<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 2
TO
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
Thermo Voltek Corp.
(Name of Issuer)
Thermo Voltek Corp.
Thermedics Inc.
TV Acquisition Corporation
Thermo Electron Corporation
(Name of Person(s) Filing Statement)
Common Stock, par value $.05 per share
(Title of Class of Securities)
883602 10 4
(CUSIP Number of Class of Securities)
Sandra L. Lambert, Secretary
Thermo Voltek Corp.
c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, Massachusetts 02454-9046
(781) 622-1000
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
with a copy to:
Seth H. Hoogasian, General Counsel
Thermo Voltek Corp.
c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, Massachusetts 02454-9046
(781) 622-1000
This statement is filed in connection with (check the appropriate box):
a. /X/ The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. The filing of a registration statement under the Securities Act of 1933.
c. A tender offer.
d. None of the above.
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Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. / /
Calculation of Filing Fee
<TABLE>
<CAPTION>
Transaction Value* Amount of Filing Fee
------------------ --------------------
<S> <C>
$18,744,950 $3,749
</TABLE>
* Solely for purposes of calculating the filing fee. Assumes purchase of
2,677,850 shares of Common Stock, par value $.05 per share, of Thermo Voltek
Corp. at $7.00 per share.
/X/ Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount previously paid: $3,749
Form or registration no.: Proxy Statement on Schedule 14A
Filing party: Thermo Voltek Corp.
Dates filed: December 3, 1998, January 19, 1999 and February 12,
1999
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This Amendment No. 2 to Rule 13e-3 Transaction Statement (as so
amended, the "Statement") is being filed in connection with the filing by Thermo
Voltek Corp. ("Voltek" or the "Company") with the Securities and Exchange
Commission (the "Commission") on February 12, 1999 of a definitive Proxy
Statement on Schedule 14A (as amended, the "Proxy Statement") in connection with
a special meeting of the stockholders of Voltek. At such meeting, the
stockholders of Voltek will vote upon the adoption of an Agreement and Plan of
Merger dated as of November 24, 1998 (the "Merger Agreement") by and among
Voltek, TV Acquisition Corporation (the "Merger Sub") and Thermedics Inc.
("Thermedics"), pursuant to which the Merger Sub, a wholly owned subsidiary of
Thermedics, will be merged with and into Voltek.
The following cross reference sheet is being supplied pursuant to
General Instruction F to Schedule 13E-3 and shows the location in the Proxy
Statement of the information required to be included in response to the items of
this Statement. The information in the Schedule 14A which is attached hereto as
Exhibit (d)(3), including all appendices thereto, is hereby expressly
incorporated herein by reference and the responses to each item are qualified in
their entirety by the provisions of the Proxy Statement.
CROSS REFERENCE SHEET
Item in Schedule 13E-3 Caption or Location in the Proxy Statement
- ---------------------- ------------------------------------------
Item 1(a)..........................."Introduction"; "Summary - Parties to the
Merger"
Item 1(b)..........................."Summary - Purpose of the Special Meeting";
"- Record Date and Quorum"; "- Market Prices
of Common Stock and Dividends"; "The Special
Meeting - Record Date and Quorum
Requirement"
Item 1(c)..........................."Summary - Market Prices of Common Stock and
Dividends"
Item 1(d)..........................."Summary - Market Prices of Common Stock
and Dividends"
Item 1(e)...........................Not applicable
Item 1(f)..........................."Appendix E - Information Concerning
Transactions in the Common Stock of the
Company"
Item 2(a) - (c)....................."Summary - Parties to the Merger"; "Business
of the Company"; "Certain Information
Concerning the Merger Sub, Thermedics and
Thermo Electron"; "Appendix D - Information
Concerning Directors and Executive Officers
of the Company, Thermedics, the Merger Sub
and Thermo Electron"
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Item 2(d)..........................."Appendix D - Information Concerning
Directors and Executive Officers of the
Company, Thermedics, the Merger Sub and
Thermo Electron"
Item 2(e) ..........................Not Applicable
Item 2(f)...........................Not Applicable
Item 2(g)..........................."Appendix D - Information Concerning
Directors and Executive Officers of the
Company, Thermedics, the Merger Sub and
Thermo Electron"
Item 3(a)(1)........................"Certain Transactions"
Item 3(a)(2) - 3(b) ................"Summary - The Merger"; "- Purpose and
Reasons of Thermedics and Thermo Electron
for the Merger"; "Special Factors -
Background of the Merger"; "- The Special
Committee's and the Board's Recommendation";
"- Purpose and Reasons of Thermedics and
Thermo Electron for the Merger"; "Certain
Transactions"; "Appendix E - Information
Concerning Transactions in the Common Stock
of the Company"
Item 4(a)..........................."Introduction"; "Summary - The Merger";
"- Assumption of Voltek Stock Options by
Thermedics"; "- Certain Effects of the
Merger"; "- Conditions to the Merger,
Termination and Expenses"; "Special
Factors - Certain Effects of the Merger";
"The Merger"; "Appendix A - Agreement and
Plan of Merger"
Item 4(b)..........................."Introduction"; "Summary - Purpose of the
Special Meeting"; "- The Merger"; "Special
Factors - Conduct of Voltek's Business
After the Merger"; "The Merger - Conversion
of Securities"; "Federal Income Tax
Consequences"; "Appendix A - Agreement and
Plan of Merger"
Item 5(a)..........................."Special Factors - Conduct of Voltek's
Business After the Merger"
Item 5(b) .........................."Special Factors - Conduct of Voltek's
Business After the Merger"
Item 5(c)..........................."Introduction"; "Special Factors - Conflicts
of Interest"; "- Conduct of Voltek's
Business After the Merger"
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Item 5(d) .........................."Summary - Certain Effects of the Merger";
"Special Factors - Certain Effects of the
Merger"
Item 5(e)..........................."Summary - Certain Effects of the Merger";
"Special Factors - Certain Effects of the
Merger"; "- Conduct of Voltek's Business
After the Merger"
Item 5(f) .........................."Summary - Certain Effects of the Merger";
"Special Factors - Certain Effects of the
Merger"
Item 5(g) .........................."Summary - Certain Effects of the Merger";
"Special Factors - Certain Effects of the
Merger"
Item 6(a)..........................."The Merger - Source of Funds"
Item 6(b)..........................."Summary - Opinion of Financial Advisor";
"- Conflicts of Interest"; "Special
Factors - Opinion of Financial Advisor";
"- Conflicts of Interest"; "The Merger
- Expenses"
Item 6(c)...........................Not applicable
Item 6(d)...........................Not applicable
Item 7(a) - (c)....................."Summary - Purpose of the Special Meeting";
"- Opinion of Financial Advisor";
"- Purpose and Reasons of Thermedics and
Thermo Electron for the Merger"; "Special
Factors - Background of the Merger";
"- The Special Committee's and the Board's
Recommendation"; "- Opinion of Financial
Advisor"; "- Purpose and Reasons of
Thermedics and Thermo Electron for the
Merger"
Item 7(d) .........................."Summary - The Merger"; "- Assumption of
Voltek Stock Options by Thermedics";
"- Conflicts of Interest";
"- Certain Effects of the Merger";
"- Federal Income Tax Consequences";
"Special Factors - Conflicts of Interest";
"- Certain Effects of the Merger";
"- Conduct of Voltek's Business After the
Merger"; "The Merger - Conversion of
Securities"; "- Assumption of Voltek Stock
Options by Thermedics"; "Federal Income Tax
Consequences"
Item 8(a) .........................."Summary - The Special Committee's and the
Board's Recommendation"; "- Position of
Thermedics and Thermo Electron as to
Fairness of the Merger"; "Special Factors -
The Special Committee's and the Board's
Recommendation"; "- Position of
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Thermedics and Thermo Electron as to
Fairness of the Merger"
Item 8(b) .........................."Summary - The Special Committee's and the
Board's Recommendation"; "- Position of
Thermedics and Thermo Electron as to
Fairness of the Merger"; "Special Factors -
Background of the Merger"; "- The Special
Committee's and the Board's Recommendation";
"- Opinion of Financial Advisor";
"- Position of Thermedics and Thermo
Electron as to Fairness of the Merger"
Item 8(c) .........................."Introduction"; "Summary - Vote Required
and Revocation of Proxies"; "The Special
Meeting - Voting Procedures"; "The Merger
- Conditions"
Item 8(d)..........................."Summary - The Special Committee's and the
Board's Recommendation"; "- Opinion of
Financial Advisor"; "Special Factors -
Background of the Merger"; "- The Special
Committee's and the Board's Recommendation";
"- Opinion of Financial Advisor"; "Appendix
B - Fairness Opinion of HSBC Securities,
Inc."
Item 8(e)..........................."Summary - The Special Committee's and the
Board's Recommendation"; "Special Factors
- The Special Committee's and the Board's
Recommendation"
Item 8(f)...........................None
Item 9(a) - (c)....................."Summary - Opinion of Financial Advisor";
"Special Factors - Background of the
Merger"; "- Opinion of Financial Advisor";
"Appendix B - Fairness Opinion of HSBC
Securities, Inc."
Item 10(a) ........................."Introduction"; "Summary - Vote Required and
Revocation of Proxies"; "- Conflicts of
Interest"; "Special Factors - Purpose and
Reasons of Thermedics and Thermo Electron
for the Merger"; "- Conflicts of Interest";
"The Special Meeting - Voting Procedures";
"Security Ownership of Certain Beneficial
Owners and Management"; "Appendix E -
Information Concerning Transactions in the
Common Stock of the Company"
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Item 10(b).........................."Appendix E - Information Concerning
Transactions in the Common Stock of the
Company"
Item 11............................."Introduction"; "Summary - Vote Required
and Revocation of Proxies"; "- The
Merger"; "The Special Meeting - Voting
Procedures"; "The Merger"; "Appendix A -
Agreement and Plan of Merger"
Item 12(a).........................."Introduction"; "Summary - Vote Required
and Revocation of Proxies"; "The Special
Meeting - Voting Procedures"; "Appendix D -
Information Concerning Directors and
Executive Officers of the Company,
Thermedics, the Merger Sub and Thermo
Electron"
Item 12(b).........................."Summary - The Special Committee's and the
Board's Recommendation"; "- Position of
Thermedics and Thermo Electron as to
Fairness of the Merger"; "Special Factors -
The Special Committee's and the Board's
Recommendation"; "- Position of Thermedics
and Thermo Electron as to Fairness of the
Merger"
Item 13(a).........................."Summary - Rights of Dissenting
Stockholders"; "The Special Meeting - Voting
Procedures"; "Rights of Dissenting
Stockholders"; "Appendix C - Section 262 of
the General Corporation Law of the State of
Delaware"
Item 13(b)..........................Not applicable
Item 13(c).........................."Special Factors -- Certain Effects of the
Merger"
Item 14(a).........................."Selected Quarterly Financial Data"; "Ratio
of Earnings to Fixed Charges"; "Selected
Financial Information"; "Consolidated
Financial Statements"
Item 14(b)..........................Not applicable
Item 15(a).........................."The Special Meeting - Proxy Solicitation"
Item 15(b)..........................Not applicable
Item 16.............................Entirety of Proxy Statement
Item 17(a)..........................Not applicable
Item 17(b)(1).......................Opinion of HSBC Securities, Inc. dated
November 24, 1998 (included as Appendix B
to the Proxy Statement)
Item 17(b)(2).......................Presentation dated November 24, 1998 to the
Special Committee of the Board of Directors
of Thermo Voltek Corp. by HSBC
Securities, Inc.
Item 17(b)(3).......................Presentation dated September 15, 1998 to the
Special Committee of the Board of Directors
of Thermo Voltek Corp. by HSBC
Securities, Inc.
Item 17(c) .........................Agreement and Plan of Merger dated as of
November 24, 1998 among Thermo Voltek Corp.,
Thermedics Inc., and TV Acquisition
Corporation (included as Appendix A to the
Proxy Statement)
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Item 17(d)(1) ......................Copy of Letter to Stockholders
Item 17(d)(2) ......................Copy of Notice of Special
Meeting of Stockholders
Item 17(d)(3) ......................Definitive Proxy Statement
Item 17(d)(4) ......................Form of Proxy
Item 17(e) .........................Text of Section 262 of the General
Corporation Law of the State of Delaware
(included as Appendix C to the Proxy
Statement)
Item 17(f) .........................Definitive Proxy Statement
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information set forth in the sections entitled "Introduction"
and "Summary - Parties to the Merger" of the Proxy Statement is incorporated
herein by reference.
(b) The information set forth in the sections entitled "Summary - Purpose
of the Special Meeting," "- Record Date and Quorum," "- Market Prices of Common
Stock and Dividends" and "The Special Meeting - Record Date and Quorum
Requirement" of the Proxy Statement is incorporated herein by reference.
(c) The information set forth in the section entitled "Summary - Market
Prices of Common Stock and Dividends" of the Proxy Statement is incorporated
herein by reference.
(d) The information set forth in the section entitled "Summary - Market
Prices of Common Stock and Dividends" of the Proxy Statement is incorporated
herein by reference.
(e) Not applicable.
(f) The information set forth in Appendix E to the Proxy Statement is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is being filed jointly by the Company (which is the issuer
of the class of equity securities that is the subject of the Rule 13e-3
transaction), Thermedics, the Merger Sub, and Thermo Electron.
(a) - (c) The information set forth in the sections entitled "Summary
Parties to the Merger", "Business of the Company," "Certain Information
Concerning the Merger Sub, Thermedics and Thermo Electron" and Appendix D to
the Proxy Statement is incorporated herein by reference.
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(d) The information set forth in Appendix D to the Proxy Statement is
incorporated herein by reference.
(e) During the last five years, none of the Company, Thermedics, the
Merger Sub or Thermo Electron, nor (to the knowledge of each of the Company,
Thermedics, the Merger Sub or Thermo Electron, respectively) any executive
officer or director of the Company, Thermedics, the Merger Sub or Thermo
Electron, respectively, has been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors).
(f) During the last five years, none of the Company, Thermedics, the
Merger Sub or Thermo Electron, nor (to the knowledge of each of the Company,
Thermedics, the Merger Sub or Thermo Electron, respectively) any executive
officer or director of the Company, Thermedics, the Merger Sub or Thermo
Electron, respectively, has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction which resulted in a judgment,
decree or final order (i) enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or (ii)
finding a violation with respect to such laws.
(g) The information set forth in Appendix D to the Proxy Statement is
incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) (1) The information set forth in the section entitled "Certain
Transactions" of the Proxy Statement is incorporated herein by reference.
(a) (2)-(b) The information set forth in the sections entitled "Summary -
The Merger," "- Purpose and Reasons of Thermedics and Thermo Electron for the
Merger," "Special Factors - Background of the Merger," "The Special Committee's
and the Board's Recommendation," "- Purpose and Reasons of Thermedics and Thermo
Electron for the Merger," "Certain Transactions" and in Appendix E to the Proxy
Statement is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "Introduction,"
"Summary - The Merger," "- Assumption of Voltek Stock Options by Thermedics,"
"- Certain Effects of the Merger, " "- Conditions to the Merger, Termination and
Expenses," "Special Factors - Certain Effects of the Merger" and "The Merger"
and in Appendix A to the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled "Introduction,"
"Summary - Purpose of the Special Meeting," "- The Merger" "Special Factors -
Conduct of Voltek's Business After the Merger," "The Merger - Conversion of
Securities," "Federal Income Tax Consequences" and Appendix A to the Proxy
Statement is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) The information set forth in the section entitled "Special Factors -
Conduct of Voltek's Business After the Merger" of the Proxy Statement is
incorporated herein by reference.
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(b) The information set forth in the section entitled "Special Factors -
Conduct of Voltek's Business After the Merger" of the Proxy Statement is
incorporated herein by reference.
(c) The information set forth in the sections entitled "Introduction,"
"Special Factors - Conflicts of Interest" and "- Conduct of Voltek's Business
After the Merger" of the Proxy Statement is incorporated herein by
reference.
(d) The information set forth in the sections entitled "Summary - Certain
Effects of the Merger" and "Special Factors - Certain Effects of the Merger" of
the Proxy Statement is incorporated herein by reference.
(e) The information set forth in the sections entitled "Summary - Certain
Effects of the Merger," "Special Factors - Certain Effects of the Merger" and
"- Conduct of Voltek's Business After the Merger" of the Proxy Statement is
incorporated herein by reference.
(f) The information set forth in the sections entitled "Summary - Certain
Effects of the Merger" and "Special Factors - Certain Effects of the Merger" of
the Proxy Statement is incorporated herein by reference.
(g) The information set forth in the sections entitled "Summary - Certain
Effects of the Merger" and "Special Factors - Certain Effects of the Merger" of
the Proxy Statement is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the section entitled "The Merger - Source
of Funds" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled "Summary - Opinion
of Financial Advisor", "- Conflicts of Interest," "Special Factors - Opinion of
Financial Advisor" "- Conflicts of Interest" and "The Merger - Expenses" of
the Proxy Statement is incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) - (c) The information set forth in the sections entitled "Summary -
Purpose of the Special Meeting," "- Opinion of Financial Advisor," "- Purpose
and Reasons of Thermedics and Thermo Electron for the Merger," "Special
Factors - Background of the Merger," "- The Special Committee's and the Board's
Recommendation," "- Opinion of Financial Advisor" and "- Purpose and Reasons
of Thermedics and Thermo Electron for the Merger" of the Proxy Statement is
incorporated herein by reference.
(d) The information set forth in the sections entitled "Summary - The
Merger," "- Assumption of Voltek Stock Options by Thermedics," "- Conflicts of
Interest," "- Certain Effects of
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the Merger," "- Federal Income Tax Consequences," "Special Factors - Conflicts
of Interest," "- Certain Effects of the Merger," "- Conduct of Voltek's
Business After the Merger," "The Merger - Conversion of Securities,"
"- Assumption of Voltek Stock Options by Thermedics" and "Federal Income Tax
Consequences" of the Proxy Statement is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "Summary - The
Special Committee's and the Board's Recommendation," "- Position of Thermedics
and Thermo Electron as to Fairness of the Merger," "Special Factors - The
Special Committee's and the Board's Recommendation" and "- Position of
Thermedics and Thermo Electron as to Fairness of the Merger" of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled "Summary - The
Special Committee's and the Board's Recommendation," "- Position of Thermedics
and Thermo Electron as to Fairness of the Merger," "Special Factors - Background
of the Merger," "- The Special Committee's and the Board's Recommendation,"
"- Opinion of Financial Advisor" and "Position of Thermedics and Thermo
Electron as to Fairness of the Merger" of the Proxy Statement is incorporated
herein by reference.
(c) The information set forth in the sections entitled "Introduction,"
"Summary - Vote Required and Revocation of Proxies," "The Special Meeting -
Voting Procedures" and "The Merger - Conditions" of the Proxy Statement is
incorporated herein by reference.
(d) The information set forth in the sections entitled "Summary - The
Special Committee's and the Board's Recommendation," "- Opinion of Financial
Advisor," "Special Factors - Background of the Merger," "- The Special
Committee's and the Board's Recommendation," "- Opinion of Financial Advisor"
and in Appendix B to the Proxy Statement is incorporated herein by reference.
(e) The information set forth in the sections entitled "Summary - The
Special Committee's and the Board's Recommendation" and "Special Factors - The
Special Committee's and the Board's Recommendation" of the Proxy Statement is
incorporated herein by reference.
(f) None.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) - (c) The information set forth in the sections entitled "Summary -
Opinion of Financial Advisor," "Special Factors - Background of the Merger,"
"- Opinion of Financial Advisor" and in Appendix B to the Proxy Statement is
incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in the sections entitled "Introduction,"
"Summary - Vote Required and Revocation of Proxies," "- Conflicts of Interest,"
"Special Factors - Purpose and Reasons of Thermedics and Thermo Electron for the
Merger," "- Conflicts of Interest," "The Special Meeting -
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Voting Procedures," "Security Ownership of Certain Beneficial Owners and
Management" and in Appendix E to the Proxy Statement is incorporated herein by
reference.
(b) The information set forth in Appendix E to the Proxy Statement is
incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
(a) The information set forth in the sections entitled "Introduction,"
"Summary - Vote Required and Revocation of Proxies," "- The Merger," "The
Special Meeting - Voting Procedures," "The Merger" and in Appendix A to the
Proxy Statement is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information set forth in the sections entitled "Introduction,"
"Summary - Vote Required and Revocation of Proxies," "The Special Meeting -
Voting Procedures" and in Appendix D to the Proxy Statement is incorporated
herein by reference.
(b) The information set forth in the sections entitled "Summary - The
Special Committee's and the Board's Recommendation," "- Position of Thermedics
and Thermo Electron as to Fairness of the Merger," "Special Factors - The
Special Committee's and the Board's Recommendation" and "- Position of
Thermedics and Thermo Electron as to Fairness of the Merger" of the Proxy
Statement is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "Summary - Rights
of Dissenting Stockholders," "The Special Meeting - Voting Procedures," "Rights
of Dissenting Stockholders" and in Appendix C of the Proxy Statement is
incorporated herein by reference.
(b) Not applicable.
(c) The information set forth in the section entitled "Special Factors -
Certain Effects of the Merger" of the Proxy Statement is incorporated herein by
reference.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in the sections entitled "Selected Quarterly
Financial Data," "Ratio of Earnings to Fixed Charges," "Selected Financial
Information" and "Consolidated Financial Statements" of the Proxy Statement is
incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in the section entitled "The Special Meeting
- - Proxy Solicitation" of the Proxy Statement is incorporated herein by
reference.
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(b) Not applicable.
ITEM 16. ADDITIONAL INFORMATION.
The entirety of the Proxy Statement is incorporated herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not applicable.
(b)(1) Opinion of HSBC Securities, Inc. dated November 24, 1998 (included
as Appendix B to the Definitive Proxy Statement, which is filed herewith as
Exhibit 17(d)(3)).
*(b)(2) Presentation dated November 24, 1998 to the Special Committee of
the Board of Directors of Thermo Voltek Corp. by HSBC Securities, Inc.
(b)(3) Presentation dated September 15, 1998 to the Special Committee of
the Board of Directors of Thermo Voltek Corp. by HSBC Securities, Inc.
(c) Agreement and Plan of Merger dated as of November 24, 1998 among
Thermo Voltek Corp., Thermedics Inc. and TV Acquisition Corporation (included
as Appendix A to the Definitive Proxy Statement, which is filed herewith as
Exhibit 17(d)(3)).
(d)(1) Copy of Letter to Stockholders.
(d)(2) Copy of Notice of Special Meeting of Stockholders.
(d)(3) Definitive Proxy Statement.
(d)(4) Form of Proxy.
(e) Text of Section 262 of the General Corporation Law of the State of
Delaware (included as Appendix C to the Definitive Proxy Statement, which is
filed herewith as Exhibit 17(d)(3)).
(f) Definitive Proxy Statement (see Exhibit 17(d)(3)).
- ---------
* Previously filed.
13
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SIGNATURES
After due inquiry and to the best of our knowledge and belief, each of the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
THERMO VOLTEK CORP.
Dated: February 12, 1999 By: /s/ Colin I.W. Baxter
--------------------------------------------
Name: Colin I.W. Baxter
Title: President and Chief Operating Officer
THERMEDICS INC.
Dated: February 12, 1999 By: /s/ John T. Keiser
--------------------------------------------
Name: John T. Keiser
Title: President
TV ACQUISITION CORPORATION
Dated: February 12, 1999 By: /s/ John T. Keiser
--------------------------------------------
Name: John T. Keiser
Title: President
THERMO ELECTRON CORPORATION
Dated: February 12, 1999 By: /s/ Kenneth J. Apicerno
--------------------------------------------
Name: Kenneth J. Apicerno
Title: Treasurer
14
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EXHIBIT INDEX
Exhibit Number Description
99.17(b)(1) Opinion of HSBC Securities, Inc. dated November 24, 1998
(included as Appendix B to the Definitive Proxy Statement, which is filed
herewith as Exhibit 99.17(d)(3)).
*99.17(b)(2) Presentation dated November 24, 1998 to the Special
Committee of the Board of Directors of Thermo Voltek Corp. by HSBC Securities,
Inc.
99.17(b)(3) Presentation dated September 15, 1998 to the Special
Committee of the Board of Directors of Thermo Voltek Corp. by HSBC Securities,
Inc.
99.17(c) Agreement and Plan of Merger dated as of November 24, 1998
among Thermo Voltek Corp., Thermedics Inc. and TV Acquisition Corporation
(included as Appendix A to the Definitive Proxy Statement, which is filed
herewith as Exhibit 99.17(d)(3)).
99.17(d)(1) Copy of Letter to Stockholders.
99.17(d)(2) Copy of Notice of Special Meeting of Stockholders.
99.17(d)(3) Definitive Proxy Statement.
99.17(d)(4) Form of Proxy.
99.17(e) Text of Section 262 of the General Corporation Law of the
State of Delaware (included as Appendix C to the Definitive Proxy Statement,
which is filed herewith as Exhibit 99.17(d)(3)).
99.17(f) Definitive Proxy Statement (see Exhibit 99.17(d)(3)).
- ---------
* Previously filed.
15
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THERMO VOLTEK CORP.
PRESENTATION TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
September 15, 1998
HSBC Investment Banking [HSBC LOGO]
<PAGE> 2
TABLE OF CONTENTS
I. Transaction Overview
II. Historical Financial Review
III. Historical Stock Price Performance and Trading Volume
IV. Ownership Analysis
V. Projected Financial Review
VI. Market Comparison of Selected Public Companies and Implied Valuation
Analysis
VII. Discounted Cash Flow Analysis and Implied Valuation Analysis
VIII. Analysis of Selected Merger and Acquisition Transactions and Implied
Valuation Analysis
IX. Analysis of Premiums for Minority Interest Acquisitions in Going Private
Transactions and Implied Valuation Analysis
<PAGE> 3
SECTION I
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
ANALYSIS OF PROPOSED TRANSACTION
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Purchase
Price Per Diluted Option Equity Enterprise
Share Shares (a) Proceeds Value Debt Cash (b) Value
- --------- ---------- -------- -------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$7.00 x 11,564,513 - $1,978 = $78,974 + $9,106 - $18,228 = $69,852
EQUITY VALUE AS A MULTIPLE OF:
------------------------------------------------------------
Fiscal Fiscal Fiscal
Pro forma(c) 1997 LTM(d) 1998 1999
------------- ------ ------ ------ ------
Net income (e) 99.5x 47.3x 50.9x 26.7x
Book value (f) 4.4x 4.4x 4.3x 3.6x
ENTERPRISE VALUE AS A MULTIPLE OF:
------------------------------------------------------------
Fiscal Fiscal Fiscal
Pro forma(c) 1997 LTM(d) 1998 1999
------------ ------ ------ ------ ------
Revenues 1.7x 1.7x 1.9x 1.8x
EBITDA 32.4x 18.1x 18.7x 11.5x
EBIT 373.5x 38.0x 39.2x 16.8x
STOCK PRICE PRIOR TO ANNOUNCEMENT DATE(g)
------------------------------------------------------------
1 Day 1 Week 4 Weeks
------ ------ -------
Actual value $4.81 $4.38 $5.00
Premium at $7.00 per share 45.5% 60.0% 40.0%
</TABLE>
- ----------
(a) Includes 8,683,208 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 416,216 shares issuable
upon exercise of options. The shares issuable result from (i) options whose
exercise price is below the $7.00 offer and (ii) subordinated convertible
notes whose conversion price is below the $7.00 offer.
(b) Cash includes marketable securities and estimated proceeds from the sale of
the Universal Voltronics division
(c) Adjusted for the pending sale of the Universal Voltronics division
(d) Latest twelve months for the period ending July 4, 1998
(e) Excludes non-recurring items and interest expense on convertible securities
(f) Book value excludes intangible assets
(g) Assumes announcement date on March 31, 1998
- --------------------------------------------------------------------------------
September 1998 Confidential
1
<PAGE> 4
SECTION II
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
HISTORICAL INCOME STATEMENT INFORMATION
($ in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------------------
1993 1994 1995 1996 1997
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES $18,089 $ 23,641 $ 36,326 $ 48,507 $ 44,648
Cost of revenues (9,687) (12,120) (18,790) (24,357) (24,860)
------- -------- -------- -------- --------
Gross profit 8,402 11,521 17,536 24,150 19,788
SG&A expenses (6,008) (8,027) (11,766) (14,889) (15,992)
Research and development expenses (1,240) (1,492) (2,349) (3,618) (3,620)
------- -------- -------- -------- --------
OPERATING INCOME (LOSS) 1,154 2,002 3,421 5,643 176
Interest income 179 1,697 2,073 1,774 1,247
Interest expense (807) (2,216) (2,130) (1,408) (1,162)
Gain on sale of related-party investments -- -- -- -- 180
Other income 225 -- -- -- 53
------- -------- -------- -------- --------
Income before provision for income taxes 751 1,483 3,364 6,009 494
Benefit (provision) for income taxes (271) (365) (692) (1,540) (215)
------- -------- -------- -------- --------
NET INCOME (LOSS) $ 480 $ 1,118 $ 2,672 $ 4,469 $ 279
======= ======== ======== ======== ========
EARNINGS PER SHARE:
Basic $ 0.08 $ 0.19 $ 0.41 $ 0.51 $ 0.03
Diluted $ 0.08 $ 0.17 $ 0.28 $ 0.38 $ 0.03
WEIGHTED AVERAGE SHARES:
Basic 5,896 5,995 6,528 8,827 9,182
Diluted 6,014 7,202 13,512 13,628 9,305
EBITDA (a) $ 1,745 $ 2,950 $ 4,950 $ 7,279 $ 2,293
Depreciation and amortization 591 948 1,529 1,636 2,117
Annual revenue growth 39.2% 30.7% 53.7% 33.5% (8.0%)
Gross margin 46.4% 48.7% 48.3% 49.8% 44.3%
EBITDA margin 9.6% 12.5% 13.6% 15.0% 5.1%
Operating margin 6.4% 8.5% 9.4% 11.6% 0.4%
Net margin 2.7% 4.7% 7.4% 9.2% 0.6%
</TABLE>
(a) Defined as operating income before depreciation and amortization
- --------------------------------------------------------------------------------
September 1998 Confidential
2
<PAGE> 5
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
HISTORICAL INCOME STATEMENT INFORMATION
($ in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL 1996
-----------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES $10,621 $11,882 $12,800 $13,204
Cost of revenues (5,390) (6,153) (6,470) (6,344)
------- ------- ------- -------
Gross profit 5,231 5,729 6,330 6,860
SG&A expenses (3,261) (3,519) (3,792) (4,317)
Research and development expenses (710) (821) (1,007) (1,080)
------- ------- ------- -------
OPERATING INCOME (LOSS) 1,260 1,389 1,531 1,463
Interest income 502 492 399 381
Interest expense (435) (402) (297) (274)
Gain on sale of related-party investments -- -- -- --
Other income -- -- -- --
------- ------- ------- -------
Income before provision for income taxes 1,327 1,479 1,633 1,570
Benefit (provision) for income taxes (390) (347) (439) (364)
------- ------- ------- -------
NET INCOME (LOSS) $ 937 $ 1,132 $ 1,194 $ 1,206
======= ======= ======= =======
EARNINGS PER SHARE:
Basic $ 0.12 $ 0.13 $ 0.13 $ 0.13
Diluted $ 0.09 $ 0.10 $ 0.10 $ 0.10
WEIGHTED AVERAGE SHARES:
Basic 7,703 8,528 9,451 9,625
Diluted 13,632 13,636 13,615 13,627
EBITDA (a) $ 1,682 $ 1,796 $ 1,989 $ 1,812
Depreciation and amortization 422 407 458 349
Quarterly revenue growth (3.6%) 11.9% 7.7% 3.2%
Gross margin 49.3% 48.2% 49.5% 52.0%
EBITDA margin 15.8% 15.1% 15.5% 13.7%
Operating margin 11.9% 11.7% 12.0% 11.1%
Net margin 8.8% 9.5% 9.3% 9.1%
</TABLE>
(a) Defined as operating income before depreciation and amortization
- --------------------------------------------------------------------------------
September 1998 Confidential
3
<PAGE> 6
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
HISTORICAL INCOME STATEMENT INFORMATION
($ in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL 1997
-------------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES $ 9,716 $11,888 $11,132 $11,912
Cost of revenues (5,451) (6,442) (6,149) (6,818)
------- ------- ------- -------
Gross profit 4,265 5,446 4,983 5,094
SG&A expenses (4,064) (4,174) (3,612) (4,142)
Research and development expenses (847) (1,023) (842) (908)
------- ------- ------- -------
OPERATING INCOME (LOSS) (646) 249 529 44
Interest income 393 305 269 280
Interest expense (284) (296) (289) (293)
Gain on sale of related-party investments - - 180 -
Other income - - - 53
------- ------- ------- -------
Income before provision for income taxes (537) 258 689 84
Benefit (provision) for income taxes 204 (98) (262) (59)
------- ------- ------- -------
NET INCOME (LOSS) $ (333) $ 160 $ 427 $ 25
======= ======= ======= =======
EARNINGS PER SHARE:
Basic $ (0.03) $ 0.02 $ 0.05 $ -
Diluted $ (0.03) $ 0.02 $ 0.05 $ -
WEIGHTED AVERAGE SHARES:
Basic 9,832 9,222 8,837 8,837
Diluted 9,832 9,353 12,466 8,912
EBITDA (a) $ (156) $ 684 $ 1,037 $ 247
Depreciation and amortization 490 435 508 203
Quarterly revenue growth (26.4%) 22.4% (6.4%) 7.0%
Gross margin 43.9% 45.8% 44.8% 42.8%
EBITDA margin (1.6%) 5.8% 9.3% 2.1%
Operating margin (6.6%) 2.1% 4.8% 0.4%
Net margin (3.4%) 1.3% 3.8% 0.2%
</TABLE>
(a) Defined as operating income before depreciation and amortization
- --------------------------------------------------------------------------------
September 1998 Confidential
4
<PAGE> 7
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
HISTORICAL INCOME STATEMENT INFORMATION
($ in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL 1998
---------------------
FIRST SECOND
------- -------
<S> <C> <C>
REVENUES $11,440 $10,725
Cost of revenues (6,218) (5,902)
------- -------
Gross profit 5,222 4,823
SG&A expenses (3,607) (3,266)
Research and development expenses (793) (672)
------- -------
OPERATING INCOME (LOSS) 822 885
Interest income 249 233
Interest expense (287) (299)
Gain on sale of related-party investments - -
Other income 69 -
------- -------
Income before provision for income taxes 853 819
Benefit (provision) for income taxes (342) (327)
------- -------
NET INCOME (LOSS) $ 511 $ 492
======= =======
EARNINGS PER SHARE:
Basic $ 0.06 $ 0.06
Diluted $ 0.05 $ 0.05
WEIGHTED AVERAGE SHARES:
Basic 8,762 8,675
Diluted 12,235 11,891
EBITDA (a) $ 1,371 $ 1,377
Depreciation and amortization 549 492
Quarterly revenue growth (4.0%) (6.3%)
Gross margin 45.6% 45.0%
EBITDA margin 12.0% 12.8%
Operating margin 7.2% 8.3%
Net margin 4.5% 4.6%
</TABLE>
(a) Defined as operating income before depreciation and amortization
- --------------------------------------------------------------------------------
September 1998 Confidential
5
<PAGE> 8
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
HISTORICAL BALANCE SHEET INFORMATION
($ in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------
1994 1995 1996 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 8,955 $ 8,651 $17,874 $14,608
Available-for-sale investments 28,105 26,038 10,067 3,041
Short-term investments, at cost - - - -
Accounts receivable 6,161 8,680 12,123 10,388
Inventories 5,749 8,581 10,725 10,981
Prepaid income taxes and other 772 1,022 2,025 1,999
------- ------- ------- -------
Total current assets 49,742 52,972 52,814 41,017
Net PP&E 2,106 3,144 4,151 3,682
Long-term prepaid income taxes 980 648 299 539
Goodwill 9,396 12,081 16,425 18,058
------- ------- ------- -------
TOTAL ASSETS $62,224 $68,845 $73,689 $63,296
======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Notes payable $ 781 $ 1,276 $ 1,666 $ 2,376
Accounts payable 2,698 3,966 3,718 3,194
Accrued payroll and employee 879 1,128 1,264 1,159
Accrued income taxes 270 1,103 1,244 489
Other accrued expenses 1,744 2,834 3,106 3,242
Due to parent and affiliates 1,380 839 901 694
------- ------- ------- -------
Total current liabilities 7,752 11,146 11,899 11,154
Subordinated convertible obligations 46,000 36,740 19,345 17,750
Common stock 202 244 488 497
Capital in excess of par value 11,237 20,545 37,762 38,799
Retained earnings (2,857) (185) 4,284 4,563
Treasury stock (50) (20) (69) (8,836)
Cumulative translation adjustment 260 229 (56) (631)
Net unrealized gain on investments (320) 146 36 -
------- ------- ------- -------
Shareholders' investment 8,472 20,959 42,445 34,392
------- ------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $62,224 $68,845 $73,689 $63,296
======= ======= ======= =======
</TABLE>
- --------------------------------------------------------------------------------
September 1998 Confidential
6
<PAGE> 9
SECTION III
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
DAILY CLOSING PRICE AND AVERAGE VOLUME
[GRAPH DEPICTING THE THERMO VOLTEK CORP. DAILY
CLOSING STOCK PRICES AND AVERAGE TRADING VOLUME
FROM SEPTEMBER 15, 1997 TO SEPTEMBER 15, 1998.
DURING THIS PERIOD, THE HIGH CLOSING PRICE IS
INDICATED AS $7.50, THE LOW AS $4.38 AND THE
LAST AS $6.94.]
- --------------------------------------------------------------------------------
September 1998 Confidential
7
<PAGE> 10
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
DAILY CLOSING PRICE AND AVERAGE VOLUME
[GRAPH DEPICTING THE THERMO VOLTEK CORP. DAILY
CLOSING STOCK PRICES AND AVERAGE TRADING VOLUME
FROM MARCH 27, 1997 TO MARCH 30, 1998. DURING
THIS PERIOD, THE HIGH CLOSING PRICE IS INDICATED
AS $9.50, THE LOW AS $4.38 AND THE LAST AS $4.81.]
- --------------------------------------------------------------------------------
September 1998 Confidential
8
<PAGE> 11
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
CLOSING PRICE INDEX COMPARISON
[GRAPH DEPICTING AN INDEXED PRICE COMPARISON FROM SEPTEMBER 15, 1997
TO SEPTEMBER 15, 1998 OF THERMO VOLTEK CORP. (TVL), THE TOTAL
RETURN S&P SMALL CAP INDEX (SMLK.R) AND A COMPOSITE INDEX OF
COMPANIES COMPARABLE TO THERMO VOLTEK CORP. (COMPS).]
LEGEND
TVL Thermo Voltek
SMLK.R S&P SmallCap Index. Dividends reinvested. Weighted by market
capitalization.
COMPS Composite index of Advanced Energy Industries, Inc., Artesyn
Technologies, Inc., Del Global Technologies Corp., IFR Systems,
Inc. and Vicor Corp. Dividends reinvested. Weighted by market
capitalization.
- --------------------------------------------------------------------------------
September 1998 Confidential
9
<PAGE> 12
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
CLOSING PRICE INDEX COMPARISON
[GRAPH DEPICTING AN INDEXED PRICE COMPARISON FROM MARCH 27, 1997
TO MARCH 30, 1998 OF THERMO VOLTEK CORP. (TVL), THE TOTAL
RETURN S&P SMALLCAP INDEX (SMLK.R) AND A COMPOSITE INDEX OF
COMPANIES COMPARABLE TO THERMO VOLTEK CORP. (COMPS).]
LEGEND
TVL Thermo Voltek
SMLK.R S&P SmallCap Index. Dividends reinvested. Weighted by market
capitalization.
COMPS Composite index of Advanced Energy Industries, Inc., Artesyn
Technologies, Inc., Del Global Technologies Corp., IFR Systems,
Inc. and Vicor Corp. Dividends reinvested. Weighted by market
capitalization.
- --------------------------------------------------------------------------------
September 1998 Confidential
10
<PAGE> 13
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
VOLUME DISTRIBUTION BY PRICE RANGE
[GRAPH DEPICTING THE DISTRIBUTION OF THERMO VOLTEK CORP.'S
COMMON STOCK TRADING VOLUME OVER THE VARIOUS PRICES AT WHICH THE
STOCK TRADED BETWEEN SEPTEMBER 15, 1997 TO SEPTEMBER 15, 1998.]
