<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1996
REGISTRATION NO. 333-8697
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
THERMO BIOANALYSIS CORPORATION
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3826 85-0429899
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
504 AIRPORT ROAD, SANTA FE, NEW MEXICO 87504-2108
(505) 471-3232
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
SANDRA L. LAMBERT, SECRETARY
THERMO BIOANALYSIS CORPORATION
C/O THERMO ELECTRON CORPORATION
81 WYMAN STREET
POST OFFICE BOX 9046
WALTHAM, MASSACHUSETTS 02254-9046
(617) 622-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C> <C>
SETH H. HOOGASIAN, ESQ. HAL J. LEIBOWITZ, ESQ. EDWIN L. MILLER, JR., ESQ.
GENERAL COUNSEL HALE AND DORR TESTA, HURWITZ & THIBEAULT, LLP
THERMO BIOANALYSIS CORPORATION 60 STATE STREET 125 HIGH STREET
C/O THERMO ELECTRON BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02110
CORPORATION (617) 526-6000 (617) 248-7000
81 WYMAN STREET
POST OFFICE BOX 9046
WALTHAM, MASSACHUSETTS
02254-9046
(617) 622-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement has become effective.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
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
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING REGISTRATION
PRICE(1) FEE(1)(2)
- --------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value.............................. $33,120,000 $11,421
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated pursuant to Rule 457(o).
(2) Of the $11,421 registration fee, $7,614 has previously been paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
For purposes of the electronic filing of this Registration Statement,
amounts expressed in British pounds sterling are referred to as "gbp#".
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION -- DATED SEPTEMBER 16, 1996
PROSPECTUS
1,500,000 SHARES
THERMO BIOANALYSIS LOGO
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by Thermo
BioAnalysis Corporation (the "Company"), a majority-owned subsidiary of Thermo
Instrument Systems Inc. ("Thermo Instrument"), which is a majority-owned
subsidiary of Thermo Electron Corporation ("Thermo Electron"). Following this
offering, Thermo Instrument will own approximately 67.7% of the outstanding
shares of Common Stock of the Company (assuming no exercise of the Underwriters'
over-allotment option).
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $13.00 and $16.00 per share. See "Underwriting" for
information relating to the factors to be considered in determining the initial
public offering price. The Company has applied to have the Common Stock approved
for listing on the American Stock Exchange.
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
UNDERWRITING
DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- -------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company, Thermo Instrument and Thermo Electron have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $1,000,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 225,000 shares of Common Stock solely to cover
over-allotments, if any. If this option is fully exercised, the total price
to the public would be $ , the total underwriting discounts and
commissions would be $ and the total proceeds to the Company before
estimated expenses would be $ . See "Underwriting."
------------------------
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the shares
will be made in New York, New York on or about , 1996.
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS
SMITH BARNEY INC.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 4
At the upper left of the page is a graphic image depicting a number of
Microtiter plate trays manufactured by the Company's DYNEX subsidiary.
To the right of this graphic is the following caption:
The Company's DYNEX subsidiary is a market leader in Microtiter plate
technology, which significantly improves the speed and efficiency of
immunoassay testing. The Company also manufactures a complete line of
Microtiter detection systems as well as fully automated testing systems.
--------------------------------------
Below and to the right of this graphic image and caption are two graphic images
depicting computer hardware and instrumentation housing the laboratory
information management systems and chromatography data systems produced by
the Company's LabSystems division.
Next to these graphics is the following caption:
The Company's LabSystems information management systems division designs and
develops computerized laboratory information management systems ("LIMS") and
chromatography data systems. The Company is recognized as one of the world's
leading LIMS suppliers.
------------------------
THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR
MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE
THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
FOR UNITED KINGDOM PURCHASERS: THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO THE PUBLIC (AS DEFINED IN THE COMPANIES ACT 1985) AND NO PROSPECTUS HAS BEEN
OR WILL BE REGISTERED OR ISSUED IN THE UNITED KINGDOM IN RESPECT OF THE COMMON
STOCK. CONSEQUENTLY, THE COMMON STOCK MUST NOT BE OFFERED FOR SALE OR SOLD IN
THE UNITED KINGDOM EXCEPT TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN
ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT)
FOR THE PURPOSES OF THEIR BUSINESSES OR TO PERSONS WHO IT IS REASONABLE TO
EXPECT WILL ACQUIRE, HOLD, MANAGE OR DISPOSE OF INVESTMENTS (AS PRINCIPAL OR
AGENT) FOR THE PURPOSES OF THEIR BUSINESS OR ARE OTHERWISE OFFERED TO PERSONS IN
THE CONTEXT OF THEIR TRADES, PROFESSIONS OR OCCUPATIONS.
THIS PROSPECTUS MAY ONLY BE ISSUED OR PASSED ON TO ANY PERSON IN THE UNITED
KINGDOM IF THAT PERSON IS OF A KIND DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL
SERVICES ACT 1986 (INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) ORDER 1995 OR WITHIN
ARTICLE 8(1) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT ADVERTISEMENTS)
(EXEMPTIONS) (NO. 2) ORDER 1995.
------------------------
IAsys, LASERMAT, Microtiter, MRX, Multichrom and SpectraPHORESIS are
registered trademarks, and DIAS, DIAS Ultra, DYNAMO, Fluorolite, Microlite, MLX,
MRX-HD, SampleManager and VISION 2000 are trademarks, of Thermo BioAnalysis
Corporation or its subsidiaries. All other trademarks or tradenames referred to
in this Prospectus are the property of their respective owners.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Except as otherwise indicated, all information contained in
this Prospectus assumes no exercise of the Underwriters' over-allotment option.
Investors should carefully consider the information set forth under the heading
"Risk Factors."
THE COMPANY
Thermo BioAnalysis designs, manufactures and markets instruments and
information management systems for use in biochemical research and production,
as well as in clinical diagnostics. The Company focuses on three principal
product areas:
- Instrumentation. The Company markets a broad range of instruments and
consumables based on proprietary immunoassay, optical biosensor, mass
spectrometry and capillary electrophoresis technologies.
- Information Management Systems. The Company offers laboratory
information management systems and chromatography data systems for use in
laboratories and clinical testing facilities. The Company's information
management systems are designed to facilitate the monitoring and analysis
of samples throughout the laboratory or clinical lifecycle.
- Health Physics. The Company markets radiation detection instrumentation
and complete radiation monitoring systems for use in and around nuclear
power plants and other facilities where radioactive materials are used.
During the past decade, life sciences researchers have made significant
advances in identifying the basic mechanisms of biological activity at the
molecular level. These advances have created the need for increasingly
sophisticated instrumentation that allows companies to capitalize on the
improved understanding of molecular biology by developing novel drug therapies
and diagnostic products for human and animal health. In addition to the
significantly more complex biological problems under investigation, these
advances have also dramatically increased the quantity of information that needs
to be analyzed and processed. As a result, the ability to enhance productivity
and reduce product development time and cost in life sciences research has
become an increasingly important challenge and a potential competitive advantage
for pharmaceutical and biotechnology companies. These factors underly the rapid
growth in demand for life sciences instrumentation and related products as well
as the introduction of advanced bioanalytical systems such as those developed
and marketed by the Company.
The Company's strategy is to develop and market a broad portfolio of
instruments and information management systems for biochemistry applications
that address the needs of the laboratory and clinical diagnostic markets. The
Company seeks to implement this strategy through a combination of innovative
research and development and strategic acquisitions designed to expand its
technologies and product offerings. For example, the Company's recently-acquired
Affinity Sensors division has developed a line of optical biosensors that enable
near real-time analysis of molecular interactions. In addition, in February 1996
the Company acquired DYNEX Technologies ("DYNEX"), formerly Dynatech
Laboratories, a division of Dynatech Corporation, a leading supplier of
automated systems, detection systems and consumables for the immunoassay market.
The Company markets and sells its products worldwide through a number of
channels, including a direct sales force, independent sales representatives,
distributors and original equipment manufacturers.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company..................... 1,500,000 shares
Common Stock to be Outstanding after this Offering(1)... 9,601,500 shares
Proposed AMEX Symbol.................................... TBA
Use of Proceeds......................................... General corporate purposes,
including acquisitions
</TABLE>
- ---------------
(1) Does not include 925,000 shares of Common Stock reserved for issuance under
the Company's stock-based compensation plans and 3,030,303 shares of Common
Stock reserved for issuance upon the conversion of $50.0 million principal
amount of the Company's 4.875% Subordinated Convertible Note, due to Thermo
Instrument (the "Convertible Note"). As of June 29, 1996, options to
purchase 570,000 shares of Common Stock had been granted and were
outstanding under these plans. See "Capitalization," "Dilution," "Management
-- Compensation of Directors" and "-- Compensation of Executive Officers,"
"Relationship with Thermo Electron and Thermo Instrument," and Notes 2 and 9
of Notes to the Company's Consolidated Financial Statements.
3
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED (3)
----------------------
SIX MONTHS ENDED SIX MONTHS
(1) FISCAL ENDED
FISCAL YEAR ------------------- YEAR ------------
--------------------------------------------- JULY 1, JUNE 29, ------- JUNE 29,
1991 (1) 1992 (1) 1993 1994 1995 1995 1996 (2) 1995 1996
-------- -------- ------- ------- ------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................... $24,737 $20,120 $24,479 $25,127 $22,534 $11,686 $29,782 $80,803 $ 36,970
Gross Profit...................... 12,674 9,139 11,469 10,951 9,498 4,860 13,676 42,785 17,043
Research and Development
Expenses........................ 2,308 2,448 2,242 2,042 1,325 612 2,921 8,882 4,036
Write-off of Acquired
Technology...................... -- -- -- -- -- -- 3,500 -- --
Operating Income (Loss)........... 6,256 2,624 4,313 3,855 3,369 1,939 (1,762) 3,660 (972)
Net Income (Loss)................. 3,511 1,175 2,538 2,400 2,514 1,307 (2,683) 822 (1,574)
Earnings (Loss) per
Share (4)....................... .53 .18 .38 .36 .32 .18 (.33) .11 (.19)
Weighted Average
Shares (4)...................... 6,617 6,617 6,617 6,617 7,811 7,403 8,219 7,811 8,219
</TABLE>
<TABLE>
<CAPTION>
JUNE 29, 1996
----------------------------
AS
PRO FORMA (5) ADJUSTED (6)
------------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital....................................................................... $34,125 $ 53,461
Total Assets.......................................................................... 96,063 115,399
Subordinated Convertible Note, Due to Parent Company.................................. 50,000 50,000
Shareholders' Investment.............................................................. 26,466 45,802
</TABLE>
- ---------------
(1) Derived from unaudited financial statements.
(2) Includes the results of DYNEX since its acquisition by the Company on
February 7, 1996 and the results of the Affinity Sensors and LabSystems
divisions of Fisons plc ("Fisons") since their acquisition by Thermo
Instrument on March 29, 1996.
(3) 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 six months ended June
29, 1996, as if the acquisitions of DYNEX and Affinity Sensors and
LabSystems, the issuance of the $50.0 million principal amount 4.875%
Subordinated Convertible Note ("the Convertible Note") to Thermo Instrument
and the repayment of the $30.0 million principal amount note payable to
Thermo Electron had occurred on January 1, 1995. The pro forma results are
not necessarily indicative of future operations or the actual results that
would have occurred had the acquisitions of DYNEX and Affinity Sensors and
LabSystems, the issuance of the Convertible Note to Thermo Instrument and
the repayment of the $30.0 million principal amount note payable to Thermo
Electron occurred on January 1, 1995.
(4) Pursuant to Securities and Exchange Commission requirements, earnings (loss)
per share have been presented for all periods. Weighted average shares for
all periods include the 6,500,000 shares issued to Thermo Instrument in
connection with the initial capitalization of the Company in February 1995
and the effect of the assumed exercise of stock options issued within one
year prior to the Company's proposed initial public offering.
(5) The pro forma balance sheet data as of June 29, 1996 is derived from the pro
forma condensed balance sheet included elsewhere in this Prospectus, which
was prepared as if the payment of $9.0 million by the Company to Thermo
Instrument in July 1996, made in consideration for the transfer of Affinity
Sensors and LabSystems, the issuance of the $50.0 million principal amount
Convertible Note to Thermo Instrument and the repayment of the $30.0 million
principal amount note payable to Thermo Electron had occurred on June 29,
1996.
(6) Adjusted to reflect the sale by the Company of 1,500,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $14.50
per share, after deducting estimated underwriting discounts and commissions
and offering expenses payable by the Company.
4
<PAGE> 7
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Accordingly, the following factors should be considered
carefully in evaluating the Company and its business before purchasing any of
such shares.
Intense Competition. The Company encounters and expects to continue to
encounter intense competition in the sale of its products. The Company believes
that the principal competitive factors affecting the markets for its products
include product features, product performance, price and service. The Company's
competitors include a number of large multinational corporations. These
companies and certain of the Company's other competitors have substantially
greater financial, marketing and other resources than the Company. As a result,
they may be able to adapt more quickly to new or emerging technologies and
changes in customer requirements, or to devote greater resources to the
promotion and sale of their products than the Company. Competition could
increase if new companies enter the market or if existing competitors expand
their product lines or intensify efforts within existing product lines. There
can be no assurance that the Company's current products, products under
development or ability to develop new technologies will be sufficient to enable
it to compete effectively. See "Business -- Competition."
Rapid and Significant Technological Change and New Products. The markets
for the Company's products are characterized by rapid and significant
technological change, evolving industry standards and frequent new product
introductions and enhancements. Many of the Company's products and products
under development are technologically innovative, and require significant
planning, design, development and testing, at the technological, product and
manufacturing process levels. These activities require significant capital
commitments and investment by the Company. In addition, products that are
competitive in the Company's markets are characterized by rapid and significant
technological change due to industry standards that may change on short notice
and by the introduction of new products and technologies that render existing
products and technologies uncompetitive or obsolete. There can be no assurance
that any of the products currently being developed by the Company, or those to
be developed in the future, will be technologically feasible or accepted by the
marketplace, that any such development will be completed in any particular time
frame, or that the Company's products or proprietary technologies will not
become uncompetitive or obsolete. See "Business -- Research and Development" and
"-- Competition."
Uncertainty of Market Acceptance of New Products. Certain of the Company's
products represent alternatives to traditional instruments and methods and as a
result 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. This is particularly true where the purchase of the
product requires a significant capital commitment. The Company's optical
biosensor, MALDI-TOF and capillary electrophoresis products are based on
relatively new technologies. The Company believes that, to a significant extent,
its growth prospects depend on its ability to gain acceptance by a broader group
of customers of the efficiency and efficacy of the Company's innovative
technologies. There can be no assurance that the Company will be successful in
obtaining such broad acceptance. See "Business -- Products" and "-- Research and
Development."
Dependence on Capital Spending Policies and Government Funding. The
Company's customers include pharmaceutical, biotechnology and chemical companies
and clinical diagnostic laboratories and companies. The capital spending
policies of these companies can have a significant effect on the demand for the
Company's products. Such policies are based on a wide variety of factors,
including the resources available to make such purchases, the spending
priorities among various types of research equipment and the policies regarding
capital expenditures during recessionary periods. Any decrease in capital
spending by life sciences companies could have a material adverse effect on the
Company's business and results of operations. Recently, biotechnology companies
have raised significant amounts of capital through public share offerings, and
most of these companies are engaged in active research and development programs
that include capital spending. However, the availability of capital through the
public markets can be cyclical and there can be no assurance that the raising of
capital by these companies will continue, nor can there be any assurance that
additional capital, if available, will result in increased sales of the
Company's products. See "Business -- Customers, Marketing and Distribution."
5
<PAGE> 8
Approximately 39% of the Company's sales during the six-month period ended
June 29, 1996 were to universities, government research laboratories, private
foundations and other institutions where funding is dependent on grants from
government agencies such as the National Institutes of Health (the "NIH") and
the equivalent of the NIH in the foreign countries where the Company markets its
products. If government funding necessary to purchase the Company's products
were to become unavailable to researchers for any extended period of time or if
overall research funding were to decrease, the Company's business and results of
operations could be adversely affected. In addition, in fiscal 1995
approximately 33% of sales by the Company's Eberline health physics subsidiary
were made to various branches of the United States government, primarily the
United States Department of Energy (the "DOE"). The Company believes that recent
uncertainties in the federal budget process have led to a decrease in demand for
the Company's health physics products from the Departments of Defense and
Energy. Revenues attributable to sales to the Departments of Defense and Energy
declined from approximately $3.0 million for the six-month period ended July 1,
1995 to approximately $1.3 million for the six-month period ended June 29, 1996.
Any further decline in purchases by the United States government, including
without limitation declines as the result of budgeting limitations, could have
an adverse effect on the Company's business and results of operations.
Dependence on Patents and Proprietary Rights. The Company places
considerable importance on obtaining patent and trade secret protection for
significant new technologies, products and processes because of the length of
time and expense associated with bringing new products through the development
process and to the marketplace. The Company's success depends in part on its
ability to develop patentable products and obtain and enforce patent protection
for its products both in the United States and in other countries. The Company
has filed and intends to file applications as appropriate for patents covering
its products. No assurance can be given that patents will issue from any pending
or future patent applications owned by or licensed to the Company or that the
claims allowed under any issued patents will be sufficiently broad to protect
the Company's technology. In addition, no assurance can be given that any issued
patents owned by or licensed to the Company will not be challenged, invalidated
or circumvented, or that the rights granted thereunder will provide competitive
advantages to the Company. The Company could incur substantial costs in
defending itself in suits brought against it or in suits in which the Company
may assert its patent rights against others. If the outcome of any such
litigation is unfavorable to the Company, the Company's business and results of
operations could be materially adversely affected.
The commercial success of the Company will also depend in part on its
neither infringing patents issued to competitors or others nor breaching the
technology licenses upon which components of the Company's products are based.
The Company is aware of patents and patent applications belonging to competitors
and other third parties, and it is uncertain whether these patents and patent
applications will require the Company to alter its products or processes, pay
licensing fees or cease making and selling infringing products and pay damages
for past infringement. In particular, the Company is aware of a U.S. patent held
by a third party which may relate to the design of the cuvette used in the
Company's optical biosensor system. The Company is also aware of patents held by
another third party which may relate to the features of certain of the Company's
MALDI-TOF mass spectrometers. The Company had no revenues from products which
allegedly utilized features associated with these patents in fiscal 1995 because
the Company acquired its optical biosensor system in the first quarter of 1996
and because the MALDI-TOF mass spectrometers which are the subject of certain of
these patents were under development. The Company believes that revenues from
products which allegedly utilized features associated with these patents
represented approximately 3% of the Company's total revenues during the
six-month period ended June 29, 1996. Although the Company believes that the
validity and/or infringement of these patents may be subject to challenge, if
the patent holder were successful in enforcing any such patent, the Company
would be subject to damages for past infringement and enjoined from
manufacturing and selling products utilizing the features associated with the
patent, which could have a material adverse effect on the Company's business and
results of operations. The Company has received an opinion of the patent law
firm of St. Onge Steward Johnston & Reens LLC to the effect that none of the
features of the Company's MALDI-TOF mass spectrometers infringe any valid claims
of the patents referred to above. The Company has not obtained an opinion of
patent counsel with respect to the U.S. patent asserted against the design of
the cuvette used in the Company's optical biosensor system. An opinion of
counsel only represents such counsel's view of applicable law and is not binding
on any court or governmental agency.
6
<PAGE> 9
The Company relies on trade secrets and proprietary know-how which it seeks
to protect, in part, by confidentiality agreements with its collaborators,
employees and consultants. There can be no assurance that these agreements will
not be breached, that the Company would have adequate remedies for any breach or
that the Company's trade secrets will not otherwise become known or be
independently developed by competitors. See "Business -- Patents and Proprietary
Technology."
Government Regulations; No Assurance of Regulatory Approval. The
production and marketing of certain of the Company's products and its ongoing
research and development activities are subject to regulation by government
authorities in the United States and in other countries. To the extent that an
analytical instrument will be used in human clinical or diagnostic applications,
the manufacturer of that instrument must submit to the U.S. Food and Drug
Administration (the "FDA"), prior to commercial distribution of the instrument,
either a premarket notification ("510(k)") or a premarket approval ("PMA")
application. The Company has, to date, been required to obtain 510(k) clearance
with respect to certain clinical applications of its Microtiter technology
products. There can be no assurance that 510(k) clearance for any future product
or modification of an existing product will be granted by the FDA within a
reasonable time frame, if at all, that in the future the FDA will not require
manufacturers of certain medical devices to engage in a more thorough and time
consuming approval process than the 510(k) process, or that the FDA or certain
corresponding state or international government agencies will permit marketing
of the Company's products in their respective jurisdictions.
As a result of the clinical applications of certain of the Company's
Microtiter technology products, the Company is registered with the FDA as a
medical device manufacturer. As such, the Company may be inspected on a routine
basis by the FDA for compliance with the FDA's Good Manufacturing Practices and
other applicable regulations. These regulations require that the Company
manufacture its products and maintain related documentation in a prescribed
manner with respect to manufacturing, testing and quality control activities.
Further, the Company is required to comply with various FDA requirements for
reporting of product malfunctions and other matters.
The regulatory standards for manufacturing are currently being applied
stringently by the FDA and state regulatory agencies. Noncompliance with FDA or
applicable state agency regulations or discovery of previously unknown problems
with a product, manufacturer or facility may result in restrictions on such
product or manufacturer, including fines, recalls, injunctions or seizures of
products, refusal of the government to approve or clear product approval
applications or to allow the Company to enter into government supply contracts,
or even withdrawal of the product from the market or criminal prosecution, any
of which could have a material adverse effect on the Company's business and
results of operations.
International regulatory bodies often establish varying regulations
governing product standards, packaging requirements, labeling requirements,
import restrictions, tariff regulations, duties and tax requirements. In order
to continue to sell its products in Europe, the Company is required to maintain
an ISO 9000 series registration, an internationally-recognized set of quality
standards, and each of its products is required to obtain a CE mark, evidence of
compliance with European Union electronic safety requirements. While the Company
has an active program to comply with CE mark requirements and an ISO 9000
compliance program, there can be no assurance that the Company will be
successful in maintaining its compliance with applicable certification
requirements. Any violation of, and the cost of compliance with, these
regulations or requirements could have a material adverse effect on the
Company's business and results of operations.
See "Business -- Government Regulations."
Uncertainty of Patient Reimbursement. The Company estimates that revenues
from products used in diagnostic testing represented approximately 9% of the
Company's total revenues in the six-month period ended June 29, 1996. The
Federal government regulates reimbursement of fees for certain diagnostic
examinations and capital equipment acquisition costs connected with services to
Medicare beneficiaries. Recent legislation has limited Medicare reimbursement
for diagnostic examinations. For example, deficit reduction measures have
resulted in reimbursement rate reductions in the past and may result in further
rate reductions in the future. According to third party data, overall Medicare
reimbursements were estimated to decline approximately 2.3% in 1996 from 1995.
These policies may have the effect of limiting the
7
<PAGE> 10
availability or reimbursement for procedures, and as a result may inhibit or
reduce demand by healthcare providers for products in the markets in which the
Company competes. While the Company cannot predict what effect the policies of
government entities and other third party payors will have on future sales of
the Company's products, there can be no assurance that such policies would not
have an adverse impact on the operations of the Company.
Potential Product Liability. The Company's business exposes it to
potential product liability claims which are inherent in the manufacturing,
marketing and sale of biomedical instruments and diagnostic products, and as
such the Company may face substantial liability to patients for damages
resulting from the faulty design or manufacture of its products. The Company
currently maintains product liability insurance, but there can be no assurance
that this insurance will provide sufficient coverage in the event of a claim,
that the Company will be able to maintain such coverage on acceptable terms, if
at all, or that a product liability claim would not materially adversely affect
the business or financial condition of the Company.
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 February 1996 the
Company acquired DYNEX Technologies, formerly Dynatech Laboratories, from
Dynatech Corporation, and in July 1996 acquired the Affinity Sensors and
LabSystems divisions of Fisons plc from Thermo Instrument. 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. For example, the Company's recent acquisition
of DYNEX resulted in a cost in excess of net assets acquired of $32,959,000.
Establishment of this intangible asset will result in charges to operating
income of approximately $825,000 per year over a 40-year amortization period.
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. See "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Background."
Risks Associated With International Operations. International sales
accounted for 33% of the Company's revenues in fiscal 1995. The Company expects
that this percentage will increase in fiscal 1996 as a result of its
acquisitions of DYNEX, Affinity Sensors and LabSystems. The Company intends to
continue to expand its presence in international markets. International revenues
are subject to a number of risks, including the following: agreements may be
difficult to enforce and receivables difficult to collect through a foreign
country's legal system; foreign customers may have longer payment cycles;
foreign countries 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 of the Company's products and
services is made in the local currency; U.S. export licenses may be difficult to
obtain; and the protection of intellectual property in foreign countries may be
more difficult to enforce. There can be no assurance that any of these factors
will not have a material adverse impact on the Company's business and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Customers, Marketing and Distribution."
Potential Fluctuations in Quarterly Performance. The Company's quarterly
operating results may vary significantly depending on a number of factors,
including the size, timing and shipment of individual orders, seasonality of
revenue, foreign currency exchange rates, the mix of products sold and general
economic conditions. 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. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
8
<PAGE> 11
Control by Thermo Instrument. The Company's stockholders do not have the
right to cumulate votes for the election of directors. Thermo Instrument, which
will own approximately 67.7% of the outstanding Common Stock of the Company
after this offering (approximately 75.4% assuming conversion of the Convertible
Note), in each case assuming no exercise of the Underwriters' over-allotment
option, has the power to elect the entire Board of Directors of the Company and
to approve or disapprove any corporate action submitted to a vote of the
Company's stockholders. The Convertible Note is generally convertible upon
demand into up to 3,030,303 shares of Common Stock at the election of Thermo
Instrument at any time prior to July 23, 2001. See "Relationship with Thermo
Electron and Thermo Instrument" 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 Thermo Instrument. For example, conflicts may arise in the
determination of the annual services fee payable by the Company pursuant to the
Corporate Services Agreement between the Company and Thermo Electron and in
determining whether to invest funds with or borrow funds from Thermo Electron
pursuant to other contractual arrangements. Certain officers of the Company are
also officers of Thermo Instrument, Thermo Electron and/or other subsidiaries of
Thermo Electron, and are full-time employees of Thermo Instrument 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
Thermo Instrument and Thermo Electron. The members of the Board of Directors of
the Company who are also affiliated with Thermo Electron or Thermo Instrument
will consider not only the short-term and the long-term impact of operating
decisions on the Company, but also the impact of such decisions on the
consolidated financial results of Thermo Instrument and Thermo Electron. In some
instances the impact of such decisions could be disadvantageous to the Company
while advantageous to Thermo Instrument or Thermo Electron, or vice versa. The
Company is a party to various agreements with Thermo Electron and Thermo
Instrument that may limit the Company's operating flexibility. See "Relationship
with Thermo Electron and Thermo Instrument."
Significant Additional Shares Eligible for Sale After this Offering. At
the conclusion of the 120-day period following the closing of this offering, the
Company will file a registration statement pursuant to the Securities Act of
1933, as amended (the "Securities Act"), covering the resale of 1,601,500 shares
of Common Stock held by existing investors other than Thermo Instrument. The
6,500,000 shares of Common Stock owned by Thermo Instrument will become eligible
for resale under Rule 144 promulgated under the Securities Act commencing in
February 1997. In addition, as long as Thermo Instrument 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 Common
Stock owned by Thermo Instrument. Thermo Instrument and the Company have agreed
not to sell any shares of Common Stock for a 180-day period after the date of
this Prospectus, other than (i) shares of Common Stock to be sold to the
Underwriters in this offering, (ii) the grant of options to purchase shares of
Common Stock pursuant to existing stock-based compensation plans, (iii) shares
of Common Stock which may be sold to Thermo Instrument, and (iv) the issuance of
shares of Common Stock as consideration for the acquisition of one or more
businesses (provided that such Common Stock may not be resold prior to the
expiration of the 180-day period referenced above).
Additional shares of 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 Common Stock in the public market following this offering
could adversely affect the market price of the Common Stock and affect the
Company's ability to raise capital. See "Relationship with Thermo Electron and
Thermo Instrument," "Shares Eligible for Future Sale" and "Underwriting."
Immediate and Substantial Dilution. Purchasers of the Common Stock offered
hereby will incur an immediate and substantial dilution in the net tangible book
value per share of the Common Stock from the initial public offering price of
$13.54 per share. Additional dilution is likely to occur upon the exercise of
outstanding stock options. See "Dilution."
No Prior Public Market; Potential Volatility of Stock Price. Prior to this
offering, there has been no public market for the Common Stock, and there can be
no assurance that an active trading market will develop or be sustained after
this offering or that the market price of the Common Stock will not decline
9
<PAGE> 12
below the initial public offering price. The initial public offering price will
be determined by negotiations among the Company and the Representatives of the
Underwriters. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. Factors such as
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 Common Stock.
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 Common Stock. Declaration of
dividends on the 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."
Unallocated Net Proceeds. The Company has not as yet identified specific
uses of the net proceeds to be received by it from this offering, and, pending
such uses, the Company expects that it will invest such net proceeds primarily
in investment grade interest bearing or dividend bearing instruments, either
directly by the Company or pursuant to a repurchase agreement with Thermo
Electron. The Company will have discretion over the use and investment of such
proceeds. See "Use of Proceeds" and "Relationship with Thermo Electron and
Thermo Instrument -- Miscellaneous."
10
<PAGE> 13
THE COMPANY
The Company was incorporated in Delaware in February 1995 as a wholly-owned
subsidiary of Thermo Instrument. At that time, Thermo Instrument contributed all
of the assets relating to its capillary electrophoresis product line, its
MALDI-TOF division and its Eberline health physics division to the Company in
exchange for 6,500,000 shares of Common Stock and the assumption by the Company
of substantially all of the liabilities relating to such businesses. On February
7, 1996, the Company acquired all of the assets, subject to certain liabilities,
of DYNEX Technologies, formerly Dynatech Laboratories, from Dynatech
Corporation. In March 1996, Thermo Instrument acquired a substantial portion of
the businesses comprising the Scientific Instruments Division of Fisons plc
("Fisons"), a wholly-owned subsidiary of Rhone-Poulenc Rorer Inc. On July 22,
1996, the Company acquired the Affinity Sensors and LabSystems divisions of
Fisons from Thermo Instrument.
Unless the context otherwise requires, references in this Prospectus to the
Company or Thermo BioAnalysis refer to Thermo BioAnalysis Corporation and its
subsidiaries and the predecessor businesses that constitute the Company. As of
September 12, 1996, Thermo Instrument beneficially owned 80.2% of the Company's
outstanding Common Stock, excluding the shares of Common Stock issuable upon
conversion of the $50.0 million principal amount of the Company's 4.875%
Subordinated Convertible Note, due to Thermo Instrument, which was issued in
July 1996 (the "Convertible Note"). The Company's principal executive offices
are located at 504 Airport Road, Santa Fe, New Mexico 87504-2108, and its
telephone number is (505) 471-3232.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $19,336,000 (approximately
$22,386,000 if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $14.50 per share and after
deducting estimated underwriting discounts and commissions and offering
expenses. The principal purposes of this offering are to increase the Company's
equity capital, to create a public market for the Common Stock and to facilitate
future access by the Company to public equity markets.
The Company expects to use the net proceeds from this offering for working
capital and other general corporate purposes, including the possible acquisition
of one or more businesses whose products are complementary with those offered by
the Company. However, the Company has no specific agreements or commitments with
respect to any acquisition that would be material to the Company.
Pending these uses, the Company expects to invest the net proceeds from
this 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 "Risk Factors -- Unallocated Net Proceeds"
and "Relationship with Thermo Electron and Thermo Instrument -- Miscellaneous."
DIVIDEND POLICY
The Company anticipates that for the foreseeable future the Company's
earnings, if any, will be retained for use in the business and that no cash
dividends will be paid on the Common Stock.
11
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
29, 1996, on a pro forma basis as if the issuance of the $50.0 million principal
amount Convertible Note to Thermo Instrument and the repayment of the $30.0
million principal amount note payable to Thermo Electron had occurred on June
29, 1996, and as adjusted to give effect to the sale of Common Stock offered
hereby at an assumed initial public offering price of $14.50 per share and after
deducting estimated underwriting fees and commissions and offering expenses
payable by the Company.
<TABLE>
<CAPTION>
JUNE 29, 1996
-----------------------
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Subordinated Convertible Note, Due to Parent Company.................... $50,000 $50,000
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000 shares authorized; 8,101,500
shares issued and outstanding and 9,601,500 shares as adjusted
(1)................................................................ 81 96
Capital in excess of par value........................................ 26,917 46,238
Accumulated deficit................................................... (540) (540)
Cumulative translation adjustment..................................... 8 8
-------- --------
Total Shareholders' Investment................................ 26,466 45,802
-------- --------
Total Capitalization (Subordinated Convertible Note, Due
to Parent Company and Shareholders' Investment)......... $76,466 $95,802
======== ========
</TABLE>
- ---------------
(1) Does not include 925,000 shares of Common Stock reserved for issuance under
the Company's stock-based compensation plans and 3,030,303 shares of Common
Stock reserved for issuance upon conversion of the Convertible Note. Options
to purchase 570,000 shares of Common Stock had been granted and were
outstanding under the Company's stock-based compensation plans as of June
29, 1996. See "Dilution," "Management -- Compensation of Directors" and
"-- Compensation of Executive Officers" and Notes 2 and 9 of Notes to the
Company's Consolidated Financial Statements.
12
<PAGE> 15
DILUTION
As of June 29, 1996, the Company had a negative net tangible book value of
$10,071,000 or $1.24 per share. Negative net tangible book value per share is
determined by dividing negative net tangible book value (total tangible assets
less total liabilities) of the Company by the number of shares of Common Stock
outstanding. After giving effect to the sale of 1,500,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $14.50 per share
and the receipt of the estimated net proceeds therefrom, the pro forma net
tangible book value of the Common Stock as of June 29, 1996 would have been
$9,265,000 or $.96 per share. This represents an immediate increase in net
tangible book value of $2.20 per share to existing shareholders and an immediate
dilution in net tangible book value of $13.54 per share to new investors
purchasing Common Stock in this offering. See "Risk Factors -- Immediate and
Substantial Dilution." The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed price to public............................................. $14.50
Negative net tangible book value per share as of June 29, 1996,
before this offering.......................................... $(1.24)
Increase in net tangible book value per share attributable to
this offering................................................. 2.20
-------
-
Net tangible book value per share as of June 29, 1996, after this
offering (1)(2).................................................... .96
-------
-
Dilution per share to new investors (1)(2).......................... $13.54
========
</TABLE>
- ---------------
(1) If the Underwriters' over-allotment option were exercised in full, the net
tangible book value per share after this offering would be $1.25, resulting
in an immediate dilution of $13.25 per share to investors purchasing shares
in this offering. See "Underwriting."
(2) If all options outstanding at June 29, 1996 to purchase an aggregate of
570,000 shares of Common Stock at a weighted average price of $10.51 per
share were exercised in full, and the $50.0 million principal amount
Convertible Note issued in July 1996 was converted by Thermo Instrument into
3,030,303 shares of the Company's Common Stock in addition to the
Underwriters' exercise of the over-allotment option, the net tangible book
value per share after this offering would be $5.09, resulting in an
immediate dilution of $9.41 per share to investors purchasing shares in this
offering.
The following table sets forth as of June 29, 1996, the number of shares of
Common Stock purchased from the Company, the total consideration paid to the
Company and the average price paid per share by existing shareholders and by the
investors purchasing shares of Common Stock in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Thermo Instrument (1)............. 6,500,000 67.7% $12,080,000 24.2% $1.86
Other existing investors (2)...... 1,601,500 16.7 16,015,000 32.1 10.00
New investors..................... 1,500,000 15.6 21,750,000 43.7 14.50
------- ---- ------- ----
Total........................ 9,601,500 100.0% $49,845,000 100.0%
======= ==== ======= ====
</TABLE>
- ---------------
(1) Represents the book value of net assets transferred by Thermo Instrument to
the Company in exchange for 6,500,000 shares of the Company's Common Stock.
(2) Represents the price paid for shares of Common Stock purchased for cash.
