlog. The backlog of MSC as of the Closing Date is greater
-------
than or equal to $1,750,000. For purposes of this Section 3.23, "backlog" means
all firm orders and commitments for MSC's products and services which orders and
commitments contain terms and conditions that are consistent with MSC's
practices over the past year.
3.24 Inventories. All Inventories (as defined below) are of a
-----------
quality and quantity usable and salable in the Ordinary Course of Business.
Items included in such Inventories are carried on the books of the Sellers at
the lower of cost or market and, with respect to Inventories existing as of the
Balance Sheet Date, are reflected on the September Balance Sheets net of
applicable reserves for excess and obsolete items. Such reserves have been
determined in accordance with past practices and conform to generally accepted
accounting principles consistently applied. The term "Inventories" includes all
stock of raw materials, work-in-process and finished goods held by the Sellers,
for manufacturing, assembly, processing, finishing, and sale or resale to
others.
3.25 Product and Service Warranties. The Sellers have provided the
------------------------------
Buyer with copies of the current standard warranty used for each of the products
and services of the Sellers. Part 3.25 of the Disclosure Letter also describes
any and all other product or service warranties made by or on behalf of the
Sellers that deviate materially from the current standard warranties and which
remain in effect on the date hereof, or pursuant to which any of the Sellers
have any remaining obligations.
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3.26 Authority of Representative. The Representative has all
---------------------------
necessary legal power and authority to act on behalf of the Sellers and the
Principals as provided herein.
3.27 No Additional Representations and Warranties. Except as
--------------------------------------------
specifically set forth in this Agreement (including the Disclosure Letter), the
Sellers and Principals disclaim all representations and warranties, whether
express or implied, written or oral.
3.28 Sufficiency of Assets. Except as set forth in Part 3.28 of the
---------------------
Disclosure Letter, the assets owned by the Sellers are the only assets
necessary for the continued conduct of the businesses of the Sellers after the
Closing in substantially the same manner as conducted prior to the Closing.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly
------------------------------
organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts.
4.2 Authority; No Conflict.
----------------------
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Buyer has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement and to perform its obligations under this Agreement.
(b) Except as set forth in Exhibit D, neither the execution
---------
and delivery of this Agreement by Buyer nor the consummation or performance of
any of the Contemplated Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to: (i) any provision of Buyer's Organizational Documents; (ii) any
resolution adopted by the board of directors or the stockholders of Buyer; (iii)
any Legal Requirement or Order to which Buyer may be subject; or (iv) any
Contract to which Buyer is a party or by which Buyer may be bound.
Except as set forth in Exhibit D, Buyer is not and will not be required to
---------
obtain any Consent from any Person in connection with the execution and
delivery of this Agreement by Buyer or the consummation or performance of any
of the Contemplated Transactions by Buyer.
4.3 Certain Proceedings. There is no pending Proceeding that has
-------------------
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
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4.4 Brokers and Finders. Buyer and its officers and agents have
-------------------
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold the Sellers and the Principals
harmless from any such payment alleged to be due by or through Buyer as a result
of the action of Buyer or its officers or agents.
5. INDEMNIFICATION; REMEDIES
5.1 Survival. Subject to Section 5.4, all representations,
--------
warranties, covenants, and obligations in this Agreement, the Disclosure Letter
and any other certificate or document delivered pursuant to this Agreement will
survive the Closing; the right to indemnification, reimbursement, or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
Knowledge acquired (or capable of being acquired) about the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant,
or obligation.
5.2 Indemnification and Reimbursement By the Sellers and the
--------------------------------------------------------
Principals. The Sellers and the Principals will indemnify and hold harmless
- ----------
Buyer, its representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons"), and will reimburse the Indemnified
Persons, for any loss, liability, claim, damage, expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising from or in connection with:
(a) any Breach of any representation or warranty made by any
of the Sellers in this Agreement, the Disclosure Letter, or any other
certificate or document delivered at and in connection with the Closing of the
Contemplated Transactions by any of the Sellers pursuant to this Agreement;
(b) any Breach by any of the Sellers of any covenant or
obligation of any of the Sellers in this Agreement;
(c) any Excluded Liability;
(d) any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any of the Sellers or the
Principals; or
(e) any product liability claim relating to products sold by
any of the Sellers prior to the Closing Date; provided that such claim is not
caused by Buyer's intervening negligence in the service, maintenance or repair
of such product.
5.3 Indemnification and Reimbursement by Buyer. Buyer will
------------------------------------------
indemnify and hold harmless the Sellers and the Principals, and will reimburse
the Sellers and the Principals, for any Damages arising from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this
25
<PAGE>
Agreement, (b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement, (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions or (d) any
Assumed Liabilities.
5.4 Time Limitations. None of the Sellers or the Principals will
----------------
have any liability for indemnification under section 5.2(a) with respect to any
representation or warranty in Sections 3.4, 3.5, 3.7, 3.9, 3.12, 3.14, 3.16,
3.19, 3.20, 3.21, 3.22, 3.23, 3.24 unless on or before March 31, 1997 the
Representative is given notice of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer. None of the
Sellers or the Principals will have any liability for indemnification under
section 5.2(a) with respect to any representation or warranty in Sections 3.8,
3.10, 3.11, 3.13, 3.15, 3.17, 3.18, 3.25, 3.26, unless on or before the second
anniversary of the Closing Date the Representative is given notice of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Buyer. The Sellers and the Principals will have no liability for
indemnification under Section 5.2(a) with respect to Section 3.1, 3.2, 3.3, or
3.6, unless on or before the expiration of the applicable statute of limitations
the Representative is given notice of a claim specifying the factual basis of
that claim in reasonable detail to the extent known by Buyer. A claim for
indemnification or reimbursement under Sections 5.2 (b), (c) or (d) may be made
at any time.
5.5 Limitations on Amount -- Sellers and Principals.
-----------------------------------------------
(a) None of the Sellers or the Principals will have any
liability for indemnification pursuant to Section 5.2(a), (i) at any time with
respect to any claim by the Buyer for less than $5,000 and (ii) until the total
of all Damages with respect to such matters (including claims under $5,000)
exceeds $100,000, and then such liability shall only be for Damages in excess of
$100,000. Notwithstanding any provision herein to the contrary, except for
liability for indemnification with respect to breaches of Sections 3.1, 3.2, 3.3
or 3.6, the maximum aggregate liability of the Sellers and the Principals under
Section 5.2 shall not exceed $6,750,000.
(b) Notwithstanding any provision herein to the contrary,
except for liability for indemnification with respect to breaches of Sections
3.1, 3.2, 3.3 or 3.6, no Principal shall have any liability under section 5.2 in
excess of the amount set forth opposite such Principal's name on Exhibit F
---------
attached hereto. In addition, with respect to any single claim (and subject to
the overall limitation set forth in the preceding sentence) for indemnification,
Dennis Carlson shall not have any liability which is greater than the product of
(i) the amount set forth opposite Dennis Carlson's name on Exhibit F attached
---------
hereto divided by $6,750,000 and (ii) the total amount of the claim for which
Buyer is then seeking indemnification.
5.6 Procedures for Indemnification -- Third Party Claims.
-----------------------------------------------------
(a) Promptly after receipt by an indemnified party under
Section 5.2 or Section 5.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the
26
<PAGE>
indemnifying party of the commencement of such claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is prejudiced by
the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 5.6(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 5 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (A) there is
no finding or admission of any violation of Legal Requirements or any violation
of the rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and (ii) the
indemnifying party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party. Notwithstanding the foregoing, if a customer or a supplier any of the
Sellers asserts that the Buyer is liable to such customer or supplier for a
monetary obligation which may constitute or result in Damages for which the
Buyer may be entitled to indemnification pursuant to this Section 5 and the
Buyer reasonably determines that it has a valid business reason to fulfill such
obligations, then (i) the Buyer shall be entitled to satisfy such obligation
without prior notice to or consent from the Sellers, (ii) the Buyer may make a
claim for indemnification pursuant to this Section 5 and (iii) the Buyer shall
be reimbursed, in accordance with the provisions of this Section 5, for any such
Damages for which it is entitled to indemnification pursuant to the provisions
of this Section 5; provided, however, that if the Buyer makes a claim for
-------- -------
indemnification in accordance with this sentence the Sellers and the Principals
shall not be deemed to have waived any defense to such claim by the Buyer,
notwithstanding the Buyer's prior satisfaction of the obligation for which
indemnification is sought, and it shall not be a defense to the Buyer's claim
for indemnification that the Buyer has satisfied the obligation for which
indemnification is sought.
27
<PAGE>
(c) Notwithstanding the foregoing, if an indemnified
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent.
(d) For purposes of providing any notice required under this
Section 5, the Buyer may treat the Representative as the authorized
representative of all of the Sellers and Principals any notice given to the
Representative shall be deemed given to each Seller and each Principal.
5.7 Procedure for Indemnification -- Other Claims. A claim for
---------------------------------------------
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
6. GENERAL PROVISIONS
6.1 Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
6.2 Public Announcements. Any public announcement or similar
--------------------
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, by the Buyer only with the consent of the Representative,
and by any of the Sellers or the Principals, only with the consent of the Buyer,
none of which consents will unreasonably be withheld. The content of any public
announcement by the Buyer will be subject to review and approval by the
Representative, and the content of any public announcement by any of the Sellers
or the Principals will be subject to review and approval by the Buyer, none of
which approvals will unreasonably be withheld. Sellers and Buyer will consult
with each other concerning the means by which the Sellers' employees, customers,
and suppliers and others having dealings with the Sellers will be informed of
the Contemplated Transactions, and Buyer will have the right to be present for
any such communication.
6.3 Notices. All notices, consents, waivers, and other
-------
communications under this Agreement must be in writing and will be deemed to
have been duly given when actually received or if earlier, one day after deposit
with a nationally recognized overnight delivery service, charges prepaid, or
three days after deposit in the U.S. mail by certified mail, return receipt
requested, postage prepaid, in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers a party may designate by notice to the other parties):
28
<PAGE>
any Seller or the Representative:
Moisture Systems Corporation
117 South Street
Hopkinton, MA 01748-2273
Attention: President
Fax No.: (508) 435-6677
with a copy to:
John J. Concannon III, Esq.
Bingham, Dana & Gould
150 Federal Street
Boston, MA 02110-1726
Fax No.: (617) 951-8736
Buyer:
Thermedics Detection Inc.
220 Mill Road
Chelmsford, MA 01824
Attention: President
Fax No.: (508) 251-2024
with a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02254-9046
Attention: General Counsel
Fax No. (617) 622-1283
6.4 Jurisdiction; Service of Process. Any action or proceeding
--------------------------------
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the
Commonwealth of Massachusetts, County of Middlesex, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of
Massachusetts and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. With respect to MSC-
UK and the Principals, any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Agreement may be brought against
any of the parties in the courts of England and each of MSC-UK, the Principals
and Buyer consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in this
Section 6.4 may be served on any party anywhere in the world.
29
<PAGE>
6.5 Further Assurances. The parties agree (a) to furnish upon
------------------
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
6.6 Waiver. The rights and remedies of the parties to this
------
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
6.7 Entire Agreement and Modification. This Agreement supersedes
---------------------------------
all prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
6.8 Disclosure Letter. In the event of any inconsistency between
-----------------
the statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
6.9 Assignments, Successors, and Third-Party Rights. No party
-----------------------------------------------
hereto may assign any of its, his or her rights under this Agreement without the
prior consent of the other parties except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of Buyer, provided that Buyer
shall remain jointly and severally liable with such Subsidiary for any of
Buyer's obligations hereunder. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
6.10 Severability. If any provision of this Agreement is held
------------
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full
30
<PAGE>
force and effect. Any provision of this Agreement held invalid or unenforceable
only in part or degree will remain in full force and effect to the extent not
held invalid or unenforceable.
6.11 Section Headings; Construction. The headings of Sections in
------------------------------
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Sections" refer to the
corresponding Sections of this Agreement. All words used in this Agreement will
be construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
6.12 Time of Essence. With regard to all dates and time periods set
---------------
forth or referred to in this Agreement, time is of the essence.
6.13 Governing Law. This Agreement will be governed by and construed
-------------
under the laws of the Commonwealth of Massachusetts without regard to conflicts
of laws principles.
6.14 Relief. In the event of a breach of the provisions of this
------
Agreement by a Seller, in addition to any other rights and remedies that Buyer
may have under law or in equity, Buyer shall have the right to specific
performance and injunctive relief, it being acknowledged and agreed that money
damages will not provide an adequate remedy.
6.15 Access to Information. The Sellers shall make available, and
---------------------
direct and authorize their respective independent public accountants to make
available, to the Buyer and to the independent public accountants representing
the Buyer (at no cost to the Buyer), all working papers pertaining to the
examination by the Sellers' accountants of the accounting records of the
Sellers, and shall provide such cooperation as Buyer shall reasonably request in
connection with Buyer's preparation of any financial statements relating to the
businesses of the Sellers required to be included in any filing made by Buyer or
any affiliate of Buyer with the Securities and Exchange Commission pursuant to
the Securities Act or the Exchange Act. For a period of time as may be
reasonably requested, upon written request of a Seller or Principal, Buyer or
its successor shall make or cause to be made available to such Seller or
Principal, as the case may be, all books and records included in the Assets that
are needed by such Seller or Principal for a valid business or financial
purpose, and permit such Seller or Principal to inspect and copy such books and
records upon reasonable notice and at such reasonable times as may be mutually
agreed upon by such Seller or Principal and Buyer and shall be at such Seller's
or Principal's sole cost and expense.
6.16 Solicitation. For a period of two years after of the Sellers or
------------
the Principals shall, either directly or indirectly as a stockholder, investor,
partner, director, officer, employee or in any other capacity, solicit or
attempt to induce any Restricted Employee to terminate his or her employment
with Buyer or any affiliate of the Buyer; provided, however, that it shall not
-------- -------
be a breach of this Section 6.16 for any Seller or Principal to solicit
Restricted Employees by means of general public advertisements. For purposes of
this agreement, a "Restricted Employee" shall mean any person, other than
employees terminated involuntarily by the Buyer, who (i) either (A) hold or have
access to trade secrets or other confidential information relating to the
business of the Sellers or (B) had annual base salary in 1994 of at least
$50,000, and (ii) either (X) was an employee of the Buyer or any affiliate of
the Buyer on either the date of
31
<PAGE>
this Agreement or the Closing Date or (Y) was an employee of any of the Sellers
on either the date of this Agreement or the Closing Date and who is employed by
the Buyer immediately after the Closing.
6.17 Non-Competition.
---------------
(a) For a period of five years after the Closing Date, none
of the Sellers or the Principals shall, either directly or indirectly as a
stockholder, investor, partner, director, officer, employee, consultant or
otherwise, engage in a Competitive Business in any territory. For purposes of
this Agreement, a "Competitive Business" means (i) the development, manufacture,
marketing or sale of any product utilizing near infrared technology which is
competitive with any product manufactured, sold or developed (or under
development) by a Seller on or prior to the Closing Date or (ii) the rendering
or marketing of any service which is competitive with any service rendered or
marketed (or proposed to be rendered or marketed) by a Seller on or prior to the
Closing Date. Buyer acknowledges and agrees that the Principals are and will be
passive investors in Sensortech Systems Inc.
(b) The Sellers and the Principals agree that the duration
and geographic scope of the non-competition provision set forth in this Section
6.17 are reasonable. In the event that any court determines that the duration or
the geographic scope, or both, are unreasonable and that such provision is to
that extent unenforceable, the parties agree that the provision shall remain in
full force and effect for the greatest time period and in the greatest area that
would not render it unenforceable. The parties intend that this non-competition
provision shall be deemed to be a series of separate covenants, one for each and
every county of each and every state of the U.S. and each and every political
subdivision of each and every country outside the U.S. where this provision is
intended to be effective.
6.18 Seniority of Employees. To the extent that length of service is
----------------------
relevant for vesting or benefit calculations or allowances under retirement or
other benefit plans made available to Buyer's employees, any of the Seller's
employees that accept employment with the Buyer shall receive credit for their
years of service with the Sellers.
6.19 United Kingdom Value Added Tax. The Sellers and Buyer intend
------------------------------
that article 5 of the United Kingdom Value Added Tax (Special Provisions) Order
1992 shall apply to the sale of Assets located in the United Kingdom under this
Agreement, so that the sale is treated as neither a supply of goods nor a supply
of services.
6.20 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THERMEDICS DETECTION INC.
By: /s/ John W. Wood Jr.
---------------------------
Name: John W. Wood Jr.
-------------------------
Title: Chairman
------------------------
SELLERS:
MOISTURE SYSTEMS CORPORATION
By: /s/ Roger E. Carlson
---------------------------
Name: Roger E. Carlson
-------------------------
Title: President
------------------------
MOISTURE SYSTEMS LIMITED
By: /s/ John Fordham
---------------------------
Name: John Fordham
-------------------------
Title: Director
------------------------
ANACON CORPORATION
By: /s/ Roger E. Carlson
---------------------------
Name: Roger E. Carlson
-------------------------
Title: President
------------------------
PRINCIPALS:
/s/ Dennis Carlson
------------------------------
Dennis Carlson
/s/ Roger Carlson
------------------------------
Roger Carlson
/s/ John Fordham
------------------------------
John Fordham
33
<PAGE>
Exhibit 2.2
SHARE PURCHASE AGREEMENT
THE UNDERSIGNED:
1. Rutter Holding B.V., a private limited liability company organized under
the laws of The Netherlands, having its registered seat in Enschede, The
Netherlands ("Holding");
2. Thermedics Detection Inc., a company organized under the laws of the
Commonwealth of Massachusetts, having its registered seat in Chelmsford,
Massachusetts, the United States of America ("Thermedics");
3. Mr. R. Rutter, residing at Enschede, The Netherlands ("Mr. Rutter");
4. Reggeborgh Beheer B.V., a private limited liability company organized
under the laws of The Netherlands, having its registered seat in
Rijssen, The Netherlands ("Reggeborgh");
5. Mr. L.L.A. Pover residing at Hengelo, The Netherlands ("Mr. Pover");
(The individuals and the company mentioned in 3, 4 and 5 are indirect
shareholders of Holding, hereafter collectively: the "Holders").
WHEREAS:
A. Mr. Rutter, Reggeborgh and Pover Holding B.V., a private limited
liability company organized under the laws of The Netherlands having its
registered seat in Enschede, The Netherlands, are the holders of the
entire issued and outstanding share capital in Pover Gemeenschappelijk
Bezit B.V., a private limited liability company organized under the laws
of The Netherlands, having its registered seat in Enschede, The
Netherlands ("Pover") and Pover is the holder of the entire issued and
outstanding share capital of Holding;
B. Holding is the holder of the entire issued and outstanding share capital
(the "Shares") in Rutter & Co. B.V., a private limited liability company
organized under the laws of The Netherlands, having its registered seat
in Enschede, The Netherlands ("Rutter");
C. Rutter is the holder of 90% of the issued and outstanding share capital
in Rutter Instrumentation S.A.R.L., a company organized under the laws
of France, having its registered seat in Bry sur Marne, France ("SARL")
and of 50% of the issued and outstanding share capital in Systech B.V.,
a private limited liability company organized under the laws of The
Netherlands, having its registered seat in Enschede, The Netherlands
("BV") (SARL and BV hereafter collectively: the "Group Companies" and
the shares held by Rutter in the Group Companies hereafter: the "Group
Company Shares");
<PAGE>
D. Holding desires to sell and transfer the Shares to Thermedics and
Thermedics desires to purchase and acquire the Shares from Holding
subject to the terms and conditions set forth in this Share Purchase
Agreement (the "Agreement").
HEREBY AGREE AS FOLLOWS:
ARTICLE 1 - SALE AND TRANSFER OF THE SHARES
1.1 Subject to the terms and conditions set out in this Agreement Holding
hereby sells and agrees to transfer the Shares to Thermedics and
Thermedics hereby purchases and agrees to accept transfer of the Shares
from Holding.
1.2 Holding hereby agrees to transfer the Shares to Thermedics through the
execution by the parties on the date of this Agreement of a notarial
deed of transfer in the form of Annex 1.2 hereto, which will be passed
by a civil law notary of Nauta Dutilh in Amsterdam, and the
acknowledgment of the transfer by Rutter.
ARTICLE 2 - PURCHASE PRICE AND PAYMENT
2.1 The purchase price for the Shares shall be US$ 7,000,000 (the "Purchase
Price").
2.2 The Purchase Price shall be paid on the date of this Agreement by
Thermedics transferring an amount of US$ 7,000,000 to the bank account
of Holding with ABN Amro Bank, N.V., account number 62.05.45.771.
ARTICLE 3 - PURCHASE PRICE ADJUSTMENT
Notwithstanding Article 2 above, the Purchase Price shall be adjusted as
follows:
(i) the Purchase Price shall be increased or decreased by the amount by
which the tangible assets minus the liabilities as of the date of this
Agreement (the "Net Tangible Assets") of Rutter are greater than or less
than, as the case may be the equivalent in Netherlands guilders of US$
1,115,000 on the basis of the exchange rate on the date of this
Agreement (the "Closing Date Rate") set forth in the Key Currency Cross
Rates published in the Wall Street Journal (the "Wall Street Chart").
(ii) the Purchase Price shall be decreased by the amount by which Rutter's
backlog on the date of this Agreement is less than the equivalent in
Netherlands guilders of US$ 1,125,000, on the basis of the average
exchange rate between the exchange rate on the date of this Agreement
and the exchange rate on 30 September 1995 (the "Average Rate"), set
forth in the Wallstreet Chart, provided that the adjustment made
pursuant to this Article 3(ii) shall be no greater in the aggregate than
the equivalent in Netherlands guilders of US$
2
<PAGE>
500,000 on the basis of the Closing Date Rate (the "Backlog
Adjustment"). Sales to affiliates shall be disregarded in calculating
backlog for purposes of this Article 3(ii). Affiliates are deemed to be
any person or entity controlling, controlled by or under common control
with Rutter.
ARTICLE 4 - ESTABLISHMENT OF THE NET TANGIBLE ASSET ADJUSTMENT
4.1 For the purpose of establishing the Net Tangible Assets, Thermedics and
its accountants shall prepare a statement of the tangible assets minus
the liabilities (= assets (excluding intangible assets) minus the
liabilities (including provisions)) (the "Net Tangible Assets") of
Rutter as at the date hereof (the "Net Asset Statement") in accordance
with the requirements of all relevant laws and accounting principles
generally accepted in The Netherlands with respect to the preparation of
the annual accounts and applied on a basis consistent with Rutter's
December 31, 1994 and September 30, 1995 balance sheets, and submit such
draft to Holding no later than on 15 March 1996 in order for Holding,
assisted by its accountants Deloitte & Touche ("D&T") to review and to
submit its objections, if any, against such draft to Thermedics within
40 days after the draft has been received by Holding (the "Receipt
Date"). If Holding does not object to the draft Net Asset Statement by
the date which is 40 days after the Receipt Date, then the draft Net
Asset Statement shall be the final Net Asset Statement.
4.2 Should Holding and Thermedics fail to reach agreement on any objection
raised by Holding within 60 days after the Receipt Date (the "Objection
Date"), then the Net Asset Statement shall be determined by an
internationally recognized accounting firm, which shall not be D&T or
Thermedic's accountants (the "Accountants"), chosen by the mutual
agreement of Holding and Thermedics.
4.3 If Holding and Thermedics fail to agree on the appointment of the
Accountants within 30 days after the Objection Date, then Holding and
Thermedics - and if one of the parties fails to cooperate, the other
party on behalf of both parties - shall request the Chairman of the
Netherlands Institute of Registered Accountants ("NIVRA") to appoint
such Accountants.
4.4 Holding and Thermedics shall within 14 days after the appointment of the
Accountants submit the Net Asset Statement as well as statements of
their respective positions in writing to the Accountants (the
"Submission Date").
4.5 Holding and Thermedics undertake to procure that the Accountants shall
notify Holding and Thermedics of their decision as promptly as possible
and in any event no later than 60 days after the Submission Date.
4.6 The fees and expenses arising out of the engagement of the Accountants
shall be borne equally by Holding and Thermedics.
3
<PAGE>
ARTICLE 5 - ESTABLISHMENT OF THE BACKLOG ADJUSTMENT
Should Holding and Thermedics fail to reach agreement on the amounts
referred to in Article 3 (ii) within 30 days after the date of this Agreement,
then the Backlog Adjustment shall be determined by the Accountants in
accordance with Article 4.2 through 4.6 of this Agreement.
ARTICLE 6 - PAYMENT OF THE ADJUSTMENTS
6.1 Within two days after the Net Asset Statement has been established in
accordance with Article 4 of this Agreement,
(a) in the event the Net Tangible Assets are less than the equivalent
in Netherlands guilders of US$ 1,115,000 on the basis of the
Closing Date Rate, Holding, or the Holders pro rata, shall pay to
Thermedics an amount in Netherlands guilders equal to the
difference between (i) the equivalent in Netherlands guilders of
US$ 1,115,000 on the basis of the Closing Date Rate and (ii) the
Net Tangible Assets as shown on the Net Asset Statement to the bank
account of Thermedics with [ ] bank, account number [ ]; or
(b) in the event the Net Tangible Assets are greater than the
equivalent in Netherlands guilders of US$ 1,115,000 on the basis of
the Closing Date Rate, Thermedics shall pay to Holding an amount in
Netherlands guilders equal to the difference between (i) the Net
Tangible Assets as shown on the Net Asset Statement and (ii) the
equivalent in Netherlands guilders of US$1,115,000 on the basis of
the Closing Date Rate to the bank account of Holding as mentioned
in Article 2.2 of this Agreement.
6.2 Within two days after the Backlog Adjustment has been established in
accordance with Article 5 of this Agreement, Holding or the Holders shall
pay to Thermedics the Backlog Adjustment.
ARTICLE 7 - HOLDING AND HOLDERS' REPRESENTATIONS AND WARRANTIES
Holding and the Holders represent and warrant to Thermedics that each of the
matters set forth in Article 7.1 through 7.70 hereof ("Holding and Holders'
Representations and Warranties") are true and correct on the date of this
Agreement.
AUTHORITY
7.1 Holding and the Holders have all requisite power and authority to
execute this Agreement and to consummate the transactions contemplated
hereby.
CORPORATE STANDING
4
<PAGE>
7.2 Rutter is duly organized and validly existing under the laws of the
Netherlands. The most recent articles of association of Rutter are
attached as Annex 7.2 hereto. There have been to date no resolutions to
amend such articles of association nor are presently any such
resolutions in the course of preparation. No petition for bankruptcy in
respect of Rutter has been filed and Rutter has not been declared
bankrupt, nor has it filed for or been granted suspension of payment.
Rutter has not been dissolved and no resolution to dissolve Rutter has
been adopted and there is no action or request pending to accomplish
such dissolution.
7.3 Rutter does not hold shares or other equity interest in any other
business entity other than the Group Companies. Rutter has no branches
nor has it owned any branches over the last three years.
7.4 The Group Companies are duly organized and validly existing under the
laws of the countries in which they are incorporated. The most recent
articles of association of each of the Group Companies are attached as
Annex 7.4 hereto. There have been to date no resolutions to amend such
articles of association nor are presently any such resolutions in the
course of preparation. No petition for bankruptcy in respect of any of
the Group Companies has been filed and none of the Group Companies has
been declared bankrupt, nor has any of the Group Companies filed for or
been granted suspension of payment. None of the Group Companies has been
dissolved and no resolution to dissolve any of the Group Companies has
been adopted and there is no action or request pending to accomplish
such dissolution.
MANAGING DIRECTORS; POWERS OF ATTORNEY
7.5 The extract from the trade register with respect to Rutter dated 9
January 1996, attached hereto as Annex 7.5 is correct as of the date
hereof and the information contained therein has not been modified by
any later filing. Rutter has no managing directors ("statutair
directeuren"), supervisory directors ("commissarissen") or proxyholders
("gevolmachtigden") other than the persons named in the extract from the
trade register.
7.6 The Group Companies have no managing directors, supervisory directors,
or proxyholders other than the persons named in Annex 7.6 hereto.
7.7 The representations and warranties contained in this Article 7 apply
mutatis mutandis to the Group Companies and to the Group Company Shares
insofar as not already explicitly provided for herein.
SHARES
7.8 Holding has full right and title to the Shares. Apart from the
obligations resulting from this Agreement there are no obligations with
respect to any of the Shares.
5
<PAGE>
7.9 The authorized share capital of Rutter consists of 500 shares, with a
nominal value of NLG 1,000 each, numbered 1 through 500 of which 451
shares have been validly issued and fully paid up and are free from
pledges, attachments, rights of usufruct and any other charges, except
for the pre-emptive rights and blocking arrangements contained in the
articles of association of Rutter and except as mentioned in Annex 7.9
hereto.