- --------------------------------------------------------------------------------
September 1998 Confidential
11
<PAGE> 14
SECTION IV
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
SHAREHOLDER OWNERSHIP ANALYSIS(a)
<TABLE>
<CAPTION>
Percent
Shares of Total
--------- --------
<S> <C> <C>
Shares Outstanding 8,683,208 100.0%
Institutional Ownership:
Dimensional Fund Advisors 383,246 4.4%
Brundage, Story Rose, LLC 138,050 1.6%
Barclays Global Investors 118,186 1.4%
Vanguard Group Inc. 115,100 1.3%
Bear, Stearns & Co. 49,000 0.6%
Smith Barney Investment Advisors 43,952 0.5%
ABTRUST 22,500 0.3%
ANB Investment Management 20,098 0.2%
Northern Trust Quantitative Advisors 20,098 0.2%
GAMCO Investors Inc. 20,000 0.2%
P. Schoenfeld Asset Management 16,600 0.2%
Winslow Management Company 15,000 0.2%
RCM American Smaller Companies 4,500 0.1%
Retirement System - Small Co Growth 2,250 0.0%
U.S. Trust Company of New York 1,800 0.0%
--------- -----
Total Institutional Holdings 970,380 11.2%
Insider Ownership:
Colin I.W. Baxter 17,307 0.2%
John W. Wood Jr 14,621 0.2%
Paul Kelleher 10,000 0.1%
William W. Hoover 8,994 0.1%
John Hatsopoulos 7,668 0.1%
Theo Melas-Kyriazi 5,581 0.1%
Sandra L. Lambert 1,912 0.0%
Elias P. Gyftopoulos 1,000 0.0%
Peter Richman 1,000 0.0%
--------- -----
Total Insider Holdings 68,083 0.8%
Thermo Electron et al 6,009,408 69.2%
Total Retail Holdings 1,635,337 18.8%
</TABLE>
(a) As of July 31, 1998. Excludes shares issuable upon the conversion of
subordinated obligations or the exercise of outstanding options.
- --------------------------------------------------------------------------------
September 1998 Confidential
12
<PAGE> 15
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
SHAREHOLDER OWNERSHIP ANALYSIS
[PIE CHART DEPICTING THERMO VOLTEK CORP. SHAREHOLDER
BREAKDOWN AMONGST THE FOLLOWING INVESTOR GROUPS:]
Institutions 11.2%
Insiders 0.8%
Retail 18.8%
Thermo Electron et al 69.2%
- --------------------------------------------------------------------------------
September 1998 Confidential
13
<PAGE> 16
SECTION V
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
PROJECTED PRO FORMA INCOME STATEMENT INFORMATION
Average Scenario
($ in thousands)
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal Year
------------------ --------------------------------------------------------
Third Fourth 1999 2000 2001 2002 2003
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 8,616 $ 9,395 $ 38,170 $ 42,000 $ 44,550 $ 48,400 $ 53,250
Cost of revenues (4,859) (5,153) (19,183) (20,740) (20,715) (21,900) (23,690)
------- ------- -------- -------- -------- -------- --------
Gross profit 3,757 4,242 18,987 21,260 23,835 26,500 29,560
SG&A expenses (2,985) (2,921) (11,450) (12,730) (13,030) (13,945) (15,180)
R&D expenses (625) (628) (2,524) (2,520) (2,600) (2,805) (3,070)
Goodwill amortization (non-deductible) (82) (81) (337) (337) (340) (340) (340)
Intangible amortization (non-deductible) (5) (5) (3) (3) - - -
Goodwill amortization (deductible) (48) (48) (192) (192) (192) (192) (192)
Other income (expense) (6) (5) (10) (3) (3) (3) (3)
Corporate services agreement (69) (75) (305) (336) (356) (387) (426)
------- ------- -------- -------- -------- -------- --------
Operating income (loss) (63) 479 4,166 5,139 7,314 8,828 10,349
Interest income 4.5% 256 256 1,034 1,110 1,200 1,468 1,786
Interest expense (258) (258) (1,032) (1,020) (823) (820) (413)
Deferred debt expense (6) (6) (24) (24) - - -
Advisory fees - - (90) - - - -
------- ------- -------- -------- -------- -------- --------
Income (loss) before income taxes (71) 471 4,054 5,205 7,691 9,476 11,722
Benefit (provision) for taxes 28 (188) (1,622) (2,082) (3,076) (3,790) (4,689)
------- ------- -------- -------- -------- -------- --------
Net income $ (43) $ 283 $ 2,432 $ 3,123 $ 4,615 $ 5,686 $ 7,033
======= ======= ======== ======== ======== ======== ========
EBITDA (a) $ 418 $ 974 $ 6,063 $ 7,029 $ 9,049 $ 10,583 $ 12,124
</TABLE>
(a) Defined as operating income (loss) before depreciation and amortization
- --------------------------------------------------------------------------------
September 1998 Confidential
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<PAGE> 17
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
PROJECTED PRO FORMA BALANCE SHEET INFORMATION
Average Scenario
($ in thousands)
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal Year
----------------- -----------------------------------------------
Third Fourth 1999 2000 2001 2002 2003
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets less cash and equivalents:
Accounts receivable, net $ 8,767 $ 8,701 $ 7,675 $ 7,871 $ 8,252 $ 8,483 $ 8,915
Inventory 9,613 9,308 8,775 8,799 8,880 9,032 9,286
Unbilled contract costs & fees 400 200 - - - - -
Prepaid expenses 222 208 245 290 290 290 290
Prepaid income taxes 1,763 1,763 1,763 1,763 1,763 1,763 1,763
------- ------- ------- ------- ------- ------- -------
20,765 20,180 18,458 18,723 19,185 19,568 20,254
Current liabilities less current debt 5,614 5,919 5,745 5,725 6,506 6,970 7,660
Working capital less cash and current debt $15,151 $14,261 $12,713 $12,998 $12,679 $12,598 $12,594
Depreciation and amortization 481 495 1,897 1,890 1,735 1,755 1,775
Net capital expenditures 260 240 1,041 1,125 1,125 1,125 1,125
</TABLE>
- --------------------------------------------------------------------------------
September 1998 Confidential
15
<PAGE> 18
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
PROJECTED PRO FORMA INCOME STATEMENT INFORMATION
High Scenario
($ in thousands)
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal Year
------------------ --------------------------------------------------------
Third Fourth 1999 2000 2001 2002 2003
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 8,616 $ 9,395 $ 38,170 $ 41,987 $ 46,186 $ 50,804 $ 55,885
Cost of revenues (4,859) (5,153) (19,183) (20,574) (20,322) (22,354) (24,589)
------- ------- -------- -------- -------- -------- --------
Gross profit 3,757 4,242 18,987 21,413 25,864 28,450 31,296
SG&A expenses (2,985) (2,921) (11,450) (11,966) (13,163) (14,479) (15,927)
R&D expenses (625) (628) (2,524) (2,519) (2,695) (2,944) (3,222)
Goodwill amortization (non-deductible) (82) (81) (337) (337) (340) (340) (340)
Intangible amortization (non-deductible) (5) (5) (3) (3) - - -
Goodwill amortization (deductible) (48) (48) (192) (192) (192) (192) (192)
Other income (expense) (6) (5) (10) (3) (3) (3) (3)
Corporate services agreement (69) (75) (305) (336) (369) (406) (447)
------- ------- -------- -------- -------- -------- --------
Operating income (loss) (63) 479 4,166 6,057 9,102 10,086 11,165
Interest income 4.5% 256 256 1,034 1,184 1,370 1,660 1,966
Interest expense (258) (258) (1,032) (1,020) (823) (820) (413)
Deferred debt expense (6) (6) (24) (24) - - -
Advisory fees - - (90) - - - -
------- ------- -------- -------- -------- -------- --------
Income (loss) before income taxes (71) 471 4,054 6,197 9,649 10,926 12,718
Benefit (provision) for taxes 28 (188) (1,622) (2,479) (3,859) (4,371) (5,087)
------- ------- -------- -------- -------- -------- --------
Net income $ (43) $ 283 $ 2,432 $ 3,718 $ 5,790 $ 6,555 $ 7,631
======= ======= ======== ======== ======== ======== ========
EBITDA (a) $ 418 $ 974 $ 6,063 $ 7,928 $ 10,787 $ 11,775 $ 12,874
</TABLE>
(a) Defined as operating income (loss) before depreciation and amortization
- --------------------------------------------------------------------------------
September 1998 Confidential
16
<PAGE> 19
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
PROJECTED PRO FORMA BALANCE SHEET INFORMATION
High Scenario
($ in thousands)
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal Year
------- ------- -----------------------------------------------
Third Fourth 1999 2000 2001 2002 2003
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets less cash and equivalents:
Accounts receivable, net $ 8,767 $ 8,701 $ 7,675 $ 6,921 $ 7,613 $ 8,374 $ 9,212
Inventory 9,613 9,308 8,775 7,913 7,816 8,598 9,457
Unbilled contract costs & fees 400 200 - - - - -
Prepaid expenses 222 208 245 290 290 290 290
Prepaid income taxes 1,763 1,763 1,763 1,763 1,763 1,763 1,763
------- ------- ------- ------- ------- ------- -------
20,765 20,180 18,458 16,887 17,482 19,025 20,722
Current liabilities less current debt 5,614 5,919 5,745 6,298 6,928 7,621 8,383
Working capital less cash and current debt $15,151 $14,261 $12,713 $10,589 $10,554 $11,404 $12,339
Depreciation and amortization 481 495 1,897 1,871 1,685 1,689 1,709
Net capital expenditures 260 240 1,041 858 953 1,062 1,184
</TABLE>
- --------------------------------------------------------------------------------
September 1998 Confidential
17
<PAGE> 20
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
PROJECTED PRO FORMA INCOME STATEMENT INFORMATION
Low Scenario
($ in thousands)
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal Year
------------------ --------------------------------------------------------
Third Fourth 1999 2000 2001 2002 2003
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 8,616 $ 9,395 $ 38,170 $ 40,460 $ 42,888 $ 45,461 $ 48,189
Cost of revenues (4,859) (5,153) (19,183) (19,825) (20,586) (21,367) (22,167)
------- ------- -------- -------- -------- -------- --------
Gross profit 3,757 4,242 18,987 20,635 22,302 24,094 26,022
SG&A expenses (2,985) (2,921) (11,450) (12,138) (12,866) (13,638) (14,457)
R&D expenses (625) (628) (2,524) (2,428) (2,503) (2,635) (2,778)
Goodwill amortization (non-deductible) (82) (81) (337) (337) (340) (340) (340)
Intangible amortization (non-deductible) (5) (5) (3) (3) - - -
Goodwill amortization (deductible) (48) (48) (192) (192) (192) (192) (192)
Other income (expense) (6) (5) (10) (3) (3) (3) (3)
Corporate services agreement (69) (75) (305) (324) (343) (364) (386)
------- ------- -------- -------- -------- -------- --------
Operating income (loss) (63) 479 4,166 5,210 6,055 6,922 7,866
Interest income 4.5% 256 256 1,034 1,083 1,106 1,289 1,505
Interest expense (258) (258) (1,032) (1,020) (823) (820) (413)
Deferred debt expense (6) (6) (24) (24) - - -
Advisory fees - - (90) - - - -
------- ------- -------- -------- -------- -------- --------
Income (loss) before income taxes (71) 471 4,054 5,249 6,338 7,391 8,958
Benefit (provision) for taxes 28 (188) (1,622) (2,100) (2,535) (2,956) (3,583)
------- ------- -------- -------- -------- -------- --------
Net income $ (43) $ 283 $ 2,432 $ 3,149 $ 3,803 $ 4,435 $ 5,375
======= ======= ======== ======== ======== ======== ========
EBITDA (a) $ 418 $ 974 $ 6,063 $ 7,101 $ 7,800 $ 8,707 $ 9,702
</TABLE>
(a) Defined as operating income (loss) before depreciation and amortization
- --------------------------------------------------------------------------------
September 1998 Confidential
18
<PAGE> 21
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
PROJECTED PRO FORMA BALANCE SHEET INFORMATION
Low Scenario
($ in thousands)
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal Year
----------------- -----------------------------------------------
Third Fourth 1999 2000 2001 2002 2003
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets less cash and equivalents:
Accounts receivable, net $ 8,767 $ 8,701 $ 7,675 $ 8,337 $ 8,837 $ 9,367 $ 9,929
Inventory 9,613 9,308 8,775 9,259 9,614 9,979 10,353
Unbilled contract costs & fees 400 200 - - - - -
Prepaid expenses 222 208 245 290 290 290 290
Prepaid income taxes 1,763 1,763 1,763 1,763 1,763 1,763 1,763
------- ------- ------- ------- ------- ------- -------
20,765 20,180 18,458 19,649 20,504 21,399 22,335
Current liabilities less current debt 5,614 5,919 5,745 5,462 5,790 6,137 6,505
Working capital less cash and current debt $15,151 $14,261 $12,713 $14,187 $14,714 $15,262 $15,830
Depreciation and amortization 481 495 1,897 1,891 1,745 1,785 1,836
Net capital expenditures 260 240 1,041 1,150 1,228 1,314 1,406
</TABLE>
- --------------------------------------------------------------------------------
September 1998 Confidential
19
<PAGE> 22
SECTION VI
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
(Data in millions, except per share data)
<TABLE>
<CAPTION>
Market Price Information Earnings Per Share(a)
------------------------------ ---------------------
52 Week Range Calendar Year End
Latest Price ------------- % of ---------------------
Symbol Ex'chg Company Fye Filing Cur'cy 09/15/98 High Low High 1997 1998 1999
- ------ ------ ------- --- ------ ------ -------- ------ ----- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ELECTRONIC COMPONENTS / TEST EQUIPMENT
2308 TT Taipei Delta Electronics, Inc. DC 12/97 NT$ 93.50 159.17 82.08 58.7% 5.19 6.26 8.49
IFRS NMS IFR Systems, Inc. JE 06/98 US$ 5.06 25.38 5.06 20.0% 0.93 0.59 0.93
SAHN SW SWX Schaffner Holding AG SP 03/98 Sf 182 315 169 57.8% 12.9 20.3 23.8
----------------------------------------------------------------------------------
AVERAGE 45.5%
----------------------------------------------------------------------------------
POWER CONVERSION / AMPLIFICATION
AEIS NMS Advanced Energy Industries, Inc. DC 06/98 US$ 8.31 36.81 6.25 22.6% 0.64 (0.21) 0.42
ATSN NMS Artesyn Technologies, Inc. DC 06/98 US$ 15.75 31.13 13.38 50.6% 0.98 0.88 1.27
DGTC NMS Del Global Technologies Corp. JL 04/98 US$ 7.38 12.69 7.38 58.1% 0.65 0.76 0.92
VICR NMS Vicor Corp. DC 06/98 US$ 9.44 35.00 8.81 27.0% 0.60 0.48 0.65
----------------------------------------------------------------------------------
COMBINED AVERAGE 42.1%
----------------------------------------------------------------------------------
</TABLE>
- -----------
(a) Earnings estimates and long-term growth rates are from First Call as of
September 15, 1998, except for Delta Electronics, Inc. and Schaffner Holding
AG which are from HSBC Securities, Inc.
- --------------------------------------------------------------------------------
September 1998 Confidential
20
<PAGE> 23
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
(Data in millions)
<TABLE>
<CAPTION>
Price/Earnings Ratio
---------------------------------------
L-T(a) Calendar Year End Tangible Market/
Growth ---------------------- Shares Market Book Tangible
Symbol Ex'chg Company Rate 1997 1998 1999 (mm) Cur'cy Cap'n Value Book
- ------ ------ ------- ------ ------ ----- ----- ----- ------ -------- --------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ELECTRONIC COMPONENTS / TEST EQUIPMENT
2308 TT Taipei Delta Electronics, Inc. 30% 18.0x 14.9x 11.0x 560.9 NT$ 52,440.9 11,401.2 4.6x
IFRS NMS IFR Systems, Inc. 25% 5.4x 8.6x 5.4x 8.2 US$ 41.5 (28.8) nmf
SAHN SW SWX Schaffner Holding AG 25% 14.1x 9.0x 7.6x 0.6 Sf 115.0 18.8 6.1x
------------------------------------------------------------------------------------------------------------------
AVERAGE 27% 12.5x 10.8x 8.0x 5.4x
------------------------------------------------------------------------------------------------------------------
POWER CONVERSION / AMPLIFICATION
AEIS NMS Advanced Energy Industries, Inc.(b) 26% 13.0x nmf 19.8x 26.6 US$ 221.1 80.4 2.7x
ATSN NMS Artesyn Technologies, Inc. 25% 16.1x 17.9x 12.4x 38.9 US$ 612.1 136.5 4.5x
DGTC NMS Del Global Technologies Corp. 18% 11.3x 9.7x 8.0x 7.6 US$ 56.1 51.5 1.1x
VICR NMS Vicor Corp. 15% 15.7x 19.7x 14.5x 42.1 US$ 397.5 206.6 1.9x
------------------------------------------------------------------------------------------------------------------
COMBINED AVERAGE 23% 13.4x 13.3x 11.3x 3.5x
------------------------------------------------------------------------------------------------------------------
</TABLE>
nmf - not meaningful
- ------------------------------
(a) Earnings estimates and long-term growth rates are from First Call as of
September 15, 1998, except for Delta Electronics, Inc. and Schaffner
Holding AG which are from HSBC Securities, Inc.
(b) Shares outstanding are pro forma for 4 million new shares issued pursuant
to a merger
- --------------------------------------------------------------------------------
September 1998 Confidential
21
<PAGE> 24
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
(Data in millions)
<TABLE>
<CAPTION>
Latest Twelve Months
---------------------- Enterprise Value to:
Period Ending 06/30/98 ----------------------
Enterp. ---------------------- LTM LTM LTM
Symbol Ex'chg Company Cur'cy Value(a) Sales EBITDA EBIT Sales EBITDA EBIT
- ------ ------ ------- ------ -------- ----- ------ ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ELECTRONIC COMPONENTS / TEST EQUIPMENT
2308 TT Taipei Delta Electronics, Inc. NT$ 49,630.7 na na na na na na
IFRS NMS IFR Systems, Inc. US$ 152.4 148.1 12.3 3.8 1.0x 12.4x 40.2x*
SAHN SW SWX Schaffner Holding AG Sf 170.5 145.1 21.0 16.4 1.2x 8.1x 10.4x
-------------------------------------------------------------------------------------------------------
AVERAGE 1.1x 10.2x 10.4x
-------------------------------------------------------------------------------------------------------
POWER CONVERSION / AMPLIFICATION
AEIS NMS Advanced Energy Industries, Inc. US$ 193.1 151.4 19.6 14.9 1.3x 9.8x 12.9x
ATSN NMS Artesyn Technologies, Inc. US$ 609.8 550.9 68.8 53.0 1.1x 8.9x 11.5x
DGTC NMS Del Global Technologies Corp. US$ 49.6 61.4 10.4 8.3 0.8x 4.8x 6.0x
VICR NMS Vicor Corp. US$ 326.5 169.5 40.3 31.0 1.9x 8.1x 10.5x
-------------------------------------------------------------------------------------------------------
COMBINED AVERAGE 1.2x 8.7x 10.3x
-------------------------------------------------------------------------------------------------------
</TABLE>
* - excluded from calculations of the average and the combined average
- -------------
(a) Enterprise value equals market capitalization plus total debt plus preferred
equity plus minority interests minus cash
- --------------------------------------------------------------------------------
September 1998 Confidential
22
<PAGE> 25
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
IMPLIED VALUATION USING AVERAGE OF ELECTRONIC COMPONENTS AND TEST EQUIPMENT
COMPANIES
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Average Multiple
--------------------------------------
Price / Price /
Thermo Calendar Calendar Price / Implied Implied
Voltek's 1998 1999 Tangible Equity Share
Valuation Parameter(a) Value Net Income Net Income Book Value Value Value(b)
- ----------------------- ------- ---------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Calendar 1998 net income $ 1,533 10.8x $16,598 $1.44
Calendar 1999 net income 2,958 8.0x 23,766 2.06
Tangible book value (7/4/98) 18,120 5.4x 97,104 8.40
</TABLE>
<TABLE>
<CAPTION>
Average Multiple
-----------------------------------
Enterprise Value /
------------------ Plus: Implied Implied
LTM LTM LTM Less: Plus: Option Equity Share
Valuation Parameter (a) Revenues EBITDA EBIT Debt Cash Proceeds Value Value(b)
- ----------------------- -------- ------ ----- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LTM revenues $40,478 1.1x $(9,106) $18,228 $1,978 $55,716 $4.82
LTM EBITDA 3,858 10.2x (9,106) 18,228 1,978 50,633 4.38
LTM EBIT 1,840 10.4x (9,106) 18,228 1,978 30,204 2.61
----------------------------
Average $45,670 $3.95
Median 40,419 3.50
High 97,104 8.40
Low 16,598 1.44
----------------------------
</TABLE>
- ------------------------------------------------------
(a) Data are pro forma for the proposed the sale of the Universal Voltronics
division
(b) Includes 8,683,208 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 416,216 shares issuable
upon exercise of options. The shares issuable result from (i) options
whose exercise price is below the $7.00 offer and (ii) subordinated
convertible notes whose conversion price is below the $7.00 offer.
- --------------------------------------------------------------------------------
September 1998 Confidential
23
<PAGE> 26
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
IMPLIED VALUATION USING COMBINED AVERAGE
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Average Multiple
--------------------------------------
Price / Price /
Thermo Calendar Calendar Price / Implied Implied
Voltek's 1998 1999 Tangible Equity Share
Valuation Parameter(a) Value Net Income Net Income Book Value Value Value(b)
- ----------------------- ------- ---------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Calendar 1998 net income $ 1,533 13.3x $20,375 $1.76
Calendar 1999 net income 2,958 11.3x 33,312 2.88
Tangible book value (7/4/98) 18,120 3.5x 63,309 5.47
</TABLE>
<TABLE>
<CAPTION>
Average Multiple
-----------------------------------
Enterprise Value /
------------------ Plus: Implied Implied
LTM LTM LTM Less: Plus: Option Equity Share
Valuation Parameter (a) Revenues EBITDA EBIT Debt Cash Proceeds Value Value(b)
- ----------------------- -------- ------ ----- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LTM revenues $40,478 1.2x $(9,106) $18,228 $1,978 $60,498 $5.23
LTM EBITDA 3,858 8.7x (9,106) 18,228 1,978 44,581 3.86
LTM EBIT 1,840 10.3x (9,106) 18,228 1,978 29,991 2.59
----------------------------
Average $42,011 $3.63
Median 38,947 3.37
High 63,309 5.47
Low 20,375 1.76
----------------------------
</TABLE>
- ------------------------------------------------------
(a) Data are pro forma for the proposed the sale of the Universal Voltronics
division
(b) Includes 8,683,208 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 416,216 shares issuable
upon exercise of options. The shares issuable result from (i) options
whose exercise price is below the $7.00 offer and (ii) subordinated
convertible notes whose conversion price is below the $7.00 offer.
- --------------------------------------------------------------------------------
September 1998 Confidential
24
<PAGE> 27
SECTION VII
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
PROJECTED PRO FORMA INCOME STATEMENT INFORMATION (ASSUMES AVERAGE SCENARIO)
($ in thousands)
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal Year
------------------ ---------------------------------------------------- Terminal
Third Fourth 1999 2000 2001 2002 2003 Value
------- ------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income (EBIT) $ (63) $ 479 $ 4,166 $ 5,139 $ 7,314 $ 8,828 $ 10,349 $ 10,349
Non-deductible amortization 87 86 340 340 340 340 340 340
------- ------- ------- ------- ------- ------- -------- --------
EBIT before non-deductible amortization 24 565 4,506 5,479 7,654 9,168 10,689 10,689
Taxes on EBIT (10) (226) (1,802) (2,192) (3,062) (3,667) (4,276) (4,276)
------- ------- ------- ------- ------- ------- -------- --------
After-tax operating income $ 14 $ 339 $ 2,704 $ 3,287 $ 4,592 $ 5,501 $ 6,413 $ 6,413
======= ======= ======= ======= ======= ======= ======== ========
CASH SOURCES
After-tax operating income $ 14 $ 339 $ 2,704 $ 3,287 $ 4,592 $ 5,501 $ 6,413 $ 6,413
Depreciation and amortization(a) 394 409 1,557 1,550 1,395 1,415 1,435 1,435
Increase (decrease) in
working capital(b) 979 890 1,548 (285) 319 81 4 4
Other cash sources (uses) 6 6 24 24 - - - -
------- ------- ------- ------- ------- ------- -------- --------
TOTAL SOURCES $ 1,393 $ 1,644 $ 5,833 $ 4,576 $ 6,306 $ 6,997 $ 7,852 $ 7,852
======= ======= ======= ======= ======= ======= ======== ========
CASH USES
Net capital expenditures $ 260 $ 240 $ 1,041 $ 1,125 $ 1,125 $ 1,125 $ 1,125 1,125
Other cash uses (sources) - - - - - - - -
------- ------- ------- ------- ------- ------- -------- --------
TOTAL USES $ 260 $ 240 $ 1,041 $ 1,125 $ 1,125 $ 1,125 $ 1,125 $ 1,125
======= ======= ======= ======= ======= ======= ======== ========
- --------------------------------------------------------------------------------------------------------------------
FREE CASH FLOW $ 1,133 $ 1,404 $ 4,792 $ 3,451 $ 5,181 $ 5,872 $ 6,727 $ 6,727
- --------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------
Discount Rate (WACC) Present Value of Cash Flows (c)
--------------------------------------------------------------
15.0% $ 18,677
17.5% 17,584
20.0% 16,598
22.5% 15,705
25.0% 14,895
27.5% 14,158
--------------------------------------------------------------
</TABLE>
(a) Excludes non-deductible amortization
(b) Excludes cash and equivalents and current debt
(c) Terminal value not included
- --------------------------------------------------------------------------------
September 1998 Confidential
25
<PAGE> 28
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
EBIT MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS
ASSUMES AVERAGE SCENARIO
($ in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 15.00% 17.50% 20.00% 22.50% 25.00% 27.50%
- ------------------------------------------------------------------------------------------------------------------------
Present Value of Cash Flows $18,677 $17,584 $16,598 $15,705 $14,895 $14,158
- ------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
8.0x $39,495 $35,243 $31,525 $28,264 $25,396 $22,867
9.0x 44,432 39,649 35,465 31,797 28,570 25,726
Multiple 10.0x 49,368 44,054 39,406 35,330 31,745 28,584
11.0x 54,305 48,459 43,347 38,863 34,919 31,443
12.0x 59,242 52,865 47,287 42,396 38,094 34,301
- ------------------------------------------------------------------------------------------------------------------------
Enterprise Value:
8.0x $58,172 $52,827 $48,122 $43,969 $40,291 $37,025
9.0x 63,109 57,233 52,063 47,502 43,465 39,884
Multiple 10.0x 68,046 61,638 56,004 51,035 46,640 42,742
11.0x 72,982 66,043 59,944 54,568 49,814 45,600
12.0x 77,919 70,449 63,885 58,101 52,989 48,459
- ------------------------------------------------------------------------------------------------------------------------
Equity Value:
8.0x $69,272 $63,927 $59,223 $55,069 $51,391 $48,125
9.0x 74,209 68,333 63,163 58,602 54,565 50,984
Multiple 10.0x 79,146 72,738 67,104 62,135 57,740 53,842
11.0x 84,083 77,143 71,044 65,668 60,914 56,701
12.0x 89,019 81,549 74,985 69,201 64,089 59,559
- ------------------------------------------------------------------------------------------------------------------------
Implied Enterprise Value / LTM Revenues Multiple:
8.0x 1.4x 1.3x 1.2x 1.1x 1.0x 0.9x
9.0x 1.6x 1.4x 1.3x 1.2x 1.1x 1.0x
Multiple 10.0x 1.7x 1.5x 1.4x 1.3x 1.2x 1.1x
11.0x 1.8x 1.6x 1.5x 1.3x 1.2x 1.1x
12.0x 1.9x 1.7x 1.6x 1.4x 1.3x 1.2x
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
September 1998 Confidential
26
<PAGE> 29
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
EBIT MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS (CONTINUED)
ASSUMES AVERAGE SCENARIO
($ in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------
Summary:
WACC: 20.00%
Multiple: 10.0x
EBIT Terminal Value: $ 10,349
Present Value of Cash Flows $ 16,598
Present Value of Terminal Value 39,406
--------
Enterprise Value 56,004
Plus: Cash (a) 18,228
Plus: Option Proceeds 1,978
Less: Debt (9,106)
--------
Equity Value $ 67,104
========
Equity Value per Share $ 5.80
- ----------------------------------------------------
</TABLE>
- ----------------------------------------------------
(a) Data are pro forma for the proposed the sale of the Universal Voltronics
division
- --------------------------------------------------------------------------------
September 1998 Confidential
27
<PAGE> 30
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
EBITDA MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS
ASSUMES AVERAGE SCENARIO
($ in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 15.00% 17.50% 20.00% 22.50% 25.00% 27.50%
- --------------------------------------------------------------------------------------------------------------------------
Present Value of Cash Flows $18,677 $17,584 16,598 $15,705 $14,895 $14,158
- --------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
6.0x $34,701 $30,966 27,699 $24,834 $22,314 $20,092
7.0x 40,485 36,127 32,315 28,972 26,033 23,441
Multiple 8.0x 46,269 41,288 36,932 33,111 29,752 26,790
9.0x 52,052 46,449 41,548 37,250 33,471 30,138
10.0x 57,836 51,610 46,165 41,389 37,190 33,487
- --------------------------------------------------------------------------------------------------------------------------
Enterprise Value:
6.0x $53,379 $48,550 44,296 $40,538 $37,209 $34,250
7.0x 59,162 53,711 48,913 44,677 40,928 37,599
Multiple 8.0x 64,946 58,872 53,529 48,816 44,646 40,947
9.0x 70,729 64,033 58,146 52,955 48,365 44,296
10.0x 76,513 69,194 62,762 57,094 52,084 47,645
- --------------------------------------------------------------------------------------------------------------------------
Equity Value:
6.0x $64,479 $59,650 55,397 $51,639 $48,309 $45,350
7.0x 70,262 64,811 60,013 55,777 52,028 48,699
Multiple 8.0x 76,046 69,972 64,629 59,916 55,747 52,047
9.0x 81,830 75,133 69,246 64,055 59,466 55,396
10.0x 87,613 80,294 73,862 68,194 63,184 58,745
- --------------------------------------------------------------------------------------------------------------------------
Implied Enterprise Value / LTM Revenues Multiple:
6.0x 1.3x 1.2x 1.1x 1.0x 0.9x 0.8x
7.0x 1.5x 1.3x 1.2x 1.1x 1.0x 0.9x
Multiple 8.0x 1.6x 1.5x 1.3x 1.2x 1.1x 1.0x
9.0x 1.7x 1.6x 1.4x 1.3x 1.2x 1.1x
10.0x 1.9x 1.7x 1.6x 1.4x 1.3x 1.2x
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
September 1998 Confidential
28
<PAGE> 31
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
EBITDA MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS (CONTINUED)
ASSUMES AVERAGE SCENARIO
($ in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C>
----------------------------------------------------
Summary:
WACC: 20.00%
Multiple: 8.0x
EBITDA Terminal Value: $12,124
Present Value of Cash Flows $16,598
Present Value of Terminal Value 36,932
-------
Enterprise Value 53,529
Plus: Cash (a) 18,228
Plus: Option Proceeds 1,978
Less: Debt (9,106)
-------
Equity Value $64,629
=======
Equity Value per Share $ 5.59
----------------------------------------------------
</TABLE>
- ---------------------------------
(a) Data are pro forma for the proposed the sale of the Universal Voltronics
division
- --------------------------------------------------------------------------------
September 1998 Confidential
29
<PAGE> 32
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
TERMINAL FREE CASH FLOW METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS
ASSUMES AVERAGE SCENARIO
($ in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 15.00% 17.50% 20.00% 22.50% 25.00% 27.50%
- ----------------------------------------------------------------------------------------------------------------------------
Present Value of Cash Flows $18,677 $17,584 $16,598 $15,705 $14,895 $14,158
- ----------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
6.0% $35,658 $24,902 $18,297 $13,919 $10,861 $ 8,642
6.5% 37,755 26,034 18,975 14,354 11,155 8,848
Terminal Growth Rate of Cash Flows 7.0% 40,115 27,274 19,705 14,817 11,464 9,064
7.5% 42,789 28,637 20,493 15,311 11,792 9,291
8.0% 45,846 30,145 21,347 15,839 12,139 9,529
- ----------------------------------------------------------------------------------------------------------------------------
Enterprise Value:
6.0% $54,335 $42,486 $34,895 $29,624 $25,756 $22,800
6.5% 56,433 43,618 35,572 30,059 26,049 23,006
Terminal Growth Rate of Cash Flows 7.0% 58,792 44,858 36,302 30,522 26,359 23,222
7.5% 61,467 46,221 37,090 31,016 26,687 23,448
8.0% 64,523 47,729 37,944 31,544 27,034 23,687
- ----------------------------------------------------------------------------------------------------------------------------
Equity Value:
6.0% $65,435 $53,586 $45,995 $40,724 $36,856 $33,900
6.5% 67,533 54,718 46,673 41,159 37,149 34,106
Terminal Growth Rate of Cash Flows 7.0% 69,892 55,958 47,402 41,622 37,459 34,322
7.5% 72,567 57,322 48,191 42,116 37,787 34,548
8.0% 75,623 58,829 49,044 42,644 38,134 34,787
- ----------------------------------------------------------------------------------------------------------------------------
Implied Enterprise Value / LTM Revenues Multiple:
6.0% 1.3x 1.0x 0.9x 0.7x 0.6x 0.6x
6.5% 1.4x 1.1x 0.9x 0.7x 0.6x 0.6x
Terminal Growth Rate of Cash Flows 7.0% 1.5x 1.1x 0.9x 0.8x 0.7x 0.6x
7.5% 1.5x 1.1x 0.9x 0.8x 0.7x 0.6x
8.0% 1.6x 1.2x 0.9x 0.8x 0.7x 0.6x
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
September 1998 Confidential
30
<PAGE> 33
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
TERMINAL FREE CASH FLOW METHODOLOGY FOR
DISCOUNTED CASH FLOW ANALYSIS (CONTINUED)
ASSUMES AVERAGE SCENARIO
($ in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C>
-------------------------------------------------------
Summary:
WACC: 20.00%
Terminal Growth Rate of Cash Flows: 7.0%
Terminal Free Cash Flow Value: $ 6,727
Present Value of Cash Flows $16,598
Present Value of Terminal Value 19,705
-------
Enterprise Value 36,302
Plus: Cash (a) 18,228
Plus: Option Proceeds 1,978
Less: Debt (9,106)
-------
Equity Value $47,402
=======
Equity Value per Share $ 4.10
-------------------------------------------------------
</TABLE>
- --------------
(a) Data are pro forma for the proposed the sale of the Universal Voltronics
division
- --------------------------------------------------------------------------------
September 1998 Confidential
31
<PAGE> 34
SECTION VIII
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
OVERVIEW OF SELECTED TRANSACTIONS
<TABLE>
<CAPTION>
Date Date
Effective Announced Target Target Business Description Acquirer
--------- --------- ------ --------------------------- --------
<S> <C> <C> <C> <C> <C> <C>
1. 06/14/95 05/10/95 Best Power Technology, Inc. Mnfr uninterruptible power
supplies General Signal Corp.
2. 03/13/96 11/17/95 Deltec Power Systems, Inc. (a) Mnfr uninterruptible power
supplies and dvlp related
management software Exide Electronics Group Inc.
3. 09/15/97 09/15/97 Trench Group S.A. (b) Mnfr test equipment and engineered
products for high voltage
applications CVC Capital Partners Ltd.
4. 11/19/97 10/16/97 Exide Electronics Group Inc. (c) Mnfr uninterruptible power
supplies and power management and
facilities monitoring software BTR plc
5. 12/29/97 09/03/97 Zytec Corp. Mnfr switchmode power supplies
for OEMs of telecommunications
products and electronics Artesyn Technologies Inc.(d)
6. 06/19/98 04/23/98 Vero Group plc Mnfr power supplies, electronic
enclosures, racks and backplanes Applied Power Inc.
7. 06/19/98 03/11/98 Corcom Inc. Mnfr RFI filters, power entry
products and filtered telco Communications Instruments
connectors Inc.
8. 07/07/98 04/27/98 Fluke Corp. Mnfr compact electronic power tools Danaher Corp.
</TABLE>
- -----------------------------------
(a) Subsidiary of Fiskars Oy Ab
(b) Subsidiary of BBA Group plc
(c) Danaher Corp. made a bid on July 9, 1997
(d) Formerly Computer Products Inc.
- --------------------------------------------------------------------------------
September 1998 Confidential
32
<PAGE> 35
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
TRANSACTION MULTIPLE ANALYSIS
($ in millions)
<TABLE>
<CAPTION>
Equity Value
as a Multiple of:
----------------- Enterprise Value as a Multiple of:
Date Date Equity Book Net Enterprise ----------------------------------
Effective Announced Target Value Value Income Value Revenues EBITDA(a) EBIT(b)
--------- --------- ------ ------ ----- ------ ---------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 06/14/95 05/10/95 Best Power Technology, Inc. $200.6 3.6x 18.3x $192.7 1.3x 10.2x 11.6x
2. 03/13/96 11/17/95 Deltec Power Systems, Inc. 169.5 nmf 32.0x 201.8 1.5x 11.3x 20.1x
3. 09/15/97 09/15/97 Trench Group S.A. 280.9 2.5x 18.7x 278.0 1.2x 8.5x 11.5x
4. 11/19/97 10/16/97 Exide Electronics Group Inc. 352.4 nmf nmf 593.7 1.1x 9.8x 16.5x
5. 12/29/97 09/03/97 Zytec Corp. 334.5 8.3x 31.0x 341.9 1.5x 14.1x 17.7x
6. 06/19/98 04/23/98 Vero Group plc 190.6 4.8x 17.5x 194.9 1.2x 8.7x 11.4x
7. 06/19/98 03/11/98 Corcom Inc. 51.0 2.2x 17.2x 42.9 1.2x 7.3x 9.1x
8. 07/07/98 04/27/98 Fluke Corp. 684.4 3.2x 23.1x 647.6 1.5x 10.4x 13.9x
-----------------------------------------------------------------------------
Average 4.1x 22.6x 1.3x 10.0x 14.0x
Median 3.4x 18.7x 1.2x 10.0x 12.8x
-----------------------------------------------------------------------------
</TABLE>
- ------------------------------------
nmf - not meaningful
(a) EBITDA equals operating income before interest, taxes, depreciation and
amortization
(b) EBIT equals operating income before interest and taxes
- --------------------------------------------------------------------------------
September 1998 Confidential
33
<PAGE> 36
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
IMPLIED VALUATION USING TRANSACTION MULTIPLES
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Average
Multiple
--------
Equity
Thermo Value to Implied Implied
Voltek's Book Equity Share
Valuation Parameter(a) Value Value Value Value(b)
- --------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Tangible book value (7/4/98) $18,120 4.1x $74,215 $6.42
</TABLE>
<TABLE>
<CAPTION>
Average
Multiple
----------
Thermo Enterprise Plus: Implied Implied
Voltek's Value to Less: Plus: Option Equity Share
Valuation Parameter(a) Value Revenues Debt Cash Proceeds Value Value(b)
- ----------------------- -------- ---------- -------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
LTM revenues $40,478 1.3x $(9,106) $18,228 $1,978 $63,199 $5.46
------------------------
Average $5.94
Median 5.94
High 6.42
Low 5.46
------------------------
</TABLE>
- -----------
(a) Data are pro forma for the proposed the sale of the Universal Voltronics
division
(b) Includes 8,683,208 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 416,216 shares issuable
upon exercise of options. The shares issuable result from (i) options whose
exercise price is below the $7.00 offer and (ii) subordinated convertible
notes whose conversion price is below the $7.00 offer.
- --------------------------------------------------------------------------------
September 1998 Confidential
34
<PAGE> 37
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
ANALYSIS OF SHARE PREMIUMS
($ actual)
<TABLE>
<CAPTION>
Premium Premium Premium
1 Day 1 Week 4 Weeks
Price Prior To Prior To Prior To
Date Date Per Announ. Announ. Announ.
Effective Announced Target Name Share Date Date Date
--------- --------- ----------- ------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
1. 06/14/95 05/10/95 Best Power Technology Inc. $ 21.00 61.5% 68.0% 75.0%
2. 11/19/97 10/16/97 Exide Electronics Group Inc. 29.00 125.2%* 133.2%* 149.5%*
3. 12/30/97 09/03/97 Zytec Corp. 42.15 45.3% 48.2% 71.2%
4. 06/19/98 03/11/98 Corcom Inc. 13.00 33.3% 31.6% 36.8%
5. 06/19/98 04/23/98 Vero Group plc 2.59 40.2% 40.8% 40.5%
6. 07/07/98 04/27/98 Fluke Corp. 33.39 44.0% 43.6% 40.6%
-----------------------------------------------------
Average 44.9% 46.5% 52.8%
Median 44.0% 43.6% 40.6%
-----------------------------------------------------
</TABLE>
* Excluded from the average and the median
- -----------------
Source: Securities Data Company, Inc.