13
<PAGE> 16
SELECTED FINANCIAL INFORMATION
The selected financial information below as of and for the fiscal years
ended January 1, 1994, December 31, 1994 and December 30, 1995 has been derived
from the Company's Consolidated Financial Statements, which have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report included elsewhere in this Prospectus. This information should be read in
conjunction with the Company's 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 and for the six
month periods ended July 1, 1995 and June 29, 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 six months ended June 29, 1996 are not
necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
PRO FORMA
COMBINED (2)
----------------------
FISCAL SIX MONTHS
SIX MONTHS ENDED YEAR ENDED
FISCAL YEAR -------------------- ------- ------------
----------------------------------------------- JULY 1, JUNE 29, JUNE 29,
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...................... $24,737 $20,120 $24,479 $25,127 $22,534 $11,686 $ 29,782 $80,803 $ 36,970
------- ------- ------- ------- ------- -------- --------- ------- ------------
Costs and Operating Expenses:
Cost of revenues............ 12,063 10,981 13,010 14,176 13,036 6,826 16,106 38,018 19,927
Selling, general and
administrative expenses... 4,110 4,067 4,914 5,054 4,804 2,309 9,017 30,243 13,979
Research and development
expenses.................. 2,308 2,448 2,242 2,042 1,325 612 2,921 8,882 4,036
Write-off of acquired
technology................ -- -- -- -- -- -- 3,500 -- --
------- ------- ------- ------- ------- -------- --------- ------- ------------
18,481 17,496 20,166 21,272 19,165 9,747 31,544 77,143 37,942
------- ------- ------- ------- ------- -------- --------- ------- ------------
Operating Income (Loss)....... 6,256 2,624 4,313 3,855 3,369 1,939 (1,762 ) 3,660 (972)
Interest Income (Expense),
Net......................... -- -- -- -- 819 238 (375 ) (1,690) (725)
------- ------- ------- ------- ------- -------- --------- ------- ------------
Income (Loss) Before Income
Taxes....................... 6,256 2,624 4,313 3,855 4,188 2,177 (2,137 ) 1,970 (1,697)
Income Tax Provision
(Benefit)................... 2,745 1,449 1,775 1,455 1,674 870 546 1,148 (123)
------- ------- ------- ------- ------- -------- --------- ------- ------------
Net Income (Loss)............. $ 3,511 $ 1,175 $ 2,538 $ 2,400 $ 2,514 $ 1,307 $ (2,683 ) $ 822 $ (1,574)
======= ======= ======= ======= ======= ======= ========= ======= =============
Earnings (Loss) per Share
(3)......................... $ .53 $ .18 $ .38 $ .36 $ .32 $ .18 $ (.33 ) $ .11 $ (.19)
======= ======= ======= ======= ======= ======= ========= ======= =============
Weighted Average Shares (3)... 6,617 6,617 6,617 6,617 7,811 7,403 8,219 7,811 8,219
======= ======= ======= ======= ======= ======= ========= ======= =============
BALANCE SHEET DATA (AT END OF
PERIOD):
Working Capital............... $ 5,663 $ 5,808 $ 6,333 $ 8,282 $27,105 $16,845 $(15,875 ) $ 34,125
Total Assets.................. 13,830 11,767 13,596 14,349 32,907 22,199 85,063 96,063
Subordinated Convertible Note,
Due to Parent Company....... -- -- -- -- -- -- -- 50,000
Shareholders' Investment...... 7,892 7,838 8,332 10,162 29,146 18,783 26,466 26,466
</TABLE>
- ---------------
(1) Includes the results of DYNEX since its acquisition by the Company on
February 7, 1996 and the results of the Affinity Sensors and LabSystems
divisions of Fisons since their acquisition by Thermo Instrument on March
29, 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 six months ended June
29, 1996, as if the acquisitions of DYNEX and Affinity Sensors and
LabSystems, the issuance of the $50.0 million principal amount Convertible
Note to Thermo Instrument and the repayment of the $30.0 million principal
amount note payable to Thermo Electron had occurred on January 1, 1995. The
pro forma balance sheet information is derived from the pro forma condensed
balance sheet included elsewhere in this Prospectus, which was prepared as
if the payment of $9.0 million by the Company to Thermo Instrument, made in
consideration for the transfer of Affinity Sensors and LabSystems, the
issuance of the $50.0 million principal amount Convertible Note to Thermo
Instrument and the repayment of the $30.0 million principal amount note
payable to Thermo Electron had occurred on June 29, 1996.
(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 the 6,500,000 shares issued to Thermo Instrument in
connection with the initial capitalization of the Company and the effect of
the assumed exercise of stock options issued within one year prior to the
Company's proposed initial public offering.
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company operates in three principal areas: life sciences
instrumentation, information management systems and health physics
instrumentation. The Company's instrumentation group includes its DYNEX
Technologies and Affinity Sensors subsidiaries and its capillary electrophoresis
("CE") and MALDI-TOF mass spectrometer divisions, through which the Company
designs, manufactures and markets a broad range of instruments and consumables
based on proprietary immunoassay, optical biosensor, mass spectrometry and CE
technologies. The Company's LabSystems subsidiary designs, implements and
supports laboratory information management systems ("LIMS") and chromatography
data systems. The Company's Eberline health physics subsidiary supplies
radiation detection and counting instrumentation and sophisticated radiation
monitoring systems to the nuclear industry worldwide.
The Company's strategy is to develop and market a portfolio of instruments
and information management systems for biochemistry and other applications
through research and development of innovative products and through the
acquisition of complementary businesses and technologies. In February 1996, the
Company acquired DYNEX, which supplies automated systems, detection systems and
consumables for the immunoassay market, for $43.1 million. DYNEX incurred an
operating loss of $1.0 million on revenues of $28.5 million for the period from
April 1, 1995 through February 7, 1996. DYNEX's operating loss includes
corporate service fees charged by its former parent company of $0.7 million. In
addition, DYNEX changed suppliers of plastic resins used in the manufacture of
certain of its products. This change resulted in reduced revenue during the
transition period.
In July 1996, the Company acquired the Affinity Sensors and LabSystems
divisions of Fisons from Thermo Instrument for $9.0 million, subject to a
post-closing adjustment. Affinity Sensors supplies optical biosensors used in
life sciences research by the pharmaceutical and biotechnology industries,
universities and medical research institutes. Affinity Sensors was established
to develop and commercialize products based on a new technology, optical
biosensors, and commenced commercial sales in 1993. Affinity Sensors incurred a
pre-tax loss of $2.5 million on revenues of $2.4 million in 1995. LabSystems
markets laboratory information management systems and chromatography data
systems used in research and development, quality assurance and control, and
processing plants. LabSystems had pre-tax income of $3.1 million on revenues of
$20.0 million in 1995. Because, as of June 29, 1996, the Company, Affinity
Sensors and LabSystems were deemed for accounting purposes to be under control
of their common owner, Thermo Instrument, which had acquired a substantial
portion of the businesses comprising the Scientific Instruments Division of
Fisons on March 29, 1996, the accompanying financial information as of and for
the six months ended June 29, 1996 includes the results of operations of
Affinity Sensors and LabSystems from March 29, 1996, the date these businesses
were acquired by Thermo Instrument. During the six months ended June 29, 1996,
the Company wrote-off $3.5 million of acquired technology in connection with
these acquisitions. Because the Company had not paid Thermo Instrument for these
businesses as of June 29, 1996, the accompanying June 29, 1996 financial
statements include an amount payable to Thermo Instrument of $9.0 million,
subject to a post-closing adjustment.
RESULTS OF OPERATIONS
Six Months Ended June 29, 1996 Compared With Six Months Ended July 1, 1995
Revenues increased 155% to $29.8 million in the six months ended June 29,
1996 from $11.7 million in the six months ended July 1, 1995. This increase was
primarily due to the inclusion of $14.7 million in revenues from DYNEX, which
was acquired in February 1996, and the inclusion of $6.0 million in revenues
from LabSystems and Affinity Sensors, which were acquired as of March 29, 1996
for accounting purposes, offset in part by lower revenues at the Company's
Eberline health physics subsidiary caused primarily by reduced spending at DOE
facilities as a result of the federal budgetary impasse. In addition, sales of
the Company's MALDI-TOF product line declined due to increased competition.
The gross profit margin increased to 46% in the six months ended June 29,
1996 from 42% in the six months ended July 1, 1995, primarily due to the
inclusion of higher margin revenues at DYNEX, LabSystems
15
<PAGE> 18
and Affinity Sensors, offset in part by a decrease in margins at the Company's
MALDI-TOF division, due to a change in distribution channels from
commission-based sales agents to distributors, which resulted in reduced
revenues.
Selling, general and administrative expenses as a percentage of revenues
increased to 30% in the six months ended June 29, 1996 from 20% in the six
months ended July 1, 1995, primarily due to higher costs as a percentage of
revenues at DYNEX and LabSystems. In mid-1996 the Company implemented cost
reduction plans at DYNEX and LabSystems, which are expected to reduce selling,
general and administrative expenses as a percentage of revenues at each business
primarily by decreasing staffing levels and, to a lesser extent, travel and
other related costs. Research and development expenses increased to $2.9 million
from $0.6 million primarily due to the inclusion of expenses at DYNEX,
LabSystems and Affinity Sensors.
During the six months ended June 29, 1996, Thermo Instrument wrote-off $3.5
million in acquired technology in connection with the acquisition of Affinity
Sensors and LabSystems. Because, as of June 29, 1996, the Company, Affinity
Sensors and LabSystems were deemed for accounting purposes to be under the
common control of Thermo Instrument, this write-off is included in the Company's
results of operations.
Interest expense in the six months ended June 29, 1996 represents interest
associated with the $30.0 million principal amount promissory note issued to
Thermo Electron in February 1996 in connection with the DYNEX acquisition. This
note was repaid in July 1996 with the proceeds of the $50.0 million principal
amount Convertible Note issued to Thermo Instrument. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
The effective tax rate was 40% in both periods, excluding the effect of the
March 1996 write-off of acquired technology associated with the acquisition of
U.K.-based Affinity Sensors and LabSystems, for which no tax benefit has been
recorded. This rate exceeds the statutory federal income tax rate primarily due
to the impact of state income taxes.
In 1995, the Company had sales to customers outside of the United States
which represented 33% of total revenues. With the acquisitions of DYNEX,
Affinity Sensors and LabSystems, the Company expects that an increasing
percentage of its manufacturing operations and a majority of its revenues will
be to customers outside the United States. Inherent in international operations
are risks such as greater difficulties in collecting accounts receivable due to
longer payment cycles and possible difficulties enforcing agreements and legal
claims in foreign jurisdictions. Tax rates in certain foreign countries exceed
that of the United States and foreign earnings may be subject to withholding
requirements or the imposition of tariffs, exchange controls or other
restrictions. In addition, currency exchange fluctuations affecting the
relationship between the U.S. dollar and foreign currencies may adversely affect
the Company's results of operations and cash flows. See "Risk Factors -- Risks
Associated With International Operations."
1995 Compared With 1994
Revenues decreased 10% to $22.5 million in 1995 from $25.1 million in 1994,
primarily due to lower health physics sales which resulted from lower capital
spending by commercial nuclear power producers and government laboratories, U.S.
government budget constraints and regulatory uncertainty concerning clean-up
projects.
The gross profit margin declined to 42% in 1995 from 44% in 1994. This
reduction was primarily due to lower sales of high-margin personnel
contamination monitors and environmental monitors produced by the Company's
Eberline health physics subsidiary.
Selling, general and administrative expenses as a percentage of revenues
increased to 21% in 1995 from 20% in 1994 due to the decrease in revenues noted
above. Research and development expenses decreased to $1.3 million in 1995 from
$2.0 million in 1994 primarily due to the elimination of German research and
development activities at the Company's MALDI-TOF division and a reduction in
spending at the Company's Eberline health physics subsidiary in 1994 and in
1995.
Interest income in 1995 represents interest on the net proceeds of the
Company's private placements of Common Stock in March 1995 and April 1995.
The effective tax rate was 40% in 1995 and 38% in 1994. These rates exceed
the statutory federal rate primarily due to the impact of state income taxes.
The increase in the effective rate resulted from the inability
16
<PAGE> 19
in 1995 to provide a tax benefit on foreign losses and a reduced tax benefit
associated with the Company's foreign sales corporation.
1994 Compared With 1993
Revenues increased 3% to $25.1 million in 1994 from $24.5 million in 1993,
due to an increase in revenues of the Company's MALDI-TOF product line caused by
increased market acceptance of those products, offset in part by lower health
physics revenues caused by reduced spending by the DOE and commercial nuclear
power producers.
The gross profit margin declined to 44% in 1994 from 47% in 1993 due to
lower sales of one of the Company's high-margin health physics instruments.
Selling, general and administrative expenses as a percentage of revenues
was 20% in both periods. Research and development expenses decreased to $2.0
million in 1994 from $2.2 million in 1993 primarily due to a reduction in
spending at the Company's Eberline health physics subsidiary in 1994.
The effective tax rate was 38% in 1994 and 41% in 1993. These rates exceed
the statutory federal rate primarily due to the impact of state income taxes.
The decrease in the effective rate resulted from the inability in 1993 to
provide a tax benefit on foreign losses.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was negative $15.9 million as of June 29,
1996, compared with $27.1 million as of December 30, 1995. The decrease in
working capital was primarily due to the issuance of a $30.0 million promissory
note to Thermo Electron to partially fund the acquisition of DYNEX and the
inclusion of an amount payable to Thermo Instrument of $9.0 million related to
the acquisition of Affinity Sensors and LabSystems. Included in working capital
are cash and cash equivalents of $12.2 million as of June 29, 1996, compared
with $17.7 million as of December 30, 1995. During the first six months of 1996,
$8.2 million of cash was provided by operating activities. Accounts payable and
other current liabilities increased by approximately $3.8 million primarily as a
result of higher accounts payable and accrued expense balances at DYNEX, which
had been reduced from normal levels in anticipation of its acquisition by the
Company. Inventory decreased by approximately $0.7 million primarily as a result
of lower balances at DYNEX due to managing production levels to carry lower
finished goods inventories. During the first six months of 1996, the Company
expended $0.4 million for the purchases of property, plant and equipment. The
Company expects to expend approximately $0.7 million for additional purchases of
property, plant and equipment during the remainder of 1996.
In February 1996, the Company purchased DYNEX for approximately $43.1
million. To fund the acquisition of DYNEX, the Company used cash and borrowed
$30.0 million from Thermo Electron pursuant to a promissory note due February
1997, and bearing interest at the 90 day Commercial Paper Composite Rate, as
quoted by Merrill Lynch, plus 25 basis points, set quarterly. The interest rate
for this note was 5.69% as of June 29, 1996.
In July 1996, the Company purchased Affinity Sensors and LabSystems from
Thermo Instrument for approximately $9.0 million, subject to a post-closing
adjustment. In connection with the acquisition of Affinity Sensors and
LabSystems, in July 1996 the Company issued to Thermo Instrument a $50.0 million
principal amount 4.875% subordinated convertible note, due 2001, convertible
into shares of the Company's Common Stock at $16.50 per share. The Company used
the proceeds of the subordinated convertible note to retire the $30.0 million
promissory note issued to Thermo Electron in connection with the acquisition of
DYNEX.
Though the Company expects to have positive cash flow from its existing
operations, the Company anticipates it will require significant amounts of cash
to pursue the acquisition of complementary businesses. The Company expects that
it will finance these acquisitions through a combination of internal funds,
including the net proceeds from the sale of the shares of Common Stock offered
hereby, additional debt or equity financing from capital markets, or short-term
borrowings from Thermo Instrument or Thermo Electron, although there is no
agreement with Thermo Instrument or Thermo Electron under which such parties are
obligated to lend funds to the Company. The Company believes that its existing
resources are sufficient to meet the capital requirements of its existing
businesses for at least the next 24 months.
17
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS OF DYNEX TECHNOLOGIES
OVERVIEW
DYNEX Technologies operated as a division of Dynatech Corporation through
February 7, 1996. The Company acquired substantially all of the assets of DYNEX,
subject to certain liabilities, on February 7, 1996. DYNEX designs, manufactures
and markets products used in the immunoassay segment of the bioinstrumentation
market.
In describing the results of operations below, the period from April 1,
1995 through February 7, 1996 is referenced as fiscal 1996, and the years ended
March 31, 1995 and 1994 are referenced as fiscal 1995 and fiscal 1994,
respectively.
RESULTS OF OPERATIONS
Fiscal 1996 Compared With Fiscal 1995
Revenues decreased 24% to $28.5 million in fiscal 1996 from $37.3 million
in fiscal 1995. Revenues decreased $5.8 million in fiscal 1996 due to the
abbreviated fiscal year. In addition, DYNEX had nonrecurring sales of certain
products to customers in Russia of $0.2 million in fiscal 1996 compared with
$3.0 million in fiscal 1995.
The gross profit margin decreased to 45% in fiscal 1996 from 46% in fiscal
1995, primarily due to an increase in lower margin sales to original equipment
manufacturers ("OEM's"), offset in part by a reduction in lower margin
nonrecurring sales in fiscal 1996 of certain products manufactured by third
parties for customers in Russia.
Selling, general and administrative expenses as a percentage of revenues
increased to 40% in fiscal 1996 from 34% in fiscal 1995 primarily due to the
decrease in revenues discussed above. Research and development expenses
decreased to $2.3 million in fiscal 1996 from $2.5 million in fiscal 1995
primarily due to the abbreviated fiscal year.
Interest expense increased in fiscal 1996 primarily due to an increase in
the interest allocation from Dynatech Corporation as a result of increased
borrowings.
The effective tax rates in fiscal 1996 and fiscal 1995 differ from the
statutory federal income tax rate primarily due to the inability to provide a
tax benefit on losses incurred at certain subsidiaries and, to a lesser extent,
higher tax rates at certain foreign subsidiaries.
Fiscal 1995 Compared With Fiscal 1994
Revenues increased 24% to $37.3 million in fiscal 1995 from $30.1 million
in fiscal 1994. Revenues increased primarily due to increased demand, which
resulted in part from the introduction of certain new instrumentation products.
In addition, nonrecurring sales of certain products to customers in Russia
accounted for an increase in revenues of $2.3 million.
The gross profit margin decreased to 46% in fiscal 1995 from 49% in fiscal
1994, primarily due to the inclusion of lower margin nonrecurring revenues on
the sale of certain products manufactured by third parties for customers in
Russia, and an increase in lower margin sales to OEM's.
Selling, general and administrative expenses as a percentage of revenues
decreased to 34% in fiscal 1995 from 41% in fiscal 1994 primarily due to the
increase in revenues discussed above. Research and development expenses were
$2.5 million in both periods.
Interest expense decreased in fiscal 1995 primarily due to a decrease in
the interest allocation from Dynatech Corporation.
The effective tax rates in fiscal 1995 and fiscal 1994 differ from the
statutory federal income tax rate primarily due to the inability to provide a
tax benefit on losses incurred at certain subsidiaries and, to a lesser extent,
higher tax rates at certain foreign subsidiaries.
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
OF AFFINITY SENSORS AND LABSYSTEMS
OVERVIEW
Affinity Sensors and LabSystems operated as divisions of Fisons plc through
March 29, 1996 at which time Thermo Instrument acquired a substantial portion of
the Scientific Instruments Division of Fisons plc (of which Affinity Sensors and
LabSystems form a part). In July 1996, the Company acquired Affinity Sensors and
LabSystems from Thermo Instrument.
Affinity Sensors was established to develop and commercialize products
based on a new technology, optical biosensors, and commenced commercial sales in
1993. LabSystems designs, implements and supports laboratory information
management systems and chromatography data systems.
RESULTS OF OPERATIONS
First Quarter 1996 Compared with First Quarter 1995
Turnover increased 7% to 2.9 million British pounds sterling in the first
quarter of 1996 from 2.7 million British pounds sterling in the first quarter of
1995. This increase was primarily due to an increase of 0.6 million British
pounds sterling in turnover at LabSystems due to increased demand for its
product in South America and Asia, partially offset by a decrease in turnover of
0.4 million British pounds sterling at Affinity Sensors due to the timing of
certain shipments.
The gross profit margin declined to 53% in the first quarter of 1996, from
63% in the first quarter of 1995, primarily due to a provision for obsolescence
recorded in the first quarter of 1996 for approximately 0.3 million British
pounds sterling.
Distribution costs represented 30% of turnover in the first quarter of 1996
compared with 24% of turnover in the first quarter of 1995. The increase was
primarily due to an increase in the reserve for bad debts of approximately 0.2
million British pounds sterling. Administrative expenses remained constant at
63% of turnover in both periods.
1995 Compared With 1994
Turnover decreased 4% to 14.4 million British pounds sterling in 1995 from
15.0 million British pounds sterling in 1994. This decrease was primarily due to
a decrease of 1.0 million British pounds sterling in turnover at LabSystems due
to a decrease in demand for its chromatography data systems, offset in part by
an increase in turnover of 0.4 million British pounds sterling at Affinity
Sensors due to increased demand.
The gross profit margin increased to 75% in 1995 from 72% in 1994,
primarily due to a change in sales mix at Affinity Sensors.
Distribution costs represented 18% of turnover in 1995 compared with 21% of
turnover in 1994. The decrease was primarily due to a restructuring of
LabSystems' United States sales office which resulted in the elimination of
approximately one third of the office's sales personnel. Administrative expenses
remained constant at 55% of turnover in both periods.
The tax provision in both periods exceeded the United Kingdom statutory
rate of 33% primarily due to losses incurred by sales offices in the United
States for which no tax benefit has been recorded.
1994 Compared With 1993
Turnover decreased 6% to 15.0 million British pounds sterling in 1994 from
16.0 million British pounds sterling in 1993. This decrease was primarily due to
a decrease of 1.7 million British pounds sterling in turnover at LabSystems due
to a decrease in demand for its chromatography data systems products, offset in
part by an increase in turnover of 0.7 million British pounds sterling at
Affinity Sensors due to increased demand.
19
<PAGE> 22
The gross profit margin decreased to 72% in 1994 from 74% in 1993 due to a
decrease in turnover of higher margin products at LabSystems.
Distribution costs represented 21% of turnover in 1994 compared with 18% of
turnover in 1993. This increase was primarily due to an increase of
approximately 0.4 million British pounds sterling in costs for Affinity Sensors'
United States sales office for a full year of operations in 1994 compared with
three months in 1993. Administrative expenses represented 55% of turnover in
1994 compared with 58% of turnover in 1993. This decrease was primarily due to a
write-off of 0.4 million British pounds sterling of intangibles in 1993.
The tax provision in both periods exceeds the United Kingdom statutory rate
of 33% primarily due to losses incurred by sales offices in the United States
for which no tax benefit has been recorded.
20
<PAGE> 23
BUSINESS
Thermo BioAnalysis designs, manufactures and markets instruments and
information management systems for use in biochemical research and production,
as well as in clinical diagnostics. The Company focuses on three principal
product areas:
- Instrumentation. The Company markets a broad range of instruments and
consumables based on proprietary immunoassay, optical biosensor, mass
spectrometry and capillary electrophoresis technologies.
- Information Management Systems. The Company offers laboratory information
management systems ("LIMS") and chromatography data systems for use in
laboratories and clinical testing facilities. The Company's information
management systems are designed to facilitate the monitoring and analysis
of samples throughout the laboratory or clinical lifecycle.
- Health Physics. The Company markets radiation detection instrumentation
and complete radiation monitoring systems for use in and around nuclear
power plants and other facilities where radioactive materials are used.
During the past decade, life sciences researchers have made significant
advances in identifying the basic mechanisms of biological activity at the
molecular level. These advances have created the need for increasingly
sophisticated instrumentation that allows companies to capitalize on the
improved understanding of molecular biology by developing novel drug therapies
and diagnostic products for human and animal health. In addition to the
significantly more complex biological problems under investigation, these
advances have also dramatically increased the quantity of information that needs
to be analyzed and processed. As a result, the ability to enhance productivity
and reduce product development time and cost in life sciences research has
become an increasingly important challenge and a potential competitive advantage
for pharmaceutical and biotechnology companies. These factors underly the rapid
growth in demand for life sciences instrumentation and related products as well
as the introduction of advanced bioanalytical systems such as those developed
and marketed by the Company.
The Company's strategy is to develop and market a broad portfolio of
instruments and information management systems for biochemistry applications
that address the needs of the laboratory and clinical diagnostic markets. The
Company seeks to implement this strategy through a combination of innovative
research and development and strategic acquisitions designed to expand its
technologies and product offerings. For example, the Company's recently-acquired
Affinity Sensors division has developed a line of optical biosensors that enable
real-time analysis of molecular interactions. In addition, in February 1996 the
Company acquired DYNEX Technologies ("DYNEX"), formerly Dynatech Laboratories, a
division of Dynatech Corporation, a leading supplier of automated systems,
detection systems, and consumables for the immunoassay market. The Company
markets and sells its products worldwide through a number of channels, including
a direct sales force, independent sales representatives, distributors and
original equipment manufacturers ("OEMs").
BACKGROUND
During the past decade, biochemical research evolved rapidly as a result of
new techniques and discoveries that enabled scientists to address biological
problems at the molecular level. In particular, dramatic strides have been made
in the understanding of the composition and function of the human genome, as
well as in such areas as antisense, ribozymes, signal transduction and gene
amplification diagnostics. These breakthroughs have in turn led to important
developments in the understanding, diagnosis and treatment of a wide variety of
diseases, including cancer, heart disease and diabetes.
Industry sources estimate that approximately 50,000 research groups are
engaged in biochemical and other forms of life sciences research activities
worldwide, including academic institutions, government laboratories and private
foundations, as well as biotechnology, pharmaceutical and chemical companies and
diagnostic laboratories. The increased emphasis on cost-effectiveness and
optimizing resources in the life sciences is forcing these organizations to
become more selective in the allocation of their research budgets.
21
<PAGE> 24
Consequently, these organizations have embraced new technologies which
accelerate and improve the cost effectiveness of the discovery and development
process.
At the same time as these organizations are seeking to address the effects
of cost reductions, the proliferation of new biological targets offers an
incentive for pharmaceutical companies to increase their drug discovery efforts.
Researchers at pharmaceutical and biotechnology companies, universities and
other institutions have identified numerous novel receptors, enzymes and other
proteins as drug targets and have generated information on their potential role
in human diseases. Advances in genomics research leading to the identification
of genes implicated in human diseases have also contributed to this
proliferation of new biological targets. The identification of these targets has
provided expanded opportunities for the discovery and development of new drugs
and diagnostic applications. Through combinatorial chemistry (the process of
assembling chemical molecules to rapidly produce many ordered sequences to such
molecules), scientists are creating large libraries of novel compounds which are
screened against biological targets for molecular activity. This process
requires pharmaceutical and other companies to seek methods to rapidly design,
synthesize and evaluate greater numbers of drug candidates. The Company believes
that bioanalytical instruments will provide the medium to enable pharmaceutical
companies to achieve this goal.
Traditional analytical instruments and early bioanalytical instruments and
methods were not designed to rapidly analyze subtle biological events and
process the large volume of complex data necessary to evaluate biological
functions of today's biochemical discoveries and to understand and quantify
biological mechanisms and interactions. For example, the analytical biochemistry
industry today relies primarily on technology developed ten to twenty years ago
for small-scale research use in biochemistry laboratories. The Company seeks to
address the gap it perceives in the bioanalytical instrumentation and systems
market by developing and acquiring a broad portfolio of products for
biochemistry applications that address the needs of the biochemical and clinical
diagnostics markets.
PRODUCTS
Instrumentation
The Company designs, manufactures and markets a broad range of instruments
and consumables based on proprietary immunoassay, optical biosensor, mass
spectrometry and capillary electrophoresis technologies. The Company's products
include automated systems, detection systems and consumables for the immunoassay
market offered under the "DYNEX" name; optical biosensors marketed under the
"Affinity Sensors" name; MALDI-TOF mass spectrometers; and capillary
electrophoresis systems, components and accessories.
Immunoassay. DYNEX designs, manufactures, sells and supports products for
immunoassay testing. Immunoassay is an analytical method used for the
qualitative and quantitative analysis of biological molecules. Immunoassays are
widely used in pharmaceutical and biopharmaceutical research, as well as for
clinical testing and diagnosis of patient samples. In vitro diagnostic
instruments for immunoassay testing are designed to measure the presence of
specific substances, or analytes, in blood or other body fluids. Immunoassay
testing is one of the most widely-used methods for diagnostic testing due to its
ability to detect very small quantities of analytes. Immunoassay technology is
used in a number of screening, diagnostic and monitoring tests, including tests
for pregnancy, hepatitis and HIV.
Immunoassay products are used in medical and pharmaceutical research,
clinical diagnostics, veterinary medicine, agricultural diagnostics, water
quality testing, and food and beverage testing. According to industry sources,
sales in the entire immunodiagnostic market were approximately $4.5 billion in
1995. The Company estimates the microplate instruments and consumables segment
of that market was approximately $290 million in 1995. The Company believes that
trends in the medical industry, such as the proliferation of disease, new
diagnostic discoveries and the demand for more cost-efficient automated testing
systems, will drive growth in this market over the next few years.
DYNEX is a market leader in microplate technology, which significantly
improves the speed and efficiency of immunoassay testing. This technology
enables laboratories to run analyses of up to 96 samples simultaneously using
small amounts of both the sample being tested and the chemicals used to test the
samples. Microplate systems offer clinical users the ability to automate and
increase the throughput of their
22
<PAGE> 25
testing processes. These systems also allow researchers to conduct tests on
small samples with increased sensitivity and consistency. DYNEX pioneered the
development of microplate technology, now an industry standard for immunoassay
testing in clinical applications and in pharmaceutical and biopharmaceutical
research, with its Microtiter product line, and holds all rights to the
Microtiter tradename.
A Microtiter system is comprised of several components, including a plastic
96-well plate, a detection device and a washer. In the Microtiter system, a
reagent, or testing chemical, is bound to the Microtiter plate. The tested
sample is placed in one of the wells; if the specific analyte being tested is
present, it will attach itself to the substance bound to the microplate. The
remainder of the sample is then washed out, leaving the analyte bound to the
well. A second reagent is then added to each well and if any analyte is present,
the second reagent adheres to it. Each well is then washed clean of unattached
reagents and analyzed with a luminescence, fluorescence or absorbance detector.
The detector measures the presence of the second reagent, either through its
luminescent or fluorescent qualities or by its color. The amount of analyte
present in the original sample can then be derived by determining the amount of
the second reagent in the well at the end of the test cycle.
The Company believes that it offers among the most sensitive, flexible and
automated Microtiter systems currently available. The primary advantage of the
DYNEX Microtiter immunoassay testing system is the breadth of the Company's line
of Microplate products and services. In addition, DYNEX's Microtiter products
are compatible with all detection technologies and many reagent test kits. A
number of immunoassay systems currently available are closed systems,
manufactured and supplied by certain reagent manufacturers. These closed systems
can only process tests made by that manufacturer, limiting flexibility and
requiring the user to purchase multiple systems in order to utilize a variety of
test kits. The Microtiter system is an open system which allows laboratories and
clinics to select the most appropriate and cost-effective assay from products
offered by several competing reagent manufacturers and to rapidly introduce new
diagnostic tests as they become available. The Company believes that this
advantage will become increasingly important as laboratories and clinics face
mounting cost pressure in the current healthcare environment.
The Company's principal immunoassay products include:
- Microtiter detection systems, which read the results of diagnostic tests
through the detection of color, luminescence or fluorescence. The Company
markets the DYNEX ImmunoAssay System ("DIAS") reader, a modular,
fully-automated detector that serves as a stand-alone reader or as the
controlling unit of DYNEX's automated Microtiter plate processing system;
the MRX and MRX-HD colorimetric detectors; the MLX luminescence detector;
and the Fluorolite line of fluorescence detectors. Suggested U.S. list
prices for Microtiter plate detectors and computerized detection systems
range from approximately $9,000 to approximately $30,000.
- Automated testing systems, which combine detection, washing, reagent
dispensing, incubation and data management functions. The Company's DIAS
system with time management software allows users to automatically
process and analyze Microtiter applications and to conduct several assays
or tests concurrently or at pre-scheduled intervals. This system can be
configured to hold up to 24 Microtiter plates, resulting in the automated
analysis of up to 2,304 samples. Suggested U.S. list prices for these
systems range from approximately $50,000 to approximately $90,000,
depending on system configuration.
- Consumables, consisting primarily of small plastic Microtiter plates with
96 wells, which are used to hold the sample and reagents during the
testing process. The Company's consumables are used by both reagent
manufacturers, who coat them with reagents and resell them to
laboratories, and by researchers, who are developing new applications
using experimental reagents for testing purposes. The Company's plastic
products are manufactured using high-performance resins with
characteristics that facilitate consistent test results.
Optical Biosensors. Optical biosensor systems are a new technology used to
quantify biomolecules and characterize their functional properties. Optical
biosensor systems monitor the interaction of two or more biological compounds by
measuring changes in the refractive index caused by molecular activity. Unlike
competing technologies, which statically measure only the presence and quantity
of a biomolecule, optical
23
<PAGE> 26
biosensors dynamically measure the speed and strength of the molecular
interaction. The result is an analytical instrument which provides previously
unavailable information regarding molecular activity in real time without the
need for chemical or radioactive labels, thereby reducing the time associated
with the testing process. The Company believes that optical biosensors may be
useful in developing more effective therapeutics, more selective diagnostics and
a greater understanding of the molecular basis of inter- and intracellular
communication. According to industry sources, worldwide sales of optical
biosensors in 1995 have grown to approximately $30 million since their
introduction in 1990.
The Company's Affinity Sensors division ("Affinity Sensors") designs,
develops and sells optical biosensors for life sciences research in the
pharmaceutical and biotechnology industries, universities and medical research
institutes. Affinity Sensors' biosensor-based assay system, known as IAsys, is
an optical biosensor system comprised of two components, an instrument system
and a disposable biosensor which can have tailored specificity and can be used
up to one hundred or more times before disposal. The Company offers both manual
and automated versions of its IAsys optical biosensor system for performing a
broad range of assays and affinity measurements. Suggested U.S. list prices for
the IAsys optical biosensor system range from approximately $85,000 to
approximately $200,000.
The Company believes that its IAsys optical biosensor systems offer
practical, cost and time saving advantages over conventional analytical
technologies. The IAsys system eliminates the multi-step process associated with
conventional testing techniques such as enzyme-linked immunosorbant assays
("ELISA"), radio-immunoassays ("RIA"), ultracentrifugation and fluorescence
polarization, thereby reducing the amount of time necessary to obtain test
results and enhancing research productivity. The IAsys system uses a cuvette
rather than a flow-through design, thereby allowing the monitoring of reactions
for an unlimited period and the recovery of substantially all of the sample used
in the testing process.
Affinity Sensors has incorporated patented technology into the IAsys system
that directly detects an extensive range of analytes, including
biopharmaceuticals, proteins, peptides, DNA and cells. The Company believes that
the IAsys system has a wide range of applications, including life sciences
research, clinical diagnostics, environmental, industrial and defense
applications. Researchers use the Company's optical biosensors to assist them in
understanding which molecules interact, how many interact, how strongly and how
quickly they interact, and how they bind relative to one another.
MALDI-TOF Mass Spectrometry. Mass spectrometry measures the molecular
weight of a sample's components, thereby enabling identification and measurement
of organic chemical compounds and/or inorganic elements contained in the sample.
Historically, mass spectrometry has been of little use to biochemists because
mass spectrometry measurements of large molecules, such as the biomolecules that
comprise peptides and proteins which have molecular weights in excess of 3,000
daltons, were not possible.
The development of ionization techniques such as those used in the
MALDI-TOF mass spectrometer have solved this problem. MALDI-TOF mass
spectrometers, first commercially available in 1990, measure the amount of time
required for an ionized molecule to reach a detector and convert that
measurement into a measurement of mass. Using these devices, biochemists can
measure molecules with molecular weights of up to 500,000 daltons.
According to industry sources, worldwide sales of MALDI-TOF mass
spectrometers in 1995 were estimated to be approximately $74 million and
estimated to increase at a rate of approximately 20% per year through 1999. The
Company believes that the growth of this market may accelerate as the advantages
of the relatively new MALDI-TOF technology are recognized by the biotechnology
community and as new applications for the technology are developed.
The Company currently offers two MALDI-TOF mass spectrometers: LASERMAT, an
automated standard-resolution benchtop instrument controlled by a personal
computer and designed to permit biochemists to conduct fast and accurate
measurements in their own laboratories; and VISION 2000, a high-resolution,
research-grade instrument designed for the analysis of complex biomolecules with
a mass range of up to 500,000 daltons. VISION 2000 incorporates an advanced
technology for obtaining detailed structural information, such as the amino acid
sequence of a peptide, by purely instrumental means. The Company is
24
<PAGE> 27
also completing the development of DYNAMO, an enhanced benchtop MALDI-TOF mass
spectrometer which has significantly enhanced resolution. Suggested U.S. list
prices for the Company's MALDI-TOF mass spectrometers range from approximately
$100,000 to approximately $250,000.