7.10 There are no share certificates in respect of the Shares and no
depository receipts for shares have been issued in respect of Rutter
except as mentioned in Annex 7.10 hereto. Holding is entitled without
any restriction to sell and transfer the Shares.
7.11 Rutter is not under any obligation to issue any further shares in its
capital and no resolution to that effect has been passed. No option or
other right (contingent or otherwise) to purchase or acquire any shares
in Rutter has been resolved upon or granted, except as mentioned in
Annex 7.11 hereto.
7.12 There are no shareholder or voting agreements pertaining to shares in
Rutter, except as mentioned in Annex 7.12 hereto.
7.13 The shareholder's register of Rutter, a copy of which is attached as
Annex 7.13 hereto, correctly and completely reflects the current and
former shareholders of Rutter and all particulars required to be
contained by such register.
7.14 Since 30 September 1995 no (interim) dividend or other distribution has
been declared on the Shares save as disclosed in Annex 7.14.
GROUP COMPANY SHARES
7.15 The authorized and issued share capital of each of the Group Companies
consists of the number of shares set forth in Annex 7.15 hereto. Rutter
has completed the transfer of the shares in Rutter Eicholzer A.G., a
company organized under the laws of Switzerland ("AG"), having its
registered seat in Zug, Switzerland and in Rutter and Co. GbmH, a
company organized under the laws of Germany, having its registered seat
in Ahaus, Germany ("GmbH") on terms and conditions approved in advance
by Thermedics and Rutter will not have any liability or obligation
relating to the businesses of AG or GmbH or the transfer of the shares
of such companies.
7.16 The shareholder's register of each of the Group Companies, copies of
which are attached as Annex 7.16 hereto, correctly and completely
reflects the current and former shareholders of each of the Group
Companies and all particulars required to be contained by such register.
ANNUAL ACCOUNTS
7.17 The (i) balance sheet of Rutter as at 31 December 1994 and its profit
and loss account for the financial year then ended together with the
explanatory notes thereto and the (ii)
6
<PAGE>
balance sheet of Rutter as at 30 September 1995 (the "September Balance
Sheet") ((i) and (ii) collectively: "the Accounts") and the annual
report ("jaarverslag") have all been attached as Annex 7.17 to this
Agreement.
7.18 The Accounts have been prepared in accordance with the relevant legal
requirements and the requirements of the generally accepted principles
of accounting in The Netherlands. The reporting methods applied in
drawing up the Accounts were consistent with the reporting methods
applied during the three consecutive years ending immediately before
1994.
7.19 The Accounts are complete, true and correct in all respects and fairly
present the financial condition and the composition and magnitude of the
assets and liabilities and the operations and results of Rutter in the
relevant year.
7.20 The Accounts fully disclose and make full and adequate provisions for
all actual and contingent liabilities of Rutter as of each of the
relevant dates and Rutter had no liabilities on any such date other than
the ones so disclosed in Annex 7.20 hereto, which relate only to the
legal proceedings in respect of IP&T/ASAM as disclosed in Annex 7.54
hereto and provided for in Article 9.3 of this Agreement.
7.21 Since 30 September 1995 and save as disclosed in Annex 7.21,
(i) there have been no changes in the conditions, financial or
otherwise, of Rutter or any of the Group Companies, which have
adversely affected or may affect their net asset value, backlog
or in general their business, properties or financial condition;
(ii) no shareholders' resolutions relating to Rutter have been passed
either during or outside any general meeting of shareholders,
including, without limitation, resolutions regarding the
distribution of dividends.
(iii) neither Rutter nor any of the Group Companies have entered into
any agreement or assumed any obligations or liabilities or taken
or initiated any action or passed any resolution relating to
their assets, their business, other than in the ordinary course
of business.
PERSONAL PROPERTY AND INVENTORY
7.22 Rutter has good and marketable title to all personal property reflected
in the Accounts or acquired since 30 September 1995 (the "Personal
Property") save for properties sold or otherwise disposed of in the
ordinary course of business.
7.23 The Personal Property is not subject to any attachments or charged with
any pledges, leases or any other encumbrances of any nature whatsoever
and no item of the Personal Property is subject to any retention of
title.
7
<PAGE>
7.24 The Personal Property comprises all property required to enable Rutter
to conduct its business as it is currently conducted and is in a good
state of maintenance and repair, taking into consideration normal wear
and tear.
7.25 The inventories ("voorraden") reflected in the September Balance Sheet
were acquired or produced or shall be acquired or produced in the
ordinary course of business of Rutter and are or will be of a good
quality usable and saleable in the normal course of business, not to
exceed one year, of Rutter and their quantity is adequate for the level
at which the business of Rutter is currently run. The inventories
reflected on the September Balance Sheet are valued at the lower of cost
or market.
REAL PROPERTY
7.26 Rutter does not own real property.
7.27 The real property set forth in Annex 7.27 hereto (the "Leasehold
Property") has been leased by Rutter as lessee on the terms and
conditions stated in such Annex.
7.28 No other agreements pertaining to the Leasehold Property have been
concluded, other than those which appear from the lease agreements
referred to in 7.27 above.
7.29 All obligations towards the lessor arising from the lease agreement
referred to in 7.27 above have been complied with; there are no rent or
other disputes pending or threatened with respect to such lease
agreements.
7.30 The Leasehold Property has not been leased to anyone other than Rutter
and no other right or use or enjoyment of the Leasehold Property has
been granted or promised to any person or entity other than Rutter.
7.31 To the extent that any of the Leasehold Property has been leased with
the value added tax, such tax has been applied in the manner prescribed
by law and within the statutory periods.
7.32 Rutter has no real property in ground lease ("erfpacht"). The Leasehold
Property is not subject to any registered easements
("erfdienstbaarheden").
7.33 No property rights as contemplated in the "Belemmeringenwet
Privaatrecht" have been vested on the Leasehold Property.
7.34 Neither public nor private law prohibits or restricts the present use
of the Leasehold Property.
7.35 The Leasehold Property is in a good state of maintenance and repair and
is in accordance with all terms of the relevant lease agreements, taking
into consideration normal wear and tear.
8
<PAGE>
TAXES AND SOCIAL SECURITY CONTRIBUTIONS
7.36 Except as disclosed in Annex 7.36 hereto, Rutter has timely and
correctly filed all tax and social security contributions returns which
it was required to file (including but not limited to those relating to
corporation tax, VAT, wage withholding tax ("loonbelasting"), social
security contributions, national, provincial and local taxes) in any
jurisdiction, and has timely and correctly paid and withheld all the
taxes including but not limited to corporation tax, VAT wage withholding
tax, social security contributions, national, provincial and local taxes
which have become due or have been assessed.
7.37 Holding and Rutter have completed and will with respect to the period up
to and including the date of this Agreement complete all required tax
returns and social security filings timely and correctly. There is no
dispute pending or, to the knowledge of Holding, threatened, for unpaid
taxes or social security contributions.
7.38 Except as disclosed in Annex 7.38 hereto Rutter has no outstanding
liabilities for taxes or social security contributions, including but
not limited to wage withholding tax or social security liabilities
relating to Mr. Rutter's Consulting Arrangement (defined below) for any
period ending on or prior to the date hereof.
7.39 Holding has no claim against Rutter relating to the set off of
corporation tax except as disclosed in Annex 7.39 hereto.
PRODUCT LIABILITY
7.40 There will be no product liability claims with regard to products
manufactured, or sold by Rutter prior to the date of this Agreement
which are not fully covered by insurance carried by Rutter that will
continue to be in effect after the date of this Agreement.
TRADE NAMES
7.41 A true list of all the trade names which Rutter uses or has the right
to use is attached hereto as Annex 7.41.
INDUSTRIAL PROPERTY RIGHTS
7.42 Particulars of all registered patents, trade marks, registered designs
or licenses thereof (the "Industrial Property Rights"), owned or used by
Rutter are summarized in Annex 7.42 hereto.
7.43 There are no Industrial Property Rights or any inventions, copyrights,
technical know-how or trade secrets ("Intangibles") used by Rutter which
are not owned by it or the use of which by it are in any way restricted
by the rights of a third party in respect thereof, except as mentioned
in Annex 7.43 hereto. Rutter does not infringe and has not infringed the
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Industrial Property Rights or Intangibles of any other party. Rutter is
not liable for the payment of any royalty or compensation in any form in
connection with Industrial Property Rights or Intangibles of any third
party.
7.44 No license or other right in respect of any Industrial Property Rights
or Intangibles has been granted or agreed to be granted to any third
party, except as mentioned in Annex 7.44 hereto.
LEGALITY OF THE OPERATIONS OF THE BUSINESS OF RUTTER
7.45 Except as disclosed in Annex 7.45 hereto, the conduct of the business of
Rutter does not violate and has not violated any provisions of any
applicable laws, regulations or orders of any governmental
administrative body or authority having jurisdiction thereof. Rutter has
complied with all laws, regulations and orders in respect of employment
and employment practices and particularly in respect of work place
protection, hygiene, health and safety protection.
7.46 Rutter has complied with all applicable laws, regulations and orders in
respect of environmental matters and pollution of the environment
(including air, soil and water) and the property used by Rutter, its
surroundings and its environment is not polluted with any concentration
of material which may be considered hazardous or damaging for the public
health or the environment and which may result in any obligation or
liability on the part of Rutter. Rutter will have no liability with
respect to any environmental conditions existing on or prior to the date
hereof at any facility owned or operated by Rutter prior to the date
hereof or otherwise as a result of the conduct of the business of Rutter
prior to the date hereof.
7.47 Rutter has at its disposal all licenses or permits which are necessary
for carrying out and continuing its operation and business. Those
licenses and permits are in full force and are not subject to any
conditions other than the conditions provided for by these licenses and
permits themselves, which conditions are not unreasonably burdensome for
Rutter.
7.48 Said licenses and permits have neither been returned, revoked nor
restricted, nor is any return, revocation or restriction impending or
reasonably anticipated.
7.49 The operations and the business of Rutter is carried out in a manner
which is consistent with said licenses and permits and neither the
zoning plan in force for the area where Rutter is located nor any
licence nor any other regulation will restrict Rutter in the use of its
buildings, structures, installation or other real properties. No
governmental authority has alleged that Rutter is in violation of any
applicable law, rule, regulation, license, permit or other legal
requirement.
Contracts
7.50 Annex 7.50 hereto contains in respect of Rutter a true and complete list
of any and all agreements and commitments of, or for the benefit of,
Rutter, of the following nature: (i)
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agreements important to the business of Rutter without regard to
monetary amounts, (ii) agreements which based on current economic
circumstances will result in a loss when performed, (iii) agreements or
arrangements that may be terminated by another party as a result of any
change of direct or indirect control of Rutter or pursuant to which
payment or fulfilment of any obligation can be accelerated (iv) long
term agreements which cannot be terminated without penalty within three
months following the date of this Agreement (v) agreements (other than
employment agreements and trading contracts) with a value or entailing a
monetary obligation in excess of NLG 50,000.--(vi) distributorship-,
agency- and exclusive sales agreements and requirements contracts (vii)
hire purchase-, rental, and lease agreements (other than with respect to
real property), (viii) joint venture or partnership arrangement, (ix)
all written or oral agreements with customers and (x) all agreements
relating to the acquisition or sale of assets or shares other than in
the ordinary course of business during the past five years.
(collectively: the "Contracts")
7.51 Each of the Contracts is a valid and binding agreement in accordance
with its terms and Rutter has fulfilled all obligations required by such
Contracts to have been performed by it, except as mentioned in Annex
7.51 hereto.
7.52 There has not occurred any default under any of the Contracts on the
part of Rutter or on the part of any other party thereto nor has any
event occurred which with the giving of notice or the lapse of time, or
both, would constitute any default on the part of Rutter under any of
the Contracts, nor has any event occurred which with the giving of
notice or the lapse of time, or both, would constitute any default on
the part of any other party to any of the Contracts nor has any party to
any of the Contracts cancelled or threatened to cancel any Contract,
except as mentioned in Annex 7.52 hereto.
7.53 No consent of any party to any of the Contracts is required for the
execution or performance of this Agreement or the consummation of the
transactions contemplated hereby or the continued performance by any
party of its obligations under any Contract after the date of this
Agreement and Rutter is not restricted by any Contract from carrying on
its business, except as mentioned in Annex 7.53 hereto.
LITIGATION
7.54 Rutter is not engaged in any legal or administrative action and there
are no proceedings or investigations pending or threatened against or
affecting Rutter or its business or its assets, nor is there any basis
for such legal or administrative action, proceedings or investigation,
other than listed in Annex 7.54 hereto.
INSURANCE
7.55 A listing of all insurance policies of which Rutter is owner, insured or
beneficiary together with a summary of the risks insured, the amounts of
coverage, the premium rate, the cash value and the expiry date thereof,
has been attached hereto as Annex 7.55(a) (the "Policies"). All premiums
due and payable by Rutter with respect to the Policies have been
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paid in full, except as mentioned in Annex 7.55(b) hereto. Rutter has
not done or failed to do anything, which might invalidate or prejudice
recovery under the Policies or which might influence finding similar
insurances for Rutter under other policies after the date of this
Agreement. Any and all facts and circumstances, known to Holding and/or
Rutter, which may give rise to a claim under the Policies and which
should be notified to the insurers in order to secure insurance
coverage, have been so notified. There are no outstanding material
requirements or material recommendations by any insurer or governmental
authority exercising similar functions which requires or recommends any
changes in the conduct of the business of, or any material repairs or
other work to be done on or with respect to any of the properties or
assets of, or redesigns, retrofits or other changes in products
manufactured or sold by Rutter. Rutter has not received any notice or
other communication from any insurer cancelling or materially amending
any of the Policies and no cancellation or amendment is threatened,
except as mentioned.
EMPLOYEES AND PENSIONS
7.56 Rutter has no employees or consultants other than those listed in Annex
7.56 hereto (collectively: the "Employees"), which list includes part-
time employees. Annex 7.56 lists, with respect to all Employees, their
date of birth, date entry into service, current salary and benefits.
Apart from the Employees and the managing directors no person can claim
to have a (full-time or part-time) employment agreement with Rutter. The
supplemental agreement between Mr. Rutter and Mr. Pover acting on behalf
of Pover and Holding and Rutter dated 1 November 1991 and any other
agreements between Mr. Rutter and Rutter ("Mr. Rutter's Consulting
Arrangement") have been terminated and fully satisfied by Holding and/or
Rutter.
7.57 Annex 7.57 hereto contains the complete text of the collective labour
agreement(s) applicable to the Employees and of all other existing
agreements concluded with labour unions, employer associations or works
councils.
7.58 Rutter has no obligation, whether legally or established by custom to
pay to any of its current, retired or other former employees, managing
directors or supervisory directors any salary, fringe benefit or premium
except as described in Annex 7.58 hereto.
7.59 Rutter has no obligations arising from the termination or cancellation
of any of its employment agreements and Rutter has no obligations under
any agreements with any of its employees providing for severance
payments.
7.60 There is no bonus, profit sharing, incentive, saving, severance pay,
(early) retirement (other than contained in any collective labour
agreement), insurance (group or single), stock option, stock purchase
plan or any other employee benefit plan or arrangement in effect with or
in prospect for the Employees and/or others.
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7.61 There are no arrears and during the past five years there have been no
arrears with respect to the payment of salaries or fringe benefits or
other financial obligations to the Employees or to the supervisory
directors.
PENSION SCHEMES AND EARLY RETIREMENT SCHEMES
7.62 Any and all pension and early retirement schemes for the benefit of the
Employees and the managing directors of Rutter (the "Schemes") have been
summarized in Annex 7.62(a) hereto. All contributions that are due and
payable by Rutter under the Schemes and all contributions due and
payable by the participants thereof have been duly made. Except for the
obligations resulting from the Schemes, which have always timely been
satisfied, there exists no obligation Rutter in respect of any of its
former or present employees regarding any pension or other retirement
plan, except as mentioned in Annex 7.62(b) hereto. No additional funding
of the Schemes shall be required to satisfy the obligations of Rutter
under the Schemes to any past or present employee with respect to any
period of employment up to the date of this Agreement, except as
mentioned in Annex 7.62(c) hereto.
GUARANTEES AND BANK ACCOUNTS
7.63 Rutter has not agreed to act as a surety for or issued any guarantees or
indemnities in favour of third parties, or provided (or agreed to
provide) security in favour of third parties other than listed in Annex
7.63 hereto.
7.64 Annex 7.64 (a) hereto lists all loan agreements by Rutter and its
banking and overdraft facilities. No third party has given any guarantee
or security in respect of any loan, banking or overdraft facility
granted to Rutter. Attached as Annex 7.64 (b) is a written confirmation
from ABN Amro Bank N.V. (the "Bank") stating that on the date of this
Agreement Rutter has no credit facility outstanding with the Bank.
ABSENCE OF CHANGES AND EVENTS
7.65 Since the date of the September Balance Sheet and save as disclosed in
Annex 7.65 hereto there have been no changes in the condition, financial
or otherwise, of Rutter, which have adversely affected or may adversely
affect in a material way its net assets value or in general its
business, properties or financial condition.
CONFLICTING OBLIGATIONS
7.66 Neither Holding nor Rutter is a party to, subject to or bound by any
law, agreement or judgement or decree of any court or other governmental
body which would prevent or would be violated by the execution of this
Agreement, the consummation of the transactions contemplated hereunder.
CUSTOMERS AND SUPPLIERS
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7.67 Except as set forth in Annex 7.67(a) hereto, no purchase orders or
commitments of Rutter, which orders or commitments are material,
individually or in the aggregate, are materially in excess of normal
requirements for Rutter, nor are prices provided therein materially in
excess of current market prices for the products or services to be
provided thereunder. No material supplier of Rutter has indicated within
the past year that it will stop, or materially decrease the rate of,
supplying materials, products, or services to Rutter and no material
customer of Rutter has indicated within the past year that it will stop,
or materially decrease the rate of, buying material, products or
services from Rutter. A list of (a) each customer that accounted for
more than 5% of the revenues of Rutter during the last fiscal year and
(b) each supplier that is the sole supplier of any significant product
or component to Rutter is set forth in Annex 7.67(b) attached hereto.
RECALLS
7.68 No products of Rutter have been recalled since January 1, 1993 and, to
the knowledge of Holding or the Holders, there is no basis for any such
recall.
PRODUCTS AND SERVICE WARRANTIES
7.69 Attached hereto as Annex 7.69 are copies of the current standard
warranty used for each of the products and services of Rutter. Rutter
has not made any other product or service warranties that deviate from
the current standard warranties and which remain in effect on the date
hereof, or pursuant to which Rutter has any remaining obligations.
OTHER INFORMATION
7.70 The information concerning Rutter set forth in this Agreement, its
Annexes and any documents, letters or other written statements furnished
to Thermedics or to be furnished to Thermedics pursuant to this
Agreement, do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein, in light
of the circumstances in which they are made, not false or misleading.
Copies of all documents heretofore or hereafter made available to
Thermedics pursuant hereto were or will be in all material respects
complete and accurate copies of such documents and fully and fairly
present the businesses, operations, assets, liabilities and prospects of
Rutter.
ARTICLE 8 - THERMEDICS' REPRESENTATIONS AND WARRANTIES
Thermedics represents and warrants to Holding that the matters set forth in
this Article 8 ("Thermedics' Representations and Warranties") are true and
correct on the date hereof. Thermedics is duly organized and validly existing
under the laws of the Commonwealth of Massachusetts, the United States of
America, and has all requisite power and authority to execute this Agreement
and to consummate the transactions contemplated hereby.
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ARTICLE 9 - INDEMNIFICATION
9.1 Each of Holding and the Holders shall compensate Thermedics for and
indemnify and hold Thermedics harmless against all losses, costs
(including legal and other professional fees), damages, liabilities or
expenses (collectively the "Damages") incurred as a result of or
relating to any of Holding and Holders' Representations and Warranties
not being as represented or warranted or being misleading and/or
resulting from or relating to the non-fulfilment of Holding's other
respective agreements or obligations contained herein.
9.2 Each of Holding and the Holders shall compensate Thermedics for and
indemnify and hold Thermedics harmless against the Damages incurred as a
result of or relating to Rutter's former shareholding in Unitron Systems
Terneuzen B.V. ("Unitron") and the transfer of the shares in Unitron by
Rutter to Holding by way of a dividend distribution.
9.3 Each of Holding and the Holders shall compensate Thermedics for and
indemnify and hold Thermedics harmless against the Damages incurred as a
result of or relating to the litigation in respect of IP&T/ASAM, as
disclosed in Annex 7.54 hereto.
9.4 Each of Holding and the Holders shall compensate Thermedics for and
indemnify and hold Thermedics harmless against the Damages incurred as a
result of or relating to Rutter`s Consulting Arrangement.
9.5 The indemnification obligations of each Holder shall be pro rata based
on such Holder's ownership of Holding on the date of this Agreement. To
the extent that Holding fully compensates Thermedics under Article 9
with respect to any Damages, Holders shall be released of their
obligations to Thermedics with respect to such Damages. The right to
claim damages under Article 9 is without prejudice to any other remedy
Thermedics may have under Dutch law.
9.6 Thermedics shall compensate Holding for and indemnify and hold Holding
harmless against the Damages incurred as a result of or relating to
Thermedics' Representations and Warranties not being as represented or
warranted or being misleading and/or resulting from or relating to the
non-fulfilment of Thermedics' other respective agreements or obligations
contained herein.
ARTICLE 10 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES
10.1 The obligations of Holding and the Holders to indemnify Thermedics for
breaches of Holding and Holders' Representations and Warranties will
survive for a period of two years after the date of this Agreement
except that
(a) the obligations of Holding and the Holders to indemnify
Thermedics for breaches by Holding and the Holders of their
representations and warranties contained in
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Articles 7.45 and 7.46 will survive for a period of four years
after the date of this Agreement;
(b) the obligations of Holding and the Holders to indemnify
Thermedics for breaches by Holding and the Holders of their
representations and warranties contained in the Articles 7.36,
7.37, 7.38 and 7.39 will survive for a period of five years
after the date of this Agreement; and
(c) the obligations of Holding and the Holders to indemnify
Thermedics for breaches by Holding and the Holders of their
representations and warranties contained in the Articles 7.1,
7.2, 7.3, 7.4, 7.8. 7.9, 7.13, 7.15, 7.16 and 7.66 will survive
indefinitely.
10.2 The obligations of Thermedics to indemnify Holding for breaches of
Thermedics' Representations and Warranties will survive indefinitely.
ARTICLE 11 - LIMITATIONS
Notwithstanding Article 10.1, neither Holding nor the Holders shall have any
obligation to indemnify Thermedics:
(1) for the breach of any representation or warranty if such breach results
in a claim by Thermedics for less than US$ 5,000;
(2) for the breach of any representation or warranty unless and until the
aggregate of all Damages suffered by Thermedics as a result of Holding's
and the Holders' breaches of representations or warranties (including
claims under US$ 5,000) exceeds US$ 50,000;
provided that none of the limitations on liability described in the
preceding clauses (1) and (2) shall exist with respect to any breach of
representations and warranties contained in Articles 7.1, 7.2, 7.3, 7.4, 7.8.
7.9, 7.13, 7.15, 7.16, and 7.66;
(3) for an amount in excess of the Purchase Price;
but if and when Thermedics incurs Damages of US$ 50,000 or more as a result
of Holding's and the Holders' breaches of the representations and warranties,
Holding and the Holders shall indemnify Thermedics for all such Damages,
including the first US$ 50,000 of Damages.
ARTICLE 12 - EFFECTS OF TAXES, INSURANCES AND PROVISIONS
12.1 In determining whether any of the limitations set forth in Article 11
have been exceeded and, if so, in determining the amount of the Damages,
the Damages shall be reduced:
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(i) by the positive effect, if any, of
(a) insurance recoveries, provided that such recoveries have been
received in connection with the same fact or facts which give
rise to the indemnification for the Damages; and
(b) tax refunds or reductions to the extent that such refunds or
reductions relate to taxes payable or paid with respect to the
taxable year in which the Damages occurred or any year prior
thereto, provided that such tax refunds or reductions are caused
by the same fact or facts which give rise to the indemnification
for the Damages; and
(ii) to the extent that a specifically designated provision has been
established in the September Balance Sheet with respect to the matter
for which indemnification for Damages is sought.
12.2 If a claim or potential claim of Thermedics for Damages is based upon or
related to any action, claim or proceeding by a third party (for the
purpose of this article 11.2 the third party shall be deemed to include
tax authorities and the authorities charged with the execution of the
social security legislation) (a "Third Party Claim") Thermedics shall
notify Holding in writing within [14 days] after having become aware of
such Third Party Claim. Within [14 days] from the date of notification
of the Third Party Claim, the parties shall mutually agree upon the
course of action to be taken and the assumption of the defense by
Holding of such action or proceeding, including the employment of
counsel reasonably satisfactory to both parties. Holding shall pay the
fees and disbursements of such counsel.
ARTICLE 13 - BANK GUARANTEE
13.1 Holding and the Holders hereby deliver a bank guarantee for an amount of
twenty per cent (20%) of the Purchase Price for a duration of two years
from the date of this Agreement and for an amount of ten per cent (10%)
of the Purchase Price for a duration of the third and the fourth year
after the date of this Agreement, issued by a first class Dutch
commercial bank, attached hereto as Annex 13.1 (the "Bank Guarantee").
13.2 The Bank Guarantee shall serve as a security for Thermedics for the
payment by Holding and the Holders of any adjustment to the Purchase
Price due to Thermedics pursuant to Article 3 hereof and for any
indemnification payable by Holding and the Holders pursuant to Article
9.1 hereof, it being understood that the amount of the Bank Guarantee
shall not in any way limit Holding's and Holders' liability under such
Articles.
ARTICLE 14 - CONSULTING AGREEMENT
Mr. Rutter shall enter into a new consulting agreement effective as from the
date of this Agreement, attached as Annex 14 hereto.
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ARTICLE 15 - CONFIDENTIALITY
Holding and each of the Holders undertake not to at any time subsequent to
this Agreement divulge or communicate to any company, person or entity (other
than to Thermedics and Rutter) as the case may be, or to any of their officers
or employees who need to acquire such knowledge in the performance of their
duties or as directed or approved by Thermedics in writing, any confidential
information or information of an apparently confidential nature concerning the
business, affairs, accounts, transactions, customers, suppliers or business
relations of Rutter ("Confidential Information"). Subsequent to the date of
this Agreement, none of Holding or the Holders shall disclose any Confidential
Information or use any Confidential Information for any purpose whatsoever.
ARTICLE 16 - ANNEXES
The Annexes to this Agreement form an integral part hereof. Any reference to
this Agreement includes a reference to the said Annexes.
ARTICLE 17 - EXPENSES
Except as provided herein, each party shall bear its own expenses and
Holding shall bear Rutter's expenses incurred in connection with the
preparation of this Agreement and the transaction contemplated thereby,
including taxes and legal, accounting and other fees.
ARTICLE 18 - NOTICES
Any notice or communication required to be delivered to either party
pursuant to or in connection with this Agreement shall be given by registered
mail with copy per telefax to the addressees set forth below:
To:
Rutter Holding B.V.
Postbus 40111
7504 RC ENSCHEDE
fax: 053-4323367
Thermedics Detection, Inc.
220 Mills Road
Chelmsford, MA 01824
U.S.A.
fax: 00-1-508-251-2024
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Mr. R. Rutter
De Braakweg 131
7524 PG ENSCHEDE
fax: 053-356179
Reggeborgh Beheer B.V.
Postbus 319
7460 AH RIJSSEN
fax: 0548-518735
Mr. L.L.A. Pover
Kees van Baarenstraat 34
7558 DD HENGELO
fax: 074-772831
or to such other address or representative as either party may designate by
means of a written notice to be sent to the other from time to time.
ARTICLE 19 - GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by the laws of The Netherlands and any
disputes arising in connection with this Agreement or further agreements
resulting therefrom shall be submitted to the District Court in Amsterdam.
ARTICLE 20 - FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such documents, and (c)
to do such other acts and things, all as the other party may reasonably request
for the purpose of carrying out the intent of this Agreement and the documents
referred to in this Agreement.
ARTICLE 21 - NON-COMPETITION
21.1 For a period of five years after the date of this Agreement, neither
Holding or the Holders shall, either directly or indirectly as a
stockholder, investor, partner, director, officer, employee, consultant
or otherwise, engage in a Competitive Business in any territory,
provided however, that Reggeborgh is allowed to invest in a Competitive
Business, provided that Reggeborgh shall not enter into any agreement
with Mr. Rutter or Mr. Pover in any Competitive Business. For purposes
of this Agreement, a "Competitive Business" means any activity in which
Rutter is engaged at the date of this Agreement or at any date five
years prior to this Agreement. It is understood that Mr. Rutter and Mr.