- --------------------------------------------------------------------------------
September 1998 Confidential
35
<PAGE> 38
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
IMPLIED VALUATION USING SHARE PREMIUMS
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Average Premium
Thermo --------------------------------------------- Implied Implied
Voltek's One Day One Week Four Weeks Equity Share
Valuation Parameter(a) Value Prior to Ann. Prior to Ann. Prior to Ann. Value Value(b)
- ----------------------- -------- ------------- ------------- ------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Price One Day Prior to Announcement $4.81 44.9% $80,638 $6.97
Price One Week Prior to Announcement 4.38 46.5% 74,100 6.41
Price Four Weeks Prior to Announcement 5.00 52.8% 88,363 7.64
------------------------
Average $7.01
Median 6.97
High 7.64
Low 6.41
------------------------
</TABLE>
- -----------------
(a) Adjusted for the pending sale of the Universal Voltronics division
(b) Includes 8,683,208 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 416,216 shares issuable
upon exercise of options. The shares issuable result from (i) options whose
exercise price is below the $7.00 offer and (ii) subordinated convertible
notes whose conversion price is below the $7.00 offer.
- --------------------------------------------------------------------------------
September 1998 Confidential
36
<PAGE> 39
SECTION IX
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
SELECTED M&A TRANSACTION PREMIUMS FOR MINORITY INTEREST ACQUISITIONS
IN GOING PRIVATE TRANSACTIONS
<TABLE>
<CAPTION>
Value of
Date Transaction Percent
Effective Acquiror Name Target Name Target Business Description ($ Mm) Sought
--------- ------------- ----------- --------------------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
1. 02/23/94 Holderbank Financiere Glarus Holnam Inc(Holdernam Inc) Manufacture cement;holding co $ 51.7 5.0%
2. 06/09/94 Wassall PLC General Cable(Cie Gen de Eaux) Mnfr copper,building wire 35.9 46.3%
3. 12/29/94 Ogden Corp Ogden Projects Inc(Ogden Corp) Heavy construction company 110.3 15.8%
4. 06/16/95 LinPac Mouldings Ltd Ropak Corp Manufacture plastic containers 28.5 58.3%
5. 02/16/97 Novartis AG SyStemix Inc(Novartis AG) Mnfr,dvlp cellular processes 107.6 32.2%
6. 09/05/97 Gold Kist Inc Golden Poultry Co Inc Produce,wholesale poultry 52.1 25.0%
7. 12/31/96 Electromagnetic Sciences Inc LXE Mnfr microwave components 14.8 22.2%
8. 11/27/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) Manufacture steel 56.5 15.5%
9. 12/11/96 Ansaldo Transporti SpA Union Switch & Signal Inc Manufacture railroad equip 27.1 38.4%
10. 07/09/97 Mafco Holdings Inc Mafco Consolidated Grp(Mafco) Mnfr cosmetics,beauty products 116.8 15.0%
11. 07/09/98 Texas Industries Inc Chaparral Steel Co Mnfr primary steel products 72.8 18.7%
12. 01/15/98 FH Faulding & Co Ltd Faulding Inc(FH Faulding & Co) Mnfr pharmaceuticals 77.3 38.0%
13. 03/30/98 Waste Management Inc Wheelabrator Technologies Inc Mnfr laboratory, medical equip 869.7 34.6%
14. 11/26/97 Rhone-Poulenc SA Rhone-Poulenc Rorer Inc Manufacture pharmaceuticals 4,831.6 36.9%
15. 07/15/98 ISP Holdings Inc Intl Specialty Prods Mnfr specialty chemicals 324.5 20.1%
</TABLE>
<TABLE>
<CAPTION>
Premium Premium Premium
1 Day 1 Week 4 Weeks
Prior to Prior to Prior to
Price Announce- Announce- Announce-
Date Per ment ment ment
Effective Acquiror Name Target Name Share Date Date Date
--------- ------------- ----------- ------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1. 02/23/94 Holderbank Financiere Glarus Holnam Inc(Holdernam Inc) $ 7.65 13.3% 15.5% 7.4%
2. 06/09/94 Wassall PLC General Cable(Cie Gen de Eaux) 6.00 17.1% 21.5% 11.6%
3. 12/29/94 Ogden Corp Ogden Projects Inc(Ogden Corp) 18.38 5.8% 17.6% 20.5%
4. 06/16/95 LinPac Mouldings Ltd Ropak Corp 11.00 4.8% 6.0% 4.8%
5. 02/16/97 Novartis AG SyStemix Inc(Novartis AG) 19.50 4.7% 69.6% 59.2%
6. 09/05/97 Gold Kist Inc Golden Poultry Co Inc 14.25 52.0% 50.0% 39.0%
7. 12/31/96 Electromagnetic Sciences Inc LXE 13.13 22.1% 14.2% 19.4%
8. 11/27/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) 10.00 17.6% 29.0% 77.8%
9. 12/11/96 Ansaldo Transporti SpA Union Switch & Signal Inc 7.25 3.6% 3.6% --%
10. 07/09/97 Mafco Holdings Inc Mafco Consolidated Grp(Mafco) 33.50 23.5% 23.5% 27.6%
11. 07/09/98 Texas Industries Inc Chaparral Steel Co 15.50 20.4% 25.3% 29.2%
12. 01/15/98 FH Faulding & Co Ltd Faulding Inc(FH Faulding & Co) 13.50 25.6% 22.7% 45.9%
13. 03/30/98 Waste Management Inc Wheelabrator Technologies Inc 16.50 26.9% 28.2% 30.7%
14. 11/26/97 Rhone-Poulenc SA Rhone-Poulenc Rorer Inc 97.00 22.1% 22.8% 29.3%
15. 07/15/98 ISP Holdings Inc Intl Specialty Prods 18.25 4.3% 1.7% 14.5%
-------------------------------------------
Average 17.6% 23.4% 27.8%
Median 17.6% 22.7% 27.6%
High 52.0% 69.6% 77.8%
Low 3.6% 1.7% --%
-------------------------------------------
</TABLE>
Source: Securities Data Company, Inc.
- --------------------------------------------------------------------------------
September 1998 Confidential
37
<PAGE> 40
HSBC Securities, Inc. THERMO VOLTEK CORP.
- --------------------------------------------------------------------------------
IMPLIED VALUATION USING TRANSACTION PREMIUMS
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Thermo Premium Premium Premium Implied Implied
Voltek's One Day One Week Four Weeks Equity Share
Valuation Parameter (a) Value Prior to Ann. Prior to Ann. Prior to Ann. Value Value(b)
- -------------------------------------- -------- ------------- ------------- ------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Price One Day Prior to Announcement $4.81 17.6% $65,442 $5.66
Price One Week Prior to Announcement 4.38 23.4% 62,439 5.40
Price Four Weeks Prior to Announcement 5.00 27.8% 73,893 6.39
-------------------------------------
Average $67,258 $5.82
Median 65,442 5.66
High 73,893 6.39
Low 62,439 5.40
------------------------------------
</TABLE>
- -----------------
(a) Adjusted for the pending sale of the Universal Voltronics division
(b) Includes 8,683,208 shares outstanding, 2,465,089 shares issuable upon
conversion of subordinated convertible notes and 416,216 shares issuable
upon exercise of options. The shares issuable result from (i) options whose
exercise price is below the $7.00 offer and (ii) subordinated convertible
notes whose conversion price is below the $7.00 offer.
- --------------------------------------------------------------------------------
September 1998 Confidential
38
<PAGE> 1
[Thermo Voltek Corp. Logo]
February 12, 1999
470 WILDWOOD STREET
P.O. BOX 2878
WOBURN, MASSACHUSETTS 01888-1578
Dear Stockholder:
I am pleased to invite you to a Special Meeting of the stockholders of
Thermo Voltek Corp., at which you will be asked to approve the proposed merger
of Voltek with a newly-formed subsidiary of Thermedics Inc. (Voltek's parent
company). The Special Meeting will take place at 10:00 a.m. on Thursday, March
25, 1999 at the offices of Thermo Electron Corporation, 81 Wyman Street,
Waltham, Massachusetts 02454. The merger, if approved by Voltek's stockholders,
would result in the public stockholders of Voltek receiving $7.00 in cash,
without interest, per share for their stock and Voltek becoming a private
company.
If Voltek's stockholders approve the merger, the merger would be
accomplished under an Agreement and Plan of Merger by and among Voltek, TV
Acquisition Corporation and Thermedics. Please carefully read the Merger
Agreement, which is attached as Appendix A to the enclosed Proxy Statement. In
addition, if you choose to dissent from the proposed merger and wish to seek
appraisal of the fair value of your stock, please refer to the sections of the
Proxy Statement regarding the rights of dissenting stockholders.
After comparing the proposed merger to various strategic alternatives,
including the sale of Voltek to an unaffiliated third party, a special committee
of the Voltek Board of Directors has concluded that the proposed merger
represents the best available course for Voltek and its public stockholders. The
Special Committee has received an opinion from its financial advisor, HSBC
Securities, Inc., as to the fairness of the merger from a financial point of
view to the Voltek stockholders (other than Thermedics and its affiliates).
Please read carefully the written opinion of HSBC Securities, Inc., dated
November 24, 1998, which is attached as Appendix B to the enclosed Proxy
Statement.
Voltek's Board of Directors and the Special Committee of the Board of
Directors believe that the proposed merger with Thermedics is both substantively
and procedurally fair to the public stockholders of Voltek, and unanimously
recommend that stockholders vote "FOR" approval of the proposed merger. In
considering the recommendations of the Board of Directors with respect to the
merger, stockholders should be aware that four of the six members of the Voltek
Board of Directors are either directors or employees of Thermedics or Thermo
Electron and thus have interests that are in addition to, or different from,
your interests as stockholders of Voltek.
Delaware law requires that a majority of the outstanding shares of Voltek
Common Stock entitled to vote at the Special Meeting vote in favor of the merger
for the merger to be approved. Thermedics, which owns approximately 66% of the
outstanding Common Stock, and Thermo Electron, which owns approximately 3% of
the outstanding Common Stock, intend to vote their shares in favor of the Merger
Agreement, thus assuring that the merger will be approved for purposes of
Delaware law. However, under the Merger Agreement, approval of the merger also
requires the affirmative vote of a majority of the outstanding shares of Common
Stock voted at the Special Meeting that are not owned by Thermedics, Thermo
Electron or the officers and directors of Voltek, Thermedics and Thermo
Electron. Only stockholders of record at the close of business on February 11,
1999 will receive notice of and be able to vote at the Special Meeting or any
adjournment or adjournments thereof.
The accompanying Proxy Statement provides you with a summary of the
proposed merger and additional information about the parties involved and their
interests. Please give all this information your careful attention. You can also
obtain other information about Voltek, Thermedics and Thermo Electron from
documents filed with the Securities and Exchange Commission.
<PAGE> 2
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE TAKE THE TIME
TO VOTE BY COMPLETING AND MAILING THE ENCLOSED PROXY CARD TO US TODAY. IF YOU
DATE, SIGN AND MAIL YOUR PROXY CARD WITHOUT INDICATING HOW YOU WISH TO VOTE,
YOUR PROXY WILL BE COUNTED AS A VOTE IN FAVOR OF THE MERGER AGREEMENT. YOUR VOTE
IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.
Your Board of Directors believes that the transaction with Thermedics is in
the best interests of Voltek and its public stockholders and has unanimously
approved it. Your Board of Directors unanimously recommends that stockholders
vote for the approval of the Merger Agreement. On behalf of the Board of
Directors, I urge you to sign, date and return the enclosed proxy today.
Please do not send any stock certificates to us now. If the merger is
approved, we will send you instructions concerning the surrender of your shares.
Thank you for your interest and participation.
Yours very truly,
/s/ COLIN I.W. BAXTER
------------------------------------
COLIN I.W. BAXTER
President and Chief Operating Officer
<PAGE> 1
[Thermo Voltek Corp. Logo]
NOTICE OF SPECIAL MEETING
February 12, 1999
To the Holders of the Common Stock of
THERMO VOLTEK CORP.
I am pleased to give you notice of and cordially invite you to attend in
person or by proxy the Special Meeting of the stockholders of Thermo Voltek
Corp., a Delaware corporation (the "Company" or "Voltek"), which will be held on
Thursday, March 25, 1999, at 10:00 a.m., at the offices of Thermo Electron
Corporation, 81 Wyman Street, Waltham, Massachusetts 02454, and at any
adjournment or adjournments thereof (the "Special Meeting"). At the Special
Meeting, stockholders will:
1. Consider and vote on a proposal to approve an Agreement and Plan of
Merger dated as of November 24, 1998 (the "Merger Agreement") pursuant
to which TV Acquisition Corporation, a newly-formed company (the
"Merger Sub"), will be merged with and into Voltek (the "Merger"). Upon
the Merger, each stockholder of the Company (other than stockholders
who perfect their dissenters' rights, Thermedics Inc. ("Thermedics")and
Thermo Electron Corporation) will become entitled to receive $7.00 in
cash, without interest, for each outstanding share of common stock,
$.05 par value, of the Company (the "Common Stock") owned by such
stockholder immediately prior to the effective time of the Merger. A
copy of the Merger Agreement is attached as Appendix A to and is
described in the accompanying Proxy Statement.
2. Transact such other business as may properly come before the Special
Meeting.
Only stockholders of record at the close of business on February 11, 1999
will receive notice of and be able to vote at the Special Meeting.
The accompanying Proxy Statement describes the Merger Agreement, the
proposed Merger and the actions to be taken in connection with the Merger. The
Company's Bylaws require that the holders of a majority of the outstanding
shares of Common Stock entitled to vote be present or represented by proxy at
the Special Meeting in order to constitute a quorum for the transaction of
business. It is important that your shares be represented at the Special Meeting
regardless of the number of shares you hold. Whether or not you are able to be
present in person, please sign and return promptly the enclosed Proxy Card in
the accompanying envelope, which requires no postage if mailed in the United
States. You may revoke your proxy in the manner described in the accompanying
Proxy Statement at any time before it is voted at the Special Meeting.
Stockholders who properly demand appraisal prior to the stockholder vote at
the Special Meeting, who do not vote in favor of adoption of the Merger
Agreement and who otherwise comply with the provisions of Section 262 of the
General Corporation Law of the State of Delaware (the "DGCL") will be entitled,
if the Merger is completed, to statutory appraisal of the "fair value" of their
shares of Common Stock. See "RIGHTS OF DISSENTING STOCKHOLDERS" in the
accompanying Proxy Statement and the full text of Section 262 of the DGCL, which
is attached as Appendix C to and is described in the accompanying Proxy
Statement, for a description of the procedures that you must follow in order to
exercise your appraisal rights.
This Notice, the Proxy Card and Proxy Statement enclosed herewith are sent
to you by order of the Board of Directors.
SANDRA L. LAMBERT
Secretary
<PAGE> 2
WHETHER OR NOT YOU PLAN TO ATTEND, IT IS IMPORTANT THAT YOUR SHARES ARE
REPRESENTED AT THE SPECIAL MEETING. TO APPROVE AND ADOPT THE MERGER AGREEMENT,
THE AFFIRMATIVE VOTE OF (I) A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK
ENTITLED TO VOTE THEREON AND (II) A MAJORITY OF THE OUTSTANDING SHARES OF COMMON
STOCK THAT ARE VOTED AT THE SPECIAL MEETING BY STOCKHOLDERS OTHER THAN
THERMEDICS, THERMO ELECTRON CORPORATION AND THE DIRECTORS AND OFFICERS OF THE
COMPANY, THERMEDICS AND THERMO ELECTRON CORPORATION (THE "PUBLIC STOCKHOLDERS"),
IS REQUIRED. YOU ARE REQUESTED TO PROMPTLY COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT IN THE ENVELOPE PROVIDED. YOU MAY REVOKE THE PROXY AT ANY
TIME PRIOR TO ITS EXERCISE IN THE MANNER DESCRIBED IN THE ATTACHED PROXY
STATEMENT. ANY STOCKHOLDER PRESENT AT THE SPECIAL MEETING MAY REVOKE SUCH
HOLDER'S PROXY AND VOTE PERSONALLY ON THE MERGER AGREEMENT AT THE SPECIAL
MEETING.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. IN CONSIDERING THE RECOMMENDATIONS OF THE
BOARD OF DIRECTORS WITH RESPECT TO THE MERGER, THE PUBLIC STOCKHOLDERS SHOULD BE
AWARE THAT CERTAIN OFFICERS AND DIRECTORS OF THE COMPANY HAVE CERTAIN INTERESTS
THAT ARE IN ADDITION TO, OR DIFFERENT FROM, THE INTERESTS OF THE PUBLIC
STOCKHOLDERS. SEE "SPECIAL FACTORS -- CONFLICTS OF INTEREST."
IF A PROPERLY EXECUTED PROXY CARD IS SUBMITTED AND NO INSTRUCTIONS ARE
GIVEN, THE SHARES OF COMMON STOCK REPRESENTED BY THAT PROXY WILL BE VOTED "FOR"
THE PROPOSED MERGER.
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES TO THE COMPANY AT THIS TIME.
<PAGE> 1
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of Thermo
Voltek Corp., a Delaware corporation (the "Company" or "Voltek"), in connection
with the solicitation by its Board of Directors (the "Board" or the "Board of
Directors") of proxies to be used at a Special Meeting of stockholders to be
held on Thursday, March 25, 1999, at 10:00 a.m., at the offices of Thermo
Electron Corporation, 81 Wyman Street, Waltham, Massachusetts 02454, and at any
adjournment or adjournments thereof (the "Special Meeting"). The Board of
Directors has fixed the close of business on February 11, 1999 as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of, and to vote at, the Special Meeting.
The Special Meeting has been called to consider and vote on a proposal to
approve an Agreement and Plan of Merger dated as of November 24, 1998 (the
"Merger Agreement"), which is attached to this Proxy Statement as Appendix A.
Pursuant to the Merger Agreement, TV Acquisition Corporation (the "Merger Sub"),
a newly-formed Delaware corporation, will be merged with and into Voltek (the
"Merger"), with Voltek being the surviving corporation (the "Surviving
Corporation"). Voltek is a majority-owned subsidiary and the Merger Sub is a
wholly owned subsidiary of Thermedics Inc., a Massachusetts corporation
("Thermedics"), which in turn is a majority-owned subsidiary of Thermo Electron
Corporation, a Delaware corporation ("Thermo Electron"). The Merger Sub was
organized by Thermedics solely to facilitate the Merger.
In the Merger, each outstanding share of common stock, $.05 par value, of
Voltek (the "Common Stock") (other than shares held by stockholders who are
entitled to and who have perfected their Dissenters' Rights (as defined below),
shares held by Voltek in treasury and shares held by Thermedics and Thermo
Electron) will be canceled and converted automatically into the right to receive
$7.00 in cash, payable to the holder thereof, without interest. See "THE
MERGER." On March 30, 1998, the last trading day prior to the public
announcement of the proposed Merger, the closing price per share of Common Stock
was $4 13/16. On February 11, 1999, the last trading day prior to the printing
of this Proxy Statement, the closing price per share of Common Stock was $6 3/4.
The directors and officers of Voltek immediately prior to the Merger shall
be the initial directors and officers of the Surviving Corporation; however,
Thermedics intends to appoint a board of directors comprised solely of the
Surviving Corporation's management after the Merger. All options to purchase
Common Stock immediately prior to the Merger shall be assumed by Thermedics and
converted into options to purchase the common stock, $.10 par value, of
Thermedics. See "THE MERGER."
Under Delaware law, approval of the Merger at the Special Meeting will
require the affirmative vote of holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Special Meeting. Thermedics, which owns
approximately 66% of the outstanding Common Stock, and Thermo Electron, which
owns approximately 3% of the outstanding Common Stock, intend to vote their
shares in favor of the Merger Agreement, thus assuring that the Merger will be
approved under Delaware law. However, pursuant to the Merger Agreement, approval
of the Merger will also require the affirmative vote of a majority of the
outstanding shares of Common Stock that are voted at the Special Meeting by
stockholders other than Thermedics, Thermo Electron and the directors and
officers of the Company, Thermedics and Thermo Electron (the "Public
Stockholders").
The Board of Directors recommends that stockholders vote "FOR" approval and
adoption of the Merger Agreement. In considering the recommendations of the
Board of Directors with respect to the Merger, the Public Stockholders should be
aware that certain officers and directors of the Company have certain interests
that are in addition to, or different from, the interests of the Public
Stockholders. See "SPECIAL FACTORS -- Conflicts of Interest."
Stockholders should read and consider carefully the information contained
in this Proxy Statement. The consummation of the Merger is subject to certain
conditions. Accordingly, even if the stockholders approve the Merger, there can
be no assurance that the Merger will be consummated. This Proxy Statement, the
Notice of Special Meeting and the enclosed Proxy Card are first being mailed to
stockholders of the Company on or about February 16, 1999.
<PAGE> 2
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION IN CONNECTION WITH THE SOLICITATION OF PROXIES MADE HEREBY OTHER
THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THERMEDICS, THERMO ELECTRON OR THE MERGER
SUB. THIS PROXY STATEMENT DOES NOT CONSTITUTE A SOLICITATION OF A PROXY IN ANY
JURISDICTION WHERE, OR TO OR FROM ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH PROXY SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PROXY
STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
2
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TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER................................... 5
SUMMARY.................................................................. 7
Date, Time and Place of the Special Meeting............................ 7
Purpose of the Special Meeting......................................... 7
Record Date and Quorum................................................. 7
Vote Required and Revocation of Proxies................................ 7
Parties to the Merger.................................................. 8
The Merger............................................................. 8
Effective Time of the Merger and Payment for Shares.................... 9
Assumption of Voltek Stock Options by Thermedics....................... 9
The Special Committee's and the Board's Recommendation................. 9
Opinion of Financial Advisor........................................... 10
Purpose and Reasons of Thermedics and Thermo Electron for
the Merger.......................................................... 11
Position of Thermedics and Thermo Electron as to Fairness
of the Merger....................................................... 11
Conflicts of Interest.................................................. 12
Certain Effects of the Merger.......................................... 13
Stockholder Litigation................................................. 13
Conditions to the Merger, Termination and Expenses..................... 14
Federal Income Tax Consequences........................................ 14
Rights of Dissenting Stockholders...................................... 15
Accounting Treatment................................................... 15
Market Prices of Common Stock and Dividends............................ 15
SPECIAL FACTORS.......................................................... 17
Background of the Merger............................................... 17
The Special Committee's and the Board's Recommendation................. 19
Opinion of Financial Advisor........................................... 22
Purpose and Reasons of Thermedics and Thermo Electron for
the Merger.......................................................... 28
Position of Thermedics and Thermo Electron as to Fairness
of the Merger....................................................... 29
Conflicts of Interest.................................................. 29
Certain Effects of the Merger.......................................... 31
Conduct of Voltek's Business After the Merger.......................... 32
Conduct of the Business of the Company if the Merger is
Not Consummated..................................................... 32
Stockholder Litigation................................................. 32
THE SPECIAL MEETING...................................................... 33
Proxy Solicitation..................................................... 33
Record Date and Quorum Requirement..................................... 33
Voting Procedures...................................................... 33
Voting and Revocation of Proxies....................................... 34
Effective Time......................................................... 34
THE MERGER............................................................... 34
Conversion of Securities............................................... 34
Assumption of Voltek Stock Options by Thermedics....................... 35
Transfer of Shares..................................................... 35
Conditions............................................................. 35
Representations and Warranties......................................... 36
Covenants.............................................................. 36
Indemnification and Insurance.......................................... 37
Termination, Amendment and Waiver...................................... 38
Source of Funds........................................................ 38
Expenses............................................................... 39
Accounting Treatment................................................... 39
Regulatory Approvals................................................... 39
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RIGHTS OF DISSENTING STOCKHOLDERS........................................ 40
FEDERAL INCOME TAX CONSEQUENCES.......................................... 42
BUSINESS OF THE COMPANY.................................................. 43
Overview............................................................... 43
Testing Instruments.................................................... 43
Power Products......................................................... 43
Sales and Marketing.................................................... 44
Sale of Universal Voltronics Division.................................. 44
Properties............................................................. 44
SELECTED QUARTERLY FINANCIAL DATA........................................ 45
RATIO OF EARNINGS TO FIXED CHARGES....................................... 45
SELECTED FINANCIAL INFORMATION........................................... 46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.............................................. 47
Overview............................................................... 47
Results of Operations.................................................. 47
Liquidity and Capital Resources........................................ 49
Year 2000.............................................................. 50
CERTAIN PROJECTED FINANCIAL DATA......................................... 51
August Projections..................................................... 53
November Projections................................................... 54
FORWARD-LOOKING STATEMENTS............................................... 55
MANAGEMENT............................................................... 56
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................................. 57
Principal Stockholder.................................................. 57
Management............................................................. 58
CERTAIN TRANSACTIONS..................................................... 59
CERTAIN INFORMATION CONCERNING THE MERGER SUB, THERMEDICS
AND THERMO ELECTRON.................................................... 61
The Merger Sub......................................................... 61
Thermedics............................................................. 61
Thermo Electron........................................................ 62
INDEPENDENT PUBLIC ACCOUNTANTS........................................... 62
STOCKHOLDER PROPOSALS.................................................... 62
ADDITIONAL INFORMATION................................................... 62
AVAILABLE INFORMATION.................................................... 63
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... 63
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS............................... F-1
APPENDICES
APPENDIX A -- Agreement and Plan of Merger............................... A-1
APPENDIX B -- Opinion of HSBC Securities, Inc............................ B-1
APPENDIX C -- Text of Section 262 of the General Corporation
Law of the State of Delaware............................... C-1
APPENDIX D -- Information Concerning Directors and Executive
Officers of the Company, Thermedics, the
Merger Sub and Thermo Electron............................. D-1
APPENDIX E -- Information Concerning Transactions in the
Common Stock of the Company................................ E-1
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<PAGE> 5
QUESTIONS AND ANSWERS ABOUT THE MERGER
1. WHEN AND WHERE IS THE VOLTEK SPECIAL MEETING?
The Voltek Special Meeting will take place on Thursday, March 25, 1999, at
10:00 a.m., at the offices of Thermo Electron Corporation, 81 Wyman Street,
Waltham, Massachusetts 02454.
2. WHAT PROPOSALS ARE VOLTEK STOCKHOLDERS VOTING ON?
Voltek stockholders are being asked to approve the Merger Agreement. The
Merger Agreement provides that a wholly owned subsidiary of Thermedics will
merge with and into Voltek and, as a result, Thermedics and Thermo Electron will
collectively own all of the outstanding Common Stock of Voltek. After the
Merger, Thermedics currently intends to transfer its entire equity interest in
Voltek to Thermo Electron.
3. WHAT WILL VOLTEK STOCKHOLDERS RECEIVE IN THE MERGER?
In the Merger, Voltek stockholders will receive $7.00 in cash per share of
Voltek Common Stock. The amount of cash consideration to be paid to Voltek
stockholders will equal approximately $19.1 million in the aggregate.
On March 30, 1998 (the last trading day before the public announcement of
the proposed Merger), the closing price of Voltek Common Stock reported in the
consolidated transaction reporting system was $4 13/16 and on February 11, 1999
(the most recent practicable date prior to the printing of this Proxy
Statement), the closing price of Voltek Common Stock reported in the
consolidated transaction reporting system was $6 3/4.
4. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
In general, each stockholder's receipt of $7.00 per share in the Merger
will be a taxable transaction. Each stockholder's gain or loss per share will be
equal to the difference between $7.00 and the stockholder's basis per share in
the Common Stock. Voltek stockholders should consult their tax advisors for a
full understanding of the tax consequences of the Merger. No gain or loss will
be recognized by Voltek, Thermedics or the Merger Sub by reason of the Merger.
5. WHY IS VOLTEK'S BOARD OF DIRECTORS RECOMMENDING APPROVAL OF THE TRANSACTION?
Voltek's Board of Directors believes, based on the recommendation of its
Special Committee, that the proposed transaction is fair to and in the best
interests of, Voltek and its stockholders other than Thermedics and its
affiliates.
6. WHAT RIGHTS DO STOCKHOLDERS HAVE IF THEY OPPOSE THE MERGER?
Stockholders who wish to dissent from the Merger may seek appraisal of the
fair value of their shares, but only if they strictly comply with all of the
procedures under Delaware law that are summarized on pages 40-41 of this Proxy
Statement.
7. WHAT STOCKHOLDER VOTE IS REQUIRED TO APPROVE THE MERGER?
Under Delaware law, a majority of the outstanding shares of Common Stock
entitled to vote must approve the Merger. Thermedics and Thermo Electron, which
collectively own approximately 69% of the outstanding Common Stock, intend to
vote in favor of the Merger. Accordingly, the vote approving the Merger under
Delaware law is assured. Approval of the Merger will also require the
affirmative vote of a majority of the outstanding shares of Common Stock voted
at the Special Meeting by stockholders other than Thermedics, Thermo Electron
and the directors and officers of Voltek, Thermedics and Thermo Electron.
8. WHAT HAPPENS IF I DO NOT INSTRUCT A BROKER HOLDING MY SHARES AS TO HOW TO
VOTE THEM OR I ABSTAIN FROM VOTING?
If your shares are held by a broker as nominee, your broker will not be
able to vote your shares without instructions from you. If your broker is unable
to vote your shares or if you abstain, it will have the effect of voting against
the Merger under Delaware law; however, Thermedics and Thermo Electron own
sufficient shares to satisfy the Delaware law voting requirement. The Merger
Agreement also requires approval of the outstanding shares voted at the Special
Meeting by stockholders other than Thermedics, Thermo Electron and
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<PAGE> 6
the officers and directors of Thermedics, Thermo Electron and Voltek. With
respect to this voting requirement, broker non-votes and abstentions are not
votes cast at the Special Meeting and therefore will reduce the number, but not
the percentage, of the affirmative votes necessary for approval of the Merger.
In other words, abstentions and broker non-votes will have no effect on the
outcome of such vote.
9. WHO IS ENTITLED TO VOTE?
Holders of record of Voltek Common Stock at the close of business on
February 11, 1999, the record date for the Special Meeting, are entitled to vote
at the Special Meeting.
10. WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
We are working to complete all aspects of the Merger as quickly as
possible. If approved by the stockholders, we currently expect the Merger to be
completed by April 1999.
11. WHAT DO I NEED TO DO NOW?
After you have carefully read this Proxy Statement, please complete, sign
and mail your Proxy Card in the enclosed return envelope as soon as possible.
That way, your shares can be represented at the Special Meeting. If your shares
are held by a broker as nominee, you should receive a Proxy Card from your
broker.
Voltek stockholders must return their Proxy Cards before the Special
Meeting in order for their votes to be counted at the Special Meeting.
12. CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY CARD?
You may change your vote at any time before the vote takes place at the
Special Meeting. To do so, you can attend the Special Meeting and vote in
person, complete and send a new Proxy Card with a later date or send a written
notice stating you would like to revoke your proxy. The notice should be sent
to: Thermo Voltek Corp., c/o Thermo Electron Corporation, 81 Wyman Street,
Waltham, MA 02454, Attention: Corporate Secretary.
13. SHOULD I SEND IN MY VOLTEK STOCK CERTIFICATES NOW?
No. You should continue to hold your certificates for Voltek Common Stock.
If the Merger is approved, you will receive a package containing instructions on
how to exchange your shares of Voltek Common Stock for cash.
14. WILL VOLTEK'S 3 3/4% CONVERTIBLE SUBORDINATED DEBENTURES BE EXCHANGED IN
THE MERGER?
No. However, the Merger will give holders of the debentures the right to
cause Voltek to redeem the debentures at 100% of the principal amount to be
received, plus accrued interest. If a holder of debentures chooses not to redeem
its debentures, that holder's right to receive shares of Voltek Common Stock
upon conversion of the debentures will be converted into the right to receive
$7.00 in cash per share of Common Stock that the debentures would have been
convertible into before the Merger.
15. WHAT WILL HAPPEN TO THE VOLTEK STOCK OPTIONS?
Options to purchase Voltek Common Stock outstanding on the effective date
of the Merger, whether or not then exercisable, will be assumed by Thermedics
and converted into options to purchase the common stock of Thermedics.
16. WHO SHOULD I CALL IF I HAVE ANY ADDITIONAL QUESTIONS?
You should call Voltek Investor Relations at (781) 622-1111.
17. WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
We do not expect to ask you to vote on any other matters at the Special
Meeting.
6
<PAGE> 7
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. Reference is made to, and this Summary is qualified in its
entirety by, the more detailed information contained elsewhere or incorporated
by reference in this Proxy Statement. Stockholders should read this Proxy
Statement and its appendices in their entirety before voting.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The Special Meeting of stockholders of Thermo Voltek Corp., a Delaware
corporation (the "Company" or "Voltek"), will be held on Thursday, March 25,
1999, at 10:00 a.m., at the offices of Thermo Electron Corporation, 81 Wyman
Street, Waltham, Massachusetts 02454.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the stockholders of the Company will consider and
vote on a proposal to approve an Agreement and Plan of Merger dated as of
November 24, 1998 (the "Merger Agreement"), which is attached to this Proxy
Statement as Appendix A. The Merger Agreement provides that TV Acquisition
Corporation (the "Merger Sub"), a newly-formed Delaware corporation that is a
wholly owned subsidiary of Thermedics Inc., a Massachusetts corporation
("Thermedics"), would merge with and into Voltek (the "Merger"). Voltek would be
the surviving corporation (the "Surviving Corporation") in the Merger, and each
outstanding share of common stock, $.05 par value, of Voltek (the "Common
Stock"), other than shares held by stockholders who are entitled to and who have
perfected their Dissenters' Rights (as defined below), shares held by Voltek in
treasury and shares held by Thermedics and Thermo Electron Corporation, a
Delaware corporation ("Thermo Electron"), will be converted automatically into
the right to receive $7.00 in cash, payable to the holders thereof, without
interest (the "Cash Merger Consideration"). See "THE MERGER."
RECORD DATE AND QUORUM
The Board of Directors of the Company (the "Board" or the "Board of
Directors") has fixed the close of business on February 11, 1999 as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of, and to vote at, the Special Meeting. Each holder of record of Common
Stock at the close of business on the Record Date is entitled to one vote for
each share then held on each matter submitted to a vote of stockholders. At the
close of business on the Record Date, there were 8,733,897 shares of Common
Stock outstanding, of which 2,617,126 shares were held by stockholders of the
Company other than Thermedics, Thermo Electron and the directors and officers of
the Company, Thermedics and Thermo Electron (the "Public Stockholders"). The
holders of a majority of the outstanding shares of Common Stock entitled to vote
at the Special Meeting must be present in person or represented by proxy to
constitute a quorum for the transaction of business. Abstentions will be counted
as shares present and entitled to vote for purposes of determining a quorum;
however, broker non-votes will not be counted as shares present and entitled to
vote for purposes of determining a quorum. See "THE SPECIAL MEETING -- Record
Date and Quorum Requirement."
VOTE REQUIRED AND REVOCATION OF PROXIES
Under Delaware law, holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Special Meeting must approve the Merger.
For the purposes of the vote required under Delaware law, a failure to vote, a
vote to abstain and a broker non-vote will have the same legal effect as a vote
cast against approval of the Merger. Thermedics, which owns approximately 66% of
the outstanding Common Stock, and Thermo Electron, which owns approximately 3%
of the outstanding Common Stock, own enough shares of Common Stock to approve
the Merger under Delaware law without the vote of any other holders of Common
Stock and intend to vote their shares in favor of the Merger Agreement. However,
the Merger Agreement also requires that the holders of a majority of the
outstanding shares of Common Stock that are voted at the Special Meeting by the
Public Stockholders must approve the Merger. For purposes of this vote, an
abstention and a broker non-vote will reduce the absolute number, but not the
percentage, of affirmative votes necessary
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<PAGE> 8
to approve the Merger. In other words, abstentions and broker non-votes will not
be included in the determination of the outcome of such vote. See "THE SPECIAL
MEETING -- Voting Procedures."
A stockholder who returns a proxy may revoke it at any time before the
stockholder's shares are voted at the Special Meeting. The proxy may be revoked
by written notice to the Secretary of the Company received prior to the Special
Meeting, by executing and returning a later-dated proxy or by voting by ballot
at the Special Meeting. See "THE SPECIAL MEETING -- Voting and Revocation of
Proxies."
If a properly executed Proxy Card is submitted and no instructions are
given, the shares of Common Stock represented by that proxy will be voted "FOR"
the proposed Merger.
PARTIES TO THE MERGER
The Company
The Company designs, manufactures and markets test instruments and a range
of products related to power amplification, conversion and quality. The
Company's test instruments simulate pulsed electromagnetic interference, radio
frequency interference and changes in AC voltage to allow manufacturers of
electronic systems and integrated circuits to test for electromagnetic
compatibility, to ensure product quality and to meet certain regulatory
requirements. The Company's power products include radio frequency and microwave
power amplifiers, power-conversion equipment and application-specific power
supplies. These power products are used in communications, broadcast, research
and medical imaging applications.
The principal executive offices of the Company are located at 470 Wildwood
Street, P.O. Box 2878, Woburn, Massachusetts 01888-1578, and its telephone
number is (781) 938-3786. See "BUSINESS OF THE COMPANY."
The Merger Sub
The Merger Sub is a newly formed Delaware corporation organized at the
direction of Thermedics for the sole purpose of effecting the Merger and has not
conducted any prior business.
The principal executive offices of the Merger Sub are located at 470
Wildwood Street, P.O. Box 2999, Woburn, Massachusetts 01888-1799, and its
telephone number is (781) 938-3786. See "CERTAIN INFORMATION CONCERNING THE
MERGER SUB, THERMEDICS AND THERMO ELECTRON."
Thermedics
Thermedics develops, manufactures and markets precision weighing and
inspection equipment, electrochemistry and microweighing products, product
quality assurance systems, electronic test instruments and a range of power
electronics and security devices, as well as implantable heart-assist systems,
whole-blood coagulation testing equipment, skin-incision devices and other
biomedical products.
The principal executive offices of Thermedics are located at 470 Wildwood
Street, P.O. Box 2999, Woburn, Massachusetts 01888-1799, and its telephone
number is (781) 938-3786. See "CERTAIN INFORMATION CONCERNING THE MERGER SUB,
THERMEDICS AND THERMO ELECTRON."
THE MERGER
The Merger Agreement provides that subject to satisfaction of certain
conditions, the Merger Sub will be merged with and into Voltek, and that
following the Merger, the separate existence of the Merger Sub will cease and
Voltek will continue as the Surviving Corporation. At the effective time of the
Merger, which shall be the date and time of filing of the Certificate of Merger
with the Secretary of State of the State of Delaware (the "Effective Time") (and
the date on which the Effective Time occurs being the "Effective Date"), and
subject to the terms and conditions set forth in the Merger Agreement, each
share of issued and outstanding Common Stock (other than shares as to which
Dissenters' Rights (as defined below) are properly perfected
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<PAGE> 9
and not withdrawn, shares held by Voltek in treasury and shares held by
Thermedics and Thermo Electron) will, by virtue of the Merger, be canceled and
converted into the right to receive the Cash Merger Consideration. As a result
of the Merger, Voltek's Common Stock will no longer be publicly traded and will
be 100% owned by Thermedics and Thermo Electron. The aggregate consideration
payable in the Merger, assuming no Dissenters' Rights (as defined below) are
exercised, is approximately $19.1 million. See "THE MERGER."
EFFECTIVE TIME OF THE MERGER AND PAYMENT FOR SHARES
The Effective Time is currently expected to occur as soon as practicable
after the Special Meeting, subject to approval of the Merger Agreement at the
Special Meeting and satisfaction or waiver of the terms and conditions of the
Merger Agreement. See "-- Conditions to the Merger, Termination and Expenses"
and "THE MERGER -- Conditions." Detailed instructions with regard to the
surrender of stock certificates, together with a letter of transmittal, will be
forwarded to stockholders by the Company's transfer agent, American Stock
Transfer and Trust Company (the "Payment Agent"), promptly following the
Effective Time. Stockholders should not submit their stock certificates to the
Payment Agent until they have received such materials. The Payment Agent will
send payment of the Cash Merger Consideration to stockholders as promptly as
practicable following receipt by the Payment Agent of their stock certificates
and other required documents. No interest will be paid or accrued on the cash
payable upon the surrender of stock certificates. See "THE MERGER -- Conversion
of Securities." Stockholders should not send any stock certificates to the
Company or the Payment Agent at this time.
ASSUMPTION OF VOLTEK STOCK OPTIONS BY THERMEDICS
At the Effective Time, each outstanding option to purchase shares of Common
Stock (each, a "Voltek Stock Option") under the Voltek Stock Option Plans (as
defined below), whether or not exercisable, will be assumed by Thermedics. Each
Voltek Stock Option so assumed by Thermedics will continue to have, and be
subject to, the same terms and conditions set forth in the applicable Voltek
Stock Option Plan immediately prior to the Effective Time, except that (i) each
Voltek Stock Option will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of common stock, $.10
par value per share, of Thermedics ("Thermedics Common Stock") equal to the
product of the number of shares of Common Stock that were issuable upon exercise
of such Voltek Stock Option immediately prior to the Effective Time multiplied
by a fraction (the "Exchange Ratio"), the numerator of which is the Cash Merger
Consideration and the denominator of which is the closing price (the "Closing
Price") of Thermedics Common Stock on the day immediately preceding the
Effective Date as reported by the American Stock Exchange, Inc. (the "AMEX"),
rounded down to the nearest whole number of shares of Thermedics Common Stock,
and (ii) the per share exercise price for the shares of Thermedics Common Stock
issuable upon exercise of each such assumed Voltek Stock Option will be equal to
the quotient determined by dividing the exercise price per share of Common Stock
at which such Voltek Stock Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded up to the nearest whole cent. See
"THE MERGER -- Assumption of Voltek Stock Options by Thermedics."