Capillary Electrophoresis. Capillary electrophoresis or "CE" is a
purification and separation technique commercially introduced in 1989. CE
systems separate molecules by measuring the speeds at which different compounds
move through an extremely narrow tube or capillary that is charged with an
electric field.
The largest market for CE systems are biopharmaceutical companies, whose
research activities require state-of-the-art CE systems and related supplies.
One of the principal applications for CE systems is the analysis and separation
of biomolecules such as proteins, peptides and nucleic acids, including DNA.
Applications of DNA separation by CE include the identification of specific
individuals through DNA "fingerprinting" and the diagnosis of diseases and
specific genetic disorders such as leukemia, hepatitis and sickle cell anemia.
CE is a rapidly growing purification and separation technique, and industry
sources estimate that the total size of the CE market in 1995, including
instrumentation, service and consumables, was approximately $51 million.
The Company's SpectraPHORESIS line of CE systems includes a low-cost,
manually-controlled CE system and a fully-automated CE system with multiple
wavelength detectors. The Company recently introduced its new generation CE
system, the SpectraPHORESIS Ultra. The Company believes that the SpectraPHORESIS
Ultra has more than twice the sample capacity of competing products, thereby
permitting users to decrease labor costs by allowing longer periods of
unattended operation. The Company's CE systems offer high sensitivity, as well
as advanced data handling, control and automation features. The Company also
offers a line of CE capillaries, buffers and other consumables. Suggested U.S.
list prices for the Company's CE products range from approximately $1,750 to
approximately $40,000.
Information Management Systems
Laboratories and clinical facilities are gathering increasing amounts of
data from a variety of sources utilizing an array of instrumental and
non-instrumental techniques. These data must then be organized, interpreted,
distributed and archived for a variety of business and regulatory reasons.
Companies can improve the efficiency of their analytical laboratories by
using a laboratory information management system ("LIMS") to perform sample
login, test scheduling, test execution, automated results entry, results
validation, reporting and data archiving. LIMS benefits include minimizing the
number of laboratory personnel needed to handle increases in sample volume,
facilitating the implementation of new analytical procedures and improving
compliance with regulatory guidelines. Productivity and accuracy can also be
enhanced by reducing manual data transcription and automating error-prone manual
tasks such as sample status tracking, calculations, report preparation, and
information retrieval. In addition, LIMS facilitates the maintenance of data and
procedure security, audit trails and validation checks that are key components
in complying with regulatory agency requirements. According to industry sources,
worldwide sales of LIMS products in 1995 were approximately $200 million.
LabSystems, the Company's information management systems subsidiary,
designs, develops and supports LIMS and chromatography data systems. LabSystems
is recognized as one of the world's leading LIMS suppliers. LabSystems also
maintains an implementation support group that provides software customization
and project management services for its customers. LabSystems' products are
distributed throughout a wide user base including research and development,
quality assurance/quality control and processing facilities. A substantial
majority of LabSystems' customers are Fortune 500 companies in the process
chemical, aerospace, pharmaceutical, environmental, oil and gas, petrochemical,
automotive, food and beverage, agricultural and medical products industries.
SampleManager, LabSystems' LIMS product, is a fully-integrated suite of
software modules that provides industry-specific functionality in the areas of
statistical analysis, instrument control, pharmaceutical stability studies,
pharmaceutical batch material control and data security and integrity. The
Company believes that its SampleManager is the only LIMS product that uses open
system architecture, allowing easy
25
<PAGE> 28
integration with other software packages and platforms. The current version of
SampleManager is available on DEC, HP and IBM platforms, running Rdb and Oracle
databases. The Company believes that it was the first LIMS vendor worldwide to
achieve an accredited ISO 9001/TickIT certification. As of June 30, 1996,
SampleManager had been installed in over 550 sites worldwide.
LabSystems also offers SampleManager-IDI, a software module that enables
SampleManager to interface with SAP AG's R3 office data management system. The
Company's SampleManager-IDI software module has been certified by SAP AG and
integrates SampleManager with the user's other software data systems. The
Company believes that its SampleManager-IDI interface, which is used by
approximately 30% to 35% of LabSystems' customers, is an important selling point
for the SampleManager product.
XChrom and Multichrom, the Company's chromatography data systems or "CDS"
products, are open system analytical tools which assist users in analyzing
chromatographic data obtained via gas and liquid chromatography and capillary
electrophoresis. XChrom is available on a variety of platforms, runs on any
Intel 486 or Pentium-based personal computer under Microsoft Windows NT, and may
be customized to suit most hardware configurations. Multichrom is a multi-user,
multi-channel system for the DEC Alpha AXP and VAX platforms under the OpenVMS
operating system. Chromatography instruments and autosamplers from leading
vendors can be controlled centrally by XChrom and Multichrom, providing a common
interface between instruments and aiding productivity and compliance with
regulatory practices.
XChrom and Multichrom are designed for use as stand-alone data systems or
as part of an integrated system running LIMS products. Sample lists, calibration
protocols and analytical results can be shared between the two applications,
simplifying operation and avoiding transcription errors. The close interaction
between the Company's LIMS and chromatography applications is of particular
benefit to customers operating in a regulated environment.
LabSystems recently introduced Yukon, a software interface between
SampleManager and various analytical instruments. Yukon allows laboratory
personnel to automatically send analytical results from a laboratory test
instrument to SampleManager, thereby eliminating the time-consuming task of
manually transmitting such results into the management information system and
ensuring a secure information flow free of transcription errors.
Suggested U.S. list prices for SampleManager, XChrom, Multichrom and Yukon
are approximately $150,000, $50,000, $50,000 and $7,500, respectively.
Health Physics
The Company believes that its Eberline health physics subsidiary is a
leading supplier of radiation detection and counting instrumentation and
sophisticated radiation monitoring systems to the nuclear industry. Eberline
produces a broad range of products, including portable and stand-alone
instruments and computer-integrated systems that detect and measure nuclear
radiation in and around nuclear power plants and other facilities where
radioactive materials are used. In May 1986, a portal monitor supplied by the
Company's predecessor to a nuclear power plant in Sweden provided the first
indication to Western countries of unusually high levels of nuclear radiation
that resulted from the Chernobyl reactor accident in the former Soviet Union.
According to industry sources, worldwide sales of instruments and related
products to the nuclear industry in 1994 were approximately $521 million. The
Company believes that its Eberline health physics subsidiary offers products
which compete in approximately 35% of this worldwide market.
Approximately 65% of the radiation monitoring instruments sold by Eberline
are purchased for use in nuclear power plants and United States Department of
Energy facilities. The remainder are sold to medical and educational
institutions, the military service, state and local governments and others. For
a discussion of a recent trend in purchases by the Departments of Defense and
Energy, see "Risk Factors -- Dependence on Capital Spending Policies and
Government Funding."
The Company's radiation monitoring instruments can be separated into three
broad categories:
26
<PAGE> 29
- Automated Contamination Monitors. Eberline offers a line of automated
contamination monitors that detect and measure trace amounts of
radioactive material on personnel, clothing, tools, wastes and other
materials that are removed from radiologically controlled or potentially
contaminated areas.
- Environmental Monitors. Eberline manufactures and sells a complete line
of environmental monitors, including air monitors, air samplers/pumps,
area monitors and system data acquisition computers that measure
radioactive gases such as radon and radioactive particulates in the
ambient air, in work spaces, in effluents to the atmosphere and in
residential and commercial buildings.
- Portable Monitors. Eberline also offers portable survey meters that
detect and monitor nuclear radiation dose rates and contamination levels,
electronic alarming dosimeters that are worn by personnel working in
radiologically controlled areas and a complete system of readers,
computers and software to implement a fully integrated dosimetry
management and access control system. Limits placed on dose rates are the
basis for the precautions taken to ensure the safety of personnel who
enter and work in radiologically controlled areas.
Eberline also designs, manufactures and installs complete
computer-integrated systems for monitoring effluents from nuclear power plants
and for making radiation measurements at strategic locations throughout such
facilities. These systems comprise a network of radiation monitors and data
acquisition subsystems that process and store measurements and, on request,
transmit data to a central system controller for display and recordkeeping.
Eberline provides the hardware, software and customer service for these
installed systems. Since 1978, Eberline has installed systems in more than 65
nuclear facilities worldwide.
Suggested U.S. list prices for the Company's health physics products range
from approximately $500 for portable survey meters to in excess of $1 million
for complete monitoring systems.
CUSTOMERS, MARKETING AND DISTRIBUTION
Customers
The Company has approximately 9,400 customers worldwide. The Company's
customers include pharmaceutical, biotechnology, chemical and industrial
companies as well as academic institutions, government laboratories and private
foundations. The Company anticipates that it will derive a majority of its
revenues from customers located outside of North America in fiscal 1996. See
"Risk Factors -- Risks Associated with International Operations." For more
detailed financial information regarding the Company's foreign and domestic
operations and export sales, see Note 8 of Notes to the Company's Consolidated
Financial Statements. In fiscal 1995, sales of products by the Company's
Eberline subsidiary to various branches of the United States government
accounted for approximately 24% of the Company's total revenues. No other
customer accounted for more than 10% of the Company's total revenues in fiscal
1995.
Marketing and Distribution
The Company markets and distributes its products through a number of
channels, including a direct sales force, independent sales representatives,
distributors and OEMs. The method of distribution is determined by product line
and market size and potential, as well as by local business convention, industry
mix and the availability of technically-qualified representatives.
Instrumentation. DYNEX has focused its sales efforts on the clinical
diagnostic and research markets, including healthcare and hospital facilities,
chemical and pharmaceutical manufacturers, universities, medical and
pharmaceutical research laboratories, veterinary and agricultural research
laboratories and governmental institutions such as the FDA, the NIH and the
Center for Disease Control. DYNEX's products are used principally by large
clinical and research laboratories and manufacturers, including pharmaceutical
companies, where large-batch, high volume testing methods are required.
DYNEX sells to its customers principally through its direct sales force,
OEMs and through distributors throughout the major countries in the world. DYNEX
maintains direct sales offices in the Czech Republic, France, Germany, Hong
Kong, Russia, the United Kingdom and the United States. DYNEX also sells through
manufacturers' representatives. DYNEX sells to clinical laboratories and
hospitals primarily through
27
<PAGE> 30
OEM arrangements with major reagent manufacturers, including Johnson & Johnson,
Diagnostic Products Corporation and Sanofi Diagnostias Pasteur, which purchase
consumables and instruments for resale to their customers.
Affinity Sensors serves a variety of geographic markets and maintains
direct sales and service offices in the United Kingdom and the United States, as
well as distributors, including in some locations Thermo Instrument, in
Australia, Belgium, France, Germany, the Netherlands, Italy, Spain, Scandinavia,
Switzerland, Singapore and Japan. See "Relationship with Thermo Electron and
Thermo Instrument."
The Company distributes its MALDI-TOF mass spectrometry products through
its direct sales force in the United States and Western Europe and through sales
representatives elsewhere in the world. The Company distributes its MALDI-TOF
mass spectrometry products in Japan through an arrangement with ThermoQuest
Corporation, a majority-owned subsidiary of Thermo Instrument ("ThermoQuest").
ThermoQuest also distributes the Company's CE products and is the exclusive
distributor of such products in jurisdictions in which it maintains a direct
sales force. See "Relationship with Thermo Electron and Thermo Instrument."
Information Management Systems. LabSystems serves a variety of geographic
markets and maintains direct sales and service offices in the United Kingdom and
the United States, as well as a network of distributors, including in some
locations Thermo Instrument, in France, Germany, Italy, Scandinavia, Spain, the
Netherlands, the Middle East, South Africa, Australia, Brazil, Canada and
Singapore. See "Relationship with Thermo Electron and Thermo Instrument."
Health Physics. Eberline sells instruments directly in the United States
and Canada and through sales representatives elsewhere in the world. Eberline
has sales and support offices in Santa Fe, New Mexico and West Columbia, South
Carolina. In addition, direct sales representatives are located in Chicago,
Illinois, Atlanta, Georgia and Santa Fe, New Mexico.
COMPETITION
The markets for the Company's products are highly competitive. In each of
the markets it serves, the Company competes with a number of companies, many of
which have greater engineering, manufacturing and marketing resources than the
Company.
Instrumentation
DYNEX competes primarily on the basis of technological innovation, cost,
performance (including throughput and sensitivity) and flexibility. DYNEX's
principal competitors in the consumables or plastics market include Nunc-Nalge
Inc., Greiner GmbH and Corning-Costar Corporation. In the detection systems
market, DYNEX competes with Bio-Tek Instruments, Inc., Life Sciences
International Inc. and Molecular Devices Corporation. In the automated systems
market, DYNEX's competitors include BioChem Pharma Inc., Immunosystems, Inc.,
Hamilton Bonaduz AG and Tecan AG.
Affinity Sensors competes in the optical biosensor market primarily on the
basis of ease and flexibility of use, technical performance, analytical
throughput and speed of data analysis. The dominant competitor in the market for
optical biosensors is the Pharmacia Biosensor subsidiary of Pharmacia & Upjohn,
Inc.
The Company competes in the MALDI-TOF mass spectrometry market primarily on
the basis of the technical performance of its MALDI-TOF mass spectrometers as
well as on the need in the analytical biochemistry community for
highly-automated mass spectrometers. To a lesser degree, the Company also
competes on the basis of price. Principal competitors in the mass spectrometry
market include PerSeptive Biosystems, Inc., Shimadzu Corporation,
Hewlett-Packard Company ("Hewlett-Packard"), Bruker Instruments Inc. and
Micromass Ltd.
The Company competes in the market for CE systems primarily on the basis of
technical performance and automation features. The Company's principal
competitors in the CE market include Beckman Instruments, Inc. ("Beckman"),
Bio-Rad Laboratories, Inc. and Hewlett-Packard.
28
<PAGE> 31
Information Management Systems
LabSystems competes in the high-end LIMS and CDS markets primarily on the
basis of the functionality, flexibility and technical sophistication of its
systems, as well as on its ability to tailor its software packages to a
customer's specific laboratory protocols and to provide superior customer
service and technical support. Significant competitors in the LIMS and CDS
markets include Perkin-Elmer Corporation, Beckman, Hewlett-Packard, the
Laboratory MicroSystems, Inc. subsidiary of Instron Corporation and Waters
Instruments, Inc.
Health Physics
Although there has been a trend toward consolidation among suppliers of
health physics instrumentation over the last five years, the market for health
physics instrumentation remains fragmented. Eberline competes in this market
primarily on the basis of product reliability and technological innovation.
Significant competitors include the Nuclear Instruments Group of EG&G, Inc., the
Nuclear Products Division of Morgan Crucible Co. plc, the Bicron/NE Technology
division of Saint-Gobain/Norton Industrial Ceramics Corporation and The Rados
Companies.
RESEARCH AND DEVELOPMENT
The Company's research and development activities are designed to provide
the Company with continued technological leadership in its markets. DYNEX's
research and development activities are focused principally on detection
systems, automated systems and consumables. DYNEX introduced the MLX
luminescence detection system in May 1996, and expects to introduce a
third-generation fully automated testing system, the DIAS Ultra, in the second
half of 1996. Affinity Sensors introduced an automated system in the second
quarter of 1996, and is currently developing multi-analyte biosensors capable of
simultaneously conducting multiple tests on a single sample, software capable of
providing real-time data analysis and improved optical designs and surface
chemistries. The Company's MALDI-TOF division is currently developing DYNAMO, an
enhanced benchtop MALDI-TOF mass spectrometer. LabSystems' current research and
development efforts are focused on expanding its existing product line by
developing additional client/server applications for its SampleManager and
XChrom products.
The Company's research and development activities include new product
development, product updates and enhancement of existing products. A substantial
amount of the Company's research and development expenses are incurred in
connection with new product development. Approximately 20% of the Company's
employees are involved with research and product development. Company-funded
research and development expenditures were approximately $2.2 million, $2.0
million and $1.3 million during fiscal 1993, 1994 and 1995, respectively.
GOVERNMENT REGULATIONS
Government regulations play a significant role in the research,
development, production and commercialization of health care products, such as
pharmaceuticals, diagnostics and certain instrumentation. None of the Company's
products currently requires FDA approval except for certain of the Company's
Microtiter technology products that are used in clinical or diagnostic
applications. FDA regulations apply not only to therapeutic and other health
care products, but also to the processes and reproduction facilities used to
produce such products.
Clinical diagnostic applications of the Company's products are and will
continue to be subject to FDA device and reagent approval and regulations.
Before a medical device can be commercially distributed, the manufacturer must
submit to the FDA either a premarket notification ("510(k)") or a premarket
approval ("PMA") application. A 510(k) notification can be submitted when the
device is substantially equivalent to another device currently being marketed in
the classes of devices eligible for marketing pursuant to 510(k) notifications.
Receipt of 510(k) clearance takes at least three months, but may take much
longer and may require the submission of clinical safety and efficacy data to
the FDA. There can be no assurance that the use of a 510(k) notification will be
available for any clinical application of the Company's products or for any of
the Company's potential diagnostic products.
29
<PAGE> 32
A PMA, which is required for medical devices not eligible to be marketed
under a 510(k) notification, must demonstrate that the product is safe and
effective and thus requires more time to prepare and a more complex submission
to the FDA. Following completion of laboratory evaluations and adequately
controlled clinical trials to establish safety and efficacy of the product for
its intended use, the Company would be required to file a PMA application, which
includes the results of that research and product development, clinical studies
and related information. FDA review and approval of a PMA application often
requires 12 to 18 months or longer and must be completed before the product may
be sold for clinical diagnostic use in the United States. The process of
obtaining PMAs from the FDA and other regulatory authorities can be costly, time
consuming and subject to unanticipated delays.
The Company has, to date, been required to obtain 510(k) clearance with
respect to certain clinical applications of its Microtiter technology products.
There can be no assurance that 510(k) clearance for any future product or
modification of an existing product will be granted by the FDA within a
reasonable time frame, or at all, or that in the future the FDA will not require
manufacturers of certain medical devices to engage in a more thorough and time
consuming approval process than the 510(k) process, or that the FDA or certain
corresponding government agencies will permit marketing of the Company's systems
in their respective jurisdictions. There can be no assurance that the approvals
of the Company's or its customers' products, processes or facilities will be
granted. Any failure to obtain, or delay in obtaining, any such required
approval could adversely affect the Company's marketing efforts.
As a result of the clinical applications of certain of the Company's
Microtiter technology products, the Company is registered with the FDA as a
medical device manufacturer. As such, the Company may be inspected on a routine
basis by the FDA for compliance with the FDA's regulations regarding Good
Manufacturing Practices and other applicable regulations. These regulations
require that the Company manufacture its products and maintain related
documentation in a prescribed manner with respect to manufacturing, testing and
quality control activities. Further, the Company is required to comply with
various FDA requirements for reporting of product malfunctions and other
matters. The regulatory standards for manufacturing are currently being applied
stringently by the FDA and state regulatory agencies. Noncompliance with FDA or
applicable state agency regulations or discovery of previously unknown problems
with a product, manufacturer or facility may result in restrictions on such
product or manufacturer, including fines, costly recalls, injunction or seizure
of products, refusal of the government to approve or clear product approval
applications or to allow the Company to enter into government supply contracts
or even withdrawal of the product from the market or criminal prosecution, any
of which could have a material adverse effect on the Company's business and
results of operations.
In addition, a significant percentage of the Company's product revenues are
derived from sales outside of the United States. International regulatory bodies
often establish varying regulations governing product standards, packaging
requirements, labeling requirements, import restrictions, tariff regulations,
duties and tax requirements. As a result of the Company's sales in Europe, the
Company may be required to comply with applicable European medical device
directives. Failure to receive a CE mark certification would prohibit the
Company from selling its products in Europe, which could have a material adverse
effect on the Company's business and results of operations. The Company has
obtained, or is expected to obtain in the near future, CE mark certification for
nearly all of the products that it markets in Europe.
Certain other countries require the Company to obtain clearances for its
products prior to marketing the products in those countries. In addition,
certain countries impose product specifications that differ from those mandated
in the United States. These requirements may significantly affect the efficiency
and timeliness of international market introductions of the Company's products.
The Company is also subject to numerous environmental and safety laws and
regulations, including those governing use of hazardous materials. Any
violations of, and the costs of compliance with these regulations could
adversely impact the Company's operation.
See "Risk Factors -- Government Regulations; No Assurance of Regulatory
Approvals."
30
<PAGE> 33
PATENTS AND PROPRIETARY TECHNOLOGY
The Company's policy is to protect its intellectual property rights and to
apply for patent protection when appropriate. The Company currently holds
several issued United States patents expiring at various dates ranging from 2002
to 2011. The Company also has applications pending for additional United States
patents and a number of foreign counterparts for its patents in various foreign
countries. In addition, the Company has registered or other trademarks. Patent
protection provides the Company with competitive advantages with respect to
certain systems. The Company believes, however, that technical know-how and
trade secrets are more important to its business than patent protection.
The Company seeks to maintain the confidentiality of its proprietary
technology that is not covered by patent protection by requiring employees who
work with proprietary information to sign confidentiality agreements and by
limiting access by parties outside the Company to such confidential information.
There can be no assurance, however, that these measures will prevent the
unauthorized disclosure or use of this information, or that others will not be
able to independently develop such information. Moreover, as is the case with
the Company's patent rights, the enforcement by the Company of its trade secret
rights can be lengthy and costly, with no guarantee of success.
Competitors of the Company and other third parties hold issued patents and
pending patent applications relating to certain instrumentation and other
related technologies, and it is uncertain whether these patents and patent
applications will require the Company to alter its products or processes, pay
licensing fees or cease making and selling infringing products and pay damages
for past infringement. In particular, the Company is aware of a U.S. patent held
by a third party which may relate to the design of the cuvette used in the
Company's optical biosensor system. The Company is also aware of patents held by
another third party which may relate to the features of certain of the Company's
MALDI-TOF mass spectrometers. The Company had no revenues from products which
allegedly utilized features associated with these patents in fiscal 1995 because
the Company acquired its optical biosensor system in the first quarter of 1996
and because the MALDI-TOF mass spectrometers which are the subject of certain of
these patents were under development. The Company believes that revenues from
products which allegedly utilized features associated with these patents
represented approximately 3% of the Company's total revenues during the
six-month period ended June 29, 1996. Although the Company believes that the
validity and/or infringement of these patents may be subject to challenge, if
the patent holder were successful in enforcing any such patent, the Company
would be subject to damages for past infringement and enjoined from
manufacturing and selling products utilizing the features associated with the
patent, which could have a material adverse effect on the Company's business and
results of operations. The Company has received an opinion of the patent law
firm of St. Onge Steward Johnston & Reens LLC to the effect that none of the
features of the Company's MALDI-TOF mass spectrometers infringe any valid claims
of the patents referred to above. The Company has not obtained an opinion of
patent counsel with respect to the U.S. patent asserted against the design of
the cuvette used in the Company's optical biosensor system. An opinion of
counsel only represents such counsel's view of applicable law and is not binding
on any court or governmental agency. See "Risk Factors -- Dependence on Patents
and Proprietary Rights."
BACKLOG
At July 1, 1995 and June 29, 1996, the Company's backlog was approximately
$2.2 million and $13.2 million, respectively. The Company includes in backlog
only those orders for which it has received firm purchase orders and for which
delivery has been specified within twelve months. 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.
31
<PAGE> 34
FACILITIES
The Company owns and leases a number of facilities in the United States,
Europe and Asia as set forth below:
<TABLE>
<CAPTION>
APPROXIMATE OWNED/ EXPIRATION
LOCATION SQUARE FEET LEASED OF LEASE USE
- ---------------------------------- ------------ ---------- ------------ ---------------------
<S> <C> <C> <C> <C>
Santa Fe, New Mexico 60,000 Owned -- Manufacturing, Sales
& Administration
Chantilly, Virginia 50,500 Leased 2001 Manufacturing, Sales
& Administration
Altrincham, England 30,000 Leased 2015 Software Production &
Administration
Guernsey, Channel Island 23,000 Leased 1997 Manufacturing
Hemel Hempstead, England 15,000 Subleased 1996(1) Manufacturing, Sales
& Administration
Cambridge, England 12,600 Leased 2002 Manufacturing, Sales
& Administration
Denkendorf, Germany 12,000 Leased --(2) Sales
Beverly, Massachusetts 8,200 Subleased --(3) Sales and
Administration
Columbia, South Carolina 7,000 Owned -- Manufacturing, Sales
and Administration
Billingshurst, England 5,000 Leased 1996 Sales
Saint Quentin En Yvelines, France 3,900 Leased 1997 Sales
Moscow, Russia 2,200 Leased 2001 Sales
Kowloon, Hong Kong 2,100 Leased 1997 Sales
Prague, Czech Republic 1,500 Leased 1996 Sales
</TABLE>
- ------------------------
(1) Subleased from ThermoQuest. See "Relationship with Thermo Electron and
Thermo Instrument."
(2) Tenancy is month-to-month.
(3) Occupied under an informal arrangement with Fisons; building lease expires
in 2008.
The Company believes that its existing facilities and offices are adequate
for its current needs and that suitable additional space will be available as
needed in the future. The Company also believes that none of its manufacturing
facilities is currently fully utilized and that the additional manufacturing
capacity available at such facilities will be sufficient to satisfy its
manufacturing requirements for at least the next 12 months.
PERSONNEL
As of June 29, 1996, the Company had 497 employees, of which 103 were
engaged in research and development, 132 in sales and marketing, 148 in
manufacturing and 114 in general administrative functions. The Company's
employees at its Eberline health physics subsidiary are represented by one labor
union. None of the Company's other employees are represented by a labor union,
and the Company considers its relations with its employees to be good. The
Company's current union agreement expires in June 1997.
LEGAL PROCEEDINGS
The Company is not a party to any litigation that it believes could have a
material adverse effect on the Company or its results of operations.
32
<PAGE> 35
RELATIONSHIP WITH THERMO ELECTRON
AND THERMO INSTRUMENT
The Company was incorporated in Delaware in February 1995 as a wholly-owned
subsidiary of Thermo Instrument. At that time, Thermo Instrument contributed all
of the assets relating to its CE product line, its MALDI-TOF division and its
Eberline health physics division to the Company in exchange for 6,500,000 shares
of Common Stock and the assumption by the Company of substantially all of the
liabilities relating to such businesses. On February 7, 1996, the Company
acquired all of the assets, subject to certain liabilities, of DYNEX from
Dynatech Corporation. In March 1996, Thermo Instrument acquired a substantial
portion of the businesses comprising the Scientific Instruments Division of
Fisons plc ("Fisons"), a wholly-owned subsidiary of Rhone-Poulenc Rorer Inc. On
July 22, 1996, the Company acquired the Affinity Sensors and LabSystems
divisions of Fisons from Thermo Instrument for approximately $9.0 million,
subject to a post-closing adjustment.
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Electron and certain of its
subsidiaries have created publicly and/or privately held majority-owned
subsidiaries. The Company and the other Thermo Electron subsidiaries are
hereinafter referred to herein as the "Thermo Subsidiaries."
Thermo Instrument develops, manufactures and markets analytical instruments
used to detect and monitor air pollution, radioactivity, complex chemical
compounds and toxic metals and other elements in a broad range of liquids and
solids. For its fiscal year ended December 30, 1995 and the six months ended
June 29, 1996 Thermo Instrument had consolidated revenues of $782,662,000 and
$547,123,000, respectively, and consolidated net income of $79,306,000 and
$69,339,000, respectively.
Thermo Electron and its subsidiaries develop, manufacture and market
environmental monitoring and analysis instruments, biomedical products including
heart-assist systems and respiratory care products, papermaking and recycling
equipment, alternative-energy systems, industrial process equipment and other
specialized products. Thermo Electron and its subsidiaries also provide
environmental and metallurgical services and conduct advanced technology
research and development. For its fiscal year ended December 30, 1995 and the
six months ended June 29, 1996, Thermo Electron had consolidated revenues of
$2,207,417,000 and $1,398,144,000, respectively, and consolidated net income of
$140,080,000 and $85,942,000, respectively.
See "Risk Factors -- Potential Conflicts of Interest" and "--Significant
Additional Shares Eligible for Sale After this Offering."
THE THERMO ELECTRON CORPORATE CHARTER
Thermo Electron and the Thermo Subsidiaries, including the Company,
recognize that the benefits and support that derive from their affiliation are
essential elements of their individual performance. Accordingly, Thermo Electron
and each of the Thermo Subsidiaries, including the Company, have 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
33
<PAGE> 36
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 ensuring that the Thermo Group remains in compliance with all covenants
imposed by external financing sources, including covenants related to borrowings
of Thermo Electron or other members of the Thermo Group, and for apportioning
such constraints within the Thermo Group. In addition, Thermo Electron
establishes certain internal policies and procedures applicable to members of
the Thermo Group. The cost of the services provided by Thermo Electron to the
Thermo Subsidiaries is covered under existing corporate services agreements
between Thermo Electron and each of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Company, may 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, Thermo Electron and the Company 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 certain financial and other services to the Company. In
1993, 1994 and 1995, Thermo Electron assessed the Company an annual fee for the
services equal to 1.25%, 1.25% and 1.20%, respectively, of the Company's
revenues. Effective January 1, 1996, the fee was reduced to 1.00% of the
Company's total revenues. The fee may be changed by mutual agreement of the
Company and Thermo Electron. For the fiscal year ended December 30, 1995 and for
the six months ended June 29, 1996, Thermo Electron assessed the Company
$270,000 and $298,000 in fees under the Services Agreement, respectively. The
Company believes that the charges under the Services Agreement are
representative of the expenses that the Company would have incurred on a stand
alone basis and that the terms of the Services Agreement are reasonable. 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. The Services Agreement automatically renews for
successive one-year terms, unless canceled by the Company upon 30 days' prior
notice. In addition, the Services Agreement terminates automatically in the
event the Company ceases to be a member of the Thermo Group or ceases to be a
participant in the Charter. In the event of a termination of the Services
Agreement, the Company will be required to pay a termination fee equal to the
fee that was paid by the Company for services under the Services Agreement for
the nine-month period prior to termination. Following termination, Thermo
Electron may provide certain administrative services on an as-requested basis by
the Company or as required in order to meet the Company's obligations under
Thermo Electron's policies and procedures. Thermo Electron will charge the
Company a fee equal to the market rate for comparable services if such services
are provided following termination.
TAX ALLOCATION AGREEMENT
The Tax Allocation Agreement between Thermo Instrument and the Company
outlines the terms under which the Company is to be included in Thermo
Electron's consolidated Federal and state income tax returns. Under current law,
the Company will be included in such tax returns so long as Thermo Electron owns
at least
34
<PAGE> 37
80% of the outstanding common stock of Thermo Instrument and Thermo Instrument
owns at least 80% of the outstanding Common Stock of the Company. Immediately
following this offering, Thermo Instrument will own less than 80% of the
Company's outstanding Common Stock and the Company will not be included in
Thermo Electron's consolidated Federal and state income tax returns for periods
commencing thereafter.
MASTER GUARANTEE REIMBURSEMENT AGREEMENTS
The Company has entered into a Master Guarantee Reimbursement Agreement
with Thermo Electron which provides that the Company will reimburse Thermo
Electron for any costs it incurs in the event it is required to pay third
parties pursuant to any guarantees it issues on the Company's behalf. Thermo
Instrument has entered into a similar agreement with Thermo Electron with regard
to the Company's obligations which are guaranteed by Thermo Electron. The
Company has also entered into a Master Guarantee Reimbursement Agreement with
Thermo Instrument which provides that the Company will reimburse Thermo
Instrument for any costs it incurs in the event that Thermo Instrument is
required to pay Thermo Electron or any other party pursuant to any guarantees it
issues on the Company's behalf.
RELATED PARTY TRANSACTIONS
The Company has entered into a lease and services arrangement with
ThermoQuest under which ThermoQuest leases approximately 15,000 square feet of
space, and provides certain services, to the Company. The Company pays
ThermoQuest rent in an amount that is approximately equal to the Company's pro
rata share of ThermoQuest's occupancy costs and an allocated portion of
ThermoQuest's costs for providing such services. This arrangement may be
terminated by the Company or by ThermoQuest upon 30 days' prior notice. For the
six months ended June 29, 1996, the Company paid ThermoQuest approximately
$34,000 under this arrangement. The Company made no payments to ThermoQuest
under this arrangement in fiscal 1995.
ThermoQuest acts as a distributor of certain of the Company's products, is
the exclusive distributor of the Company's MALDI-TOF products in Japan and is
the exclusive distributor of the Company's CE products in countries in which it
maintains a direct sales force. In consideration of such arrangements, the
Company sells ThermoQuest such products at discounted rates negotiated by the
parties. ThermoQuest is responsible for all installation and warranty labor
obligations at its expense. These arrangements may be terminated on not less
than three months' notice by either party given after December 31, 1996. For the
six months ended June 29, 1996, the Company sold $595,000 of products to
ThermoQuest under these arrangements. Prior to 1996, ThermoQuest acted as a
commission-based sales agent for these products. Under this prior arrangement,
the Company paid ThermoQuest commissions of $1,263,000 in the fiscal year ended
December 30, 1995. In addition, the Company pays ThermoQuest a finder's fee for
each qualified lead that generates an order for the Company's MALDI-TOF products
from customers in the United States and Europe.
The Company has entered into an arrangement with ThermoQuest whereby
ThermoQuest provides assembly labor for the Company's CE products on a contract
basis. Under this arrangement, ThermoQuest assembles instruments as required by
the Company for a charge based on the sum of ThermoQuest's actual cost of
materials and the allocable portion of its labor, overhead and other indirect
expenses. For the fiscal year ended December 30, 1995 and the six months ended
June 29, 1996, the Company paid ThermoQuest approximately $600,000 and $269,000,
respectively, under this arrangement.
The Company's Eberline health physics subsidiary purchases certain
controllers and detectors from Thermo Instrument under an original equipment
manufacturer agreement. Under this agreement, the Company has the exclusive
right to sell these instruments in the United States, Canada and Mexico. In
consideration of the Company's agreement to purchase certain minimum quantities
of these instruments, Thermo Instrument grants the Company certain discounts,
which are increased for volume purchases. The Company is responsible for all
warranty repair and maintenance obligations at its expense, but obtains
replacement parts from Thermo Instrument without charge. This agreement will
remain in effect until December 31, 1996, and is automatically renewable for
one-year periods thereafter unless terminated by either party upon 90 days'
notice. For the six months ended June 29, 1996, the Company purchased $132,000
of
35
<PAGE> 38
instruments from Thermo Instrument under this agreement. The Company made no
purchases under this agreement in fiscal 1995.
The Company's Eberline health physics subsidiary also acts as a distributor
of certain Thermo Instrument product lines and, with the exception of Thermo
Instrument, is the exclusive distributor of such product lines to nuclear power
plants and government agencies in the United States and Canada. In consideration
of such arrangement, Thermo Instrument sells the Company such instruments at a
discount from Thermo Instrument's published list prices, and provides additional
quantity discounts. Thermo Instrument is responsible for warranty repairs at its
own expense. For the fiscal year ended December 30, 1995 and the six months
ended June 29, 1996, the Company purchased $212,000 and $72,000 of instruments
from Thermo Instrument, respectively, under this arrangement.
Various Thermo Instrument companies act as distributors of certain of the
Company's LabSystems and Affinity Sensors products under informal arrangements
that date from prior to the acquisition of the Fisons businesses in March 1996.
In consideration of such arrangements, the Company sells the respective Thermo
Instrument companies certain products at discounted rates negotiated by the
parties. Under such arrangements, the respective Thermo Instrument companies are
generally responsible for warranty repair and maintenance obligations. For the
fiscal year ended December 30, 1995 and the six months ended June 29, 1996,
LabSystems and Affinity Sensors sold an aggregate of $7,954,000 and $5,012,000
of products to Fisons companies that were subsequently acquired by Thermo
Instrument, respectively, under these arrangements.
The Company believes that the arrangements set forth above are on terms
comparable to those the Company would receive from unaffiliated parties.
MISCELLANEOUS
Currently, Thermo Instrument beneficially owns approximately 80.2% of the
outstanding shares of Common Stock (excluding shares of Common Stock issuable
upon conversion of the Convertible Note). Thermo Instrument presently intends to
maintain a majority interest in the Company. This may require Thermo Instrument
to convert principal amounts of the Convertible Note or to purchase additional
shares of Common Stock from time to time as the number of outstanding shares
issued by the Company increases. These purchases may be made either in the open
market or directly from the Company. See "Risk Factors -- Control by Thermo
Instrument."