L.L.A. Pover
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will remain shareholders of Unitron and that Mr. Rutter will remain
shareholder of Maderlake;
21.2 Holding and the Holders agree that the duration and geographic scope of
the non-competition provisions set forth in this Article 21 are
reasonable. In the event that any court determines that the duration or
the geographic scope, or both, are unreasonable and that such provision
is to that extent unenforceable, the parties agree that the provision
shall remain in full force and effect for the greatest time period and
in the greatest area that would not render it unenforceable. The parties
intend that this non-competition provision shall be deemed to be a
series of separate covenants, one for each and every country of each and
every state of the U.S. and each and every political subdivision of each
and every country outside the U.S. where this provision is intended to
be effective.
ARTICLE 22 - SOLICITATION
For a period of two years after the date of this Agreement, neither Holding
nor any of the Holders shall, either directly or indirectly as a stockholder,
investor, partner, director, officer, employee or otherwise, solicit or attempt
to induce any Restricted Employee (as defined below) to terminate his or her
employment with Rutter or any affiliate of Rutter, provided however, that it
shall not be a breach of this Article 22 for either Holding or the Holders to
solicit Restricted Employees by means of general public advertisements. For
purposes of this Agreement, a Restricted Employee shall mean any person, other
than employees terminated involuntarily by Rutter, who (i) either (a) holds or
has access to trade secrets or other confidential information relating to the
business of Rutter or (b) had an annual base salary in 1995 of at least NLG
75,000, and (iii) either (X) was an employee of Thermedics or any affiliate of
Thermedics on the date of this Agreement or (Y) was an employee of Rutter on
the date of this Agreement and who is employed by Thermedics immediately after
the date of this Agreement.
Signed in Amsterdam on 25 January 1996.
Rutter Holding B.V. Thermedics Detection, Inc.
by: by:
name : L.L.A. Pover name : Gary Lortie
title: Dir. title: Director of Finance
signature: /s/ L.L.A. Pover signature: /s/ Gary Lortie
Mr. R. Rutter
signature: /s/ R. Rutter
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Reggeborgh Beheer B.V. Mr. L.L.A. Pover
by:
name: H. Holterman
title: Dir. signature: /s/ L.L.A. Pover
signature: /s/ H. Holterman
Mrs. Pover Mrs. Rutter
for approval for approval
signature: _______________ signature: _______________
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EXHIBIT 3.1
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL J. CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF ORGANIZATION
(Under G.L Ch. 156B)
ARTICLE I
The name of the corporation is:
Thermedetec Inc.
ARTICLE II
The purpose of the corporation is to engage in the following business
activities:
(a) To manufacture and market explosive detection and drug detection
devices;
(b) To provide drug detection services; and
(c) To carry on any other business, operation or activity which may be
lawfully carried on by a corporation organized under the provisions of
the Business Law of the Commonwealth of Massachusetts.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 x
11 sheets of paper with a left margin of at least 1 inch. Additions to more
than one article may be made on a single sheet so long as each article
requiring each addition is clearly indicated.
<PAGE>
ARTICLE III
The type and classes of stock and the total number of shares and par value,
if any, of each type and class of stock which the corporation is authorized to
issue is as follows:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
TYPE NUMBER OF TYPE NUMBER OF PAR
SHARES SHARES VALUE
Common: Common: 200,000 $.10
Preferred: Preferred:
ARTICLE IV
If more than one type, class or series of stock is authorized, a description
of each with, if any, the preferences, voting powers, qualifications, special
or relative rights or privileges as to each type and class thereof and any
series now established.
None
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are as follows:
None
ARTICLE VI
Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders: (If there are no
provisions, state "None".)
See Continuation Sheets 6A and 6B
Note: The preceding six (6) articles are considered to be permanent and may
only be changed by filing appropriate Articles of Amendment.
<PAGE>
ARTICLE VII
The effective date of organization of the corporation shall be the date
approved and filed by the Secretary of the Commonwealth. If a later effective
date is desired, specify such date which shall not be more than thirty days
after the date of filing.
The information contained in ARTICLE VIII is NOT a PERMANENT part of the
Articles of Organization and may be changed ONLY by filing the appropriate form
provided therefor.
ARTICLE VIII
a. The post office address of the corporation IN MASSACHUSETTS is:
470 Wildwood Street
P.O. Box 2999
Woburn, MA 01888
b. The name, residential address and post office address (if different) of
the directors and officer of the corporation are as follows:
<TABLE>
<CAPTION>
RESIDENTIAL POST OFFICE
NAME ADDRESS ADDRESS
<S> <C> <C> <C>
President: Louis S. Slaughter 26 Bittersweet Lane P.O. Box 9046
Weston, MA 02193 Waltham, MA 02254
Treasurer: Theo Melas-Kyriazi 15 Norfolk Road P.O. Box 9046
Chestnut Hill, MA 02167 Waltham, MA 02254
Clerk: Sandra L. Lambert 149 College Road P.O. Box 9046
Concord, MA 01742 Waltham, MA 02254
Directors: George N. Hatsopoulos 233 Tower Road P.O. Box 9046
Lincoln, MA 01773 Waltham, MA 02254
Robert C. Howard 230 Windsor Road P.O. Box 9046
Waban, MA 02168 Waltham, MA 02254
Firooz Rufeh 185 Hunters Ridge Road P.O. Box 9046
Concord, MA 01742 Waltham, MA 02254
John W. Wood Jr. 132 Williams Road P.O. Box 2999
Concord, MA 01742 Woburn, MA 01888
</TABLE>
<PAGE>
c. The fiscal year (i.e., tax year) of the corporation shall end on the
last day of the month of:
The Saturday nearest December 31 each year
d. The name and BUSINESS address of the RESIDENT AGENT of the corporation,
if any, is:
None
ARTICLE IX
By-laws of the corporation have been duly adopted and the president,
treasurer, clerk and directors whose names are set forth above, have been duly
elected.
IN WITNESS WHEREOF and under the pains and penalties of perjury, I/WE, whose
signature(s) appear below as incorporator(s) and whose names and business or
residential address(es) ARE CLEARLY TYPED OR PRINTED beneath each signature do
hereby associate with the intention of forming this corporation under the
provisions of General Laws Chapter 156B and do hereby sign these Articles of
Organization as incorporator(s) this 6th day of December, 1990.
/s/ Shella Lieberman
Shella Lieberman, Incorporator
Note: If an already-existing corporation is acting as incorporator, type in
the exact name of the corporation, the state or other jurisdiction where
it was incorporated, the name of the person signing on behalf of said
corporation and the title he/she holds or other authority by which such
action is taken.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156B, SECTION 12)
=======================================
I hereby certify that, upon an examination of these articles of
organization, duly submitted to me, it appears that the provisions of the
General Laws relative to the organization of corporations have been complied
with, and I hereby approve said articles; and the filing fee in the amount of
$200.00 having been paid, said articles are deemed to have been filed with me
this 7th day of December, 1990.
Effective date: /s/ Michael J. Connolly
MICHAEL J. CONNOLLY
Secretary of the Commonwealth
FILING FEE: 1/20 of 1% of the total amount of the authorized capital
stock with par value, and one cent a share for all authorized shares
without par value, but not less than $150 General Laws, Chapter 156B.
Shares of stock with a par value of less than one dollar shall be deemed
to have par value of one dollar per share.
PHOTOCOPY OF ARTICLES OF ORGANIZATION TO BE SENT
CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
Telephone: (617) 482-4420
<PAGE>
CONTINUATION SHEET 6A
(a) The corporation may be a partner in any business enterprise
which the corporation has power to conduct itself.
(b) Meetings of stockholders may be held anywhere in the United
States as shall be determined from time to time by the directors or as shall be
stated in the call of the meeting.
(c) The By-laws may provide that the directors may make, amend or
repeal the By-Laws, in whole or in part, except with respect to any provision
thereof which by law, by the Articles of Organization or by the By-laws requires
action by the stockholders.
(d) The By-laws may provide for the indemnification, to the extent
legally permissible, of directors, officers, employees or other agents of the
corporation, and persons who serve at the corporation's request as directors,
officers, employees or other agents of another organization of which the
corporation is a stockholder, in which the corporation otherwise holds an
ownership interest or of which the corporation is a creditor.
(e) The requisite vote to effect an amendment of the Articles of
Organization shall be a majority of each class of stock outstanding and
entitled to vote thereon, at a meeting duly called for the purpose; provided,
only, that any provision added to or changes made in the Articles of
Organization by such amendment could have been included in, and any provision
deleted thereby could have been omitted from, original Articles of Organization
filed at the time of such meeting.
(f) The requisite vote for the approval by the corporation of any
agreement of consolidation or merger with any other corporation or corporations
shall be a majority of each class of stock of the corporation outstanding and
entitled to vote thereon.
(g) The By-laws may provide that the corporation may enter into
contracts and otherwise transact business as a vendor, purchaser, partner, joint
venturer or otherwise with any director, officer, or stockholder of the
corporation, and with any corporation, joint stock company, business trust,
partnership or other entity in which any director, officer or stockholder of
this corporation is or may become a director, officer, stockholder, joint
venturer, partner, trustee or beneficiary, or in which he may otherwise be or
become a party or may have an interest, pecuniary or otherwise; and that no such
contract or transaction shall, in the absence of fraud, be affected, invalidated
or avoided, and no such director, officer or stockholder shall be held liable to
account to the corporation or to any creditor or stockholder of the corporation
for any profit or benefit realized by such person through any such contract or
transaction, by reason of such adverse interest or by reason of any fiduciary
relationship of such director, officer or stockholder to the corporation arising
out of such office or stock ownership.
<PAGE>
CONTINUATION SHEET 6B
(h) No director of this corporation shall be personally liable to
the corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director notwithstanding any statutory provision or other
law imposing such liability, provided, however, that nothing in this clause
(h) shall eliminate or limit the liability of a director to the extent provided
by applicable law (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 61 or 62 or successor provisions of Chapter 156B of the Massachusetts
General Laws or (iv) for any transaction from which the director derived an
improper personal benefit. The foregoing provisions of this clause (h) shall not
eliminate the liability of a director for any act or omission occurring prior to
the date this clause (h) becomes effective. No amendment to or repeal of this
clause (h) shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL J. CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
CERTIFICATE OF CORRECTION
(GENERAL LAWS, CHAPTER 156B, SECTION 6A)
FEDERAL IDENTIFICATION NUMBER: Applied for.
CORPORATE NAME: Thermedetec Inc.
DOCUMENT TO BE CORRECTED: Articles of Organization
IT IS HEREBY CERTIFIED THAT THE ABOVE MENTIONED DOCUMENT WAS FILED WITH THE
OFFICE OF THE SECRETARY OF STATE ON 12/7/90.
PLEASE STATE THE INACCURACY OR DEFECT TO BE CORRECTED IN SAID DOCUMENT:
In Article I, the name of the corporation was typed incorrectly. The second
"t" of the name should have been capitalized.
PLEASE STATE CORRECTED VERSION OF THE DOCUMENT:
The name of the corporation is: ThermedeTec Inc.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, WE SIGN OUR NAMES
THIS 3rd DAY OF January IN THE YEAR 1991.
/s/ Louis S. Slaughter, PRESIDENT
Louis S. Slaughter
/s/ Sandra L. Lambert, CLERK
Sandra L. Lambert
NOTE: IF THE INACCURACY OR DEFECT TO BE CORRECTED IS NOT APPARENT ON THE
FACE OF THE DOCUMENTS, MINUTES OF THE MEETING SUBSTANTIATING THE ERROR MUST BE
FILED WITH THE CERTIFICATE. IF REQUIRED, ADDITIONAL INFORMATION MAY BE STATED
ON A SEPARATE 8 1/2 X 11 INCH WHITE PAPER.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL J. CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
FEDERAL
IDENTIFICATION
NO. 04-3106698
We, Louis S. Slaughter, President, and
Sandra L. Lambert, Clerk of
ThermedeTec Inc.
(EXACT name of corporation)
located at: 470 Wildwood Street, Woburn, MA 01888
(MASSACHUSETTS Address of Corporation)
do hereby certify that these ARTICLES OF AMENDMENT affecting Articles
NUMBERED: 1
(Number those articles 1, 2, 3, 4, 5, and/or 6 being amended hereby)
of the Articles of Organization were duly adopted at a meeting held on
June 1, 1992, by vote of:
100 shares of Common of 100 shares outstanding,
type class & series, (if any)
_____shares of____________of_____________shares outstanding, and
type class & series, (if any)
_____shares of____________of_____________shares outstanding,
type class & series, (if any)
being at least a majority of each type, class or series outstanding and
entitled to vote thereon:
Note: If the space provided under any Amendment or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper leaving a left-hand margin of at least 1 inch for binding. Additions to
more than one Amendment may be continued on a single sheet so long as each
Amendment requiring each such addition is clearly indicated.
<PAGE>
To change the number of shares and the par value (if any) of any type, class
or series of stock which the corporation is authorized to issue fill in the
following:
The total presently authorized is:
WITHOUT PAR VALUE STOCK WITH PAR VALUE STOCKS
TYPE NUMBER OF TYPE NUMBER OF PAR VALUE
SHARES SHARES
Common: Common
Preferred: Preferred:
CHANGE the total authorized to:
WITHOUT PAR VALUE STOCK WITH PAR VALUE STOCKS
TYPE NUMBER OF TYPE NUMBER OF PAR VALUE
SHARES SHARES
Common: Common
Preferred: Preferred:
<PAGE>
That Article I of the Corporation's Articles of Organization is hereby
amended to read as follows:
ARTICLE I
The name of the Corporation is:
Thermedics Detection Inc.
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of the General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
EFFECTIVE DATE:______________________________
IN WITNESS WHEREOF, AND UNDER THE PENALTIES OF PERJURY, we have hereunto
signed our names this 2nd day of July, in the year 1992.
/s/ Louis S. Slaughter Louis S. Slaughter, President
/s/ Sandra L. Lambert Sandra L. Lambert, Clerk
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
======================================
I hereby approve the within articles of amendment and, the filing fee in the
amount of $100 having been paid, said articles are deemed to have been filed
with me this 6th day of July, 1992.
/s/ Michael J. Connolly
MICHAEL J. CONNOLLY
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
Telephone: (617) 482-4420
<PAGE>
FEDERAL IDENTIFICATION
NO. 04-3106698
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, John W. Wood, Jr., President, and
Sandra L. Lambert, Clerk of
Thermedics Detection Inc.
(Exact name of corporation)
located at 220 Mill Road, Chelmsford, MA
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered: III
(Number those articles 1, 2, 3, 4, 5, and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held on 20th,
1996, by vote of:
100 shares of Common of 100 shares outstanding,
(type class & series, if any)
_________shares of____________of_____________shares outstanding, and
(type class & series, if any)
_________shares of____________of_____________shares outstanding,
(type class & series, if any)
being at least a majority of each type, class or series outstanding and
entitled to vote thereon
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 x
11 sheets of paper with a left margin of at least 1 inch. Additions to more
than one article may be made on a single sheet so long as each article
requiring each addition is clearly indicated.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue fill in the
following:
The total presently authorized is:
WITHOUT PAR VALUE STOCK WITH PAR VALUE STOCKS
TYPE NUMBER OF TYPE NUMBER OF PAR VALUE
SHARES SHARES $.10
Common: Common: 200,000
Preferred: Preferred:
Change the total authorized to:
WITHOUT PAR VALUE STOCK WITH PAR VALUE STOCKS
TYPE NUMBER OF TYPE NUMBER OF PAR VALUE
SHARES SHARES $.10
Common: Common: 15,000,000
Preferred: Preferred:
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter, 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date:______________________________
SIGNED UNDER THE PENALTIES OF PERJURY this 21st day of March, 1996.
/s/ John W. Wood, Jr. John W. Wood, Jr., President
/s/ Seth H. Hoogasian Seth H. Hoogasian, Assistant Clerk
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
========================================
I hereby approve the within Articles of Amendment and, the filing fee in the
amount of $ having been paid, said articles are deemed to have been
filed with me this 22nd day of March, 1996.
Effective date:_____________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
<PAGE>
EXHIBIT 3.2
As Amended and Restated
Through 03/20/96
THERMEDICS DETECTION INC.
BY-LAWS
TABLE OF CONTENTS
Title Page
Article I - General 1
Section 1.1. Offices 1
Section 1.2. Seal 1
Section 1.3. Fiscal Year 1
Article II - Stockholders 1
Section 2.1. Place of Meeting 1
Section 2.2. Annual Meetings 1
Section 2.3. Special Meetings 1
Section 2.4. Notice of Meetings 2
Section 2.5. Quorum 2
Section 2.6. Voting 2
Section 2.7. Inspectors of Election 3
Section 2.8. Action Without Meeting 3
Article III - Directors 3
Section 3.1. Powers 3
Section 3.2. Number, Election and Term of Office 3
Section 3.3. Place of Meetings 3
Section 3.4. Annual Meetings 3
Section 3.5. Regular Meetings 3
Section 3.6. Special Meetings 4
Section 3.7. Notice of Meetings 4
Section 3.8. Quorum 4
Section 3.9. Voting 4
Section 3.10. Action Without Meeting 4
Section 3.11. Meetings by Telephone Conference Calls 4
Section 3.12. Resignations 5
Section 3.13. Removal 5
Section 3.14. Vacancies 5
<PAGE>
Title Page
Section 3.15. Compensation of Directors 5
Section 3.16. Committees 5
Section 3.17. Issuance of Stock 5
Article IV - Officers 5
Section 4.1. Officers 5
Section 4.2. Election and Term of Office 6
Section 4.3. President 6
Section 4.4. Vice Presidents 6
Section 4.5. Treasurer and Assistant Treasurer 6
Section 4.6. Clerk and Assistant Clerk 6
Section 4.7. Secretary and Assistant Secretary 7
Section 4.8. Resignation 7
Section 4.9. Removal 7
Section 4.10. Vacancies 7
Section 4.11. Subordinate Officers 7
Section 4.12. Compensation 7
Article V - Stock 7
Section 5.1. Stock Certificates 7
Section 5.2. Transfer of Stock 8
Section 5.3. Fixing Date for Determination of
Stockholders' Rights 8
Section 5.4. Lost, Mutilated or Destroyed Certificates 9
Article VI - Miscellaneous Management Provisions 9
Section 6.1. Execution of Instruments 9
Section 6.2. Corporate Records 9
Section 6.3. Voting of Securities owned by
this Corporation 9
Section 6.4. Conflict of Interest 10
Section 6.5. Indemnification 10
Article VII - Amendments 10
Section 7.1. General 10
Section 7.2. Date of Annual Meeting of Stockholders 11
Article VIII - Miscellaneous 11
Section 8.1. Massachusetts Control Share Acquisition
Act 11
<PAGE>
THERMEDICS DETECTION INC.
BY-LAWS
ARTICLE I - GENERAL
Section 1.1. OFFICES. The principal office of the corporation shall be in
Chelmsford, Massachusetts. The corporation may also have offices at such other
place or places within or without Massachusetts as the Board of Directors may
from time to time determine or the business of the corporation may require.
Section 1.2. SEAL. The seal of the corporation shall be in the form of a
circle inscribed with the name of the corporation, the year of its incorporation
and the word "Massachusetts." When authorized by the Board of Directors and to
the extent not prohibited by law, a facsimile of the corporate seal may be
affixed or reproduced.
Section 1.3. FISCAL YEAR. The fiscal year of the corporation shall be the
twelve months ending on the Saturday nearest December 31 in each year.
ARTICLE II - STOCKHOLDERS
Section 2.1. PLACE OF MEETING. Meetings of stockholders shall be held at
the principal office of the corporation or, to the extent permitted by the
Articles of Organization, at such other place within the United States as the
Board of Directors may from time to time designate.
Section 2.2. ANNUAL MEETINGS. The annual meeting of stockholders shall be
held at 10:00 a.m., or such other hour as may from time to time be designated by
the Board of Directors, on the second Tuesday of February in each year, or any
date within six months of the end of the Corporation's fiscal year, for the
purpose of electing a Board of Directors and transacting such other business as
may properly be brought before such meeting. At the annual meeting any business
may be transacted whether or not the notice of such meeting shall have contained
a reference thereto, except where such a reference is required by law, the
Articles of Organization or these By-laws. If the annual meeting is not held on
the date determined in accordance with this Section, a special meeting in lieu
of the annual meeting may be held with all the force and effect of an annual
meeting.
Section 2.3. SPECIAL MEETINGS. Special meetings of stockholders may be
called by the President or by the Board of Directors, and shall be called by
the Clerk or, in case of death, absence, incapacity or refusal of the Clerk, by
any other officer, upon written application of one or more stockholders who hold
at least one tenth part in interest of the capital stock entitled to vote at the
meeting. At any special meeting only business to which a reference shall have
been contained in the notice of such meeting may be transacted.
<PAGE>
Section 2.4. NOTICE OF MEETINGS. Written or printed notice of each
meeting of stockholders, stating the place, date and hour and the purposes of
the meeting shall be given by the Clerk or other officer calling the meeting at
least seven days, but not more than sixty days before the meeting to each
stockholder entitled to vote at the meeting or entitled to such notice by
leaving such notice with him at his residence or usual place of business or by
mailing it, postage prepaid, and addressed to the stockholder at his address as
it appears in the records of the corporation. No notice need be given to any
stockholder if he, or his authorized attorney, waives such notice by a writing
executed before or after the meeting and filed with the records of the meeting
or by his presence, in person or by proxy, at the meeting. Any person
authorized to give notice of any such meeting may make affidavit of such notice,
which, as to the facts therein stated, shall be conclusive. It shall be the
duty of every stockholder to furnish to the Clerk of the corporation or to the
transfer agent, if any, of the class of stock owned by him, his current post
office address.
Section 2.5. QUORUM. At all meetings of stockholders the holders of a
majority in interest of all capital stock entitled to vote at such meeting or,
if two or more classes of stock are issued, outstanding and entitled to vote as
separate classes, a majority in interest of each class, present in person or
represented by proxy, shall constitute a quorum. The announcement of a quorum
by the officer presiding at the meeting shall constitute a conclusive
determination that a quorum is present. The absence of such an announcement
shall have no significance. Shares of its own stock held by the corporation or
held for its use and benefit shall not be counted in determining the total
number of shares outstanding at any particular time. If a quorum is not present
or represented, the stockholders present or represented and entitled to vote at
such meeting, by a majority vote, may adjourn the meeting from time to time,
without notice other than announcement at the meeting until a quorum is present
or represented. At any adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted if
the meeting had been held as originally called. The stockholders present at a
duly organized meeting may continue to transact business until adjournment
notwithstanding the withdrawal of one or more stockholders so as to leave less
than a quorum.
Section 2.6. VOTING. Except as otherwise provided by law or the Articles
of Organization, at all meetings of stockholders each stockholder shall have one
vote for each share of stock entitled to vote and registered in his name and a
proportionate vote for a fractional share. Any stockholder may vote in person or
by proxy dated not more than six months prior to the meeting and filed with the
Clerk of the meeting. Every proxy shall be in writing subscribed by a
stockholder or his authorized attorney-in-fact, and dated. A proxy with
respect to stock held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
corporation receives a specific written notice to the contrary from any one of
them. No proxy shall be valid after final adjournment of the meeting. Voting on
all matters, including the election of directors, shall be by voice vote unless
voting by ballot is requested by any stockholder. Except as otherwise provided
by law, the Articles of Organization, or these By-laws, at all meetings of
stockholders all questions shall be determined by a vote of a majority of the
shares voting, or, if two or more classes of stock are entitled to vote as
separate classes, a vote of a majority of the shares voting of each class
voting, present in person or
2
<PAGE>
represented by proxy. The corporation shall not, directly or indirectly, vote
shares of its own stock.
Section 2.7. INSPECTORS OF ELECTION. Two inspectors may be appointed by
the Board of Directors before or at each meeting of stockholders, or, if no such
appointment shall have been made, the presiding officer may make such
appointment at the meeting. At the meeting for which they are appointed, such
inspectors shall open and close the polls, receive and take charge of the
proxies and ballots, and decide all questions touching on the qualifications of
voters, the validity of proxies and the acceptance and rejection of votes. If
any inspector previously appointed shall fail to attend or refuse or be unable
to serve, the presiding officer shall appoint an inspector in his place.
Section 2.8. ACTION WITHOUT MEETING. Any action which may be taken by
stockholders may be taken without a meeting if all stockholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of the meetings of stockholders. Such consents shall be
treated for all purposes as a vote at a meeting.
ARTICLE III - DIRECTORS
Section 3.1. POWERS. Except as otherwise provided by law, the Articles of
Organization or these By-laws, the business of the corporation shall be managed
by a Board of Directors who may exercise all the powers of the corporation.
Section 3.2. NUMBER, ELECTION AND TERM OF OFFICE. The Board of Directors
shall consist of not less than two nor more than nine directors. Within the
limits specified, the number of directors shall be determined (a) by a vote of
the stockholders at the annual meeting, or (b) by a vote of the stockholders at
a special meeting called for the purpose by the Board of Directors, or (c) by
vote of the Board of Directors. Except for the initial directors and except as
provided in Section 3.14, the directors shall be elected at the annual meeting
of the stockholders or at a special meeting. All directors shall hold office
until the following annual meeting or special meeting in lieu of the annual
meeting and until their successors are chosen and qualified.
Section 3.3. PLACE OF MEETINGS. Meetings of the Board of Directors may be
held at any place within or without the Commonwealth of Massachusetts.
Section 3.4. ANNUAL MEETINGS. A meeting of the Board of Directors for the
election of officers and the transaction of general business shall be held each
year beginning in 1986, at the place of and immediately after the final
adjournment of the annual meeting of stockholders or the special meeting in lieu
of the annual meeting. No notice of such annual meeting need be given.
Section 3.5. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held, without notice, at such time and place as the Board of Directors
may determine. Any
3
<PAGE>
director not present at the time of the determination shall be advised, in
writing, of any such determination.
Section 3.6. SPECIAL MEETINGS. Special meetings of the Board of
Directors, including meetings in lieu of the annual or regular meetings, may be
held upon notice at any time upon the call of the President and shall be called
by the President or the Clerk or, in case of the death, absence, incapacity or
refusal of the Clerk, by any other officer, upon written application, signed by
any two directors, stating the purpose of the meeting.
Section 3.7. NOTICE OF MEETINGS. Wherever notice of any meetings of the
Board of Directors is required by these By-laws or by vote of the Board of
Directors, such notice shall state the place, date and hour of the meeting and
shall be given to each director by the President, Clerk or other officer calling
the meeting at least two days prior to such meeting if given in person, by
telephone or by telegram or at least four days prior to such meeting if given by
mail. Notice shall be deemed to have been duly given, if by mail, by depositing
the notice in the post office as a first class letter, postage prepaid, or, if
by telegram, by completing and filing the notice on a telegraph blank and paying
the requisite fee at any telegraph office, the letter or telegram being
addressed to the director at his last known mailing address as it appears on the
books of the corporation. No notice need be given to any director who waives
such notice by a writing executed before or after the meeting and filed with the
records of the meeting or by his attendance at the meeting without protesting at
or before the commencement of the meeting the lack of notice to him. No notice
of adjourned meetings of the Board of Directors need be given.
Section 3.8. QUORUM. At all meetings of the Board of Directors, a
majority of the directors then in office shall constitute a quorum. If a quorum
is not present, those present may adjourn the meeting from time to time until a
quorum is obtained. At any adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted if the
meeting had been held as originally called.
Section 3.9. VOTING. At any meeting of the Board of Directors, the vote
of a majority of those present shall decide any matter except as otherwise
provided by law, the Articles of Organization or these By-laws.
Section 3.10. ACTION WITHOUT MEETING. Any action which may be taken at
any meeting of the Board of Directors may be taken without a meeting if all the
directors consent to the action in writing and the written consents are filed
with the records of the meetings of the Board of Directors. Such consents shall
be treated for all purposes as a vote at a meeting.
Section 3.11. MEETINGS BY TELEPHONE CONFERENCE CALLS. Directors or
members of any committee designated by the Board of Directors may participate in
a meeting of the Board of Directors or such committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting.
4
<PAGE>
Section 3.12. RESIGNATIONS. Any director may resign by giving written
notice to the President or Clerk. Such resignation shall take effect at the
time or upon the event specified therein, or, if none is specified, upon
receipt. Unless otherwise specified in the resignation, its acceptance shall not
be necessary to make it effective.
Section 3.13. REMOVAL. A director may be removed from office with or
without cause by vote of the holders of a majority in interest of the stock
entitled to vote in the election of such director and may be removed from office
with cause by vote of a majority of the directors then in office. A director
may be removed for cause only after reasonable notice and opportunity to be
heard before the body proposing to remove him.