THE SPECIAL COMMITTEE'S AND THE BOARD'S RECOMMENDATION
In April 1998, the Board appointed a committee (the "Special Committee") of
two directors, Messrs. William W. Hoover and Peter Richman (who are not
executive officers or employees of the Company, Thermedics, the Merger Sub or
Thermo Electron and who are not directors of Thermo Electron, Thermedics or the
Merger Sub), to act on behalf of, and in the interests of, the Public
Stockholders in their review of and evaluation of the proposed Merger and other
strategic alternatives, including a possible sale of the Company. Mr. Hoover and
Mr. Richman own in the aggregate 55,142 shares of Common Stock and will receive
a payment for their shares of Common Stock in the aggregate amount of $385,994
upon consummation of the Merger. In addition, as of January 31, 1999, the
members of the Special Committee hold options to acquire an aggregate of 10,900
shares of Common Stock, with exercise prices ranging from $5.42 to $14.05, which
will be assumed by Thermedics and converted into options to acquire shares of
Thermedics Common Stock on the same terms as all the other holders of Voltek
Stock Options. See "THE MERGER -- Assumption of Voltek
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Stock Options by Thermedics." Further, deferred units equal to 3,576 shares of
Common Stock have accumulated under the Company's deferred compensation plan for
directors for the benefit of Mr. Richman, which units will be converted into the
right to receive the Cash Merger Consideration per unit for an aggregate cash
payment of $25,032. Mr. Richman also beneficially owns shares of common stock of
Thermedics, as set forth in more detail under "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT -- Management."
At the conclusion of its review and evaluation, the Special Committee
unanimously recommended to the Company's Board that the Merger Agreement be
approved and that it be recommended to the stockholders of the Company for
adoption and approval. In connection with its recommendation, the Special
Committee considered the opinion of its financial advisor, HSBC Securities, Inc.
("HSBC"), that the consideration of $7.00 per share in cash payable under the
Merger Agreement is fair from a financial point of view to the Voltek
stockholders other than Thermedics and its affiliates. See "SPECIAL
FACTORS -- Opinion of Financial Advisor." As part of their deliberations, the
Special Committee determined that the Merger is substantively and procedurally
fair to the Public Stockholders.
Following the unanimous recommendation of the Special Committee, the Board
of Directors unanimously approved the Merger Agreement, declared its
advisability and recommended that the stockholders of the Company approve the
Merger Agreement. In connection with its recommendation, the Board also
considered the opinion of HSBC and adopted the analysis of the Special Committee
with regard to both the substantive and procedural fairness of the Merger. In
reaching their respective decisions to recommend approval of the Merger
Agreement, the Special Committee and the Board also considered the factors set
forth elsewhere in this Proxy Statement. See "SPECIAL FACTORS -- The Special
Committee's and the Board's Recommendation."
In considering the recommendations of the Board of Directors with respect
to the Merger, the Public Stockholders should be aware that certain officers and
directors of the Company have certain interests that are in addition to, or
different from, the interests of the Public Stockholders. See "SPECIAL
FACTORS -- Conflicts of Interest."
The Special Committee and the Board recommend that the Voltek stockholders
vote "FOR" approval of the Merger Agreement.
OPINION OF FINANCIAL ADVISOR
HSBC provided its oral opinion to the Special Committee on September 16,
1998, that, as of the date of such opinion, the consideration of $7.00 per share
in cash payable under the Merger Agreement was fair from a financial point of
view to the stockholders of the Company other than Thermedics and its
affiliates. HSBC subsequently confirmed its earlier opinion in writing on
September 23, 1998, and subsequently reaffirmed its opinion in writing on
November 24, 1998. The full text of the written opinion of HSBC dated November
24, 1998, which sets forth assumptions made, matters considered and limitations
on the review undertaken in connection with the opinions, is attached hereto as
Appendix B and is incorporated herein by reference. The opinions of HSBC
referred to herein do not constitute a recommendation as to how any stockholder
should vote with respect to the Merger. Holders of shares of Common Stock are
urged to, and should, read the opinion in its entirety. See "SPECIAL
FACTORS -- Opinion of Financial Advisor."
The Special Committee retained HSBC as financial advisor to assist it in
its evaluation of the proposed Merger and strategic alternatives to the Merger
proposal, including a possible sale of the Company. Pursuant to the terms of
HSBC's engagement letter with the Company, the Company has paid HSBC retainer
fees totaling $90,000, comprised of an initial retainer fee of $30,000 and two
additional monthly fees of $30,000, and has also paid HSBC a fee of $50,000 for
the preparation and delivery of a written fairness opinion dated September 23,
1998, and a fee of $30,000 for the preparation and delivery of the written
fairness opinion dated November 24, 1998 (which fees were payable regardless of
the conclusions expressed therein). In addition, the Company had agreed to pay
HSBC, upon consummation of a transaction with the Company not involving
Thermedics, a transaction fee equal to the greater of (i) $500,000 or (ii) 1.0%
of the aggregate consideration
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in connection with such transaction. No such transaction was consummated, and
therefore no such transaction fee is payable to HSBC. In addition, the Company
has agreed to reimburse HSBC for its out-of-pocket expenses, including the fees
and disbursements of its counsel, arising in connection with its engagement, and
to indemnify HSBC to the fullest extent permitted by law against certain
liabilities relating to or arising out of its engagement, except for liabilities
found to have resulted primarily or directly from the gross negligence or
willful misconduct of HSBC.
PURPOSE AND REASONS OF THERMEDICS AND THERMO ELECTRON FOR THE MERGER
The purpose of Thermedics and Thermo Electron for engaging in the
transactions contemplated by the Merger Agreement is for Thermedics to acquire
all of the outstanding shares of Common Stock, other than the shares held by
Thermo Electron. In determining to acquire such shares of Common Stock at this
time, Thermedics and Thermo Electron considered the following factors: (i) the
latest market trends in the markets in which the Company competes, primarily the
electromagnetic compatibility ("EMC") test market, (ii) the financial
performance and profitability of the Company, (iii) the uncertainty regarding
Voltek's future growth prospects and (iv) the disproportionate impact of public
disclosure of Voltek's poor financial performance on Thermedics and Thermo
Electron, given the size of Voltek's business relative to those companies.
Thermedics and Thermo Electron also determined that as a private company Voltek
will have greater operating flexibility to focus on enhancing value by
emphasizing growth and operating cash flow without the constraint of the public
market's emphasis on quarterly earnings.
Thermedics also considered the advantages and disadvantages of certain
alternatives to taking Voltek private, including (i) selling its equity interest
in the Company and (ii) leaving Voltek as a public majority-owned subsidiary of
Thermedics. Thermedics considered the number of Voltek shares held by minority
stockholders, recent trends in the price of the Common Stock and the relative
lack of liquidity for the Common Stock. Thermedics reviewed the net overall cost
of the transaction and its benefits, including its contribution to Thermedics'
earnings. Thermedics also explored alternative uses for the cash proposed to be
used for this transaction. After consideration of these various factors,
Thermedics decided to make a proposal to Voltek to acquire for cash, through a
merger, all of the outstanding shares of Common Stock that it and Thermo
Electron did not own at a price of $7.00 per share, which represented a premium
of 45.5% over the closing price of the Common Stock on the AMEX on March 30,
1998, the date immediately prior to the public announcement of the proposal.
Thermedics proposed to structure the transaction as a cash merger in order to
transfer ownership of the equity interest in the Company in a single transaction
and provide the stockholders other than Thermedics and Thermo Electron with
prompt payment in cash in exchange for their shares. See "SPECIAL
FACTORS -- Purpose and Reasons of Thermedics and Thermo Electron for the
Merger."
Thermo Electron beneficially owns, in the aggregate, directly and
indirectly through Thermedics, approximately 76% of the outstanding Common
Stock. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT --
Principal Stockholder."
POSITION OF THERMEDICS AND THERMO ELECTRON AS TO FAIRNESS OF THE MERGER
Thermedics and Thermo Electron considered the analyses and findings of (i)
HSBC with respect to the fairness, from a financial point of view, of the
consideration of $7.00 per share in cash payable under the Merger Agreement to
the stockholders of Voltek other than Thermedics and its affiliates (see
"SPECIAL FACTORS -- Opinion of Financial Advisor"), and (ii) the Special
Committee and the Board with respect to the fairness of the Merger to the Public
Stockholders (see "SPECIAL FACTORS -- The Special Committee's and the Board's
Recommendation"). As of the date of the Merger Agreement, each of Thermedics and
Thermo Electron adopts the analyses and findings of HSBC with respect to the
fairness, from a financial point of view, of the consideration of $7.00 per
share in cash payable under the Merger Agreement to the stockholders of Voltek
other than Thermedics and its affiliates, and the Special Committee and the
Board with respect to the fairness of the Merger. Based solely on the analyses
and findings of HSBC and the Special Committee, Thermedics and Thermo Electron
believe that the Merger is both procedurally and substantively fair to the
Public Stockholders and that the Cash Merger Consideration is fair to the Public
Stockholders from
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<PAGE> 12
a financial point of view. Neither Thermedics nor Thermo Electron attached
specific weights to any factors in reaching its belief as to fairness.
Thermedics and Thermo Electron are not making any recommendation as to how the
Public Stockholders should vote on the Merger Agreement. See "SPECIAL
FACTORS -- Position of Thermedics and Thermo Electron as to Fairness of the
Merger."
The Public Stockholders should be aware that certain officers and directors
of Thermedics and Thermo Electron are also officers and directors of the Company
and have certain interests that are in addition to, or different from, the
interests of the Public Stockholders. See "SPECIAL FACTORS -- Conflicts of
Interest." Thermedics and Thermo Electron considered these potential conflicts
of interest and based in part thereon, Thermedics' proposed offer was
conditioned on, among other things, the approval of the Merger by the Special
Committee and the receipt by the Special Committee of a fairness opinion from an
investment banking firm.
CONFLICTS OF INTEREST
In considering the recommendation of the Board with respect to the Merger,
stockholders should be aware that certain officers and directors of Voltek have
interests in connection with the Merger that present them with actual or
potential conflicts of interest, which are described in more detail under
"SPECIAL FACTORS -- Conflicts of Interest."
The Special Committee
Mr. Hoover and Mr. Richman, members of the Special Committee, own in the
aggregate 55,142 shares of Common Stock and will receive a payment for their
shares of Common Stock in the aggregate amount of $385,994 upon consummation of
the Merger. In addition, as of January 31, 1999, the members of the Special
Committee hold options to acquire an aggregate of 10,900 shares of Common Stock,
with exercise prices ranging from $5.42 to $14.05, which will be assumed by
Thermedics and converted into options to acquire shares of Thermedics Common
Stock on the same terms as all the other holders of Voltek Stock Options. See
"THE MERGER -- Assumption of Voltek Stock Options by Thermedics." Further,
deferred units equal to 3,576 shares of Common Stock have accumulated under the
Company's deferred compensation plan for directors for the benefit of Mr.
Richman, which units will be converted into the right to receive the Cash Merger
Consideration per unit for an aggregate cash payment of $25,032. Mr. Richman
also beneficially owns shares of common stock of Thermedics, as set forth in
more detail under "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT -- Management." The Special Committee formally met five times, either
in person or telephonically, from April 1998 through the date of this Proxy
Statement and, in addition, had numerous informal discussions and consultations
in person and telephonically. As compensation for serving on the Special
Committee, the Board has authorized that each member of the Special Committee
receive a special retainer fee of $20,000 and additional fees of $1,000 for each
meeting attended in person and $500 for each meeting attended telephonically.
Mr. Richman is also a member of the board of directors of Thermo Sentron Inc., a
majority-owned subsidiary of Thermedics. See "SPECIAL FACTORS -- Conflicts of
Interest."
The Voltek Directors and Executive Officers
The members of the Board of Directors, other than the members of the
Special Committee, and executive officers of Voltek own in the aggregate 50,421
shares of Common Stock and will receive a payment for their shares of Common
Stock in the aggregate amount of $352,947 upon consummation of the Merger. In
addition, such Board members and executive officers hold options to acquire an
aggregate of 218,500 shares of Common Stock, with exercise prices ranging from
$5.00 to $14.05, which will be assumed by Thermedics and converted into options
to acquire shares of Thermedics Common Stock on the same terms as all the other
holders of Voltek Stock Options. See "THE MERGER -- Assumption of Voltek Stock
Options by Thermedics." Such Board members and executive officers also
beneficially own shares of common stock of Thermedics and Thermo Electron as set
forth in more detail under "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT -- Management." Further, certain members of the Board and certain
executive officers hold directorship or officer positions with Thermedics and/or
Thermo Electron. See "MANAGEMENT."
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<PAGE> 13
Indemnification and Insurance
The Merger Agreement provides that for a period of six (6) years after the
Effective Time, Thermedics will, and will cause the Surviving Corporation to,
fulfill and honor in all respects the indemnification obligations of Voltek,
pursuant to Voltek's Certificate of Incorporation and Bylaws, each as in effect
immediately prior to the Effective Time, to those individuals who were
directors, including the members of the Special Committee, and executive
officers of Voltek at the Effective Time. In addition, the directors and
executive officers of the Company will be provided with continuing directors'
and officers' liability insurance coverage for a period of six (6) years
following the Merger, subject to certain limitations. See "SPECIAL
FACTORS -- Conflicts of Interest" and "THE MERGER -- Indemnification and
Insurance."
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, the entire equity interest in the Company will
be beneficially owned by Thermo Electron, directly and indirectly through
Thermedics. Thermo Electron and Thermedics will have complete control over the
conduct of the Company's business and will have 100% interest in the net book
value and net earnings of the Company and any future increases in the value of
the Company. Thermedics' and Thermo Electron's combined ownership of the Company
prior to the transaction contemplated herein aggregated approximately 69%. Upon
completion of this transaction, Thermo Electron's and Thermedics' aggregate
interest in the Company's net book value of $34.5 million on October 3, 1998 and
net earnings of $0.3 million and $0.6 million for the year ended January 3, 1998
and the nine months ended October 3, 1998, respectively, would increase from
approximately 69% of such amounts to 100% of such amounts. The Public
Stockholders will no longer have any interest in, and will not be stockholders
of, Voltek and therefore will not participate in Voltek's future earnings and
potential growth and will no longer bear the risk of any decreases in the value
of the Company. Instead, the stockholders of the Company other than Thermedics,
Thermo Electron and holders who perfect their Dissenters' Rights (as defined
below) will have the right to receive the Cash Merger Consideration for each
share held.
In addition, the Common Stock will no longer be traded on the AMEX and
price quotations with respect to sales of shares in the public market will no
longer be available. The registration of the Common Stock under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") will be terminated, and
this termination will eliminate the Company's obligation to file periodic
financial and other information with the Securities and Exchange Commission (the
"Commission") and will make most other provisions of the Exchange Act
inapplicable. See "SPECIAL FACTORS -- Certain Effects of the Merger."
The consummation of the Merger will also give the holders of Voltek's
3 3/4% Convertible Subordinated Debentures due 2000 (the "3 3/4% Debentures")
the right to have Voltek redeem such 3 3/4% Debentures for a cash amount equal
to 100% of the principal amount to be redeemed, plus accrued interest. The cost
to Voltek of such redemption will be approximately $5.3 million.
STOCKHOLDER LITIGATION
In late March and early April, 1998, four putative class actions were filed
in the Court of Chancery of the State of Delaware in and for New Castle County
by stockholders of the Company. On October 6, 1998, the Court of Chancery
entered an order consolidating these four actions under the caption In re Thermo
Voltek Corp. Shareholders Litigation, Consolidated C.A. 16287 (the "Action").
The complaint in the Action names the Company, Thermedics, Thermo Electron and
the directors of the Company as defendants and alleges, among other things, that
the Company's directors violated the fiduciary duties of loyalty, good faith and
fair dealing that they owed to all stockholders of the Company other than the
named defendants and the affiliates of the named defendants because the proposed
price of $7.00 per share to be paid to the Company's stockholders under the
terms of the proposed Merger Agreement was allegedly unfair and grossly
inadequate. The complaints further allege that the Company, Thermedics and
Thermo Electron have violated their alleged fiduciary duty of fair dealing by
proposing the merger transaction at the time. The complaints request that the
Court of Chancery, among other things, declare that the Action is a proper class
action and enjoin the proposed transaction or order that any transaction be
approved by a majority of the Voltek stockholders other than the named
defendants and their affiliates.
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<PAGE> 14
On November 17, 1998, the Company, Thermedics, Thermo Electron and the
individual defendants filed an answer to the complaint in the Action in which
they deny the allegations of any violation of law or breaches of any duty to the
plaintiffs or the purported class set forth in the complaints. Thermedics filed
a motion to dismiss the complaint for, among other things, procedural and
jurisdictional defects and failure to state a claim upon which relief can be
granted, which is currently pending before the court. The parties are currently
conducting discovery. See "SPECIAL FACTORS -- Stockholder Litigation."
CONDITIONS TO THE MERGER, TERMINATION AND EXPENSES
Each party's obligation to effect the Merger is subject to satisfaction of
a number of conditions, including with respect to one or both parties: (i) the
Merger Agreement shall have been approved and adopted by the affirmative vote of
(a) the holders of a majority of the outstanding shares of Common Stock entitled
to vote thereon in accordance with the provisions of Section 251 of the General
Corporation Law of the State of Delaware (the "DGCL") and (b) the majority of
the outstanding shares of Common Stock voted at the Special Meeting by the
Public Stockholders; (ii) no court, administrative agency or commission or other
governmental or regulatory body or authority or instrumentality shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order which is in effect and which
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger; (iii) the representations and warranties of the
parties shall be true and correct in all material respects as of the Effective
Time, except as permitted by the Merger Agreement; and (iv) each of the parties
shall have performed or complied in all material respects with all agreements
and covenants required by the Merger Agreement to be performed by them. Certain
conditions that have not been satisfied may be waived by the other party. See
"THE MERGER -- Conditions." Even if the stockholders approve the Merger
Agreement, there can be no assurance that the Merger will be consummated.
At any time prior to the Effective Time, whether before or after approval
of the Merger by the stockholders of Voltek, the Merger Agreement may be
terminated by the mutual written consent of the board of directors of Thermedics
and the Board of Directors of Voltek (upon approval of the Special Committee).
In addition, any of the parties, in accordance with the provisions of the Merger
Agreement, may terminate the Merger Agreement prior to the Effective Time,
whether before or after approval of the Merger by the stockholders of Voltek, if
(i) the Merger has not been consummated by June 30, 1999, (ii) a court of
competent jurisdiction or governmental, regulatory or administrative agency or
commission issues an order, decree or ruling or takes any other action
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling or action is final and nonappealable or (iii) the approval of the
stockholders of Voltek necessary to consummate the Merger has not been obtained.
See "THE MERGER -- Termination, Amendment and Waiver."
In addition, Thermedics may terminate the Merger Agreement prior to the
Effective Time, whether before or after approval of the Merger by the
stockholders of Voltek, if Voltek breaches any representation, warranty,
covenant or agreement and fails to cure such breach within ten (10) business
days after written notice of such breach from Thermedics. Voltek may terminate
the Merger Agreement prior to the Effective Time, whether before or after
approval of the Merger by the stockholders of Voltek, if (i) Voltek's Board of
Directors, upon approval of the Special Committee, determines in good faith on
the advice of outside legal counsel that the Board's fiduciary duties under
applicable law require it to do so or (ii) Thermedics breaches any
representation, warranty, covenant or agreement and fails to cure such breach
within ten (10) business days after written notice of such breach from Voltek.
See "THE MERGER -- Termination, Amendment and Waiver."
Each of the parties has agreed to pay its own costs and expenses in
connection with the Merger Agreement, whether or not the Merger is consummated.
See "THE MERGER -- Expenses."
FEDERAL INCOME TAX CONSEQUENCES
The receipt of the Cash Merger Consideration by holders of Common Stock
pursuant to the Merger will be a taxable transaction for federal income tax
purposes. All holders of Common Stock should consult their
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<PAGE> 15
tax advisors to determine the effect of the Merger on such holders under
federal, state, local and foreign tax laws. See "FEDERAL INCOME TAX
CONSEQUENCES."
RIGHTS OF DISSENTING STOCKHOLDERS
Any stockholder of Voltek who does not vote in favor of the proposal to
approve the Merger Agreement and who complies strictly with the applicable
provisions of Section 262 of the DGCL has the right to dissent and be paid cash
for the "fair value" of such holder's shares of Common Stock ("Dissenters'
Rights"). The applicable provisions of Section 262 of the DGCL are attached to
this Proxy Statement as Appendix C. To perfect Dissenters' Rights with respect
to the Merger, a Voltek stockholder must follow the procedures set forth therein
precisely. Those procedures are summarized in this Proxy Statement under "RIGHTS
OF DISSENTING STOCKHOLDERS."
Shares of Common Stock held by persons properly exercising Dissenters'
Rights will not be converted into the Cash Merger Consideration in the Merger
and after the Effective Time will represent only the right to receive such
consideration as is determined to be due such dissenting stockholder pursuant to
Section 262 of the DGCL. If after the Effective Time any dissenting stockholder
(i) fails to perfect or loses such right to payment or appraisal pursuant to
Section 262 of the DGCL or (ii) withdraws such demand for appraisal within 60
days after the Effective Date pursuant to Section 262 of the DGCL, each share of
Common Stock of such stockholder shall be treated as a share that had been
converted as of the Effective Time into the right to receive the Cash Merger
Consideration.
ACCOUNTING TREATMENT
The Merger will be accounted for as the acquisition of a minority interest
by Thermedics, using the purchase method of accounting.
MARKET PRICES OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the AMEX (symbol: TVL). The following table
sets forth, for the periods indicated, the high and low sales prices of the
Company's Common Stock as reported in the consolidated transaction reporting
system. Sales prices have been restated to reflect a three-for-two stock split,
effected in the form of a 50% stock dividend, in August 1996.
<TABLE>
<CAPTION>
HIGH LOW
------- --------
<S> <C> <C>
1996
First Quarter........................................... $14 5/64 $10 1/4
Second Quarter.......................................... 15 12 5/64
Third Quarter........................................... 14 1/8 10 21/64
Fourth Quarter.......................................... 14 9 3/4
1997
First Quarter........................................... 12 7/8 9 3/8
Second Quarter.......................................... 9 5/8 6 7/8
Third Quarter........................................... 7 9/16 6
Fourth Quarter.......................................... 7 1/2 5
1998
First Quarter........................................... 7 3/8 4 1/8
Second Quarter.......................................... 7 3/16 6 7/8
Third Quarter........................................... 7 1/8 5 7/8
Fourth Quarter.......................................... 6 13/16 6 1/16
1999
First Quarter (through February 11, 1999)............... 6 13/16 6 11/16
</TABLE>
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<PAGE> 16
On March 30, 1998, the last trading day prior to the public announcement of
the proposed Merger, the high, low and closing sales price per share of Common
Stock was $4 15/16, $4 13/16 and $4 13/16, respectively. On February 11, 1999,
the last trading day prior to the printing of this Proxy Statement, the closing
price per share of Common Stock was $6 3/4.
At February 11, 1999, there were 309 holders of record of Common Stock and
approximately 1,007 persons or entities holding in nominee name.
The Company has never paid any cash dividends on its Common Stock. Pursuant
to the Merger Agreement, the Company has agreed not to pay any dividends on the
Common Stock prior to the Effective Time.
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<PAGE> 17
SPECIAL FACTORS
BACKGROUND OF THE MERGER
In mid-March 1998, Thermedics' senior management initially considered
taking Voltek private given its concerns about Voltek's performance and
uncertain future prospects. Thermedics' management examined several factors,
including the latest market trends in the markets in which Voltek competes,
primarily the EMC test market, the financial performance and profitability of
Voltek, uncertainty regarding Voltek's future growth prospects and the
disproportionate impact of public disclosure of Voltek's poor financial
performance on Thermedics and Thermo Electron, given the size of Voltek's
business relative to those companies. Management also considered recent trends
in the price of Voltek's Common Stock and its relative lack of liquidity,
although Voltek's current stock price was not a significant factor in the timing
of management's decision to propose taking Voltek private. In late March 1998,
Thermedics' management decided to propose to the Thermedics board of directors
that it consider taking Voltek private and at management's request, a special
Thermedics board meeting was called to consider this proposal.
On March 30, 1998, the board of directors of Thermedics held a special
meeting at which Thermedics management presented the proposal to take Voltek
private by acquiring all of the outstanding shares of Common Stock that
Thermedics and Thermo Electron did not own. The Thermedics board discussed
several factors presented by management regarding this proposal, including the
latest market trends in the markets in which Voltek competes, primarily the EMC
test market, the financial performance and profitability of Voltek, including
uncertainty regarding Voltek's future growth prospects, and the market price and
relative lack of liquidity for Voltek's Common Stock. The Thermedics board also
considered the advantages and disadvantages of certain alternatives to taking
Voltek private, including selling its equity interest in Voltek to an
unaffiliated third party and leaving Voltek as a public majority-owned
subsidiary. The Thermedics board discussed the number of Voltek shares held by
minority stockholders, recent trends in the stock price and a proposed offer
price. The Thermedics board reviewed the net overall cost of the transaction to
Thermedics and its benefits, including its contribution to Thermedics' earnings.
The Thermedics board also explored alternative uses for the cash proposed to be
used for this proposal. After consideration of these various factors, the
Thermedics board voted to make a proposal to Voltek to acquire, through a
merger, all of the outstanding shares of Voltek Common Stock that it and Thermo
Electron did not own at a cash purchase price of $7.00 per share (the "Offer"),
which represented a premium of 45.5% over the closing price of Voltek's Common
Stock on March 30, 1998, the last trading day prior to the public announcement
of the Offer. This Offer was promptly communicated to Voltek. On March 31, 1998,
Thermedics issued a press release announcing the Offer.
On April 1, 1998, the Board of Directors of Voltek held a special meeting
to discuss the Offer. All members of the Board of Directors, except Dr. Elias P.
Gyftopoulos and Mr. Theo Melas-Kyriazi, were present at the meeting. The Board
determined that because Thermedics owned approximately 66% of the Company's
outstanding Common Stock, it was desirable to appoint a special committee, to
act on behalf of, and in the interests of, the Public Stockholders, to evaluate
the merits of the Offer, including consideration of alternatives to the Offer
and to make a recommendation to the full Board on whether to approve any such
transaction. Mr. William Hoover and Mr. Peter Richman were then appointed to
serve as members of the Special Committee and were authorized to retain a
financial advisor, a legal advisor and any other advisors that they deemed
appropriate to assist them in carrying out their responsibilities. Further, the
Board voted to grant the Special Committee and its advisors access to all
officers and members of management of the Company and its subsidiaries and to
all other information and materials regarding the Company, including its books,
records, projections and financial statements deemed necessary by the Special
Committee for its review. The Board noted that Mr. Richman was also a director
of Thermo Sentron Inc., a majority-owned subsidiary of Thermedics, but
determined that this position did not prevent him from fulfilling his duties as
a member of the Special Committee. After the Board meeting, the Special
Committee met with and interviewed Stanley Keller, Esq. of Palmer and Dodge LLP
to serve as special counsel to the Special Committee. The meeting included a
discussion of the role of the Special Committee and the selection of a financial
advisor. Over the next several days, the Special Committee explored alternatives
for special counsel
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<PAGE> 18
to the Special Committee. After considering alternatives, the Special Committee
retained Palmer & Dodge LLP to serve as its special counsel.
On April 2, 1998, the Company announced that a lawsuit had been filed on
March 31, 1998 in the Court of Chancery of the State of Delaware by a
stockholder of Voltek seeking to act on behalf of all stockholders of Voltek
other than the named defendants and the affiliates of the named defendants
alleging, among other things, that the proposed price of $7.00 per share was
unfair and grossly inadequate and seeking, among other things, injunctive and
other appropriate relief. The Company subsequently learned that three similar
lawsuits had also been filed in the Court of Chancery of the State of Delaware.
See " -- Stockholder Litigation."
During April and May 1998, the Special Committee met or had telephonic
discussions with its special counsel regarding a number of matters, including
its role in the process, the stockholder litigation and preparation for the
selection of a financial advisor. Also during that period, the Special
Committee, through its special counsel, proposed to Thermedics to add as a
condition to the proposed Merger the requirement that the Merger be approved by
a majority of the Public Stockholders voting on the Merger and also inquired
whether Thermedics would support the sale of the Company to an unaffiliated
third party as an alternative to the Merger proposal. Thermedics agreed to the
proposed additional condition to the Merger and also indicated it would be
willing to consider the sale of the Company to an unaffiliated third party.
The Special Committee, with the assistance of special counsel, developed a
list of potential financial advisors and solicited proposals from these
candidates. Because the engagement of the financial advisor would involve
seeking alternatives to the Merger proposal that could include the sale by
Thermedics of its interest in the Company, the Special Committee sought the
views of Thermedics as to appropriate candidates. Thermedics identified three
firms, including HSBC, and the Special Committee identified two others. On June
9, 1998, the Special Committee interviewed representatives of the five
candidates. On June 12, 1998, the Special Committee formally retained HSBC as
its financial advisor to assist it in evaluating the Thermedics Merger proposal
and to consider alternatives to the proposal, including selling the Company to
an unaffiliated third party. On June 12, 1998, the Company issued a press
release announcing that the Special Committee had retained HSBC as its financial
advisor, that the Merger was further conditioned on approval by the Public
Stockholders and that Thermedics was willing to consider the sale of the Company
to an unaffiliated third party. The Special Committee selected HSBC primarily
because of its reputation internationally as an investment banking firm with
substantial experience in acquisitions involving public companies and its
specific knowledge of the Company and the markets in which it competes. The
Special Committee considered HSBC's prior work for other Thermo Electron
companies which consisted of acting as an underwriter in Thermo Electron's
equity offering in April 1998 and in Thermo Vision Corporation's initial public
offering in December 1997, as placement agent for the private placement of
Thermo Trilogy Corporation's common stock in December 1997, and for Trex
Communications Corporation's common stock in June 1997, both indirect
subsidiaries of Thermo Electron, and as placement agent for ThermoLase
Corporation's sale of convertible debentures in August 1997 and for certain
consulting services. HSBC received aggregate fees of approximately $1,992,906 in
connection with its work on those transactions. The Special Committee concluded
that HSBC's substantial experience and its familiarity with the Company and its
markets, among other factors, outweighed any concerns that might arise from
HSBC's prior work with Thermo Electron.
Following its selection in June and through July, HSBC undertook its
diligence efforts and, working with management of the Company, prepared a
confidential offering memorandum relating to the sale of the Company. During
this period it also sought to identify potential buyers and sent out a letter
soliciting interest to 95 potential domestic and international buyers, including
78 strategic and 17 financial potential buyers.
Based on these efforts, HSBC identified 13 potential buyers, eight of which
were strategic and five financial, who indicated interest and entered into
confidentiality agreements. In late July and early August, HSBC provided the
confidential offering memorandum to these 13 potential buyers and established
August 15, 1998 as the deadline for submitting a written preliminary non-binding
proposal to acquire the Company. As of that date, no proposals were received by
HSBC; however, given that several potential buyers were unavailable during the
month of August, HSBC, with the approval of the Special Committee, extended the
deadline to September 15, 1998.
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<PAGE> 19
HSBC kept the Special Committee informed of the progress of its efforts. On
September 9, 1998, the Special Committee met with HSBC to review the progress of
its search for a buyer for the Company and the status of its evaluation of the
Offer. HSBC reported that it had not yet received a proposal to acquire the
Company. On the same day, HSBC also met with the full Board of Voltek to review
the progress of its search for a buyer for the Company and the status of its
evaluation of the Offer. Also on September 9, 1998, the Special Committee
requested that Voltek ask Thermedics to consider increasing its Offer, but
stated that it believed the Offer as currently formulated was acceptable and
recommended to the full Voltek Board that it accept the Thermedics proposal even
if the Offer was not increased. The request to increase the Offer was
communicated to Thermedics management, which took it under advisement.
On September 15, 1998, HSBC reported to the Special Committee that no
proposals to acquire the Company had been received by the deadline. On September
16, 1998, HSBC met with the Special Committee to give a final report on the
outcome of its efforts to sell the Company and then rendered its oral opinion to
the Special Committee that the proposal by Thermedics of $7.00 per share in cash
was fair, from a financial point of view, to the Voltek stockholders other than
Thermedics and its affiliates. HSBC reviewed the various factors it considered
in rendering its opinion, which are comparable to those reviewed in connection
with HSBC's November 24, 1998 opinion and are described below under "-- Opinion
of Financial Advisor". The full Board of Voltek then met and heard the report of
HSBC. At this time, Thermedics management communicated to Voltek that it did not
wish to increase its Offer. The Special Committee then recommended to the full
Voltek Board that it accept the Thermedics proposal. On September 17, 1998,
following the Board meeting, Voltek issued a press release announcing that,
based on the recommendation of the Special Committee, its Board approved
proceeding with the Thermedics Merger proposal.
Following the September 16 Voltek Board meeting, special counsel for the
Special Committee and counsel for Thermedics prepared the Merger Agreement and
negotiated the final terms of the transaction. On November 24, 1998, a meeting
of the Special Committee was held, at which HSBC updated its report on the
fairness, from a financial point of view, of the $7.00 per share cash
consideration payable to the Voltek stockholders other than Thermedics and its
affiliates under the Merger Agreement, and confirmed its earlier opinion. HSBC
reviewed the various factors it considered in rendering its opinion, which are
described below under "-- Opinion of Financial Advisor." The terms of the Merger
Agreement were also reviewed. The Merger Agreement was then presented to the
full Board of Voltek for their approval and, based on the recommendation of the
Special Committee, the Board of Voltek unanimously voted to approve the Merger
Agreement. In addition, the Voltek Board confirmed its determination that the
Merger was fair, from a financial point of view, to the Voltek stockholders
other than Thermedics and its affiliates and voted to recommend to the
stockholders that they approve the Merger. Also on November 24, 1998, the final
proposed Merger Agreement was presented to the board of directors of Thermedics,
which unanimously approved the Agreement. The Merger Agreement was then duly
executed by the parties.
THE SPECIAL COMMITTEE'S AND THE BOARD'S RECOMMENDATION
The Special Committee and the Voltek Board believe that the terms of the
Merger are fair to, and in the best interests of, the Voltek stockholders other
than Thermedics and its affiliates. In reaching this conclusion, the Special
Committee has determined that the Merger is both substantively and procedurally
fair to the stockholders of Voltek other than Thermedics and its affiliates. The
Board has adopted the analysis of the Special Committee with regard to both the
substantive and procedural fairness of the Merger. Accordingly, the Voltek Board
has unanimously approved the Merger Agreement and unanimously recommends its
approval by the stockholders.
In reaching their decisions to approve the Merger Agreement and recommend
its approval to the stockholders, the Special Committee and the Voltek Board
considered the following factors, which constitute all of the material factors
considered by the Special Committee and the Board:
- The current and historical market prices of the Common Stock. The Special
Committee and the Board considered the declining per share price of the
Common Stock prior to the time of Thermedics' proposal, the possibility
that the price would remain depressed and the premium that $7.00 per
share offered over such price. The Special Committee and the Board did
not consider the trading prices of
19
<PAGE> 20
the Common Stock for the period following the announcement of Thermedics'
proposal because they believed that such prices reflected anticipation of
the purchase of the Common Stock at the price proposed by Thermedics.
- Information concerning the financial performance, condition, business
operations and prospects of Voltek. The Special Committee and the Board
considered the historical, current and potential future performance of
Voltek and determined that the price per share offered by Thermedics'
proposal offered a substantial premium to the Public Stockholders given
the current performance and the uncertainty of future performance of
Voltek.
- The effects of the Merger on Voltek's stockholders other than Thermedics
and Thermo Electron, including the premium over the market price of the
Common Stock immediately prior to the public announcement of Thermedics'
proposal. The Special Committee and the Board concluded that the $7.00
per share price proposed by Thermedics, which represented premiums of
40.0%, 60.0% and 45.5% over the per share price on dates four weeks, one
week and one day, respectively, prior to announcement of such proposal,
would enable the Public Stockholders to obtain a higher price for their
stock than would \otherwise be available in the market at that time,
including pursuant to any stock repurchase program by Voltek, Thermedics
or Thermo Electron. All of the most recent repurchases by Voltek and
Thermedics (fourth quarter 1997 and first quarter 1998) were at or below
$7.00 per share, and any further repurchases would be at the then current
market price, which was trending below $7.00 per share. The purchase by
Thermedics would also eliminate the exposure of the Public Stockholders
to any future or continued declines in the price of the Common Stock.
- The terms of the Merger Agreement, including (i) the amount and form of
the consideration, (ii) the limited number of conditions to the
obligations of Thermedics, including the lack of a financing condition,
(iii) the right of the Voltek Board, upon recommendation of the Special
Committee, to terminate the Merger Agreement if the Board determines that
the Board's fiduciary duties to the Voltek stockholders require it to do
so, and (iv) the absence of a termination fee in the event Voltek
terminates the Merger Agreement. The Special Committee and the Board
believed that the foregoing made the consummation of the transaction more
likely than it would be if more significant conditions were placed on the
completion of the transaction or if Thermedics did not have the
independent financial resources to complete the transaction. Further, the
Special Committee and the Board believed that the ability of the Voltek
Board to terminate the Merger Agreement without payment of a termination
fee in the event its fiduciary duties to the Voltek stockholders required
it to do so provided the Board the freedom to protect the interests of
the Public Stockholders.
- Current market trends in the markets in which Voltek competes, primarily
the EMC test market. The Special Committee and the Board considered the
fact that the EMC test market was shrinking due to lower demand as more
companies came into compliance with the established standards and the
need for testing declined, resulting in a decline in revenues from the
EMC test market with no assurance that such decline would not continue.
- The financial performance and profitability of Voltek, including
declining sales and profitability and uncertainty regarding its future
growth prospects. The Special Committee and the Board determined that the
Merger would shift the risk of the future financial performance of Voltek
from the Public Stockholders, who do not have the power to control
Voltek, entirely to Thermedics, which does have the power to control
Voltek and is in a better position to manage and bear that risk.
- The market price and relative lack of liquidity for the Common Stock and
the liquidity that would be realized by stockholders from the all cash
offer. The Special Committee and the Board believed that the liquidity to
be realized by the Public Stockholders would be beneficial to such
stockholders as it would give them liquidity that ownership of the Common
Stock did not otherwise provide as each of them believed that Thermedics'
significant ownership of the Common Stock (i) resulted in a relatively
small public float that necessarily limited the amount of trading in the
Common Stock and (ii) decreased the likelihood that a proposal to acquire
the Common Stock would be made by an independent entity without the
consent of Thermedics.
20
<PAGE> 21
- The absence of a third party buyer for the Company prior to the time of
Thermedics' proposal and after active solicitation by HSBC persuaded the
Special Committee and the Board that no better offer other than that of
Thermedics would be made for Voltek and, accordingly, there would be no
opportunity to consider an alternative transaction or otherwise provide
liquidity to the Public Stockholders.
- The opportunity of the Voltek stockholders to vote on the Merger and the
requirement that the Merger be approved by a majority of the stockholders
present and voting at the Special Meeting other than Thermedics, Thermo
Electron and the officers and directors of Voltek, Thermedics and Thermo
Electron. The Special Committee and the Board believed that the
opportunity of the Public Stockholders to vote on the Merger would enable
the Public Stockholders to independently determine the desirability and
fairness of the Merger and would appropriately place the decision of
whether to complete the Merger with the Public Stockholders.
- The opinion of HSBC that the consideration of $7.00 per share in cash is
fair from a financial point of view to the Voltek stockholders other than
Thermedics and its affiliates. The Special Committee and the Board
reviewed the independent financial analyses performed by HSBC, including
analyses of relative value (including tangible book value) and discounted
cash flows that assume Voltek will continue as a going concern, and found
them to be reasonable and believed that HSBC's conclusion that the price
offered by Thermedics was fair from a financial point of view to the
Public Stockholders was a reasonable conclusion based on the analyses
performed.
- The positive aspects of the Company, including its high quality products,
highly regarded management team, leading market position in certain
product areas, diversified customer base and strong existing product
portfolio. The Special Committee and the Board believed that these
aspects were potential contributors to the future success of Voltek and
weighed in favor of continuing Voltek as an independent entity. However,
these positive aspects were offset by the many other considerations.