The Company's cash equivalents may be invested from time to time pursuant
to a repurchase agreement with Thermo Electron. Under this agreement, the
Company in effect lends excess cash to Thermo Electron, which Thermo Electron
collateralizes with investments principally consisting of corporate notes,
United States government agency securities, money market funds, commercial paper
and other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement will be
readily convertible into cash by the Company and have an original maturity of
three months or less. The repurchase agreement earns a rate based on the
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter.
From time to time, the Company may transact business in the ordinary course
with other companies in the Thermo Group. All such transactions are on terms
comparable to those the Company would receive from unaffiliated parties.
36
<PAGE> 39
MANAGEMENT
The directors and executive officers of the Company and their ages as of
June 30, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- -------------------------------------------------
<S> <C> <C>
Barry S. Howe 40 Chief Executive Officer, President and Director
Donald W. Hanna 40 Vice President
John N. Hatsopoulos Vice President, Chief Financial Officer and
62 Director
Paul F. Kelleher 53 Chief Accounting Officer
Jonathan W. Painter 37 Treasurer and Director
Richard W. K. Chapman, Ph.D. 51 Chairman of the Board and Director
Denis A. Helm 57 Vice Chairman of the Board and Director
Arvin H. Smith 66 Director
Elias P. Gyftopoulos,
Ph.D.(1) 68 Director
Arnold N. Weinberg, M.D.(1) 66 Director
</TABLE>
- ---------------
(1) Member of the Audit and Human Resources Committees.
All of the Company's Directors are elected annually by the shareholders and
hold office until their respective successors are duly elected and qualified.
Executive officers are elected annually by the Board of Directors and serve at
its discretion. Messrs. Hatsopoulos, Kelleher and Painter are full-time
employees of Thermo Electron, Thermo Instrument or other subsidiaries of Thermo
Electron, but these individuals devote such time to the affairs of the Company
as the Company's needs reasonably require from time to time.
Mr. Howe has been Chief Executive Officer, President and a Director of the
Company since its inception in February 1995. Mr. Howe was also President of TSP
and its predecessor, a manufacturer of chromatography instruments for
pharmaceutical, biotechnical and environmental analysis, from September 1989 to
December 1995, and has been a Vice President of Thermo Instrument, a
manufacturer of analytical, environmental-monitoring and process-control
instrumentation, since 1994.
Mr. Hanna has been Vice President of the Company since its inception in
February 1995. Mr. Hanna was President of Thermo Instrument's National Nuclear
Corporation subsidiary, a manufacturer of products for the nuclear power
industry, from 1990 through 1994 and has been President of the Company's
Eberline subsidiary since 1994.
Mr. Hatsopoulos has been Vice President, Chief Financial Officer and a
Director of the Company since its inception in February 1995. Mr. Hatsopoulos
has been a Vice President and Chief Financial Officer of Thermo Instrument since
1988, the Chief Financial Officer of Thermo Electron, a diversified technology
company, since 1988 and an Executive Vice President of Thermo Electron since
1986. He is also a Director of Thermedics Inc., Thermo Ecotek Corporation,
Thermo Fibertek Inc., Thermo Instrument, Thermo Power Corporation, Thermo
TerraTech Inc., ThermoTrex Corporation, Thermo Optek Corporation, ThermoQuest,
Thermo Sentron Inc., Trex Medical Corporation and Lehman Brothers Funds, Inc.,
an open-end management investment company.
Mr. Kelleher has been the Chief Accounting Officer of the Company since its
inception in February 1995. Mr. Kelleher has been Vice President, Finance of
Thermo Electron since 1987 and served as its Controller from January 1982 to
January 1996. He is a Director of ThermoLase Corporation.
Mr. Painter has been Treasurer and Director of the Company since its
inception in February 1995. Mr. Painter has been Treasurer of Thermo Electron
and Thermo Instrument since August 1994. Mr. Painter had served as Director of
Strategic Planning of Thermo Electron's Thermo Fibertek Inc. subsidiary, a
supplier of paper-recycling equipment, papermaking systems and accessories, from
February 1993 through September 1994. Prior to that time, Mr. Painter was
Associate General Counsel of Thermo Electron and its subsidiaries. Mr. Painter
is a Director of Thermo Fibergen Inc.
37
<PAGE> 40
Dr. Chapman has been Chairman of the Board and a Director of the Company
since its inception in February 1995. Dr. Chapman served as President of
ThermoQuest's Finnigan Corporation subsidiary, a manufacturer of mass
spectrometers and chromatography systems, from 1992 to 1995, as Chief Executive
Officer and President of ThermoQuest, the parent company of Finnigan
Corporation, since June 1995, and as a Vice President of Thermo Instrument since
1994. Dr. Chapman is a Director of ThermoQuest and Thermo Cardiosystems Inc.
Mr. Helm has been Vice Chairman of the Board and a Director of the Company
since its inception in February 1995, and President of Thermo Instrument's
Thermo Environmental Instruments Inc. subsidiary, an environmental instruments
company, since 1981. Mr. Helm has been a Senior Vice President of Thermo
Instrument since 1994 and was a Vice President of Thermo Instrument from 1986
until 1994.
Mr. Smith has been a Director of the Company since its inception in
February 1995. Mr. Smith has been a Director and President and Chief Executive
Officer of Thermo Instrument since 1986. Mr. Smith has been an Executive Vice
President of Thermo Electron since 1991 and, prior to that time, a Senior Vice
President of that corporation since 1986. Mr. Smith is also a Director of
Thermedics Inc., Thermo Optek Corporation, ThermoQuest and ThermoSpectra
Corporation.
Dr. Gyftopoulos has been a Director of the Company since its inception in
February 1995. Dr. Gyftopoulos had been the Ford Professor of Mechanical and
Nuclear Engineering at the Massachusetts Institute of Technology for more than
five years prior to his retirement in April 1996. He is also a Director of
Thermo Cardiosystems Inc., Thermo Electron, ThermoLase Corporation, Thermo
Remediation Inc., ThermoSpectra Corporation and Thermo Voltek Corp.
Dr. Weinberg has been Professor of Medicine at the Harvard Medical School
and Medical Director of the Medical Department of the Massachusetts Institute of
Technology for at least five years.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company, Thermo Instrument, 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 or for participating in certain meetings of committees of
the Board of Directors held by means of conference telephone. Payment of
Directors fees is made quarterly. Dr. Chapman and Messrs. Helm, Howe,
Hatsopoulos, Painter and Smith are all employees of Thermo Electron companies
and do not receive any cash compensation from the Company for their services as
Directors. Directors are also reimbursed for reasonable out-of-pocket expenses
incurred in attending such meetings.
Directors Deferred Compensation Plan. Under the Company's Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan"), a Director
has the right to defer receipt of his fees until he ceases to serve as a
Director, dies or retires from his principal occupation. In the event of a
change of control or proposed change of 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 in 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 Common Stock or the outstanding common stock of Thermo Instrument 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 of the
Common Stock or the common stock of Thermo Instrument 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 date of deferral as units of Common Stock. When payable,
amounts deferred may be disbursed solely in shares of Common Stock accumulated
under the Deferred Compensation Plan. The Company has reserved 25,000 shares of
Common Stock under this plan. The Deferred Compensation Plan will not become
effective until completion of an initial public offering. As of the date of this
Prospectus, no units have accumulated under this plan.
38
<PAGE> 41
Directors Stock Option Plan. The Company has adopted a Directors Stock
Option Plan (the "Plan") under which options to purchase shares of the Common
Stock will be automatically granted to each non-management Director for his
service as a Director (i) upon the later of the adoption of the Plan and his
election or appointment as a Director and (ii) for his attendance at or
participation in meetings of the Board of Directors or its committees. The Plan
provides for the grant of stock options upon a Director's initial appointment
and, beginning in 2000, awards options to purchase 1,000 shares annually to
eligible Directors, provided the Company's Common Stock is then publicly traded.
A total of 100,000 shares of Common Stock has been reserved for issuance under
the Plan.
Under the Plan, each eligible Director and each new outside Director
initially joining the Board of Directors in 1996 will be granted an option to
purchase 15,000 shares of Common Stock upon the Director's appointment or
election. The size of the award to new Directors appointed to the Board of
Directors after 1996 will be reduced by 3,750 shares in each subsequent year.
Directors initially joining the Board of Directors after 1999 would not receive
an option grant upon their appointment or election to the Board of Directors,
but would be eligible to participate in the annual option awards described
below. Options evidencing initial grants to Directors vest and are exercisable
upon the fourth anniversary of the date of grant, unless the Common Stock
underlying the option grant is registered under Section 12 ("Section 12
Registration") of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), prior to the fourth anniversary of such grant. In the event that the
effective date of Section 12 Registration occurs prior to the fourth anniversary
of the date of grant, then the option becomes exercisable (on the later of 90
days after Section 12 Registration or six months after the date of grant) and
the shares acquired upon exercise will be subject to restrictions on transfer
and the right of the Company to repurchase such shares at the exercise price in
the event the Director ceases to serve as a Director of the Company or any other
Thermo Electron company. In such event, the restrictions and repurchase rights
shall lapse or be deemed to have lapsed in annual installments of 3,750 shares
per year, starting with the first anniversary of the date of grant, provided the
Director has continuously served as a Director of the Company, Thermo Electron
or any subsidiary of Thermo Electron since the grant date. These options expire
on the fifth anniversary of the grant date, unless the Director dies, ceases to
be an eligible director or otherwise ceases to serve as a Director of the
Company, Thermo Electron or any subsidiary of Thermo Electron prior to that
date.
Commencing in 2000, eligible Directors will also receive an annual grant of
options to purchase 1,000 shares of Common Stock, provided the Common Stock is
then publicly traded. The annual grant would be made at the close of business on
the date of each annual meeting of shareholders of the Company to each outside
Director then holding office, commencing with the annual meeting to be held in
2000. Options evidencing annual grants may be exercised at any time from and
after the six-month anniversary of the date of grant and prior to the expiration
of the option on the third anniversary of the date of grant. Shares acquired
upon exercise of the options would be subject to repurchase by the Company at
the exercise price if the recipient ceased to serve as a Director of the Company
or any other Thermo Electron company prior to the first anniversary of the date
of grant for any reason other than death.
The exercise price for options granted under the Plan will be determined by
the average of the closing prices reported by the American Stock Exchange (or
such other principal exchange on which the Common Stock is then traded) for the
five trading days immediately preceding and including the date the option is
granted or, if the shares underlying the option are not so traded, at the last
price paid per share by independent investors in an arms' length transaction
with the Company prior to the date of grant.
As of June 29, 1996, options to purchase 30,000 shares of the Company's
Common Stock exercisable at $10.00 per share were outstanding under the Plan.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table summarizes compensation for services to the Company in
all capacities awarded to, earned by or paid to the Company's Chief Executive
Officer and one other executive officer for the fiscal year ended December 30,
1995 (the Chief Executive Officer and such other executive officer being
hereinafter
39
<PAGE> 42
referred to as the "Named Executive Officers"). No other executive officer of
the Company who held office at the end of fiscal 1995 met the definition of
"highly compensated" within the meaning of the Securities and Exchange
Commission's executive compensation disclosure rules 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 Thermo Instrument."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION SECURITIES
------------------ UNDERLYING OPTIONS (NO. OF ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS SHARES AND COMPANY)(1) COMPENSATION(2)
- ------------------------------- -------- ------- -------------------------- ---------------
<S> <C> <C> <C> <C>
Barry S. Howe
President and Chief Executive
Officer...................... $134,000 $65,000 50,000(TBA) $ 6,128
1,650(TMO)
5,000(TLZ)
Donald W. Hanna
Vice President................. $ 95,000 $18,000 21,000(TBA) $ 4,682
</TABLE>
- ---------------
(1) All options to purchase shares of the Company's Common Stock shown in the
table were granted after the end of fiscal 1995 but are included in the
table for clarity of presentation. In addition to receiving options to
purchase Common Stock (designated in the table as TBA), Mr. Howe was granted
options to purchase shares of the common stock of Thermo Electron
(designated in the table as TMO) and ThermoLase Corporation (designated in
the table as TLZ) under Thermo Electron's stock option program.
(2) Represents the amount of matching contributions made on behalf of the Named
Executive Officer by the Company under the Thermo Electron 401(k) plan.
Stock Options Granted During Fiscal 1995
The following table sets forth certain information concerning grants of
stock options made during fiscal 1995 to each of the Named Executive Officers.
It has not been the Company's policy in the past to grant stock appreciation
rights, and no such rights were granted during fiscal 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
% OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SHARES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(2)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------
NAME GRANTED(1) YEAR SHARE DATE 5% 10%
- --------------------- ---------- ------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Barry S. Howe........ 50,000(TBA) 11.9% $ 10.00 1/31/08 $398,000 $1,069,000
1,650(TMO) 0.1%(3) $ 24.85 5/23/98 $ 6,468 $ 13,580
5,000(TLZ) 0.5%(3) $ 22.75 11/28/07 $ 90,550 $ 243,250
Donald W. Hanna...... 21,000(TBA) 5.0% $ 10.00 1/31/08 $167,160 $ 448,980
</TABLE>
- ---------------
(1) All options to purchase shares of the Company's Common Stock (designated in
the table as TBA) were granted after the end of fiscal 1995 but are included
in the table for clarity of presentation. The options to
40
<PAGE> 43
purchase shares of the common stock of Thermo Electron (designated in the
table as TMO) and ThermoLase Corporation (designated in the table as TLZ)
are immediately exercisable while the options to purchase shares of the
Common Stock of the Company are not exercisable until the earlier of (i) 90
days after the effective date of the registration of the 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. For publicly traded
companies, the repurchase rights generally lapse ratably over a five- to
ten-year period, depending on the option term which may vary from seven to
twelve years, provided that the optionee continues to be employed by the
granting corporation or another Thermo Electron company. For companies that
are not publicly traded, the repurchase rights lapse in their entirety on
the ninth anniversary of the grant date. The options to purchase shares of
the common stock of Thermo Electron granted to Mr. Howe have a three-year
term and the repurchase rights lapse in their entirety on the second
anniversary of the grant date. The granting corporation may permit the
holders of all such options to exercise options and satisfy tax withholding
obligations by surrendering shares equal in fair market value to the
exercise price or withholding obligation.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10%, compounded annually from the date the respective options were granted
to their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise. Actual gains, if any, on stock option exercises will
depend on the future performance of the common stock of the granting
corporation, the optionholders' continued employment through the option
period and the date on which the options are exercised.
(3) These options were granted under a stock option plan maintained by Thermo
Electron and accordingly are reported as a percentage of total options
granted to employees of Thermo Electron and its subsidiaries.
CERTAIN TRANSACTIONS
The Company has adopted a program under which it may make interest-free
loans to certain key employees, including certain of the Named Executive
Officers, to enable such employees to purchase the Company's Common Stock in the
open market. The Company has made no such loans as of the date of this
Prospectus.
41
<PAGE> 44
Stock Options Exercised During Fiscal 1995 and Year-End Option Values
The following table sets forth certain information concerning each exercise
of a stock option during fiscal 1995 and outstanding stock options held at the
end of fiscal 1995 by each of the Named Executive Officers. No stock
appreciation rights were exercised or outstanding during fiscal 1995.
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 FISCAL OPTIONS AT FISCAL
NUMBER OF YEAR-END YEAR-END
SHARES ----------------- ---------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME COMPANY EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(1)
- -------------------- -------------------- ----------- -------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
Barry S. Howe(2).... Thermo BioAnalysis -- -- 0 / 50,000 $ 0 / 225,000(3)
Thermo Instrument -- -- 89,062 / 0 $ 1,037,803 / 0
Thermedics -- -- 4,000 / 0 $ 44,600 / 0
Thermo Ecotek -- -- 7,500 / 0 $ 71,625 / 0
Thermo Electron 6,381 $101,094 71,787 / 0(2) $ 1,206,917 / 0
Thermo Fibertek -- -- 15,750 / 0 $ 159,390 / 0
Thermo Power -- -- 4,000 / 0 $ 15,100 / 0
Thermo TerraTech -- -- 4,000 / 0 $ 10,380 / 0
ThermoLase -- -- 5,000 / 0 $ 15,625 / 0
ThermoSpectra -- -- 4,000 / 0 $ 22,500 / 0
ThermoTrex -- -- 5,350 / 0 $ 198,693 / 0
Donald W. Hanna..... Thermo BioAnalysis -- -- 0 / 21,000 $ 0 / 94,500(3)
Thermo Instrument 2,812 $ 48,366 15,000 / 0 $ 163,500 / 0
Thermo Electron -- -- 21,373 / 0(2) $ 390,793 / 0
ThermoSpectra -- -- 1,500 / 0 $ 8,438 / 0
</TABLE>
- ---------------
(1) Options to purchase shares of the Company's Common Stock were granted after
the end of fiscal 1995 but are included in the table for clarity of
presentation. All of the options reported outstanding at the end of the
fiscal year were immediately exercisable, except the options to purchase
shares of the Company's Common Stock which are not exercisable until the
earlier of (i) 90 days after the effective date of the registration of the
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.
(2) Options to purchase 22,500 and 11,250 shares of the common stock of Thermo
Electron granted to Mr. Howe and Mr. Hanna, respectively, 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.
(3) No public market existed for the shares underlying the options as of
December 30, 1995. Accordingly, this value has been calculated on the basis
of an assumed market value of $14.50 per share, which is the midpoint of the
estimated public offering price range.
42
<PAGE> 45
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of June 29, 1996, and as
adjusted to reflect the sale of the shares of Common Stock offered in this
offering, by Thermo Instrument, which is the only person or entity that owns
beneficially more than 5% of the outstanding shares of Common Stock. See "Risk
Factors -- Control by Thermo Instrument."
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS NUMBER OF SHARES OUTSTANDING SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
- --------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Thermo Electron Corporation(1)........................... 6,500,000(2) 80.2%(2)
81 Wyman Street
Waltham, Massachusetts 02254
Thermo Instrument Systems Inc.(1)........................ 6,500,000(2) 80.2%(2)
1275 Hammerwood Avenue
Sunnyvale, California 94089
</TABLE>
- ---------------
(l) Thermo Instrument is a majority-owned subsidiary of Thermo Electron and,
therefore, Thermo Electron may be deemed a beneficial owner of the shares of
Common Stock beneficially owned by Thermo Instrument. Thermo Electron
disclaims beneficial ownership of these shares. After the sale of the Common
Stock in this offering, Thermo Instrument will beneficially own
approximately 67.7% of the outstanding Common Stock (approximately 66.1% if
the Underwriters' over-allotment option is exercised in full).
(2) Excludes 3,030,303 shares of Common Stock issuable upon conversion of the
Convertible Note.
MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of June 29, 1996 as well as
information regarding the beneficial ownership of the common stock of Thermo
Instrument and Thermo Electron, as of June 29, 1996, with respect to (i) each of
the Company's Directors, (ii) each of the Named Executive Officers, and (iii)
all Directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
THERMO THERMO
BIOANALYSIS INSTRUMENT THERMO ELECTRON
NAME(1) CORPORATION(2) SYSTEMS INC.(3) CORPORATION(4)
- ---------------------------------------------------- -------------- --------------- ---------------
<S> <C> <C> <C>
Dr. Richard W.K. Chapman............................ 500 138,671 81,631
Dr. Elias P. Gyftopoulos............................ 0 47,018 71,070
Donald W. Hanna..................................... 0 16,205 22,172
John N. Hatsopoulos................................. 0 93,122 636,980
Denis A. Helm....................................... 0 161,901 160,294
Barry S. Howe....................................... 2,000 99,962 84,442
Jonathan W. Painter................................. 0 5,768 36,273
Arvin H. Smith...................................... 9,000 431,653 512,942
Dr. Arnold N. Weinberg.............................. 0 0 0
All Directors and current executive officers as a
group (10 persons)................................ 11,500 1,012,979 1,750,707
</TABLE>
- ---------------
(1) Except as reflected in the footnotes to this table, shares of Common Stock
and common stock of Thermo Instrument and Thermo Electron beneficially owned
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 an
aggregate of 184,000 shares of Common Stock; however, these options will not
become exercisable until 90 days after this offering. No Director or
executive officer beneficially owned more than 1% of the Common Stock
outstanding as of
43
<PAGE> 46
such date, and all Directors and executive officers as a group beneficially
owned less than 1% of the Common Stock outstanding as of such date.
(3) Shares of the common stock of Thermo Instrument beneficially owned by Dr.
Chapman, Dr. Gyftopoulos, Mr. Hanna, Mr. Hatsopoulos, Mr. Helm, Mr. Howe,
Mr. Painter, Mr. Smith and all Directors and executive officer as a group
include 121,287, 14,465, 15,000, 83,750, 112,500, 89,062, 5,625, 234,375 and
691,064 shares, respectively, that such person or group has the right to
acquire within 60 days of June 29, 1996, through the exercise of stock
options. Shares beneficially owned by Mr. Hanna, Mr. Hatsopoulos, Mr. Helm,
Mr. Howe, Mr. Painter, Mr. Smith and all Directors and executive officers as
a group include 245, 515, 380, 263, 143, 516 and 2,445 full shares,
respectively, allocated through July 1, 1995 to their respective accounts
maintained pursuant to Thermo Electron's employee stock ownership plan
("ESOP"). The trustees of the ESOP, who have investment power over its
assets, are Mr. Hatsopoulos and Mr. Peter Pantazelos. Shares beneficially
owned by Mr. Howe include 1,968 shares held in a trust of which Mr. Howe is
the trustee. No Director or executive officer beneficially owned more than
1% of the common stock of Thermo Instrument outstanding as of June 29, 1996;
all Directors and executive officers as a group beneficially owned 1.0% of
such common stock outstanding as of such date.
(4) The shares of common stock of Thermo Electron have been adjusted to reflect
three-for-two stock splits effected on May 25, 1995 and June 5, 1996. Shares
of the common stock of Thermo Electron beneficially owned by Dr. Chapman,
Dr. Gyftopoulos, Mr. Hanna, Mr. Hatsopoulos, Mr. Helm, Mr. Howe, Mr.
Painter, Mr. Smith and all Directors and executive officers as a group
include 80,284, 9,375, 20,098, 349,935, 106,347, 73,287, 32,095, 222,411 and
991,406 shares, respectively, that such person or group has the right to
acquire within 60 days of June 29, 1996, through the exercise of stock
options. Shares beneficially owned by Mr. Hanna, Mr. Hatsopoulos, Mr. Helm,
Mr. Howe, Mr. Painter, Mr. Smith and all Directors and executive officers as
a group include 777, 1,838, 1,231, 694, 391, 1,621 and 7,780 full shares,
respectively, allocated through July 1, 1995 to their respective accounts
maintained pursuant to Thermo Electron's ESOP. The trustees of the ESOP, who
have investment power over its assets, are Mr. Hatsopoulos and Mr. Peter
Pantazelos. Shares beneficially owned by Mr. Hatsopoulos include 168,750
shares held by a QTIP trust for the benefit of Mr. Hatsopoulos'
sister-in-law and of which Mr. Hatsopoulos is a trustee. No Director or
executive officer beneficially owned more than 1% of the common stock of
Thermo Electron outstanding as of June 29, 1996; all Directors and executive
officers as a group beneficially owned 1.2% of such common stock outstanding
as of such date.
44
<PAGE> 47
DESCRIPTION OF CAPITAL STOCK
As of June 29, 1996 the Company had 25,000,000 shares of Common Stock
authorized for issuance, of which 8,101,500 were issued and outstanding. Each
share of Common Stock is entitled to pro rata participation in distributions
upon liquidation and to one vote on all matters submitted to a vote of
shareholders. Dividends may be paid to the holders of Common Stock when and if
declared by the Board of Directors out of funds legally available therefor.
Holders of Common Stock have no preemptive, conversion or similar rights. The
outstanding shares of Common Stock are, and the shares offered hereby when
issued will be, legally issued, fully paid and nonassessable.
The shares of Common Stock have noncumulative voting rights. 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 this offering, Thermo Instrument will
continue to beneficially own at least a majority of the outstanding Common
Stock, and will have the power to elect all of the members of the Company's
Board of Directors. Thermo Instrument is a majority-owned subsidiary of Thermo
Electron and, therefore, Thermo Electron may be deemed a beneficial owner of the
shares of Common Stock beneficially owned by Thermo Instrument. Thermo Electron
disclaims beneficial ownership of these shares.
The Company's Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of Directors. The provisions eliminate a Director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts, 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 Certificate of Incorporation also contains provisions to
indemnify the Directors and officers of the Company to the fullest extent
permitted by the General Corporation Law of Delaware. The Company believes that
these provisions will assist the Company in attracting and retaining qualified
individuals to serve as Directors and officers.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
45
<PAGE> 48
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, there will be 9,601,500 shares of Common
Stock of the Company outstanding (assuming no exercise of the Underwriters'
over-allotment option). The shares issued in this offering will be freely
tradable without restriction or further registration under the Securities Act of
1933, as amended (the "Securities Act"), except that any shares purchased in
this 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 a Stock Purchase Agreement with the
shareholders of the Company other than Thermo Instrument, to file a registration
statement under the Securities Act covering the sale of 1,601,500 shares of the
Common Stock owned by them (the "Registrable Shares") within 120 days of the
closing of this 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 this Offering."
As of June 29, 1996, Thermo Instrument owned 6,500,000 of the outstanding
shares of Common Stock (not including 3,030,303 shares issuable upon conversion
of the Convertible Note). Thermo Electron, Thermo Instrument and the Company
have agreed, without the prior written consent of the Representatives of the
Underwriters, not to offer, sell or otherwise dispose of any shares of Common
Stock within a 180-day period after the date of this Prospectus, other than (i)
shares of Common Stock to be sold to Underwriters in this offering, (ii) the
issuance of options to purchase Common Stock pursuant to existing stock-based
compensation plans, (iii) shares of Common Stock which may be sold to Thermo
Instrument, and (iv) the issuances of shares of Common Stock as consideration
for the acquisition of one or more businesses (provided that such Common Stock
may not be resold prior to the expiration of the 180-day period referenced
above). So long as Thermo Instrument is able to elect a majority of the Board of
Directors it will be able to cause the Company at any time to register under the
Securities Act all or a portion of the Common Stock owned by Thermo Instrument
or its affiliates, in which case it would be able to sell such shares without
restriction upon effectiveness of the registration statement.
In general, under Rule 144 as currently in effect, 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 Common Stock (approximately 96,000 after this offering) or (ii) the average
weekly trading volume in the 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 925,000 shares of Common Stock for grants under
its existing stock-based compensation plans. As of June 29, 1996 the Company had
options outstanding to purchase up to 570,000 shares of Common Stock to certain
of its officers and directors at a weighted average exercise price of $10.51 per
share. Ninety days after the completion of the Company's initial public 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 June 29, 1996, repurchase rights had not lapsed as to any of the shares
issuable upon exercise of outstanding options. The Company has
46
<PAGE> 49
reserved 355,000 shares for future grant under plans. The Company intends to
file registration statements under the Securities Act to register all shares of
Common Stock issuable under such plans. Shares covered by these registration
statements 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 this offering, there has been no public market for the Common
Stock of the Company, and no prediction can be made as to the effect, if any,
that market sales of shares of Common Stock or the availability of shares for
sale will have on the market price of the Common Stock prevailing from time to
time. Nevertheless, sales of significant numbers of shares of the Common Stock
in the public market could adversely affect the market price of the 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 this Offering."
47
<PAGE> 50
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, each of the Underwriters named below, for whom NatWest Securities
Limited, Lehman Brothers Inc. and Smith Barney Inc. are acting as
Representatives (the "Representatives"), has severally agreed to purchase from
the Company the following respective number of shares of Common Stock at the
public offering price less the underwriting discounts and commissions set forth
on the cover page of this Prospectus:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------------------------------------------------------------------------- ----------------
<S> <C>
NatWest Securities Limited...................................................
Lehman Brothers Inc..........................................................
Smith Barney Inc.............................................................
---------
Total........................................................................ 1,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent. The nature of the
Underwriters' obligations is that they are committed to purchase all shares of
Common Stock offered in this offering if any such shares are purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer shares of Common Stock directly to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
selected dealers (who may include the Underwriters) at such price less a selling
concession not in excess of $ per share. The Underwriters may allow and such
dealers may re-allow a concession not in excess of $ per share to certain
other dealers (who may include the Underwriters). After commencement of the
offering to the public, the public offering price and other selling terms may be
changed by the Representatives. The Representatives have informed the Company
that the Underwriters do not intend to confirm sales of shares of Common Stock
to any accounts over which they exercise discretionary authority.
The Company has granted to the several Underwriters an option, exercisable
not later than 30 days after the date of this Prospectus, to purchase up to
225,000 additional shares of Common Stock at the public offering price, less the
aggregate underwriting discounts and commissions, set forth on the cover page of
this Prospectus, solely to cover over-allotments. To the extent that the
Underwriters exercise such option, each of the Underwriters will be committed,
subject to certain conditions, to purchase a number of option shares
proportionate to such Underwriter's initial commitment.
The Underwriting Agreement provides that the Company, Thermo Instrument and
Thermo Electron will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the Underwriters may be required to make in respect thereof.
Thermo Electron, Thermo Instrument and the Company have also agreed that
they will not, without the Representatives' prior written consent, sell or
otherwise dispose of any shares of Common Stock within a 180-day period after
the date of this Prospectus, other than (i) shares of Common Stock to be sold to
the Underwriters in this offering, (ii) the grant of options to purchase Common
Stock pursuant to currently existing stock-based compensation plans, (iii)
shares of Common Stock which may be sold to Thermo Instrument, and (iv) the
issuance of shares of Common Stock as consideration for the acquisition of one
or more businesses (provided that such Common Stock may not be resold prior to
the expiration of the 180-day period referenced above). See "Risk Factors --
Significant Additional Shares Eligible for Sale After this Offering" and "Shares
Eligible for Future Sale."
Certain of the Underwriters from time to time have performed, and expect to
provide in the future, various investment banking services for Thermo Electron
and its subsidiaries.
NatWest Securities Limited, a United Kingdom broker-dealer and a member of
the Securities and Futures Authority Limited, has agreed that, as part of the
distribution of the shares of Common Stock offered hereby and subject to certain
exceptions, it will not offer or sell any shares of Common Stock within the
48
<PAGE> 51
United States, its territories or possessions or to persons who are citizens
thereof or residents therein. The Underwriting Agreement does not limit sales of
shares of Common Stock offered hereby outside of the United States.
NatWest Securities Limited has also represented and agreed that (i) it has
not offered or sold and will not offer or sell any Common Stock to persons in
the United Kingdom prior to admission of the Common Stock 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 Common Stock 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 Common Stock, 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) (No. 2) Order 1995 or is a person to whom the document may
otherwise lawfully be issued or passed on.
Prior to this offering there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price will be
prevailing market and economic conditions, estimates of the business potential
and prospects of the Company, the state of the Company's business operations, an
assessment of the Company's management, the consideration of the above factors
in relation to market valuations of companies in related businesses and other
factors deemed relevant. The estimated initial public offering price range set
forth on the cover page of this preliminary prospectus is subject to change as a
result of market conditions and other factors.
LEGAL OPINIONS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Seth H. Hoogasian, Esq., General Counsel of
Thermo Electron, Thermo Instrument and the Company, and certain legal matters
will be passed upon for the Underwriters by Testa, Hurwitz & Thibeault, LLP,
Boston, Massachusetts. Mr. Hoogasian owns or has the right to acquire 3,000
shares of Common Stock, 16,737 shares of common stock of Thermo Instrument and
118,177 shares of common stock of Thermo Electron.
EXPERTS
The Consolidated Financial Statements of the Company and of others included
in this Prospectus and the financial statement schedules 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 reports of said firm and the authority of said firm
as experts in accounting and auditing in giving said reports.
The balance sheets as of March 31, 1995 and February 7, 1996 and the
statements of income, retained earnings and cash flows for the years ended March
31, 1994 and 1995 and the period from April 1, 1995 through February 7, 1996 of
Dynatech Medical Products Limited, referred to in this Prospectus, have been
referenced in reliance on the report of Coopers & Lybrand, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The references in this Prospectus set forth under the captions "Risk
Factors -- Dependence on Patents and Proprietary Rights" and "Business --
Patents and Proprietary Technology" to the opinion of St. Onge
49
<PAGE> 52
Steward Johnston & Reens LLC, patent counsel for the Company, have been reviewed
and approved by such counsel, as experts on such matters, and are included
herein in reliance upon such review and approval.
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 shares of Common Stock offered hereby. This Prospectus, which
constitutes a part of the 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. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to 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 shall be deemed qualified in its entirety 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.
REPORTS TO SECURITY HOLDERS
The Company intends to furnish holders of the Common Stock offered hereby
with annual reports containing financial statements audited by an independent
public accounting firm and with quarterly reports containing unaudited summary
financial statements for each of the first three quarters of each fiscal year.