Section 3.14. VACANCIES. In the event of a vacancy in the Board of
Directors, by reason of an enlargement of the Board of Directors or otherwise,
the remaining directors, by majority vote, may elect a director to fill such
vacancy and may exercise the powers of the full Board of Directors until the
vacancy is filled.
Section 3.15. COMPENSATION OF DIRECTORS. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 3.16. COMMITTEES. The Board of Directors may, by vote of a
majority of the directors then in office, appoint from their number one or more
committees and delegate to such committees some or all of their powers to the
extent permitted by law, the Articles of Organization or these By-laws. Except
as the Board of Directors may otherwise determine, any such committee shall be
governed in the conduct of its business by the rules governing the conduct of
the business of the Board of Directors contained in these By-laws and may, by
majority vote of the entire committee, make other rules for the conduct of its
business. The Board of Directors shall have power at any time to fill vacancies
in any such committees, to change its membership or to discharge the committee.
Section 3.17. ISSUANCE OF STOCK. The Board of Directors shall have power
to issue and sell or otherwise dispose of such shares of the corporation's
authorized but unissued capital stock to such persons and at such times and for
such consideration, cash, property, services, expenses, or otherwise, and upon
such terms as it shall determine from time to time.
ARTICLE IV - OFFICERS
Section 4.1. OFFICERS. The officers of the corporation shall consist of a
President, a Treasurer, a Clerk, and such other officers with such other titles
as the Board of Directors may determine including but not limited to a Chairman
of the Board, a Secretary, one or more Vice Presidents, Assistant Treasurers and
Assistant Clerks, and Assistant Secretaries. Any two offices may be held by the
same person except that the Clerk shall not also serve as President or
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Treasurer. Any officer may be required to give a bond for the faithful
performance of his duties in such form and with such sureties as the Board of
Directors may determine.
Section 4.2. ELECTION AND TERM OF OFFICE. Except for the initial officers
and except as provided in Section 4.10, the President, Treasurer and Clerk shall
be elected by the Board of Directors at its annual meeting or at the special
meeting held in lieu of the annual meeting and shall hold office until the
following annual meeting of the Board of Directors or the special meeting in
lieu of said annual meeting and until their successors are chosen and qualified.
Other officers may be chosen by the Board of Directors at the annual meeting or
any other meeting and shall hold office for such period as the Board of
Directors may prescribe.
Section 4.3. PRESIDENT. Unless the Board of Directors otherwise
determines, the President shall be the chief executive officer of the
corporation. He shall have the general control and management of the
corporation's business and affairs. He need not be a director. Unless there is
a Chairman of the Board, the President shall preside at all meetings of the
Board of Directors and of the stockholders.
Section 4.4. VICE PRESIDENTS. The Vice President, or if there be more
than one, the Vice Presidents, shall perform such of the duties of the President
on behalf of the corporation as may be respectively assigned to him or them from
time to time by the Board of Directors or the President. The Board of directors
may designate a Vice President as the Executive Vice President, and in the
absence or inability of the President to act, such Executive Vice President
shall have and possess all of the powers and discharge all of the duties of the
President, subject to the control of the Board of Directors.
Section 4.5. TREASURER AND ASSISTANT TREASURER. The Treasurer shall be
the principal financial officer of the corporation. He shall have custody and
control over all funds and securities of the corporation, maintain full and
adequate accounts of all moneys received and paid by him on account of the
corporation and, subject to the control of the Board of Directors, discharge all
duties incident to the office of Treasurer. Any Assistant Treasurer shall
perform such of the duties of the Treasurer and such other duties as the Board
of Directors, the President or the Treasurer may designate. The Treasurer shall
have authority, in connection with the normal business of the corporation, to
sign contracts, bids, bonds, powers of attorney and other documents when
required.
Section 4.6. CLERK AND ASSISTANT CLERK. The Clerk shall be the principal
recording officer of the corporation. He shall record all proceedings of the
stockholders and discharge all duties incident to the office of Clerk. Unless a
Secretary is appointed by the Board of Directors to perform such duties, the
Clerk shall record all proceedings of the Board of Directors and of any
committees appointed by the Board of Directors. Any Assistant Clerk shall
perform such of the duties of the Clerk and such other duties as the Board of
Directors, the President or the Clerk may designate. In the absence of the
Clerk or any Assistant Clerk from any meeting of stockholders, the Board of
Directors or any committee appointed by the Board of Directors, a Temporary
Clerk designated by the person presiding at the meeting shall perform the
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duties of the Clerk. The Clerk shall be a resident of the Commonwealth of
Massachusetts unless a resident agent has been appointed by the corporation
pursuant to law to accept service of process.
Section 4.7. SECRETARY AND ASSISTANT SECRETARY. If appointed by the Board
of Directors, the Secretary shall record all proceedings of the Board of
Directors and discharge all duties incident to the office of Secretary. Any
Assistant Secretary shall perform such of the duties of the Secretary and such
other duties as the Board of Directors, President or Secretary may designate.
The Board of Directors and any committee appointed by the Board of Directors may
appoint a Secretary and one or more Assistant Secretaries to perform the
functions of the Secretary and Assistant Secretary for such committee.
Section 4.8. RESIGNATION. Any officer may resign by giving written notice
to the President or Clerk. Such resignation shall take effect at the time or
upon the event specified therein, or, if none is specified, upon receipt.
Unless otherwise specified in the resignation, its acceptance shall not be
necessary to make it effective.
Section 4.9. REMOVAL. An officer may be removed from office with cause,
after reasonable notice and opportunity to be heard, or without cause, in either
case, by vote of a majority of the directors then in office.
Section 4.10. VACANCIES. The Board of Directors may fill any vacancy
occurring in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President, Treasurer and Clerk.
Section 4.11. SUBORDINATE OFFICERS. The Board of Directors may, from time
to time, authorize any officer to appoint and remove subordinate officers and to
prescribe their powers and duties. The term "subordinate officers" shall in no
event include the President, Treasurer and Clerk.
Section 4.12. COMPENSATION. The Board of Directors may fix the
compensation of all officers of the corporation and may authorize any officer
upon whom the power of appointing subordinate officers may have been conferred
to fix the compensation of such subordinate officers.
ARTICLE V - STOCK
Section 5.1. STOCK CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates of stock of the corporation in such form as the
Board of Directors may from time to time prescribe. Each certificate shall be
duly numbered and entered in the books of the corporation as it is issued, shall
state the holder's name and the number and the class and the designation of the
series, if any, of his shares, shall be signed by the Chief Executive Officer,
President or a Vice President and by the Treasurer or an Assistant Treasurer and
may, but need not, be sealed with the seal of the corporation. If any stock
certificate is signed by a transfer agent, or by a registrar, other than a
director, officer or employee of the corporation, the
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signatures thereon of the officers may be facsimiles. In case any officer who
has signed or whose facsimile signature has been placed on any certificate shall
have ceased to be such officer before such certificate is issued, it may
nevertheless be issued by the corporation and delivered with the same effect as
if he were such officer at the time of its issue. Every certificate of stock
which is subject to any restriction on transfer pursuant to the Articles of
Organization, the By-laws or any agreement to which the corporation is a party,
shall have the restrictions noted conspicuously on the certificate and shall
also set forth on the face or back of the certificate either (i) the full text
of the restriction, or (ii) a statement of the existence of such restriction and
a statement that the corporation will furnish a copy thereof to the holder of
such certificate upon written request and without charge. Every certificate
issued at a time when the corporation is authorized to issue more than one class
or series of stock shall set forth upon the face or back of the certificate
either (i) the full text of the preferences, voting powers, qualifications and
special and relative rights of the shares of each class and series, if any,
authorized to be issued, as set forth in the Articles of Organization or (ii) a
statement of the existence of such preferences, powers, qualifications and
rights, and a statement that the corporation will furnish a copy thereof to the
holder of such certificate upon written request and without charge.
Section 5.2. TRANSFER OF STOCK. Subject to any transfer restrictions then
in force, the shares of stock of the corporation shall be transferable only upon
its books by the holders thereof in person or by their duly authorized attorneys
or legal representatives. Such transfer shall be effected by delivery of the
old certificate, together with a duly executed assignment and power to transfer
endorsed thereon or attached thereto and with such proof of the authenticity of
the signature and such proof of authority to make the transfer as the
corporation or its agents may reasonably require, to the person in charge of the
stock and transfer books and ledgers or to such other person as the Board of
Directors may designate, who shall thereupon cancel the old certificate and
issue a new certificate. The corporation may treat the holder of record of any
share or shares of stock as the owner of such stock, and shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have notice thereof, express or
otherwise.
Section 5.3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS' RIGHTS. The
Board of Directors may fix in advance a time, not exceeding sixty days preceding
the date of any meeting of stockholders, or the date for the payment of any
dividend or the making of any distribution to stockholders, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or the last date on which the consent or
dissent or stockholders may be effectively expressed for any purpose, as the
record date for determining the stockholders entitled to notice of, and to vote
at, such meeting and any adjournment thereof, to receive such dividend or
distribution, to receive such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to
express such consent or dissent. In such case only stockholders of record on
the date so fixed shall have such right, notwithstanding any transfer of stock
on the books of the corporation after the record date. In any case in which the
Board of Directors does not fix a record date or provide for the closing of the
transfer books, the record date shall be the thirtieth day next preceding the
date of such meeting, the dividend payment or distribution date, the date for
allotment of rights, the date for exercising of rights in respect of any such
change, conversion
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or exchange of capital stock, or the date for expressing such consent or
dissent, as the case may be.
Section 5.4. LOST, MUTILATED OR DESTROYED CERTIFICATES. No certificates
for shares of stock of the corporation shall be issued in place of any
certificate alleged to have been lost, mutilated or destroyed, except upon
production of such evidence of the loss, mutilation or destruction and upon
indemnification of the corporation and its agents to such extent and in such
manner as the Board of Directors may prescribe and as required by law.
ARTICLE VI - MISCELLANEOUS MANANAGEMENT PROVISIONS
Section 6.1. EXECUTION OF INSTRUMENTS. Except as otherwise provided in
these By-laws or as the Board of Directors may generally or in particular cases
authorize the execution thereof in some other manner, all instruments,
documents, deeds, leases, transfers, contract, bonds, notes, checks, drafts and
other obligations made, accepted or endorsed by the corporation shall be signed
by the President or a Vice President, or by the Treasurer or an Assistant
Treasurer, or by the Clerk. Facsimile signatures may be used in the manner and
to the extent authorized generally or in particular cases by the Board of
Directors.
Section 6.2. CORPORATE RECORDS. The original, or attested copies, of the
Articles of Organization, By-laws, and records of all meetings of incorporators
and stockholders, and the stock and transfer records, which shall contain the
names of all stockholders and the record address and the amount of stock held by
each, shall be kept in the Commonwealth of Massachusetts at the principal office
of the corporation, or at an office of its Clerk, its resident agent or its
transfer agent. The copies and records need not all be kept in the same office.
They shall be available at all reasonable times for inspection by any
stockholder for any proper purpose. They shall not be available for inspection
to secure a list of stockholders or other information for the purpose of selling
such list or information or copies thereof or of using the same for a purpose
other than in the interest of the applicant, as a stockholder, relative to the
affairs of the corporation.
Section 6.3. VOTING OF SECURITIES OWNED BY THIS CORPORATION. Subject
always to the specific directions of the Board of Directors, (a) any shares or
other securities issued by any other corporation and owned or controlled by this
corporation may be voted in person at any meeting of security holders of such
other corporation by the President of this corporation if he is present at such
meeting, or in his absence by the Treasurer of this corporation if he is present
at such meeting, and (b) whenever, in the judgment of the President, it is
desirable for this corporation to execute a proxy or written consent in respect
to any shares or other securities issued by any other corporation and owned by
this corporation, such proxy or consent shall be executed in the name of this
corporation by the President, without the necessity of any authorization by the
Board of Directors, affixation of corporate seal or countersignature or
attestation by another officer, provided that if the President is unable to
execute such proxy or consent by reason of sickness, absence from the United
States or other similar cause, the Treasurer may execute such proxy or consent.
Any person or persons designated in the manner
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above stated as the proxy or proxies of this corporation shall have full right,
power and authority to vote the shares or other securities issued by such other
corporation and owned by this corporation the same as such shares or other
securities might be voted by this corporation.
Section 6.4. CONFLICT OF INTEREST. No contract or other transaction of
the corporation shall, in the absence of fraud, be affected or invalidated by
the fact that any stockholder, director or officer of the corporation or any
corporation, firm or association of which he may be a director, officer,
stockholder or member may be a party to or may have an interest, pecuniary or
otherwise, in, any such contract or other transaction, provided that the nature
and extent of his interest was disclosed to, or known by, the entire Board of
Directors before acting on such contract or other transaction. Except in the
case of any contract or other transaction between the corporation and any other
corporation controlling, controlled by or under common control with the
corporation, any director of the corporation who is also a director, officer,
stockholder or member of any corporation, firm or association with which the
corporation proposes to contract or transact any business, or who has an
interest, pecuniary or otherwise, in any such contract or other transaction, may
not be counted in determining the existence of a quorum at any meeting of the
Board of Directors which shall authorize any such contract or such transaction,
and such director shall not participate in the vote to authorize any such
contract or transaction. Any such contract or transaction may be authorized or
approved by a majority of the directors then in office and not disqualified by
this Section 6.4 to vote on such matters, even though the disinterested
directors do not constitute a quorum.
Section 6.5. INDEMNIFICATION. The corporation shall indemnify each
director and officer against all judgments, fines, settlement payments and
expenses, including reasonable attorneys' fees, paid or incurred in connection
with any claim, action, suit or proceeding, civil or criminal, to which he may
be made a party or with which he may be threatened by reason of his being or
having been a director or officer of the corporation, or, at its request, a
director, officer, stockholder or member of any other corporation, firm or
association of which the corporation is a stockholder or creditor and by which
he is not so indemnified, or by reason of any action or omission by him in such
capacity, whether or not he continues to be a director or officer at the time of
incurring such expenses or at the time the indemnification is made. No
indemnification shall be made hereunder (a) with respect to payments and
expenses incurred in relation to matters as to which he shall be finally
adjudged in such action, suit or proceeding not to have acted in good faith and
in the reasonable belief that his action was in the best interests of the
corporation, or (b) otherwise prohibited by law. The foregoing right of
indemnification shall not be exclusive of other rights to which any director or
officer may otherwise be entitled and shall inure to the benefit of the executor
or administrator of such director or officer.
ARTICLE VII - AMENDMENTS
Section 7.1. GENERAL. These By-laws may be amended, added to or repealed,
in whole or in part, (a) by vote of the stockholders at a meeting, where the
substance of the proposed amendment is stated in the notice of the meeting, or
(b) by vote of a majority of the directors then in office, except that no
amendment may be made by the Board of Directors on
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matters reserved to the stockholders by law or the Articles of Organization or
which changes the provisions of these By-laws relating to meetings of
stockholders, to the removal of directors or to the requirements for amendment
of these By-laws. Notice of any amendment, addition or repeal of any By-law by
the Board of Directors stating the substance of such action shall be given to
all stockholders not later than the time when notice is given of the meeting of
stockholders next following such action by the Board of Directors. Any By-law
adopted by the Board of Directors may be amended or repealed by the
stockholders.
Section 7.2. DATE OF ANNUAL MEETING OF STOCKHOLDERS. No amendment of
these By-laws changing the date of the annual meeting of stockholders may be
made within sixty days before the date fixed in these By-laws for such meeting.
Notice of such change shall be given to all stockholders at least twenty days
before the new date fixed for the meeting.
ARTICLE VIII - MISCELLANEOUS
Section 8.1. MASSACHUSETTS CONTROL SHARE ACQUISITION ACT. Pursuant to
Section 2(c) of Chapter 110D of the Massachusetts General Laws, the Corporation
has elected that the provisions of said Chapter 110D shall not apply to "control
share acquisitions" (as defined in said Chapter 110D) of this Corporation.
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Exhibit 4.1
[FRONT OF STOCK CERTIFICATE]
THERMEDICS DETECTION INC.
TDX
COMMON STOCK PAR Incorporated under the laws of the COMMON STOCK
PAR VALUE $.10 State of Delaware CUSIP ___________
SEE REVERSE SIDE
FOR CERTAIN DEFINITIONS
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.10 PAR VALUE, OF
THERMEDICS DETECTION INC.
transferable on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this Certificate properly
endorsed. The Certificate and the shares represented hereby are issued under
and shall be subject to the laws of the State of Delaware and all the provision
of the Certificate of Incorporation and the By-Laws of the Corporation, and all
the amendments from time to time made thereto. This Certificate is not valid
unless countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
[ THERMEDICS DETECTION INC. ]
[ Corporate Seal ]
Secretary President and Chief Executive Officer
<PAGE>
[BACK OF STOCK CERTIFICATE]
THERMEDICS DETECTION INC.
This Corporation will furnish without charge to each stockholder who so
requests, a copy of the designations, powers, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof, and the qualifications, limitation or restrictions of such
preferences and/or rights. Any such requests may be addressed to the Secretary
of the Corporation.
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entities
JT TEN - as joint tenants with right of
survivorship and not as
tenants in common
UNIF GIFT MIN ACT - __________ Custodian ___________
(Cust) (Minor)
under Uniform Gifts to Minors
Act __________________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________________________________________________
_____________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
_____________________________________________________________________________
_________________________________________________________ Shares of the Stock
represented by the within Certificate, and do hereby irrevocably constitute
and appoint _________________________________________________________________
_____________________________________________________________________________
Attorney to transfer the said Stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated _______________________________ _________________________________
Signature
___________________________________
THE SIGNATURES TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE CERTIFICATE
IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATSOEVER.
<PAGE>
EXHIBIT 10.1
CORPORATE SERVICES AGREEMENT
THIS is an AGREEMENT dated as of the 20th day of March, 1996 between
Thermo Electron Corporation, a Delaware corporation ("Thermo"), and Thermedics
Detection Inc. ("Subsidiary"), a Massachusetts corporation.
PRELIMINARY STATEMENT
Subsidiary desires to obtain administrative and other services from
Thermo and Thermo is willing to furnish or make such services available to
Subsidiary.
By this Agreement, Thermo and Subsidiary desire to set forth the basis
for Thermo's providing services of the type referred to herein.
AGREEMENTS
IT IS MUTUALLY agreed by the parties hereto as follows:
1. SERVICES
1.1 Beginning on the date of this Agreement, Thermo, through its
corporate staff, will provide or otherwise make available to Subsidiary certain
general corporate services, including but not limited to accounting, tax,
corporate communications, legal, financial and other administrative staff
functions, and arrange for administration of insurance and employee benefit
programs. The services will include the following:
(a) ACCOUNTING AND SECURITIES COMPLIANCE RELATED SERVICES.
Maintenance of corporate records, assistance, if and when necessary, in
preparation of Securities and Exchange Commission filings, including without
limitation registration statements, Forms 10-K, 10-Q and 8-K, assistance in the
preparation of Proxies and Proxy Statements and the solicitation of Proxies, and
assistance in the preparation of the Annual and Quarterly Reports to
Stockholders, maintenance of internal audit support services and review of
compliance with financial and accounting procedures.
(b) TAX RELATED SERVICES. Preparation of Federal tax returns,
preparation of state and local tax returns (including income tax returns), tax
research and planning and assistance on tax audits (Federal, state and local).
(c) INSURANCE AND EMPLOYEE BENEFIT RELATED SERVICES. Arranging for
liability, property and casualty, and other normal business insurance coverage.
Support for product, worker safety and environmental programs (Subsidiary
acknowledges that principal
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responsibility for compliance rests with the Subsidiary). Administration of
Subsidiary's employee participation in employee benefit plans sponsored by
Thermo and insurance programs such as the following: 401(k) plan, group medical
insurance, group life insurance, employee stock purchase plan and various stock
options plans. Filing of all required reports under ERISA for employee benefit
plans sponsored by Thermo.
(d) CORPORATE RECORD KEEPING SERVICES. Maintenance of corporate
records, including without limitation, maintenance of minutes of meetings of the
Boards of Directors and Stockholders, supervision of transfer agent and
registration functions, coordination of stock repurchase programs, and tracking
of stock issuances and reserved shares.
(e) Services in addition to those enumerated in subsections 1.1(a)
through 1.1(d) above including, but not limited to, routine legal and other
administrative activities, Corporate information and treasury and other
financial services as reasonably requested by Subsidiary.
1.2 For performing general services of the types described above in
Paragraph 1.1, Thermo will initially charge Subsidiary an annual fixed fee
equal to 1.0% of the gross revenues of Subsidiary for the fiscal year in which
such services are performed (such amount to be prorated on a daily basis for
any partial year), which fee is intended to compensate Thermo for Subsidiary's
pro rata share of the aggregate costs actually incurred by Thermo in connection
with the provision of such services to all recipients thereof. The fee set
forth in the preceding sentence may be adjusted from time to time by mutual
agreement of Thermo and Subsidiary.
1.3 In addition to the foregoing services, certain specific services
are made available to Subsidiary by Thermo on an as-requested basis. These may
include, but are not limited to, services specifically requested by Subsidiary
or services which, in Thermo's judgment, are not routine administrative services
or create unusual burdens or demands on Thermo's resources, such as litigation
support, acquisition and offering support services (including legal services),
corporate development, tax audit support or public or investor relations
services other than routine shareholder communications. Thermo will charge
Subsidiary the costs actually incurred (including overhead and general
administrative expenses) for such services that are requested by Subsidiary and
supplied by Thermo.
1.4 The charges for services pursuant to Subsections 1.2 and 1.3
above will be determined and payable no less frequently than on a quarterly
basis. The charges will be due when billed and shall be paid no later than 30
days from the date of billing.
1.5 When services of the type described above in this Section 1 are
provided by outside providers to Subsidiary or, in connection with the
provision of such services out-of-pocket costs are incurred such as travel, the
cost thereof will be paid by Subsidiary. To the extent that Subsidiary is
billed by the provider directly, Subsidiary shall pay the bill directly. If
Thermo is billed for such services, Thermo may pay the bill and charge
Subsidiary the amount of the bill or forward the bill to Subsidiary for payment
by Subsidiary.
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2. SUBSIDIARY'S DIRECTORS AND OFFICERS. Nothing contained herein
will be construed to relieve the directors or officers of Subsidiary from the
performance of their respective duties or to limit the exercise of their powers
in accordance with the charter or By-Laws of Subsidiary or in accordance with
any applicable statute or regulation.
3. LIABILITIES. In furnishing Subsidiary with management advice
and other services as herein provided, neither Thermo nor any of its officers,
directors or agents shall be liable to Subsidiary or its creditors or
shareholders for errors of judgment or for anything except willful malfeasance,
bad faith or gross negligence in the performance of their duties or reckless
disregard of their obligations and duties under the terms of this Agreement. The
provisions of this Agreement are for the sole benefit of Thermo and Subsidiary
and will not, except to the extent otherwise expressly stated herein, inure to
the benefit of any third party.
4. TERM.
(a) TERM. The initial term of this Agreement shall begin on the
date of this Agreement and continue through the end of the current fiscal year.
This Agreement shall automatically renew at the end of the initial term for
successive one-year terms until terminated in accordance with Subsection (b)
below.
(b) TERMINATION. This Agreement may be terminated by Subsidiary at
any time on thirty days prior notice to Thermo. In addition, this Agreement
shall automatically terminate without any further action by either party on the
date the Subsidiary ceases to be a member of the Thermo Group or a participant
in the Thermo Electron Corporate Charter.
(c) TERMINATION FEE. In the event of a termination of this
Agreement, Subsidiary shall pay to Thermo its pro rata fee pursuant to Section
1.2 for the year in which the termination takes effect plus a termination fee
equal to the fee payable under Section 1.2 for the most recent nine consecutive
months.
(d) POST-TERMINATION SERVICES. Following a termination of this
Agreement, corporate administrative services of the kind provided under the
Agreement may continue to be provided to Subsidiary on an as-requested basis by
the Subsidiary or as required in the event it is not practicable for the
Subsidiary to provide such services or it is otherwise unable to identify
another source to provide such services (as would be the case of administration
of employee benefit plans and insurance programs sponsored by Thermo and in
which Subsidiary's employees participate) or as otherwise required by Thermo
acting in its capacity as majority stockholder of Subsidiary. In the event such
services are provided by Thermo to Subsidiary, Subsidiary shall be charged by
Thermo a fee equal to the market rate for comparable services charged by third-
party vendors. Such fee will be charged monthly and payable by Subsidiary within
thirty days. The obligations of Subsidiary set forth in this Section 4(d) shall
survive the termination of this Agreement.
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5. STATUS. Thermo shall be deemed to be an independent contractor
and, except as expressly provided or authorized in this Agreement, shall have no
authority to act for or represent Subsidiary.
6. OTHER ACTIVITIES OF THERMO. Subsidiary recognizes that Thermo
now renders and may continue to render management and other services to other
companies that may or may not have policies and conduct activities similar to
those of Subsidiary. Thermo shall be free to render such advice and other
services, and Subsidiary hereby consents thereto. Thermo shall not be required
to devote full time and attention to the performance of its duties under this
Agreement, but shall devote only so much of its time and attention as it deems
reasonable or necessary to perform the services required hereunder.
7. NOTICES. All notices, billings, requests, demands, approvals,
consents, and other communications which are required or may be given under this
Agreement shall be in writing and will be deemed to have been duly given if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid to the parties at their respective addresses set
forth below:
If to Subsidiary: If to Thermo:
Thermedics Detection Inc. Thermo Electron Corporation
220 Mill Road 81 Wyman Street
Chelmsford, Massachusetts 02254 Waltham, Massachusetts 02254
Attention: President Attention: Chief Executive Officer
8. NO ASSIGNMENT. This Agreement shall not be assignable except
with the prior written consent of the other party to this Agreement.
9. APPLICABLE LAW. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Massachusetts applicable to
contracts made and to be performed therein.
10. PARAGRAPH TITLES. The paragraph titles used in this Agreement
are for convenience of reference only and will not be considered in the
interpretation or construction of any of the provisions thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument by their duly authorized officers as of the date
first above written.
THERMO ELECTRON CORPORATION THERMEDICS DETECTION INC.
By: /s/ John W. Wood Jr. By: /s/ Jonathan W. Painter
Title: Senior Vice President Title: Treasurer
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EXHIBIT 10.3
TAX ALLOCATION AGREEMENT
THIS AGREEMENT is made as of the 20th day of March, 1996 between
Thermedics Inc., a Massachusetts corporation ("TMD"), and Thermedics Detection
Inc., a Massachusetts corporation ("Detection" - The term "Detection" shall
refer to Detection and those of its subsidiaries that are at least 80% owned by
Thermedics Detection Inc.).
PRELIMINARY STATEMENT
TMD is the parent of an affiliated group of corporations (including
Detection) within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
TMD owns more than 80% of the issued and outstanding shares of voting
common stock of Detection, the only class of stock that Detection is authorized
to issue. Detection is required to file consolidated federal income tax
returns with TMD.
TMD is the common parent of an affiliated group of corporations and
Detection recognizes that any one of them that sustains a net operating loss or
otherwise generates beneficial tax attributes for a taxable period may be
deprived of such benefits when offset in that or other periods against income
or tax liabilities of the others.
By this Agreement, the parties desire to set forth the understanding
they have reached with respect to the filing of the consolidated United States
federal income tax returns. Foreign tax returns are not subject to this
Agreement.
AGREEMENTS
IT IS MUTUALLY agreed by the parties hereto as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1. The Term "TMD Group" means the group of corporations of
which TMD is common parent and with which TMD files an affiliated consolidated
federal income tax return, excluding Detection and subsidiaries of Detection
that may exist now or in the future. For purposes of this Agreement, the TMD
Group shall be treated as a single corporate entity. The TMD Group and Detection
and its subsidiaries, respectively, are sometimes herein referred to
collectively as the "Two Companies" or the "Companies." This Agreement
anticipates that TMD will set aside and retain certain sums calculated as
provided herein. All reference to TMD paying sums to itself pursuant to this
Agreement shall be satisfied by TMD setting aside sums in respect of the
obligations established under this Agreement.
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1.2. The paragraph titles used herein are for convenience of
reference only and will not be considered in the interpretation or construction
of any of the provisions hereof. Words may be construed in the singular or the
plural as the context requires.
2. TAX RETURNS.
2.1. Federal Tax Returns. TMD as the common parent will
prepare and file or cause to be prepared and filed federal and state income tax
returns on a consolidated basis, for the TMD Group and Detection and its
subsidiaries for all fiscal periods as to which a consolidated return is
appropriate in accordance with the terms of this Agreement.
2.2. STATE TAX RETURNS. TMD as the common parent will prepare
and file or cause to be filed state income tax returns on a combined,
consolidated, unitary, or other method that TMD believes will result in a lower
overall tax liability to the Two Companies. Detection will reimburse TMD for its
portion of the tax. Such reimbursement will be the tax Detection would have paid
on a separate return basis, but only if it was required to file a return in that
state.