In determining that the Merger is fair to the stockholders other than
Thermedics and its affiliates, the Special Committee and the Board considered
the above factors as a whole and did not assign specific or relative weights to
them. In the view of the Special Committee and the Board, each of the factors
listed above, except as otherwise indicated, reinforced their belief that the
transaction was in the best interests of the stockholders other than Thermedics
and its affiliates.
This belief was further reinforced by their recognition that the Special
Committee was formed to provide independent consideration of the transaction and
that the Special Committee had engaged independent counsel and HSBC to assist
the Special Committee in its negotiation and evaluation of the transaction. As
the Special Committee and the Board believed that the Special Committee, with
the assistance of independent counsel and HSBC, would adequately protect the
interests of the Public Stockholders, no other unaffiliated representative was
retained to act solely on behalf of the Public Stockholders for the purposes of
negotiating the terms of the Merger or the Merger Agreement.
The Special Committee and the Board did not consider the Cash Merger
Consideration as compared to any implied liquidation value because it was not
and is not contemplated that the Company will be liquidated, whether or not the
Merger is completed.
THE SPECIAL COMMITTEE AND THE VOLTEK BOARD, BY A UNANIMOUS VOTE, HAVE
APPROVED THE MERGER AGREEMENT, BELIEVE THAT THE TERMS OF THE MERGER ARE FAIR TO
THE STOCKHOLDERS OTHER THAN THERMEDICS AND ITS AFFILIATES AND UNANIMOUSLY
RECOMMEND THAT THE STOCKHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT.
In considering the recommendation of the Special Committee and the Board
with respect to the Merger Agreement, stockholders should be aware that certain
members of the Special Committee and the Board have certain interests in the
Merger that are different from, or in addition to, the interests of stockholders
generally and that represent actual or potential conflicts of interest. The
Special Committee and the Board were aware of these interests and considered
them, among other matters, in approving the Merger Agreement. See
" -- Conflicts of Interest."
21
<PAGE> 22
In order to aid the evaluation of the Company by the Special Committee and
HSBC and HSBC's assessment of the fairness, from a financial point of view, of
the consideration of $7.00 per share in cash payable pursuant to the Merger
Agreement, the Company furnished the Special Committee and HSBC with certain
projected financial data prepared by the Company's management. SEE "CERTAIN
PROJECTED FINANCIAL DATA."
OPINION OF FINANCIAL ADVISOR
The Special Committee, on behalf of the Board of Directors, retained HSBC
under an engagement letter dated June 17, 1998 to act as the Special Committee's
financial advisor in connection with evaluating Thermedics' proposal to acquire
all of the Common Stock of the Company that it and Thermo Electron did not own
and to consider alternative proposals. HSBC and its affiliates are
internationally recognized investment banking firms and, as a customary part of
their investment banking businesses, are engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for corporate and other
purposes. The Special Committee selected HSBC because of its expertise and
reputation and because of its knowledge of the Company. HSBC rendered its oral
opinion to the Special Committee on September 16, 1998, that, as of such date,
and based upon and subject to various considerations and assumptions stated at
such time, the consideration of $7.00 per share to be paid pursuant to the
proposed Merger is fair, from a financial point of view, to the stockholders of
the Company other than Thermedics and its affiliates. This opinion was confirmed
in writing on September 23, 1998, and subsequently reaffirmed on November 24,
1998. The Special Committee did not limit HSBC's discretion regarding the
investigations to be made or procedures to be followed by it in rendering its
opinions. Although HSBC evaluated the financial terms of the Merger and
participated in discussions concerning the consideration to be paid, HSBC did
not recommend the amount of consideration to be paid in the Merger.
THE FULL TEXT OF THE WRITTEN OPINION OF HSBC DATED NOVEMBER 24, 1998, WHICH
SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT AND IS
INCORPORATED HEREIN BY REFERENCE. THIS OPINION IS SUBSTANTIALLY SIMILAR TO
HSBC'S SEPTEMBER 23, 1998 OPINION. HSBC'S OPINIONS ARE DIRECTED TO THE SPECIAL
COMMITTEE, ARE DIRECTED ONLY TO THE CONSIDERATION TO BE PAID TO STOCKHOLDERS OF
THE COMPANY (OTHER THAN THERMEDICS AND ITS AFFILIATES) PURSUANT TO THE MERGER
AGREEMENT AND DO NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF THE
COMPANY AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING. THE
SUMMARY OF THE OPINION OF HSBC SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. STOCKHOLDERS OF THE
COMPANY SHOULD READ THE OPINION IN ITS ENTIRETY.
In arriving at its opinions, HSBC:
- reviewed the Merger Agreement (in connection with the September opinions,
HSBC reviewed the then current drafts of the Merger Agreement);
- reviewed certain publicly available financial statements and other
information of the Company;
- reviewed certain internal business plans and financial forecasts of the
Company, as prepared by senior management of the Company;
- conducted discussions with senior management of the Company concerning
the financial statements and internal business plans and forecasts of the
Company;
- reviewed the results of operations of the Company and compared them with
those of certain publicly traded companies that it deemed to be relevant;
- considered the financial terms, to the extent publicly available, of
certain other transactions that it deemed to be relevant; and
- reviewed the stock market trading price ranges and valuation multiples
for the shares of Common Stock and compared them with those of certain
publicly traded companies that it deemed to be relevant.
22
<PAGE> 23
In addition, HSBC conducted such other financial studies, analyses and
investigations as it deemed appropriate.
In preparing its opinions, HSBC assumed and relied on the accuracy and
completeness of all information reviewed by it or conveyed to it in discussions
with the Company and assumed no responsibility for independently verifying such
information or undertaking an independent evaluation or appraisal of any of the
assets or liabilities of the Company and was not furnished with any such
evaluation or appraisal. In addition, HSBC did not conduct any physical
inspection of the properties or facilities of the Company. With respect to the
financial forecast information furnished to or discussed with HSBC by the
Company, HSBC assumed that such information was reasonably prepared and
reflected the best currently available estimates and judgment of the Company's
management as to the expected future financial performance of the Company. In
rendering its September 16, 1998 oral opinion and its September 23, 1998 written
opinion, HSBC also assumed that the final form of the Merger Agreement would be
substantially similar to the September 23, 1998 draft reviewed by it. In
connection with HSBC's engagement to provide financial advisory services to the
Special Committee concerning strategic alternatives, HSBC was authorized to
solicit, and did solicit, interest from other parties with respect to an
acquisition of, or other business combination involving, the Company. In
arriving at its opinions, HSBC considered the nature, scope and results of such
solicitation.
HSBC's opinions are based on economic, market and other conditions on, and
the information made available to HSBC as of, the date of its respective
opinions. Subsequent developments may affect the opinions of HSBC, and HSBC does
not have any obligation to update, revise, or reaffirm such opinions.
Summary of Analyses
The following is a brief summary of the material financial analyses HSBC
used in connection with providing its oral opinion on September 16, 1998 and its
written opinion dated November 24, 1998.
Stock Price Performance. HSBC reviewed the historical stock prices and
trading volume history for the shares of Common Stock. This review showed that
prices ranged from $4.38 to $7.19 during the one-year period from November 21,
1997, to November 24, 1998, from $4.38 to $7.50 during the one-year period from
September 15, 1997 to September 15, 1998, and from $4.38 to $9.50 during the
one-year period from March 27, 1997, to March 30, 1998. This review also showed
that the market price for the shares of Common Stock was up approximately 1% for
the one-year period ended November 23, 1998, as compared to the S&P Small Cap
Index which was down by approximately 7% over the same period; that the market
price for the shares of Common Stock was down approximately 3% for the one-year
period ended September 15, 1998, as compared to the S&P Small Cap Index which
was down approximately 16% over the same period; and that the market price for
the shares of Common Stock was down approximately 48% for the one-year period
ended March 30, 1998, as compared to the S&P Small Cap Index which was up by
approximately 46% over the same period. HSBC also compared the relative stock
price performance of the shares of Common Stock with an index of certain
companies HSBC believed to be relevant (the "Comparable Companies", which
included Advanced Energy Industries, Inc., Artesyn Technologies, Inc., Del
Global Technologies Corp., IFR Systems, Inc. and Vicor Corp.) for the one-year
periods from March 27, 1997 to March 30, 1998, from September 15, 1997 to
September 15, 1998, and from November 21, 1997 to November 23, 1998. HSBC
selected the Comparable Companies for comparison purposes because such companies
were publicly traded companies in the electronic components, test equipment,
power conversion and power amplifier industries. This review showed that the
market price for the shares of Common Stock was up approximately 1% for the
one-year period ended November 23, 1998, as compared to a decline of
approximately 34% for the index of Comparable Companies, was down approximately
3% for the one-year period ended September 15, 1998, as compared to a decline of
approximately 59% for the index of Comparable Companies, and was down
approximately 48% for the one-year period ended March 30, 1998, as compared to
an increase of approximately 79% for the index of Comparable Companies.
23
<PAGE> 24
HSBC also reviewed the closing prices of the Common Stock on the dates
which were four weeks, one week and one day prior to Thermedics' announcement on
March 31, 1998 of its proposal to acquire the Common Stock. This review
indicated that, based on a $7.00 per share price to be paid in the Merger:
- at four weeks prior to the announcement, the closing price per share of
Common Stock was $5.00 and the consideration represented a premium of
40.0% over the price of a share of Common Stock on that date;
- at one week prior to the announcement, the closing price per share of
Common Stock was $4.38 and the consideration represented a premium of
60.0% over the price of a share of Common Stock on that date; and
- at one day prior to the announcement, the closing price per share of
Common Stock was $4.81 and the consideration represented a premium of
45.5% over the price of a share of Common Stock on that date.
Review of Selected Publicly Traded Companies. HSBC reviewed and compared
certain actual and estimated financial, operating and stock market information
of the Company with that of certain publicly traded companies in the electronic
components, test equipment, power conversion and power amplifier industries (the
"Selected Public Companies"). The companies included in HSBC's analysis were
Advanced Energy Industries, Inc., Artesyn Technologies, Inc., Del Global
Technologies Corp., Delta Electronics, Inc., IFR Systems, Inc., Schaffner
Holding AG and Vicor Corp.
HSBC calculated certain financial multiples for the Company and each of the
Selected Public Companies including, among others:
- price to earnings ("P/E") multiples based on estimated calendar 1998
earnings per share ("EPS");
- P/E multiples based on estimated calendar 1999 EPS;
- price to tangible book value ("P/Book") multiples based on shareholders'
investment minus intangible assets as reported on the most recent
available financial statements;
- enterprise value (market capitalization plus debt minus cash) multiples
based on the latest twelve months ("LTM") revenues;
- enterprise value multiples based on LTM earnings before interest, taxes,
depreciation and amortization ("EBITDA"); and
- enterprise value multiples based on LTM earnings before interest and
taxes ("EBIT").
The calendar 1998 and 1999 EPS estimates for the Selected Public Companies were
based on publicly available earnings estimates as provided by First Call
Investor Service or, in the case of Delta Electronics, Inc. and Schaffner
Holding AG, HSBC's research analysts.
The results used in connection with HSBC's November 24, 1998 opinion, based
on a per share price of $7.00, were as follows:
ANALYSIS OF FINANCIAL MULTIPLES FOR THE COMPANY AND SELECTED PUBLIC COMPANIES
<TABLE>
<CAPTION>
SELECTED PUBLIC AVERAGE OF SELECTED
ANALYSIS * COMPANIES RANGE PUBLIC COMPANIES COMPANY
---------- --------------- ------------------- -------
<S> <C> <C> <C>
Estimated 1998 P/E.......................... 9.8x to 28.8x 17.7x 154.6x
Estimated 1999 P/E.......................... 8.4x to 54.3x 13.0x 37.3x
P/Book...................................... 1.5x to 6.9x 4.6x 4.2x
Enterprise Value to LTM Revenues............ 1.0x to 3.8x 1.7x 1.9x
Enterprise Value to LTM EBITDA.............. 6.9x to 52.4x 8.6x 28.5x
Enterprise Value to LTM EBIT................ 8.7x to 406.4x 11.5x 160.8x
</TABLE>
- ---------------
* Based on financial information at or for the period ended October 3, 1998 in
the case of the Company or at or for the comparable period in the case of the
Selected Public Companies.
24
<PAGE> 25
The results used in connection with HSBC's September 16, 1998 opinion,
based on a per share price of $7.00, were as follows:
ANALYSIS OF FINANCIAL MULTIPLES FOR THE COMPANY AND SELECTED PUBLIC COMPANIES
<TABLE>
<CAPTION>
SELECTED PUBLIC AVERAGE OF SELECTED
ANALYSIS * COMPANIES RANGE PUBLIC COMPANIES COMPANY
---------- --------------- ------------------- -------
<S> <C> <C> <C>
Estimated 1998 P/E.......................... 8.6x to 19.7x 13.3x 50.9x
Estimated 1999 P/E.......................... 5.4x to 19.8x 11.3x 26.7x
P/Book...................................... 1.1x to 6.1x 3.5x 4.4x
Enterprise Value to LTM Revenues............ 0.8x to 1.9x 1.2x 1.7x
Enterprise Value to LTM EBITDA.............. 4.8x to 12.4x 8.7x 18.1x
Enterprise Value to LTM EBIT................ 6.0x to 40.2x 10.3x 38.0x
</TABLE>
- ---------------
* Based on financial information at or for the period ended July 4, 1998 in the
case of the Company or at or for the comparable period in the case of the
Selected Public Companies.
HSBC excluded certain outlying values that differed from the relative
groupings of the other values in the calculation of the average of the Estimated
1998 P/E, Estimated 1999 P/E, Enterprise Value to LTM EBITDA and Enterprise
Value to LTM EBIT multiples. HSBC believes that these outlying values for
certain companies reflect temporary market aberrations that can skew average
values. In addition, HSBC was unable to derive meaningful multiples for certain
of the Selected Public Companies in a few instances because of unavailable
information, negative tangible book value or negative earnings.
None of the Selected Public Companies is identical to the Company.
Accordingly, any analysis by HSBC of the Selected Public Companies necessarily
involved complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that would necessarily
affect the public trading values of the Selected Public Companies.
Analysis of Selected Acquisition Transactions. Using publicly available
information, HSBC reviewed and compared eight selected mergers and acquisitions
transactions in the electronic components, test equipment, power conversion and
power amplifier industries since May 1995 (the "Selected Acquisition
Transactions"). The Selected Acquisition Transactions were: (i) General Signal
Corporation's acquisition of Best Power Technology, Inc.; (ii) Exide Electronics
Group, Inc.'s acquisition of Deltec Power Systems, Inc.; (iii) CVC Capital
Partners Ltd.'s acquisition of Trench Group S.A.; (iv) BTR plc's acquisition of
Exide Electronics Group, Inc.; (v) Artesyn Technologies, Inc.'s acquisition of
Zytec Corporation; (vi) Applied Power Inc.'s acquisition of VERO Group plc;
(vii) Communications Instruments, Inc.'s acquisition of Corcom, Inc.; and (viii)
Danaher Corporation's acquisition of Fluke Corporation.
HSBC calculated certain financial multiples for the Company at a price per
share of Common Stock of $7.00 and, to the extent that relevant information was
publicly available, for each of the targets in the Selected Acquisition
Transactions, including, among others, equity value (the purchase price of the
common equity) as a multiple of tangible book value and historical net income,
and enterprise value as a multiple of revenues, EBITDA and EBIT.
25
<PAGE> 26
The results, based on a per share price of $7.00, were as follows:
ANALYSIS OF FINANCIAL MULTIPLES FOR SELECTED ACQUISITION TRANSACTIONS AND THE
COMPANY
<TABLE>
<CAPTION>
COMPANY
(BASED ON COMPANY
FINANCIAL (BASED ON FINANCIAL
SELECTED AVERAGE OF INFORMATION AT INFORMATION AT
ACQUISITION SELECTED OR FOR THE OR FOR THE
TRANSACTION ACQUISITION PERIOD ENDED PERIOD ENDED
ANALYSIS RANGE TRANSACTIONS OCTOBER 3, 1998)* JULY 4, 1998)**
- -------- ------------ ------------ ----------------- -------------------
<S> <C> <C> <C> <C>
Equity Value to Historical Net Income... 17.2x to 32.0x 22.6x 103.0x 47.3x
Equity Value to Tangible Book Value..... 2.2x to 8.3x 4.1x 4.2x 4.4x
Enterprise Value to Revenues............ 1.1x to 1.5x 1.3x 1.9x 1.7x
Enterprise Value to EBITDA.............. 7.3x to 14.1x 10.0x 28.5x 18.1x
Enterprise Value to EBIT................ 9.1x to 20.1x 14.0x 160.8x 38.0x
</TABLE>
- ---------------
* Used in connection with HSBC's November 24, 1998 opinion.
** Used in connection with HSBC's September 16, 1998 opinion.
HSBC also reviewed the premiums paid over the closing price of the shares
of the targets in the Selected Acquisition Transactions at one day, one week and
four weeks prior to the announcement of each of the Selected Acquisition
Transactions. HSBC excluded certain outlying values in the calculation of the
averages of the premiums paid that differed from the relative groupings of the
other values. HSBC believes that these outlying values for certain companies
reflect temporary market aberrations that can skew average values.
The review of such premiums implied the following per share equity values
as such premiums were applied to the shares of Common Stock on dates prior to
the March 31, 1998 announcement of Thermedics' proposal:
AVERAGE SHARE PREMIUMS IN SELECTED ACQUISITION TRANSACTIONS AND IMPLIED SHARE
VALUES
<TABLE>
<CAPTION>
AVERAGE PER SHARE PREMIUM IN IMPLIED SHARE VALUE
TIME SELECTED ACQUISITION TRANSACTIONS OF THE COMPANY
- ---- --------------------------------- -------------------
<S> <C> <C>
One Day prior to Announcement..... 44.9% $6.97
One Week prior to Announcement.... 46.5% $6.41
Four Weeks prior to
Announcement.................... 52.8% $7.64
</TABLE>
Discounted Cash Flow Analysis. In connection with its November 24, 1998
opinion, HSBC performed a discounted cash flow analysis for the Company for the
fourth quarter of fiscal year 1998 through the end of fiscal year 2003. HSBC
estimated the present value of the free cash flows of the Company set forth in
these projections for the fourth quarter of fiscal year 1998 through the end of
fiscal year 2003 using discount rates ranging from 15.0% to 27.5%. HSBC also
calculated estimated terminal values for the Company (as of December 31, 2003)
by applying multiples ranging from 7.0x to 11.0x to the Company's estimated
fiscal 2003 EBIT, multiples ranging from 5.0x to 9.0x to the Company's estimated
fiscal 2003 EBITDA and terminal growth rates of 6% to 8% for the Company's
estimated fiscal 2003 free cash flow. The range of terminal values was then
discounted to present value using discount rates ranging from 15% to 27.5%.
At the time of HSBC's November 24, 1998 opinion, the midpoints of the
discounted cash flow analysis indicated:
- a present value of the Company's per share equity of $4.88 on the basis
of a terminal value EBIT multiple of 9.0x using a discount rate of 20%,
- a present value of the Company's per share equity of $4.70 on the basis
of a terminal value EBITDA multiple of 7.0x using a discount rate of 20%,
and
- a present value of the Company's per share equity of $3.58 on the basis
of a 7% growth rate of terminal free cash flow and a discount rate of
20%.
26
<PAGE> 27
In connection with its September 16, 1998 opinion, HSBC performed a
discounted cash flow analysis for the Company for the third quarter of fiscal
year 1998 through the end of fiscal year 2003. HSBC estimated the present value
of the free cash flows of the Company set forth in these projections for the
third quarter of fiscal year 1998 through the end of fiscal year 2003 using
discount rates ranging from 15.0% to 27.5%. HSBC also calculated estimated
terminal values for the Company (as of December 31, 2003) by applying multiples
ranging from 8.0x to 12.0x to the Company's estimated fiscal 2003 EBIT,
multiples ranging from 6.0x to 10.0x to the Company's estimated fiscal 2003
EBITDA and terminal growth rates of 6% to 8% for the Company's estimated fiscal
2003 free cash flow. The range of terminal values was then discounted to present
value using discount rates ranging from 15% to 27.5%.
At the time of HSBC's September 16, 1998 opinion, the midpoints of the
discounted cash flow analysis indicated:
- a present value of the Company's per share equity of $5.80 on the basis
of a terminal value EBIT multiple of 10.0x using a discount rate of 20%,
- a present value of the Company's per share equity of $5.59 on the basis
of a terminal value EBITDA multiple of 8.0x using a discount rate of 20%,
and
- a present value of the Company's per share equity of $4.10 on the basis
of a 7% growth rate of terminal free cash flow and a discount rate of
20%.
Minority Interest Buy-Out Analysis. HSBC reviewed the premiums paid in
fifteen completed minority interest acquisitions by majority interest holders
since January 1994. Such transactions were (i) Holderbank Financiere Glarus
AG/Holnam Inc.; (ii) Wassall PLC/General Cable PLC; (iii) Ogden Corp/Ogden
Projects Inc; (iv) LinPac Mouldings Ltd/Ropak Corp; (v) Novartis AG/SyStemix,
Inc; (vi) Gold Kist Inc/ Golden Poultry Co. Inc; (vii) Electromagnetic Sciences
Inc/LXE Inc.; (viii) Renco Group Inc/WCI Steel Inc.; (ix) Ansaldo Transporti
SpA/Union Switch & Signal Inc; (x) Mafco Holdings Inc/Mafco Consolidated Group,
Inc.; (xi) Texas Industries Inc/Chaparral Steel Co; (xii) FH Faulding & Co
Ltd/Faulding Inc; (xiii) Waste Management Inc/Wheelabrator Technologies Inc;
(xiv) Rhone-Poulenc SA/ Rhone-Poulenc Rorer Inc; and (xv) ISP Holdings
Inc/International Specialty Products, Inc.
HSBC reviewed the premiums paid based on the closing price of the target's
shares at one day, one week and four weeks prior to the announcement of the
respective transactions. The premiums calculated and the implied per share
equity values for the Company prior to the March 31, 1998, announcement of
Thermedics' proposal were as follows:
AVERAGE SHARE PREMIUMS IN MINORITY INTEREST BUY-OUT TRANSACTIONS AND IMPLIED
SHARE VALUES
<TABLE>
<CAPTION>
AVERAGE PER SHARE PREMIUM IN
MINORITY INTEREST BUY-OUT IMPLIED SHARE VALUE
TIME TRANSACTIONS OF THE COMPANY
- ---- ---------------------------- -------------------
<S> <C> <C>
One Day prior to Announcement..................... 17.6% $5.66
One Week prior to Announcement.................... 23.4% $5.40
Four Weeks prior to Announcement.................. 27.8% $6.39
</TABLE>
In connection with its September 16, 1998 opinion, HSBC conducted financial
analyses comparable to those performed in connection with its November 24, 1998
written opinion. Based on actual third fiscal quarter results, which were lower
than the estimates used by HSBC in connection with its September 16, 1998
opinion, and the Company's consequent reduction of its projected financial
performance for future fiscal periods, HSBC's November 24, 1998 analysis of the
Company based on financial multiples for selected public companies, selected
acquisition transactions and minority interest buy-in transactions yielded a
lower per share equity valuation of the Company. Commensurately, HSBC's November
24, 1998 discounted cash flow analysis of the Company also yielded a lower per
share equity valuation of the Company than HSBC's September 15, 1998 discounted
cash flow analysis.
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<PAGE> 28
While the summary set forth above contains the material analyses performed
by HSBC, it does not purport to be a complete description of such analyses. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or summary description. HSBC believes that the
summary set forth above and its analyses must be considered as a whole and that
selecting portions thereof, without considering all of its analyses, could
create an incomplete view of the processes underlying its analyses and opinions.
HSBC based its analyses on assumptions that it deemed reasonable, including
assumptions concerning general business and economic conditions and
industry-specific factors. As described above, certain of the analyses performed
by HSBC relied on forecasts of future financial performance provided by the
management of the Company. Analyses based on forecasts of future results are not
necessarily indicative of actual future results, and actual future results may
be significantly more or less favorable than suggested by such analyses.
Accordingly, because such forecasts are inherently subject to substantial
uncertainty, none of the Company, Thermedics, HSBC or any other person can
provide any assurance that future results will not be materially different from
those forecast. The other principal assumptions upon which HSBC based its
analyses are set forth above under the description of each such analysis. HSBC's
analyses are not necessarily indicative of actual values, trading values or
actual future results that might be achieved, all of which may be higher or
lower than those indicated. No company or transaction used in the above analyses
as a comparison is identical to the Company or the Merger. Moreover, HSBC's
analyses are not and do not purport to be appraisals or otherwise reflective of
the prices at which the shares of Common Stock could actually be bought or sold.
HSBC and its affiliates regularly engage in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
Pursuant to the terms of HSBC's engagement letter with the Company, the
Company has paid HSBC retainer fees totaling $90,000, comprised of an initial
retainer fee of $30,000 and two additional monthly fees of $30,000, and has paid
HSBC a fee of $50,000 for the preparation and delivery of a written fairness
opinion dated September 23, 1998, and a fee of $30,000 for the preparation and
delivery of the written fairness opinion dated November 24, 1998 (which fees
were payable regardless of the conclusions expressed therein). In addition, the
Company had agreed to pay HSBC, upon consummation of a transaction with the
Company not involving Thermedics, a transaction fee equal to the greater of (i)
$500,000 or (ii) 1.0% of the aggregate consideration in connection with such
transaction. No such transaction was consummated, and therefore no such
transaction fee is payable to HSBC. In addition, the Company has agreed to
reimburse HSBC for its out-of-pocket expenses, including the fees and
disbursements of its counsel, arising in connection with its engagement, and to
indemnify HSBC to the fullest extent permitted by law against certain
liabilities relating to or arising out of its engagement, except for liabilities
found to have resulted primarily or directly from the gross negligence or
willful misconduct of HSBC.
HSBC has, in the past, provided financial advisory and financing services
to Thermo Electron and certain of its affiliates including acting as underwriter
or placement agent in connection with equity and debt financings, and may
continue to do so and has received, and may receive, fees for the rendering of
such services. During the last two years, HSBC has received fees for such
services from Thermo Electron and certain of its affiliates of $1,992,906 in the
aggregate. Also, in the ordinary course of business, HSBC may actively trade the
securities of Thermo Electron, as well as securities of affiliates of Thermo
Electron, including Thermedics, for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. In addition, HSBC has, from time to time, acted as broker on
behalf of Thermo Electron in connection with its purchases in the open market of
its common stock.
PURPOSE AND REASONS OF THERMEDICS AND THERMO ELECTRON FOR THE MERGER
The purpose of Thermedics and Thermo Electron for engaging in the
transactions contemplated by the Merger Agreement is for Thermedics to acquire
all of the outstanding shares of Common Stock, other than the shares held by
Thermo Electron. In determining to acquire such shares of Common Stock at this
time, Thermedics and Thermo Electron considered the following factors: (i) the
latest market trends in the markets in which the Company competes, primarily the
EMC test market that has been affected by the declining
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<PAGE> 29
influence of IEC 801, the European directive on electromagnetic compatibility
that took effect January 1, 1996, (ii) the financial performance and
profitability of the Company, (iii) the uncertainty regarding Voltek's future
growth prospects and (iv) the disproportionate impact of public disclosure of
Voltek's poor financial performance on Thermedics and Thermo Electron, given the
size of Voltek's business relative to those companies. Thermedics and Thermo
Electron also determined that as a private company Voltek will have greater
operating flexibility to focus on enhancing value by emphasizing growth and
operating cash flow without the constraint of the public market's emphasis on
quarterly earnings.
Thermedics also considered the advantages and disadvantages of certain
alternatives to taking Voltek private, including (i) selling its equity interest
in the Company and (ii) leaving Voltek as a public majority-owned subsidiary of
Thermedics. Thermedics considered the number of Voltek shares held by minority
stockholders, recent trends in the price of the Common Stock and the relative
lack of liquidity for the Common Stock. Thermedics reviewed the net overall cost
of the transaction and its benefits, including its contribution to Thermedics'
earnings. Thermedics also explored alternative uses for the cash proposed to be
used for this transaction. After consideration of these various factors,
Thermedics decided to make a proposal to Voltek to acquire, through a merger,
all of the outstanding shares of Common Stock that it and Thermo Electron did
not own at a price of $7.00 per share. This price represented a premium of 45.5%
over the closing price of the Common Stock on the AMEX on March 30, 1998, the
date immediately prior to the public announcement of the proposal. Thermedics
proposed to structure the transaction as a cash merger in order to transfer
ownership of the equity interest in the Company in a single transaction and
provide the stockholders other than Thermedics and Thermo Electron with prompt
payment in cash in exchange for their shares.
Thermo Electron beneficially owns, directly and indirectly through
Thermedics, approximately 76% of the outstanding Common Stock. See "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Principal Stockholder."
POSITION OF THERMEDICS AND THERMO ELECTRON AS TO FAIRNESS OF THE MERGER
Thermedics and Thermo Electron considered the analyses and findings of (i)
HSBC with respect to the fairness, from a financial point of view, of the
consideration of $7.00 per share in cash payable under the Merger Agreement to
the stockholders of Voltek other than Thermedics and its affiliates (see "--
Opinion of Financial Advisor"), and (ii) the Special Committee and the Board
with respect to the fairness of the Merger to the Public Stockholders (see "--
The Special Committee's and the Board's Recommendation"). As of the date of the
Merger Agreement, each of Thermedics and Thermo Electron adopts the analyses and
findings of HSBC with respect to the fairness, from a financial point of view,
of the consideration of $7.00 per share in cash payable under the Merger
Agreement to the stockholders of Voltek other than Thermedics and its
affiliates, and the Special Committee and the Board with respect to the fairness
of the Merger. Based solely on the analyses and findings of HSBC and the Special
Committee, Thermedics and Thermo Electron believe that the Merger is both
procedurally and substantively fair to the Public Stockholders and that the Cash
Merger Consideration is fair to the Public Stockholders from a financial point
of view. Neither Thermedics nor Thermo Electron attached specific weights to any
factors in reaching its belief as to fairness. Thermedics and Thermo Electron
are not making any recommendation as to how the Public Stockholders should vote
on the Merger Agreement.
Certain officers and directors of Thermedics and Thermo Electron are also
officers and directors of the Company and have certain interests that are in
addition to, or different from, the interests of the Public Stockholders. See
"-- Conflicts of Interest." Thermedics and Thermo Electron considered these
potential conflicts of interest and based in part thereon, Thermedics' Offer was
conditioned on, among other things, the approval of the Merger by the Special
Committee and the receipt by the Special Committee of a fairness opinion from an
investment banking firm.
CONFLICTS OF INTEREST
In considering the recommendations of the Board with respect to the Merger,
the Public Stockholders should be aware that certain officers and directors of
Voltek have interests in connection with the Merger that
29
<PAGE> 30
present them with actual or potential conflicts of interest, as summarized
below. The Special Committee and the Board were aware of these interests and did
not view them either positively or negatively, but considered them among the
other matters described above under "-- The Special Committee's and the Board's
Recommendation."
Following consummation of the Merger, the current executive officers and
directors of Voltek will continue as the initial executive officers and
directors of the Surviving Corporation; however, Thermedics intends to appoint a
board of directors comprised solely of the Surviving Corporation's management
after the Merger. Officers and directors who own Common Stock will receive the
Cash Merger Consideration on the same terms as all the other stockholders.
Special Committee
As compensation for serving on the Special Committee, which formally met on
five occasions, either in person or telephonically, from April 1998 through the
date of this Proxy Statement, the Board has authorized that each member of the
Special Committee receive a special retainer fee of $20,000 and additional fees
of $1,000 for each meeting attended in person and $500 for each meeting attended
telephonically.
As of January 31, 1999, Mr. Hoover and Mr. Richman, members of the Special
Committee, hold options to acquire an aggregate of 10,900 shares of Common
Stock. The options have exercise prices ranging from $5.42 to $14.05. Under the
terms of the Merger Agreement, the options held by the members of the Special
Committee will be treated on the same terms as all the other holders of Voltek
Stock Options and therefore will be assumed by Thermedics and converted into
options to acquire shares of Thermedics Common Stock. See "THE
MERGER -- Assumption of Voltek Stock Options by Thermedics." In addition, the
members of the Special Committee own in the aggregate 55,142 shares of Common
Stock and will receive a payment for their shares of Common Stock in the
aggregate amount of $385,994 upon consummation of the Merger. Further, deferred
units equal to 3,576 shares of Common Stock have accumulated under the Company's
deferred compensation plan for directors for the benefit of Mr. Richman, which
units will be converted into the right to receive the Cash Merger Consideration
per unit for an aggregate cash payment of $25,032. Mr. Richman also beneficially
owns shares of common stock of Thermedics, as set forth in more detail under
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Management."
Mr. Richman is also a member of the Board of Directors of Thermo Sentron
Inc., a majority-owned subsidiary of Thermedics and had been a consultant to
Thermedics and its subsidiaries on corporate development and acquisition
strategies from March 1993 to March 1995. See "MANAGEMENT."
The Voltek Directors and Executive Officers
The members of the Board of Directors, other than the members of the
Special Committee, and executive officers of Voltek own in the aggregate 50,421
shares of Common Stock and will receive a payment for their shares of Common
Stock in the aggregate amount of $352,947 upon consummation of the Merger. In
addition, such Board members and executive officers hold options to acquire an
aggregate of 218,500 shares of Common Stock, with exercise prices ranging from
$5.00 to $14.05, which will be assumed by Thermedics and converted into options
to acquire shares of Thermedics Common Stock on the same terms as all the other
holders of Voltek Stock Options. See "THE MERGER -- Assumption of Voltek Stock
Options by Thermedics." Such Board members and executive officers also
beneficially own shares of common stock of Thermedics and Thermo Electron. See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Management,"
for information regarding beneficial ownership by the Board and executive
officers of Common Stock and common stock of Thermedics and Thermo Electron.
Further, certain members of the Board and certain executive officers hold
directorship or officer positions with Thermedics and/or Thermo Electron. For a
description of such positions, see "MANAGEMENT."
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<PAGE> 31
Indemnification and Insurance
The Merger Agreement provides that for a period of six (6) years after the
Effective Time, Thermedics will, and will cause the Surviving Corporation to,
fulfill and honor in all respects the indemnification obligations of Voltek,
pursuant to Voltek's Certificate of Incorporation and Bylaws, each as in effect
immediately prior to the Effective Time, to those individuals who were
directors, including the members of the Special Committee, and executive
officers of Voltek at the Effective Time. The Surviving Corporation's
Certificate of Incorporation and Bylaws will contain the provisions with respect
to indemnification and elimination of liability for monetary damages currently
set forth in Voltek's Certificate of Incorporation and Bylaws and such
provisions will not be amended, repealed or otherwise modified for a period of
six (6) years from the Effective Time in any manner that would adversely affect
the rights of those individuals who were directors and executive officers of
Voltek at the Effective Time, unless such modification is required by law. See
"THE MERGER -- Indemnification and Insurance."
In addition, Thermedics will cause the Surviving Corporation, either
directly or through participation in Thermo Electron's umbrella policy, to
maintain in effect, for a period of six (6) years after the Effective Time, a
directors' and officers' liability insurance policy covering the Voltek
executive officers and directors who, at the Effective Time, were then covered
by Thermo Electron's liability insurance policy with coverage in amount and
scope at least as favorable as such officer's and director's existing coverage.
However, in no event will the Surviving Corporation be required to pay premiums
for such insurance in excess of 175% of premiums currently allocable to and paid
by Voltek. See "THE MERGER -- Indemnification and Insurance."
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, Thermo Electron, directly and indirectly through
Thermedics, will beneficially own the entire equity interest in the Company.
Thermo Electron and Thermedics will have complete control over the conduct of
the Company's business and will have a 100% interest in the net book value and
net earnings of the Company and any future increases in the value of the
Company. Thermedics' and Thermo Electron's combined ownership of the Company
prior to the transaction contemplated herein aggregated approximately 69%. Upon
completion of this transaction, Thermo Electron's and Thermedics' aggregate
interest in the Company's net book value of $34.5 million on October 3, 1998 and
net earnings of $0.3 million and $0.6 million for the year ended January 3, 1998
and the nine months ended October 3, 1998, respectively, would increase from
approximately 69% of such amounts to 100% of such amounts. The Public
Stockholders of Voltek will not have an opportunity to continue their equity
interest in Voltek as an ongoing corporation and therefore will not share in the
future earnings and potential growth of Voltek and will no longer bear the risk
of any decrease in the value of the Company. Upon consummation of the Merger,
the Common Stock will no longer be traded on the AMEX, price quotations will no
longer be available and the registration of the Common Stock under the Exchange
Act will be terminated. The termination of registration of the Common Stock
under the Exchange Act will eliminate the requirement to provide information to
the Commission and will make most of the provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b) and the requirement
of furnishing a proxy or information statement in connection with stockholders'
meetings, no longer applicable.
The consummation of the Merger will also give the holders of Voltek's
3 3/4% Debentures the right to have Voltek redeem such 3 3/4% Debentures for a
cash amount equal to 100% of the principal amount to be redeemed, plus accrued
interest. The cost to Voltek of such redemption will be approximately $5.3
million. If a holder elects not to redeem its 3 3/4% Debentures, its right to
receive shares of Common Stock upon conversion of such 3 3/4% Debentures will be
converted into the right to receive $7.00 in cash per share of Common Stock that
such 3 3/4% Debentures would have been convertible into prior to the Merger. The
conversion price of the 3 3/4% Debentures is $7.83; therefore, the Company does
not expect any holder to elect to convert its 3 3/4% Debentures. The 3 3/4%
Debentures are listed for trading on the Luxembourg Stock Exchange. The Company
does not intend to take any action to provide that the right to receive cash
upon conversion of the 3 3/4% Debentures will be eligible for trading on any
securities exchange or an automated inter-dealer quotation system.
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<PAGE> 32
The receipt of cash pursuant to the Merger will be a taxable transaction.
See "FEDERAL INCOME TAX CONSEQUENCES."
CONDUCT OF VOLTEK'S BUSINESS AFTER THE MERGER
Thermedics and Thermo Electron are continuing to evaluate Voltek's
business, assets, practices, operations, properties, corporate structure,
capitalization, management and personnel and discuss what changes, if any, will
be desirable. After the Merger, Thermedics currently intends to transfer its
entire equity interest in the Company to Thermo Electron. Subject to the
foregoing, for the foreseeable future, Thermedics and Thermo Electron expect
that the day-to-day business and operations of Voltek will be conducted
substantially as they are currently being conducted by Voltek. Except for the
Company's real estate located in Mount Kisco, New York, which is under agreement
to be sold, Thermedics and Thermo Electron do not currently intend to dispose of
any material assets of Voltek, other than in the ordinary course of business.
Additionally, Thermo Electron and Thermedics do not currently contemplate any
material change in the composition of Voltek's current management except that
Thermedics intends to appoint a board of directors comprised of the Surviving
Corporation's management after the Merger.
CONDUCT OF THE BUSINESS OF THE COMPANY IF THE MERGER IS NOT CONSUMMATED
If the Merger is not consummated, the Board of Directors expects that the
Company's current management will continue to operate the Company's business
substantially as presently operated. Thermedics, however, currently intends to
sell its equity interest in the Company to Thermo Electron. No other
alternatives are presently being considered.
STOCKHOLDER LITIGATION
In late March and early April, 1998, four putative class actions were filed
in the Court of Chancery of the State of Delaware in and for New Castle County
by stockholders of the Company. On October 6, 1998, the Court of Chancery
entered an order consolidating these four actions under the caption In re Thermo
Voltek Corp. Shareholders Litigation, Consolidated C.A. 16287 (the "Action").
The complaint in the Action names the Company, Thermedics, Thermo Electron and
directors of the Company as defendants and alleges, among other things, that the
Company's directors violated the fiduciary duties of loyalty, good faith and
fair dealing that they owed to all stockholders of the Company other than the
named defendants and the affiliates of the named defendants because the proposed
price of $7.00 per share to be paid to the Company's stockholders under the
terms of the proposed Merger Agreement was allegedly unfair and grossly
inadequate. The complaints further allege that the Company, Thermedics and
Thermo Electron have violated their alleged fiduciary duty of fair dealing by
proposing the merger transaction at the time. The complaints request that the
Court of Chancery, among other things, declare that the Action is a proper class
action and enjoin the proposed transaction or order that any transaction be
approved by a majority of the Voltek stockholders other than the named
defendants and their affiliates.
On November 17, 1998, the Company, Thermedics, Thermo Electron and the
individual defendants filed an answer to the complaint in the Action in which
they deny the allegations of any violation of law or breaches of any duty to the
plaintiffs or the purported class set forth in the complaints. Thermedics filed
a motion to dismiss the complaint for, among other things, procedural and
jurisdictional defects and failure to state a claim upon which relief can be
granted, which is currently pending before the court. The parties are currently
conducting discovery.
The parties' obligations to proceed with the Merger will not be relieved if
the Action is still pending immediately prior to the Effective Time unless a
court order or injunction is in effect prohibiting consummation of the Merger.
See "THE MERGER -- Conditions."