50
<PAGE> 53
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
THERMO BIOANALYSIS CORPORATION
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 six months ended July 1,
1995 and June 29, 1996.......................................................... F-3
Consolidated Balance Sheet as of December 31, 1994, December 30, 1995 and June
29, 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 six months ended July
1, 1995 and June 29, 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 six months ended June
29, 1996........................................................................ F-6
Notes to Consolidated Financial Statements....................................... F-7
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
Reports of Independent Public Accountants........................................ F-15
Consolidated Statement of Operations for the years ended March 31, 1994 and 1995
and for the period from April 1, 1995 through February 7, 1996.................. F-17
Consolidated Balance Sheet as of March 31, 1995 and February 7, 1996............. F-18
Consolidated Statement of Cash Flows for the years ended March 31, 1994 and 1995
and for the period from April 1, 1995 through February 7, 1996.................. F-19
Consolidated Statement of Shareholder's Investment for the years ended March 31,
1994 and 1995 and for the period from April 1, 1995 through February 7, 1996.... F-20
Notes to Consolidated Financial Statements....................................... F-21
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
Auditors' Report................................................................. F-26
Combined Profit and Loss Accounts for the years ended December 31, 1993, 1994 and
1995, for the three months ended March 31, 1995 and for the period from January
1, 1996 through March 29, 1996.................................................. F-27
Combined Balance Sheets as of December 31, 1994 and 1995......................... F-28
Combined Cash Flow Statements for the years ended December 31, 1993, 1994 and
1995, for the three months ended March 31, 1995 and for the period from January
1, 1996 through March 29, 1996.................................................. F-29
Notes to Combined Financial Statements........................................... F-30
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION OF THERMO BIOANALYSIS CORPORATION,
THE DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION AND THE AFFINITY SENSORS AND
LABSYSTEMS DIVISIONS OF FISONS PLC (UNAUDITED)
Pro Forma Combined Condensed Statement of Operations for the year ended
December 30, 1995.............................................................. F-38
Pro Forma Combined Condensed Statement of Operations for the six months ended
June 29, 1996................................................................... F-39
Pro Forma Condensed Balance Sheet as of June 29, 1996............................ F-40
Notes to Pro Forma Combined Condensed Financial Statements....................... F-41
</TABLE>
F-1
<PAGE> 54
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo BioAnalysis Corporation:
We have audited the accompanying consolidated balance sheet of Thermo
BioAnalysis Corporation (a Delaware corporation and 80%-owned subsidiary of
Thermo Instrument Systems 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 each of the three years in the period
ended December 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Thermo
BioAnalysis Corporation and subsidiaries as of December 31, 1994 and December
30, 1995 and the results of their operations and their cash flows for each of
the three years in the period ended December 30, 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 10, 1996 (except with
respect to
certain matters discussed in
Note 9, as to
which the date is July 22, 1996)
F-2
<PAGE> 55
THERMO BIOANALYSIS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JULY 1, JUNE 29,
1993 1994 1995 1995 1996
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues (Note 8)........................ $24,479 $25,127 $22,534 $11,686 $ 29,782
------- ------- ------- ------ -------
Costs and Operating Expenses:
Cost of revenues....................... 13,010 14,176 13,036 6,826 16,106
Selling, general and administrative
expenses (Note 6)................... 4,914 5,054 4,804 2,309 9,017
Research and development expenses...... 2,242 2,042 1,325 612 2,921
Write-off of acquired technology (Note
9).................................. -- -- -- -- 3,500
------- ------- ------- ------ -------
20,166 21,272 19,165 9,747 31,544
------- ------- ------- ------ -------
Operating Income (Loss).................. 4,313 3,855 3,369 1,939 (1,762)
Interest Income.......................... -- -- 819 238 293
Interest Expense......................... -- -- -- -- (668)
------- ------- ------- ------ -------
Income (Loss) Before Provision for
Income Taxes........................... 4,313 3,855 4,188 2,177 (2,137)
Provision for Income Taxes (Note 4)...... 1,775 1,455 1,674 870 546
------- ------- ------- ------ -------
Net Income (Loss)........................ $ 2,538 $ 2,400 $ 2,514 $ 1,307 $ (2,683)
======= ======= ======= ====== =======
Earnings (Loss) per Share................ $ .38 $ .36 $ .32 $ .18 $ (.33)
======= ======= ======= ====== =======
Weighted Average Shares.................. 6,617 6,617 7,811 7,403 8,219
======= ======= ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 56
THERMO BIOANALYSIS CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 29,
1996
1994 1995 -----------
------- ------- (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................................... $ 21 $17,747 $12,234
Accounts receivable, less allowances of $154, $154 and $926... 5,870 5,482 14,123
Inventories................................................... 5,665 5,968 13,417
Prepaid income taxes (Note 4)................................. 614 673 2,089
Prepaid expenses.............................................. 70 7 631
Due from parent company and affiliates........................ -- 761 --
------- ------- -------
12,240 30,638 42,494
------- ------- -------
Property, Plant and Equipment, at Cost, Net..................... 1,659 1,654 6,031
------- ------- -------
Patents and Other Assets........................................ 12 195 3,495
------- ------- -------
Cost in Excess of Net Assets of Acquired Companies.............. 438 420 33,043
------- ------- -------
$14,349 $32,907 $85,063
======= ======= =======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Note payable, due to Thermo Electron Corporation.............. $ -- $ -- $30,000
Accounts payable.............................................. 816 432 5,094
Accrued payroll and employee benefits......................... 848 692 2,709
Accrued installation and warranty expenses.................... 248 370 1,884
Accrued income taxes.......................................... 1,815 1,665 2,080
Other accrued expenses........................................ 211 374 9,100
Due to parent company and affiliates.......................... 20 -- 7,502
------- ------- -------
3,958 3,533 58,369
------- ------- -------
Deferred Income Taxes (Note 4).................................. 229 228 228
------- ------- -------
Shareholders' Investment (Notes 2 and 7):
Net parent company investment................................. 10,162 -- --
Common stock, $.01 par value, 25,000,000 shares authorized;
8,101,500 shares issued and outstanding.................... -- 81 81
Capital in excess of par value................................ -- 26,917 26,917
Retained earnings (accumulated deficit)....................... -- 2,143 (540)
Cumulative translation adjustment............................. -- 5 8
------- ------- -------
10,162 29,146 26,466
------- ------- -------
$14,349 $32,907 $85,063
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 57
THERMO BIOANALYSIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
JULY 1, JUNE 29,
1993 1994 1995 1995 1996
------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES:
Net income (loss)............................................. $ 2,538 $ 2,400 $ 2,514 $ 1,307 $ (2,683)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 243 289 346 173 1,284
Provision for losses on accounts receivable............... 132 15 -- -- 66
Deferred income tax expense (benefit)..................... (169) 279 (60) -- --
Write-off of acquired technology (Note 9)................. -- -- -- -- 3,500
Changes in current accounts, excluding the effects of
acquisition:
Accounts receivable..................................... (2,016) 269 388 837 1,074
Inventories............................................. (122) (1,265) (303) (156 ) 690
Other current assets.................................... 66 (78) (698) (139 ) 416
Accounts payable........................................ 589 (610) (384) (203 ) 1,585
Other current liabilities............................... 730 (540) (41) 1,725 2,234
------- ------- -------- -------- --------
Net cash provided by operating activities............. 1,991 759 1,762 3,544 8,166
------- ------- -------- -------- --------
INVESTING ACTIVITIES:
Acquisition, net of cash acquired............................. -- -- -- -- (43,191)
Purchases of property, plant and equipment.................... (190) (237) (313) (171 ) (451)
Other......................................................... -- -- (183) -- --
------- ------- -------- -------- --------
Net cash used in investing activities................. (190) (237) (496) (171 ) (43,642)
------- ------- -------- -------- --------
FINANCING ACTIVITIES:
Net proceeds from issuance of Company common stock (Note
7)........................................................ -- -- 14,918 14,918 --
Transfer from parent company to fund income tax payments.... 1,497 1,670 1,930 -- --
Net transfer to parent company.............................. (3,304) (2,185) (383) (267 ) --
Proceeds from issuance of note payable to parent company
(Note 9).................................................. -- -- -- -- 30,000
------- ------- -------- -------- --------
Net cash provided by (used in) financing activities... (1,807) (515) 16,465 14,651 30,000
------- ------- -------- -------- --------
Exchange Rate Effect on Cash.................................. -- -- (5) -- (37)
------- ------- -------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents.............. (6) 7 17,726 18,024 (5,513)
Cash and Cash Equivalents at Beginning of Period.............. 20 14 21 21 17,747
------- ------- -------- -------- --------
Cash and Cash Equivalents at End of Period.................... $ 14 $ 21 $ 17,747 $18,045 $ 12,234
======= ======= ======== ======== ========
CASH PAID FOR:
Interest...................................................... $ -- $ -- $ -- $ -- $ 645
======= ======= ======== ======== ========
Income taxes.................................................. $ 1,497 $ 1,670 $ 1,930 $ -- $ 34
======= ======= ======== ======== ========
NONCASH ACTIVITIES:
Fair value of assets of acquired businesses................... $ -- $ -- $ -- $ -- $ 67,895
Consideration given........................................... -- -- -- -- 52,191
------- ------- -------- -------- --------
Liabilities assumed of acquired businesses................ $ -- $ -- $ -- $ -- $ 15,704
======= ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 58
THERMO BIOANALYSIS CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON CAPITAL RETAINED
NET PARENT STOCK, IN EARNINGS CUMULATIVE
COMPANY $.01 PAR EXCESS OF (ACCUMULATED TRANSLATION
INVESTMENT VALUE PAR VALUE DEFICIT) ADJUSTMENT
----------- -------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 2, 1993........... $ 7,546 $ -- $ -- $ -- $ --
Net income........................ 2,538 -- -- -- --
Net transfer to parent company.... (1,807) -- -- -- --
----------- -------- --------- ------------ ----------
BALANCE JANUARY 1, 1994........... 8,277 -- -- -- --
Net income........................ 2,400
Net transfer to parent company.... (515) -- -- -- --
----------- -------- --------- ------------ ----------
BALANCE DECEMBER 31, 1994......... 10,162 -- -- -- --
Net income prior to capitalization
of
Company......................... 371 -- -- -- --
Net transfer from parent 1,547 -- -- -- --
company.........................
Capitalization of Company......... (12,080) 65 12,015 -- --
Net proceeds from private -- 16 14,902 -- --
placements
of Company common stock
(Note 7)........................
Net income after capitalization of
Company......................... -- -- -- 2,143 --
Translation adjustment............ -- -- -- -- 5
----------- -------- --------- ------------ ----------
BALANCE DECEMBER 30, 1995......... -- 81 26,917 2,143 5
(UNAUDITED)
Net loss.......................... -- -- -- (2,683) --
Translation adjustment............ -- -- -- -- 3
----------- -------- --------- ------------ ----------
BALANCE JUNE 29, 1996............. $ -- $ 81 $26,917 $ (540) $ 8
======== ======== ======= ========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 59
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Thermo BioAnalysis Corporation (the "Company") develops, manufactures, and
sells instrumentation for the health physics, biopharmaceutical, and analytical
biochemistry instrumentation markets. It comprises three operations that
specialize in health physics instrumentation, matrix-assisted laser
desorption/ionization time-of-flight mass spectrometry ("MALDI-TOF"), and
capillary electrophoresis ("CE").
Relationship with Thermo Instrument Systems Inc. and Thermo Electron
Corporation
The Company was incorporated in February 1995 as a wholly owned subsidiary
of Thermo Instrument Systems Inc. ("Thermo Instrument") at which time Thermo
Instrument transferred to the Company the assets related to certain elements of
Thermo Separation Products Inc.'s CE product line, Finnigan MAT Ltd.'s MALDI-TOF
division, and Eberline Instruments' health physics instrumentation division,
including $300,000 in cash, in exchange for 6,500,000 shares of the Company's
common stock. As of December 30, 1995, Thermo Instrument owned 6,500,000 shares
of the Company's common stock, representing 80% of such stock outstanding.
Thermo Instrument is an 86%-owned subsidiary of Thermo Electron Corporation
("Thermo Electron").
The accompanying financial statements include the assets, liabilities,
income and expenses of the Company as included in Thermo Instrument's
consolidated financial statements. The accompanying financial statements do not
include Thermo Instrument's general corporate debt, which is used to finance
operations of all of its respective business segments, or an allocation of
Thermo Instrument's interest expense. The Company has had positive cash flows
from operations since 1993.
Principles of Consolidation
The accompanying financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest December
31. References to 1993, 1994 and 1995 are for the fiscal years ended January 1,
1994, December 31, 1994 and December 30, 1995, respectively.
Revenue Recognition
The Company recognizes revenues upon shipment of its products. The Company
provides a reserve for its estimate of warranty and installation costs at the
time of shipment. The Company recognizes revenue from service contracts over the
respective terms of the contracts.
Income Taxes
The Company and Thermo Instrument have a tax allocation agreement under
which both the Company and Thermo Instrument are included in Thermo Electron's
consolidated federal and certain state income tax returns. The agreement
provides that in years in which the Company has taxable income, it will pay to
Thermo Electron amounts comparable to the taxes the Company would have paid if
it had filed separate tax returns. If Thermo Instrument's equity ownership of
the Company drops below 80%, the Company would be required to file its own
income tax returns.
F-7
<PAGE> 60
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 per Share
Pursuant to Securities and Exchange Commission requirements, earnings per
share have been presented for all periods. Weighted average shares for all
periods include the 6,500,000 shares issued to Thermo Instrument in connection
with the capitalization of the Company and the effect of the assumed exercise of
stock options issued within one year prior to the Company's proposed initial
public offering.
Cash and Cash Equivalents
Prior to its incorporation, the cash receipts and disbursements of the
Company were combined with other Thermo Instrument corporate cash transactions
and balances, except for certain payroll accounts.
As of December 30, 1995, $17,661,000 of the Company's cash equivalents were
invested in a repurchase agreement with Thermo Electron. Under this agreement,
the Company in effect lends excess cash to Thermo Electron, which Thermo
Electron collateralizes with investments principally consisting of U.S.
government agency securities, corporate notes, commercial paper, money market
funds, and other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company and have an original maturity of three
months or less. The repurchase agreement earns a rate based on the Commercial
Paper Composite Rate plus 25 basis points, set at the beginning of each quarter.
Cash equivalents are carried at cost, which approximates market value.
Inventories
Inventories are stated at the lower of cost (on a weighted average 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 materials and supplies......................................... $3,202 $3,501
Work in process.................................................... 1,460 1,127
Finished goods..................................................... 1,003 1,340
------ ------
$5,665 $5,968
====== ======
</TABLE>
F-8
<PAGE> 61
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives of the property as follows: buildings and improvements, 15 years;
machinery and equipment, 3 to 5 years; and leasehold improvements, the shorter
of the term of the lease or the life of the asset. Property, plant and equipment
consist of the following:
<TABLE>
<CAPTION>
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Land................................................................. $ 285 $ 285
Buildings............................................................ 2,594 2,603
Machinery, equipment and leasehold improvements...................... 3,433 3,429
------ ------
6,312 6,317
Less: Accumulated depreciation and amortization...................... 4,653 4,663
------ ------
$1,659 $1,654
====== ======
</TABLE>
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired companies
is amortized using the straight-line method over 40 years. Accumulated
amortization was $284,000 and $302,000 at year-end 1994 and 1995, respectively.
The Company assesses the future useful life of this asset whenever events or
changes in circumstances indicate that the current useful life has diminished.
The Company considers the future undiscounted cash flows of the acquired
businesses in assessing the recoverability of this asset.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiary 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.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Statements
The financial statements as of June 29, 1996 and for the six-month periods
ended July 1, 1995 and June 29, 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 six-month period ended June 29, 1996 are not necessarily
indicative of the results to be expected for the entire year.
F-9
<PAGE> 62
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. STOCK-BASED COMPENSATION PLANS
In February 1995, the Company adopted a stock-based compensation plan for
its key employees, directors, and others, which permits the grant of a variety
of stock and stock-based awards as determined by the human resources committee
of the Company's Board of Directors (the "Board Committee"), including
restricted stock, stock options, stock bonus shares or performance-based shares.
The option recipients and the terms of options granted under this plan are
determined by the Board Committee. Options granted to date generally vest and
become immediately exercisable on the ninth anniversary of the grant date,
unless the Company's common stock becomes publicly traded prior to such date. In
such an event, options become exercisable 90 days after the Company becomes
subject to the Securities Exchange Act of 1934, but are subject to certain
transfer restrictions and the right of the Company to repurchase shares issued
upon exercise of the options at the exercise price, upon certain events. The
restrictions and repurchase rights generally are deemed to have lapsed ratably
over periods ranging from five to ten years after the first anniversary of the
grant date, depending on the term of the option, which generally ranges from ten
to twelve years. Nonqualified stock options may be granted at any price
determined by the Board Committee, although incentive stock options must be
granted at not less than the fair market value of the Company's stock on the
date of grant. As of December 30, 1995, no options had been granted under this
plan. The Company also has a directors' stock option plan, adopted in November
1995, that provides for the grant of stock options to outside directors pursuant
to a formula approved by the Company's shareholders. Options granted under this
plan have the same general terms as options granted to date under the
stock-based compensation plan described above, except that the option term is
five years and the options vest and become immediately exercisable on the fourth
anniversary of the grant date, unless the Company's common stock becomes
publicly traded prior to such date. In such an event, the transfer restrictions
and repurchase rights described above generally are deemed to have lapsed
ratably over a four-year period. As of December 30, 1995, options to purchase
30,000 shares of the Company's common stock exercisable at $10.00 per share were
outstanding under this plan. As of December 30, 1995, no options have been
exercised and no options are exercisable under this plan. In addition to the
Company's stock-based compensation plans, certain officers and key employees may
also participate in the stock-based compensation plans of Thermo Electron or its
majority-owned subsidiaries.
No accounting recognition is given to options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity.
3. EMPLOYEE BENEFIT PLANS
Employee Stock Purchase Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in an employee stock purchase plan sponsored by Thermo Instrument.
Prior to the November 1995 plan year, shares of Thermo Instrument's and Thermo
Electron's common stock could be purchased at the end of a 12-month plan year at
85% of the fair market value at the beginning of the plan year, and the shares
purchased were subject to a one-year resale restriction. Effective November 1,
1995, the applicable shares of common stock may be purchased at 95% of the fair
market value at the beginning of the plan year, and the shares purchased are
subject to a six-month resale restriction. Shares are purchased through payroll
deductions of up to 10% of each participating employee's gross wages.
401(k) Savings Plan and Employee Stock Ownership Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in Thermo Electron's 401(k) savings plan and, prior to 1995, in
Thermo Electron's employee stock ownership plan ("ESOP"). 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 these
plans, the Company contributed and charged to expense $149,000, $169,000 and
$128,000 in 1993, 1994 and 1995, respectively.
F-10
<PAGE> 63
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Effective December 31, 1994, the ESOP was split into two plans: ESOP I, covering
employees of Thermo Electron's corporate office and its wholly owned
subsidiaries and ESOP II, covering employees of certain of Thermo Electron's
majority-owned subsidiaries, including the Company. Effective December 31, 1994,
the ESOP II plan was terminated and as a result, the Company's employees are no
longer eligible to participate in an ESOP.
4. INCOME TAXES
The components of income before provision for income taxes are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic................................................. $4,449 $3,684 $3,828
Foreign.................................................. (136) 171 360
------ ------ ------
$4,313 $3,855 $4,188
====== ====== ======
</TABLE>
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................................................ $1,563 $ 939 $1,331
State.................................................. 381 237 284
Foreign................................................ -- -- 119
------ ------ ------
1,944 1,176 1,734
------ ------ ------
Net deferred (prepaid):
Federal................................................ (139) 231 (50)
State.................................................. (30) 48 (10)
------ ------ ------
(169) 279 (60)
------ ------ ------
$1,775 $1,455 $1,674
====== ====== ======
</TABLE>
The provision for income taxes in the accompanying statement of operations
differs from the provision calculated by applying the statutory federal income
tax rate of 35% to income before provision for income taxes due to the
following:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory rate............. $1,510 $1,349 $1,466
Increases (decreases) resulting from:
State income taxes, net of federal tax................. 228 185 178
Net foreign losses not benefited and tax rate
differential........................................ 48 (60) (7)
Tax benefit of foreign sales corporation............... (22) (34) (6)
Amortization of cost in excess of net assets of
acquired company.................................... 7 6 6
Other, net............................................. 4 9 37
------ ------ ------
$1,775 $1,455 $1,674
====== ====== ======
</TABLE>
F-11
<PAGE> 64
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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......................................... $309 $355
Inventory basis difference.......................................... 243 256
Allowance for doubtful accounts..................................... 62 62
---- ----
$614 $673
==== ====
Deferred income taxes:
Depreciation........................................................ $229 $228
==== ====
</TABLE>
A provision has not been made for U.S. or additional foreign taxes on
$365,000 of undistributed earnings in foreign subsidiaries that could be subject
to taxation if remitted to the U.S. because the Company currently plans to keep
these amounts permanently reinvested overseas. The Company believes that any
additional U.S. tax liability due upon remittance of such earnings would be
immaterial.
5. OPERATING LEASES
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 $71,000, $71,000 and $69,000 in 1993,
1994 and 1995, respectively.
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 $306,000,
$314,000 and $270,000 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.
Other Related Party Transactions
The Company purchases and sells products in the ordinary course of business
with other companies associated with Thermo Electron. Sales of such products to
affiliated companies totalled $197,000, $262,000 and $279,000 in 1993, 1994 and
1995, respectively. Purchases of products from such companies totalled $313,000,
$413,000 and $414,000 in 1993, 1994 and 1995, respectively.
A majority-owned subsidiary of Thermo Electron acts as a commission-based
sales agent for certain of the Company's products. The Company paid $1,003,000,
$1,288,000 and $1,263,000 under this arrangement in 1993, 1994 and 1995,
respectively.
F-12
<PAGE> 65
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, a majority-owned subsidiary of Thermo Electron assembles
certain of the Company's products. For these services, the Company paid
$652,000, $566,000 and $600,000 in 1993, 1994 and 1995, respectively.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
7. COMMON STOCK
In March 1995, the Company sold 700,000 shares of its common stock in a
private placement for net proceeds of $6,530,000. In April 1995, the Company
sold 901,500 shares of its common stock in a private placement for net proceeds
of $8,388,000.
At December 30, 1995, the Company had reserved 925,000 unissued shares of
its common stock for possible issuance under stock-based compensation plans.
8. GEOGRAPHICAL INFORMATION AND SIGNIFICANT CUSTOMER
The Company is engaged in one business segment: developing, manufacturing,
and selling instrumentation for the health physics, biopharmaceutical, and
analytical biochemistry instrumentation markets. 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........................................... $20,971 $19,891 $17,741
England................................................. 3,508 5,236 4,793
------- ------- -------
$24,479 $25,127 $22,534
======= ======= =======
Income before provision for income taxes:
United States (a)....................................... $ 4,449 $ 3,684 $ 3,009
England................................................. (136) 171 360
------- ------- -------
Total operating income.................................. 4,313 3,855 3,369
Interest income......................................... -- -- 819
------- ------- -------
$ 4,313 $ 3,855 $ 4,188
======= ======= =======
Identifiable assets:
United States........................................... $11,776 $11,134 $29,022
England................................................. 1,912 3,215 3,885
------- ------- -------
$13,688 $14,349 $32,907
======= ======= =======
Export revenues included in United States revenues above
(b)..................................................... $ 3,609 $ 3,217 $ 2,741
======= ======= =======
</TABLE>
- ---------------
(a) Includes corporate general and administrative expenses.
(b) In general, export sales are denominated in U.S. dollars.
Sales to U.S. government agencies accounted for 47%, 32%, and 24% of the
Company's total revenues in 1993, 1994 and 1995, respectively.
F-13
<PAGE> 66
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
9. SUBSEQUENT EVENTS
Stock-based Compensation Plans
In January 1996, the Board Committee granted options to purchase 396,000
shares of the Company's common stock at $10.00 per share, which was the fair
market value on the date of grant. In June 1996, the Board Committee granted
options to purchase 144,000 shares of the Company's common stock at $12.00 per
share, which was the fair market value on the date of grant.
Acquisitions
In February 1996, the Company acquired substantially all of the assets,
subject to certain liabilities, of the DYNEX Technologies ("DYNEX") division of
Dynatech Corporation for $43,191,000, subject to a post-closing adjustment.
DYNEX designs, manufactures and markets products used in the immunoassay segment
of the bioinstrumentation market. This acquisition has been accounted for using
the purchase method of accounting, and DYNEX's results of operations have been
included in the accompanying financial statements from the date of acquisition.
The aggregate cost of DYNEX exceeded the estimated fair value of the acquired
net assets by $32,959,000 which is being amortized over 40 years.
In March 1996, Thermo Instrument acquired a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons plc
("Fisons"), a wholly owned subsidiary of Rhone-Poulenc Rorer Inc. In July 1996,
the Company acquired the Affinity Sensors and LabSystems divisions of Fisons
from Thermo Instrument for $9,000,000 in cash, subject to a post-closing
adjustment. Affinity Sensors supplies biosensors used in life sciences research
by the pharmaceutical and biotechnology industries, universities and medical
research institutes. LabSystems designs, implements and supports laboratory
information management systems and chromatography systems used in research and
development, quality assurance and control, and process plants. Because, as of
June 29, 1996, the Company, Affinity Sensors and LabSystems were deemed for
accounting purposes to be under control of their common owner, Thermo
Instrument, the accompanying financial statements as of and for the six months
ended June 29, 1996 include the results of operations of Affinity Sensors and
LabSystems from March 29, 1996, the date these businesses were acquired by
Thermo Instrument, in a manner similar to a pooling-of-interests. During the six
months ended June 29, 1996, the Company wrote off $3,500,000 of acquired
technology in connection with these acquisitions which represents the portion of
the purchase price allocated to technology in development at the acquired
businesses, based on estimated replacement cost. Because the Company had not
paid Thermo Instrument for these businesses as of June 29, 1996, the
accompanying June 1996 financial statements include an amount payable to Thermo
Instrument of $9,000,000.
To help finance the acquisition of DYNEX, the Company borrowed $30,000,000
from Thermo Electron pursuant to a promissory note due February 1997, and
bearing interest at the Commercial Paper Composite Rate plus 25 basis points,
set at the beginning of each quarter. In conjunction with the acquisition of
Affinity Sensors and LabSystems in July 1996, the Company issued to Thermo
Instrument a $50,000,000 principal amount 4.875% subordinated convertible note,
due 2001, convertible into shares of the Company's common stock at $16.50 per
share. The Company used part of the proceeds of the subordinated convertible
note to retire the $30,000,000 promissory note.
Pro forma information for the Company, DYNEX and Affinity Sensors and
LabSystems is available elsewhere in this Prospectus.
F-14
<PAGE> 67
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the DYNEX Technologies Division of Dynatech Corporation:
We have audited the accompanying consolidated balance sheet of the DYNEX
Technologies Division of Dynatech Corporation as of March 31, 1995 and February
7, 1996, and the related consolidated statements of operations, cash flows, and
shareholder's investment for each of the two years in the period ended March 31,
1995 and the period from April 1, 1995 through February 7, 1996. 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 did not audit the financial
statements of Dynatech Medical Products Limited, which statements reflect 14
percent and 16 percent of consolidated assets as of March 31, 1995 and February
7, 1996, respectively, and 35 percent, 32 percent and 41 percent of consolidated
cost of revenues for each of the two years in the period ended March 31, 1995
and the period from April 1, 1995 through February 7, 1996, respectively. Those
statements were audited by other auditors whose report has been furnished to us
and our opinion, insofar as it relates to the amounts included for that entity,
is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the DYNEX Technologies Division of
Dynatech Corporation as of March 31, 1995 and February 7, 1996 and the results
of their operations and their cash flows for each of the two years in the period
ended March 31, 1995 and for the period from April 1, 1995 through February 7,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 19, 1996
F-15
<PAGE> 68
REPORT OF THE AUDITORS TO THE MEMBERS OF
DYNATECH MEDICAL PRODUCTS LIMITED
We have audited the accounts.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The company's directors are responsible for the preparation of the
accounts. It is our responsibility to form an independent opinion, based on our
audit, on those accounts and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the accounts. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the accounts, and of whether the accounting
policies are appropriate to the company's circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the accounts are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion, we also evaluated the overall adequacy of the
presentation of information in the accounts.
OPINION
In our opinion the accounts give a true and fair view of the state of the
company's affairs as at March 31, 1995 and at February 7, 1996 and of its income
and cash flows for the years ended March 31, 1994 and 1995 and the period from
April 1, 1995 through February 7, 1996 and have been properly prepared in
accordance with the Companies (Guernsey) Law, 1994.
Coopers & Lybrand
Chartered Accountants
Guernsey, Channel Islands
July 19, 1996
F-16
<PAGE> 69
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
--------------------- FEBRUARY 7,
1994 1995 1996
------- ------- -------------
<S> <C> <C> <C>
Revenues (Note 6)........................................ $30,130 $37,328 $28,503
------- ------- -------------
Costs and Operating Expenses:
Cost of revenues....................................... 15,476 20,297 15,783
Selling, general and administrative expenses (includes
$2,515, $2,182 and $2,152 to Dynatech Corporation)
(Note 5)............................................ 12,203 12,636 11,402
Research and development expenses...................... 2,483 2,467 2,297
------- ------- -------------
30,162 35,400 29,482
------- ------- -------------
Operating Income (Loss).................................. (32) 1,928 (979)
Interest Income.......................................... 154 156 146
Interest Expense (includes $1,353, $1,050 and $1,427 to
Dynatech Corporation) (Note 5)......................... (1,662) (1,312) (1,610)
------- ------- -------------
Income (Loss) Before Provision for Income Taxes.......... (1,540) 772 (2,443)
Provision for Income Taxes (Note 3)...................... 228 436 320
------- ------- -------------
Net Income (Loss)........................................ $(1,768) $ 336 $(2,763)
======= ======= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-17
<PAGE> 70
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, FEBRUARY 7,
1995 1996
--------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................... $ 5,269 $ 1,232
Accounts receivable, less allowances of $293 and $174............... 5,435 4,923
Inventories......................................................... 5,861 6,737
Prepaid expenses.................................................... 585 866
Prepaid income taxes (Note 3)....................................... 130 170
--------- -----------
17,280 13,928
--------- -----------
Property and Equipment, at Cost, Net.................................. 2,080 2,138
--------- -----------
$19,360 $16,066
======== ========
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities:
Short-term debt..................................................... $ 3,732 $ --
Accounts payable.................................................... 1,670 1,094
Accrued payroll and employee benefits............................... 1,681 825
Accrued installation and warranty expenses.......................... 270 270
Customer deposits................................................... 479 483
Accrued income taxes................................................ 436 320
Deferred revenue.................................................... 106 189
Accrued sales commissions........................................... 427 264
Other accrued expenses.............................................. 781 564
--------- -----------
9,582 4,009
--------- -----------
Deferred Income Taxes (Note 3)........................................ 130 170
--------- -----------
Commitments (Note 4)
Shareholder's Investment:
Net parent company investment....................................... 9,292 12,056
Cumulative translation adjustment................................... 356 (169)
--------- -----------
9,648 11,887
--------- -----------
$19,360 $16,066
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-18
<PAGE> 71
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
------------------- FEBRUARY 7,
1994 1995 1996
------- ------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................ $(1,768) $ 336 $(2,763)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization....................... 1,255 1,103 874
Provision for losses on accounts receivable......... 36 74 41
Changes in current accounts:
Accounts receivable.............................. 1,462 (634) 333
Inventories...................................... 320 (887) (1,152)
Other current assets............................. 75 75 (301)
Accounts payable................................. (980) 693 (531)
Other current liabilities........................ 1,115 (721) (1,184)
------- ------- -------------
Net cash provided by (used in) operating
activities..................................... 1,515 39 (4,683)
------- ------- -------------
INVESTING ACTIVITIES:
Purchases of property and equipment...................... (892) (1,127) (975)
------- ------- -------------
FINANCING ACTIVITIES:
Net transfer from Dynatech Corporation................... 895 1,746 5,527
Dividends paid to Dynatech Corporation................... (600) (400) --
Increase (decrease) in short-term debt................... 685 156 (3,652)
------- ------- -------------
Net cash provided by financing activities........ 980 1,502 1,875
------- ------- -------------
Exchange Rate Effect on Cash............................... 716 (489) (254)
------- ------- -------------
Increase (Decrease) in Cash and Cash Equivalents........... 2,319 (75) (4,037)
Cash and Cash Equivalents at Beginning of Period........... 3,025 5,344 5,269
------- ------- -------------
Cash and Cash Equivalents at End of Period................. $ 5,344 $ 5,269 $ 1,232
======= ======= ==========
CASH PAID FOR:
Interest................................................. $ 311 $ 260 $ 193
======= ======= ==========
Income taxes............................................. $ 315 $ 305 $ 78
======= ======= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE> 72
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDER'S INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET PARENT CUMULATIVE
COMPANY TRANSLATION
INVESTMENT ADJUSTMENT
----------- -----------
<S> <C> <C>
BALANCE MARCH 31, 1993............................................... $ 9,083 $ 41
Net loss............................................................. (1,768) --
Net transfer from Dynatech Corporation............................... 895 --
Dividends paid to Dynatech Corporation............................... (600) --
Translation adjustment............................................... -- 759
----------- -----------
BALANCE MARCH 31, 1994............................................... 7,610 800
Net income........................................................... 336 --
Net transfer from Dynatech Corporation............................... 1,746 --
Dividends paid to Dynatech Corporation............................... (400) --
Translation adjustment............................................... -- (444)
----------- -----------
BALANCE MARCH 31, 1995............................................... 9,292 356
Net loss............................................................. (2,763) --
Net transfer from Dynatech Corporation............................... 5,527 --
Translation adjustment............................................... -- (525)
----------- -----------
BALANCE FEBRUARY 7, 1996............................................. $12,056 $(169)
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-20
<PAGE> 73
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
DYNEX Technologies (the "Company") designs, manufactures and markets
products used in the immunoassay segment of the bioinstrumentation market. The
Company is a division of Dynatech Corporation ("Dynatech"), and was formerly
known as Dynatech Laboratories.
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.
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. Deferred revenue in the accompanying balance sheet consists of
unearned revenue on service contracts which is recognized as revenue over the
life of the service contract. Substantially all of the deferred revenue included
in the accompanying balance sheet as of February 7, 1996, will be recognized
within one year.
Income Taxes
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," the Company recognizes deferred income taxes
based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in which the
differences are expected to be reflected in the tax return.
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>
MARCH 31, FEBRUARY 7,
1995 1996
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
Raw materials and supplies.................................. $ 2,191 $ 2,054
Work in process............................................. 559 581
Finished goods.............................................. 3,111 4,102
--------- -----------
$ 5,861 $ 6,737
======== ========
</TABLE>
F-21
<PAGE> 74
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property 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, 3 to 10 years;
and leasehold improvements, the shorter of the term of the lease or the life of
the asset. Property and equipment consist of the following:
<TABLE>
<CAPTION>
MARCH 31, FEBRUARY 7,
1995 1996
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
Machinery, equipment and leasehold improvements................. $ 6,782 $ 6,807
Less: Accumulated depreciation and amortization................. 4,702 4,669
--------- -----------
$ 2,080 $ 2,138
======== ========
</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 shareholder's investment titled "Cumulative translation
adjustment." Foreign currency transaction gains and losses are included in the
accompanying statement of operations and are not material for all periods
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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. 401(K) SAVINGS PLAN
Substantially all of the Company's full-time U.S. employees are eligible to
participate in Dynatech'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. In addition,
the Company may provide a discretionary contribution which is allocated based on
each employee's salary and length of service. Contributions charged to expense
were $66,000, $113,000, and $103,000 for the years ended March 31, 1994 and 1995
and for the period from April 1, 1995 through February 7, 1996, respectively.
3. INCOME TAXES
The components of income (loss) before provision for income taxes are as
follows:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
----------------- FEBRUARY 7,
1994 1995 1996
------- ----- -------------
<S> <C> <C> <C>
(IN THOUSANDS)
Domestic................................................... $(1,094) $(163) $(1,926)
Foreign.................................................... (446) 935 (517)
------- ----- -------------
$(1,540) $ 772 $(2,443)
======= ===== ==========
</TABLE>
F-22
<PAGE> 75
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
------------- FEBRUARY 7,
1994 1995 1996
---- ---- -------------
<S> <C> <C> <C>
(IN THOUSANDS)
Currently payable
Foreign..................................................... $228 $436 $ 320
==== ==== ==========
</TABLE>
The provision for income taxes in the accompanying statement of operations
differs from the provision calculated by applying the statutory federal income
tax rate of 35% to income (loss) before provision for income taxes due to the
following:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
----------------- FEBRUARY 7,
1994 1995 1996
----- ------- -------------
<S> <C> <C> <C>
(IN THOUSANDS)
Provision (benefit) for income taxes at statutory rate..... $(539) $ 270 $ (855)
Increases (decreases) resulting from:
Net foreign losses not benefited and tax rate
differential.......................................... 384 109 501
Net operating loss not benefited......................... 613 366 1,014
Other, net............................................... (230) (309) (340)
----- ------- ----------
$ 228 $ 436 $ 320
===== ======= ==========
</TABLE>
Prepaid income taxes and deferred income taxes in the accompanying balance
sheet consist of the following:
<TABLE>
<CAPTION>
MARCH 31, FEBRUARY 7,
1995 1996
--------- -------------
<S> <C> <C> <C>
(IN THOUSANDS)
Prepaid income taxes:
Reserves and accruals.......................................... $ 146 $ 192
Inventory basis difference..................................... 4 5
Net operating loss carryforwards............................... 5,003 5,397
------- -------
5,153 5,594
Less: Valuation allowance...................................... 5,023 5,424
------- -------
$ 130 $ 170
======= =======
Deferred income taxes:
Depreciation................................................... $ 127 $ 167
Other.......................................................... 3 3
------- -------
$ 130 $ 170
======= =======
</TABLE>
The valuation allowance relates to uncertainty concerning the realization
of $13,875,000 of federal net operating loss carryforwards, the realization of
which is limited to the future income of the Company's U.S. subsidiary. The loss
carryforwards will expire in the years 2004 through 2011. Any tax benefit
resulting from use of the loss carryforwards will be recorded as a reduction to
the provision for income taxes.
F-23
<PAGE> 76
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A provision has not been made for U.S. or additional foreign taxes on
$2,164,000 of undistributed earnings in foreign subsidiaries that could be
subject to taxation if remitted to the U.S. because the Company currently plans
to keep these amounts permanently reinvested overseas.
4. 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 $977,000, $948,000 and $688,000 for
the years ended March 31, 1994 and 1995 and for the period from April 1, 1995
through February 7, 1996, respectively. Future minimum payments due under
noncancelable operating leases are $736,000 in the remainder of calendar 1996;
$600,000 in 1997; $371,000 in 1998; $376,000 in 1999; $383,000 in 2000; and
$29,000 in 2001 and thereafter. Total future minimum lease payments are
$2,495,000.
5. RELATED PARTY TRANSACTIONS
Corporate Services Agreement
The Company and Dynatech have corporate services agreements under which
Dynatech provides certain administrative services, including risk management,
administration for certain employee benefits, tax advice and preparation of tax
returns, centralized cash management and certain other services. For these
services, the Company paid fees of approximately 1.2% of budgeted revenue and
2.6% of actual expenses incurred. In addition, Dynatech charged the Company an
interest allocation. The corporate service fees and the interest allocation
totaled $2,515,000, $2,182,000, and $2,152,000 for the years ended March 31,
1994 and 1995 and for the period from April 1, 1995 through February 7, 1996,
respectively. Management believes that the corporate service fee and interest
allocation are reasonable and representative of the expenses the Company would
have incurred on a stand-alone basis.
6. GEOGRAPHICAL INFORMATION
The Company is engaged in one business segment: developing, manufacturing,
and marketing products used in the immunoassay segment of the bioinstrumentation
market. The following table shows data for the Company by geographical area.