3. TIME OF PAYMENT OF FEDERAL OBLIGATIONS TO TMD. The obligations
of the Companies for Federal income tax payments will be determined and paid as
follows:
(a) Not later than the 15th day after the end of the fourth,
sixth, ninth and twelfth months of each consolidated taxable year of TMD, TMD
will make a reasonable determination (consistent with the provisions of Section
6655 of the Code) of the separate federal income tax liability that each Company
would be required to pay as estimated payments on a separate return basis for
that period. Each Company shall pay to TMD the amount of such liability within
ten days.
(b) After the end of TMD's fourth accounting quarter and
before the 15th day of the third month thereafter, each Company will promptly
pay to TMD the entire amounts estimated to be due and payable under such
Company's federal income tax return as if filed on a separate return basis, less
all amounts previously paid with respect to that year pursuant to subparagraph
(a) of this Paragraph 3.
(c) If upon the filing of the consolidated income tax
return, a revised calculation is made in the manner set forth in subparagraph
(b) of this Paragraph 3, and it is determined that either Company has paid to
TMD with respect to the consolidated taxable year an amount greater than that
required by Paragraph 3(b), then that excess will be promptly paid by TMD to
that Company.
4. TAX OBLIGATIONS OF TMD. TMD will pay the consolidated tax
liabilities of the Companies arising from filing a consolidated federal income
tax return.
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5. PAYMENT OF FUNDS BY TMD. After the end of TMD's fourth quarter
and before the 15th day of the third month thereafter, if in any year Detection
incurs a loss, TMD shall pay to Detection a sum equal to the amount of benefit
realized by TMD that is attributable to the loss incurred by Detection.
6. CHANGES IN PRIOR YEAR'S TAX LIABILITIES. In the event that the
consolidated tax liability or the separate tax liability referred to in
Paragraphs 3 and 4 hereof for any year for which a consolidated tax return for
the two Companies was filed is or would be increased or decreased by reason of
filing an amended return or returns (including carry-back claims), or by reason
of the examination of the returns by the Internal Revenue Service, the amounts
due TMD for payment of taxes under Paragraph 3 hereof, and the amount to be
paid to TMD for allocation to Detection under Paragraph 4 hereof for each such
year will be recomputed by TMD to reflect the adjustments to taxable income and
tax credits for the taxable year and interest or penalties, if any. In
accordance with those recomputations, additional sums will be paid by the
Companies to TMD or paid by TMD to the Companies regardless of whether a member
has become a Departing Member (as defined in Paragraph 8 hereof) subsequent to
the taxable year of recomputation.
7. NEW MEMBERS. The Companies agree that if, subsequent to the
execution of this Agreement, TMD becomes the parent, as that term is used in
Section 1504 of the Code, of one or more subsidiary corporations, in addition to
Detection, then each newly acquired subsidiary corporation may become a separate
party to this Agreement by consenting in writing to be bound by its provisions,
effective immediately upon its delivery to TMD, but the income, deductions and
tax credits of the newly acquired subsidiary corporations will first be included
in the consolidated federal income tax return as required by the Code.
8. DEPARTING MEMBERS.
8.1. The term "Departing Member," as used herein, will mean a
Company that is no longer permitted under the Code to be included in the
consolidated federal income tax return.
8.2. In applying this Agreement to a Departing Member for the
final taxable year in which its income, deductions, and tax credits are required
to be included in the consolidated federal income tax return: (i) the amount
required to be paid by a Departing Member under the provisions of Paragraph 3
hereof and (ii) the amount that the Departing Member is entitled to receive
under the provisions of Paragraph 4 hereof, will be determined by taking into
account the income, deductions and tax credits of the Departing Member only for
the fractional part of such year as the Departing Member was a member of the
consolidated group and included in the consolidated federal income tax return.
8.3. After the filing of the consolidated federal income tax
return for the last taxable year that the Departing Member was included therein,
the Departing Member will be informed of the amount of consolidated carry-overs
as of the end of the taxable year or period
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which are attributable to the Departing Member, as provided by Treasury
Regulations Section 1.1502-79 or otherwise, including the agreement of the
parties.
9. DETERMINATION OF SUMS DUE FROM AND PAYABLE TO MEMBERS. TMD will
determine the sums due from and payable to the Companies under the provisions
of this Agreement (including the determination for purposes of Paragraph 6
hereof). The Companies agree to provide TMD with such information as may
reasonably be necessary to make these determinations. Issues arising in the
course of the determinations that are not expressly provided for in this
Agreement will be resolved in an equitable manner.
10. TAX CONTROVERSIES. If a consolidated federal income tax return
for any taxable year during which this Agreement is in effect is examined by the
Internal Revenue Service, the examination, as well as any other matters relating
to that tax return, including any tax litigation, will be handled solely by TMD.
Detection will cooperate with TMD and to this end will execute protests,
petitions, and any other documents as TMD determines to be necessary or
appropriate. The cost and expense of TMD's handling of a tax controversy,
including legal and accounting fees, will be allocated to and paid by the
Company to whom the tax controversy relates. If the tax controversy relates to
both Companies, the cost and expense will be allocated between the Companies in
the proportion that each Company's potential additional tax liability bears to
the total potential additional tax liability of both Companies (determined in
accordance with Paragraph 6 hereto and assuming that the tax controversy is
resolved in favor of the Internal Revenue Service) for the taxable year on
issue. If the tax controversy encompasses more than one taxable year, TMD will
first allocate the cost and expense to each taxable year in the proportion that
the potential additional tax liability for each taxable year bears to the total
potential additional tax liability for the taxable years in issue.
11. EFFECTIVE DATE. This Agreement shall be effective beginning as
of the date of this Agreement, and will continue on a year-to-year basis
thereafter with respect to Detection for so long as Detection is permitted to
file a consolidated federal income tax return with TMD.
12. STATE TAXES. The two Companies will jointly file any state tax
return on a combined, consolidated, unitary, or other method that TMD determines
results in a lower overall tax liability to the Two Companies. In the event that
said state tax returns shall be filed, the provisions of sections 1 through 11
hereof shall apply, mutatis mutandis (the necessary changes being made) to the
allocation, preparation, filing and payment related to such state taxes and tax
returns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THERMEDICS INC. THERMEDICS DETECTION INC.
By: /s/ John W. Wood Jr. By: /s/ Jonathan W. Painter
Title: President Title: Treasurer
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EXHIBIT 10.4
MASTER REPURCHASE AGREEMENT
AGREEMENT dated as of the 20th day of March, 1996 between Thermo
Electron Corporation, a Delaware corporation ("Seller"), and Thermedics
Detection Inc., a Massachusetts corporation (the "Buyer").
1. APPLICABILITY
From time to time Buyer and Seller may enter into transactions in which
Seller agrees to transfer to Buyer certain securities and/or financial
instruments ("Securities") against the transfer of funds by Buyer, with a
simultaneous agreement by Buyer to transfer to Seller such Securities on
demand, against the transfer of funds by Seller. Each such transaction shall
be referred to herein as a "Transaction" and shall be governed by this
Agreement, unless otherwise agreed in writing.
2. DEFINITIONS
(a) "Act of Insolvency", with respect to either party (i) the
commencement by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law,
or such party seeking the appointment of a receiver, trustee, custodian or
similar official for such party or any substantial part of its property; or (ii)
the commencement of any such case or proceeding against such party, or another
seeking such an appointment, which (A) is consented to or not timely contested
by such party, (B) results in the entry of an order for relief, such an
appointment or the entry of an order having a similar effect, or (C) is not
dismissed within 15 days; or (iii) the making by a party of a general assignment
for the benefit of creditors; or (iv) the admission in writing by a party of
such party's inability to pay such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided by Seller
to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Income", with respect to any Security at any time, any
principal thereof then payable and all interest, dividends or other
distributions thereon;
(d) "Market Value", with respect to any Securities as of any date,
the price for such Securities on such date obtained from a generally recognized
source agreed to by the parties or the most recent closing bid quotation from
such a source, plus accrued Income to the extent not included therein (other
than any Income transferred to Seller pursuant to Paragraph 6 hereof) as of such
date (unless contrary to market practice for such Securities);
(e) "Other Buyers", third parties that have entered into an
agreement with Seller that is substantially similar to this Agreement;
<PAGE>
(f) "Pricing Rate", a rate equal to the Commercial Paper Composite
rate for 30-day maturities provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated (or, if such rate is not available, a substantially equivalent rate
agreed to by Buyer and Seller) plus 25 basis points, which rate shall be
adjusted on the first business day of each fiscal quarter and shall be in effect
for the entirety such fiscal quarter;
(g) "Purchase Price", the price at which Purchased Securities are
transferred by Seller to Buyer;
(h) "Purchased Securities", the Securities transferred by Seller to
Buyer in a Transaction hereunder, and any Securities substituted therefor in
accordance with Paragraph 9 hereof. The term "Purchased Securities" with respect
to any Transaction at any time also shall include Additional Purchase Securities
transferred pursuant to Paragraph 4(a) and shall exclude Securities returned
pursuant to Paragraph 4(b);
(i) "Repurchase Collateral Account", a book account maintained by
Seller containing, among other Securities, the Purchased Securities; and
(j) "Repurchase Price", for any Purchased Security, an amount equal
to the Purchase Price paid by Buyer to Seller for such Purchased Security.
3. TRANSACTIONS
(a) A Transaction may be initiated by Buyer upon the transfer of the
Purchase Price to Seller's account. Upon such transfer, Seller shall transfer
to Buyer Purchased Securities having a Market Value equal to 103% of the
Purchase Price.
(b) Purchased Securities shall be held in custody for Buyer by
Seller in the Repurchase Collateral Account. Seller shall indicate on its books
for such account Buyer's ownership of the Purchased Securities. Upon reasonable
request from Buyer, Seller shall provide Buyer with a complete list of Purchased
Securities owned by Buyer.
(c) Upon demand by Buyer or Seller, Seller shall repurchase from
Buyer, and Buyer shall sell to Seller, for the Repurchase Price all or any part
of the Purchased Securities then owned by Buyer.
4. MARGIN MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased
Securities then owned by Buyer is less than 103% of the aggregate Repurchase
Price for such Purchased Securities, then Seller shall transfer to Buyer
additional Securities ("Additional Purchased Securities"), so that the aggregate
Market Value of such Purchased Securities, including any such Additional
Purchased Securities, will thereupon equal or exceed 103% of such aggregate
Repurchase Price.
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(b) If at any time the aggregate Market Value of all Purchased
Securities then owned by Buyer exceeds 103% of the aggregate Repurchase Price
for such Purchased Securities, then Seller may transfer Purchased Securities to
Seller, so that the aggregate Market Value of such Purchased Securities will
thereupon not exceed 103% of such aggregate Repurchase Price.
5. INTEREST PAYMENTS
If during any fiscal month Buyer owned Purchased Securities, then on the
first day of the next following fiscal month Seller shall pay to Buyer an
amount equal to the sum of the aggregate Repurchase Prices of the Purchased
Securities owned by Buyer at the close of each day during the preceding fiscal
month divided by the number of days in such month and the product multiplied by
the Pricing Rate times the number of days in such month divided by 360.
6. INCOME PAYMENTS AND VOTING RIGHTS
Where a particular Transaction's term extends over an Income payment
date on the Purchased Securities subject to that Transaction, Buyer shall, on
the date such Income is payable, transfer to Seller an amount equal to such
Income payment or payments with respect to any Purchased Securities subject to
such Transaction. Seller shall retain all voting rights with respect to
Purchased Securities sold to Buyer under this Agreement.
7. SECURITY INTEREST
Although the parties intend that all Transactions hereunder be sales and
purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction and this
Agreement, and shall be deemed to have granted to Buyer a security interest in,
all of the Purchased Securities with respect to all Transactions hereunder and
all proceeds thereof.
8. PAYMENT AND TRANSFER
Unless otherwise mutually agreed, all transfers of funds hereunder shall
be in immediately available funds. As used herein with respect to Securities,
"transfer" is intended to have the same meaning as when used in Section 8-313 of
the Massachusetts Uniform Commercial Code or, where applicable, in any federal
regulation governing transfers of the Securities.
9. SUBSTITUTION
Buyer hereby grants Seller the authority to manage, in Seller's sole
discretion, the Purchased Securities held in custody for Buyer by Seller in the
Repurchase Collateral Account. Buyer expressly agrees that Seller may (i)
substitute other Securities for any Purchased Securities and (ii) commingle
Purchased Securities with other Securities held in the Repurchase Collateral
Account. Substitutions shall be made by transfer to Buyer of such other
Securities and transfer to Seller of the Purchased Securities for which
substitution is being made. After substitution, the
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substituted Securities shall be deemed to be Purchased Securities. Securities
which are substituted for Purchased Securities shall have a Market Value at the
time of substitution equal to or greater than the Market Value of the Purchase
Securities for which such Securities were substituted.
10. REPRESENTATIONS
Each of Buyer and Seller represents and warrants to the other that (i)
it is duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance, (ii) the person signing this Agreement on its behalf is duly
authorized to do so on its behalf, (iii) it has obtained all authorizations of
any governmental body required in connection with this Agreement and the
Transactions hereunder and such authorizations are in full force and effect and
(iv) the execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance, charter, by-law or
rule applicable to it or any agreement by which it is bound or by which any of
its assets are affected. On the date for any Transaction Buyer and Seller shall
each be deemed to repeat all the foregoing representations made by it.
11. EVENTS OF DEFAULT
In the event that (i) Seller fails to repurchase or Buyer fails to
transfer Purchased Securities upon demand for repurchase from either Buyer or
Seller, (ii) Seller or Buyer fails, after one business day's notice, to comply
with Paragraph 4 hereof, (iii) Buyer fails to make payment to Seller pursuant to
Paragraph 6 hereof, (iv) Seller fails to comply with Paragraph 5 hereof, (v) an
Act of Insolvency occurs with respect to Seller or Buyer, (vi) any
representation made by Seller or Buyer shall have been incorrect or untrue in
any material respect when made or repeated or deemed to have been made or
repeated, or (vii) Seller or Buyer shall admit to the other its inability to, or
its intention not to, perform any of its obligations hereunder (each an "Event
of Default"):
(a) At the option of the nondefaulting party, exercised by written
notice to the defaulting party (which option shall be deemed to have been
exercised, even if no notice is given, immediately upon the occurrence of any
Act of Insolvency), Seller shall become obligated to repurchase, and Buyer shall
become obligated to sell, all Purchased Securities then owned by Buyer for the
Repurchase Price of such Purchased Securities.
(b) If Seller is the defaulting party and Buyer exercises or is
deemed to have exercised the option referred to in subparagraph (a) of this
Paragraph, (i) the Seller's obligations hereunder to repurchase all Purchased
Securities in such Transactions shall thereupon become immediately due and
payable, (ii) all Income paid after such exercise or deemed exercise shall be
retained by Buyer and applied to the aggregate unpaid Repurchase Prices owed by
Seller, and (iii) Seller shall immediately deliver to Buyer any Purchased
Securities subject to such Transactions then in Seller's possession.
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(c) In all Transactions in which Buyer is the defaulting party, upon
tender by Seller of payment of the aggregate Repurchase Prices for all such
Transactions, Buyer's right, title and interest in all Purchased Securities
subject to such Transactions shall be deemed transferred to Seller, and Buyer
shall deliver all such Purchased Securities to Seller.
(d) After one business day's notice to the defaulting party (which
notice need not be given if an Act of Insolvency shall have occurred, and which
may be the notice given under subparagraph (a) of this Paragraph or the notice
referred to in clause (ii) of the first sentence of this Paragraph), the
nondefaulting party may:
(i) as to Transactions in which Seller is the defaulting
party, (A) immediately sell, in a recognized market at such price or prices as
Buyer may reasonably deem satisfactory, any or all Purchased Securities subject
to such Transactions and apply the proceeds thereof to the aggregate unpaid
Repurchase Prices and any other amounts owing by Seller hereunder or (B) in its
sole discretion elect, in lieu of selling all or a portion of such Purchased
Securities, to give Seller credit for such Purchased Securities in an amount
equal to the price therefor on such date, obtained from a generally recognized
source or the most recent closing bid quotation from such a source, against the
aggregate unpaid Repurchase Prices and any other amounts owing by Seller
hereunder; and
(ii) as to Transactions in which Buyer is the defaulting
party, (A) purchase securities ("Replacement Securities") of the same class and
amount as any Purchased Securities that are not delivered by Buyer to Seller as
required hereunder or (B) in its sole discretion elect, in lieu of purchasing
Replacement Securities, to be deemed to have purchased Replacement Securities at
the price therefor on such date, obtained from a generally recognized source or
the most recent closing bid quotation from such a source.
(e) As to Transactions in which Buyer is the defaulting party,
Buyer shall be liable to Seller (i) with respect to Purchased Securities (other
than Additional Purchased Securities), for any excess of the price paid (or
deemed paid) by Seller for Replacement Securities therefor over the Repurchase
Price for such Purchased Securities and (ii) with respect to Additional
Purchased Securities, for the price paid (or deemed paid) by Seller for the
Replacement Securities therefor.
(f) The defaulting party shall be liable to the nondefaulting party
for the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or as a consequence of an Event of
Default.
(g) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other agreement or
applicable law.
12. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will
enter into each Transaction hereunder in consideration of and in reliance upon
the fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in
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consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to
perform all of its obligations in respect of each Transaction hereunder, and
that a default in the performance of any such obligations shall constitute a
default by it in respect of all Transactions hereunder, (ii) that each of them
shall be entitled to set off claims and apply property held by them in respect
of any Transaction against obligations owing to them in respect of any other
Transactions hereunder and (iii) that payments, deliveries and other transfers
made by either of them in respect of any Transaction shall be deemed to have
been made in consideration of payments, deliveries and other transfers in
respect of any other Transactions hereunder, and the obligations to make any
such payments, deliveries and other transfers may be applied against each other
and netted.
13. ENTIRE AGREEMENT; SEVERABILITY
This Agreement shall supersede any existing agreements between the
parties containing general terms and conditions for repurchase transactions.
Each provision and agreement and agreement herein shall be treated as separate
and independent from any other provision or agreement herein and shall be
enforceable notwithstanding the unenforceability of any such other provision or
agreement.
14. NON-ASSIGNABILITY; TERMINATION
The rights and obligations of the parties under this Agreement and under
any Transactions shall not be assigned by either party without the prior
written consent of the other party. Subject to the foregoing, this Agreement
and any Transactions shall be binding upon and shall inure to the benefit of
the parties and their respective successors and assigns. This Agreement may be
canceled by either party upon giving written notice to the other, except that
this Agreement shall, notwithstanding such notice, remain applicable to any
Transactions then outstanding.
15. GOVERNING LAW
This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts without giving effect to the conflict of law principles thereof.
16. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a wavier of its right to exercise
any other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto.
19. INTENT
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the United
States Code, as amended (except insofar
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as the type of Securities subject to such Transaction or the term of such
Transaction would render such definition inapplicable), and a "securities
contract" as that term is defined in Section 741 of Title 11 of the United
States Code, as amended.
(b) It is understood that either party's right to liquidate
Securities delivered to it in connection with Transactions hereunder or to
exercise any other remedies pursuant to Paragraph 11 hereof, is a contractual
right to liquidate such Transaction as described in Sections 555 and 559 of
Title 11 of the United States Code, as amended.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THERMO ELECTRON CORPORATION THERMEDICS DETECTION INC.
By: /s/ John W. Wood Jr. By: /s/ Jonathan W. Painter
(Signature) (Signature)
John W. Wood Jr. Jonathan W. Painter
(Print Name) (Print Name)
Title: Senior Vice President Title: Treasurer
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EXHIBIT 10.5
MASTER GUARANTEE REIMBURSEMENT AGREEMENT
This AGREEMENT is entered into as of the 20th day of March, 1996 by and
among Thermo Electron Corporation (the "Parent") and those of its subsidiaries
that join in this Agreement by executing the signature page hereto (the
"Majority Owned Subsidiaries").
WITNESSETH:
WHEREAS, the majority owned subsidiaries in the past have entered into,
and wish to enter into in the future, various financial transactions, such as
convertible or nonconvertible debt, bank loans, and equity offerings, and other
contractual arrangements with third parties (the "Underlying Obligations");
WHEREAS, the Majority Owned Subsidiaries acknowledge that they are
unable to enter into many kinds of Underlying Obligations without a guarantee of
their performance thereunder from the Parent (a "Parent Guarantee");
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier Majority
Owned Subsidiaries ") are themselves majority owned subsidiaries of other
Majority Owned Subsidiaries ("First Tier Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second Tier
Majority Owned Subsidiary's Underlying Obligations are often demanded and given
without the respective First Tier Majority Owned Subsidiary also issuing a
guarantee of such Underlying Obligation;
WHEREAS, the Parent is willing to consider continuing to issue Parent
Guarantees, on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each party hereto, the parties agree as follows:
1. If, after the date hereof, the Parent provides a Parent
Guarantee of an Underlying Obligation, and the beneficiary(ies) of the Parent
Guarantee enforce the Parent Guarantee, or the Parent performs under the Parent
Guarantee for any other reason, then the Majority Owned Subsidiary that is
obligated under such Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage (including reasonable
attorneys' fees) suffered by the Parent as a result of the Parent Guarantee. If
the Underlying Obligation is issued by a Second Tier Majority Owned Subsidiary,
and such Second Tier Majority Owned Subsidiary is unable to fully indemnify the
Parent (because of the poor financial condition of such Second Tier Majority
Owned Subsidiary, or for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such Second Tier Majority
Owned Subsidiary shall indemnify and save harmless the Parent from any remaining
liability, cost, expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
<PAGE>
2. For purposes of this Agreement, the term "guarantee" shall
include not only a formal guarantee of an obligation, but also any other
arrangement where the Parent is liable for the obligations of a Majority Owned
Subsidiary. Such other arrangements include (a) representations, warranties
and/or covenants or other obligations joined in by the Parent, whether on a
joint or joint and several basis, for the benefit of the Majority Owned
Subsidiary and (b) responsibility of the Parent by operation of law for the acts
and omissions of the Majority Owned Subsidiary, including controlling person
liability under securities and other laws.
3. Promptly after the Parent receives notice that a beneficiary of
a Parent Guarantee is seeking to enforce such Parent Guarantee, the Parent shall
notify the Majority Owned Subsidiary(s) obligated under the relevant Underlying
Obligation. Such Majority Owned Subsidiary(s) shall have the right, at its own
expense, to contest the claim of such beneficiary. If a Majority Owned
Subsidiary is contesting the claim of such beneficiary, the Parent will not
perform under the relevant Parent Guarantee unless and until, in the Parent's
reasonable judgment, the Parent is obligated under the terms of such Parent
Guarantee to perform. Subject to the foregoing, any dispute between a Majority
Owned Subsidiary and a beneficiary of a Parent Guarantee shall not affect such
Majority Owned Subsidiary's obligation to promptly indemnify the Parent
hereunder.
4. All payments required to be made by a Majority Owned Subsidiary
shall be made within two days after receipt of notice from the Parent.
5. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts applicable to contracts made
and performed therein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THERMO ELECTRON CORPORATION
By: /s/ John W. Wood Jr.
Title: Senior Vice President
THERMEDICS INC.
By: /s/ John W. Wood Jr.
Title: President
THERMEDICS DETECTION INC.
By: /s/ Jonathan W. Painter
Title: Treasurer
<PAGE>
EXHIBIT 10.6
MASTER GUARANTEE REIMBURSEMENT AGREEMENT
This AGREEMENT is entered into as of the 20th day of March, 1996 by and
among Thermedics Inc. (the "Parent") and those of its subsidiaries that join in
this Agreement by executing the signature page hereto (the "Majority Owned
Subsidiaries").
WITNESSETH:
WHEREAS, the majority owned subsidiaries wish to enter into in the
future various financial transactions, such as convertible or nonconvertible
debt, bank loans, and equity offerings, and other contractual arrangements with
third parties (the "Underlying Obligations");
WHEREAS, the Majority Owned Subsidiaries acknowledge that they may be
unable to enter into many kinds of Underlying Obligations without a guarantee
of their performance thereunder from the Parent (a "Parent Guarantee");
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier Majority
Owned Subsidiaries ") may themselves be majority owned subsidiaries of other
Majority Owned Subsidiaries ("First Tier Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second Tier
Majority Owned Subsidiary's Underlying Obligations may be demanded and given
without the respective First Tier Majority Owned Subsidiary also issuing a
guarantee of such Underlying Obligation; and
WHEREAS, the Parent is willing to consider continuing to issue Parent
Guarantees, on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each party hereto, the parties agree as follows:
1. If, after the date hereof, the Parent provides a Parent
Guarantee of an Underlying Obligation, and the beneficiary(ies) of the Parent
Guarantee enforce the Parent Guarantee, or the Parent performs under the Parent
Guarantee for any other reason, then the Majority Owned Subsidiary that is
obligated under such Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage (including reasonable
attorneys' fees) suffered by the Parent as a result of the Parent Guarantee. If
the Underlying Obligation is issued by a Second Tier Majority Owned Subsidiary,
and such Second Tier Majority Owned Subsidiary is unable to fully indemnify the
Parent (because of the poor financial condition of such Second Tier Majority
Owned Subsidiary, or for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such Second Tier Majority
Owned Subsidiary shall indemnify and save harmless the Parent from any remaining
liability, cost, expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
<PAGE>
2. For purposes of this Agreement, the term "guarantee" shall
include not only a formal guarantee of an obligation, but also any other
arrangement where the Parent is liable for the obligations of a Majority Owned
Subsidiary. Such other arrangements include (a) representations, warranties
and/or covenants or other obligations joined in by the Parent, whether on a
joint or joint and several basis, for the benefit of the Majority Owned
Subsidiary and (b) responsibility of the Parent by operation of law for the acts
and omissions of the Majority Owned Subsidiary, including controlling person
liability under securities and other laws.
3. Promptly after the Parent receives notice that a beneficiary of
a Parent Guarantee is seeking to enforce such Parent Guarantee, the Parent shall
notify the Majority Owned Subsidiary(s) obligated under the relevant Underlying
Obligation. Such Majority Owned Subsidiary(s) shall have the right, at its own
expense, to contest the claim of such beneficiary. If a Majority Owned
Subsidiary is contesting the claim of such beneficiary, the Parent will not
perform under the relevant Parent Guarantee unless and until, in the Parent's
reasonable judgment, the Parent is obligated under the terms of such Parent
Guarantee to perform. Subject to the foregoing, any dispute between a Majority
Owned Subsidiary and a beneficiary of a Parent Guarantee shall not affect such
Majority Owned Subsidiary's obligation to promptly indemnify the Parent
hereunder.
4. All payments required to be made by a Majority Owned Subsidiary
shall be made within two days after receipt of notice from the Parent.
5. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts applicable to contracts made
and performed therein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THERMEDICS INC.
By: /s/ John W. Wood Jr.
Title: President
THERMEDICS DETECTION INC.
By: /s/ Jonathan W. Painter
Title: Treasurer
<PAGE>
EXHIBIT 10.7
THERMEDICS DETECTION INC.
EQUITY INCENTIVE PLAN
(As restated to reflect the two-for-three reverse stock split effected in
March 1996)
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to secure for
Thermedics Detection Inc. (the "Company") and its Stockholders the benefits
arising from capital stock ownership by employees, officers and Directors of,
and consultants to, the Company and its subsidiaries or other persons who are
expected to make significant contributions to the future growth and success of
the Company and its subsidiaries. The Plan is intended to accomplish these goals
by enabling the Company to offer such persons equity-based interests, equity-
based incentives or performance-based stock incentives in the Company, or any
combination thereof ("Awards").
2. ADMINISTRATION
The Plan will be administered by the Board of Directors of the Company
(the "Board"). The Board shall have full power to interpret and administer the
Plan, to prescribe, amend and rescind rules and regulations relating to the Plan
and Awards, and full authority to select the persons to whom Awards will be
granted ("Participants"), determine the type and amount of Awards to be granted
to Participants (including any combination of Awards), determine the terms and
conditions of Awards granted under the Plan (including terms and conditions
relating to events of merger, consolidation, dissolution and liquidation, change
of control, vesting, forfeiture, restrictions, dividends and interest, if any,
on deferred amounts), waive compliance by a participant with any obligation to
be performed by him or her under an Award, waive any term or condition of an
Award, cancel an existing Award in whole or in part with the consent of a
Participant, grant replacement Awards, accelerate the vesting or lapse of any
restrictions of any Award and adopt the form of instruments evidencing Awards
under the Plan and change such forms from time to time. Any interpretation by
the Board of the terms and provisions of the Plan or any Award thereunder and
the administration thereof, and all action taken by the Board, shall be final,
binding and conclusive on all parties and any person claiming under or through
any party. No Director shall be liable for any action or determination made in
good faith. The Board may, to the full extent permitted by law, delegate any or
all of its responsibilities under the Plan to a committee (the "Committee")
appointed by the Board and consisting of two or more members of the Board, each
of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-
3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange
Act").