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THE SPECIAL MEETING
PROXY SOLICITATION
This Proxy Statement is being delivered to Voltek's stockholders in
connection with the solicitation by the Board of proxies to be voted at the
Special Meeting to be held on Thursday, March 25, 1999 at 10:00 a.m., local
time, at the offices of Thermo Electron Corporation, 81 Wyman Street, Waltham,
Massachusetts 02454. All expenses incurred in connection with solicitation of
the enclosed proxy will be paid by the Company. Officers, directors and regular
employees of the Company, who will receive no additional compensation for their
services, may solicit proxies by telephone or personal call. The Company has
requested brokers and nominees who hold stock in their names to furnish this
proxy material to their customers and the Company will reimburse such brokers
and nominees for their related out-of-pocket expenses. This Proxy Statement and
the accompanying Proxy Card are first being mailed to stockholders of the
Company on or about February 16, 1999.
RECORD DATE AND QUORUM REQUIREMENT
The Board has fixed the close of business on February 11, 1999 as the
Record Date for the determination of stockholders entitled to notice of, and to
vote at, the Special Meeting. Each holder of record of Common Stock at the close
of business on the Record Date is entitled to one vote for each share then held
on each matter submitted to a vote of stockholders. At the close of business on
the Record Date, there were 8,733,897 shares of Common Stock issued and
outstanding held by 309 holders of record and by approximately 1,007 persons or
entities holding in nominee name. Of such outstanding shares, 2,617,126 shares
were held by the Public Stockholders.
The holders of a majority of the outstanding shares entitled to vote at the
Special Meeting must be present in person or represented by proxy to constitute
a quorum for the transaction of business. Abstentions are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. Broker non-votes will not be counted as shares present and entitled to
vote for purposes of determining the presence or absence of a quorum for the
transaction of business.
VOTING PROCEDURES
Under Delaware law, holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Special Meeting must approve the Merger
Agreement. The Merger Agreement is attached to this Proxy Statement as Appendix
A. For the purposes of the vote required under Delaware law, a failure to vote,
a vote to abstain and a broker non-vote will have the same legal effect as a
vote cast against approval of the Merger. Thermedics, which owns approximately
66% of the outstanding Common Stock, and Thermo Electron, which owns
approximately 3% of the outstanding Common Stock, own enough shares of Common
Stock to approve the Merger under Delaware law without the vote of the Public
Stockholders and intend to vote their shares in favor of the Merger Agreement.
However, the Merger Agreement also requires that the holders of a majority of
the outstanding shares of Common Stock that are voted at the Special Meeting by
the Public Stockholders must approve the Merger Agreement. For purposes of this
vote, an abstention and a broker non-vote will reduce the absolute number, but
not the percentage, of affirmative votes necessary for approval of the Merger.
In other words, abstentions and broker non-votes will have no effect on the
outcome of such vote.
If a properly executed Proxy Card is submitted and no instructions are
given, the shares of Common Stock represented by that proxy will be voted "FOR"
the proposed Merger.
Under Delaware law, holders of Common Stock who do not vote in favor of the
Merger Agreement and who comply with certain notice requirements and other
procedures will have the right to dissent and to be paid cash for the "fair
value" of their shares as finally determined in accordance with the procedures
under Delaware law. The "fair value," as finally determined, may be more or less
than the consideration to be received by other stockholders of Voltek under the
terms of the Merger Agreement. Failure to follow such procedures under Delaware
law precisely will result in the loss of Dissenters' Rights. See "RIGHTS OF
DISSENTING STOCKHOLDERS."
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VOTING AND REVOCATION OF PROXIES
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised by (i) filing with the Secretary of Voltek an instrument
revoking it, (ii) submitting a duly executed proxy bearing a later date or (iii)
voting in person at the Special Meeting. Subject to such revocation, all shares
represented by each properly executed proxy received by the Secretary of Voltek
will be voted in accordance with the instructions indicated thereon, and if no
instructions are indicated, will be voted to approve the Merger. The shares
represented by the accompanying Proxy Card and entitled to vote will be voted if
the Proxy Card is properly signed and received by the Secretary of the Company
prior to the Special Meeting.
EFFECTIVE TIME
The Merger will be effective as soon as practicable following stockholder
approval of the Merger Agreement and upon the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware. The Effective Time
is currently expected to occur as soon as practicable after the Special Meeting,
subject to approval of the Merger Agreement at the Special Meeting and
satisfaction or waiver of the terms and conditions set forth in the Merger
Agreement. See "THE MERGER -- Conditions."
THE MERGER
The Merger Agreement provides that the Merger Sub, a newly-formed Delaware
corporation that is a wholly owned subsidiary of Thermedics, will be merged with
and into Voltek, and that following the Merger, the separate existence of the
Merger Sub will cease and Voltek will continue as the Surviving Corporation.
The terms of and conditions to the Merger are contained in the Merger
Agreement that is included in full as Appendix A to this Proxy Statement and is
incorporated herein by reference. The discussion in this Proxy Statement of the
Merger, and the summary description of all material terms of the Merger
Agreement that is contained in this section, are subject to and qualified in
their entirety by reference to the more complete information set forth in the
Merger Agreement.
CONVERSION OF SECURITIES
At the Effective Time, subject to the terms, conditions and procedures set
forth in the Merger Agreement, each share of Common Stock issued and outstanding
immediately prior to the Effective Time (other than the Dissenting Shares,
shares held in treasury by Voltek and shares held by Thermedics and Thermo
Electron) will, by virtue of the Merger, be converted into the right to receive
the Cash Merger Consideration. Except for the right to receive the Cash Merger
Consideration, from and after the Effective Time, all shares (other than the
Dissenting Shares, shares held in treasury by Voltek and shares held by
Thermedics and Thermo Electron), by virtue of the Merger and without any action
on the part of the holders, will no longer be outstanding and will be canceled
and retired and will cease to exist. Each holder of a stock certificate formerly
representing any shares (other than the Dissenting Shares, shares held in
treasury by Voltek and shares held by Thermedics and Thermo Electron) will after
the Effective Time cease to have any rights with respect to such shares other
than the right to receive the Cash Merger Consideration for such shares upon
surrender of the stock certificate.
No interest will be paid or accrued on the amount payable upon the
surrender of any stock certificate. Payment to be made to a person other than
the registered holder of the stock certificate surrendered is conditioned upon
the stock certificate so surrendered being properly endorsed and otherwise in
proper form for transfer, as determined by the Payment Agent. Further, the
person requesting such payment will be required to pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the stock certificate surrendered or establish to the satisfaction of
the Payment Agent that such tax has been paid or is not payable. Six (6) months
following the Effective Time, Thermedics may require the Payment Agent to
deliver to it any funds (including any interest received with respect thereto)
made available to the Payment Agent which have not been disbursed to holders of
stock certificates formerly representing shares outstanding prior to the
Effective Time. After such time holders of Voltek stock certificates will be
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entitled to look to Thermedics only as general creditors with respect to cash
payable upon due surrender of their stock certificates. Notwithstanding the
foregoing, neither the Payment Agent nor any party to the Merger Agreement will
be liable to any holder of stock certificates formerly representing shares for
any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
At the Effective Time, subject to the terms, conditions and procedures set
forth in the Merger Agreement, each share of Common Stock issued and outstanding
immediately prior to the Effective Time held by Thermedics and Thermo Electron
will, by virtue of the Merger, be converted at the Effective Time into one share
of common stock of the Surviving Corporation. Each share of the Merger Sub's
common stock that is issued and outstanding immediately prior to the Merger
will, at the Effective Time, cease to be outstanding, be canceled and retired
without payment of any consideration therefor and cease to exist. All shares
held in treasury by Voltek immediately prior to the Effective Time will, at the
Effective Time, cease to be outstanding, be canceled and retired without payment
of any consideration therefor and cease to exist.
ASSUMPTION OF VOLTEK STOCK OPTIONS BY THERMEDICS
Voltek has, from time to time, issued options to acquire Common Stock
pursuant to its 1985 Stock Option Plan, 1990 Stock Option Plan, 1994 Equity
Incentive Plan and 1994 Directors Stock Option Plan, each as amended (the
"Voltek Stock Option Plans"). At the Effective Time, each outstanding Voltek
Stock Option under the Voltek Stock Option Plans, whether or not exercisable,
will be assumed by Thermedics. Each Voltek Stock Option so assumed by Thermedics
will continue to have, and be subject to, the same terms and conditions set
forth in the applicable Voltek Stock Option Plan immediately prior to the
Effective Time, except that (i) each Voltek Stock Option will be exercisable (or
will become exercisable in accordance with its terms) for that number of whole
shares of Thermedics Common Stock equal to the product of the number of shares
of Common Stock that were issuable upon exercise of such Voltek Stock Option
immediately prior to the Effective Time multiplied by the Exchange Ratio (as
defined below), rounded down to the nearest whole number of shares of Thermedics
Common Stock, and (ii) the per share exercise price for the shares of Thermedics
Common Stock issuable upon exercise of such assumed Voltek Stock Option will be
equal to the quotient determined by dividing the exercise price per share of
Common Stock at which such Voltek Stock Option was exercisable immediately prior
to the Effective Time by the Exchange Ratio, rounded up to the nearest whole
cent. The Exchange Ratio is a fraction, the numerator of which is the Cash
Merger Consideration and the denominator of which is the closing price of
Thermedics Common Stock on the day immediately preceding the Effective Date as
reported by the AMEX.
TRANSFER OF SHARES
Shares of Common Stock will not be transferred on the stock transfer books
at or after the Effective Time. If certificates representing such shares are
presented to Voltek after the Effective Time, such shares will be canceled and
exchanged for the Cash Merger Consideration.
CONDITIONS
Each party's obligation to effect the Merger is subject to the satisfaction
of each of the following conditions at or prior to the Effective Time:
(i) the Merger Agreement and the transactions contemplated therein shall
have been approved and adopted by the affirmative vote of (a) the
holders of a majority of the outstanding shares of Common Stock
entitled to vote thereon in accordance with the DGCL and (b) the
majority of the outstanding shares of Common Stock voted at the
Special Meeting by the Public Stockholders; and
(ii) no court, administrative agency or commission or other governmental
or regulatory body or authority or instrumentality shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order which
is in effect and which has the effect of making the Merger illegal
or otherwise prohibiting consummation of the Merger.
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<PAGE> 36
The obligations of Voltek to effect the Merger are subject to the
satisfaction of each of the following conditions at or prior to the Effective
Time, unless waived by Voltek (upon approval of the Special Committee):
(i) the representations and warranties of the Merger Sub and Thermedics
in the Merger Agreement shall be true and correct on and as of the
Effective Time, except as otherwise permitted by the Merger
Agreement;
(ii) the Merger Sub and Thermedics shall have performed or complied in
all material respects with all agreements and covenants required by
the Merger Agreement to be performed or complied with by them at or
prior to the Effective Time; and
(iii) Voltek shall have received a certificate of the President, Chief
Executive Officer or Chief Operating Officer of Thermedics
certifying to the effect of above clauses (i) and (ii).
The obligations of the Merger Sub and Thermedics to effect the Merger are
subject to the satisfaction of each of the following conditions at or prior to
the Effective Time, unless waived by Thermedics:
(i) the representations and warranties of Voltek in the Merger Agreement
shall be true and correct on and as of the Effective Time, except as
otherwise permitted by the Merger Agreement;
(ii) Voltek shall have performed or complied in all material respects
with all agreements and covenants required by the Merger Agreement
to be performed or complied with by it on or prior to the Effective
Time; and
(iii) Thermedics shall have received a certificate of the President, Chief
Executive Officer or Chief Operating Officer of Voltek certifying to
the effect of above clauses (i) and (ii).
REPRESENTATIONS AND WARRANTIES
Voltek has made representations and warranties in the Merger Agreement
regarding, among other things, its organization and good standing, authority to
enter into the transaction, its capitalization, requisite governmental and other
consents and approvals, the content and submission of forms and reports required
to be filed by Voltek with the Commission, and its receipt of a fairness opinion
from HSBC.
Thermedics and the Merger Sub have made representations and warranties in
the Merger Agreement regarding, among other things, their organization and good
standing, authority to enter the transaction, adequacy of Thermedics' financial
resources to pay the Cash Merger Consideration, accuracy of information supplied
by Thermedics for submission on forms and reports required to be filed by Voltek
with the Commission, and requisite governmental and other consents and
approvals.
The representations and warranties of the parties in the Merger Agreement
will expire upon consummation of the Merger. After such expiration none of the
parties to the Merger Agreement or their respective officers, directors or
principals will have any liability for any such representations or warranties.
COVENANTS
In the Merger Agreement, Voltek has agreed that during the period from the
date of the Merger Agreement and continuing until the earlier of termination of
the Merger Agreement or the Effective Time, Voltek will carry on its business in
the usual, regular and ordinary course, substantially consistent with past
practice and will not, without the prior consent of Thermedics, or unless
otherwise permitted by the Merger Agreement:
(i) waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice
options granted under any employee, consultant or director stock
plans or authorize cash payments in exchange for any options granted
under any of such plans;
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<PAGE> 37
(ii) enter into any material partnership arrangements, joint development
agreements or strategic alliances;
(iii) grant any severance or termination pay to any officer or employee
except payments in amounts consistent with past practice or pursuant
to written agreements outstanding or adopt any new severance plan;
(iv) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock
or split, combine or reclassify any capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu
of or in substitution for any capital stock;
(v) issue, deliver, sell, authorize or propose the issuance, delivery or
sale of, any shares of its capital stock or any securities
convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any
securities convertible into shares of capital stock, or enter into
other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than the
issuance of shares of Common Stock pursuant to the exercise of stock
options therefor or conversion of the outstanding 3 3/4% Debentures
outstanding as of the date of the Merger Agreement;
(vi) cause, permit or propose any amendments to its Certificate of
Incorporation or Bylaws;
(vii) acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a material portion of the
assets of, or by any other manner, any other business or any
corporation, partnership interest, association or other business
organization or division thereof, or otherwise acquire or agree to
acquire any assets or enter into any joint ventures, strategic
partnerships or alliances;
(viii) sell, lease, license, encumber or otherwise dispose of any
properties or assets that are material, individually or in the
aggregate, to the business of Voltek;
(ix) incur any indebtedness for borrowed money (other than ordinary course
trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or
issue or sell any debt securities or warrants or guarantee any debt
securities of others;
(x) adopt or amend any employee benefit or stock purchase or option plan,
or enter into any employment contract, pay any special bonus or
special remuneration to any director or employee, or increase the
salaries or wage rates of its officers or employees, except increases
in amounts consistent with past practice;
(xi) pay, discharge or satisfy any claim, liability or obligation, other
than the payment, discharge or satisfaction in the ordinary course of
business;
(xii) make any grant of exclusive rights to any third party; or
(xiii) agree in writing or otherwise to take any of the actions described
above.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that for a period of six (6) years after the
Effective Time, Thermedics will, and will cause the Surviving Corporation to,
fulfill and honor in all respects the indemnification obligations of Voltek,
pursuant to Voltek's Certificate of Incorporation and Bylaws, each as in effect
immediately prior to the Effective Time, to those individuals who were
directors, including the members of the Special Committee, and executive
officers of Voltek at the Effective Time. The Surviving Corporation's
Certificate of Incorporation and Bylaws will contain the provisions with respect
to indemnification and elimination of liability for monetary damages currently
set forth in Voltek's Certificate of Incorporation and Bylaws and such
provisions will not be amended, repealed or otherwise modified for a period of
six (6) years
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<PAGE> 38
from the Effective Time in any manner that would adversely affect the rights of
those individuals who were directors and executive officers of Voltek at the
Effective Time, unless such modification is required by law.
In addition, Thermedics will cause the Surviving Corporation, either
directly or through participation in Thermo Electron's umbrella policy, to
maintain in effect, for a period of six (6) years after the Effective Time, a
directors' and officers' liability insurance policy covering the Voltek
executive officers and directors who, at the Effective Time, were then covered
by Thermo Electron's liability insurance policy with coverage in amount and
scope at least as favorable as such officer's and director's existing coverage.
However, in no event will the Surviving Corporation be required to pay premiums
for such insurance in excess of 175% of premiums currently allocable to and
payable by Voltek.
TERMINATION, AMENDMENT AND WAIVER
At any time prior to the Effective Time, whether before or after approval
of the Merger by the stockholders of Voltek, the Merger Agreement may be
terminated by the mutual written consent of the board of directors of Thermedics
and the Board of Directors of Voltek (upon approval of the Special Committee).
Either Voltek, with the approval of the Special Committee, or Thermedics
may terminate the Merger Agreement prior to the Effective Time, whether before
or after approval of the Merger by the stockholders of Voltek, if (i) the Merger
has not been consummated by June 30, 1999, unless such party's action or
inaction constitutes a breach of the Merger Agreement and has been a principal
cause of or resulted in the failure of the Merger to be consummated, (ii) a
court of competent jurisdiction or governmental, regulatory or administrative
agency or commission issues an order, decree or ruling or takes any other action
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling or action is final and nonappealable or (iii) approval of the
stockholders of Voltek necessary to consummate the Merger has not been obtained
unless such party's action or inaction constitutes a breach of the Merger
Agreement and has been the principal cause of or resulted in the failure to
obtain the requisite stockholder approval to consummate the Merger.
In addition, Thermedics may terminate the Merger Agreement prior to the
Effective Time, whether before or after approval of the Merger by the
stockholders of Voltek, if Voltek breaches any representation, warranty,
covenant or agreement and fails to cure such breach within ten (10) business
days after written notice of such breach from Thermedics.
Voltek may terminate the Merger Agreement prior to the Effective Time,
whether before or after approval of the Merger by the stockholders of Voltek, if
(i) Voltek's Board of Directors, upon approval of the Special Committee,
determines in good faith on the advice of outside legal counsel that the Board's
fiduciary duties under applicable law require it to do so or (ii) Thermedics
breaches any representation, warranty, covenant or agreement and fails to cure
such breach within ten (10) business days after written notice of such breach
from Voltek.
Subject to the provisions of applicable law, the Merger Agreement may be
amended by the parties thereto at any time by written agreement of the parties;
provided, however, that Voltek may not amend the Merger Agreement without the
approval of the Special Committee.
SOURCE OF FUNDS
The aggregate consideration payable in the Merger is approximately $19.1
million. Thermedics intends to finance the Merger entirely from cash on hand.
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<PAGE> 39
EXPENSES
The parties have agreed to pay their own costs and expenses in connection
with the Merger Agreement and the transactions contemplated thereby. Assuming
the Merger is consummated, the estimated costs and fees in connection with the
Merger and the related transactions, which will be paid by Voltek are as
follows:
<TABLE>
<CAPTION>
COST OR FEE ESTIMATED AMOUNT
- ----------- ----------------
<S> <C>
Financial advisory fees................................... $170,000
Legal fees................................................ 55,000
Accounting fees........................................... 10,000
Special Committee fees.................................... 47,000
Printing and mailing fees................................. 150,000
Commission filing fees.................................... 3,749
Other regulatory filing fees.............................. 5,000
Miscellaneous............................................. 59,251
--------
$500,000
</TABLE>
See "SPECIAL FACTORS -- Opinion of Financial Advisor" for a description of
the fees to be paid to HSBC in connection with its engagement. For a description
of certain fees payable to the members of the Special Committee, see "SPECIAL
FACTORS -- Conflicts of Interest."
ACCOUNTING TREATMENT
The Merger will be accounted for as the acquisition of a minority interest
by Thermedics, using the purchase method of accounting.
REGULATORY APPROVALS
No federal or state regulatory approvals are required to be obtained that
have not already been obtained, nor any regulatory requirements complied with,
in connection with the consummation of the Merger by any party to the Merger
Agreement, except for (i) the requirements of the DGCL in connection with
stockholder approvals and consummation of the Merger and (ii) the requirements
of the federal securities laws.
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<PAGE> 40
RIGHTS OF DISSENTING STOCKHOLDERS
Under the DGCL, record holders of shares of Common Stock who follow the
procedures set forth in Section 262 and who have not voted in favor of the
Merger Agreement will be entitled to have their shares of Common Stock appraised
by the Court of Chancery of the State of Delaware and to receive payment of the
"fair value" of such shares together with a fair rate of interest, if any, as
determined by such court. The "fair value" as determined by the Delaware court
is exclusive of any element of value arising from the accomplishment or
expectation of the Merger. The following is a summary of certain of the
provisions of Section 262 of the DGCL and is qualified in its entirety by
reference to the full text of Section 262, a copy of which is attached hereto as
Appendix C.
Under Section 262, where a merger agreement is to be submitted for approval
and adoption at a meeting of stockholders, as in the case of the Special
Meeting, not less than 20 calendar days prior to the meeting, the Company must
notify each of the holders of Common Stock at the close of business on the
Record Date that such appraisal rights are available and include in each such
notice a copy of Section 262. This Proxy Statement constitutes such notice. Any
stockholder wishing to exercise appraisal rights should review the following
discussion and Appendix C carefully because failure to timely and properly
comply with the procedures specified in Section 262 will result in the loss of
appraisal rights under the DGCL.
A holder of shares of Common Stock wishing to exercise appraisal rights
must deliver to the Company, before the vote on the approval and adoption of the
Merger Agreement at the Special Meeting, a written demand for appraisal of such
holder's shares of Common Stock. Such demand will be sufficient if it reasonably
informs the Company of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares. A proxy or vote against
the Merger Agreement will not constitute such a demand. In addition, a holder of
shares of Common Stock wishing to exercise appraisal rights must hold of record
such shares on the date the written demand for appraisal is made and must
continue to hold such shares through the Effective Time.
Only a holder of record of shares of Common Stock is entitled to assert
appraisal rights for the shares of Common Stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder of
record fully and correctly, as the holder's name appears on the stock
certificates. Holders of Common Stock who hold their shares in brokerage
accounts or other nominee forms and wish to exercise appraisal rights should
consult with their brokers to determine the appropriate procedures for the
making of a demand for appraisal by such nominee. All written demands for
appraisal of Common Stock should be sent or delivered to Sandra L. Lambert,
Secretary, Thermo Voltek Corp., c/o Thermo Electron Corporation, 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454, so as to be received before
the vote on the approval and adoption of the Merger Agreement at the Special
Meeting.
If the shares of Common Stock are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of the demand should be
made in that capacity, and if the shares of Common Stock are owned of record by
more than one person, as in a joint tenancy or tenancy in common, the demand
should be executed by or on behalf of all joint owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on behalf
of a holder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the agent
is agent for such owner or owners. A record holder such as a broker holding
Common Stock as nominee for several beneficial owners may exercise appraisal
rights with respect to the Common Stock held for one or more beneficial owners
while not exercising such rights with respect to the Common Stock held for other
beneficial owners; in such case, the written demand should set forth the number
of shares as to which appraisal is sought and where no number of shares is
expressly mentioned the demand will be presumed to cover all Common Stock held
in the name of the record owner.
Within 10 calendar days after the Effective Time, the Company, as the
Surviving Corporation in the Merger, must send a notice as to the effectiveness
of the Merger to each person who has satisfied the appropriate provisions of
Section 262 and who has not voted in favor of the Merger Agreement. Within 120
calendar days after the Effective Time, the Company, or any stockholder entitled
to appraisal rights under Section 262 and who has complied with the foregoing
procedures, may file a petition in the Delaware Court of
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<PAGE> 41
Chancery demanding a determination of the fair value of the shares of all such
stockholders. The Company is not under any obligation, and has no present
intention, to file a petition with respect to the appraisal of the fair value of
the shares of Common Stock. Accordingly, it is the obligation of the
stockholders to initiate all necessary action to perfect their appraisal rights
within the time prescribed in Section 262.
Within 120 calendar days after the Effective Time, any stockholder of
record who has complied with the requirements for exercise of appraisal rights
will be entitled, upon written request, to receive from the Company a statement
setting forth the aggregate number of shares of Common Stock with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such statement must be mailed within 10 calendar days
after a written request therefor has been received by the Company.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights and will appraise the "fair value" of the shares of
Common Stock, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. Holders considering
seeking appraisal should be aware that the fair value of their shares of Common
Stock as determined under Section 262 could be more than, the same as or less
than the amount per share that they would otherwise receive if they did not seek
appraisal of their shares of Common Stock. The Delaware Supreme Court has stated
that "proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in the appraisal proceedings. In addition, Delaware courts have
decided that the statutory appraisal remedy, depending on factual circumstances,
may or may not be a dissenter's exclusive remedy. The Court will also determine
the amount of interest, if any, to be paid upon the amounts to be received by
persons whose shares of Common Stock have been appraised. The costs of the
action may be determined by the Court and taxed upon the parties as the Court
deems equitable. The Court may also order that all or a portion of the expenses
incurred by any holder of shares of Common Stock in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts used in the appraisal proceeding, be charged pro
rata against the value of all the shares of Common Stock entitled to appraisal.
The Court may require stockholders who have demanded an appraisal and who
hold Common Stock represented by certificates to submit their certificates of
Common Stock to the Court for notation thereon of the pendency of the appraisal
proceedings. If any stockholder fails to comply with such direction, the Court
may dismiss the proceedings as to such stockholder.
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
of Common Stock subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends or
other distributions payable to holders of record of shares of Common Stock as of
a date prior to the Effective Time).
If any stockholder who demands appraisal of shares under Section 262 fails
to perfect, or effectively withdraws or loses, the right to appraisal, as
provided in the DGCL, the shares of Common Stock of such holder will be
converted into the right to receive the Cash Merger Consideration in accordance
with the Merger Agreement, without interest. A stockholder will fail to perfect,
or effectively lose, the right to appraisal if no petition for appraisal is
filed within 120 calendar days after the Effective Time. A stockholder may
withdraw a demand for appraisal by delivering to the Company a written
withdrawal of the demand for appraisal and acceptance of the Merger, except that
any such attempt to withdraw made more than 60 calendar days after the Effective
Time will require the written approval of the Company. Once a petition for
appraisal has been filed, such appraisal proceeding may not be dismissed as to
any stockholder without the approval of the Court.
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<PAGE> 42
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the Merger. This discussion is based on currently
existing provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences to the holders of Common Stock as described herein. Special tax
consequences not described below may be applicable to particular classes of
taxpayers, including financial institutions, broker-dealers, persons who are not
citizens or residents of the United States or who are foreign corporations,
foreign partnerships or foreign estates or trusts as to the United States and
holders who acquired their stock through the exercise of an employee stock
option or otherwise as compensation.
THIS TAX DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED
UPON PRESENT LAW. EACH HOLDER OF COMMON STOCK SHOULD CONSULT SUCH HOLDER'S OWN
TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER,
INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS
AND THE POSSIBLE EFFECT OF CHANGES IN SUCH TAX LAWS.
The receipt of the Cash Merger Consideration in the Merger by holders of
Common Stock will be a taxable transaction for federal income tax purposes. Each
holder's gain or loss per share will be equal to the difference between $7.00
and the holder's basis per share in the Common Stock. Such gain or loss
generally will be a capital gain or loss provided that the holder held the
Common Stock as a capital asset. Capital gain or loss will be treated as
long-term capital gain or loss if the holder held the Common Stock for more than
one year, and will be treated as short-term capital gain or loss if the holder
held the Common Stock for one year or less.
A holder of Common Stock may be subject to backup withholding at the rate
of 31% with respect to Cash Merger Consideration received pursuant to the
Merger, unless the holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact, or (b) provides a
correct taxpayer identification number ("TIN"), certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. To prevent the possibility of
backup federal income tax withholding, each holder must provide the Payment
Agent with his or her correct TIN by completing a Form W-9 or Substitute Form
W-9. A holder of Common Stock who does not provide Thermedics with his or her
correct TIN may be subject to penalties imposed by the Internal Revenue Service
(the "IRS"), as well as backup withholding. Any amount withheld under these
rules will be creditable against the holder's federal income tax liability.
Thermedics (or its agent) will report to the holders of Common Stock and the IRS
the amount of any "reportable payments," as defined in Section 3406 of the Code,
and the amount of tax, if any, withheld with respect thereto.
Neither the Company nor Thermedics will recognize gain or loss for tax
purposes as a result of the Merger.
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<PAGE> 43
BUSINESS OF THE COMPANY
OVERVIEW
Voltek was originally incorporated in 1960 under the name Universal
Voltronics Corp. Thermedics, a publicly traded subsidiary of Thermo Electron,
acquired a controlling interest in the Company's Common Stock in March 1990. In
November 1992, the Company's name was changed to Thermo Voltek Corp. The Company
designs, manufactures and markets test instruments and a range of products
related to power amplification, conversion and quality. The Company's test
instruments simulate pulsed electromagnetic interference ("pulsed EMI"), radio
frequency interference ("RFI") and changes in AC voltage to allow manufacturers
of electronic systems and integrated circuits to test for electromagnetic
compatibility ("EMC"), to ensure product quality and to meet certain regulatory
requirements. These products are used in the product-development,
design-verification, and quality-assurance stages, enabling customers to
optimize performance, reliability, and safety in the final design, and to meet
industry standards and regulatory requirements, including a European Union
("EU") directive that took effect in January 1996. The Company's power products
include radio frequency ("RF") and microwave power amplifiers, power-conversion
equipment and application-specific power supplies. These power products are used
in communications, broadcast, research and medical imaging applications. In July
1996, the Company acquired Pacific Power Source Corporation, a manufacturer of
power-conversion equipment and programmable power amplifiers. In April 1997, the
Company acquired Milmega Ltd., a manufacturer of microwave amplifiers. In
November 1998, the Company sold its Universal Voltronics division, which
manufactured high-voltage power supply products.
TESTING INSTRUMENTS
The Company's testing instruments fall into two main categories: (i)
equipment to test completed electronic products and (ii) equipment to test
individual electronic components such as integrated circuits.
Product Testing Equipment
The Company's EMC testing systems for electronic products simulate pulsed
EMI -- including RFI, disturbances in electrical power, and natural and man-made
phenomena such as lightning and static electricity -- to allow manufacturers to
check for resistance to these and other forms of potentially troublesome
electronic pollution. These systems perform both immunity and emissions
testing -- to verify that completed electronic products are not only immune to
EMI, but also that they are not emitting EMI. The Company's KeyTek Instrument
division's ECAT(R) system integrates comprehensive pulsed EMI and power-quality
failure simulation and testing with built-in diagnostic capabilities. KeyTek
also offers a range of lower-cost instruments designed to test completed
products for a particular type of pulsed EMI. KeyTek also manufactures the
G-Strip, an RFI immunity tester that analyzes how effectively electronics resist
the effects of radio frequency emitted by other electronic devices.
Component-reliability Testing Equipment
KeyTek also manufactures EMC testing instruments that allow manufacturers
to test electronic components and subassemblies, particularly integrated
circuits and wafer die, for immunity to electrostatic discharge ("ESD") and
electrical overstress ("EOS"). These products expose electronic components and
subassemblies to controlled and repeatable stress levels, thereby determining
their ability to withstand ESD and EOS. These products also simulate the damage
that can occur during normal handling or operating procedures associated with
the manufacturing, testing, and transportation of such components.
POWER PRODUCTS
The Company's power products, described below, have applications in both
EMC and non-EMC areas. These include RF and microwave power amplifiers,
power-conversion equipment and application-specific power supplies.
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Power Amplifiers
Through its Kalmus Engineering and Milmega Ltd. divisions, the Company
manufactures RF and microwave power amplifiers that have applications in EMC
testing and other areas. When used in EMC test applications, the RF power
amplifiers manufactured by Kalmus test products for immunity to conducted and
radiated RFI. They are also suitable for a variety of laboratory and research
applications where precise control over power level and frequency are required;
in medical imaging applications; and in wireless communications applications,
broadcasting, and mobile data communications. Milmega, acquired in April 1997,
designs and manufactures microwave power amplifiers. Microwave power amplifiers
have frequencies of one gigaHertz and above and RF power amplifiers have
frequencies of one gigaHertz and lower. Milmega's products are suitable for EMC
test and other areas, including research, communications, medical, and military
applications.
Power-conversion Equipment
The Company's Pacific Power Source Corporation division manufactures
power-conversion equipment that can be incorporated into EMC test equipment to
assess how well electronics tolerate normal variations in the quality and
quantity of AC voltage. The power-conversion equipment is also used in other
kinds of testing equipment and in application-specific power supplies. In
October 1997, the Company established a new division, Global Power Systems, to
market specialized power products, particularly for use in marine applications.
Its initial product line is a family of dock-to-yacht power systems that convert
power from an onshore source anywhere in the world to the voltage, phase, and
frequency required by luxury yachts.
SALES AND MARKETING
The Company markets its products to customers in diverse industries
throughout North America, Europe, Southeast Asia and South America primarily
through distributors and manufacturers' representatives. Domestic sales channels
are through manufacturers' representatives and most international sales channels
are through distributors. See Note 11 to the Company's Consolidated Financial
Statements included elsewhere within this Proxy Statement for financial
information relating to foreign and domestic operations and export sales.
SALE OF UNIVERSAL VOLTRONICS DIVISION
On November 5, 1998, the Company completed the sale of substantially all of
the assets of its Universal Voltronics division, located in Mount Kisco, New
York, excluding the real property, to Universal Voltronics Corp., a subsidiary
of Pine Brook Capital, Inc. for $2.5 million in cash and the assumption of
certain liabilities. The purchase price is subject to a post-closing adjustment
based on the net assets of the division as of the closing date. The Universal
Voltronics division designed and manufactured high-voltage power supplies,
modulators, and related high-voltage equipment for industrial, medical, and
security processes, and defense and scientific research applications. These
systems transform utility-supplied AC power into the DC voltages and currents
required by the user and allow precise control over the performance level
desired for each application. The Universal Voltronics division had unaudited
revenues of $4.4 million and operating income of $0.7 million in the first nine
months of 1998, and in 1997 had revenues of $3.9 million and an operating loss
of $31,000.
PROPERTIES
The Company leases approximately 110,000 square feet of office,
engineering, laboratory, and production space under leases expiring at various
dates until 2010, principally in Massachusetts, Washington, California, The
Netherlands, the United Kingdom and Italy. Approximately 45,000 square feet of
office, engineering, laboratory and production space that the Company owns in
Mount Kisco, New York is currently under agreement to be sold. The Company
believes that its facilities are in good condition and are suitable and adequate
for its present operations, and that suitable space is readily available if any
of its leases are not extended.
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<PAGE> 45
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998
-----------------------------
FIRST SECOND THIRD
------- ------- -------
<S> <C> <C> <C> <C>
Revenues............................................ $11,440 $10,725 $ 8,671
Gross Profit........................................ 5,222 4,823 3,434
Net Income (Loss)................................... 511 492 (399)
Earnings (Loss) per Share:
Basic............................................. .06 .06 (.05)
Diluted........................................... .05 .05 (.05)
</TABLE>
<TABLE>
<CAPTION>
1997
------------------------------------------
FIRST SECOND(1) THIRD FOURTH
------- --------- ------- -------
<S> <C> <C> <C> <C>
Revenues............................................ $ 9,716 $11,888 $11,132 $11,912
Gross Profit........................................ 4,265 5,446 4,983 5,094
Net Income (Loss)................................... (333) 160 427 25
Basic and Diluted Earnings (Loss) per Share......... (.03) .02 .05 --
</TABLE>
<TABLE>
<CAPTION>
1996
-----------------------------------------
FIRST SECOND THIRD(2) FOURTH
------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenues............................................ $10,621 $11,882 $12,800 $13,204
Gross Profit........................................ 5,231 5,729 6,330 6,860
Net Income.......................................... 937 1,132 1,194 1,206
Earnings per Share:
Basic............................................. .12 .13 .13 .13
Diluted........................................... .09 .10 .10 .10
</TABLE>
- ---------------
(1) Reflects the April 1997 acquisition of Milmega Ltd.
(2) Reflects the July 1996 acquisition of Pacific Power Source Corporation.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Company for the periods indicated. For purposes of computing the
ratios of earnings to fixed charges, "earnings" represent income from continuing
operations before taxes, plus fixed charges. "Fixed charges" for continuing
operations consist of interest on indebtedness and amortization of debt expense
and one-third of rental expense, which is deemed to be the interest component of
such rental expense.
<TABLE>
<CAPTION>
FISCAL YEAR(1) NINE MONTHS ENDED
------------------------------------ -----------------
1993 1994 1995 1996 1997 OCTOBER 3, 1998
---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.... 1.84 1.63 2.49 4.77 1.34 1.92
</TABLE>
- ---------------
(1) The Company's fiscal years ended on January 1, 1994, December 31, 1994,
December 30, 1995, December 28, 1996 and January 3, 1998.
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<PAGE> 46
SELECTED FINANCIAL INFORMATION
The selected financial information included below for the Company as of and
for the fiscal years ended January 3, 1998, and December 28, 1996, and for the
fiscal year ended 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 Proxy Statement. The selected financial information as of
December 30, 1995, and as of and for the fiscal years ended December 31, 1994,
and January 1, 1994, has been derived from the Company's Consolidated Financial
Statements, which have been audited by Arthur Andersen LLP, but have not been
included in this Proxy Statement. The selected financial information as of and
for the nine months ended October 3, 1998, and September 27, 1997, has not been
audited but, in the opinion of the Company, includes all adjustments (consisting
only of normal, recurring adjustments) necessary to present fairly such
information in accordance with generally accepted accounting principles applied
on a consistent basis. The results of operations for the nine months ended
October 3, 1998, are not necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------- FISCAL YEAR
OCTOBER 3, SEPTEMBER 27, -----------------------------------------------
1998 1997 1997(1) 1996(2) 1995(3) 1994(4) 1993
---------- ------------- ------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Revenues............................... $30,836 $32,736 $44,648 $48,507 $36,326 $23,641 $18,089
------- ------- ------- ------- ------- ------- -------
Costs and Operating Expenses:
Cost of revenues..................... 17,357 18,042 24,860 24,357 18,790 12,120 9,687
Selling, general, and administrative 10,284 11,850 15,992 14,889 11,766 8,027 6,008
expenses...........................
Research and development expenses.... 2,092 2,712 3,620 3,618 2,349 1,492 1,240
------- ------- ------- ------- ------- ------- -------
29,733 32,604 44,472 42,864 32,905 21,639 16,935
------- ------- ------- ------- ------- ------- -------
Operating Income....................... 1,103 132 176 5,643 3,421 2,002 1,154
Interest Income........................ 705 967 1,247 1,774 2,073 1,697 179
Interest Expense....................... (870) (869) (1,162) (1,408) (2,130) (2,216) (807)
Gain on Sale of Related-party -- 180 180 -- -- -- --
Investments..........................
Other Income........................... 69 -- 53 -- -- -- 225
------- ------- ------- ------- ------- ------- -------
Income Before Income Tax Provision..... 1,007 410 494 6,009 3,364 1,483 751
Income Tax Provision................... 403 156 215 1,540 692 365 271
------- ------- ------- ------- ------- ------- -------
Net Income............................. $ 604 $ 254 $ 279 $ 4,469 $ 2,672 $ 1,118 $ 480
======= ======= ======= ======= ======= ======= =======
Earnings per Share:
Basic................................ $ .07 $ .03 $ .03 $ .51 $ .41 $ .19 $ .08
======= ======= ======= ======= ======= ======= =======
Diluted.............................. $ .07 $ .03 $ .03 $ .38 $ .28 $ .17 $ .08
======= ======= ======= ======= ======= ======= =======
Weighted Average Shares:
Basic................................ 8,707 9,297 9,182 8,827 6,528 5,995 5,896
======= ======= ======= ======= ======= ======= =======
Diluted.............................. 8,772 9,436 9,305 13,628 13,512 7,995 6,014
======= ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA (at end of period)
Working Capital...................... $28,019 $30,384 $29,863 $40,915 $41,826 $41,990 $42,023
Total Assets......................... 60,245 64,802 63,296 73,689 68,845 62,224 57,471
Long-term Obligations................ 15,250 18,450 17,750 19,345 36,740 46,000 46,000
Shareholders' Investment............. 34,454 34,265 34,392 42,445 20,959 8,472 7,097
OTHER DATA
Book Value per Share................. 3.97 3.88 3.89 4.35 4.30 2.10 1.80
Cash Dividends....................... -- -- -- -- -- -- --
</TABLE>
- ---------------
(1) Reflects the April 1997 acquisition of Milmega Ltd.
(2) Reflects the July 1996 acquisition of Pacific Power Source Corporation.
(3) Reflects the March 1995 acquisition of Kalmus Engineering Incorporated.
(4) Reflects the July 1994 acquisition of Verifier Systems Limited.
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<PAGE> 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company designs, manufactures, and markets test instruments and a range
of products related to power amplification, conversion, and quality. The
Company's test instruments help manufacturers of electronic systems and
integrated circuits ensure product quality and meet certain regulatory
requirements. The Company's power products are used in communications,
broadcast, research, and medical imaging applications, as well as in EMC testing
applications.