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
-------------------- FEBRUARY 7,
1994 1995 1996
------- -------- -------------
<S> <C> <C> <C>
(IN THOUSANDS)
Revenues:
United States........................................ $15,541 $ 18,428 $13,250
Germany.............................................. 7,212 9,962 7,169
Guernsey Channel Islands............................. 6,591 8,163 7,547
United Kingdom....................................... 3,519 3,833 2,689
France............................................... 1,907 3,064 3,617
Other................................................ 3,827 4,907 3,806
Transfers among geographical areas (a)............... (8,467) (11,029) (9,575)
------- -------- -------
$30,130 $ 37,328 $28,503
======= ======== =======
</TABLE>
F-24
<PAGE> 77
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
-------------------- FEBRUARY 7,
1994 1995 1996
------- -------- -------------
<S> <C> <C> <C>
(IN THOUSANDS)
Income (loss) before provision for income taxes:
United States................................ $ (335) $ 395 $(1,257)
Germany...................................... (220) 439 286
Guernsey, Channel Islands.................... (253) 145 (573)
United Kingdom............................... 180 336 98
France....................................... (247) 125 313
Other........................................ 843 488 154
------- -------- -------
Total operating income (loss)................ (32) 1,928 (979)
Interest expense, net........................ (1,508) (1,156) (1,464)
------- -------- -------
$(1,540) $ 772 $(2,443)
======= ======== =======
Identifiable assets:
United States................................ $ 5,212 $ 5,800 $ 2,619
Germany...................................... 3,743 3,537 3,456
Guernsey, Channel Islands.................... 1,792 2,601 2,759
United Kingdom............................... 3,414 4,441 4,060
France....................................... 1,304 1,509 1,647
Other........................................ 1,506 1,472 1,525
------- -------- -------
$16,971 $ 19,360 $16,066
======= ======== =======
Export revenues included in United States
revenues above (b):
Europe....................................... $ 1,612 $ 2,519 $ 1,544
Other........................................ 1,148 1,243 878
------- -------- -------
$ 2,760 $ 3,762 $ 2,422
======= ======== =======
</TABLE>
- ---------------
(a) Transfers among geographical areas are accounted for at prices that are
representative of transactions with unaffiliated parties.
(b) In general, export sales are denominated in U.S. dollars.
7. SUBSEQUENT EVENT
On February 7, 1996, the Company was sold to Thermo BioAnalysis
Corporation.
F-25
<PAGE> 78
AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF THERMO BIOANALYSIS CORPORATION
We have audited the combined financial statements on pages F-27 to F-37
which have been prepared under the historical cost convention and the accounting
policies set out on pages F-30 to F-31.
RESPECTIVE RESPONSIBILITIES OF MANAGEMENT AND AUDITORS
The managements of Affinity Sensors and LabSystems are responsible for
preparing financial statements for the division for which they are responsible,
which give a true and fair view of the state of affairs of the division at
December 31, 1994 and 1995, and of the results of the division for the years
ended December 31, 1993, 1994 and 1995. In preparing those financial statements,
each division's management is required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
- prepare the financial statements on the going concern basis unless it its
inappropriate to presume that the division will continue in business.
Each division's management is responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the financial
position of the division. Each division's management is also responsible for
safeguarding the assets of the division and hence for taking reasonable steps
for the prevention of fraud and other irregularities.
The responsibility for the preparation of the combined financial statements
rests with the directors of Thermo BioAnalysis Corporation.
It is our responsibility to form an independent opinion, based on our
audit, on the combined financial statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board which are substantially in accordance with generally
accepted auditing standards in the United States. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the significant
estimates and judgements made by management in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the
circumstances of each division, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
combined state of affairs of the divisions at December 31, 1994 and 1995 and of
their losses and cash flows for the years ended December 31, 1993, 1994 and
1995, in accordance with generally accepted accounting principles in the United
Kingdom.
Accounting practices used by the divisions and Thermo BioAnalysis
Corporation in preparing the accompanying combined financial statements conform
with generally accepted accounting principles in the United Kingdom. Had the
accompanying financial statements been prepared in accordance with United States
generally accepted accounting principles, the information included in them would
not be materially different. Accordingly, no reconciliation of net income and
owner's equity to United States generally accepted accounting principles has
been included in the combined financial statements.
ARTHUR ANDERSEN
Cambridge, England
July 22, 1996
F-26
<PAGE> 79
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
COMBINED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, THREE MONTHS JANUARY 1, 1996
---------------------------- ENDED THROUGH
1993 1994 1995 MARCH 31, 1995 MARCH 29, 1996
gbp#000 gbp#000 gbp#000 gbp#000 gbp#000
------ ------ ------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Turnover (Note 2).................. 15,980 14,959 14,361 2,678 2,862
Cost of sales...................... (4,210) (4,220) (3,526) (1,000) (1,349)
------ ------ ------ ------ ------
Gross profit....................... 11,770 10,739 10,835 1,678 1,513
Distribution costs................. (2,803) (3,075) (2,539) (636) (862)
Administrative expenses............ (9,206) (8,246) (7,893) (1,675) (1,802)
------ ------ ------ ------ ------
Profit (loss) on ordinary
activities before taxation (Note
3)............................... (239) (582) 403 (633) (1,151)
Tax on profit (loss) on ordinary
activities (Note 5).............. (292) (104) (406) -- --
------ ------ ------ ------ ------
Loss for the financial year after
taxation transferred to reserves
(Note 11)........................ (531) (686) (3) (633) (1,151)
====== ====== ====== ====== ======
</TABLE>
Movements in reserves are shown in Note 11.
All amounts relate to continuing operations.
The loss for each financial year is the only material recognised gain or loss
for each year, and accordingly a statement of total recognised gains and losses
is not presented in these financial statements.
The accompanying notes are an integral part of these profit and loss accounts.
F-27
<PAGE> 80
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
gbp#000 gbp#000
------- -------
<S> <C> <C>
FIXED ASSETS
Tangible assets (Note 6).................................................... 1,885 1,592
------ ------
CURRENT ASSETS
Stocks (Note 7)............................................................. 1,197 1,026
Debtors (Note 8)............................................................ 5,781 5,507
Cash at bank and in hand.................................................... 10,526 13,039
------ ------
17,504 19,572
Creditors: Amounts falling due within one year (Note 9)..................... (4,802) (5,033)
------ ------
Net current assets.......................................................... 12,702 14,539
------ ------
Total assets less current liabilities....................................... 14,587 16,131
Provisions for liabilities and charges (Note 10)............................ (647) (949)
------ ------
13,940 15,182
====== ======
OWNER'S EQUITY
Net parent company investment (Note 11)..................................... 13,913 15,152
Cumulative translation adjustment (Note 11)................................. 27 30
------ ------
13,940 15,182
====== ======
</TABLE>
These accounts were approved on July 22, 1996.
The accompanying notes are an integral part of these balance sheets.
F-28
<PAGE> 81
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
COMBINED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, THREE MONTHS JANUARY 1,
------------------------ ENDED 1996 THROUGH
1993 1994 1995 MARCH 31, 1995 MARCH 29, 1996
gbp#000 gbp#000 gbp#000 gbp#000 gbp#000
------ ------ ------ -------------- --------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
NET CASH INFLOW FROM OPERATING ACTIVITIES
(Note 12)................................ 1,840 1,759 1,263 287 742
TAXATION
Corporation tax paid....................... (292) (104) (406) -- --
------ ------ ------ ------ ------
Tax paid................................... (292) (104) (406) -- --
------ ------ ------ ------ ------
INVESTING ACTIVITIES
Payments to acquire tangible fixed
assets................................... (1,145) (939) (795) -- (142)
Receipts from sales of tangible fixed
assets................................... -- 20 35 35 --
------ ------ ------ ------ ------
Net cash inflow (outflow) from investing
activities............................... (1,145) (919) (760) 35 (142)
------ ------ ------ ------ ------
Net cash inflow before financing........... 403 736 97 322 600
------ ------ ------ ------ ------
FINANCING
Capital injection (withdrawal) (Note 11)... 2,503 1,031 1,242 (10,848) (13,609)
------ ------ ------ ------ ------
Net cash inflow (outflow) from financing... 2,503 1,031 1,242 (10,848) (13,609)
------ ------ ------ ------ ------
Increase (decrease) in cash and cash
equivalents (Note 13).................... 2,906 1,767 1,339 (10,526) (13,009)
====== ====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these cash flow statements.
F-29
<PAGE> 82
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
A summary of the principal accounting policies, all of which have been
applied consistently throughout the three years ending December 31, 1993, 1994
and 1995, is set out below.
(a) Basis of preparation
The combined financial statements have been prepared as an aggregation of
the financial statements of the Affinity Sensors and LabSystems divisions of
Fisons plc, and their respective sales offices based in the United States.
In preparing this aggregation, the directors of Thermo BioAnalysis
Corporation have eliminated transactions and balances between LabSystems and its
sales office and Affinity Sensors and its sales office. Unrealised profit on
stocks and demonstration models held as tangible fixed assets have also been
eliminated. LabSystems and Affinity Sensors do not trade with each other.
(b) Basis of accounting
The financial statements are prepared under the historical cost convention
and have been prepared in accordance with applicable United Kingdom accounting
standards.
(c) Tangible fixed assets
Fixed assets are shown at cost less depreciation. Depreciation is provided
at rates calculated to write-off the cost, less estimated residual value, of
each asset on a straight-line basis over its expected useful life, as follows:
Plant and equipment, fixtures and fittings 4 years - 10 years
Leasehold improvements Over the period of the lease
(d) Stocks
Stocks and work-in-progress are stated at the lower of cost or net
realisable value.
Cost, which is calculated on the FIFO basis, comprises material and, where
appropriate, labour and factory overheads.
(e) Taxation
Corporation tax payable is provided on taxable profits at the current rate.
Corporation tax payable is settled via the capital account with Fisons plc
in the United Kingdom, and Fisons Instruments North America Inc. in the United
States. Hence no corporation tax creditors appear in these financial statements.
Deferred taxation is provided using the liability method on all timing
differences only to the extent that they are expected to reverse in the future
without being replaced.
Deferred tax assets resulting from tax losses carried forward are not
recognised in the financial statements except to the extent that they are
anticipated to be recoverable without being replaced by equivalent debit
balances.
F-30
<PAGE> 83
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(f) Foreign currency
Transactions denominated in foreign currencies are recorded using the rate
of exchange ruling at the date of the transaction or, if hedged, at the forward
contract rate.
Monetary assets and liabilities denominated in foreign currencies at the
balance sheet date are reported at the exchange rates prevailing at that date
or, if appropriate, at the forward contract rate. Any gain or loss arising from
a change in exchange rates subsequent to the date of transaction is included as
an exchange gain or loss in the profit and loss account.
The results of the sales offices in the United States are translated at the
average rate of exchange during each year and their balance sheets at the rate
ruling at each balance sheet date.
Exchange differences arising on translation of the opening net assets and
results of overseas operations are dealt with through reserves.
(g) Turnover
Turnover represents the invoiced value of goods and services sold during
the year, less trade discounts and allowances, stated net of value added tax.
(h) Research and development costs
Research and development expenditure is charged to the profit and loss
account as incurred.
(i) Leases
The company enters into operating leases as described in Note 15.
Operating leases are charged on a straight-line basis over the lease term.
(j) Pension costs
The amount charged to the profit and loss account in respect of pension
costs for defined benefit schemes is the estimated regular cost of providing the
benefits accrued in the year, adjusted to reflect variations from that cost. The
regular cost is calculated so that it represents a substantially level
percentage of current and future payroll. Variations from regular cost are
charged or credited to the profit and loss account over the estimated average
remaining working life of scheme members.
The schemes are externally funded, with the assets held separately from
those of the group in trustee administered funds. Differences between amounts
charged to the profit and loss account and amounts contributed to the schemes
are shown as either provisions or prepayments in the balance sheet.
F-31
<PAGE> 84
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. TURNOVER
The analysis of turnover by geographical area is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
gbp#000 gbp#000 gbp#000
------- ------- -------
<S> <C> <C> <C>
United Kingdom............................................ 3,113 3,226 3,310
United States............................................. 9,158 8,582 6,911
Rest of world............................................. 3,709 3,151 4,140
------- ------- -------
15,980 14,959 14,361
======= ======= =======
</TABLE>
The analysis of turnover and profit (loss) on ordinary activities before
taxation by activity is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
gbp#000 gbp#000 gbp#000
------- ------- -------
<S> <C> <C> <C>
Turnover
LabSystems................................................ 15,620 13,878 12,851
Affinity Sensors.......................................... 360 1,081 1,510
------- ------- -------
15,980 14,959 14,361
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995
gbp#000 gbp#000 gbp#000
------- ------- -------
<S> <C> <C> <C>
Profit (loss) on ordinary activities before taxation
LabSystems................................................ 1,903 927 1,975
Affinity Sensors.......................................... (2,142) (1,509) (1,572)
------- ------- -------
(239) (582) 403
======= ======= =======
</TABLE>
3. PROFIT (LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit (loss) on ordinary activities is stated after charging:
<TABLE>
<CAPTION>
1993 1994 1995
gbp#000 gbp#000 gbp#000
------- ------- -------
<S> <C> <C> <C>
Exceptional items included within administrative expenses
-- redundancy and restructuring costs................... -- -- 507
-- tangible fixed assets written off.................... 273 -- --
Depreciation
-- owned tangible fixed assets.......................... 604 893 781
Hire of plant and machinery under operating leases........ 17 59 154
Operating lease rentals -- land and buildings............. 156 142 266
Staff costs............................................... 4,588 5,018 4,638
Research and development.................................. 2,117 2,788 3,010
</TABLE>
4. STAFF COSTS
Particulars of employees are shown below.
<TABLE>
<CAPTION>
1993 1994 1995
gbp#000 gbp#000 gbp#000
------- ------- -------
<S> <C> <C> <C>
Wages and salaries........................................ 4,186 4,585 4,212
Social security costs..................................... 357 392 334
Other pension costs....................................... 45 41 92
------- ------- -------
4,588 5,018 4,638
======= ======= =======
</TABLE>
F-32
<PAGE> 85
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The average weekly number of persons employed by the divisions was as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
NUMBER NUMBER NUMBER
------ ------ ------
<S> <C> <C> <C>
Administration............................................ 41 43 44
Sales and support......................................... 68 81 73
Research and development.................................. 66 62 48
--- --- ---
175 186 165
=== === ===
</TABLE>
5. TAX ON PROFIT (LOSS) ON ORDINARY ACTIVITIES
The tax charge is based on the result for the year and comprises:
<TABLE>
<CAPTION>
1993 1994 1995
gbp#000 gbp#000 gbp#000
------- ------- -------
<S> <C> <C> <C>
Corporation tax at 33%............................................ 292 104 406
=== === ===
</TABLE>
In arriving at the tax charge for each year, no account has been taken of
any deferred tax asset resulting from losses incurred by the sales offices in
the United States.
Management considers it would be imprudent to recognize such an asset as
its recovery is not expected to occur in the foreseeable future.
It is not practicable to quantify the tax losses carried forward in the
United States.
6. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
LEASEHOLD PLANT AND FIXTURES AND
IMPROVEMENTS EQUIPMENT FITTINGS TOTAL
gbp#000 gbp#000 gbp#000 gbp#000
------------- --------- ------------ -------
<S> <C> <C> <C> <C>
COST
At January 1, 1994............... 432 3,804 12 4,248
Additions........................ -- 925 14 939
Disposals........................ -- (742) (6) (748)
Exchange adjustment.............. -- (19) -- (19)
--- --------- --- ------
At December 31, 1994............. 432 3,968 20 4,420
--- --------- --- ------
DEPRECIATION
At January 1, 1994............... 172 1,886 7 2,065
Charge for the year.............. 35 849 9 893
On disposals..................... -- (416) -- (416)
Exchange adjustment.............. -- (6) (1) (7)
--- --------- --- ------
At December 31, 1994............. 207 2,313 15 2,535
--- --------- --- ------
NET BOOK VALUE
At December 31, 1994............. 225 1,655 5 1,885
============= ======== =========== ======
At January 1, 1994............... 260 1,918 5 2,183
============= ======== =========== ======
COST
At January 1, 1995............... 432 3,968 20 4,420
Additions........................ -- 793 2 795
Disposals........................ -- (1,423) (6) (1,429)
Exchange adjustment.............. -- 5 -- 5
--- --------- --- ------
At December 31, 1995............. 432 3,343 16 3,791
--- --------- --- ------
</TABLE>
F-33
<PAGE> 86
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
LEASEHOLD PLANT AND FIXTURES AND
IMPROVEMENTS EQUIPMENT FITTINGS TOTAL
gbp#000 gbp#000 gbp#000 gbp#000
------------- --------- ------------ -------
<S> <C> <C> <C> <C>
DEPRECIATION
At January 1, 1995............... 207 2,313 15 2,535
Charge for the year.............. 37 742 2 781
On disposals..................... -- (1,111) (6) (1,117)
--- --------- --- ------
At December 31, 1995............. 244 1,944 11 2,199
--- --------- --- ------
NET BOOK VALUE
At December 31, 1995............. 188 1,399 5 1,592
============= ======== =========== ======
At January 1, 1995............... 225 1,655 5 1,885
============= ======== =========== ======
</TABLE>
7. STOCKS
<TABLE>
<CAPTION>
1994 1995
gbp#000 gbp#000
------- -------
<S> <C> <C>
Components............................................................ 99 230
Work-in-progress...................................................... 121 58
Finished goods........................................................ 977 738
----- -----
1,197 1,026
===== =====
</TABLE>
8. DEBTORS
The following are included in the net book value of debtors:
<TABLE>
<CAPTION>
1994 1995
gbp#000 gbp#000
------- -------
<S> <C> <C>
Amounts falling due within one year:
Trade debtors....................................................... 4,284 3,943
Amounts owed by Fisons group undertakings........................... 1,091 1,340
Other debtors....................................................... 145 --
Prepayments and accrued income...................................... 261 224
----- -----
5,781 5,507
===== =====
</TABLE>
9. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1994 1995
gbp#000 gbp#000
------- -------
<S> <C> <C>
Bank overdraft........................................................ 210 1,384
Trade creditors....................................................... 1,120 819
Amounts owed to Fisons group undertakings............................. 698 225
Other creditors....................................................... 361 541
Accruals and deferred income.......................................... 2,413 2,064
----- -----
4,802 5,033
===== =====
</TABLE>
F-34
<PAGE> 87
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
10. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
INSTALLATION OTHER
PROVISION PROVISIONS TOTAL
gbp#000 gbp#000 gbp#000
------------ ---------- -------
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 1994........................... 375 99 474
Charged to profit and loss account................... 212 83 295
Released unused...................................... (3) (116) (119)
Utilised............................................. -- (3) (3)
--- ---- ----
BALANCE AT DECEMBER 31, 1994......................... 584 63 647
Charged to profit and loss account................... 407 69 476
Released unused...................................... (98) (10) (108)
Utilised............................................. -- (66) (66)
--- ---- ----
BALANCE AT DECEMBER 31, 1995......................... 893 56 949
=== ==== ====
</TABLE>
11. RECONCILIATION OF MOVEMENTS IN OWNER'S EQUITY
<TABLE>
<CAPTION>
NET PARENT CUMULATIVE
COMPANY TRANSLATION
INVESTMENT ADJUSTMENT TOTAL
gbp#000 gbp#000 gbp#000
----------- ----------- -------
<S> <C> <C> <C>
At January 1, 1994................................... 13,568 27 13,595
Capital injection.................................... 1,031 -- 1,031
Retained loss for the year........................... (686) -- (686)
------ --- ------
At December 31, 1994................................. 13,913 27 13,940
====== === ======
At January 1, 1995................................... 13,913 27 13,940
Capital injection.................................... 1,242 -- 1,242
Retained loss for the year........................... (3) -- (3)
Gain on foreign currency translation................. -- 3 3
------ --- ------
At December 31, 1995................................. 15,152 30 15,182
====== === ======
</TABLE>
12. RECONCILIATION OF OPERATING PROFIT (LOSS) TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1993 1994 1995
gbp#000 gbp#000 gbp#000
-------- -------- -------
<S> <C> <C> <C>
Profit (loss) on ordinary activities before
taxation........................................... (239) (582) 403
Adjustment for items not involving the movement of
cash:
Depreciation charge............................. 604 893 781
Loss on disposal of fixed assets................ 55 312 277
Decrease in debtors............................. 1,643 245 273
(Increase) decrease in stocks................... (87) (131) 171
Increase (decrease) in creditors and
provisions.................................... (163) 1,010 (640)
Translation (loss) gain on consolidation........ 27 12 (2)
----- ----- -----
Net cash inflow from operating activities............ 1,840 1,759 1,263
===== ===== =====
</TABLE>
The translation (loss) gain on consolidation is considered to be immaterial
and has not been allocated to individual captions.
F-35
<PAGE> 88
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
13. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS DURING THE YEAR
<TABLE>
<CAPTION>
CASH AT BANK BANK
AND IN HAND OVERDRAFTS NET
gbp#000 gbp#000 gbp#000
------------ ---------- -------
<S> <C> <C> <C>
Balance at January 1, 1993.......................... 5,643 -- 5,643
Movement in year.................................... 3,093 (187) 2,906
------ ------ ------
Balance at December 31, 1993........................ 8,736 (187) 8,549
Movement in year.................................... 1,790 (23) 1,767
------ ------ ------
Balance at December 31, 1994........................ 10,526 (210) 10,316
Movement in year.................................... 2,513 (1,174) 1,339
------ ------ ------
Balance at December 31, 1995........................ 13,039 (1,384) 11,655
====== ====== ======
</TABLE>
14. RELATED PARTY TRANSACTIONS
Sales to other Fisons entities
Both divisions make the majority of overseas sales via other Fisons
businesses, which in turn sell product to end users. These combined financial
statements include the selling operations based in the United States, but not
those in other territories as these entities are not being acquired by Thermo
BioAnalysis. The total sales to other Fisons businesses (except for those based
in the United States) are as follows:
<TABLE>
<CAPTION>
AFFINITY
LABSYSTEMS SENSORS TOTAL
YEAR ENDED gbp#000 gbp#000 gbp#000
---------- -------- -------
<S> <C> <C> <C>
December 31, 1993................................. 2,820 176 2,996
===== === =====
December 31, 1994................................. 2,217 271 2,488
===== === =====
December 31, 1995................................. 1,856 447 2,303
===== === =====
</TABLE>
15. OPERATING LEASE COMMITMENTS
Annual commitments under noncancellable operating leases are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
gbp#000 gbp#000 gbp#000
------- ------- -------
<S> <C> <C> <C>
Land and buildings
Expiry date:
-- between two and five years................ 88 88 88
-- after five years.......................... 141 142 269
--- --- ---
229 230 357
=== === ===
Other
Expiry date:
-- within one year........................... -- 63 24
-- between two and five years................ 8 45 63
--- --- ---
8 108 87
=== === ===
</TABLE>
F-36
<PAGE> 89
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONCLUDED)
16. CONTINGENT LIABILITIES
A third party has claimed that a part used by Affinity Sensors in their
products may infringe one of its patents.
The management of Affinity Sensors considers that the likelihood of a
material liability resulting from this claim is remote. Accordingly, no
provision has been made in respect of this claim in these combined financial
statements.
17. PENSION ARRANGEMENTS
The majority of the United Kingdom employees of LabSystems and Affinity
Sensors belongs to group defined benefit pension schemes operated by Fisons plc.
These schemes are funded to cover future pension liabilities after allowing for
expected future earnings and pension increases.
The costs of providing these benefits are addressed in accordance with the
advice of professionally qualified actuaries. Contributions are based on pension
costs across the Fisons plc group as a whole.
Actuarial valuations of these schemes are undertaken on a regular basis by
independent qualified actuaries using the projected unit method.
The last valuation of the UK pension scheme, being the scheme principally
affecting these combined financial statements, was made at March 31, 1994.
Particulars of that valuation may be found in the Fisons plc financial
statements for the year ended December 31, 1994.
The aggregate pension cost charged in these combined financial statements
is shown in Note 4. There were no provisions or prepayments in the combined
balance sheet at either December 31, 1994 or 1995 resulting from a difference
between the amounts recognised as cost and the amounts paid to the schemes.
Following the acquisition of a substantial portion of the businesses
comprising the Scientific Instruments Division of Fisons plc by Thermo
Instrument Systems Inc., no contributions will be paid to Fisons group pension
schemes after September 1996. Those employees who are eligible have been offered
membership of certain defined contribution pension schemes operated by Thermo
Instrument Systems Inc. or its parent company.
18. POST BALANCE SHEET EVENTS
On March 29, 1996, a substantial portion of the businesses comprising the
Scientific Instruments Division of Fisons plc (of which LabSystems and Affinity
Sensors form a part) was acquired by Thermo Instrument Systems Inc., a company
incorporated in the United States.
F-37
<PAGE> 90
THERMO BIOANALYSIS CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 30, 1995
(UNAUDITED)
On February 7, 1996, the Company acquired substantially all the assets of
the DYNEX Technologies ("DYNEX") division of Dynatech Corporation ("Dynatech")
for approximately $43.1 million in cash. On March 29, 1996, Thermo Instrument
Systems Inc. ("Thermo Instrument") acquired a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons plc
("Fisons"). On July 22, 1996, the Company acquired the Affinity Sensors and
LabSystems divisions of Fisons from Thermo Instrument for $9.0 million in cash.
Because, as of June 29, 1996, the Company, Affinity Sensors and LabSystems were
deemed for accounting purposes to be under control of their common owner, Thermo
Instrument, the Company's historical financial information as of and for the
period ended June 29, 1996 includes the results of operations of Affinity
Sensors and LabSystems from March 29, 1996, the date these businesses were
acquired by Thermo Instrument. During the six months ended June 29, 1996, the
Company wrote-off $3.5 million of acquired technology in connection with the
acquisition of Affinity Sensors and LabSystems. This nonrecurring expense has
been omitted from the pro forma combined condensed statements of operations.
Because the Company had not paid Thermo Instrument for these businesses as of
June 29, 1996, the consideration for the transfer of these businesses has been
reflected as an additional amount payable to parent company. To help finance the
acquisition of DYNEX, the Company borrowed $30.0 million from Thermo Electron
Corporation ("Thermo Electron") pursuant to a promissory note due February 1997,
and bearing interest at the Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter. In conjunction with the
acquisition of Affinity Sensors and LabSystems in July 1996, the Company issued
to Thermo Instrument a $50.0 million principal amount 4.875% subordinated
convertible note (the "Convertible Note"), due 2001, convertible into shares of
the Company's common stock at $16.50 per share. The Company used part of the
proceeds of the Convertible Note to retire the $30.0 million promissory note.
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 DYNEX and Affinity Sensors and LabSystems and
the issuance of the Convertible Note to Thermo Instrument had occurred on
January 1, 1995. DYNEX has a fiscal year which differs from the Company's fiscal
year-end. The historical results of operations for DYNEX presented below have
been adjusted to conform to the Company's fiscal year-end for purposes of the
pro forma combined condensed statement of operations. 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 DYNEX and Affinity
Sensors and LabSystems and the issuance of the Convertible Note to Thermo
Instrument occurred on January 1, 1995. These statements should be read in
conjunction with the accompanying notes, the pro forma condensed balance sheet,
and the respective historical financial statements and related notes of the
Company, DYNEX and Affinity Sensors and LabSystems appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------
DYNEX AFFINITY
TECHNOLOGIES SENSORS AND
DIVISION LABSYSTEMS PRO FORMA
THERMO OF DYNATECH DIVISIONS ------------------------
BIOANALYSIS CORPORATION OF FISONS ADJUSTMENTS COMBINED
----------- ------------ ----------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues................................... $22,534 $ 35,866 $22,403 $ -- $80,803
------- ------- ------- ------- -------
Costs and Operating Expenses:
Cost of revenues......................... 13,036 19,379 5,501 102 38,018
Selling, general and administrative
expenses.............................. 4,804 12,970 11,578 891 30,243
Research and development expenses........ 1,325 2,861 4,696 -- 8,882
------- ------- ------- ------- -------
19,165 35,210 21,775 993 77,143
------- ------- ------- ------- -------
Operating Income........................... 3,369 656 628 (993) 3,660
Interest Income............................ 819 194 -- -- 1,013
Interest Expense........................... -- (1,569) -- (1,134) (2,703 )
------- ------- ------- ------- -------
Income (Loss) Before Income Taxes.......... 4,188 (719) 628 (2,127) 1,970
Income Tax Provision (Benefit)............. 1,674 475 633 (1,634) 1,148
------- ------- ------- ------- -------
Net Income (Loss).......................... $ 2,514 $ (1,194) $ (5) $ (493) $ 822
======= ======= ======= ======= =======
Earnings per Share......................... $ .32 $ .11
======= =======
Weighted Average Shares.................... 7,811 7,811
======= =======
</TABLE>
F-38
<PAGE> 91
THERMO BIOANALYSIS CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 29, 1996
(UNAUDITED)
The following unaudited pro forma combined condensed statement of
operations sets forth the results of operations for the six months ended June
29, 1996, as if the acquisitions of DYNEX and Affinity Sensors and LabSystems
and the issuance of the Convertible Note to Thermo Instrument had occurred on
January 1, 1995. DYNEX has a fiscal year which differs from the Company's fiscal
year-end. The historical results of operations for DYNEX presented below have
been adjusted to conform to the Company's fiscal year-end for purposes of the
pro forma combined condensed statement of operations. 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 DYNEX and Affinity
Sensors and LabSystems and the issuance of the Convertible Note to Thermo
Instrument occurred on January 1, 1995. These statements should be read in
conjunction with the accompanying notes, the pro forma condensed balance sheet,
and the respective historical financial statements and related notes of the
Company, DYNEX and Affinity Sensors and LabSystems appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------
DYNEX AFFINITY
TECHNOLOGIES SENSORS AND
DIVISION LABSYSTEMS PRO FORMA
THERMO OF DYNATECH DIVISIONS ----------------------
BIOANALYSIS CORPORATION OF FISONS ADJUSTMENTS COMBINED
----------- ------------ ------------ ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues................................ $29,782 $2,821 $ 4,367 $ -- $36,970
-------- -------- -------- -------- --------
Costs and Operating Expenses:
Cost of revenues...................... 16,106 1,794 2,059 (32) 19,927
Selling, general and administrative
expenses........................... 9,017 1,475 3,300 187 13,979
Research and development expenses..... 2,921 351 764 -- 4,036
Write-off of acquired technology...... 3,500 -- -- (3,500) --
-------- -------- -------- -------- --------
31,544 3,620 6,123 (3,345) 37,942
-------- -------- -------- -------- --------
Operating Loss.......................... (1,762) (799) (1,756) 3,345 (972 )
Interest Income......................... 293 12 -- -- 305
Interest Expense........................ (668) (183) -- (179) (1,030 )
-------- -------- -------- -------- --------
Loss Before Income Taxes................ (2,137) (970) (1,756) 3,166 (1,697 )
Income Tax Provision (Benefit).......... 546 11 -- (680) (123 )
-------- -------- -------- -------- --------
Net Loss................................ $(2,683) $ (981) $ (1,756) $ 3,846 $(1,574 )
======== ======== ======== ======== ========
Loss per Share.......................... $ (.33) $ (.19 )
======== ========
Weighted Average Shares................. 8,219 8,219
======== ========
</TABLE>
F-39
<PAGE> 92
THERMO BIOANALYSIS CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
JUNE 29, 1996
(UNAUDITED)
The following unaudited pro forma condensed balance sheet sets forth the
financial position as of June 29, 1996, as if the payment of $9.0 million by the
Company to Thermo Instrument in July 1996, made in consideration for the
transfer of Affinity Sensors and LabSystems, and the issuance of the Convertible
Note to Thermo Instrument, had occurred on June 29, 1996. This statement should
be read in conjunction with the accompanying notes, the pro forma combined
condensed statements of operations and the respective historical financial
statements and related notes of the Company and Affinity Sensors and LabSystems
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
HISTORICAL
-----------
THERMO PRO FORMA PRO
BIOANALYSIS ADJUSTMENTS FORMA
----------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................... $12,234 $ 11,000 $23,234
Accounts receivable, net.................................... 14,123 -- 14,123
Inventories................................................. 13,417 -- 13,417
Other current assets........................................ 2,720 -- 2,720
-------- -------- --------
42,494 11,000 53,494
-------- -------- --------
Property, Plant and Equipment, at Cost, Net................... 6,031 -- 6,031
-------- -------- --------
Patents and Other Assets...................................... 3,495 -- 3,495
-------- -------- --------
Cost in Excess of Net Assets of Acquired Companies............ 33,043 -- 33,043
-------- -------- --------
$85,063 $ 11,000 $96,063
======== ======== ========
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Current Liabilities:
Note payable, due to Thermo Electron Corporation............ $30,000 $ (30,000) $ --
Accounts payable............................................ 5,094 -- 5,094
Accrued expenses............................................ 15,773 -- 15,773
Due to (from) parent company and affiliates................. 7,502 (9,000) (1,498 )
-------- -------- --------
58,369 (39,000) 19,369
-------- -------- --------
Deferred Income Taxes......................................... 228 -- 228
-------- -------- --------
Subordinated Convertible Note, Due to Parent Company.......... -- 50,000 50,000
-------- -------- --------
Shareholders' Investment:
Common stock................................................ 81 -- 81
Capital in excess of par value.............................. 26,917 -- 26,917
Accumulated deficit......................................... (540) -- (540 )
Cumulative translation adjustment........................... 8 -- 8
-------- -------- --------
26,466 -- 26,466
-------- -------- --------
$85,063 $ 11,000 $96,063
======== ======== ========
</TABLE>
F-40
<PAGE> 93
THERMO BIOANALYSIS CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The historical financial statements of Affinity Sensors and LabSystems,
which are denominated in British pounds sterling, have been translated into U.S.
dollars for the pro forma combined condensed statements of operations at the
average exchange rate of approximately 1.56 and 1.53 British pounds sterling per
U.S. dollar for the year ended December 30, 1995 and for the six months ended
June 29, 1996, respectively.