3. EFFECTIVE DATE
The Plan shall be effective as of the date first approved by the Board of
Directors, subject to the approval of the Plan by the Corporation's
Stockholders. Grants of Awards under the Plan
<PAGE>
made prior to such approval shall be effective when made (unless otherwise
specified by the Board at the time of grant), but shall be conditioned on and
subject to such approval of the Plan.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 10.6, the total number of
shares of the common stock, $.10 par value per share, of the Company (the
"Common Stock"), reserved and available for distribution under the Plan shall be
333,333 shares. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
If any Award of shares of Common Stock requiring exercise by the
Participant for delivery of such shares terminates without having been exercised
in full, is forfeited or is otherwise terminated without a payment being made to
the Participant in the form of Common Stock, or if any shares of Common Stock
subject to restrictions are repurchased by the Company pursuant to the terms of
any Award or are otherwise reacquired by the Company to satisfy obligations
arising by virtue of any Award, such shares shall be available for distribution
in connection with future Awards under the Plan.
5. ELIGIBILITY
Employees, officers and Directors of, and consultants to, the Company and
its subsidiaries, or other persons who are expected to make significant
contributions to the future growth and success of the Company and its
subsidiaries shall be eligible to receive Awards under the Plan. The Board, or
other appropriate committee or person to the extent permitted pursuant to the
last sentence of Section 2, shall from time to time select from among such
eligible persons those who will receive Awards under the Plan.
6. TYPES OF AWARDS
The Board may offer Awards under the Plan in any form of equity-based
interest, equity-based incentive or performance-based stock incentive in Common
Stock of the Company or any combination thereof. The type, terms and conditions
and restrictions of an Award shall be determined by the Board at the time such
Award is made to a Participant; provided however that the maximum number of
shares permitted to be granted under any Award or combination of Awards to any
participant during any one calendar year may not exceed 1% of the shares of
Common Stock outstanding at the beginning of such calendar year.
An Award shall be made at the time specified by the Board and shall be
subject to such conditions or restrictions as may be imposed by the Board and
shall conform to the general rules applicable under the Plan as well as any
special rules then applicable under federal tax laws or regulations or the
federal securities laws relating to the type of Award granted.
Without limiting the foregoing, Awards may take the following forms and
shall be subject to the following rules and conditions:
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6.1 OPTIONS
An option is an Award that entitles the holder on exercise thereof to
purchase Common Stock at a specified exercise price. Options granted under the
Plan may be either incentive stock options ("incentive stock options") that meet
the requirements of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), or options that are not intended to meet the requirements
of Section 422A ("non-statutory options").
6.1.1 OPTION PRICE. The price at which Common Stock may be purchased
upon exercise of an option shall be determined by the Board, provided however,
the exercise price shall not be less than the par value per share of Common
Stock.
6.1.2 OPTION GRANTS. The granting of an option shall take place at the
time specified by the Board. Options shall be evidenced by option agreements.
Such agreements shall conform to the requirements of the Plan, and may contain
such other provisions (including but not limited to vesting and forfeiture
provisions, acceleration, change of control, protection in the event of merger,
consolidations, dissolutions and liquidations) as the Board shall deem
advisable. Option agreements shall expressly state whether an option grant is
intended to qualify as an incentive stock option or non-statutory option.
6.1.3 OPTION PERIOD. An option will become exercisable at such time or
times (which may be immediately or in such installments as the Board shall
determine) and on such terms and conditions as the Board shall specify. The
option agreements shall specify the terms and conditions applicable in the event
of an option holder's termination of employment during the option's term.
Any exercise of an option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any additional
documents required by the Board and (2) payment in full in accordance with
Section 6.1.4 for the number of shares for which the option is exercised.
6.1.4 PAYMENT OF EXERCISE PRICE. Stock purchased on exercise of an
option shall be paid for as follows: (1) in cash or by check (subject to such
guidelines as the Company may establish for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the option (or in the case of a non-statutory option, by
the Board at or after grant of the option), (i) through the delivery of shares
of Common Stock that have been outstanding for at least six months (unless the
Board expressly approves a shorter period) and that have a fair market value
(determined in accordance with procedures prescribed by the Board) equal to the
exercise price, (ii) by delivery of a promissory note of the option holder to
the Company, payable on such terms as are specified by the Board, (iii) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or (iv) by
any combination of the permissible forms of payment.
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<PAGE>
6.1.5 BUYOUT PROVISION. The Board may at any time offer to buy out for
a payment in cash, shares of Common Stock, deferred stock or restricted stock,
an option previously granted, based on such terms and conditions as the Board
shall establish and communicate to the option holder at the time that such offer
is made.
6.1.6 SPECIAL RULES FOR INCENTIVE STOCK OPTIONS. Each provision of the
Plan and each option agreement evidencing an incentive stock option shall be
construed so that each incentive stock option shall be an incentive stock option
as defined in Section 422A of the Code or any statutory provision that may
replace such Section, and any provisions thereof that cannot be so construed
shall be disregarded. Instruments evidencing incentive stock options must
contain such provisions as are required under applicable provisions of the Code.
Incentive stock options may be granted only to employees of the Company and its
subsidiaries. The exercise price of an incentive stock option shall not be less
than 100% (110% in the case of an incentive stock option granted to a more than
ten percent Stockholder of the Company) of the fair market value of the Common
Stock on the date of grant, as determined by the Board. An incentive stock
option may not be granted after the tenth anniversary of the date on which the
Plan was adopted by the Board and the latest date on which an incentive stock
option may be exercised shall be the tenth anniversary (fifth anniversary, in
the case of any incentive stock option granted to a more than ten percent
Stockholder of the Company) of the date of grant, as determined by the Board.
6.2 RESTRICTED AND UNRESTRICTED STOCK
An Award of restricted stock entitles the recipient thereof to acquire
shares of Common Stock upon payment of the purchase price subject to
restrictions specified in the instrument evidencing the Award.
6.2.1 RESTRICTED STOCK AWARDS. Awards of restricted stock shall be
evidenced by restricted stock agreements. Such agreements shall conform to the
requirements of the Plan, and may contain such other provisions (including
restriction and forfeiture provisions, change of control, protection in the
event of mergers, consolidations, dissolutions and liquidations) as the Board
shall deem advisable.
6.2.2 RESTRICTIONS. Until the restrictions specified in a restricted
stock agreement shall lapse, restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of, and upon certain
conditions specified in the restricted stock agreement, must be resold to the
Company for the price, if any, specified in such agreement. The restrictions
shall lapse at such time or times, and on such conditions, as the Board may
specify. The Board may at any time accelerate the time at which the restrictions
on all or any part of the shares shall lapse.
6.2.3 RIGHTS AS A STOCKHOLDER. A Participant who acquires shares of
restricted stock will have all of the rights of a Stockholder with respect to
such shares including the right to receive dividends and to vote such shares.
Unless the Board otherwise determines, certificates evidencing shares of
restricted stock will remain in the possession of the Company until such shares
are free of all restrictions under the Plan.
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<PAGE>
6.2.4 PURCHASE PRICE. The purchase price of shares of restricted stock
shall be determined by the Board, in its sole discretion, but such price may not
be less than the par value of such shares.
6.2.5 OTHER AWARDS SETTLED WITH RESTRICTED STOCK. The Board may
provide that any or all the Common Stock delivered pursuant to an Award will be
restricted stock.
6.2.6 UNRESTRICTED STOCK. The Board may, in its sole discretion, sell
to any Participant shares of Common Stock free of restrictions under the Plan
for a price determined by the Board, but which may not be less than the par
value per share of the Common Stock.
6.3 DEFERRED STOCK
6.3.1 DEFERRED STOCK AWARD. A deferred stock Award entitles the
recipient to receive shares of deferred stock which is Common Stock to be
delivered in the future. Delivery of the Common Stock will take place at such
time or times, and on such conditions, as the Board may specify. The Board may
at any time accelerate the time at which delivery of all or any part of the
Common Stock will take place.
6.3.2 OTHER AWARDS SETTLED WITH DEFERRED STOCK. The Board may, at the
time any Award described in this Section 6 is granted, provide that, at the time
Common Stock would otherwise be delivered pursuant to the Award, the Participant
will instead receive an instrument evidencing the right to future delivery of
deferred stock.
6.4 PERFORMANCE AWARDS
6.4.1 PERFORMANCE AWARDS. A performance Award entitles the recipient
to receive, without payment, an Amount, in cash or Common Stock or a combination
thereof (such form to be determined by the Board), following the attainment of
performance goals. Performance goals may be related to personal performance,
corporate performance, departmental performance or any other category of
performance deemed by the Board to be important to the success of the Company.
The Board will determine the performance goals, the period or periods during
which performance is to be measured and all other terms and conditions
applicable to the Award.
6.4.2 OTHER AWARDS SUBJECT TO PERFORMANCE CONDITIONS. The Board may,
at the time any Award described in this Section 6 is granted, impose the
condition (in addition to any conditions specified or authorized in this Section
6 of the Plan) that performance goals be met prior to the Participant's
realization of any payment or benefit under the Award.
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<PAGE>
7. PURCHASE PRICE AND PAYMENT
Except as otherwise provided in the Plan, the purchase price of Common
Stock to be acquired pursuant to an Award shall be the price determined by the
Board, provided that such price shall not be less than the par value of the
Common Stock. Except as otherwise provided in the Plan, the Board may determine
the method of payment of the exercise price or purchase price of an Award
granted under the Plan and the form of payment. The Board may determine that all
or any part of the purchase price of Common Stock pursuant to an Award has been
satisfied by past services rendered by the Participant. The Board may agree at
any time, upon request of the Participant, to defer the date on which any
payment under an Award will be made.
8. LOANS AND SUPPLEMENTAL GRANTS
The Company may make a loan to a Participant, either on or after the
grant to the Participant of any Award, in connection with the purchase of Common
Stock under the Award or with the payment of any obligation incurred or
recognized as a result of the Award. The Board will have full authority to
decide whether the loan is to be secured or unsecured or with or without
recourse against the borrower, the terms on which the loan is to be repaid and
the conditions, if any, under which it may be forgiven.
In connection with any Award, the Board may at the time such Award is
made or at a later date, provide for and make a cash payment to the participant
not to exceed an amount equal to (a) the amount of any federal, state and local
income tax or ordinary income for which the Participant will be liable with
respect to the Award, plus (b) an additional amount on a grossed-up basis
necessary to make him or her whole after tax, discharging all the participant's
income tax liabilities arising from all payments under the Plan.
9. CHANGE IN CONTROL
9.1 IMPACT OF EVENT
In the event of a "Change in Control" as defined in Section 9.2, the
following provisions shall apply, unless the agreement evidencing the Award
otherwise provides:
(a) Any stock options or other stock-based Awards awarded under the
Plan that were not previously exercisable and vested shall become fully
exercisable and vested.
(b) Awards of restricted stock and other stock-based Awards subject
to restrictions and to the extent not fully vested, shall become fully
vested and all such restrictions shall lapse so that shares issued
pursuant to such Awards shall be free of restrictions.
(c) Deferral limitations and conditions that relate solely to the
passage of time, continued employment or affiliation, will be waived and
removed as to deferred stock Awards and performance Awards. Performance
of other conditions (other than conditions relating solely to the passage
of time, continued employment or affiliation) will continue to
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<PAGE>
apply unless otherwise provided in the agreement evidencing the Awards or
in any other agreement between the Participant and the Company or unless
otherwise agreed by the Board.
9.2 DEFINITION OF "CHANGE IN CONTROL"
"Change in Control" means any one of the following events: (i) when, any
Person is or becomes the beneficial owner (as defined in Section 13(d) of the
Exchange Act and the Rules and Regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company or its
parent corporation, Thermedics Inc. ("Thermedics"), or the beneficial owner of
25% or more of the outstanding common stock of Thermo Electron Corporation
("Thermo Electron"), without the prior approval of the Prior Directors of the
applicable issuer, (ii) the failure of the Prior Directors to constitute a
majority of the Board of Directors of the Company, Thermedics or Thermo
Electron, as the case may be, at any time within two years following any
Electoral Event, or (iii) any other event that the Prior Directors shall
determine constitutes an effective change in the control of the Company,
Thermedics or Thermo Electron. As used in the preceding sentence, the following
capitalized terms shall have the respective meanings set forth below:
(a) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined
in Rule 405 under the Securities Act of 1933 and any "group" (within the
meaning of such term in Rule 13d-5 under the Exchange Act);
(b) "Prior Directors" shall mean the persons sitting on the
Company's, Thermedics' or Thermo Electron's Board of Directors, as the
case may be, immediately prior to any Electoral Event (or, if there has
been no Electoral Event, those persons sitting on the applicable Board of
Directors on the date of this Agreement) and any future director of the
Company, Thermedics or Thermo Electron who has been nominated or elected
by a majority of the Prior Directors who are then members of the Board of
Directors of the Company, Thermedics or Thermo Electron, as the case may
be; and
(c) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's, Thermedics' or Thermo
Electron's Common Stock, not approved by the Prior Directors, by any
Person other than the Company, Thermedics, Thermo Electron or a majority-
owned subsidiary of Thermo Electron.
10. GENERAL PROVISIONS
10.1 DOCUMENTATION OF AWARDS
Awards will be evidenced by written instruments, which may differ among
Participants, prescribed by the Board from time to time. Such instruments may be
in the form of agreements to be executed by both the Participant and the Company
or certificates, letters or similar instruments
7
<PAGE>
which need not be executed by the participant but acceptance of which will
evidence agreement to the terms thereof. Such instruments shall conform to the
requirements of the Plan and may contain such other provisions (including
provisions relating to events of merger, consolidation, dissolution and
liquidations, change of control and restrictions affecting either the agreement
or the Common Stock issued thereunder), as the Board deems advisable.
10.2 RIGHTS AS A STOCKHOLDER
Except as specifically provided by the Plan or the instrument evidencing
the Award, the receipt of an Award will not give a Participant rights as a
Stockholder with respect to any shares covered by an Award until the date of
issue of a stock certificate to the participant for such shares.
10.3 CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Common Stock
pursuant to the Plan or to remove any restriction from shares previously
delivered under the Plan (a) until all conditions of the Award have been
satisfied or removed, (b) until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been complied with, (c)
if the outstanding Common Stock is at the time listed on any stock exchange,
until the shares have been listed or authorized to be listed on such exchange
upon official notice of issuance, and (d) until all other legal matters in
connection with the issuance and delivery of such shares have been approved by
the Company's counsel. If the sale of Common Stock has not been registered under
the Securities Act of 1933, as amended, the Company may require, as a condition
to exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such act and may require
that the certificates evidencing such Common Stock bear an appropriate legend
restricting transfer.
If an Award is exercised by the participant's legal representative, the
Company will be under no obligation to deliver Common Stock pursuant to such
exercise until the Company is satisfied as to the authority of such
representative.
10.4 TAX WITHHOLDING
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be delivered,
the Board will have the right to require that the participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the Board
with regard to such requirements, prior to the delivery of any Common Stock. If
and to the extent that such withholding is required, the Board may permit the
participant or such other person to elect at such time and in such manner as the
Board
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<PAGE>
provides to have the Company hold back from the shares to be delivered, or to
deliver to the Company, Common Stock having a value calculated to satisfy the
withholding requirement.
10.5 NONTRANSFERABILITY OF AWARDS
Except as otherwise specifically provided by the Board in the case of
participants who are not reporting persons under Section 16 of the Exchange Act,
no Award (other than an Award in the form of an outright transfer of cash or
Common Stock not subject to any restrictions) may be transferred other than by
the laws of descent and distribution, except pursuant to the terms of a
qualified domestic relations order as defined in the Code, and during a
Participant's lifetime an Award requiring exercise may be exercised only by him
or her (or in the event of incapacity, the person or persons properly appointed
to act on his or her behalf).
10.6 ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's capitalization, or
other distribution with respect to common Stockholders other than normal cash
dividends, the Board will make (i) appropriate adjustments to the maximum number
of shares that may be delivered under the Plan under Section 4 above, and (ii)
appropriate adjustments to the number and kind of shares of stock or securities
subject to Awards then outstanding or subsequently granted, any exercise prices
relating to Awards and any other provisions of Awards affected by such change.
(b) The Board may also make appropriate adjustments to take into
account material changes in law or in accounting practices or principles,
mergers, consolidations, acquisitions, dispositions, repurchases or similar
corporate transactions, or any other event, if it is determined by the Board
that adjustments are appropriate to avoid distortion in the operation of the
Plan, but no such adjustments other than those required by law may adversely
affect the rights of any Participant (without the Participant's consent) under
any Award previously granted.
10.7 EMPLOYMENT RIGHTS
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued employment with the Company or any subsidiary
or interfere in any way with the right of the Company or subsidiary to terminate
any employment relationship at any time or to increase or decrease the
compensation of such person. Except as specifically provided by the Board in any
particular case, the loss of existing or potential profit in Awards granted
under the Plan will not constitute an element of damages in the event of
termination of an employment relationship even if the termination is in
violation of an obligation of the Company to the employee.
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Board at the time. For purposes of this Plan, transfer of
employment between the Company and its subsidiaries shall not be deemed
termination of employment.
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10.8 OTHER EMPLOYEE BENEFITS
The value of an Award granted to a Participant who is an employee, and
the amount of any compensation deemed to be received by an employee as a result
of any exercise or purchase of Common Stock pursuant to an Award or sale of
shares received under the Plan, will not constitute "earnings" or "compensation"
with respect to which any other employee benefits of such employee are
determined, including without limitation benefits under any pension, stock
ownership, stock purchase, life insurance, medical, health, disability or salary
continuation plan.
10.9 LEGAL HOLIDAYS
If any day on or before which action under the Plan must be taken falls
on a Saturday, Sunday or legal holiday, such action may be taken on the next
succeeding day not a Saturday, Sunday or legal holiday.
10.10 FOREIGN NATIONALS
Without amending the Plan, Awards may be granted to persons who are
foreign nationals or employed outside the United States or both, on such terms
and conditions different from those specified in the Plan, as may, in the
judgment of the Board, be necessary or desirable to further the purpose of the
Plan.
11. TERMINATION AND AMENDMENT
The Plan shall remain in full force and effect until terminated by the
Board. Subject to the last sentence of this Section 11, the Board may at any
time or times amend the Plan or any outstanding Award for any purpose that may
at the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Awards. No amendment, unless approved by the Stockholders,
shall be effective if it would cause the Plan to fail to satisfy the
requirements of the federal tax law or regulation relating to incentive stock
options or the requirements of Rule 16b-3 (or any successor rule) of the
Exchange Act. No amendment of the Plan or any agreement evidencing Awards under
the Plan may adversely affect the rights of any participant under any Award
previously granted without such participant's consent.
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EXHIBIT 10.8
THERMEDICS DETECTION INC.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Section 1. PARTICIPATION. Any director of Thermedics Detection Inc. (the
"Company") may elect to have such percentage as he or she may specify of the
fees otherwise payable to him or her deferred and paid to him or her as provided
in this Plan. A director who is also an officer of the Company or its parent
corporation, Thermo Electron Corporation, shall not be eligible to participate
in this Plan. Each election shall be made by notice in writing delivered to the
Clerk of the Company, in such form as the Clerk shall designate, and each
election shall be applicable only with respect to fees earned subsequent to the
date of the election for the period designated in the form. The term
"participant" as used herein refers to any director who shall have made an
election. No participant may defer the receipt of any fees to be earned after
the later to occur of either (a) the date on which the participant shall retire
from or otherwise cease to engage in his or her principal occupation or
employment or (b) the date on which he or she shall cease to be a director of
the Company, or such earlier date as the Board of Directors of the Company, with
the participant's consent, may designate (the "deferral termination date"). In
the event that the participant's deferral termination date is the date on which
he or she ceases to engage in his or her principal occupation or employment, the
participant or a personal representative shall advise the Company of that date
by written notice delivered to the Clerk of the Company.
Section 2. ESTABLISHMENT OF DEFERRED COMPENSATION ACCOUNTS. There shall be
established for each participant an account to be designated as that
participant's deferred compensation account.
Section 3. ALLOCATIONS TO DEFERRED COMPENSATION ACCOUNTS. There shall be
allocated to each participant's deferred compensation account, as of the end of
each quarter, an amount equal to his or her fees for that quarter which that
participant shall have elected to have deferred pursuant to Section 1.
Section 4. STOCK UNITS AND STOCK UNIT ACCOUNTS. All amounts allocated to
a participant's deferred compensation account pursuant to Section 3 and Section
5 shall be converted, at the end of each quarter, into stock units by dividing
the accumulated balance in the deferred compensation account as of the end of
that quarter by the average last sale price per share of the Company's common
stock as reported on in The Wall Street Journal, for the five business days up
to and including the last business day of that quarter. The number of stock
units, so determined, rounded to the nearest one-hundredth of a share, shall be
credited to a separate stock unit account to be established for the participant,
and the aggregate value thereof as of the last business day of that quarter
shall be charged to the participant's deferred compensation account. No amounts
credited to the participant's deferred compensation account pursuant to Section
5 subsequent to the close of the fiscal year in which occurs the participant's
deferral termination date shall be converted into stock units. Any such amount
shall be distributed in cash
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as provided in Section 8. A maximum number of 25,000 shares of the Company's
common stock may be represented by stock units credited under this Plan, subject
to proportionate adjustment in the event of any stock dividend, stock split or
other capital change affecting the Company's common stock.
Section 5. CASH DIVIDEND CREDITS. Additional credits shall be made to a
participant's deferred compensation account, until all distributions shall have
been made from the participant's stock unit account, in amounts equal to the
cash dividends (or the fair market value of dividends paid in property other
than dividends payable in common stock of the Company) which the participant
would have received from time to time had he or she been the owner on the record
dates for the payment of such dividends of the number of shares of the Company's
common stock equal to the number of units in his or her stock unit account on
those dates.
Section 6. STOCK DIVIDEND CREDITS. Additional credits shall be made to a
participant's stock unit account, until all distributions shall have been made
from the participant's stock unit account, of a number of units equal to the
number of shares of the Company's common stock, rounded to the nearest one-
hundredth share, which the participant would have received from time to time as
stock dividends had he or she been the owner on the record dates for the
payments of such stock dividends of the number of units of the Company's common
stock equal to the number of units credited to his or her stock unit account on
those dates.
Section 7. RECAPITALIZATION. If, as a result of a recapitalization of the
Company (including a stock split), the Company's outstanding shares of common
stock shall be changed into a greater or smaller number of shares, the number of
units then credited to a participant's stock unit account shall be appropriately
adjusted on the same basis.
Section 8. DISTRIBUTION OF STOCK AND CASH AFTER PARTICIPANT'S DEFERRAL
TERMINATION DATE. When a participant's deferral termination date shall occur,
the Company shall become obligated to make the distributions prescribed in the
following paragraphs (a) and (b).
(a) The Company shall distribute to the participant the number of shares of
the common stock of the Company which shall equal the total number of units
accumulated in his or her stock unit account as of the close of the fiscal year
in which the participant's deferral termination date occurs. Such distribution
of stock shall be made in ten annual installments, unless, at least six months
prior to his or her deferral termination date, the participant shall have
elected, by notice in writing filed with the Secretary of the Company, to have
such distribution made in five annual installments. In either such case, the
installments shall be of as nearly equal number of shares as practicable,
adjusted to reflect any changes pursuant to Sections 6 and 7 in the number of
units remaining in the participant's stock unit account. The first such
installment shall be distributed within 60 days after the close of the fiscal
year in which the participant's deferral termination date occurs. The remaining
installments shall be distributed at annual intervals thereafter. Anything
herein to the contrary notwithstanding, the Company shall have the option, if
its Board of Directors shall by resolution so determine, in lieu of making
distribution in ten or five annual installments as set forth above, with the
participant's consent, to distribute stock
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or any remaining installments thereof in a single distribution at any time
following the close of the fiscal year in which the participant's deferral
termination date occurs. Distribution of stock made hereunder may be made from
shares of common stock held in the treasury and/or from shares of authorized but
previously unissued shares of common stock. All distributions under the plan
shall be completed not later than December 31, 2025.
(b) The Company shall distribute to the participant sums in cash equal to
the balance credited to his or her deferred compensation account as of the close
of the fiscal year in which his or her deferral termination date occurs plus
such additional amounts as shall be credited thereto from time to time
thereafter pursuant to Section 5. The cash distribution shall be made on the
same dates as the annual distributions made pursuant to paragraph (a) above, and
each cash distribution shall consist of the entire balance credited to the
participant's deferred compensation account at the time of the annual
distribution.
If a participant's deferral termination date shall occur by reason of his
or her death or if he or she shall die after his or her deferral termination
date but prior to receipt of all distributions of stock and cash provided for in
this Section 8, all stock and cash remaining distributable hereunder shall be
distributed to such beneficiary as the participant shall have designated in
writing and filed with the Secretary of the Company or, in the absence of
designation, to the participant's personal representative. Such distributions
shall be made in the same manner and at the same intervals as they would have
been made to the participant had he or she continued to live.
Section 9. PARTICIPANT'S RIGHTS UNSECURED. The right of any participant
to receive distributions under Section 8 shall be an unsecured claim against the
general assets of the Company. The Company may but shall not be obligated to
acquire shares of its outstanding common stock from time to time in anticipation
of its obligation to make such distributions, but no participant shall have any
rights in or against any shares of stock so acquired by the Company. All such
stock shall constitute general assets of the Company and may be disposed of by
the Company at such time and for such purposes as it may deem appropriate.
Section 10. TERMINATION OF THE PLAN. The Plan shall terminate and full
distribution shall be made from all participants' deferred compensation accounts
and stock unit accounts upon any change of control of the Company. Either of
the following shall be deemed to be a change of control: (a) the occurrence,
without the prior approval of the Board of Directors, of the acquisition,
directly or indirectly, by any person of 50% or more of the outstanding common
stock of either the Company or its parent corporation, Thermedics Inc.
("Thermedics"), or the beneficial owner of 25% or more of the outstanding common
stock of Thermo Electron Corporation ("Thermo Electron"), without the prior
approval of the prior directors of the Company, Thermedics, or Thermo Electron,
as the case may be; (b) the failure of the prior directors to constitute a
majority of the Board of Directors of the Company, Thermedics or Thermo
Electron, at any time within two years following any electoral event. As used
in this sentence and the preceding sentence, person shall mean a natural person,
an entity (together with an affiliate thereof, as defined in Rule 405 under the
Securities Act of 1933) or a group, as defined in Rule 13d-5 under the
Securities Exchange Act of 1934; prior directors shall mean the persons serving
on the Board of Directors immediately prior to any electoral event; and
electoral event
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shall mean any contested election of directors or any tender or exchange offer
for common stock of the Company, Thermedics or Thermo Electron by any person
other than the Company, Thermedics, Thermo Electron or a subsidiary of any of
the foregoing companies. The Board of Directors at any time, at its discretion,
may terminate the Plan. If the Board of Directors terminates the Plan after any
person or group of persons shall have acquired or proposed to acquire control of
the Company through the Board of Directors, Thermedics or Thermo Electron, full
and prompt distribution shall be made from all participants' deferred
compensation accounts and stock unit accounts. Otherwise, distributions in
respect of credits to participants' deferred compensation accounts and stock
unit accounts as of the date of termination shall be made in the manner and at
the time prescribed in Section 8.
Section 11. AMENDMENT OF THE PLAN. The Board of Directors of the Company
may amend the Plan at any time and from time to time, provided, however, that no
amendment affecting credits already made to any participant's deferred
compensation account or stock unit account may be made without the consent of
that participant or, if that participant has died, that participant's
beneficiary.
Section 12. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective
commencing upon the date the U. S. Securities and Exchange Commission shall have
declared effective the registration of shares of the Company's Common Stock in
an underwritten public offering pursuant to the Securities Act of 1933, as
amended.
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EXHIBIT 10.10
THERMEDICS DETECTION INC.
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into this _____ day of __________, 1996,
("Agreement"), by and between Thermedics Detection Inc., a Massachusetts
corporation (the "Company"), and ________________ ("Indemnitee").
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or officers or in other capacities
unless they are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to, and activities on behalf of, the corporation;
and
WHEREAS, uncertainties relating to the continued availability of adequate
directors and officers liability insurance ("D&O Insurance") and the
uncertainties relating to indemnification have increased the difficulty of
attracting and retaining such persons; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and/or to take
on additional service for or on behalf of the Company on the condition that he
be so indemnified and that such indemnification be so guaranteed;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve or continue to
serve as an executive officer of the Company. This Agreement shall not impose
any obligation on the Indemnitee or the Company to continue the Indemnitee's
position with the Company beyond any period otherwise applicable.