The Company's KeyTek Instrument division manufactures instruments that test
for immunity to pulsed EMI and systems used in reliability testing and
characterization of electronic devices. The Company's Kalmus division
manufactures RF power amplifiers and systems used to test products for immunity
to conducted and radiated RFI and in communications, medical, and research
applications. The Company's Pacific Power Source division manufactures
power-conversion equipment for use in a variety of commercial applications and
programmable power amplifiers that can be incorporated into EMC test equipment
to assess how well electronics tolerate normal variations in the quality and
quantity of AC voltage. The Company's Comtest subsidiary distributes EMC testing
products for pulsed EMI and RFI immunity and emissions testing. Acquired in
April 1997, Milmega Ltd. primarily manufactures and markets microwave amplifiers
that are suitable for EMC testing; physics research; and communications,
medical, and military applications. In October 1997, the Company established its
Global Power Systems division to market specialized power products, particularly
for use in boating and marine applications.
During 1997, the Company experienced lower demand for its EMC test
products. Due in part to these developments, during 1997, the Company
implemented certain operational, organizational, and personnel changes. Among
these actions were termination of a centralized sales and marketing function,
commencing a termination of manufacturing operations within the United Kingdom
with a transfer of this activity to the United States, and commencing a
phase-out of certain European distribution operations. In addition, a new
divisional president was appointed at an operating company and overall staffing
levels were reduced. During 1998, the Company has continued making changes of
this nature in several of its business units. These changes have included
replacement of managers at certain businesses, completion of the termination
activities commenced in 1997, closure of a European headquarters and continued
staffing decreases. During 1997 and 1998, headcount was reduced by approximately
150 employees to 200.
Approximately 60% and 49% of the Company's revenues for 1997 and the first
nine months of 1998, respectively, were derived from sales of products outside
the U.S., including certain Asian countries, through export sales and sales by
the Company's European operations. Asia is experiencing a severe economic crisis
characterized by sharply reduced economic activity and liquidity, highly
volatile foreign-currency-exchange and interest rates, and unstable stock
markets. The Company's export sales to Asia and to customers that do business in
Asia have been affected by the unstable economic conditions there. Although the
Company seeks to charge its international customers in the same currency as its
operating costs, the Company's financial performance and competitive position
can be affected by currency exchange rate fluctuations.
RESULTS OF OPERATIONS
First Nine Months 1998 Compared With First Nine Months 1997
Revenues decreased to $30.8 million in the first nine months of 1998 from
$32.7 million in the first nine months of 1997. Revenues decreased $4.2 million
due to lower demand for certain lower-margin products in Europe and $1.2 million
as a result of lower sales of high-margin ESD-test equipment for the
semiconductor industry due in part to unstable economic conditions in Asia, as
discussed above. To a lesser extent, revenues decreased due to lower demand for
power supply products. These decreases were offset in part by revenues from the
Company's new EMC-test product, introduced in the third quarter of 1997, an
increase in sales at Universal Voltronics, related to certain new OEM
arrangements and an increase in revenues of $0.9 million due to the inclusion of
Milmega, acquired in 1997, for the full period in 1998. In November 1998, the
47
<PAGE> 48
Company sold the business of Universal Voltronics. Universal Voltronics had
unaudited revenues and operating income of $4.4 million and $0.7 million,
respectively, in the first nine months of 1998, and in 1997 had revenues and an
operating loss of $3.9 million and $31,000, respectively. (See Note 14 to the
Company's Consolidated Financial Statements included elsewhere within this Proxy
Statement.)
The gross profit margin decreased to 44% in the first nine months of 1998
from 45% in the first nine months of 1997, primarily due to a decrease in sales
of high-margin ESD-test equipment, offset in part by the favorable effect of a
reduction in the sale of certain lower-margin products and the inclusion of
higher-margin revenues from the Company's new EMC-test product.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 33% in the first nine months of 1998 from 36% in the first nine
months of 1997, primarily due to efficiencies gained from operational,
organizational, and personnel changes implemented in 1997, offset in part by the
costs of certain ongoing operational changes in 1998. The Company expects to
incur approximately $0.2 million of expenses in the fourth quarter of 1998 in
connection with plans to exit certain operations in Europe. Research and
development expenses decreased to $2.1 million in 1998 from $2.7 million in
1997, primarily due to the completed development of certain new products in the
third and fourth quarters of 1997, as well as the impact of cost-reduction
efforts, offset in part by costs associated with the development of a new
product by the Company's Global Power Systems division.
Interest income decreased to $0.7 million in the first nine months of 1998
from $1.0 million in the first nine months of 1997, primarily due to lower
average invested balances. Interest expense was $0.9 million in both periods.
The effective tax rates were 40% and 38% in the first nine months of 1998
and 1997, respectively. The effective tax rates exceeded the statutory federal
income tax rate primarily due to the impact of nondeductible expenses and state
income taxes. The effective tax rate increased in 1998 due to a shift in the
relative levels of income in the various jurisdictions in which the Company
operates.
1997 Compared With 1996
Revenues decreased to $44.6 million in 1997 from $48.5 million in 1996. The
decrease was primarily due to lower demand for the Company's EMC-test products,
resulting from the declining influence of IEC 801, the European Union directive
on electromagnetic compatibility that took effect January 1, 1996, and, to a
lesser extent, a decline in the component-reliability market for ESD-test
equipment that resulted from a slowdown in capital expenditures by the
semiconductor industry. These decreases in revenues were offset in part by an
increase in revenues of $5.8 million due to the acquisitions of Pacific Power in
July 1996 and Milmega in April 1997.
The gross profit margin decreased to 44% in 1997 from 50% in 1996,
primarily due to a decrease in the sale of certain higher-margin EMC-test
products, as well as the effect of the Company's decrease in total revenues.
Selling, general, and administrative expenses as a percentage of revenues
increased to 36% in 1997 from 31% in 1996, primarily due to the effect of the
Company's decrease in revenues, offset in part by the effect of the acquisitions
of Pacific Power and Milmega, which have lower costs as a percentage of
revenues. In addition, during the second quarter of 1997, the Company incurred
$0.4 million of severance and related costs associated with reductions in
personnel, as part of a continuing evaluation of its lines of business. Research
and development expenses were $3.6 million in both periods, primarily due to an
increase of $0.4 million related to the acquisitions of Pacific Power and
Milmega, offset by the completed development of certain new products in the
third and fourth quarters of 1996.
Interest income decreased to $1.2 million in 1997 from $1.8 million in
1996, primarily due to lower average invested balances. Interest expense
decreased to $1.2 million in 1997 from $1.4 million in 1996, primarily due to
conversions of the Company's subordinated convertible obligations.
48
<PAGE> 49
The effective tax rates were 44% and 26% in 1997 and 1996, respectively.
The effective tax rate exceeded the statutory federal income tax rate in 1997,
primarily due to the impact of nondeductible expenses and state income taxes.
The effective tax rate was below the statutory federal income tax rate in 1996,
primarily due to the elimination of the tax valuation allowance that was no
longer required (see Note 6 to the Company's Consolidated Financial Statements
included elsewhere in this Proxy Statement), offset in part by the impact of
state income taxes.
1996 Compared With 1995
Revenues increased 34% to $48.5 million in 1996 from $36.3 million in 1995,
due to an increase in revenues at Comtest, the inclusion of $3.0 million in
revenues from the July 1996 acquisition of Pacific Power, and increased revenues
at KeyTek and Kalmus. Revenues at Comtest increased primarily due to an increase
in demand for ESD-test equipment manufactured by its Verifier division, as well
as an increase in revenues from a product line for testing immunity to RFI that
was introduced in 1995. Increased revenues at KeyTek primarily resulted from
greater demand for its EMC-test equipment. Revenues at Kalmus, acquired in March
1995, increased $1.1 million due to the inclusion of revenues for the full year
in 1996 and $1.3 million primarily due to increased shipments resulting from the
implementation of manufacturing efficiencies.
The gross profit margin increased to 50% in 1996 from 48% in 1995,
primarily due to an increase in higher-margin domestic sales at KeyTek and an
increase in the gross profit margin at Kalmus, primarily due to implementation
of manufacturing efficiencies.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 31% in 1996 from 32% in 1995, primarily due to an increase in
revenues. Research and development expenses increased to $3.6 million in 1996
from $2.3 million in 1995, principally due to higher research and development
expenses at Comtest and KeyTek.
Interest income decreased to $1.8 million in 1996 from $2.1 million in
1995, primarily due to lower average invested balances. Interest expense
decreased to $1.4 million in 1996 from $2.1 million in 1995, primarily due to
conversions of the Company's subordinated convertible obligations during 1995
and 1996.
The effective tax rate was 26% in 1996 and 21% in 1995. The effective tax
rates were below the statutory federal income tax rate primarily due to the
elimination of the tax valuation allowance that was no longer required (see Note
6 to the Company's Consolidated Financial Statements included elsewhere in this
Proxy Statement), offset in part by the impact of state income taxes. The
effective tax rate increased in 1996 primarily due to a decrease in tax net
operating loss carryforwards as a percentage of income before provision for
income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $28.0 million at October 3, 1998, compared
with $29.9 million at January 3, 1998. Included in working capital are cash,
cash equivalents, and available-for-sale investments of $15.4 million at October
3, 1998, compared with $17.6 million at January 3, 1998. During the first nine
months of 1998, $0.6 million of cash was provided by operating activities. Cash
of $1.7 million was provided by a decrease in accounts receivable, primarily due
to the decrease in revenues. Cash of $2.1 million was used to reduce accounts
payable and other current liabilities, primarily as a result of decreased
business activity, while cash of $1.3 million was used to fund an increase in
inventories, primarily due to an increase in unbilled contract costs and fees
earned under certain government contracts.
Excluding available-for-sale investment activity, the Company's investing
activities in the first nine months of 1998 consisted primarily of $0.9 million
of expenditures for purchases of property, plant, and equipment. The Company
expects to make capital expenditures of approximately $0.4 million during the
remainder of 1998.
The Company's financing activities used $2.1 million of cash during the
first nine months of 1998. In April and December 1997, the Company's Board of
Directors authorized the repurchase by the Company, through various dates ending
December 16, 1998, of up to $15.0 million of its own securities, to be funded
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<PAGE> 50
from working capital. During the first nine months of 1998, the Company expended
$3.4 million under these authorizations. The Company does not currently intend
to repurchase any additional securities under these authorizations.
During 1997, $2.1 million of cash was provided by operating activities.
Cash of $1.6 million provided by a decrease in accounts receivable as a result
of the Company's decrease in revenues was offset by cash of $1.4 million used to
reduce other current liabilities.
Excluding available-for-sale investment activity, the Company's investing
activities in 1997 consisted primarily of the acquisition of Milmega for $2.8
million, net of cash acquired (see Note 3 to the Company's Consolidated
Financial Statements included elsewhere in this Proxy Statement), and $0.9
million of expenditures for purchases of property, plant, and equipment.
The Company's financing activities used $8.5 million of cash during 1997.
During 1997, the Company expended $9.7 million under authorizations to purchase
its own securities.
The Company expects to have positive cash flow from its existing
operations. Although the Company does not presently intend to actively seek to
acquire additional businesses in the near future, it may acquire one or more
complementary businesses if they are presented to the Company on terms the
Company believes to be attractive. Such acquisitions may require significant
amounts of cash. The Company expects that it will finance any such acquisitions
through a combination of internal funds and/or short-term borrowings from Thermo
Electron or Thermedics although there is no agreement with these companies to
ensure that funds will be available on acceptable terms or at all. The Company
believes that its existing resources are sufficient to meet the capital
requirements of its existing operations for at least the next 24 months.
YEAR 2000
The Company continues to assess the potential impact of the year 2000 on
the Company's internal business systems, products, and operations. The Company's
year 2000 initiatives include (i) testing and upgrading internal business
systems and facilities; (ii) testing and developing necessary upgrades for the
Company's current products and certain discontinued products; (iii) contacting
key suppliers, vendors, and customers to determine their year 2000 compliance
status; and (iv) developing contingency plans.
The Company's State of Readiness
The Company has tested and evaluated its critical information technology
systems for year 2000 compliance, including its significant computer systems,
software applications, and related equipment. The Company is currently in the
process of upgrading or replacing its noncompliant systems. The Company expects
that all of its material information-technology systems will be year 2000
compliant by the end of 1999. The Company is also evaluating the potential year
2000 impact on its facilities, including its buildings and utility systems. Any
problems that are identified will be prioritized and remediated based on their
assigned priority. The Company will continue periodic testing of its critical
internal business systems and facilities in an effort to minimize operating
disruptions due to year 2000 issues.
The Company believes that all of the material products that it currently
manufactures and sells are year 2000 compliant. However, as many of the
Company's products are complex, interact with third-party products, and operate
on computer systems that are not under the Company's control, there can be no
assurance that the Company has identified all of the year 2000 problems with its
current products. The Company believes that certain of its older products, which
it no longer manufactures or sells, may not be year 2000 compliant. The Company
is continuing to test and evaluate such products and may offer upgrades or
alternative products where reasonably practicable.
The Company is in the process of identifying and contacting suppliers,
vendors, and customers that are believed to be significant to the Company's
business operations in order to assess their year 2000 readiness. As part of
this effort, the Company is developing questionnaires relating to year 2000
compliance and intends to distribute them to its significant suppliers, vendors,
and customers. The Company intends to follow-up and
50
<PAGE> 51
monitor the year 2000 compliant progress of significant suppliers, vendors, and
customers that indicate that they are not year 2000 compliant or that do not
respond to the Company's questionnaires.
Contingency Plans
The Company intends to develop a contingency plan that will allow its
primary business operations to continue despite disruptions due to year 2000
problems. These plans may include identifying and securing other suppliers,
increasing inventories, and modifying production facilities and schedules. As
the Company continues to evaluate the year 2000 readiness of its business
systems and facilities, products and significant suppliers, vendors and
customers, it will modify and adjust its contingency plan as may be required.
Estimated Costs to Address the Company's Year 2000 Issues
As of October 3, 1998, costs incurred by the Company in connection with the
year 2000 issue have not been material. The total cost of year 2000 remediation
is not expected to exceed $100,000, but there can be no assurance that the
Company will not encounter unexpected costs or delays in achieving year 2000
compliance.
Risks of the Company's Year 2000 Issues
While the Company is attempting to minimize any negative consequences
arising from the year 2000 issue, there can be no assurance that year 2000
problems will not have a material adverse impact on the Company's business,
operations, or financial condition. While the Company expects that upgrades to
its internal business systems will be completed in a timely fashion, there can
be no assurance that the Company will not encounter unexpected costs or delays.
Despite its efforts to ensure that its material current products are year 2000
compliant, the Company may see an increase in warranty and other claims,
especially those related to Company products that incorporate, or operate using,
third-party software or hardware. In addition, certain of the Company's older
products, which it no longer manufactures or sells, may not be year 2000
compliant, which may expose the Company to claims. If any of the Company's
material suppliers, vendors, or customers experience business disruptions due to
year 2000 issues, the Company might also be materially adversely affected. The
Company's research and development, production, distribution, financial,
administrative, and communications operations might be disrupted. There is
expected to be a significant amount of litigation relating to the year 2000
issue and there can be no assurance that the Company will not incur material
costs in defending or bringing lawsuits. Any unexpected costs or delays arising
from the year 2000 issue could have a significant adverse impact on the
Company's business, operations, and financial condition.
CERTAIN PROJECTED FINANCIAL DATA
The Company does not, as a matter of course, make public forecasts or
projections as to future sales, earnings or other income statement data, cash
flows or balance sheet and financial position information. However, in order to
aid the evaluation of the Company by the Special Committee and HSBC and HSBC's
assessment of the fairness, from a financial point of view, of the consideration
of $7.00 per share in cash payable pursuant to the Merger Agreement, the
Company, in August 1998 and November 1998 furnished the Special Committee and
HSBC with certain projections (the "August Projections" and the "November
Projections," respectively, and collectively the "Projections") prepared by the
Company's management. The following summary of the Projections is included in
this Proxy Statement solely because the Projections were made available to such
parties. The Projections do not reflect any of the effects of the Merger or
other changes that may in the future be deemed appropriate concerning the
Company and its assets, business, operations, properties, policies, corporate
structure, capitalization and management in light of the circumstances then
existing. Except to the extent the November Projections update the August
Projections, the Company has not updated the Projections to reflect changes that
have occurred since their preparation; however, the Company believes that as of
the date of this Proxy Statement, such assumptions are currently reasonable
given the information known by management as of such date.
The Projections were not prepared with a view toward public disclosure or
compliance with published guidelines of the SEC or the American Institute of
Certified Public Accountants regarding forward-looking
51
<PAGE> 52
information or generally accepted accounting principles. Neither the Company's
independent auditors, nor any other independent accountants, have compiled,
examined or performed any procedures with respect to the prospective financial
information contained in the Projections, nor have they expressed any opinion or
given any form of assurance on such information or its achievability, and assume
no responsibility for, and disclaim any association with, such prospective
financial information. Furthermore, the Projections necessarily make numerous
assumptions, some (but not all) of which are set forth below and many of which
are beyond the control of the Company and may prove not to have been, or may no
longer be, accurate; however, the Company believes that as of the date of this
Proxy Statement, such assumptions are currently reasonable given the information
known by management as of such date. Additionally, this information, except as
otherwise indicated, does not reflect revised prospects for the Company's
businesses, changes in general business and economic conditions, or any other
transaction or event that has occurred or that may occur and that was not
anticipated at the time such information was prepared. Accordingly, such
information is not necessarily indicative of current values or future
performance, which may be significantly more favorable or less favorable than as
set forth below, and should not be regarded as a representation that they will
be achieved.
THE PROJECTIONS ARE NOT GUARANTEES OF PERFORMANCE. THEY INVOLVE RISKS,
UNCERTAINTIES AND ASSUMPTIONS. THE FUTURE RESULTS AND STOCKHOLDER VALUE OF THE
COMPANY MAY MATERIALLY DIFFER FROM THOSE EXPRESSED IN THE PROJECTIONS. MANY OF
THE FACTORS THAT WILL DETERMINE THESE RESULTS AND VALUES ARE BEYOND THE
COMPANY'S ABILITY TO CONTROL OR PREDICT. STOCKHOLDERS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON THE PROJECTIONS. THERE CAN BE NO ASSURANCE THAT THE
PROJECTIONS WILL BE REALIZED OR THAT THE COMPANY'S FUTURE FINANCIAL RESULTS WILL
NOT MATERIALLY VARY FROM THE PROJECTIONS. THE COMPANY DOES NOT INTEND TO UPDATE
OR REVISE THE PROJECTIONS.
The Projections included herein have been prepared by the Company based
upon management's estimates of the total market for its EMC and non-EMC products
and the Company's own performance through 2003, as well as cost reductions
(reflected in Selling, General and Administrative Expenses) related to the
elimination of the Company's central sales and marketing group, closure of
certain European facilities and other estimated expense reduction. The projected
results for fiscal 1998 set forth in the August Projections were based upon
actual results through June 1998 and management forecasts for the remainder of
the year. The projected results for fiscal 1998 set forth in the November
Projections were based upon actual results through September 1998 and management
forecasts for the remainder of the year. The historical and projected data
contained in the August Projections and the November Projections have been
prepared on a pro forma basis assuming the disposition of the Universal
Voltronics division had occurred prior to the earliest periods presented in the
respective Projections.
52
<PAGE> 53
AUGUST PROJECTIONS
<TABLE>
<CAPTION>
Q4 Q1 Q2 Q3 Q4 TOTAL
1997 1998 1998 1998(P) 1998(P) 1998(P) 1999(P) 2000(P)
------ ------ ----- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES............................... 10,786 10,165 9,260 8,616 9,395 37,436 38,170 42,000
COSTS AND OPERATING EXPENSES:
Cost of Revenues....................... 6,058 5,342 4,944 4,859 5,153 20,298 19,183 20,740
Selling, General and Administrative
Expenses............................. 3,948 3,652 3,292 3,195 3,135 13,274 12,297 13,601
Expenses for Research and
Development.......................... 825 469 359 625 628 2,081 2,524 2,520
------ ------ ----- ----- ----- ------ ------ ------
10,831 9,463 8,595 8,679 8,916 35,653 34,004 36,861
------ ------ ----- ----- ----- ------ ------ ------
Operating Income (Loss)................ (45) 702 665 (63) 479 1,783 4,166 5,139
Interest Income........................ 317 285 269 256 256 1,066 1,024 1,024
Interest Expense....................... (294) (287) (298) (264) (264) (1,113) (1,056) (1,044)
Other Income........................... 53 69 0 0 0 69 0 0
------ ------ ----- ----- ----- ------ ------ ------
Income (Loss) before Provision for
Income Taxes......................... 31 769 636 (71) 471 1,805 4,134 5,119
Income Tax (Provision) Benefit......... (20) (308) (255) 28 (188) (722) (1,654) (2,048)
------ ------ ----- ----- ----- ------ ------ ------
Net Income (Loss)...................... 11 461 381 (43) 283 1,083 2,480 3,071
====== ====== ===== ===== ===== ====== ====== ======
<CAPTION>
2001(P) 2002(P) 2003(P)
------- ------- -------
<S> <C> <C> <C>
REVENUES............................... 44,550 48,400 53,250
COSTS AND OPERATING EXPENSES:
Cost of Revenues....................... 20,715 21,900 23,690
Selling, General and Administrative
Expenses............................. 13,921 14,867 16,141
Expenses for Research and
Development.......................... 2,600 2,805 3,070
------ ------ ------
37,236 39,572 42,901
------ ------ ------
Operating Income (Loss)................ 7,314 8,828 10,349
Interest Income........................ 1,024 1,029 1,034
Interest Expense....................... (823) (820) (413)
Other Income........................... 0 0 0
------ ------ ------
Income (Loss) before Provision for
Income Taxes......................... 7,515 9,037 10,970
Income Tax (Provision) Benefit......... (3,006) (3,615) (4,388)
------ ------ ------
Net Income (Loss)...................... 4,509 5,422 6,582
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Q4 Q1 Q2 Q3 YEAR YEAR YEAR YEAR
1997 1998 1998 1998(P) 1998(P) 1999(P) 2000(P) 2001(P)
------ ------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Accounts Receivable, Net.................. 9,550 9,721 9,558 8,767 8,701 7,675 7,871 8,252
Inventories............................... 9,504 10,017 10,517 10,013 9,508 8,775 8,799 8,880
Prepaid Income Taxes and Other Prepaid
Expenses................................ 1,984 2,032 2,095 1,985 1,971 2,008 2,053 2,053
Total Current Assets Excluding Cash and
Investments............................. 21,038 21,770 22,170 20,765 20,180 18,458 18,723 19,185
Property, Plant & Equipment:
Balance, beginning of period.............. 3,644 3,464 3,217 3,210 3,464 3,003 2,679 2,446
Additions................................. 246 134 432 300 1,146 1,121 1,275 1,275
Depreciation Expense...................... 434 359 343 346 1,409 1,365 1,358 1,203
Sales, Transfers, Other................... 8 (22) (96) (40) (198) (80) (150) (150)
Balance, end of period.................... 3,464 3,217 3,210 3,124 3,003 2,679 2,446 2,368
Cost in Excess of Net Assets of Acquired
Companies............................... 18,056 18,018 17,757 17,622 17,488 16,956 16,424 15,892
Current Liabilities Excluding Notes
Payable................................. 7,112 7,331 6,040 5,614 5,919 5,745 5,725 6,506
<CAPTION>
YEAR YEAR
2002(P) 2003(P)
------- -------
<S> <C> <C>
SELECTED BALANCE SHEET DATA:
Accounts Receivable, Net.................. 8,483 8,915
Inventories............................... 9,032 9,286
Prepaid Income Taxes and Other Prepaid
Expenses................................ 2,053 2,053
Total Current Assets Excluding Cash and
Investments............................. 19,568 20,254
Property, Plant & Equipment:
Balance, beginning of period.............. 2,368 2,270
Additions................................. 1,275 1,275
Depreciation Expense...................... 1,223 1,243
Sales, Transfers, Other................... (150) (150)
Balance, end of period.................... 2,270 2,152
Cost in Excess of Net Assets of Acquired
Companies............................... 15,360 14,828
Current Liabilities Excluding Notes
Payable................................. 6,970 7,660
</TABLE>
NOTE: The historical and projected data contained herein have been prepared on
a pro forma basis assuming the disposition of the Company's Universal
Voltronics division had occurred prior to the earliest period presented.
53
<PAGE> 54
NOVEMBER PROJECTIONS
<TABLE>
<CAPTION>
Q4 Q1 Q2 Q3 Q4 TOTAL
1997 1998 1998 1998 1998(P) 1998(P) 1999(P) 2000(P) 2001(P)
------ ------ ----- ----- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES................................ 10,786 10,165 9,260 7,351 8,942 35,718 35,173 39,220 40,970
COSTS AND OPERATING EXPENSES:
Cost of Revenues........................ 6,058 5,342 4,944 4,444 5,529 20,259 17,711 19,364 19,163
Selling, General and Administrative
Expenses.............................. 3,948 3,652 3,292 3,168 3,112 13,224 11,808 12,051 12,734
Expenses for Research and Development... 825 469 359 625 690 2,143 2,863 2,963 3,169
------ ------ ----- ----- ----- ------ ------ ------ ------
10,831 9,463 8,595 8,237 9,331 35,626 32,382 34,378 35,066
------ ------ ----- ----- ----- ------ ------ ------ ------
Operating Income (Loss)................. (45) 702 665 (886) (389) 92 2,791 4,842 5,904
Interest Income......................... 317 285 269 259 248 1,061 1,009 1,010 1,010
Interest Expense........................ (294) (287) (298) (284) (286) (1,155) (1,074) (1,044) (805)
Other Income............................ 53 69 0 0 0 69 0 0 0
------ ------ ----- ----- ----- ------ ------ ------ ------
Income (Loss) Before Provision for
Income Taxes.......................... 31 769 636 (911) (427) 67 2,726 4,808 6,109
Income Tax (Provision) Benefit.......... (20) (308) (255) 365 171 (27) (1,091) (1,921) (2,444)
------ ------ ----- ----- ----- ------ ------ ------ ------
Net Income (Loss)....................... 11 461 381 (546) (256) 40 1,635 2,887 3,665
====== ====== ===== ===== ===== ====== ====== ====== ======
<CAPTION>
2002(P) 2003(P)
------- -------
<S> <C> <C>
REVENUES................................ 44,680 49,062
COSTS AND OPERATING EXPENSES:
Cost of Revenues........................ 20,445 21,949
Selling, General and Administrative
Expenses.............................. 13,740 14,679
Expenses for Research and Development... 3,409 3,703
------ ------
37,594 40,331
------ ------
Operating Income (Loss)................. 7,086 8,731
Interest Income......................... 1,010 1,010
Interest Expense........................ (785) (350)
Other Income............................ 0 0
------ ------
Income (Loss) Before Provision for
Income Taxes.......................... 7,311 9,391
Income Tax (Provision) Benefit.......... (2,924) (3,757)
------ ------
Net Income (Loss)....................... 4,387 5,634
====== ======
</TABLE>
<TABLE>
<CAPTION>
Q4 Q1 Q2 Q3 YEAR YEAR YEAR YEAR
1997 1998 1998 1998 1998(P) 1999(P) 2000(P) 2001(P)
------ ------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Accounts Receivable, Net.................. 9,550 9,721 9,558 8,004 8,134 7,282 7,403 7,936
Inventories............................... 9,504 10,017 10,517 10,349 10,098 8,655 8,758 8,891
Prepaid Income Taxes and Other Prepaid
Expenses................................ 1,984 2,032 2,095 2,014 2,001 1,972 2,043 2,045
Total Current Assets Excluding Cash and
Investments............................. 21,038 21,770 22,170 20,367 20,233 17,909 18,204 18,872
Property, Plant & Equipment:
Balance, beginning of period.............. 3,644 3,464 3,217 3,210 3,464 2,869 2,548 2,285
Additions................................. 246 134 432 257 1,003 1,019 1,125 1,175
Depreciation Expense...................... 434 359 343 350 1,404 1,300 1,288 1,333
Sales, Transfers, Other................... 8 (22) (96) (36) (194) (40) (100) (100)
Balance, end of period.................... 3,464 3,217 3,210 3,081 2,869 2,548 2,285 2,027
Cost in Excess of Net Assets of Acquired
Companies............................... 18,056 18,018 17,757 17,804 17,531 16,999 16,467 15,935
Current Liabilities Excluding Notes
Payable................................. 7,112 7,331 6,040 5,550 5,720 5,459 5,739 6,243
<CAPTION>
YEAR YEAR
2002(P) 2003(P)
------- -------
<S> <C> <C>
SELECTED BALANCE SHEET DATA:
Accounts Receivable, Net.................. 8,387 8,958
Inventories............................... 9,271 9,685
Prepaid Income Taxes and Other Prepaid
Expenses................................ 2,049 2,054
Total Current Assets Excluding Cash and
Investments............................. 19,707 20,697
Property, Plant & Equipment:
Balance, beginning of period.............. 2,027 1,900
Additions................................. 1,225 1,275
Depreciation Expense...................... 1,252 1,179
Sales, Transfers, Other................... (100) (100)
Balance, end of period.................... 1,900 1,896
Cost in Excess of Net Assets of Acquired
Companies............................... 15,403 14,871
Current Liabilities Excluding Notes
Payable................................. 6,566 7,178
</TABLE>
NOTE: The historical and projected data contained herein have been prepared on
a pro forma basis assuming the disposition of the Company's Universal
Voltronics division had occurred prior to the earliest period presented.
54
<PAGE> 55
FORWARD-LOOKING STATEMENTS
Rapid Technological Change. The market for EMC testing products and
services is characterized by rapid technological change. No assurance can be
given that the Company will be able to develop new and enhanced instruments that
keep pace with technological developments and respond to the increasingly
complex requirements of electronics manufacturers.
Reliance on Electrical Standards. Demand for the Company's EMC testing
products and services is driven to a large extent by mandatory government
standards and voluntary industry standards relating to electromagnetic
compatibility. In particular, demand for many of the Company's products results
from efforts by manufacturers to comply with IEC 801, an EC directive that
became effective on January 1, 1996. As the number of noncomplying manufacturers
is reduced over time, demand for the Company's products could be adversely
affected. In addition, if new EMC standards requiring new testing capabilities
are enacted less frequently or if EMC standards become less strict or are not
strictly enforced, demand for the Company's products could be adversely
affected.
Sole Source Suppliers. A number of the components of the Company's EMC
testing products are supplied by single vendors. Although the Company has not
experienced significant difficulty in obtaining adequate supplies from these
vendors, and believes that it would be able to identify alternative suppliers if
necessary, there can be no assurance that the unanticipated loss of a single
vendor would not result in delays in shipments or in the introduction of new
products.
International Sales. International sales account for a significant portion
of the Company's revenues. Sales to customers in certain foreign countries are
subject to a number of risks, including the following: agreements may be
difficult to enforce, and receivables difficult to collect, through a foreign
country's legal system; foreign customers may have longer payment cycles;
foreign countries could impose withholding taxes or otherwise tax the Company's
foreign income, impose tariffs, embargoes, or exchange controls, or adopt other
restrictions on foreign trade; and export licenses, if required, may be
difficult to obtain. In addition, fluctuations in foreign currency exchange
rates could have an adverse impact on international sales. A portion of the
Company's revenues is derived from exports to the Asia. Certain countries in
Asia are experiencing a severe economic crisis, which has been characterized by
sharply reduced economic activity and liquidity, highly volatile
foreign-currency-exchange and interest rates, and unstable stock markets. The
Company's export sales to Asia could be adversely affected by the unstable
economic conditions there.
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. Promising acquisitions are
difficult to identify and complete for a number of reasons, including
competition among prospective buyers and the need for regulatory approval,
including antitrust approvals. 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 business. 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 that are not favorable to the Company and, in the case
of equity financing, may result in dilution to the Company's stockholders.
Potential Impact of Year 2000 on Processing of Date-Sensitive
Information. The Company is currently assessing the potential impact of the
year 2000 on the processing of date-sensitive information by the Company's
computerized information systems and on products sold as well as products
purchased by the Company. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Year 2000."
55
<PAGE> 56
MANAGEMENT
The current directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John W. Wood Jr...................... 55 Chairman and Chief Executive Officer
Colin I.W. Baxter.................... 66 President and Chief Operating Officer
Theo Melas-Kyriazi................... 39 Chief Financial Officer and Director
Paul F. Kelleher..................... 56 Chief Accounting Officer
Elias P. Gyftopoulos................. 70 Director
William W. Hoover.................... 66 Director
Sandra L. Lambert.................... 43 Director
Peter Richman........................ 70 Director
</TABLE>
All of the Company's directors are elected annually by the stockholders 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.
John W. Wood Jr. has been a director of the Company and chairman of the
board since 1990. Mr. Wood has been the chief executive officer of the Company
since 1992, and was also the president of the Company from 1992 to January 1997.
Mr. Wood has been a senior vice president of Thermo Electron since December
1995, and, prior to that promotion, was a vice president of Thermo Electron from
September 1994. Mr. Wood was president and chief executive officer of Thermedics
from 1984 through March 1998 and, since March 1998, has been the chairman of the
board of Thermedics. Mr. Wood is also a director of Thermedics.
Colin I.W. Baxter has been president and chief operating officer of the
Company since February 1997. Mr. Baxter has been president of the Company's
Kalmus division since May 1995, and from July 1996 to January 1997 was president
of the Company's Pacific Power Source division. Prior to joining the Company,
Mr. Baxter was president and chief executive officer of Dranetz Technologies,
Inc., a designer and manufacturer of electronic instruments for measuring and
monitoring electrical power quality, demand and sequence of events recorders.
Theo Melas-Kyriazi has been a director of the Company since 1990 and has
been chief financial officer of the Company since January 1999. Since March
1998, he has also served as vice president of Thermo Electron and since January
1999 he has served as chief financial officer of Thermedics and Thermo Electron.
Mr. Melas-Kyriazi was treasurer of the Company from January 1991 to September
1994 and was treasurer of Thermo Electron from May 1988 to August 1994. From
August 1994 through March 1998, he served as president and chief executive
officer of ThermoSpectra Corporation, an affiliate of Thermo Electron, which
manufactures precision imaging, inspection, temperature control and test and
measurement instruments. Mr. Melas-Kyriazi is also a director of ThermoRetec
Corporation and the chairman of the board of ThermoSpectra Corporation, both
affiliates of Thermo Electron.
Paul F. Kelleher has been the chief accounting officer of the Company since
1990. He has been senior vice president, finance and administration, of Thermo
Electron since June 1997, and served as its vice president, finance from 1987
until 1997. Mr. Kelleher served as Thermo Electron's controller from 1982 until
January 1996. He is a director of ThermoLase Corporation, an affiliate of Thermo
Electron. Mr. Kelleher also serves as the chief accounting officer of
Thermedics.
Elias P. Gyftopoulos has been a director of the Company since 1994. He is
Professor Emeritus at The Massachusetts Institute of Technology, where he was
the Ford Professor of Mechanical Engineering and of Nuclear Engineering for more
than 20 years until his retirement in 1996. Dr. Gyftopoulos is also a director
of Thermo Electron and the following affiliates of Thermo Electron: Thermo
BioAnalysis Corporation, Thermo Cardiosystems Inc., ThermoLase Corporation,
ThermoRetec Corporation, ThermoSpectra Corporation, Thermo Vision Corporation
and Trex Medical Corporation.
56
<PAGE> 57
William W. Hoover has been a director of the Company since 1986. Mr. Hoover
is a retired U.S. Air Force Major General and former assistant secretary of the
U.S. Department of Energy. Since 1993, Mr. Hoover has been president of Hoover
Associates, a consulting firm. Prior to 1993, Mr. Hoover was executive vice
president of Air Transport Association of America, a position he held for more
than five years.
Sandra L. Lambert has been a director of the Company since 1990. Ms.
Lambert has been secretary of the Company since January 1991 and secretary and
senior counsel of Thermo Electron since July 1990. For more than five years
prior to that time, she was associate general counsel of Thermo Electron. Ms.
Lambert also serves as clerk of Thermedics.
Peter Richman has been a director of the Company since 1993. Mr. Richman
was a consultant to Thermedics and its subsidiaries, including the Company, on
corporate development and acquisition strategies from March 1993 to March 1995.
For more than five years prior to that time, he was president and chief
executive officer of KeyTek Instrument Corp., a manufacturer of EMC testing
equipment that was purchased in 1993 by the Company. Mr. Richman is also a
director of Thermo Sentron Inc., a majority-owned subsidiary of Thermedics.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of January 31, 1999 with respect to the only person
that was known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF OUTSTANDING
OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
- ------------------- ------------------ -------------------------
<S> <C> <C>
Thermo Electron Corporation(1).............. 8,474,496 75.7%
81 Wyman Street
Waltham, MA 02454-9046
</TABLE>
- ---------------
(1) Thermo Electron beneficially owned 75.7% of the Common Stock outstanding as
of January 31, 1999, of which approximately 73.5% is owned through
Thermedics and approximately 2.1% is owned directly. Includes 2,465,088
shares that Thermo Electron, through Thermedics, had the right to acquire
within 60 days of January 31, 1999, through the conversion of certain
convertible notes of the Company held by Thermedics. Thermo Electron,
through Thermedics, has the power to elect all of the members of the
Company's Board of Directors. After the Merger, Thermo Electron will
beneficially own 100% of the outstanding Common Stock.
57
<PAGE> 58
MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermedics and Thermo Electron, as of January 31,
1999, with respect to (i) each director of the Company, (ii) the chief executive
officer of the Company and other executive officers of the Company who, during
the last completed fiscal year of the Company, met the definition of "highly
compensated" within the meaning of the Commission's executive compensation
disclosure rules and (iii) all directors and current executive officers as a
group.
While certain directors and executive officers of the Company are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Company, all such persons disclaim beneficial ownership of the shares
of Common Stock owned by Thermedics or by Thermo Electron, as the case may be.
<TABLE>
<CAPTION>
THERMO THERMO ELECTRON
VOLTEK CORP.(2) THERMEDICS INC.(3) CORPORATION(4)
---------------------- ---------------------- ----------------------
NUMBER OF PERCENTAGE NUMBER PERCENTAGE NUMBER OF PERCENTAGE
NAME(1) SHARES OF CLASS OF SHARES OF CLASS SHARES OF CLASS
- ------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Colin I.W. Baxter..................... 149,207 1.7 20,000 * 63,366 *
Elias P. Gyftopoulos.................. 5,250 * 10,048 * 71,704 *
William W. Hoover..................... 23,892 * 0 * 0 *
Sandra L. Lambert..................... 1,912 * 10,122 * 96,032 *
Theo Melas-Kyriazi.................... 5,581 * 21,263 * 325,895 *
Peter Richman......................... 45,726 * 3,000 * 0 *
John W. Wood Jr....................... 96,971 1.1 177,006 * 299,366 *
All directors and current executive
officers as a group (8 persons)..... 338,539 3.8 261,799 * 1,062,218 *
</TABLE>
- ---------------
* Reflects ownership of less than 1.0% of the outstanding common stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) The shares of Common Stock beneficially owned by Mr. Baxter, Dr.
Gyftopoulos, Mr. Hoover, Mr. Richman, Mr. Wood and all directors and
executive officers as a group include 131,900, 4,250, 7,400, 3,500, 82,350
and 229,400 shares, respectively, that such person or group has the right to
acquire within 60 days of January 31, 1999, through the exercise of stock
options. Shares beneficially owned by Mr. Richman and all directors and
executive officers as a group include 3,576 full shares allocated through
January 31, 1999, to his account maintained under the Company's deferred
compensation plan for directors. Except for Mr. Wood and Mr. Baxter, who
beneficially owned 1.1% and 1.7%, respectively, of the Company's Common
Stock outstanding as of January 31, 1999, no director or executive officer
beneficially owned more than 1.0% of the Common Stock outstanding as of
January 31, 1999; all directors and current executive officers as a group
beneficially owned 3.8% of the Common Stock outstanding as of such date.
(3) Shares of the common stock of Thermedics beneficially owned by Mr. Baxter,
Dr. Gyftopoulos, Ms. Lambert, Mr. Melas-Kyriazi, Mr. Richman, Mr. Wood and
all directors and executive officers as a group include 20,000, 4,500,
8,000, 20,000, 3,000, 119,300 and 193,800 shares, respectively, that such
person or group had the right to acquire within 60 days of January 31, 1999,
through the exercise of stock options. Shares of the common stock of
Thermedics beneficially owned by Ms. Lambert, Mr. Melas-Kyriazi and all
directors and executive officers as a group include 978, 1,119 and 3,391
full shares, respectively, allocated through January 31, 1999, to their
respective accounts maintained pursuant to Thermo Electron's employee stock
ownership plan (the "ESOP"), of which the trustees, who have investment
power over its assets, are executive officers of Thermo Electron. Shares of
common stock of Thermedics beneficially owned by Mr. Wood include 2,600
shares held by him as custodian for two minor children. The directors and
executive officers did not individually or as a group beneficially own more
than 1.0% of Thermedics common stock outstanding as of January 31, 1999.
(4) The shares of the common stock of Thermo Electron beneficially owned by Mr.