NOTE 2 -- 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>
COST OF REVENUES
Increase in the finished goods inventory of DYNEX to the estimated selling
price, less the sum of the costs of disposal and a reasonable profit
allowance for the Company's selling efforts.................................. $ 102
----------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Eliminate corporate service fees charged to DYNEX by Dynatech Corporation...... (1,050)
Service fee of 1.20% of the revenues of DYNEX, Affinity Sensors and LabSystems
for services provided under a services agreement between the Company and
Thermo Electron.............................................................. 699
Amortization over 40 years of $32,959,000 of cost in excess of net assets of
acquired companies created by the acquisition of DYNEX, and over 8 years of
$3,349,000 of product technology and capitalized software created by the
acquisition of Affinity Sensors and LabSystems............................... 1,242
----------
891
----------
INTEREST EXPENSE
Eliminate the corporate interest allocation charged to DYNEX by Dynatech
Corporation as a direct consequence of the acquisition of DYNEX by the
Company without the assumption of DYNEX debt................................. (1,304)
Record interest expense on the Convertible Note issued to Thermo Instrument.... 2,438
----------
1,134
----------
INCOME TAX PROVISION (BENEFIT)
Income tax benefit associated with the utilization of the U.S. portion of net
operating losses at Affinity Sensors and LabSystems.......................... (1,280)
Income tax benefit associated with the adjustments above (excluding
amortization of cost in excess of net assets of acquired companies and the
write-off of acquired technology), calculated at the Company's statutory
income tax rate of 40%....................................................... (354)
----------
(1,634)
----------
</TABLE>
NOTE 3 -- PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
OPERATIONS FOR THE SIX MONTHS ENDED JUNE 29, 1996 (IN THOUSANDS,
EXCEPT IN TEXT)
<TABLE>
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
COST OF REVENUES
Reverse a portion of the adjustment to record the finished goods inventory of
DYNEX at the estimated selling price, less the sum of the costs of disposal
and a reasonable profit allowance for the Company's selling efforts.......... $ (32)
------
</TABLE>
F-41
<PAGE> 94
THERMO BIOANALYSIS CORPORATION
<TABLE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS -- (CONCLUDED)
(UNAUDITED)
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Eliminate corporate service fees charged to DYNEX by Dynatech Corporation...... (75)
Service fee of 1.0% of the revenues of DYNEX, Affinity Sensors and LabSystems
for services provided under a services agreement between the Company and
Thermo Electron.............................................................. 72
Amortization over 40 years of $32,959,000 of cost in excess of net assets of
acquired companies created by the acquisition of DYNEX, and over 8 years of
$3,349,000 of product technology and capitalized software created by the
acquisition of Affinity Sensors and LabSystems............................... 190
------
187
------
WRITE-OFF OF ACQUIRED TECHNOLOGY
Reverse the write-off of acquired technology under development associated with
the acquisition of Affinity Sensors and LabSystems........................... (3,500)
------
INTEREST EXPENSE
Eliminate the corporate interest allocation charged to DYNEX by Dynatech
Corporation as a direct consequence of the acquisition of DYNEX by the
Company without the assumption of DYNEX debt................................. (183)
Record interest expense on the Convertible Note issued to Thermo Instrument.... 609
Eliminate interest expense on the $30,000,000 principal amount promissory note
payable to Thermo Electron, due to its assumed repayment with the proceeds of
the Convertible Note issued to Thermo Instrument............................. (247)
------
179
------
INCOME TAX PROVISION (BENEFIT)
Income tax benefit associated with the utilization of the U.S. portion of net
operating losses at Affinity Sensors and LabSystems.......................... (623)
Income tax benefit associated with the adjustments above (excluding
amortization of cost in excess of net assets of acquired companies and the
reversal of the write-off of acquired technology), calculated at the
Company's statutory income tax rate of 40%................................... (57)
------
(680)
------
</TABLE>
<TABLE>
NOTE 4 -- PRO FORMA ADJUSTMENTS TO PRO FORMA CONDENSED BALANCE SHEET (IN
THOUSANDS)
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
CASH AND CASH EQUIVALENTS
Proceeds from the issuance of the Convertible Note to Thermo Instrument........ $ 50,000
Cash payment to acquire Affinity Sensors and LabSystems........................ (9,000)
Cash payment to retire the promissory note payable to Thermo Electron.......... (30,000)
--------
11,000
--------
NOTE PAYABLE, DUE TO THERMO ELECTRON CORPORATION
Record payment of the promissory note payable to Thermo Electron............... 30,000
--------
DUE TO PARENT COMPANY AND AFFILIATES
Record payment to Thermo Instrument for the purchase of Affinity Sensors and
LabSystems................................................................... 9,000
--------
SUBORDINATED CONVERTIBLE NOTE, DUE TO PARENT COMPANY
Record the Convertible Note issued to Thermo Instrument........................ (50,000)
--------
</TABLE>
F-42
<PAGE> 95
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
The Company........................... 11
Use of Proceeds....................... 11
Dividend Policy....................... 11
Capitalization........................ 12
Dilution.............................. 13
Selected Financial Information........ 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Management's Discussion and Analysis
of Results of Operations of DYNEX
Technologies........................ 18
Management's Discussion and Analysis
of Results of Operations of Affinity
Sensors and LabSystems.............. 19
Business.............................. 21
Relationship with Thermo Electron and
Thermo Instrument................... 33
Management............................ 37
Security Ownership of Certain
Beneficial Owners and Management.... 43
Description of Capital Stock.......... 45
Shares Eligible for Future Sale....... 46
Underwriting.......................... 48
Legal Opinions........................ 49
Experts............................... 49
Additional Information................ 50
Reports to Security Holders........... 50
Index to Financial Statements......... F-1
------------------------
UNTIL , 1996 (25 DAYS
AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------
- --------------------------------------------
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
1,500,000 SHARES
LOGO
COMMON STOCK
-------------------
PROSPECTUS
, 1996
-------------------
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS
SMITH BARNEY INC.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 96
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, other than the
underwriting discounts and commissions. 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.......... $ 11,421
NASD filing fee.............................................. 3,812
American Stock Exchange listing fee.......................... 37,500
Legal fees and expenses...................................... 150,000
Accounting fees and expenses................................. 550,000
Blue Sky fees and expenses (including legal fees)............ 10,000
Printing and engraving expenses.............................. 120,000
Transfer agent and subscription agent fees................... 5,000
Miscellaneous................................................ 112,267
--------
Total.............................................. $1,000,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and the Registrant's Certificate of
Incorporation and By-Laws limit the monetary liability of directors to the
Registrant and to its shareholders and provide for indemnification of the
Registrant'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 Registrant and, with respect
to any criminal action or proceeding, actions that the indemnitee had no
reasonable cause to believe were unlawful. The Registrant also has
indemnification agreements with its directors and officers that provide for the
maximum indemnification allowed by law. Reference is made to the Registrant's
Certificate of Incorporation, By-Laws and form of Indemnification Agreement for
Officers and Directors incorporated by reference as Exhibits 3.1, 3.2 and 10.10
hereto, respectively.
Thermo Electron has an insurance policy which insures the directors and
officers of Thermo Electron and its subsidiaries, including the Registrant,
against certain liabilities which might be incurred in connection with the
performance of their duties.
Under Section 6 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). Reference is made to
the form of Underwriting Agreement filed as Exhibit 1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On February 24, 1995, Thermo Instrument transferred to the Registrant all
of the assets and operations relating to its bioinstruments business in exchange
for 6,500,000 shares of Common Stock of the Registrant and the assumption by the
Registrant of certain liabilities relating to such business. Exemption from
registration for this transaction is claimed under Section 4(2) of the
Securities Act.
On March 15, 1995, the Registrant sold an aggregate of 700,000 shares of
Common Stock to accredited investors for an aggregate purchase price of
$6,530,000 pursuant to Regulation D of the Commission promulgated under the
Securities Act. On April 19, 1995, the Registrant sold an aggregate of 901,500
shares of Common Stock to accredited investors for an aggregate purchase price
of $8,388,000 pursuant to Regulation D of the Commission promulgated under the
Securities Act.
II-1
<PAGE> 97
From February 24, 1995 (the date of the Registrant's incorporation) through
June 29, 1996, the registrant granted options under its stock-based compensation
plans to purchase an aggregate of 570,000 shares of Common Stock at a weighted
average exercise price of $10.51 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.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------------------------------------------------------------
<C> <S> <C>
**1 -- Form of Underwriting Agreement.
*2 -- Purchase Agreement dated as of February 5, 1996 by and among the Registrant,
Dynatech Corporation and certain of their respective affiliates. 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 -- Certificate of Incorporation of the Registrant.
*3.2 -- By-Laws of the Registrant.
*4 -- Specimen Common Stock 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 February 27, 1995 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 from Exhibit 10.1 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year ended January 2,
1993 [File No. 1-8002]).
*10.3 -- Tax Allocation Agreement dated as of February 27, 1995 between Thermo
Electron and the Registrant.
*10.4 -- Master Repurchase Agreement dated as of February 27, 1995 between Thermo
Electron and the Registrant.
*10.5 -- Master Guarantee Reimbursement Agreement dated as of February 27, 1995 among
Thermo Electron, Thermo Instrument and the Registrant.
*10.6 -- Master Guarantee Reimbursement Agreement dated as of February 27, 1995
between Thermo Instrument and the Registrant.
*10.7 -- Equity Incentive Plan of the Registrant.
*10.8 -- Deferred Compensation Plan for Directors of the Registrant.
*10.9 -- Directors Stock Option Plan of the Registrant.
*10.10 -- Form of Indemnification Agreement for Officers and Directors.
*10.11 -- Asset Transfer Agreement dated as of February 27, 1995 between Thermo
Instrument and the Registrant.
*10.12 -- Asset Transfer Agreement dated as of February 27, 1995 between Thermo
Separation Products Inc. and the Registrant.
*10.13 -- Exclusive License Agreement dated as of February 27, 1995 between Thermo
Separation Products Inc. and the Registrant.
*10.14 -- Exclusive License Agreement dated as of February 27, 1995 between the
Registrant and Thermo Separation Products Inc.
*10.15 -- Manufacturing Agreement dated as of February 27, 1995 between Thermo
Separation Products Inc. and the Registrant.
*10.16 -- Note Purchase Agreement dated as of July 22, 1996 between Thermo Instrument
and the Registrant.
*10.17 -- $50,000,000 Principal Amount 4.875% Convertible Subordinated Note due 2001
dated July 22, 1996.
*10.18 -- Asset and Share Purchase Agreement dated as of July 22, 1996 among SID
Instruments Inc., HB Instruments Inc., the Registrant and Thermo Instrument.
</TABLE>
II-2
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------------------------------------------------------------
<C> <S> <C>
*10.19 -- Asset Purchase Agreement dated as of July 22, 1996 among Thermo Labsystems
Limited, FI Instruments Inc., Thermo Fast UK Limited, the Registrant and
Thermo Instrument.
In addition to the stock-based compensation plans of the Registrant, the
executive officers of the Registrant may be granted awards under stock-based
compensation plans of the Registrant's parent, Thermo Electron Corporation,
and its subsidiaries, for services rendered to the Registrant or to such
affiliated corporations. Such plans were filed as Exhibits 10.8 through
10.48 to the Annual Report on Form 10-K of Thermo Instrument for the fiscal
year ended December 30, 1995 [File No. 1-9786] 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 Coopers & Lybrand.
**23.3 -- Consent of Arthur Andersen LLP.
**23.4 -- Consent of Arthur Andersen.
**23.5 -- Consent of Seth H. Hoogasian, Esq. (included in Exhibit 5).
**23.6 -- Consent of St. Onge Steward Johnston & Reens LLC.
*24 -- Power of Attorney. (See Signature Page of this Registration Statement.)
*27 -- Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
(B) FINANCIAL STATEMENT SCHEDULES
The Financial Statement Schedules as of December 30, 1995 and the Report of
Independent Public Accountants on such schedules 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 undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, 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, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Certificate of
Incorporation and By-Laws of the Registrant and the laws of the State of
Delaware, 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 Securities 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
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 99
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registration has
duly caused this Amendment No. 2 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Waltham,
Massachusetts, on this 13th day of September, 1996.
THERMO BIOANALYSIS CORPORATION
BARRY S. HOWE
By:.................................
BARRY S. HOWE
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this Amendment No. 2 to
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------------------------
<S> <C> <C>
BARRY S. HOWE* Chief Executive Officer, September 13, 1996
.......................................... President and Director
BARRY S. HOWE (Principal Executive
Officer)
JOHN N. HATSOPOULOS* Vice President, Chief September 13, 1996
.......................................... Financial Officer and
JOHN N. HATSOPOULOS Director (Principal
Financial Officer)
PAUL F. KELLEHER* Chief Accounting Officer September 13, 1996
.......................................... (Principal Accounting
PAUL F. KELLEHER Officer)
RICHARD W. K. CHAPMAN* Chairman of the Board and September 13, 1996
.......................................... Director
RICHARD W. K. CHAPMAN
DENIS A. HELM* Vice Chairman of the Board September 13, 1996
.......................................... and Director
DENIS A. HELM
JONATHAN W. PAINTER Director September 13, 1996
..........................................
JONATHAN W. PAINTER
ARVIN H. SMITH* Director September 13, 1996
..........................................
ARVIN H. SMITH
ELIAS P. GYFTOPOULOS* Director September 13, 1996
..........................................
ELIAS P. GYFTOPOULOS
ARNOLD N. WEINBERG* Director September 13 , 1996
..........................................
ARNOLD N. WEINBERG
</TABLE>
JONATHAN W. PAINTER
By:................................
JONATHAN W. PAINTER
ATTORNEY-IN-FACT
II-4
<PAGE> 100
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THERMO BIOANALYSIS CORPORATION:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Thermo BioAnalysis Corporation included
in Thermo BioAnalysis Corporation's Form S-1 and have issued our report thereon
dated May 10, 1996 (except with respect to the matters discussed in Note 9 as to
which the date is July 22, 1996). Our audits were made for the purpose of
forming an opinion on the basic consolidated financial statements taken as a
whole. Thermo BioAnalysis Corporation's schedule of Valuation and Qualifying
Accounts, included in Schedule II on page S-2, is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states, in all material respects, the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 10, 1996
S-1
<PAGE> 101
SCHEDULE II
THERMO BIOANALYSIS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGES TO BALANCE
BEGINNING ACCOUNTS COSTS AND ACCOUNTS AT END
DESCRIPTION OF PERIOD RECOVERED EXPENSES WRITTEN OFF OF PERIOD
- -------------------------------------- ---------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 1, 1994
Allowance for Doubtful Accounts..... $139 $ 132 $ 5 $(123) $ 153
YEAR ENDED DECEMBER 31, 1994
Allowance for Doubtful Accounts..... $153 $ 15 $ -- $ (14) $ 154
YEAR ENDED DECEMBER 30, 1995
Allowance for Doubtful Accounts..... $154 $ -- $ 2 $ (2) $ 154
</TABLE>
S-2
<PAGE> 102
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------------------------------------------------------------
<S> <C> <C>
**1 -- Form of Underwriting Agreement.
*2 -- Purchase Agreement dated as of February 5, 1996 by and among the Registrant,
Dynatech Corporation and certain of their respective affiliates. 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 -- Certificate of Incorporation of the Registrant.
*3.2 -- By-Laws of the Registrant.
*4 -- Specimen Common Stock 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 February 27, 1995 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 from Exhibit 10.1 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year ended January 2,
1993 [File No. 1-8002]).
*10.3 -- Tax Allocation Agreement dated as of February 27, 1995 between Thermo
Electron and the Registrant.
*10.4 -- Master Repurchase Agreement dated as of February 27, 1995 between Thermo
Electron and the Registrant.
*10.5 -- Master Guarantee Reimbursement Agreement dated as of February 27, 1995 among
Thermo Electron, Thermo Instrument and the Registrant.
*10.6 -- Master Guarantee Reimbursement Agreement dated as of February 27, 1995
between Thermo Instrument and the Registrant.
*10.7 -- Equity Incentive Plan of the Registrant.
*10.8 -- Deferred Compensation Plan for Directors of the Registrant.
*10.9 -- Directors Stock Option Plan of the Registrant.
*10.10 -- Form of Indemnification Agreement for Officers and Directors.
*10.11 -- Asset Transfer Agreement dated as of February 27, 1995 between Thermo
Instrument and the Registrant.
*10.12 -- Asset Transfer Agreement dated as of February 27, 1995 between Thermo
Separation Products Inc. and the Registrant.
*10.13 -- Exclusive License Agreement dated as of February 27, 1995 between Thermo
Separation Products Inc. and the Registrant.
*10.14 -- Exclusive License Agreement dated as of February 27, 1995 between the
Registrant and Thermo Separation Products Inc.
*10.15 -- Manufacturing Agreement dated as of February 27, 1995 between Thermo
Separation Products Inc. and the Registrant.
*10.16 -- Note Purchase Agreement dated as of July 22, 1996 between Thermo Instrument
and the Registrant.
*10.17 -- $50,000,000 Principal Amount 4.875% Convertible Subordinated Note due 2001
dated July 22, 1996.
*10.18 -- Asset and Share Purchase Agreement dated as of July 22, 1996 among SID
Instruments Inc., HB Instruments Inc., the Registrant and Thermo Instrument.
*10.19 -- Asset Purchase Agreement dated as of July 22, 1996 among Thermo Labsystems
Limited, FI Instruments Inc., Thermo Fast UK Limited, the Registrant and
Thermo Instrument.
In addition to the stock-based compensation plans of the Registrant, the
executive officers of the Registrant may be granted awards under stock-based
compensation plans of the Registrant's parent, Thermo Electron Corporation,
and its subsidiaries, for services rendered to the Registrant or to such
affiliated corporations. Such plans were filed as Exhibits 10.8 through
10.48 to the Annual Report on Form 10-K of Thermo Instrument for the fiscal
year ended December 30, 1995 [File No. 1-9786] and are incorporated herein
by reference.
</TABLE>
<PAGE> 103
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------
<S> <C> <C>
*11 -- Computation of Earnings per Share.
*21 -- Subsidiaries of the Registrant.
**23.1 -- Consent of Arthur Andersen LLP.
**23.2 -- Consent of Coopers & Lybrand.
**23.3 -- Consent of Arthur Andersen LLP.
**23.4 -- Consent of Arthur Andersen.
**23.5 -- Consent of Seth H. Hoogasian, Esq. (included in Exhibit 5).
**23.6 -- Consent of St. Onge Steward Johnston & Reens LLC.
*24 -- Power of Attorney. (See Signature Page of this Registration
Statement).
*27 -- Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
<PAGE> 1
Exhibit 1
DRAFT 9/13/96
-------------
1,500,000 Shares
THERMO BIOANALYSIS CORPORATION
Common Stock
($.01 par value)
UNDERWRITING AGREEMENT
----------------------
_________ __, 1996
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS INC.
SMITH BARNEY INC.
As Representatives of the several
Underwriters named in Schedule I hereto
c/o NatWest Securities Limited
135 Bishopsgate
London EC2M3XT
England
Dear Sirs:
Thermo BioAnalysis Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to the several underwriters named in Schedule I
hereto (the "Underwriters") 1,500,000 shares (the "Firm Shares") of Common
Stock, $.01 par value (such class of stock being herein called the "Common
Stock"), of the Company. In addition, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, the Company
proposes to grant to the Underwriters an option to purchase up to an additional
225,000 shares (the "Option Shares") of Common Stock. The Firm Shares and any
Option Shares purchased pursuant to this Agreement are referred to herein as the
"Shares."
This is to confirm the agreement concerning the purchase of the Shares
from the Company by the Underwriters. You represent and warrant that you are
acting as the representatives (the "Representatives") of the Underwriters and
that you have been authorized by each of the other Underwriters to enter into
this Underwriting Agreement on its behalf and to act for it in the manner herein
provided.
<PAGE> 2
-2-
The Company currently is a majority-owned subsidiary of Thermo
Instrument Systems Inc., a Delaware corporation ("Thermo Instrument"), which is,
in turn, a majority-owned subsidiary of Thermo Electron Corporation, a Delaware
corporation ("Thermo Electron"). To the extent provided herein and for good and
valuable consideration, each of Thermo Instrument and Thermo Electron has become
a party to this Underwriting Agreement.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THERMO INSTRUMENT AND
THERMO ELECTRON. The Company, Thermo Instrument and Thermo Electron jointly and
severally represent and warrant to, and agree with, each Underwriter as follows.
The following representations, warranties and agreements shall be deemed to
apply to each Subsidiary (as defined in Section 13) of the Company, unless the
context does not permit:
(a) A registration statement on Form S-1 (File No. 333-8697) with
respect to the Shares (i) has been prepared by the Company in material
conformity with the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, (ii) has been filed with the Commission under the Securities
Act and (iii) has become effective under the Securities Act. If any
post-effective amendment to such registration statement has been filed with
the Commission prior to the execution and delivery of this Agreement, the
most recent such amendment has been declared effective by the Commission.
Copies of such registration statement as amended to date have been
delivered by the Company to the Representatives and, to the extent
applicable, were identical to the electronically transmitted copies thereof
filed with the Commission pursuant to the Commission's Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR"), except to the extent
permitted by Regulation S-T. For purposes of this Agreement, "Effective
Time" means the date and the time as of which such registration statement,
or the most recent post-effective amendment thereto, if any, was declared
effective by the Commission; "Effective Date" means the date of the
Effective Time; "Preliminary Prospectus" means each prospectus included in
such registration statement, or amendments thereof, before it became
effective under the Securities Act and any prospectus filed with the
Commission by the Company pursuant to Rule 424(a) of the Rules and
Regulations; "Registration Statement" means such registration statement, as
amended at the Effective Time, including all information deemed to be a
part thereof as of the Effective Time pursuant to paragraph (b) of Rule
430A of the Rules and Regulations together with any registration statement
filed by the Company pursuant to Rule 462(b) of the Rules and Regulations;
and "Prospectus" means (i) the form of prospectus relating to the Shares,
as first filed pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules
and Regulations or (ii) the term sheet or abbreviated term sheet described
in Rule 434(b) of the Rules and Regulations, as first filed pursuant to
paragraph (7) of Rule 424(b) of the Rules and Regulations together with the
last preliminary prospectus included in the Registration Statement filed
prior to the Effective Time or filed pursuant to Rule 424(a) of the Rules
and Regulations that is delivered by the Company to the Underwriters for
delivery to purchasers of the Shares. The Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus. For purposes of this Agreement, all
<PAGE> 3
-3-
references to the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement to any of the foregoing, shall
be deemed to include the respective copies thereof filed with the
Commission pursuant to EDGAR.
(b) The Registration Statement contains, and any post-effective
amendment to the Registration Statement filed with the Commission after the
Effective Time, the Prospectus and the Prospectus as amended or
supplemented will contain, all statements which are required by the
Securities Act and the Rules and Regulations; at the time of filing
thereof, any Preliminary Prospectus did not, and on the Effective Date, the
Registration Statement did not, and any post-effective amendment to the
Registration Statement filed with the Commission after the Effective Time,
the Prospectus and the Prospectus as amended or supplemented will not,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided that the Company, Thermo
Instrument and Thermo Electron make no representation or warranty as to
information contained in or omitted from the Registration Statement, the
Preliminary Prospectus or the Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by you, or by
any Underwriter through you, specifically for inclusion therein. There is
no contract or document required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement which is not described or filed as required.
(c) The accounting firm whose report appears in the Prospectus are
independent certified public accountants as required by the Securities Act
and the Rules and Regulations. The financial statements and schedules
(including the related notes) included in the Registration Statement, any
Preliminary Prospectus or the Prospectus present fairly, in all material
respects, the financial condition, results of operations and cash flows of
the entities purported to be shown thereby at the dates and for the periods
indicated and have been prepared in accordance with generally accepted
accounting principles.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus, and is
duly qualified to do business and is in good standing in each jurisdiction
in which the character of the business conducted by it or the location of
the properties owned or leased by it makes such qualification necessary
except where the failure to so qualify or be in good standing would not
have a material adverse effect on the Company and its Subsidiaries taken as
a whole; and, except as described in the Prospectus, the Company holds all
material licenses, certificates and permits from governmental authorities
necessary for the conduct of its business as described in the Prospectus.
(e) All of the outstanding shares of Common Stock have been, and the
Shares, upon issuance and delivery and payment therefor in the manner
herein described, will be, duly 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
<PAGE> 4
-4-
Company's corporate charter, by-laws or other governing documents or any
agreement or other instrument to which the Company is a party or by which
it may be bound. Neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives rise
to any rights, other than those which have been waived or satisfied and
other than as described in the Prospectus, for or relating to the
registration of any shares of Common Stock or other securities of the
Company. The capitalization of the Company as of June 29, 1996 is as set
forth in the Prospectus and the Common Stock conforms to the description
thereof contained in the Prospectus. All of the outstanding shares of
capital stock of each Subsidiary (as defined in Section 13) of the Company
have been duly authorized and validly issued, are fully paid and
nonassessable and are owned directly or indirectly by the Company, free and
clear of any claim, lien, encumbrance, security interest, restriction upon
voting or transfer or any other claim of any third party.
(f) Except as described in or contemplated by the Registration Statement
and the Prospectus, there has not been any material adverse change in, or
any adverse development which materially affects, the condition (financial
or other), results of operations, business or prospects of the Company and
its Subsidiaries on a consolidated basis from the date as of which
information is given in the Prospectus.
(g) The Company is not, and would not be with the giving of notice or
lapse of time or both, in violation of or in default under, nor will the
execution or delivery hereof or consummation of the transactions
contemplated hereby result in a violation of, or constitute a default
under, the corporate charter, by-laws or other governing documents of the
Company, or any material agreement, indenture or other instrument to which
the Company is a party or by which it is bound, or to which any of its
properties is subject, nor will the performance by the Company of its
obligations hereunder violate any existing law, rule, administrative
regulation or decree of any court or any governmental agency or body having
jurisdiction over the Company or any of its properties, or result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of the Company, which would be material to the Company
and its Subsidiaries taken as a whole. Except for permits and similar
authorizations required under the Securities Act and the securities or
"Blue Sky" laws of certain jurisdictions and for such permits and
authorizations as have been obtained, no consent, approval, authorization
or order of any U.S. court, governmental agency or body or any financial
institution is required in connection with the consummation by the Company
of the transactions contemplated by this Agreement.
(h) This Agreement has been duly authorized, executed and delivered by
the Company.
(i) The Company owns, or has valid rights to use, all items of real and
personal property which are material to the business of the Company and its
Subsidiaries taken as a whole, free and clear of all liens, encumbrances
and claims which may materially interfere with the business, properties,
financial condition or results of operations of the Company on a
consolidated basis.
<PAGE> 5
-5-
(j) Except as described in the Prospectus, there is no litigation or
governmental proceeding to which the Company or Thermo Instrument or Thermo
Electron is a party or to which any property of the Company is subject or
which is pending or, to the knowledge of the Company, Thermo Instrument or
Thermo Electron, contemplated against the Company or Thermo Instrument that
is required to be disclosed in the Prospectus and that is not so disclosed.
(k) The Company is not in violation of any law, ordinance, governmental
rule or regulation or court decree to which it is subject, which violation
could have a material adverse effect on the condition (financial or other),
results of operations, business or prospects of the Company and its
Subsidiaries on a consolidated basis.
(l) The Company owns or possesses adequate licenses or other rights to
use all intellectual property rights, including patents and trademarks,
necessary to conduct its business as described or referred to in the
Prospectus, except where such failure, singularly or in the aggregate would
not have a material adverse effect on the Company and its Subsidiaries on a
consolidated basis, and, except as disclosed in the Prospectus, neither
Thermo Electron, Thermo Instrument nor the Company has received any notice
of infringement of or conflict with (or knows of any such infringement of
or conflict with) rights or claims of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how, that if the
subject of an unfavorable decision, ruling or finding, would result in a
material adverse effect upon the Company and its Subsidiaries on a
consolidated basis, and, except as disclosed in the Prospectus, all
products or processes referred to in the Prospectus and relating to the
business of the Company now conducted by it do not infringe upon or
conflict with any right or patent, or with any discovery, invention,
product or process which is the subject of any patent application known to
the Company or Thermo Electron, in a manner which would materially and
adversely affect the Company and its Subsidiaries on a consolidated basis.
(m) Each of the Corporate Services Agreement between the Company and
Thermo Electron (the "Services Agreement"), and the other agreements
between the Company and Thermo Instrument or Thermo Electron pursuant to
which the Company was initially organized and capitalized (collectively,
the "Organization Agreements"), and the Tax Allocation Agreement between
Thermo Electron and the Company (all of the foregoing agreements being
referred to herein as the "Inter-corporate Agreements") has been duly and
validly authorized, executed and delivered by the Company and is the valid
and binding agreement of the Company enforceable in accordance with its
terms, except as provided by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally and subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) (collectively, "applicable
bankruptcy laws"). The execution, delivery and performance of the
Inter-corporate Agreements by the Company, the consummation of the
transactions therein contemplated and compliance with 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
<PAGE> 6
-6-
bound, or to which any of its properties is subject, and do not and will
not violate any existing law, rule, administrative regulation or decree of
any court or any governmental agency or body having jurisdiction over the
Company or any of its properties, or result in the creation or imposition
of any lien, charge, claim or encumbrance upon any property or asset of the
Company, which would be material to the Company and its Subsidiaries taken
as a whole. No consent, approval, authorization or order of any court,
governmental agency or body or financial institution is required in
connection with the consummation of the transactions contemplated by such
Inter-corporate Agreements.
(n) Neither the Company nor Thermo Electron nor Thermo Instrument or any
other Subsidiary of Thermo Electron has taken and none of such companies
shall take, directly or indirectly, any action designed to cause or result
in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of
Common Stock to facilitate the sale or resale of the Shares.
(o) The Shares have been approved for listing on the American Stock
Exchange, subject only to official notice of issuance.
1A. REPRESENTATIONS AND WARRANTIES OF THERMO INSTRUMENT AND THERMO
ELECTRON. Thermo Instrument and Thermo Electron each represent and warrant to,
and agree with, each Underwriter that:
(a) Each of Thermo Instrument and Thermo Electron has been duly
organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, with full power and
authority (corporate and other) to own or lease its properties and conduct
its business, and is duly qualified to do business and is in good standing
in each jurisdiction in which the character of the business conducted by it
or the location of the properties owned or leased by it makes such
qualification necessary, except where the failure to so qualify or be in
good standing would not have a material adverse effect on Thermo Electron
and its Subsidiaries taken as a whole.
(b) There has not been any material adverse change in, or any adverse
development which materially affects, the condition (financial or other),
results of operations, business or prospects of Thermo Electron and its
Subsidiaries taken as a whole, from the date as of which information is
given in the most recent quarterly or annual report filed by Thermo
Electron pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except any as may have been disclosed to the public.
(c) Except as described in their filings with the Commission under the
Exchange Act, neither Thermo Instrument nor Thermo Electron is, nor with
the giving of notice or lapse of time or both would be, in violation of or
in default under, nor will the execution or delivery hereof or consummation
of the transactions contemplated hereby result in a violation of, or
constitute a default under, the corporate charter, by-laws or other
governing documents of Thermo Instrument or Thermo Electron, or any
material agreement, indenture or other instrument to which Thermo
Instrument or Thermo Electron is a party or by which any of
<PAGE> 7
-7-
them is bound, or to which any of their properties is subject, nor will the
performance by Thermo Instrument or Thermo Electron of its obligations
hereunder violate any existing law, rule, administrative regulation or
decree of any court or any governmental agency or body having jurisdiction
over Thermo Instrument or Thermo Electron or any of their respective
properties, or result in the creation or imposition of any lien, charge,
claim or encumbrance upon any property or asset of Thermo Instrument or
Thermo Electron, which would be material to Thermo Electron and its
Subsidiaries taken as a whole. Except for permits and similar
authorizations required under the Securities Act and the securities or
"Blue Sky" laws of certain jurisdictions and for such permits and
authorizations as have been obtained, no consent, approval, authorization
or order of any court, governmental agency or body or financial institution
is required in connection with the consummation by Thermo Instrument and
Thermo Electron of the transactions contemplated by this Agreement.
(d) This Agreement has been duly authorized, executed and delivered by
Thermo Instrument and Thermo Electron.
(e) Thermo Instrument owns, and will own as of each Closing Date (as
defined below), of record and beneficially, the number of shares of Common
Stock of the Company set forth in the Prospectus, free and clear of any
liens, encumbrances, claims or restrictions, except that certain of such
shares are reserved for issuance pursuant to stock option and other benefit
plans under which options to purchase Common Stock of the Company owned by
Thermo Instrument are granted to certain employees, directors or
consultants of Thermo Electron and its Subsidiaries.
(f) The most recent Annual Report on Form 10-K of Thermo Instrument and
of Thermo Electron and any subsequent reports filed pursuant to the
Exchange Act complied as of the date thereof in all material respects with
the Exchange Act and the rules and regulations thereunder.
(g) The transfer by Thermo Instrument to the Company of certain stock
and/or assets, as described in the Prospectus and in the Organization
Agreements, has been completed by all required corporate and other action.
Each of the Inter-corporate Agreements to which Thermo Instrument is a
party has been duly and validly authorized, executed and delivered by
Thermo Instrument and is the valid and binding agreement of Thermo
Instrument enforceable in accordance with its terms, except as provided by
applicable bankruptcy laws. The execution, delivery and performance of each
of the Inter-corporate Agreements to which Thermo Instrument is a party by
Thermo Instrument, the consummation of the transactions therein
contemplated and compliance with the terms thereof do not and will not
result in a violation of, or constitute a default under, the corporate
charter, by-laws or other governing documents of Thermo Instrument, or any
agreement, indenture or other instrument to which Thermo Instrument is a
party or by which it is bound, or to which any of its properties is
subject, and do not and will not violate any existing law, rule,
administrative regulation or decree of any court or any governmental agency
or body having jurisdiction over Thermo Instrument or any of its
properties, or result in the creation or
<PAGE> 8
-8-
imposition of any lien, charge, claim or encumbrance upon any property or
asset of Thermo Instrument, which would be material to Thermo Instrument.
No consent, approval, authorization or order of any court, governmental
agency or body or financial institution is required in connection with the
consummation by Thermo Instrument of the transactions contemplated by the
Inter-corporate Agreements to which Thermo Instrument is a party, except
such as have been obtained.
(h) The Services Agreement has been duly and validly authorized,
executed and delivered by Thermo Electron and is the valid and binding
agreement of Thermo Electron, enforceable in accordance with its terms.
1B. REPRESENTATIONS AND WARRANTIES OF NATWEST SECURITIES LIMITED.
NatWest Securities Limited represents and agrees that (i) it has not offered or
sold and will not offer or sell any Shares to persons in the United Kingdom
prior to admission of the Shares to listing in accordance with Part IV of the
Financial Services Act 1986 (the "Act") except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purpose of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 or the Act, (ii) it has complied and will
comply with all applicable provisions of the Act with respect to anything done
by it in relation to the Shares in, from or otherwise involving the United
Kingdom and (iii) it has only issued or passed on, and will only issue or pass
on, in the United Kingdom any document received by it in connection with the
issue of the Shares, other than any document which consists of or any part of
listing particulars, supplementary listing particulars or any other document
required or permitted to be published by listing rules under Part IV of the Act,
to a person who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) (No.2)
Order 1995 or is a person to whom the document may otherwise lawfully
be issued or passed on.
2. PURCHASE OF THE SHARES BY THE UNDERWRITERS. (a) Subject to the terms
and conditions and upon the basis of the representations and warranties herein
set forth, the Company agrees to issue and sell to the Underwriters the Firm
Shares and each of the Underwriters agrees, severally and not jointly, to
purchase at a price of $_______ per Share, the number of Firm Shares set forth
opposite such Underwriter's name in Schedule I hereto. The Underwriters agree to
offer the Firm Shares to the public as set forth in the Prospectus.
(b) The Company hereby grants to the Underwriters an option to
purchase from the Company, solely for the purpose of covering over-allotments in
the sale of Firm Shares, all or any portion of the Option Shares for a period of
thirty (30) days from the date hereof at the purchase price per Share set forth
above. Option Shares shall be purchased from the Company, severally and not
jointly, for the accounts of the several Underwriters in proportion to the
number of Firm Shares set forth opposite such Underwriter's name in Schedule I
hereto, except that the respective purchase obligations of each Underwriter
shall be adjusted by the Representatives so that no Underwriter shall be
obligated to purchase Option Shares other than in 100-share quantities.
<PAGE> 9
-9-
3. DELIVERY OF AND PAYMENT FOR THE SHARES. Delivery of certificates for
the Firm Shares and certificates for the Option Shares, if the option to
purchase the same is exercised on or before the second Business Day (as defined
in Section 13 hereof) prior to the First Closing Date (as defined below), to be
purchased by the Underwriters from the Company and payment therefor shall be
made at the offices of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston,
Massachusetts 02110 (or such other place as mutually may be agreed upon), at
10:00 A.M., Eastern time, on the third business day after the date of this
Agreement (the "First Closing Date").
The option to purchase Option Shares from the Company granted in Section
2 hereof may be exercised during the term thereof by written notice to the
Company from the Representatives. Such notice shall set forth the aggregate
number of Option Shares as to which the option is being exercised and the time
and date, not earlier than either the First Closing Date or the second Business
Day after the date on which the option shall have been exercised nor later than
the third Business Day after the date of such exercise, as determined by the
Representatives, when the Option Shares are to be delivered (the "Option Closing
Date"). Delivery and payment for such Option Shares are to be at the offices set
forth above for delivery and payment of the Firm Shares. (The First Closing Date
and the Option Closing Date are herein individually referred to as a "Closing
Date" and collectively referred to as the "Closing Dates.")
Delivery of certificates for the Shares shall be made by or on behalf of
the Company to you, for the respective accounts of the Underwriters, against
payment by you, for the several accounts of the Underwriters, of the purchase
price therefor by certified or official bank check payable in New York Clearing
House funds to the order of the Company. The certificates for the Shares shall
be registered in such names and denominations as you shall have requested at
least two full Business Days prior to the applicable Closing Date, and shall be
made available for checking and packaging at a location in New York, New York as
may be designated by you at least one full Business Day prior to such Closing
Date. Time shall be of the essence and delivery at the time and place specified
in this Agreement is a further condition to the obligations of each Underwriter.
4. COVENANTS OF THE COMPANY, THERMO INSTRUMENT AND THERMO ELECTRON. The
Company, Thermo Instrument and Thermo Electron, jointly and severally, covenant
and agree with each Underwriter that:
(a) The Company shall comply with the provisions of, and make all
requisite filings with the Commission pursuant to, Rule 430A and Rule
424(b) of the Rules and Regulations and shall notify you promptly (in
writing, if requested) of all such filings. The Company shall notify you
promptly of any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for
additional information; the Company shall prepare and file with the
Commission, promptly upon your request, any amendments or supplements to
the Registration Statement or the Prospectus which, in your opinion, may be
necessary or advisable in connection with the distribution of the Shares;
and the Company shall not file any amendment or supplement to the
Registration Statement
<PAGE> 10
-10-
or the Prospectus, which filing is not consented to by you after reasonable
notice thereof, such consent not to be unreasonably withheld or delayed.
The Company shall advise you promptly of its receipt of notice of the
issuance by the Commission or any state or other regulatory body of any
stop order or other order suspending the effectiveness of the Registration
Statement, suspending or preventing the use of any Preliminary Prospectus
or the Prospectus or suspending the qualification of the Shares for
offering or sale in any jurisdiction, or of the institution of any
proceedings for any such purpose; and the Company shall use its best
efforts to prevent the issuance of any stop order or other such order and,
should a stop order or other such order be issued, to obtain as soon as
possible the lifting thereof.