2. GENERAL. The Company shall indemnify, and shall advance Expenses (as
hereinafter defined) to, Indemnitee as provided in this Agreement and to the
fullest extent permitted by law.
3. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY.
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 3 if, by reason of his Corporate Status (as hereinafter defined), he is,
or is threatened to be made, a party to any threatened, pending, or completed
action, suit, arbitration, alternative
<PAGE>
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative. Pursuant to
this Section 3, Indemnitee shall be indemnified against Expenses, judgments,
penalties, fines and amounts paid in settlement incurred by him or on his behalf
in connection with such action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative or any
claim, issue or matter therein; provided, however, that no indemnification shall
be made hereunder (a) with respect to Expenses, judgments, penalties, fines and
amounts paid in settlement incurred in relation to any claim, issue or matter as
to which he shall be finally adjudged in such action, suit, arbitration,
alternative dispute resolution mechanism, investigation, administrative hearing
or any other proceeding whether civil, criminal, administrative or investigative
not to have acted in good faith and in the reasonable belief that his action was
in the interests of the Company or (b) if otherwise prohibited by law.
4. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any action, suit, arbitration,
alternative dispute resolution mechanism, investigation, administrative hearing
or any other proceeding whether civil, criminal, administrative or
investigative, he shall be indemnified against all Expenses incurred by him or
on his behalf in connection therewith. If Indemnitee is not wholly successful
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters, the Company shall indemnify Indemnitee against
all Expenses incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this Section and
without limitation, the termination of any claim, issue or matter by dismissal,
or withdrawal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
5. ADVANCE OF EXPENSES. The Company shall advance all reasonable Expenses
incurred by or on behalf of Indemnitee in connection with any action, suit,
arbitration, alternative dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative within twenty days after the receipt by the
Company of a statement or statements from Indemnitee requesting such advance or
advances from time to time, whether prior to or after final disposition of such
action, suit, arbitration, alternative dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of the Indemnitee to
repay any Expenses advanced if it shall ultimately be determined that Indemnitee
is not entitled to be indemnified against such Expenses.
6. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as
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is reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification. The Clerk
of the Company shall, promptly upon receipt of such a request for
indemnification, advise the Board of Directors in writing that Indemnitee has
requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
Section 6(a) hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in the specific case:
(i) if a Change in Control (as hereinafter defined) shall have occurred, by
Independent Counsel (as hereinafter defined) in a written opinion to the Board
of Directors, a copy of which shall be delivered to Indemnitee (unless
Indemnitee shall request that such determination be made in the manner provided
below in clauses (ii) or (iii)); (ii) if a Change of Control shall not have
occurred, (A) by the Board of Directors by a majority vote of a quorum
consisting of Disinterested Directors (as hereinafter defined), or (B) if a
quorum of the Board of Directors consisting of Disinterested Directors is not
obtainable or, even if obtainable, such quorum of Disinterested Directors so
directs, by Independent Counsel in a written opinion to the Board of Directors,
a copy of which shall be delivered to Indemnitee or (C) by the stockholders of
the Company; or (iii) as provided in Section 7(b) of this Agreement; and, if it
is so determined that Indemnitee is entitled to indemnification, payment to
Indemnitee shall be made ten (10) days after such determination. Indemnitee
shall cooperate with the person, persons or entity making such determination
with respect to Indemnitee's entitlement to indemnification, including providing
to such person, persons or entity upon reasonable advance request any
documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonable
necessary to such determination. Any costs or expenses (including attorneys'
fees and disbursements) incurred by Indemnitee in so cooperating shall be borne
by the Company (irrespective of the determination as to Indemnitee's entitlement
to indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 6(b) of this Agreement, the
Independent Counsel shall be selected as provided in this Section 6(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event,
Indemnitee or the Company, as the case may be, may, within 7 days after such
written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection. Such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 13 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected may not serve as Independent Counsel
unless and until a court has determined that such objection is without merit.
If, within 20 days after submission by Indemnitee
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of a written request for indemnification pursuant to Section 6(a) hereof, no
Independent Counsel shall have been selected or, if selected, shall have been
objected to, in accordance with this Section 6(c), either the Company or
Indemnitee may petition any court of competent jurisdiction for resolution of
any objection made by the Company or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the court or by such other person as the court shall
designate, and the person with respect to whom an objection is favorably
resolved or the person so appointed shall act as Independent Counsel under
Section 6(b) hereof. The Company shall pay all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 6(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
8(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
7. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) If a Change of Control shall have occurred, in making a determination
with respect to entitlement of indemnification hereunder, the person, persons or
entity making such determination shall presume that Indemnitee is entitled to
indemnification under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 6(a) of this Agreement, and the
Company shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any determination
contrary to that presumption.
(b) If the person, persons or entity empowered or selected under Section 6
of this Agreement to determine whether Indemnitee is entitled to indemnification
shall not have made such determination within 60 days after receipt by the
company of the request therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall entitled
to such indemnification, absent (i) a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee's statement
not materially misleading, in connection with the request for indemnification or
(ii) a prohibition of such indemnification under applicable law; provided,
however, that such 60-day period may be extended for a reasonable time not to
exceed an additional 30 days, if the person, persons or entity making the
determination with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining or evaluating of documentation
and/or information relating thereto; and, provided, further, that the foregoing
provisions of this Section 7(b) shall not apply (i) if the determination of
entitlement to indemnification is to be made by the stockholders pursuant to
Section 6(b) of this Agreement and if (A) within 15 days after receipt by the
Company of the request for such determination the Board of Directors has
resolved to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within 75 days after such
receipt and such determination is made thereat, or (B) a special meeting of
stockholders is called within 15 days after such receipt for the purpose of
making such determination, such meeting is held for such purpose within 60 days
after having been so called
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and such determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 6(b) of this Agreement.
(c) The termination of any action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative or of any
claim, issue or matter therein by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right of
Indemnitee to indemnification or be deemed to constitute an adjudication that
Indemnitee did not act in good faith and in the reasonable belief that his
action was in the best interests of the Company.
8. REMEDIES OF INDEMNITEE.
(a) In the event that (i) a determination is made pursuant to Section 6 of
this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5
of this Agreement, (iii) the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 6(b) of this Agreement and
such determination shall not have been made and delivered in a written opinion
within 90 days after receipt by the Company of the request for indemnification,
(iv) payment of indemnification is not made pursuant to Section 4 of this
Agreement within ten (10) days after receipt by the Company of a written request
therefor, or (v) payment of indemnification is not made within ten (10) days
after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Section 7 of this Agreement, Indemnitee shall be entitled to an adjudication in
any court of competent jurisdiction in the Commonwealth of Massachusetts, of his
entitlement to such indemnification or advancement of Expenses. Alternatively,
Indemnitee, at his option, may seek an award in arbitration to be conducted by
a single arbitrator pursuant to the rules of the American Arbitration
Association. Indemnitee shall commence such proceeding seeking an adjudication
or an award in arbitration within 180 days following the date on which
Indemnitee first has the right to commence such proceeding pursuant to this
Section 8(a). The Company shall not oppose Indemnitee's right to seek any such
adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 6 of this Agreement that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section 8
shall be conducted in all respects as a de novo trial, or arbitration, on the
merits and Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any judicial
proceeding or arbitration commenced pursuant to this Section 8, the Company
shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been made
pursuant to Section 6 or 7 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 8, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
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material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 8 that the
procedures and presumptions of the Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 8, seeks a
judicial adjudication of or an award in arbitration to enforce his right under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 13 of this Agreement) actually and reasonably incurred by
him in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
9. SECURITY. To the extent requested by the Indemnitee and approved by
the Board of Directors, the Company may at any time and from time to time
provide security to the Indemnitee for the Company's obligations hereunder
through an irrevocable bank line of credit, funded trust or other collateral.
Any such security, once provided to the Indemnitee, may not be revoked or
released without the prior written consent of Indemnitee.
10. NON-EXCLUSIVITY; DURATION OF AGREEMENT; INSURANCE; SUBROGATION.
(a) The rights of indemnification and to receive advancement of Expenses
as provided by this Agreement shall not be deemed exclusive of any other rights
to which Indemnitee may at any time be entitled under applicable law, the
Company's articles of organization or by-laws, any other agreement, a vote of
stockholders or a resolution of directors, or otherwise. This Agreement shall
continue until and terminate upon the later of: (a) 10 years after the date that
Indemnitee shall have ceased to serve as a director or officer of the Company or
fiduciary of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which Indemnitee served at the request of the
Company; or (b) the final termination of all pending actions, suits,
arbitrations, alternative dispute resolution mechanisms, investigations,
administrative hearings or any other proceedings whether civil, criminal,
administrative or investigative in respect of which Indemnitee is granted rights
of indemnification or advancement of expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 8 of the Agreement relating thereto.
This Agreement shall be binding upon the Company and its successors and assigns
and shall inure to the benefit of Indemnitee and his heirs, executors and
administrators.
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(b) To the extent that the Company or any other person maintains D&O
Insurance providing liability insurance for directors or officers of the Company
or fiduciaries of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which such person serves at the
request of the Company, Indemnitee shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage
available for any such director or officer under such policy or policies.
(c) In the event of any payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee had otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
11. SEVERABILITY. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, in
each portion of any Section of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
12. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES.
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any action, suit or proceeding, or any claim therein, initiated,
brought or made by him (i) against the Company, unless a Change in Control shall
have occurred, or (ii) against any person other than the Company, unless
approved in advance by the Board of Directors.
13. DEFINITIONS. For purposes of this Agreement.
(a) "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule of form) promulgated under the Securities Exchange Act of 1934
(the "Act"), whether or not the Company is then subject to such reporting
requirement; provided, however, that, without limitation, such a Change in
Control shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial
owner" (as defined in rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then
7
<PAGE>
outstanding securities without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior to such person
attaining such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of Directors thereafter; or (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute at least a
majority of the Board of Directors.
(b) "Corporate Status" describes the status of a person who is or was or has
agreed to become a director of the Company, or is or was an officer or fiduciary
of the Company or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which such person is or was serving at
the request of the Company.
(c) "Disinterested Director" means a director of the Company who is not and was
not a party to the action, suit, arbitration, alternative dispute resolution
mechanism, investigation, administrative hearing or any other proceeding whether
civil, criminal, administrative or investigative in respect of which
indemnification is sought by Indemnitee.
(d) "Expenses" shall include all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees,
and all other disbursements or expenses of the types customarily incurred in
connection with prosecuting, defending, preparing to prosecute or defend or
investigating an action, suit, arbitration, alternative dispute resolution
mechanism, investigation, administrative hearing or any other proceeding whether
civil, criminal, administrative or investigative.
(e) "Independent Counsel" means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither currently is, nor in the
past five years has been, retained to represent: (i) the Company or Indemnitee
in any matter material to either such party, or (ii) any other party to the
action, suit, arbitration, alternative dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term "Independent
Counsel" shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Agreement, arising on or after the date of this
Agreement, regardless of when the Indemnitee's act or failure to act occurred.
8
<PAGE>
14. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
15. MODIFICATION AND WAIVER. This Agreement may be amended from time to
time to reflect changes in Massachusetts law or for other reasons. No
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by both of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver.
16. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any matter
which may be subject to indemnification or advancement of Expenses covered
hereunder, provided, however, that the failure to give any such notice shall not
disqualify the Indemnitee from indemnification hereunder.
17. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee, to: The address shown beneath
his or her signature on the
last page hereof.
(b) If to the Company to: Thermedics Detection Inc.
c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02254-9046
Attn: Clerk
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
18. GOVERNING LAW. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
Commonwealth of Massachusetts.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
Attest: THERMEDICS DETECTION INC.
By: By:
------------------------------- ----------------------------
Sandra L. Lambert John W. Wood Jr.
Clerk Chief Executive Officer
INDEMNITEE
----------------------------------
Address:
----------------------------------
10
<PAGE>
Exhibit 10.11
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature page
hereto, between Thermedics Detection Inc., a Massachusetts corporation (the
"Company"), and the person or entity whose name appears on the signature page
hereto (the "Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and the Purchaser agree as follows:
SECTION 1. Purchase and Sale of the Shares. At the Closing (as defined
-------------------------------
in Section 2), the Company will sell to the Purchaser, and the Purchaser will
buy from the Company, upon the terms and conditions hereinafter set forth, the
number of shares set forth on the signature page hereto (the "Shares") of the
Company's Common Stock, $.10 par value per share ("Common Stock"), at a purchase
price of $10.00 per Share.
SECTION 2. Closing. The completion of the purchase and sale of the
-------
Shares (the "Closing") shall occur on and as of March 26, 1996, or on and as of
such other date as may be agreed between the Company and the Purchaser (the
"Closing Date"). At the Closing, the Company shall deliver to the Purchaser one
or more stock certificates registered in the name of the Purchaser, or in such
name(s) as designated by the Purchaser, representing the Shares. The Company's
obligation to deliver such stock certificate(s) to the Purchaser at the Closing
shall be subject to the following conditions, either or both of which may be
waived by the Company: (a) receipt by the Company at or prior to the Closing of
a certified or official bank check or checks or wire transfer of funds in the
full amount of the purchase price for the Shares being purchased hereunder; and
(b) the accuracy of the representations and warranties made by the Purchaser and
the fulfillment of those undertakings of the Purchaser to be fulfilled prior to
the Closing. The Purchaser's obligation to accept delivery of the Shares shall
be subject to the accuracy of the representations and warranties made by the
Company herein and the fulfillment of those undertakings of the Company to be
fulfilled prior to Closing.
SECTION 3. Representations, Warranties and Covenants of the Company. The
--------------------------------------------------------
Company hereby represents and warrants to, and covenants with, the Purchaser as
follows:
3.1. Organization and Qualification: Complaince with Law. The Company
---------------------------------------------------
is a corporation duly incorporated, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts and has all requisite corporate
power and authority to conduct its business as currently conducted. The Company
is qualified to do business and is in good standing in each jurisdiction in
which it owns or leases property or transacts business and where the failure to
be so qualified would have a material adverse effect on the business, financial
condition, properties or operations of the Company. The Company is in compliance
with all laws, ordinances, regulations and decrees applicable to its properties
(whether owned or leased) and its business, and all licenses, franchises,
governmental approvals, permits and other authorizations currently applicable to
it or its business or properties are in full force and effect and the Company
<PAGE>
is in full compliance therewith, except where noncompliance with such laws,
ordinances, regulations, decrees, licenses, franchises, governmental approvals,
permits and authorizations would not, separately or in the aggregate, have a
material adverse effect on the value or use of such properties or the results of
operations of such business.
3.2. Due Execution, Delivery and Performance of this Agreement. The
---------------------------------------------------------
execution, delivery and performance of this Agreement (a) have been, or prior
to the Closing will be, duly authorized under applicable law by all requisite
corporate action by the Company, (b) will not violate any law or the
certificate of incorporation or by-laws of the Company or any provision of any
material indenture, mortgage, agreement, contract or other material instrument
to which the Company is a party or by which the Company or any of its
properties or assets is bound, or result in a breach of or constitute (upon
notice or lapse of time or both) a default under any such indenture, mortgage,
agreement, contract or other material instrument, and (c) will not result in
the creation or imposition of any lien, security interest, mortgage, pledge,
charge or other encumbrance, of any material nature whatsoever, upon any
properties or assets of the Company. This Agreement constitutes a valid and
binding obligation of the Company enforceable in accordance with its terms,
except as enforceability may be limited to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and except as the
indemnification agreements of the Company in Section 6.3 hereof may be legally
unenforceable. Except for permits and similar authorizations required under
the securities or "blue sky" laws of certain jurisdictions and for such permits
and authorizations as have been obtained, no consent, approval, authorization
or other order of any regulatory body, administrative agency, or other
governmental body in the United States is required for the valid issuance and
sale of the Shares to be sold pursuant to this Agreement.
3.3. Authorized Capital Stock. Prior to the Closing, the authorized
------------------------
capital of stock of the Company shall be increased to not fewer than 20,000,000
shares of Common Stock. The Shares will conform to the description thereof in
the Company's Private Placement Memorandum dated March 21, 1996 (the "Placement
Memorandum"). The outstanding shares of capital stock of the Company have been
duly and validly issued to Thermedics Inc., and such shares are fully paid and
nonassessable and conform to the description thereof in the Placement
Memorandum. Except as set forth in or contemplated in the Placement
Memorandum, there are no outstanding rights (including, without limitation,
preemptive rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares of capital stock or other equity interest
in the Company or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock of the
Company, any such convertible or exchangeable securities or any such rights,
warrants or options.
3.4. Issuance, Sale and Delivery of the Shares. The issuance, sale and
-----------------------------------------
delivery of the Shares have been, or prior to the Closing will be, duly
authorized under applicable law by all requisite corporate action. The Shares,
as and when delivered to the Purchaser pursuant to this Agreement, and upon
payment by the Purchaser of the purchase price therefor, will be validly issued
and outstanding, fully paid and nonassessable.
2
<PAGE>
3.5. Legal Proceedings. There is no material legal or governmental
-----------------
proceeding pending or, to the knowledge of the Company, threatened or
contemplated to which the Company is or may be a party or of which the business
or property of the Company is or may be subject which is not disclosed in the
Placement Memorandum.
3.6. No Violation of Agreements. The Company is not in violation of its
--------------------------
charter, bylaws or other organizational documents, in violation of any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company, which
violation, individually or in the aggregate, would have a material adverse
effect on the business or financial condition of the Company and its
subsidiaries taken together as a whole, and is not in default in any material
respect in the performance of any obligation, agreement or condition contained
in any bond, debenture, note or other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other agreement or instrument to which the
Company is a party or by which the Company is bound or by which the properties
of the Company are bound, and there exists no condition which, with the passage
of time or otherwise, would constitute a material default under any such
document or instrument or result in the imposition of any penalty or the
acceleration of any material indebtedness.
3.7. Governmental Permits, Etc. The Company has all necessary
-------------------------
franchises, licenses, certificates and authorizations from any foreign, federal,
state or local government or governmental agency, department or body that are
currently necessary for the operation of the business of the Company, the
absence of which would have a material adverse effect on the Company.
3.8. Financial Statements. The financial statements of the Company
--------------------
included in the Placement Memorandum present fairly, in all material respects,
the consolidated financial position of the Company as of the dates and for the
period indicated.
3.9. No Material Adverse Change. Subsequent to the respective dates as
--------------------------
of which information is given in the Placement Memorandum and except as
contemplated in the Placement Memorandum, the Company has not incurred any
material liabilities or obligations, direct or contingent, other than in the
ordinary course of business, and there has not been any material adverse change
in the Company's financial condition, results of operations, business,
prospects, key personnel or capitalization on a consolidated basis.
3.10. Placement Memorandum. The information contained in the Placement
--------------------
Memorandum is true and correct in all material respects as of the date thereof;
and the Placement Memorandum does not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein
not misleading.
SECTION 4. Representations, Warranties and Covenants of the Purchaser.
----------------------------------------------------------
The Purchaser represents and warrants to, and covenants with, the Company that:
4.1 Due Execution, Delivery and Performance of the Agreement. The
--------------------------------------------------------
Purchaser has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement. This Agreement constitutes a valid and binding
3
<PAGE>
obligation of the Purchaser enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification agreements
of the Purchaser in Section 6.3 hereof may be legally unenforceable.
4.2 Investment Representations.
--------------------------
(a) The Purchaser, taking into account the personnel and
resources he can practically bring to bear on the purchase of the Shares
contemplated hereby, is knowledgeable, sophisticated and experienced in making,
and is qualified to make, decisions with respect to investments in shares
presenting an investment decision like that involved in the purchase of the
Shares, including investments in securities issued by the Company, and has
requested, received, reviewed and considered all information he deems relevant
in making an informed decision to purchase the Shares.
(b) The Purchaser is acquiring the Shares for investment and
with no present intention of distributing any of the Shares (this representation
and warranty not limiting the Purchaser's right to sell pursuant to the
Registration Statement or to be indemnified pursuant to Section 6.3). The
Purchaser acknowledges that the Shares are subject to restrictions on
transferability and resale and may not be transferred or resold except as
permitted under the Securities Act of 1933, as amended (the "Securities Act"),
and applicable state securities laws, pursuant to registration, or pursuant to
an exemption therefrom.
(c) The Purchaser will not, directly or indirectly,
voluntarily offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Shares except in compliance with the Securities Act and the rules and
regulations promulgated thereunder.
(d) The Purchaser has, in connection with his decision to
purchase the Shares, relied solely upon the Placement Memorandum and the
representations and warranties of the Company contained herein.
(e) The Purchaser is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act.
(f) The Purchaser will not make any reoffer or resale of the
Shares unless the reoffer and resale qualify as exempt transactions under the
Securities Act and any applicable state securities laws and a legal opinion
satisfactory to the Company is given to that effect.
SECTION 5. Survival of Representations, Warranties and Agreements.
------------------------------------------------------
Except as provided in Section 6.4 and, notwithstanding any investigation made by
any party to this Agreement, all representations and warranties made by the
Company and the Purchaser herein shall survive the execution of this Agreement
and the delivery to the Purchaser of the Shares for a period of two years from
the Closing Date, after which time they shall be deemed to be extinguished and
of no further force and effect.
4
<PAGE>
SECTION 6. Registration of the Shares; Compliance with the Securities
----------------------------------------------------------
Act.
- ---
6.1. Registration Requirements.
-------------------------
(a) Within 120 days after the closing of an initial
underwritten public offering of Common Stock (the "IPO"), the Company will
(subject to the approval of the underwriters of such offering) file a
registration statement (the "Registration Statement") under the Securities Act
with respect to the resale of all Shares held by the Purchasers, and the Company
will use its best efforts to cause the Registration Statement to become
effective as soon as practicable. The Purchaser undertakes in connection
therewith to execute and deliver in a timely manner all such information and
materials and take all such action as may be required in order to permit the
Company to comply with all applicable legal requirements and to obtain the
acceleration of the effective date of the Registration Statement.
(b) The Company will use its best efforts to prepare and
file with the Securities and Exchange Commission (the "Commission") such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep the Registration Statement
effective until all the Shares registered thereunder have been sold pursuant
thereto or until, by reason of Rule 144(k) of the Commission under the
Securities Act or any other rule of similar effect, the Shares are no longer
required to be registered for the sale thereof by the Purchasers. The Purchaser
acknowledges that there may be times when the Company must suspend the use of
the prospectus forming a part of the Registration Statement until such time as
an amendment to the Registration Statement has been filed by the Company and
declared effective by the Commission, or until such time as the Company has
filed an appropriate report with the Commission pursuant to the Securities
Exchange Act of 1934, as amended. The Purchaser hereby covenants that it will
not sell any Shares pursuant to said prospectus during the period commencing at
the time at which the Company gives the Purchaser notice of the suspension of
the use of said prospectus and ending at the time the Company gives the
Purchaser notice that the Purchaser may thereafter effect sales pursuant to said
prospectus, and the Company's indemnification obligations in Section 6.3 will
not apply to sales made in violation of this provision.
6.2. Registration Procedures.
(a) The Company will furnish to the Purchaser with respect
to the Shares registered under the Registration Statement (and to each
underwriter, if any, of such Shares) such number of copies of prospectuses and
preliminary prospectuses in conformity with the requirements of the Securities
Act and such other documents as the Purchaser may reasonably request, in order
to facilitate the public sale or other disposition of all or any of the Shares
by the Purchaser. The Purchaser hereby represents, warrants and covenants that
it will comply with the applicable provisions of the Securities Act and of such
other securities or blue sky laws as may be applicable in connection with any
use of such prospectuses or preliminary prospectuses.
(b) The Company will file documents required of the Company
for normal blue sky clearance in a reasonable number of states specified in
writing by the Purchaser, provided,
5
<PAGE>
however, that the Company shall not be required to qualify to do business or
consent to service of process in any jurisdiction in which it is not now so
qualified or has not so consented.
(c) The Company will bear all expenses in connection with
the procedures in paragraphs (a) through (c) of this Section 6.2 and the
registration of the Shares pursuant to the Registration Statement, other than
fees and expenses, if any, of counsel or other advisers to the Purchaser.
(d) The Company understand that the Purchaser disclaims
being an underwriter with respect to the Shares, but the Purchaser being deemed
an underwriter shall not relieve the Company of any obligations they have
hereunder.
(e) The Purchaser agrees that it will not effect any
disposition of the Shares that would constitute a sale within the meaning of the
Securities Act except as contemplated in the Registration Statement referred to
in Section 6.1.
6.3. Indemnification.
---------------
(a) For the purpose of this Section 6.3:
(i) the term "Selling Shareholder" shall mean the
Purchaser and any person controlling the
Purchaser within the meaning of Section 15 of
the Securities Act;
(ii) the term "Registration Statement" shall mean any
preliminary prospectus, final prospectus,
exhibit, supplement or amendment included in or
relating to the Registration Statement referred
to in Section 6.1; and
(iii) the term "untrue statement" shall mean any
untrue statement or alleged untrue statement of
a material fact in the Registration Statement,
or any omission or alleged omission to state in
the Registration Statement a material fact
required to be stated therein or necessary to
make the statements therein, in the light of the
circumstances under which they were made, not
misleading.
(b) The Company agrees to indemnify and hold harmless each
Selling Shareholder from and against any losses, claims, damages or liabilities
to which such Selling Shareholder may become subject (under the Securities Act
or otherwise) insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon, any untrue
statement contained in the Registration Statement on the effective date thereof,
or arise out of any failure by the Company to fulfill any undertaking included
in the Registration Statement, and the Company will reimburse such Selling
Shareholder for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim, provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement made in such Registration Statement in reliance
upon and in conformity with
6
<PAGE>
written information furnished to the Company by or on behalf of such Selling
Shareholder specifically for use in preparation of the Registration Statement,
or the failure of such Selling Shareholder to comply with the covenants and
agreements contained herein respecting sale of the Shares.
(c) The Purchaser agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, each officer of the Company who signs the
Registration Statement and each director of the Company) from and against any
losses, claims, damages or liabilities to which the Company (or any such
officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any failure of the Purchaser to comply with the covenants and
agreements contained herein, or any untrue statement contained in the
Registration Statement on the effective date thereof if such untrue statement
was made in reliance upon and in conformity with written information furnished
by or on behalf of the Purchaser specifically for use in preparation of the
Registration Statement, and the Purchaser will reimburse the Company (or such
officer, director or controlling person), as the case may be, for any legal or
other expense reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim.
(d) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Section 6.3,
such indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel for all indemnified parties.
6.4. Termination of Conditions and Obligations. The conditions
-----------------------------------------
precedent imposed by Section 4 or this Section 6 upon the transferability of the
Shares shall cease and terminate as to any particular number of the Shares when
such Shares shall or otherwise disposed of in accordance with the intended
method of disposition set forth in the Registration Statement covering such
Shares or at such time as an opinion of counsel satisfactory to the Company
shall have been rendered to the effect that such conditions are not necessary in
order to comply with the Securities Act.
7
<PAGE>
6.5. Information Available. Until the closing of an IPO, and as long as
---------------------
the Shares are held by the Purchaser, the Company will furnish to the Purchaser
(i) as soon as practicable after available, one copy of a quarterly report to
shareholders consisting of an unaudited profit and loss statement and a balance
sheet of the Company and (ii) as soon as practicable after available, one copy
of its annual report to shareholders consisting of an unaudited profit and loss
statement and an unaudited balance sheet of the Company.
SECTION 7. Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, postage prepaid, and shall be deemed given
when so mailed:
(a) if to the Company, to
Thermedics Detection Inc.
c/o Thermo Electron Corporation
81 Wyman Street
P. O. Box 9046
Waltham, Massachusetts 02254-9046
Attention: Sandra L. Lambert, Secretary
with a copy to:
Seth H. Hoogasian, Esq.
General Counsel
Thermo Electron Corporation
81 Wyman Street
P. O. Box 9046
Waltham, Massachusetts 02254-9046
or to such other persons at such other places as the Company shall designate
to the Purchaser in writing; and
(b) if to the Purchaser, at his address as set forth at the
end of this Agreement, or at such other address or addresses as may have been
furnished to the Company in writing.
SECTION 8. Changes. This Agreement may not be modified or amended
-------
except pursuant to an instrument in writing signed by the Company and the
Purchaser.
SECTION 9. Headings. The headings of the various sections of this
--------
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 10. Severability. In case any provision contained in this
------------
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
8
<PAGE>
SECTION 11. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the Commonwealth of Massachusetts and
Federal law.
SECTION 12. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
[REMAINDER OF PAGE INTENTIONALLY BLANK.]