(b) The Company shall furnish to each of the Representatives and to
counsel for the Underwriters a signed copy of the Registration Statement as
originally filed and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith, and shall furnish to
the Underwriters such number of conformed copies of the Registration
Statement, as originally filed and each amendment thereto (excluding
exhibits other than this Agreement), the Prospectus and all amendments and
supplements to any of such documents in each case as soon as available and
in such quantities as the Representatives may from time to time reasonably
request. To the extent applicable, the copies of the Registration Statement
and each amendment thereto (including all exhibits filed therewith), any
Preliminary Prospectus or Prospectus (in each case, as amended or
supplemented) furnished to the Representative and counsel to the
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(c) Within the time during which a prospectus relating to the Shares is
required to be delivered under the Securities Act, the Company shall comply
with all requirements imposed upon it by the Securities Act, as now and
hereafter amended, and by the Rules and Regulations, as from time to time
in force, so far as is necessary to permit the continuance of sales of or
dealings in the Shares as contemplated by the provisions hereof and by the
Prospectus. If during such period any event occurs as a result of which the
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend
the Registration Statement or to supplement the Prospectus in order to
comply with the Securities Act or to file any document, the Company shall
promptly notify you and shall amend the Registration Statement or
supplement the Prospectus or file such document (at the expense of the
Company) so as to correct such statement or omission or to effect such
compliance.
(d) The Company shall take or cause to be taken all necessary action and
furnish to whomever you may direct such information as may be required in
qualifying the Shares for sale under the laws of such jurisdictions as you
shall designate, and to continue such qualifications in effect for as long
as may be necessary for the distribution of the Shares;
<PAGE> 11
-11-
except that in no event shall the Company be obligated in connection
therewith to qualify as a foreign corporation or to execute a general
consent to service of process.
(e) The Company shall make generally available to its security holders
(and shall deliver to the Representatives), in the manner contemplated by
Rule 158(b) of the Rules and Regulations or otherwise, as soon as
practicable but in any event not later than 45 days after the end of its
fiscal quarter in which the first anniversary date of the Effective Date
occurs, an earnings statement satisfying the requirements of Section 11(a)
of the Securities Act and covering a period of at least 12 consecutive
months beginning after the Effective Date.
(f) The Company, Thermo Instrument and Thermo Electron shall not, during
the 180-day period following the date of the Prospectus, except with your
prior written consent, offer for sale, sell or otherwise dispose of,
directly or indirectly, any shares of Common Stock (except for the issuance
of shares of Common Stock pursuant to existing stock option, purchase and
compensation plans, or upon conversion of any currently outstanding
convertible securities described in the Prospectus, except for sales of
shares of Common Stock by the Company to Thermo Instrument), or sell or
grant options, rights or warrants with respect to any shares of Common
Stock (other than the grant of options pursuant to existing stock option,
purchase and compensation plans), otherwise than in accordance with this
Agreement or as contemplated in the Prospectus. The Company, Thermo
Instrument and Thermo Electron will not permit any employee stock option,
director stock option or other stock option to purchase Common Stock of the
Company granted by it to be exercised, and the Common Stock issued upon
exercise of the stock option to be sold, prior to the expiration of the
180-day period following the date of this Prospectus, without your prior
written consent. The Company will not accelerate the date on which its
outstanding convertible subordinated debentures may first be converted into
Common Stock according to their current terms, without your prior written
consent.
(g) The Company shall take such steps as shall be necessary to ensure
that neither the Company nor any Subsidiary shall become an "investment
company" within the meaning of such term under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
(h) Whether or not this Agreement is terminated or the sale of the
Shares to the Underwriters is consummated, the Company shall pay or cause
to be paid (A) all expenses (including stock transfer taxes) incurred in
connection with the delivery to the several Underwriters of the Shares, (B)
all fees and expenses (including, without limitation, fees and expenses of
the Company's accountants and counsel, but excluding fees and expenses of
counsel for the Underwriters) in connection with the preparation, printing,
filing, delivery and shipping of the Registration Statement (including the
financial statements therein and all amendments and exhibits thereto), each
Preliminary Prospectus, the Prospectus and any amendments or supplements of
the foregoing and the printing, delivery and shipping of this Agreement and
other underwriting documents, including, but not limited to, any
Underwriters' Questionnaires, Underwriters' Powers of Attorney, Blue Sky
Memoranda, Agreements Among Underwriters and Selected Dealer Agreements,
(C) all filing fees and
<PAGE> 12
-12-
fees and disbursements of counsel to the Underwriters incurred in
connection with qualification of the Shares under state securities laws as
provided in Section 4(d) hereof, (D) the filing fee of the National
Association of Securities Dealers, Inc., (E) any applicable listing or
other fees, (F) the cost of printing certificates representing the Shares,
(G) the cost and charges of any transfer agent or registrar, and (H) all
other costs and expenses incident to the performance of its obligations
hereunder for which provision is not otherwise made in this Section. It is
understood, however, that, except as provided in this Section, Section 6
and Section 8 hereof, the Underwriters shall pay all of their own costs and
expenses, including the fees of their counsel, stock transfer taxes due
upon resale of any of the Shares by them and any advertising expenses
incurred in connection with any offers they may make. If the sale of the
Shares provided for herein is not consummated by reason of any failure,
refusal or inability on the part of the Company, Thermo Instrument or
Thermo Electron to perform any agreement on its part to be performed or
because any other condition of the Underwriters' obligations hereunder is
not fulfilled or if the Underwriters shall decline to purchase the Shares
for any reason permitted under this Agreement, the Company shall reimburse
the several Underwriters for all reasonable out-of-pocket disbursements
(including fees and disbursements of counsel) incurred by the Underwriters
in connection with any investigation or preparation made by them in respect
of the marketing of the Shares or in contemplation of the performance by
them of their obligations hereunder.
(i) The Company shall on or prior to each Closing Date use its best
efforts to cause the Shares to be purchased on such date by the
Underwriters to be approved for listing on the American Stock Exchange,
subject only to official notice of issuance, and shall take such action as
shall be necessary to comply with the rules and regulations of the American
Stock Exchange with respect to such Shares.
(j) During a period of five years from the Effective Date, the Company
shall furnish to the Representatives copies of all reports or other
communications furnished to shareholders and copies of any reports or
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed. To the extent applicable, such reports or documents
shall be identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters hereunder are subject to the accuracy, as of the date
hereof and each Closing Date (as if made at such Closing Date), of the
representations and warranties of the Company, Thermo Instrument and Thermo
Electron contained herein, to the performance by the Company, Thermo Instrument
and Thermo Electron of their respective obligations hereunder and to the
following additional conditions:
(a) The Prospectus shall have been filed with the Commission in a timely
fashion in accordance with Section 4(a) hereof, all post-effective
amendments to the Registration Statement shall have become effective, all
filings required by Rule 430A and Rule 424 of
<PAGE> 13
-13-
the Rules and Regulations shall have been made and no such filings shall
have been made without the consent of the Representatives; no stop order
suspending the effectiveness of the Registration Statement or any amendment
or supplement thereto shall have been issued; no proceedings for the
issuance of any such order shall have been initiated or threatened; and any
request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been
disclosed to you and complied with to your satisfaction.
(b) No Underwriter shall have been advised by the Company, Thermo
Instrument or Thermo Electron or shall have discovered and disclosed to the
Company that the Registration Statement, or the Prospectus or any amendment
or supplement thereto, contains an untrue statement of fact which in your
reasonable opinion, or in the reasonable opinion of counsel for the
Underwriters, is material, or omits to state a fact which, in your
reasonable opinion, or in the reasonable opinion of counsel to the
Underwriters, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) On or prior to each Closing Date, you shall have received from
Testa, Hurwitz & Thibeault, LLP, counsel for the Underwriters, such opinion
or opinions with respect to corporate proceedings by the Company, Thermo
Instrument and Thermo Electron, the form of the Registration Statement and
Prospectus (other than financial statements and other financial or
statistical data), the validity of the Shares, and other related matters as
you may reasonably request and such counsel shall have received such
documents and information as they reasonably request to enable them to pass
upon such matters.
(d) On each Closing Date there shall have been furnished to you the
opinion (addressed to the Underwriters) of Seth H. Hoogasian, Esq., General
Counsel of Thermo Electron, Thermo Instrument and the Company, dated such
Closing Date and in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) Each of the Company and its Significant Subsidiaries has been
duly organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, with full
corporate power and authority to own or lease its properties and conduct
its business as described in the Prospectus, and is duly qualified to do
business and is in good standing in each jurisdiction in which the
character of the business conducted by it or the location of the
properties owned or leased by it makes such qualification necessary,
except where the failure to so qualify or be in good standing would not
have a material adverse effect on the Company and its Subsidiaries taken
as a whole.
(ii) Each of Thermo Electron and its Significant Subsidiaries (as
defined in Section 13) has been duly organized and is validly existing
as a corporation in good 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
<PAGE> 14
-14-
jurisdiction in which the character of the business conducted by it or
the location of the properties owned or leased by it makes such
qualification necessary, except where the failure to so qualify or be in
good standing would not have a material adverse effect on Thermo
Electron and its Subsidiaries taken as a whole.
(iii) All of the outstanding shares of Common Stock have been and
the Shares, upon issuance and delivery and payment therefor in the
manner herein described, will be, duly authorized, validly issued, fully
paid and nonassessable. There are no preemptive or other rights to
subscribe for or to purchase, or any restriction upon the voting or
transfer of, any of the Shares pursuant to the Company's corporate
charter, by-laws, other governing documents, or any agreement or other
instrument known to such counsel to which the Company or a Subsidiary
thereof is a party or by which the Company or a Subsidiary thereof may
be bound or to which any of their respective properties is subject; and,
to the best of such counsel's knowledge, neither the filing of the
Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights for or relating
to the registration of any shares of Common Stock except such as have
been waived or satisfied, other than as described in the Prospectus. The
Common Stock conforms in all material respects to the description
thereof contained in the Prospectus. All of the outstanding shares of
capital stock of each Significant Subsidiary of the Company have been
duly authorized and validly issued, are fully paid and nonassessable and
are owned directly or indirectly by the Company free and clear of any
claim, lien, encumbrance or security interest known to such counsel
(except for certain obligations of the Company pursuant to stock and
benefit plans maintained primarily for the benefit of employees,
officers, directors and consultants of the Company and its
Subsidiaries).
(iv) Each of the Company and its Significant Subsidiaries is not,
nor with the giving of notice or lapse of time or both would be, in
violation of or in default under, nor will the execution or delivery
hereof or consummation of the transactions contemplated hereby result in
a violation of, or constitute a default under, the corporate charter,
by-laws or other governing documents of the Company or any of its
Significant Subsidiaries or, to the best knowledge of such counsel, any
material agreement, indenture or other instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries may be bound, or to which any of the properties of the
Company or any of its Subsidiaries is subject, nor, to best of such
counsel's knowledge, will the performance by the Company of its
obligations hereunder violate any existing law, rule, administrative
regulation or decree of any court or any governmental agency or body
having jurisdiction over the Company or any of its Subsidiaries or the
properties of the Company or any of its Subsidiaries, or, to the best
knowledge of such counsel, result in the creation or imposition of any
lien, charge, claim or encumbrance upon the properties or assets of the
Company or any of its Subsidiaries which would be material to the
Company and its Subsidiaries taken as a whole. Except for permits and
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
<PAGE> 15
-15-
or body or financial institution is required in connection with the
consummation by the Company, Thermo Instrument or Thermo Electron of the
transactions contemplated by this Agreement.
(v) Each of Thermo Electron and its Significant Subsidiaries is
not, nor with the giving of notice or lapse of time or both would be, in
violation of or in default under, nor will the execution or delivery
hereof or consummation of the transactions contemplated hereby result in
a violation of, or constitute a default under, the corporate charter,
by-laws or other governing documents of Thermo Electron or any of its
Significant Subsidiaries or, except as described in the Exchange Act
filings of Thermo Instrument and Thermo Electron, to the best knowledge
of such counsel, any material agreement, indenture, or other instrument
to which Thermo Electron or any of its Significant Subsidiaries is a
party or by which Thermo Electron or any of it Significant Subsidiaries
may be bound, or to which any of the properties of Thermo Electron or
any of its Significant Subsidiaries is subject, nor will the performance
by Thermo Electron of its obligations hereunder violate any existing
law, rule, administrative regulation or decree of any court or any
governmental agency or body having jurisdiction over Thermo Electron or
any of its Significant Subsidiaries or the properties of Thermo Electron
or any of its Significant Subsidiaries, or, to the best knowledge of
such counsel, result in the creation or imposition of any lien, charge,
claim or encumbrance upon the properties or assets of Thermo Electron or
any of its Significant Subsidiaries, which would be material to Thermo
Electron and its Subsidiaries taken as a whole.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company, Thermo Instrument and Thermo Electron.
(vii) Each of the Inter-corporate Agreements has been duly
authorized, executed and delivered by Thermo Instrument and Thermo
Electron, as the case may be, and is the valid and binding agreement of
Thermo Instrument and Thermo Electron enforceable in accordance with its
terms except as provided by applicable bankruptcy laws. The execution,
delivery and performance of each of the Inter-corporate Agreements by
each of the parties thereto, the consummation of the transactions
therein contemplated and compliance with the terms thereof do not and
will not result in a violation of, or constitute a default under the
corporate charter, by-laws or other governing documents of Thermo
Instrument or Thermo Electron, or any material agreement, indenture or
other instrument known to such counsel to which Thermo Instrument or
Thermo Electron is a party or by which any of them is bound, or to which
any of their properties is subject and do not and will not violate any
existing law, rule, administrative regulation or decree of any court or
any governmental agency or body having jurisdiction over Thermo
Instrument or Thermo Electron or any of their properties, or, to the
best of such counsel's knowledge, result in the creation or imposition
of any lien, charge, claim or encumbrance upon any property or asset of
Thermo Instrument or Thermo Electron, which would be material to Thermo
Electron and its Subsidiaries taken as a whole. Except for permits and
similar authorizations required under the Securities Act and the
securities or "Blue Sky" laws of certain jurisdictions and for such
permits and authorizations as have been
<PAGE> 16
-16-
obtained, no consent, approval, authorization or order of any court,
governmental agency or body or, to the knowledge of such counsel,
financial institution is required in connection with the consummation of
the transactions contemplated by the Inter-corporate Agreements.
(viii) The Registration Statement and all post-effective amendments
thereto have become effective under the Securities Act and, to the best
of such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending before or contemplated
by the Commission. All filings required by Rule 424 and Rule 430A of the
Rules and Regulations have been made; the Registration Statement as of
the Effective Date, and the Prospectus and any amendment or supplement
thereto as of their respective dates, complied as to form in all
material respects with the requirements of the Securities Act and the
Rules and Regulations (it being understood that such counsel need
express no opinion on the financial statements or other financial and
statistical data included therein). Such counsel has no reason to
believe that (i) the Registration Statement, as of its Effective Date,
or any amendment thereto, at the time it became effective contained any
untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading, or (ii) the Prospectus or any
supplement or amendment thereto, or any supplement or amendment thereto,
on such Closing Date or at the time such Prospectus or supplement or
amendment thereto was issued contains or contained any untrue statement
of a material fact or omits or omitted to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express
no opinion with respect to the financial statements or other financial
and statistical data included in the Registration Statement and the
Prospectus).
(ix) To the best knowledge of such counsel, all descriptions in
the Prospectus of statutes, regulations, legal or governmental
proceedings, contracts and other documents are accurate in all material
respects, and fairly present in all material respects the information
required to be shown and such counsel does not know of any contracts or
documents of a character required to be summarized or described therein
or to be filed as exhibits thereto that are not so summarized, described
or filed, nor does such counsel know of any pending or threatened
litigation or any governmental proceeding, statute or regulation
required to be described in the Prospectus that is not so described.
In rendering the foregoing opinion, counsel may rely, as to matters of
fact, upon certificates of officers of the Company, Thermo Instrument and
Thermo Electron and certificates of public officials. Certificates so
relied upon shall be furnished to you and shall be satisfactory to you and
your counsel.
<PAGE> 17
-17-
(e) There shall have been furnished to you a certificate, dated such
Closing Date and addressed to you, signed by the President or a Vice
President and by the Treasurer or Secretary of the Company to the effect
that: (i) the representations and warranties of the Company contained in
this Agreement are true and correct, as if made at and as of such Closing
Date, and the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or prior to
such Closing Date; (ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose
have been initiated or, to the knowledge of the signers of such
certificate, threatened; (iii) all filings required by Rule 424 and Rule
430A of the Rules and Regulations have been made; (iv) the signers of said
certificate have carefully examined the Registration Statement and the
Prospectus, and any amendments or supplements thereto and such documents
contain all statements and information required to be included therein, and
do not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; and (v) since the effective date of the
Registration Statement, there has occurred no event required to be set
forth in an amendment or supplement to the Registration Statement or the
Prospectus which has not been so set forth.
(f) There shall have been furnished to you certificates, dated such
Closing Date and addressed to you, signed by the President or a Vice
President and by the Treasurer or Secretary of each of Thermo Instrument
and Thermo Electron to the effect that: (i) the representations and
warranties of Thermo Electron or Thermo Instrument (as applicable)
contained in this Agreement are true and correct, as if made at and as of
such Closing Date, and Thermo Electron and Thermo Instrument (as
applicable) has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to such
Closing Date; (ii) the signers of said certificate have carefully examined
the Registration Statement and the Prospectus, and any amendments or
supplements thereto, and such documents contain all statements and
information required to be included therein and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading; and (iii) since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amendment or supplement to the Registration Statement or the Prospectus
which has not been so set forth.
(g) Since the Effective Time, neither the Company nor any of the
Subsidiaries of the Company shall have sustained any loss by fire, flood,
accident or other calamity, or shall have become a party to or the subject
of any litigation, which is material to the Company and its Subsidiaries
taken as a whole, nor shall there have been a material adverse change in
the general affairs, operations, business, prospects, key personnel,
capitalization, financial condition or net worth of the Company and its
Subsidiaries taken as a whole, whether or not arising in the ordinary
course of business, which loss, litigation or change, in your
<PAGE> 18
-18-
judgment, shall render it inadvisable to proceed with the payment for and
delivery of the Shares.
(h) On the date of this Agreement and on each Closing Date you shall
have received a letter from each accounting firm whose report appears in
the Prospectus, dated the date of this Underwriting Agreement or such
Closing Date, as the case may be, and addressed to you, confirming that
they are independent certified public accountants within the meaning of the
Securities Act and the applicable published Rules and Regulations, and
stating, as of the date of such letter (or, with respect to matters
involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus, as of a date
not more than five days prior to the date of each such letter), the
conclusions and findings of each such firm with respect to the financial
information and other matters covered by its letter delivered to you
concurrently with the execution of this Agreement, and with respect to each
letter delivered on a Closing Date confirming the conclusions and findings
set forth in such prior letter.
(i) You shall have been furnished with such additional documents and
certificates as you or counsel for the Underwriters may reasonably request.
(j) The Shares to be purchased on such Closing Date by the Underwriters
shall be approved for listing on the American Stock Exchange, subject only
to official notice of issuance.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and to counsel for the Underwriters. The Company,
Thermo Instrument and Thermo Electron shall furnish to you such conformed copies
of such opinions, certificates, letters and other documents as you shall
reasonably request. If any of the conditions specified in this Section 5 shall
not have been fulfilled when and as required by this Agreement, this Agreement
and all obligations of the Underwriters hereunder may be canceled at, or at any
time prior to, such Closing Date, by you. Any such cancellation shall be without
liability of the Underwriters to the Company, Thermo Instrument or Thermo
Electron. Notice of such cancellation shall be given to the Company in writing,
or by telegraph or telephone and confirmed in writing.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company, Thermo Instrument and Thermo Electron, jointly and
severally, shall indemnify and hold harmless each Underwriter against any
loss, claim, damage or liability (or any action in respect thereof), joint
or several, to which such Underwriter may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage or
liability (or action in respect thereof) arises out of or is based upon (i)
any untrue statement or alleged untrue statement made by the Company,
Thermo Instrument or Thermo Electron in Section 1 hereof or by Thermo
Instrument or Thermo Electron in Section 1A hereof, or (ii) any untrue
statement or alleged untrue statement of a material fact contained
<PAGE> 19
-19-
(A) in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement to any thereof, or (B) in any
"Blue Sky" application or other document executed by the Company
specifically for that purpose or based upon any written information
furnished by the Company filed in any state or other jurisdiction in order
to qualify any or all of the Shares under the securities laws thereof (any
such application, document or information being hereinafter called "Blue
Sky Information"), or (iii) the omission or alleged omission to state in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or
any amendment or supplement to any thereof, or in any Blue Sky Information
a material fact required to be stated therein or necessary to make the
statements therein not misleading or (iv) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Shares or the offering contemplated hereby,
and which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon matters covered by clause
(ii) or (iii) above (provided that the Company, Thermo Instrument and
Thermo Electron shall not be liable under this clause (iv) to the extent
that it is determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, liability or action resulted
directly or indirectly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its gross negligence,
willful misconduct or breach of this Agreement); and shall reimburse each
Underwriter promptly after receipt of invoices from such Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending against or appearing as a
third-party witness in connection with any such loss, claim, damage,
liability or action, notwithstanding the possibility that payments for such
expenses might later be held to be improper, in which case the person
receiving them shall promptly refund them; provided, however, that the
Company, Thermo Instrument and Thermo Electron shall not be liable in any
such case to the extent, but only to the extent, that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company
through you by or on behalf of any Underwriter specifically for use in the
preparation of the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement to any thereof, or any Blue Sky
Information; and provided, further, that as to any Preliminary Prospectus
this indemnity agreement shall not inure to the benefit of any Underwriter
on account of any loss, claim, damage, liability or action arising from the
sale of Shares to any person by that Underwriter if that Underwriter failed
to send or give a copy of the Prospectus, as the same may be amended or
supplemented, to that person within the time required by the Securities Act
and the Rules and Regulations, and the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact in such Preliminary Prospectus was corrected in the
Prospectus, unless such failure resulted from non-compliance by the Company
with Section 4(b).
(b) Each Underwriter severally, but not jointly, shall indemnify and
hold harmless the Company, Thermo Instrument and Thermo Electron against
any loss, claim, damage or liability (or action in respect thereof) to
which the Company, Thermo Instrument or Thermo Electron may become subject,
under the Securities Act or otherwise, insofar as such loss,
<PAGE> 20
-20-
claim, damage or liability (or action in respect thereof) arises out of or
is based upon (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement to any thereof,
or (B) in any Blue Sky Information, or (ii) the omission or alleged
omission to state in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement to any thereof,
or in any Blue Sky Information a material fact required to be stated
therein or necessary to make the statements therein not misleading; and
shall reimburse any legal or other expenses reasonably incurred by the
Company, Thermo Instrument or Thermo Electron promptly after receipt of
invoices from the Company, Thermo Instrument or Thermo Electron in
connection with investigating or defending against any such loss, claim,
damage, liability or action, notwithstanding the possibility that payments
for such expenses might later be held to be improper, in which case the
Company, Thermo Instrument and Thermo Electron shall promptly refund them;
provided, however, that such indemnification shall be available in each
such case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through you by or on behalf of such Underwriter specifically for
use in the preparation thereof.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 6 except to the extent it has been prejudiced in any material
respect by such failure or from any liability which it may have to an
indemnified party otherwise than under this Section 6. If any such claim or
action shall be brought against an indemnified party, and it shall notify
the indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it or they wish, jointly with
any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under such subsection
for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable costs of
investigation, except that the Representatives shall have the right to
employ counsel to represent you and those other Underwriters who may be
subject to liability arising out of any claim in respect of which indemnity
may be sought by the Underwriters against the Company, Thermo Instrument or
Thermo Electron under such subsection if, in your reasonable judgment, it
is advisable for you and those Underwriters to be represented by separate
counsel, and in that event the fees and expenses of such separate counsel
shall be paid by the indemnifying party or parties; provided, however, in
no event, shall the indemnifying party or parties be responsible for the
expenses of more than one separate counsel for all such indemnified
parties.
<PAGE> 21
-21-
(d) If the indemnification provided for in this Section 6 is unavailable
or insufficient to hold harmless an indemnified party under subsection (a)
or (b) above, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company, Thermo Instrument and Thermo Electron on the one
hand and the Underwriters on the other from the offering of the Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of the Company, Thermo Instrument and Thermo Electron on the one hand
and the Underwriters on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company, Thermo Instrument and Thermo Electron on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus.
Relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by one of the parties and such parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company, Thermo Instrument,
Thermo Electron and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were to be
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which
does not take into account the equitable considerations referred to in the
first sentence of this subsection (d). The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to
in the first sentence of this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending against any action or claim
which is the subject of this subsection (d), subject to the proviso in the
last sentence of subsection (c). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations in this
subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint. Each party entitled to contribution
agrees that upon the service of a summons or other initial legal process
upon it in any action instituted against it in respect of which
contribution may be sought, it shall promptly give written notice of such
service to the party or parties from whom contribution may be sought, but
the omission so to notify such party or parties of any such service shall
not relieve the party from whom contribution may be sought from any
<PAGE> 22
-22-
obligation it may have hereunder or otherwise (except as specifically
provided in subsection (c) hereof).
(f) The obligations of the Company, Thermo Instrument and Thermo Electron
under this Section 6 shall be in addition to any liability which the
Company, Thermo Instrument and Thermo Electron may otherwise have, and
shall extend, upon the same terms and conditions, to each person, if any,
who controls any Underwriter within the meaning of the Securities Act or
the Exchange Act; and the obligations of the Underwriters under this
Section 6 shall be in addition to any liability that the respective
Underwriters may otherwise have, and shall extend, upon the same terms and
conditions, to each director of the Company (including any person who, with
his consent, is named in the Registration Statement as about to become a
director of the Company), to each officer of the Company who has signed the
Registration Statement and to Thermo Instrument and Thermo Electron, and
each other person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act.
7. SUBSTITUTION OF UNDERWRITERS. If any Underwriter defaults in its
obligation to purchase the number of Shares which it has agreed to purchase
under this Agreement, the non-defaulting Underwriters shall be obligated to
purchase (in the respective proportions which the number of Shares set forth
opposite the name of each non-defaulting Underwriter in Schedule I hereto bears
to the total number of Shares set forth in Schedule I hereto) the Shares which
the defaulting Underwriter agreed but failed to purchase; except that the
non-defaulting Underwriters shall not be obligated to purchase any of the Shares
if the total number of Shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase exceed 9.09% of the total number of Shares, and
any non-defaulting Underwriters shall not be obligated to purchase more than
110% of the number of Shares set forth opposite its name in Schedule I hereto
plus the total number of Option Shares purchasable by it pursuant to the terms
of Section 2. If the foregoing maximums are exceeded, the non-defaulting
Underwriters, and any other underwriters satisfactory to you that so agree,
shall have the right, but shall not be obligated, to purchase (in such
proportions as may be agreed upon among them) all of the Shares. If the
non-defaulting Underwriters or the other underwriters satisfactory to you do not
elect to purchase the Shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase, the Agreement shall terminate without liability
on the part of any non-defaulting Underwriter, the Company, Thermo Instrument or
Thermo Electron except for the payment of expenses to be borne by the Company,
Thermo Instrument and Thermo Electron and the Underwriters as provided in
Section 4(h) hereof and the indemnity and contribution agreements of the
Company, Thermo Instrument, Thermo Electron and the Underwriters contained in
Section 6 hereof.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If the other
underwriters satisfactory to you are obligated or agree to purchase the Shares
of a defaulting Underwriter, either you or the Company may postpone the First
Closing Date for up to seven full Business Days in order to effect any changes
that may be necessary in the Registration Statement or the Prospectus or in any
other document or agreement, and to file promptly any amendments or any
supplements to the Registration Statement or the Prospectus which in your
opinion may thereby be made necessary.
<PAGE> 23
-23-
8. TERMINATION.
(a) Until the First Closing Date, this Agreement may be terminated by
you by giving notice as hereinafter provided to the Company, if (i) the
Company, Thermo Instrument or Thermo Electron shall have failed, refused or
been unable, at or prior to the First Closing Date, to perform any
agreement on its part to be performed hereunder, (ii) any other condition
of the obligations of the Underwriters hereunder is not fulfilled, (iii)
trading in securities generally on the New York Stock Exchange or the
American Stock Exchange or the International Stock Exchange of the United
Kingdom or the over-the-counter market shall have been suspended or minimum
prices shall have been established on any of such exchanges or such market
by the Commission or by such exchange or other regulatory body or
governmental authority having jurisdiction, (iv) a banking moratorium shall
have been declared by Federal, New York, United Kingdom or Massachusetts
authorities, or (v) the United States or the United Kingdom is or becomes
engaged in hostilities which result in the declaration of a national
emergency or war, or (vi) there shall have been such a material adverse
change in general economic, political or financial conditions, or the
effect of international conditions on the financial markets in the United
States or the United Kingdom shall be such, as to, in the judgment of a
majority in interest of the several Underwriters, make it inadvisable or
impracticable to proceed with the delivery of the Shares. Any termination
of this Agreement pursuant to this Section 8 shall be without liability on
the part of the Company, Thermo Instrument, Thermo Electron or any
Underwriter, except as otherwise provided in Sections 4(h) and 6 hereof.
Any notice referred to above may be given at the address specified in
Section 10 hereof in writing or by telegraph or telephone, and if by telegraph
or telephone, shall be immediately confirmed in writing.
9. SURVIVAL OF INDEMNITIES, CONTRIBUTION, WARRANTIES AND
REPRESENTATIONS. The agreements contained in Section 6 and the representations,
warranties and agreements of the Company, Thermo Instrument and Thermo Electron
in Sections 1, 1A and 4 shall survive the delivery of the Shares to the
Underwriters hereunder and shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement or any investigation made by
or on behalf of any indemnified party.
10. NOTICES. Except as otherwise provided in this Agreement, (a)
whenever notice is required by the provisions of this Agreement to be given to
the Company, Thermo Instrument or Thermo Electron, such notice shall be in
writing addressed to the Company, Thermo Instrument or Thermo Electron at 81
Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046; and (b) whenever
notice is required by the provisions of the Agreement to be given to the several
Underwriters, such notice shall be in writing addressed to you in care of
NatWest Securities Limited, 135 Bishopsgate, London EC2M3XT, England, Attention:
Syndicate Department.
11. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the outside cover page, the paragraph containing
stabilization information on
<PAGE> 24
-24-
the inside front cover page and the statements under the caption "Underwriting"
in any Preliminary Prospectus and in the Prospectus, constitute the only written
information furnished by or on behalf of any Underwriter referred to in
paragraph (b) of Section 1 hereof and in paragraphs (a) and (b) of Section 6
hereof.
12. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters, the Company, Thermo Instrument and Thermo
Electron, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(a) the representations, warranties, indemnities and agreements of the Company,
Thermo Instrument and Thermo Electron contained in this Agreement shall also be
deemed to be for the benefit of the person or persons, if any, who control any
Underwriter within the meaning of the Securities Act or the Exchange Act and (b)
the indemnity agreement of the Underwriters contained in Section 6 hereof shall
be deemed to be for the benefit of directors of the Company, officers of the
Company who signed the Registration Statement, and any person controlling the
Company, including Thermo Instrument and Thermo Electron. Nothing in this
Agreement shall be construed to give any person, other than the persons referred
to in this paragraph, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
13. DEFINITION OF "BUSINESS DAY", "SUBSIDIARY" AND "SIGNIFICANT
SUBSIDIARY". For purposes of this Agreement, (a) "Business Day" means any day on
which the American Stock Exchange is open for trading, (b) "Subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations and (c) "Significant
Subsidiary" has the meaning set forth in Item 1-02(v) of the Regulation S-X of
the Rules and Regulations.
14. PERFORMANCE BY THE COMPANY. Thermo Electron and Thermo Instrument
agree to cause the Company to perform each of the agreements and obligations of
the Company contained in this Agreement.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
choice of law or conflict of law principles thereof.
16. COUNTERPARTS. This Agreement may be signed in one or more
counterparts, each of which together shall constitute one and the same
agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 25
-25-
Please confirm, by signing and returning to us eight counterparts of
this Agreement, that you are acting on behalf of yourselves and the other
several Underwriters and that the foregoing correctly sets forth the agreement
among the Company, Thermo Instrument, Thermo Electron and the several
Underwriters.
Very truly yours,
THERMO BIOANALYSIS CORPORATION
By:
-------------------------------------
Title:
THERMO INSTRUMENT SYSTEMS INC.
By:
-------------------------------------
Title:
THERMO ELECTRON CORPORATION
By:
-------------------------------------
Title:
Confirmed and accepted as of the
date first above mentioned:
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS INC.
SMITH BARNEY INC.
as Representatives of the several
Underwriters named in Schedule I hereto
By: NATWEST SECURITIES LIMITED
By:
-------------------------------
Authorized Signatory
<PAGE> 26
-26-
<TABLE>
SCHEDULE I
<CAPTION>
Number of Firm
Shares To Be
Underwriter Purchased
----------- ---------
<S> <C>
NatWest Securities Limited
Lehman Brothers Inc.
Smith Barney Inc.
---------
Total.............................................. 1,500,000
=========
</TABLE>
<PAGE> 1
Exhibit 5
September 13, 1996
Thermo BioAnalysis Corporation
504 Airport Road
Santa Fe, New Mexico 87504
Re: Registration Statement on Form S-1 (Registration No. 333-08697)
Relating to Shares of the Common Stock, $.01 par value, of Thermo
BioAnalysis Corporation
------------------------------------------------------------------
Ladies and Gentlemen:
I am General Counsel to Thermo BioAnalysis Corporation, a Delaware
corporation (the "Company"), and have acted as counsel in connection with the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), on Form S-1 (the "Registration Statement") of shares of the Company's
Common Stock, $.01 par value per share (the "Common Stock"), with a proposed
maximum aggregate offering price of $33,120,000. Such shares, together with any
shares of Common Stock registered under a registration statement related to the
offering contemplated by the Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act (a "462(b) Registration
Statement"), are collectively referred to herein as the "Shares."
I or a member of my legal staff have reviewed the corporate proceedings
taken by the Company with respect to the authorization of the issuance of the
Shares. I or a member of my legal staff have also examined and relied upon
originals or copies, certified or otherwise authenticated to my satisfaction, of
all corporate records, documents, agreements or other instruments of the Company
and have made all investigations of law and have discussed with the Company's
representatives all questions of fact that I have deemed necessary or
appropriate.
Based upon and subject to the foregoing, I am of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
corporate good standing under the laws of the State of Delaware.
<PAGE> 2
2. The issuance and sale of the Shares registered pursuant to the
Registration Statement have been duly authorized by the Company and the issuance
and sale of the Shares registered pursuant to a 462(b) Registration Statement
will have been duly authorized by the Company prior to their issuance and sale.
3. The Shares, when issued and sold in accordance with the provisions
of the Underwriting Agreement between the Company and the several Underwriters
named on Schedule I thereto (in the form of Exhibit 1 to the Registration
Statement) will be validly issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement or any 462(b) Registration Statement.
Very truly yours,
Seth H. Hoogasian
General Counsel
SHH/cfb
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo BioAnalysis Corporation:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
September 13, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated July 19, 1996, on our audits of the financial statements of
Dynatech Medical Products Limited. We also consent to the reference to our firm
under the caption "Experts."
Guernsey, Channel Islands
September 13, 1996 COOPERS & LYBRAND
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To DYNEX Technologies Division of Dynatech Corporation:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
September 13, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Affinity Sensors and LabSystems Divisions of Fisons plc:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN
Cambridge, England
September 13, 1996
<PAGE> 1
EXHIBIT 23.6
ST. ONGE STEWARD JOHNSTON AND REENS LLC
986 BEDFORD STREET
STAMFORD, CT 06905-5619
September 13, 1996
Thermo BioAnalysis Corporation
c/o Thermo Electron Corporation
81 Wyman Street
Post Office Box 9046
Waltham, MA 02254-9046
Re: Thermo BioAnalysis Corporation
Dear Sirs:
I hereby consent to the reference to my firm under the captions "Risk
Factors -- Dependence on Patents and Proprietary Rights," "Business -- Patents
and Proprietary Technology" and "Experts" in Thermo BioAnalysis Corporation's
Registration Statement on Form S-1.
Very truly yours,
WESLEY W. WHITMYER, JR.