9
<PAGE>
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year set
forth below.
THERMEDICS DETECTION INC.
Date: March 25, 1996 By: /s/ Jonathan W. Painter
----------------------------------
Jonathan W. Painter, Treasurer
PURCHASER:
No. of Shares: 10,000 David H. Fine
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Name of Purchaser-- Please Print or Type
By:/s/ David H. Fine
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Signature
Title:
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Address:
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Telephone:
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Telex:
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Please complete the following:
1. The exact name in which your Shares are to be registered (this is the name
that will appear on your certificate(s)). You may use a nominee name if
appropriate:
David H. Fine
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2. The relationship between the Purchaser and the registered holder listed in
response to item 1 above:
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3. The Social Security Number or Tax Identification Number of the registered
holder listed in response to item 1 above:
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<PAGE>
EXHIBIT 10.12
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is by and among THERMEDICS DETECTION INC. (the
"Company"), a Massachusetts corporation with an office at 220 Mill Road,
Chelmsford, Massachusetts 01824-4178; THERMO ELECTRON CORPORATION ("Thermo
Electron"), a Delaware corporation and the indirect corporate parent of the
Company with an office at 81 Wyman Street, Waltham, Massachusetts 02254; and the
purchaser whose name and address is set forth on the signature page hereof (the
"Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the parties agree as follows:
SECTION 1. AUTHORIZATION OF SALE OF THE SHARES. The Company has
authorized the sale of up to 383,500 shares of its Common Stock, $.10 par value
(the "Shares"). The number of Shares may be increased or decreased by
agreement between the Company and the Placement Agents (as defined below).
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SHARES. At the Closing (as
defined in Section 3(a)), the Company will sell to the Purchaser, and the
Purchaser will buy from the Company, upon the terms and conditions hereinafter
set forth, up to the maximum number of Shares set forth on the signature page
hereof at a purchase price of $10.75 per Share. The actual number of Shares to
be purchased by the Purchaser, subject to the foregoing maximum, will be
determined by the Company and the Placement Agents, and will be set forth on the
Company's signature page to this Agreement. The Placement Agents will notify the
Purchaser prior to the Closing of the number of Shares to be so purchased by the
Purchaser. Any excess funds advanced by the Purchaser will be promptly refunded
by the Placement Agents after the Closing.
The Company represents and warrants that, at the Closing or subsequent
closings, the Company is proposing to enter into substantially this same form
of purchase agreement with certain other investors (the "Other Purchasers") and
expects to complete sales of Shares to them. The Purchaser and the Other
Purchasers are hereinafter sometimes collectively referred to as the
"Purchasers," and this Agreement and the agreements executed by the Other
Purchasers are hereinafter sometimes collectively referred to as the
"Agreements." The term "Placement Agents" shall mean NatWest Securities
Limited and National Westminster Bank PLC and, unless the context requires
otherwise, their affiliates.
SECTION 3. DELIVERY OF THE SHARES AT THE CLOSING. The completion of the
purchase and sale of the Shares (the "Closing") shall occur at a place and time
(the "Closing Date") specified by the Company and the Placement Agents and of
which the Purchasers will be notified in advance by the Placement Agents. At the
Closing, the Company shall deliver to the Purchaser one or more stock
certificates registered in the name of the Purchaser, or, if so indicated on the
signature page hereof, in the name of a nominee designated by the Purchaser,
representing the number of Shares to be purchased by it. The Company's
obligation to deliver
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2
such certificate to the Purchaser at the Closing shall be subject to the
following conditions, any one or more of which may be waived by the Company: (a)
receipt by the Company of a certified or official bank check or checks or wire
transfer of funds in the full amount of the purchase price for the Shares being
purchased hereunder; (b) completion of the purchases and sales under the
Agreements with Other Purchasers; and (c) the accuracy of the representations
and warranties made by the Purchasers and the fulfillment of those undertakings
of the Purchasers to be fulfilled prior to the Closing. The Purchaser's
obligation to accept delivery of such certificate and to pay for the Shares
evidenced thereby shall be subject to the accuracy of the representations and
warranties made by the Company and Thermo Electron herein as of the Closing and
the fulfillment of those undertakings of the Company and Thermo Electron to be
fulfilled prior to Closing as set forth herein or in the placement agreement
between the Company and the Placement Agents.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
THERMO ELECTRON. The Company and Thermo Electron hereby jointly and severally
represent and warrant to, and covenant with, the Purchaser as follows.
following representations and warranties shall be deemed to apply to each
subsidiary of the Company, unless the context clearly requires otherwise.
4.1. ORGANIZATION; COMPLIANCE WITH LAW. Each of the Company
and Thermo Electron is duly organized and validly existing in good standing
under the laws of the jurisdiction of its organization. The Company has full
corporate power and authority to own, operate and occupy its properties and to
conduct its business as presently conducted and as described in the private
placement memorandum, dated November 11, 1996, distributed in connection with
the sale of the Shares (the "Placement Memorandum") and is registered or
qualified to do business and in good standing in each jurisdiction in which it
owns or leases property or transacts business and where the failure to be so
qualified would have a material adverse effect upon the business, financial
condition, properties or operations of the Company. The Company is in compliance
with all laws, ordinances, regulations and decrees applicable to its properties
(whether owned or leased) and its business as described in the Placement
Memorandum, and all licenses, franchises, governmental approvals, permits and
other authorizations currently applicable to it or its business or properties
are in full force and effect and the Company is in full compliance therewith,
except where noncompliance with such laws, ordinances, regulations, decrees,
licenses, franchises, governmental approvals, permits and authorizations would
not, separately or in the aggregate, have a material adverse effect on the value
or use of such properties or the results of operations of such business.
4.2. DUE AUTHORIZATION. Each of the Company and Thermo
Electron has all requisite corporate power and authority to execute, deliver and
perform its obligations under the Agreements, and the Agreements have been duly
authorized and validly executed and delivered by the Company and Thermo Electron
and constitute legal, valid and binding agreements of the Company and Thermo
Electron, enforceable against the Company and Thermo Electron in accordance with
their terms, except as rights to indemnity and contribution may be limited by
state or federal securities laws or the public policy underlying such laws,
except as enforceability
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3
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' and contracting parties' rights generally,
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as otherwise described in the Placement Memorandum.
4.3. NON-CONTRAVENTION. The execution and delivery of the
Agreements, the issuance and sale of the Shares pursuant thereto, the
fulfillment of the terms of the Agreements and the consummation of the
transactions contemplated thereby will not conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, any
material agreement or instrument to which the Company or Thermo Electron is a
party or by which it is bound or the charter, by-laws or other organizational
documents of the Company or Thermo Electron, nor result in the creation or
imposition of any lien, encumbrance, claim, security interest or restriction
whatsoever upon any of the material property or assets of the Company or Thermo
Electron, or an acceleration of indebtedness pursuant to any obligation,
agreement or condition contained in any material bond, debenture, note or any
other evidence of indebtedness or any material indenture, mortgage, deed of
trust or any other material agreement or instrument to which the Company or
Thermo Electron is a party or by which any of them is bound or to which any of
the property or assets of the Company or Thermo Electron is subject, nor
conflict with, or result in a violation of, any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company or Thermo Electron. Except for permits and
similar authorizations required under the securities or "Blue Sky" laws of
certain jurisdictions and for such permits and authorizations as have been
obtained, no consent, approval, authorization or other order of any regulatory
body, administrative agency, or other governmental body in the United States is
required for the valid issuance and sale of the Shares to be sold pursuant to
the Agreements.
4.4. CAPITALIZATION. The capitalization of the Company as of
September 28, 1996 is as set forth in the Placement Memorandum. The Company has
not issued any capital stock since that date except as contemplated by the
Placement Memorandum. The Shares to be sold pursuant to the Agreements have been
duly authorized, and when issued and paid for in accordance with the terms of
the Agreements will be validly issued, fully paid and nonassessable. The Shares
will conform to the description thereof in the Placement Memorandum. The
outstanding shares of capital stock of the Company have been duly and validly
issued to Thermedics Inc. (a subsidiary of Thermo Electron), and such shares are
fully paid and nonassessable and conform to the description thereof in the
Placement Memorandum. Except as set forth in or contemplated by the Placement
Memorandum, there are no outstanding rights (including, without limitation,
preemptive rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares of capital stock or other equity interest
in the Company or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock of the
Company, any such convertible or exchangeable securities or any such rights,
warrants or options.
4.5. LEGAL PROCEEDINGS. There is no material legal or
governmental proceeding pending or, to the knowledge of the Company, threatened
or contemplated to which the Company is or may be a party or of which the
business or Placement Memorandum.
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4
4.6. NO VIOLATION OF AGREEMENTS. The Company is not in
violation of its charter, bylaws, or other organizational document, in violation
of any law, administrative regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority applicable to the Company,
which violation, individually or in the aggregate, would have a material adverse
effect on the business or financial condition of the Company and its
subsidiaries taken as a whole and is not in default in any material respect in
the performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness, in any indenture,
mortgage, deed of trust or any other agreement or instrument to which the
Company is a party or by which the Company is bound or by which the properties
of the Company are bound, and there exists no condition which, with the passage
of time or otherwise, would constitute a material default under any such
document or instrument or result in the imposition of any penalty or the
acceleration of any material indebtedness.
4.7. GOVERNMENTAL PERMITS, ETC. The Company has all necessary
franchises, licenses, certificates and other authorizations from any foreign,
federal, state or local government or governmental agency, department, or body
that are currently necessary for the operation of the business of the Company
as currently conducted and as described in the Placement Memorandum, the
absence of which would have a material adverse effect on the Company.
4.8. FINANCIAL STATEMENTS. The consolidated financial
statements of the Company included in the Placement Memorandum present fairly,
in all material respects, the consolidated financial condition of the Company as
of the dates and for the periods indicated. Such financial statements are fairly
presented in accordance with generally accepted accounting principles (except
for the absence of footnote disclosure and the absence of consolidated
statements of cash flows).
4.9. NO MATERIAL ADVERSE CHANGE. Subsequent to the respective
dates as of which information is given in the Placement Memorandum, and except
as contemplated in the Placement Memorandum, the Company has not incurred any
material liabilities or obligations, direct or contingent, other than in the
ordinary course of business, and there has not been any material adverse change
in the Company's condition (in each case, financial or other), results of
operations, business, prospects, key personnel or capitalization on a
consolidated basis.
4.10. PLACEMENT MEMORANDUM. The information contained or
incorporated by reference in the Placement Memorandum is true and correct in all
material respects as of the date thereof; and the Placement Memorandum does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
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5
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
(a) The Purchaser represents and warrants to, and covenants
with, the Company that: (i) the Purchaser is an "accredited investor" as defined
in the regulations under the United States Securities Act of 1933, as amended
(the "Securities Act"); (ii) the Purchaser is acquiring the Shares being
purchased by it for investment and with no present intention of distributing
such Shares; (iii) the Purchaser will not, directly or indirectly, voluntarily
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Shares except
in compliance with the Securities Act and the rules and regulations promulgated
thereunder; (iv) the Purchaser has had an opportunity to ask questions and
receive answers from the management of the Company regarding the Company, its
business and the offering of the Shares; (v) the Purchaser has, in connection
with its decision to purchase Shares relied solely upon the Placement Memorandum
and the representations and warranties of the Company and Thermo Electron
contained herein; and (vi) the purchase price of the Shares being purchased by
the Purchaser does not represent more than 5% of the net worth of the Purchaser
(exclusive of homes and furnishings).
(b) The Purchaser acknowledges, represents and agrees
that:
(i) no action has been or will be taken in any jurisdiction
outside the United States by the Company or the Placement Agents that would
permit an offering of the Shares, or possession or distribution of offering
material in connection with the issue of the Shares, in any country or
jurisdiction outside the United States where action for that purpose is
required. Each Purchaser outside the United States will comply with all
applicable laws and regulations in each foreign jurisdiction in which it
purchases, offers, sells or delivers Shares or has in its possession or
distributes any offering material, in all cases at its own expense. The
Placement Agents are not authorized to make any representation or use any
information in connection with the issue, placement, purchase and sale of the
Shares other than as contained in the Placement Memorandum;
(ii) certificates evidencing the Shares will be delivered to it
upon the purchase thereof with a legend substantially to the following effect:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT OR AN OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY
TO THE COMPANY) OF COUNSEL SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
IS NOT REQUIRED.
The Purchaser agrees that any sale, transfer, pledge, hypothecation or other
disposition made by it shall be made in compliance with such legend;
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6
(iii) it understands that it must bear the economic risk of its
investment for an indefinite period of time because the Shares have not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available; and
(iv) it understands that there is no public market for the
Shares.
(c) The Purchaser further represents and warrants to, and
covenants with, the Company that (i) the Purchaser has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of the Purchaser enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except as
the indemnification agreements of the Purchaser herein may be legally
unenforceable.
SECTION 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agents, all covenants, agreements, representations and warranties
made by the Company and the Purchaser herein and in the certificates for the
securities delivered pursuant hereto shall survive the execution of this
Agreement, the delivery to the Purchaser of the securities being purchased and
the payment therefor.
SECTION 7. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES
ACT.
7.1. REGISTRATION REQUIREMENTS.
(a) On the first occasion that the Company registers
any of its securities under the Securities Act for sale to the public, whether
for its own account or for the account of other security holders or both (except
with respect to registration statements on Forms S-4, S-8 or another form not
available for registering the Shares for sale to the public), it will give
written notice to the Purchasers of its intention to do so. Upon the written
request of any Purchaser received by the Company within 10 days after the giving
of any such notice by the Company, to register any of such Purchaser's Shares
(which request shall state the intended method of disposition thereof), the
Company will cause the Shares as to which registration shall have been so
requested to be included in the securities to be covered by the registration
statement (the "IPO Registration Statement") proposed to be filed by the
Company, all to the extent requisite to permit the sale or other disposition by
such Purchaser (in accordance with its written request) of the Shares so
registered. In the event that the IPO Registration Statement shall be for an
underwritten public offering of Common Stock, the number of Shares to be
included in such an
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underwriting may be reduced (pro rata among the Purchasers and other persons or
entities (other than the Company) requesting registration based upon the number
of Shares requested to be included) if and to the extent that the managing
underwriter shall be of the opinion that such inclusion would adversely affect
the marketing of the securities to be sold by the Company therein. In any such
underwritten public offering, the selling Purchasers shall become parties to the
underwriting agreement in the form agreed to by the Company and the
underwriters. If the managing underwriter shall be of the opinion that inclusion
of any securities in such registration for sale by selling shareholders would
adversely affect the marketing of the securities to be sold by the Company
therein, and no such secondary securities are to be included therein, the notice
provisions of the first sentence of this paragraph (a) shall be inapplicable.
(b) Within 120 days after the closing under the IPO
Registration Statement (or, if earlier, within 10 days after the effective date
of the registration of the Common Stock under Section 12(g) of the Securities
Exchange Act of 1934 if such registration is undertaken otherwise than in
connection with the Company's initial underwritten public offering of its Common
Stock), the Company will file a registration statement (the "Resale Registration
Statement", the IPO Registration Statement and/or the Resale Registration
Statement being referred to herein as the "Registration Statement") under the
Securities Act with respect to the resale of all Shares held by the Purchasers
and not sold pursuant to the IPO Registration Statement, and the Company will
use its best efforts to cause the Resale Registration Statement to become
effective as soon as practicable. Each Purchaser undertakes in connection
therewith to provide in a timely manner all such information and materials and
take all such action as may be required in order to permit the Company to comply
with all applicable legal requirements and to obtain the acceleration of the
effective date of the Resale Registration Statement. Each Purchaser also agrees
that such Purchaser will not publicly re-sell any Shares held by such Purchaser
and not sold pursuant to the IPO Registration Statement for a period of 120 days
after the closing under the IPO Registration Statement provided that all of the
Company's executive officers and directors similarly agree (or are otherwise
effectively precluded during such period from making public resales of shares of
Common Stock owned by them).
The Company will prepare and file with the Securities and
Exchange Commission (the "Commission") such amendments and supplements to the
Resale Registration Statement and the prospectus used in connection therewith as
may be necessary to keep the Resale Registration Statement effective until the
earliest to occur of (i) all of the securities registered thereunder have been
sold pursuant thereto, (ii) the third anniversary of the date of the Closing, or
(iii) until, by reason of Rule 144(k) under the Securities Act or any other rule
of similar effect, the Shares are no longer required to be registered for the
sale thereof by the Purchasers without restriction. The Purchaser acknowledges
that there may occasionally be times when the Company must suspend the use of
the prospectus forming a part of the Resale Registration Statement until such
time as an amendment to the Resale Registration Statement has been filed by the
Company and declared effective by the Commission, or until such time as the
Company has filed an appropriate report with the Commission pursuant to the
Securities Exchange Act of 1934, as amended. The Purchaser hereby covenants that
it will not sell any Shares pursuant to said prospectus during the period
commencing at the time at which the Company gives the Purchaser notice of the
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suspension of the use of said prospectus and ending at the time the Company
gives the Purchaser notice that the Purchaser may thereafter effect sales
pursuant to said prospectus.
7.2. REGISTRATION PROCEDURES
(a) The Company will furnish to the Purchaser with
respect to the securities registered under the Registration Statement (and to
each underwriter, if any, of such securities) such number of copies of
prospectuses and preliminary prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Purchaser may reasonably
request, in order to facilitate the public sale or other disposition of all or
any of such securities by the Purchaser; provided, however, that the obligation
of the Company to deliver copies of prospectuses or preliminary prospectuses to
the Purchaser shall be subject to the receipt by the Company of reasonable
assurances from the Purchaser that the Purchaser will comply with the applicable
provisions of the Securities Act and of such other securities or blue sky laws
as may be applicable in connection with any use of such prospectuses or
preliminary prospectuses;
(b) The Company will file documents required of the
Company for blue sky clearance in states specified in writing by the Purchaser;
provided, however, that the Company shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented; and
(c) The Company will bear all expenses in connection
with each Registration Statement and with the procedures in paragraphs (a) and
(b) of this Section 7.2 and the registration of the Shares pursuant to the
Registration Statement, other than fees and expenses, if any, of underwriters
and of counsel or other advisers to the Purchaser or the Other Purchasers.
7.3. INDEMNIFICATION. For the purpose of this Section 7.3:
(a) the term "Selling Shareholder" shall mean any
Purchaser selling securities pursuant to a Registration Statement, and any
affiliate of such Purchaser;
(b) the term "Registration Statement" shall include any
preliminary prospectus, final prospectus, exhibit, supplement or amendment
included in or relating to either Registration Statement referred to in Section
7.1; and
(c) the term "untrue statement" shall mean any untrue
statement or alleged untrue statement of a material fact in the Registration
Statement, or any omission or alleged omission to state in the Registration
Statement a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
The Company and Thermo Electron agree to indemnify and hold
harmless each Selling Shareholder from and against any losses, claims, damages
or liabilities to which such Selling Shareholder may become subject (under the
Securities Act or otherwise) insofar as such
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9
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement contained in the
Registration Statement, and the Company and Thermo Electron will reimburse such
Selling Shareholder for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company and Thermo Electron shall not be
liable in any such case to the extent that such loss, claim, damage or liability
arises out of, or is based upon, an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Selling Shareholder specifically for use
in preparation of the Registration Statement, or the failure of such Selling
Shareholder to comply with the covenants and agreements contained herein
respecting sale of its securities.
The Purchaser agrees to indemnify and Electron (and each other
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signs the Registration Statement
and each director of the Company) from and against any losses, claims, damages
or liabilities to which the Company or Thermo Electron (or any such officer,
director or controlling person) may become subject (under the Securities Act or
otherwise), insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon, any failure
of the Purchaser to comply with the covenants and agreements contained herein,
or any untrue statement contained in the Registration Statement if such untrue
statement was made in reliance upon and in conformity with written information
furnished by or on behalf of the Purchaser specifically for use in preparation
of the Registration Statement, and the Purchaser will reimburse the Company and
Thermo Electron (or such officer, director or controlling person), as the case
may be, for any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim.
Promptly after receipt by any indemnified person of a notice of
a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.3, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel for all indemnified parties.
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10
The obligations of the Company and Thermo Electron under this Section
7.3 shall be joint and several.
7.4. TERMINATION OF CONDITIONS AND OBLIGATIONS. The conditions
precedent imposed by this Agreement upon the transferability of the Shares as
relates to securities laws matters shall cease and terminate as to any
particular number of the Shares when such securities shall have been effectively
registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition set forth in the Registration
Statement covering such securities or at such time as an opinion of counsel
satisfactory to the Company shall have been rendered to the effect that such
conditions are not necessary in order to comply with the Securities Act.
7.5. INFORMATION AVAILABLE. Until the first Registration
Statement is effective, the Company will furnish to the Purchaser:
(a) as soon as practicable after available one copy
of its year-end and quarterly consolidated financial statements prepared in
accordance with generally accepted accounting principles, such-year end
statements to be audited; and
(b) upon the reasonable request of the Purchaser, any
other information concerning the Company.
SECTION 8. BROKER'S FEE. The Purchaser acknowledges that the Company
intends to pay to the Placement Agents a fee in respect of this transaction, as
well as reimbursement of their expenses. The parties hereto hereby represent
that there are no other brokers or finders entitled to compensation in
connection with the transactions contemplated hereby except for arrangements by
the Placement Agents to share a portion of their fee with certain other brokers
as selling group members.
SECTION 9. INDEMNIFICATION. The Company and Thermo Electron jointly and
severally agree to indemnify and hold harmless the Purchaser from and against
any losses, claims, damages or liabilities, together with all reasonable costs
and expenses related thereto (including, without limitation, reasonable legal
fees and expenses), which would not have been incurred if (a) all of the
representations and warranties of the Company and Thermo Electron herein had
been true and correct when made or (b) all of the covenants and agreements of
the Company and Thermo Electron herein had been duly complied with and
performed.
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11
SECTION 10. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be sent by first-class
registered or certified mail, or by an established courier service, and shall
be deemed given when so sent:
(a) if to the Company, to:
President
Thermedics Detection Inc.
220 Mill Road
Chelmsford, Massachusetts 01824-4178
with a copy to:
General Counsel
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and
(b) if to Thermo Electron, to:
General Counsel
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
or to such other person at such other place as Thermo Electron shall
designate to the Purchaser in writing; and
(c) if to the Purchaser, at its address as set forth at the end of
this Agreement, or at such other address or addresses as may have been furnished
to the Company in writing.
SECTION 11. CHANGES. Any term of the Agreements may be amended or
compliance therewith waived with the written consent of the Company, Thermo
Electron and the holders (other than Thermo Electron and its subsidiaries) of a
majority of the Shares purchased pursuant to the Agreements (whether at the
Closing or subsequent closings).
SECTION 12. HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 13. SEVERABILITY. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts and United States federal law.
SECTION 15. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts
<PAGE>
12
have been signed by each party hereto and an original or conformed copy
delivered to the other parties.
[Remainder of page intentionally left blank]
<PAGE>
13
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed by their duly authorized representatives as of the
following date.
Dated: November 19, 1996 THERMEDICS DETECTION INC.
No. of Shares Allocated to By: /s/ Jonathan W. Painter
the Purchaser: 10,000 Title: Treasurer
THERMO ELECTRON CORPORATION
By: /s/ Jonathan W. Painter
Title: Treasurer
<PAGE>
14
PURCHASER SIGNATURE PAGE
The undersigned Purchaser hereby executes the Stock Purchase Agreement
with Thermedics Detection Inc. and Thermo Electron Corporation and hereby
authorizes this signature page to be attached to a counterpart of such document
executed by a duly authorized officer of Thermedics Detection Inc. and Thermo
Electron Corporation.
Maximum Number of Shares Jeffrey J. Langan
to be Purchased: 10,000 Name of Purchaser -- PLEASE
PRINT OR TYPE
U. S. Taxpayer ID No., if any: [SIGN HERE]:
________________________ By: /s/ Jeffrey J. Langan
Title: N/A
Address:
---------------------------
---------------------------
---------------------------
Please set out below your registration requirements:
Name in which Shares
are to be registered: Jeffrey J. Langan
Address of registered holder (if different
from above):
---------------------------
---------------------------
Contact name and telephone
number regarding settlement
and registration:
---------------------------
Name
---------------------------
Telephone Number
<PAGE>
EXHIBIT 11
THERMEDICS DETECTION INC.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
------------------------------------- ---------------------------
JANUARY 1, DECEMBER 31, DECEMBER 30, SEPTEMBER 30, SEPTEMBER 28,
1994 1994 1995 1995 1996
----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
COMPUTATION OF PRIMARY
EARNINGS PER SHARE:
Net Income (Loss) (a)... $ 5,803,000 $ 6,380,000 $ 1,508,000 $ 1,593,000 $(1,063,000)
----------- ----------- ----------- ----------- -----------
Shares:
Weighted average shares
outstanding........... 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
Add: Shares issuable
from assumed
exercise of options
and shares issued
in private
placements (as
determined by the
application of the
treasury stock
method)............ 68,834 68,834 68,834 68,834 68,834
----------- ----------- ----------- ----------- -----------
Weighted averages
shares, as adjusted
(b)................... 10,068,834 10,068,834 10,068,834 10,068,834 10,068,834
----------- ----------- ----------- ----------- -----------
Primary Earnings (Loss)
per Share (a)/(b)...... $ .58 $ .63 $ .15 $ .16 $ (.11)
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF %
SUBSIDIARY INCORPORATION OWNERSHIP
<S> <C> <C>
Rutter & Co. Holland 100%
Rutter Instrumentation S.A.R.L. France 100%
Systech B.V. Holland 100%
ThermedeTec Corporation Delaware 100%
Thermedics Detection de Argentina S.A. Argentina 100%
Thermedics Detection de Mexico, S.A. de C.V. Mexico 100%
Thermedics Detection GmbH Germany 100%
Thermedics Detection Limited United Kingdom 100%
Thermedics Detection Scandinavia AS Norway 100%
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermedics Detection Inc.:
As independent public accountants, we hereby consent to the use of our
reports dated January 2, 1997 (and to all references to our Firm) included in
or made a part of this Registration Statement and related Prospectus of
Thermedics Detection Inc.
Arthur Andersen LLP
Boston, Massachusetts
January 2, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Moisture Systems Corporation and Moisture Systems Limited:
As independent public accountants, we hereby consent to the use of our
report dated January 2, 1997 (and to all references to our Firm) included in
or made a part of this Registration Statement and related Prospectus of
Thermedics Detection Inc.
Arthur Andersen LLP
Boston, Massachusetts
January 2, 1997
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Thermedics Detection
Inc. on Form S-1 of our report dated March 13, 1996 (except for the
disclosures included in the supplementary information under the caption
"United States Generally Accepted Accounting Principles (U.S. GAAP)" which is
as of December 20, 1996) relating to the consolidated and parent company
financial statements of Rutter & Co. B.V. appearing in this Prospectus, which
is part of this Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
Deloitte & Touche Registeraccountants Almelo, The Netherlands
December 31, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMEDICS
DETECTION TWELVE MONTHS ENDED 12/30/95 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 1,282
<SECURITIES> 0
<RECEIVABLES> 5,135
<ALLOWANCES> 516
<INVENTORY> 8,991
<CURRENT-ASSETS> 17,782
<PP&E> 4,874
<DEPRECIATION> 2,644
<TOTAL-ASSETS> 20,322
<CURRENT-LIABILITIES> 6,509
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 12,773
<TOTAL-LIABILITY-AND-EQUITY> 20,322
<SALES> 18,457
<TOTAL-REVENUES> 27,954
<CGS> 9,895
<TOTAL-COSTS> 15,236
<OTHER-EXPENSES> 2,741
<LOSS-PROVISION> 98
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,418
<INCOME-TAX> 910
<INCOME-CONTINUING> 1,508
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,508
<EPS-PRIMARY> .15
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMEDICS
DETECTION NINE MONTHS ENDED 9/28/96 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 8,089
<SECURITIES> 0
<RECEIVABLES> 9,759
<ALLOWANCES> 854
<INVENTORY> 8,529
<CURRENT-ASSETS> 29,162
<PP&E> 5,710
<DEPRECIATION> 3,706
<TOTAL-ASSETS> 48,425
<CURRENT-LIABILITIES> 11,419
<BONDS> 0
0
0
<COMMON> 1,030
<OTHER-SE> 14,736
<TOTAL-LIABILITY-AND-EQUITY> 48,425
<SALES> 21,338
<TOTAL-REVENUES> 30,566
<CGS> 11,821
<TOTAL-COSTS> 16,305
<OTHER-EXPENSES> 3,551
<LOSS-PROVISION> 187
<INTEREST-EXPENSE> 596
<INCOME-PRETAX> (1,713)
<INCOME-TAX> (650)
<INCOME-CONTINUING> (1,063)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,063)
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