Baxter, Dr. Gyftopoulos, Ms. Lambert, Mr. Melas-Kyriazi, Mr. Wood and all
directors and executive officers as a group include 61,000, 9,125, 83,074,
289,835, 258,359 and 874,330 shares, respectively, that such person or group
has the right to acquire within 60 days of January 31, 1999, through the
exercise of stock options. Shares of the common stock of Thermo Electron
beneficially owned by Ms. Lambert, Mr. Melas-Kyriazi and all directors and
executive officers as a group include 951, 1,071 and 3,448 full shares,
respectively, allocated through January 31, 1999, to their respective
accounts maintained pursuant to Thermo Electron's ESOP. The directors and
executive officers did not individually or as a group beneficially own more
than 1.0% of Thermo Electron common stock outstanding as of January 31,
1999.
58
<PAGE> 59
CERTAIN TRANSACTIONS
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 several privately and publicly held subsidiaries.
Thermedics has created Thermedics Detection Inc., Thermo Cardiosystems Inc. and
Thermo Sentron Inc. as publicly held subsidiaries, and has acquired the majority
interest in the Company, which until 1990 was an unaffiliated public company.
From time to time, Thermo Electron and its subsidiaries may create other
majority-owned subsidiaries as part of its spinout strategy. (The Company and
such other majority-owned Thermo Electron subsidiaries are hereinafter referred
to as the "Thermo Subsidiaries.")
Thermo Electron and each of the Thermo Subsidiaries 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 stockholders are treated
consistently and fairly, (2) the scope and nature of the cooperation among the
companies, and each company's responsibilities, are adequately defined, (3) each
company has access to the combined resources and financial, managerial and
technological strengths of the others and (4) Thermo Electron and the Thermo
Subsidiaries, in the aggregate, are able to obtain the most favorable terms from
outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit services. Pursuant to
the Charter, Thermo Electron may also provide guarantees of debt or other
obligations of the Thermo Subsidiaries or may obtain external financing at the
parent level for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on behalf of, the
consolidated entity or may obtain financing directly from external financing
sources. Under the Charter, Thermo Electron is responsible for determining that
the Thermo Group remains in compliance with all covenants imposed by external
financing sources, including covenants related to borrowings of Thermo Electron
or other members of the Thermo Group, and for apportioning such constraints
within the Thermo Group. In addition, Thermo Electron establishes certain
internal policies and procedures applicable to members of the Thermo Group. The
cost of the services provided by Thermo Electron to the Thermo Subsidiaries is
covered under existing corporate services agreements between Thermo Electron and
each of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Company, can withdraw from participation in the Charter upon 30
days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement and tax allocation
agreement (if any) 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. In
addition, 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.
59
<PAGE> 60
As provided in the Charter, the Company and Thermo Electron have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including certain legal advice and services, risk management, employee benefit
administration, tax advice and preparation of tax returns, centralized cash
management and financial and other services to the Company. The Company was
assessed an annual fee equal to 1.0% of the Company's revenues for these
services in fiscal 1996 and 1997. The annual fee has been reduced to 0.8% of the
Company's revenues for fiscal 1998. The fee is reviewed annually and may be
changed by mutual agreement of the Company and Thermo Electron. During fiscal
1996, 1997 and the nine-month period ended October 3, 1998, Thermo Electron
assessed the Company $485,000, $446,000 and $247,000, respectively, in fees
under the Services Agreement. Management believes that the charges under the
Services Agreement are reasonable and that the terms of the Services Agreement
are fair to the Company. For items such as employee benefit plans, insurance
coverage and other identifiable costs, Thermo Electron charges the Company based
on charges attributable to the Company. The Services Agreement automatically
renews for successive one-year terms, unless canceled by the Company upon 30
days' prior notice. In addition, the Services Agreement terminates automatically
in the event the Company ceases to be a member of the Thermo Group or ceases to
be a participant in the Charter. In the event of a termination of the Services
Agreement, the Company will be required to pay a termination fee equal to the
fee that was paid by the Company for services under the Services Agreement for
the nine-month period prior to termination. Following termination, Thermo
Electron may provide certain administrative services on an as-requested basis by
the Company or as required in order to meet the Company's obligations under
Thermo Electron's policies and procedures. Thermo Electron will charge the
Company a fee equal to the market rate for comparable services if such services
are provided to the Company following termination.
As of October 3, 1998, $14,234,000 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 corporate
notes, U.S. government and agency securities, money market funds, certificates
of deposit 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 a maturity of three months
or less. The repurchase agreement earns a rate based on the 90-day Commercial
Paper Composite Rate plus 25 basis points, set at the beginning of each quarter.
Thermedics holds two subordinated convertible notes of the Company. One is
in the principal amount of $6.0 million, bears interest at a rate of 6 3/4%, is
due 2002 and is convertible into Common Stock at a conversion price of $4.27 per
share. The other note is in the principal amount of $4.0 million, bears interest
at a rate of 5%, is due 2003 and is convertible into Common Stock at a
conversion price of $3.78 per share.
The Company, along with certain other Thermo Subsidiaries, participates in
a notional pool arrangement with Barclays Bank, which includes a $150 million
credit facility. Only European-based Thermo Subsidiaries participate in this
arrangement. Under this arrangement the Bank notionally combines the positive
and negative cash balances held by the participants to calculate the net
interest yield/expense for the group. The benefit derived from this arrangement
is then allocated based on balances attributable to the respective participants.
Thermo Electron guarantees all of the obligations of each participant in this
arrangement. In addition, funds on deposit under this arrangement provide credit
support for overdraft obligations of other participants. As of October 3, 1998,
the Company had a negative cash balance of approximately $2,669,000, based on an
exchange rate of $1.6994/ L1.00 as of October 3, 1998. For the nine-month period
ended October 3, 1998, the average annual interest rate earned on British pounds
sterling deposits by participants in this credit arrangement was approximately
7.58% and the average annual interest rate paid on British pounds sterling
overdrafts was approximately 7.81%.
The Company, along with certain other Thermo Subsidiaries, also
participates in a notional pool arrangement with ABN AMRO, which includes a $50
million credit facility. Only European-based Thermo Subsidiaries participate in
this arrangement. Under this arrangement the Bank notionally combines the
positive and negative cash balances held by the participants to calculate the
net interest yield/expense for the group. The benefit derived from this
arrangement is then allocated based on balances attributable to the
60
<PAGE> 61
respective participants. Thermo Electron guarantees all of the obligations of
each participant in this arrangement. In addition, funds on deposit under this
arrangement provide credit support for overdraft obligations of other
participants. As of October 3, 1998, the Company had a negative cash balance of
approximately $573,000, based on an exchange rate of $1.00/Dutch gilders 1.89.
For the nine-month period ended October 3, 1998, the average annual interest
rate earned on Dutch gilders deposits by participants in this credit arrangement
was approximately 5.0% and the average annual interest rate paid on Dutch
gilders overdrafts was approximately 5.0%.
At October 3, 1998, the Company owed Thermo Electron and its other
subsidiaries an aggregate of $496,000 for amounts due under the Corporate
Services Agreement and related administrative charges, for other products and
services, and for miscellaneous items, excluding loans described above.
In January 1996, Thermedics acquired 315,199 shares of the Company's Common
Stock having a deemed value of $17.125 per share, the five day average closing
price of Common Stock from January 15, 1996 to January 19, 1996 from Thermo
Electron in exchange for 228,236 shares of Thermedics Common Stock having a
deemed value of $23.65, the five day average closing price of Thermedics Common
Stock from January 15, 1996 to January 19, 1996.
During 1996, the human resources committee of the Board of Directors
established a stock holding policy for directors. The stock holding policy
requires each director to hold a minimum of 1,000 shares of Common Stock. In
addition, the human resources committee adopted a policy requiring directors to
hold shares of the Company's Common Stock equal to one-half of their net option
exercises over a period of five years. The net option exercise is determined by
calculating the number of shares acquired upon exercise of a stock option, after
deducting the number of shares that could have been traded to exercise the
option and the number of shares that could have been surrendered to satisfy tax
withholding obligations attributable to the exercise of the option.
In 1996, the Company also adopted a stock holding policy which requires its
executive officers to acquire and hold a minimum number of shares of Common
Stock. In order to assist the executive officers in complying with the policy,
the Company also adopted a stock holding assistance plan under which it may make
interest-free loans to certain key employees, including its executive officers,
to enable such employees to purchase Common Stock in the open market. During
1997, Mr. Colin I.W. Baxter received a loan in the principal amount of $84,383
under the plan to purchase 13,400 shares of Common Stock, of which amount,
$84,383 was outstanding as of November 30, 1998. During 1998, Mr. Baxter
received a loan in the principal amount of $11,005 under the plan to purchase
2,000 shares of Common Stock, of which amount $11,005 was outstanding as of
November 30, 1998. The loan is required to be repaid upon the earlier of demand
or the fifth anniversary of the date of the loan, unless otherwise authorized by
the Committee. This policy and plan were amended in 1998 to apply only to the
chief executive officer of the Company in the future.
CERTAIN INFORMATION CONCERNING THE MERGER SUB,
THERMEDICS AND THERMO ELECTRON
THE MERGER SUB
The Merger Sub is a newly formed Delaware corporation organized at the
direction of Thermedics for the sole purpose of facilitating the Merger and has
not conducted any prior business.
The principal executive offices of the Merger Sub are located at 470
Wildwood Street, P.O. Box 2999, Woburn, Massachusetts 01888-1799, and its
telephone number is (781) 938-3786.
THERMEDICS
Thermedics develops, manufactures and markets precision weighing and
inspection equipment, electrochemistry and microweighing products, product
quality assurance systems, electronic test instruments and a range of power
electronics and security devices, as well as implantable heart-assist systems,
whole-blood coagulation testing equipment, skin-incision devices and other
biomedical products.
61
<PAGE> 62
The principal executive offices of Thermedics are located at 470 Wildwood
Street, P.O. Box 2999, Woburn, Massachusetts 01888-1799, and its telephone
number is (781) 938-3786.
THERMO ELECTRON
Thermo Electron develops, manufactures and markets analytical and
monitoring instruments; biomedical products including heart-assist devices,
respiratory-care equipment and mammography systems; paper recycling and
papermaking equipment; alternative-energy systems; industrial process equipment;
and other specialized products. Thermo Electron also provides a range of
services that include industrial outsourcing, particularly in
environmental-liability management, laboratory analysis and metallurgical
processing; and conducts advanced-technology research and development.
The principal executive offices of Thermo Electron are located at 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, and its telephone
number is (781) 622-1000.
INDEPENDENT PUBLIC ACCOUNTANTS
The Consolidated Balance Sheets as of January 3, 1998 and December 28,
1996, and the related Consolidated Statements of Income, Shareholders'
Investment, and Cash Flows for each of the three years in the period ended
January 3, 1998, included in this Proxy Statement have been audited by Arthur
Andersen LLP, independent public accountants, as stated in their report.
Representatives of Arthur Andersen LLP are not expected to be at the Special
Meeting.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be included in the proxy statement
and form of proxy relating to the 1999 Annual Meeting of the Stockholders of
Voltek must have been received by the Company for inclusion in the proxy
statement and form of proxy on or before December 30, 1998. Management proxies
will be authorized to exercise discretionary voting authority with respect to
any shareholder proposal not included in Voltek's proxy materials for the 1999
Annual Meeting unless (a) Voltek receives notice of such proposal by March 15,
1999 and (b) the conditions set forth in Rule 14a-4(c)(2)(i)-(iii) under the
Exchange Act are met. Such proposals must also meet other requirements of the
rules of the Commission relating to stockholders' proposals. If the Merger is
consummated, the annual meeting of stockholders may be scheduled for an earlier
or later date consistent with the Company's organizational documents.
ADDITIONAL INFORMATION
Pursuant to the requirements of Section 13(e) of the Exchange Act, and Rule
13e-3 promulgated thereunder, the Company, as issuer of the class of equity
securities that is the subject of the Rule 13e-3 transaction, together with the
Merger Sub, Thermedics and Thermo Electron, have filed a Schedule 13E-3 with the
Commission with respect to the transactions contemplated by the Merger
Agreement. As permitted by the rules and regulations of the Commission, this
Proxy Statement omits certain information, exhibits and undertakings contained
in the Schedule 13E-3. Such additional information can be inspected at and
obtained from the Commission in the manner set forth below under "AVAILABLE
INFORMATION."
Statements contained in this Proxy Statement or in any document
incorporated herein by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete and in each
instance reference is made to such contract or other document filed as an
exhibit to the Schedule 13E-3 or such other document, and each such statement
shall be deemed qualified in its entirety by such reference.
62
<PAGE> 63
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements, and other
information with the Commission. The reports, proxy statements, and other
information filed with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington D.C. 20549 and at the following Regional Offices of
the Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company. The same information is also available on the
Internet at http://www.FreeEDGAR.com. The Common Stock is listed on the American
Stock Exchange, and such material that relates to the Company may also be
inspected at the offices of the American Stock Exchange, 86 Trinity Place, New
York, New York 10006-1881. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY, THE MERGER SUB, THERMEDICS AND THERMO
ELECTRON SINCE THE DATE HEREOF OR THAT THE INFORMATION IN THIS PROXY STATEMENT
OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS CURRENT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
(File No. 1-10574) are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
January 3, 1998;
2. The Company's Current Report on Form 8-K, filed with the Commission
on April 3, 1998, regarding the proposal of Thermedics to acquire, through
a merger, all of the shares of the Voltek Common Stock;
3. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended April 4, 1998;
4. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 4, 1998;
5. The Company's Current Report on Form 8-K, filed with the Commission
on August 13, 1998, regarding a proposed reorganization at Thermo Electron
and certain of its subsidiaries, including the Company;
6. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 3, 1998;
7. The Company's Current Report on Form 8-K, filed with the Commission
on December 10, 1998, regarding updated information related to the proposed
reorganization at Thermo Electron and certain of its subsidiaries,
including the Company; and
8. The description of the Common Stock which is contained in the
Company's Registration Statement on Form 8-A filed under the Exchange Act,
as such description may be amended from time to time.
Copies of the documents listed above (other than exhibits thereto which are
not specifically incorporated by reference herein) are available, without
charge, to any person, including any beneficial owner of Common Stock, to whom
this Proxy Statement is delivered, upon oral or written request to Sandra L.
Lambert, Secretary, Thermo Voltek Corp., c/o Thermo Electron Corporation, 81
Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046 (telephone (781)
622-1000).
Any statements contained in a document incorporated or deemed to be
incorporated herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded. All information
appearing in this Proxy Statement is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated herein by reference.
63
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[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 65
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Statement of Income for the nine months ended
October 3, 1998, and September 27, 1997, and the years
ended January 3, 1998, December 28, 1996, and December 30,
1995...................................................... F-3
Consolidated Balance Sheet as of October 3, 1998, January 3,
1998, and December 28, 1996............................... F-4
Consolidated Statement of Cash Flows for the nine months
ended October 3, 1998, and September 27, 1997, and the
years ended January 3, 1998, December 28, 1996, and
December 30, 1995......................................... F-5
Consolidated Statement of Shareholders' Investment for the
nine months ended October 3, 1998, and the years ended
January 3, 1998, December 28, 1996, and December 30,
1995...................................................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 66
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Thermo Voltek Corp.:
We have audited the accompanying consolidated balance sheet of Thermo
Voltek Corp. (a Delaware corporation and 65%-owned subsidiary of Thermedics
Inc.) and subsidiaries as of January 3, 1998, and December 28, 1996, and the
related consolidated statements of income, shareholders' investment, and cash
flows for each of the three years in the period ended January 3, 1998. 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
Voltek Corp. and subsidiaries as of January 3, 1998, and December 28, 1996, and
the results of their operations and their cash flows for each of the three years
in the period ended January 3, 1998, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 12, 1998
(except with respect to
certain matters discussed
in Note 14, as to which
the date is November 17, 1998)
F-2
<PAGE> 67
THERMO VOLTEK CORP.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
OCTOBER 3, SEPTEMBER 27,
1998 1997 1997 1996 1995
---------- ------------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues (Note 11)........................... $30,836 $32,736 $44,648 $48,507 $36,326
------- ------- ------- ------- -------
Costs and Operating Expenses:
Cost of revenues........................... 17,357 18,042 24,860 24,357 18,790
Selling, general, and administrative
expenses (Note 9)....................... 10,284 11,850 15,992 14,889 11,766
Research and development expenses.......... 2,092 2,712 3,620 3,618 2,349
------- ------- ------- ------- -------
29,733 32,604 44,472 42,864 32,905
------- ------- ------- ------- -------
Operating Income............................. 1,103 132 176 5,643 3,421
Interest Income.............................. 705 967 1,247 1,774 2,073
Interest Expense (includes $453, $453, $605,
$706, and $706 to related parties; Note
9)......................................... (870) (869) (1,162) (1,408) (2,130)
Gain on Sale of Related-party Investments
(Notes 2 and 9)............................ -- 180 180 -- --
Other Income................................. 69 -- 53 -- --
------- ------- ------- ------- -------
Income Before Income Tax Provision........... 1,007 410 494 6,009 3,364
Income Tax Provision (Note 6)................ 403 156 215 1,540 692
------- ------- ------- ------- -------
Net Income................................... $ 604 $ 254 $ 279 $ 4,469 $ 2,672
======= ======= ======= ======= =======
Earnings per Share (Note 12):
Basic...................................... $ .07 $ .03 $ .03 $ .51 $ .41
======= ======= ======= ======= =======
Diluted.................................... $ .07 $ .03 $ .03 $ .38 $ .28
======= ======= ======= ======= =======
Weighted Average Shares (Note 12):
Basic...................................... 8,707 9,297 9,182 8,827 6,528
======= ======= ======= ======= =======
Diluted.................................... 8,772 9,436 9,305 13,628 13,512
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 68
THERMO VOLTEK CORP.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
OCTOBER 3,
1998 1997 1996
------------ -------- --------
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (includes $14,234, $13,744, and
$16,623 under repurchase agreement with affiliated
company)............................................... $14,903 $14,608 $17,874
Available-for-sale investments, at quoted market value
(amortized cost of $502, $3,041, and $10,011; includes
$1,399 of related-party investments in 1996; Notes 2
and 9)................................................. 502 3,041 10,067
Accounts receivable, less allowances of $603, $799, and
$587................................................... 8,788 10,388 12,123
Inventories............................................... 12,335 10,981 10,725
Prepaid income taxes and other current Assets (Note 6).... 2,032 1,999 2,025
------- ------- -------
38,560 41,017 52,814
------- ------- -------
Property, Plant, and Equipment, at Cost, Net................ 3,318 3,682 4,151
------- ------- -------
Long-term Prepaid Income Taxes and Other Assets............. 564 539 299
------- ------- -------
Cost in Excess of Net Assets of Acquired Companies (Note
3)........................................................ 17,803 18,058 16,425
------- ------- -------
$60,245 $63,296 $73,689
======= ======= =======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable (Note 8).................................... $ 3,762 $ 2,376 $ 1,666
Accounts payable.......................................... 2,473 3,194 3,718
Accrued payroll and employee benefits..................... 984 1,159 1,264
Accrued income taxes...................................... (67) 489 1,244
Accrued commissions....................................... 982 1,080 1,063
Accrued warranty costs.................................... 540 624 449
Other accrued expenses.................................... 1,221 1,538 1,594
Due to parent company and affiliated companies............ 646 694 901
------- ------- -------
10,541 11,154 11,899
------- ------- -------
Subordinated Convertible Obligations (includes $10,000 of
related-party debt; Note 8)............................... 15,250 17,750 19,345
------- ------- -------
Commitments (Note 7)
Shareholders' Investment (Notes 4 and 5):
Common stock, $.05 par value, 25,000,000 shares
authorized; 9,939,865, 9,939,865, and 9,765,676 shares
issued................................................. 497 497 488
Capital in excess of par value............................ 38,649 38,799 37,762
Retained earnings......................................... 5,167 4,563 4,284
Treasury stock at cost, 1,253,282, 1,098,912, and 6,438
shares................................................. (9,522) (8,836) (69)
Cumulative translation adjustment......................... (337) (631) (56)
Net unrealized gain on available-for-sale investments
(Note 2)............................................... -- -- 36
------- ------- -------
34,454 34,392 42,445
------- ------- -------
$60,245 $63,296 $73,689
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 69
THERMO VOLTEK CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
OCTOBER 3, SEPTEMBER 27,
1998 1997 1997 1996 1995
---------- ------------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................... $ 604 $ 254 $ 279 $ 4,469 $ 2,672
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............. 1,551 1,433 2,117 1,636 1,529
Provision for losses on accounts
receivable.............................. 143 144 326 103 135
Gain on sale of investments............... -- (180) (180) -- --
Other..................................... (69) -- (330) -- (17)
Changes in current accounts, excluding the
effects of acquisitions:
Accounts receivable..................... 1,674 1,848 1,616 (3,552) (1,525)
Inventories............................. (1,259) (93) 233 (903) (2,527)
Other current assets.................... (29) 201 25 (1,390) (44)
Accounts payable........................ (785) (678) (625) (191) 968
Other current liabilities............... (1,280) (900) (1,386) 329 720
------- ------- ------- ------- -------
Net cash provided by operating activities...... 550 2,029 2,075 501 1,911
------- ------- ------- ------- -------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired (Note
3)........................................ -- (2,820) (2,820) (6,040) (4,127)
Purchases of available-for-sale
investments............................... -- -- -- (5,500) (7,500)
Proceeds from sale and maturities of
available-for-sale investments............ 2,502 6,980 6,980 21,009 10,000
Purchases of property, plant, and
equipment................................. (902) (557) (938) (2,048) (1,364)
Other........................................ 94 (125) (171) 325 526
------- ------- ------- ------- -------
Net cash provided by (used in) investing
activities................................... 1,694 3,478 3,051 7,746 (2,465)
------- ------- ------- ------- -------
FINANCING ACTIVITIES
Net increase in short-term obligations....... 1,132 943 979 510 435
Net proceeds from issuance of Company common
stock..................................... 123 293 201 232 324
Repurchases of Company common stock and long-
term obligations.......................... (3,390) (8,955) (9,655) -- (132)
Other........................................ 37 (113)
------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities................................... (2,098) (7,832) (8,475) 742 627
------- ------- ------- ------- -------
Exchange Rate Effect on Cash................... 149 169 83 234 (377)
------- ------- ------- ------- -------
Increase (Decrease) in Cash and Cash
Equivalents.................................. 295 (2,156) (3,266) 9,223 (304)
Cash and Cash Equivalents at Beginning of
Period....................................... 14,608 17,874 17,874 8,651 8,955
------- ------- ------- ------- -------
Cash and Cash Equivalents at End of Period..... $14,903 $15,718 $14,608 $17,874 $ 8,651
======= ======= ======= ======= =======
CASH PAID FOR
Interest..................................... $ 856 $ 789 $ 1,121 $ 1,311 $ 2,034
Income taxes................................. $ 884 $ 808 $ 1,335 $ 2,604 $ 236
NONCASH ACTIVITIES
Conversions of subordinated convertible
obligations (Note 8)...................... $ -- $ 895 $ 895 $17,395 $ 9,111
======= ======= ======= ======= =======
Fair value of assets of acquired companies... $ -- $ 4,807 $ 4,807 $ 7,048 $ 5,228
Cash paid for acquired companies............. -- (3,248) (3,248) (6,300) (4,157)
------- ------- ------- ------- -------
Liabilities assumed of acquired
companies............................... $ -- $ 1,559 $ 1,559 $ 748 $ 1,071
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 70
THERMO VOLTEK CORP.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
-----------
OCTOBER 3,
1998 1997 1996 1995
----------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
COMMON STOCK, $.05 PAR VALUE
Balance at beginning of period................. $ 497 $ 488 $ 244 $ 202
Issuance of stock under employees' and
directors' stock plans...................... -- 3 3 3
Conversion of subordinated convertible
obligations (Note 8)........................ -- 6 83 39
Effect of three-for-two stock split............ -- -- 158 --
------- ------- ------- -------
Balance at end of period....................... 497 497 488 244
------- ------- ------- -------
CAPITAL IN EXCESS OF PAR VALUE
Balance at beginning of period................. 38,799 37,762 20,545 11,237
Issuance of stock under employees' and
directors' stock plans...................... (150) 10 279 291
Tax benefit related to employees' and
directors' stock plans...................... -- 153 112 166
Conversion of subordinated convertible
Obligations (Note 8)........................ -- 874 16,984 8,851
Effect of three-for-two stock split............ -- -- (158) --
------- ------- ------- -------
Balance at end of period....................... 38,649 38,799 37,762 20,545
------- ------- ------- -------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance at beginning of period................. 4,563 4,284 (185) (2,857)
Net income..................................... 604 279 4,469 2,672
------- ------- ------- -------
Balance at end of period....................... 5,167 4,563 4,284 (185)
------- ------- ------- -------
TREASURY STOCK
Balance at beginning of period................. (8,836) (69) (20) (50)
Issuance of stock under employees' and
directors' stock plans...................... 270 188 (49) 30
Repurchase of Company common stock............. (956) (8,955) -- --
------- ------- ------- -------
Balance at end of period....................... (9,522) (8,836) (69) (20)
------- ------- ------- -------
CUMULATIVE TRANSLATION ADJUSTMENT
Balance at beginning of period................. (631) (56) 229 260
Translation adjustment......................... 294 (575) (285) (31)
------- ------- ------- -------
Balance at end of period....................... (337) (631) (56) 229
------- ------- ------- -------
NET UNREALIZED GAIN (LOSS) ON AVAILABLE-FOR-SALE
INVESTMENTS
Balance at beginning of period................. -- 36 146 (320)
Change in net unrealized gain (loss) on
available-for-sale investments (Note 2)..... -- (36) (110) 466
------- ------- ------- -------
Balance at end of period....................... -- -- 36 146
------- ------- ------- -------
TOTAL SHAREHOLDERS' INVESTMENT................... $34,454 $34,392 $42,445 $20,959
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 71
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Thermo Voltek Corp. (the Company) designs, manufactures, and markets test
instruments and a range of products related to power amplification, conversion,
and quality. The Company's test instruments simulate pulsed electromagnetic
interference (pulsed EMI), radio frequency interference (RFI), and changes in AC
voltage, to allow manufacturers of electronic systems and integrated circuits to
test for electromagnetic compatibility (EMC) to ensure product quality and to
meet certain regulatory requirements. The Company also provides EMC consulting
and systems-integration services and distributes EMC-related products. The
Company's power products include radio frequency (RF) and microwave power
amplifiers, power-conversion equipment, and high-voltage and
application-specific power supplies. These power products are used in
communications, broadcast, research, and medical imaging applications.
Relationship with Thermedics Inc. and Thermo Electron Corporation
As of January 3, 1998, Thermedics Inc. owned 5,771,208 shares of the
Company's common stock, representing 65% of such stock outstanding. Thermedics
is a 58%-owned subsidiary of Thermo Electron Corporation. As of January 3, 1998,
Thermo Electron owned 238,200 shares of the Company's common stock, representing
3% of such stock outstanding.
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 1997, 1996, and 1995 are for the fiscal years ended January 3,
1998, December 28, 1996, and December 30, 1995, respectively. Fiscal year 1997
included 53 weeks; 1996 and 1995 each included 52 weeks.
Revenue Recognition
The Company recognizes product revenues upon shipment of its products. The
Company provides a reserve for its estimate of warranty costs at the time of
shipment. Revenues and profits on substantially all contracts are recognized
using the percentage-of-completion method. Revenues recorded under the
percentage-of-completion method were $5,367,000 in 1997, $4,806,000 in 1996, and
$2,884,000 in 1995. The percentage of completion is determined by relating
either the actual costs or actual labor incurred to date to management's
estimate of total costs or total labor, respectively, to be incurred on each
contract. If a loss is indicated on any contract in process, a provision is made
currently for the entire loss. The Company's contracts generally provide for
billing of customers upon the attainment of certain milestones specified in each
contract. Revenues earned on contracts in process in excess of billings are
included in inventories in the accompanying balance sheet and were not material
at year-end 1997 and 1996. There are no significant amounts included in the
accompanying balance sheet that are not expected to be recovered from existing
contracts at current contract values, or that are not expected to be collected
within one year, including amounts billed but not paid under retainage
provisions.
Stock-based Compensation Plans
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans
F-7
<PAGE> 72
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Note 4). Accordingly, no accounting recognition is given to stock options
granted at fair market value until they are exercised. Upon exercise, net
proceeds, including tax benefits realized, are credited to equity.
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.
Earnings per Share
During the fourth quarter of 1997, the Company adopted SFAS No. 128,
"Earnings per Share" (Note 12). As a result, all previously reported earnings
per share have been restated; however, basic earnings per share equals the
Company's previously reported primary earnings per share for 1996 and diluted
earnings per share equals the Company's previously reported fully diluted
earnings per share for 1996 and 1995. Basic earnings per share have been
computed by dividing net income by the weighted average number of shares
outstanding during the year. Except where the result would be antidilutive,
diluted earnings per share have been computed assuming the conversion of
convertible obligations and the elimination of the related interest expense, and
the exercise of stock options, as well as their related income tax effects (Note
12).
Stock Split
All share and per share information has been restated to reflect a
three-for-two stock split, effected in the form of a 50% stock dividend,
distributed in August 1996.
Cash and Cash Equivalents
At year-end 1997 and 1996, $13,744,000 and $16,623,000, respectively, 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 corporate notes, commercial paper, U.S.
government-agency securities, money market funds, and other marketable equity
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. The repurchase agreement earns a rate based on the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter. Cash equivalents are carried at cost, which approximates market
value.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market value and include materials, labor, and manufacturing overhead.
The components of inventories are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw Materials............................................ $ 5,100 $ 4,835
Work in Process.......................................... 4,089 3,097
Finished Goods........................................... 1,792 2,793
------- -------
$10,981 $10,725
======= =======
</TABLE>
F-8
<PAGE> 73
THERMO VOLTEK CORP.
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: building and improvements, 5 to 25
years; machinery and equipment, 2 to 10 years; and leasehold improvements, the
shorter of the term of the lease or the life of the asset. Property, plant, and
equipment consists of the following:
<TABLE>
<CAPTION>
1997 1996
------- ------
(IN THOUSANDS)
<S> <C> <C>
Land and Building......................................... $ 1,808 $1,806
Machinery, Equipment, and Leasehold Improvements.......... 8,829 7,933
------- ------
10,637 9,739
Less: Accumulated Depreciation and Amortization........... 6,955 5,588
------- ------
$ 3,682 $4,151
======= ======
</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 periods not exceeding 40 years.
Accumulated amortization was $1,886,000 and $1,371,000 at year-end 1997 and
1996, respectively. The Company assesses the future useful life of this asset
whenever events or changes in circumstances indicate that the current useful
life has diminished. The Company considers the future undiscounted cash flows of
the acquired companies in assessing the recoverability of this asset. If
impairment has occurred, any excess of carrying value over fair value is
recorded as a loss.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are translated
at average exchange rates for the year in accordance with SFAS No. 52, "Foreign
Currency Translation." Resulting translation adjustments are reflected as a
separate component of shareholders' investment titled "Cumulative translation
adjustment." Foreign currency transaction gains and losses are included in the
accompanying statement of income 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,
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.
Presentation
Certain amounts in 1996 have been reclassified to conform to the
presentation in the 1997 financial statements.
Interim Financial Statements
The financial statements as of October 3, 1998, and for the nine-month
periods ended September 27, 1997, and October 3, 1998, are unaudited but, in the
opinion of management, reflect all adjustments of a
F-9
<PAGE> 74
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
normal recurring nature necessary for a fair presentation of results for these
interim periods. The results of operations for the nine-month period ended
October 3, 1998, are not necessarily indicative of the results to be expected
for the entire year.
2. AVAILABLE-FOR-SALE INVESTMENTS
In accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," the Company's debt and marketable equity securities
are considered available-for-sale investments in the accompanying balance sheet
and are carried at market value, with the difference between cost and market
value, net of related tax effects, recorded currently as a component of
shareholders' investment titled "Net unrealized gain on available-for-sale
investments."
The aggregate market value, cost basis, and gross unrealized gains and
losses of available-for-sale investments by major security type are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
MARKET COST UNREALIZED UNREALIZED
VALUE BASIS GAINS LOSSES
------- ------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997
Corporate Bonds........................... $ 1,001 $ 1,001 $-- $ --
Other..................................... 2,040 2,040 -- --
------- ------- --- ----
$ 3,041 $ 3,041 $-- $ --
======= ======= === ====
1996
Government-agency Securities.............. $ 4,501 $ 4,500 $ 1 $ --
Corporate Bonds........................... 2,379 2,314 65 --
Money Market Preferred Stock.............. 1,060 1,070 -- (10)
Other..................................... 2,127 2,127 -- --
------- ------- --- ----
$10,067 $10,011 $66 $(10)
======= ======= === ====
</TABLE>
All of the Company's available-for-sale investments in the accompanying
1997 balance sheet had contractual maturities of one year or less. Actual
maturities may differ from contractual maturities as a result of the Company's
intent to sell these securities prior to maturity and as a result of put and
call options that enable the Company, the issuer, or both to redeem these
securities at an earlier date.
Gain on the sale of investments in the accompanying 1997 statement of
income represents the gross realized gains relating to the sale of related-party
available-for-sale investments (Note 9). To determine the gain, the cost of such
investments was based on specific identification.
3. ACQUISITIONS
In April 1997, the Company acquired substantially all of the assets,
subject to certain liabilities, of Milmega Ltd. for approximately $3,248,000 in
cash. Milmega primarily manufactures and markets microwave amplifiers that are
suitable for EMC testing, physics research, and communications, medical, and
military applications.
In July 1996, the Company acquired substantially all of the assets, subject
to certain liabilities, of Pacific Power Source Corporation for $6,300,000 in
cash, including the repayment of $800,000 in debt. Pacific Power manufactures
programmable power amplifiers that can be incorporated into EMC test equipment
to assess how well electronics tolerate normal variations in the quality and
quantity of AC voltage. These amplifiers are also used in other kinds of test
equipment and in application-specific power supplies.
F-10
<PAGE> 75
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In March 1995, the Company acquired substantially all of the assets,
subject to certain liabilities, of Kalmus Engineering Incorporated and R.F.
Power Labs, Incorporated (collectively, Kalmus) for $3,755,000 in cash. Kalmus
is a manufacturer of radio frequency power amplifiers and systems used to test
products for immunity to RFI and in medical imaging and telecommunications
applications.
Additionally, the Company acquired a component-reliability product line in
1995 for approximately $402,000 in cash.
These acquisitions have been accounted for using the purchase method of
accounting, and their results of operations have been included in the
accompanying financial statements from their respective dates of acquisition.
The aggregate cost of these acquisitions exceeded the estimated fair value of
the acquired net assets by $10,413,000, which is being amortized over periods
not exceeding 40 years. Allocation of the purchase price for these acquisitions
was based on estimates of the fair value of the net assets acquired.
Pro forma data is not presented for the Company's acquisitions since they
were not material to the Company's results of operations.
4. EMPLOYEE BENEFIT PLANS
Stock-based Compensation Plans
Stock Option Plans
The Company has stock-based compensation plans for its key employees,
directors, and others. Two of the plans, adopted in 1985 and 1990, permit the
grant of nonqualified and incentive stock options. The plan adopted in 1985
expired in 1995, and no grants were made after that date. A third plan, adopted
in 1994, permits the grant of a variety of stock and stock-based awards as
determined by the human resources committee of the Company's Board of Directors
(the Board Committee), including restricted stock, stock options, stock bonus
shares, or performance-based shares. To date, only nonqualified stock options
have been awarded under this plan. The option recipients and the terms of
options granted under these plans are determined by the Board Committee.
Generally, options granted to date are exercisable immediately, 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 lapse ratably over a
five to ten year period, depending on the term of the option, which may range
from five to twelve years. Nonqualified stock options may be granted at any
price determined by the Board Committee, although incentive stock options must
be granted at not less than the fair market value of the Company's stock on the
date of grant. To date, all options have been granted at fair market value. The
Company also has a directors' stock option plan, adopted in 1993, that provides
for the grant of stock options to outside directors pursuant to a formula
approved by the Company's shareholders. Options awarded under this plan are
exercisable six months after the date of grant and expire three or seven years
after the date of grant. 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 and Thermedics.
F-11
<PAGE> 76
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Company's stock option activity is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Options Outstanding, Beginning of
Year.............................. 782 $6.37 766 $ 5.22 740 $4.07
Granted........................... 196 8.27 115 12.52 167 8.73
Exercised......................... (95) 3.28 (55) 3.64 (98) 2.94
Forfeited......................... (93) 9.06 (44) 5.74 (43) 4.30
--- --- ---
Options Outstanding, End of Year.... 790 $6.90 782 $ 6.37 766 $5.22
=== ===== === ====== === =====
Options Exercisable................. 790 $6.90 782 $ 6.37 766 $5.22
=== ===== === ====== === =====
Options Available for Grant......... 281 85 155
=== === ===
</TABLE>
A summary of the status of the Company's stock options at January 3, 1998,
is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
---------------------------------------------
NUMBER WEIGHTED
OF WEIGHTED AVERAGE AVERAGE
SHARES REMAINING EXERCISE
RANGE OF EXERCISE PRICES (IN THOUSANDS) CONTRACTUAL LIFE PRICE
- ------------------------ -------------- ---------------- --------
<S> <C> <C> <C>
$ 1.59 -- $ 4.70.............................. 221 2.0 years $ 3.30
4.71 -- 7.82.............................. 324 6.7 years 6.33
7.83 -- 10.93.............................. 173 5.6 years 10.15
10.94 -- 14.05.............................. 72 6.0 years 12.60
---
$ 1.59 -- $14.05.............................. 790 5.1 years $ 6.90
===
</TABLE>
Employee Stock Purchase Program
Substantially all of the Company's full-time U.S. employees are eligible to
participate in an employee stock purchase program sponsored by the Company and
Thermo Electron. Under this program, shares of the Company's and Thermo
Electron's common stock may be purchased at the end of a 12-month period at 95%
of the fair market value at the beginning of the period, and the shares
purchased are subject to a six-month resale restriction. Prior to November 1,
1995, the applicable shares of common stock could be purchased at 85% of the
fair market value at the beginning of the period, and the shares purchased were
subject to a one-year resale restriction. Shares are purchased through payroll
deductions of up to 10% of each participating employee's gross wages.
Pro Forma Stock-based Compensation Expense
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-based Compensation," which sets forth a fair-value
based method of recognizing stock-based compensation expense. As permitted by
SFAS No. 123, the Company has elected to continue to apply APB No. 25 to account
for its stock-based compensation plans. Had compensation cost for awards in
1997, 1996, and 1995 under the Company's stock-based compensation plans been
determined based on the fair value at the grant
F-12
<PAGE> 77
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
dates consistent with the method set forth under SFAS No. 123, the effect on the
Company's net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ------- ---------
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net Income:
As reported........................................ $279 $4,469 $2,672
Pro forma.......................................... 16 4,294 2,601
Basic Earnings per Share:
As reported........................................ .03 .51 .41
Pro forma.......................................... -- .49 .40
Diluted Earnings per Share:
As reported........................................ .03 .38 .28
Pro forma.......................................... -- .37 .28
</TABLE>
Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
expense may not be representative of the amount to be expected in future years.
Pro forma compensation expense for options granted is reflected over the vesting
period; therefore, future pro forma compensation expense may be greater as
additional options are granted.
The weighted average fair value per share of options granted was $3.41,
$5.58, and $3.70 in 1997, 1996, and 1995, respectively. The fair value of each
option grant was estimated on the grant date using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ------- ---------
<S> <C> <C> <C>
Volatility........................................... 37% 41% 41%
Risk-free Interest Rate.............................. 6.1% 6.6% 6.3%
Expected Life of Options............................. 4.8 years 5 years 4.4 years
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the input of highly
subjective assumptions, including expected stock price volatility. Because the
Company's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
401(k) Savings Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in Thermo Electron's 401(k) savings plan. Contributions to the plan
are made by both the employee and the Company. Company contributions are based
upon the level of employee contributions. For this plan, the Company contributed
and charged to expense $258,000, $249,000, and $184,000 in 1997, 1996, and 1995,
respectively.
5. COMMON STOCK
At January 3, 1998, the Company had reserved 4,670,330 unissued shares of
its common stock for possible issuance under stock-based compensation plans and
for issuance upon possible conversion of the Company's subordinated convertible
obligations.
F-13
<PAGE> 78
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES
The components of income before provision for income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic........................................ $ 1,805 $4,684 $2,616
Foreign......................................... (1,311) 1,325 748
------- ------ ------
$ 494 $6,009 $3,364
======= ====== ======
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently Payable (Receivable):
Federal......................................... $ 815 $1,554 $ 608
Foreign......................................... (540) 466 323
State........................................... 92 249 276
----- ------ ------
367 2,269 1,207
----- ------ ------
Net Prepaid:
Federal......................................... (132) (689) (412)
State........................................... (20) (40) (103)
----- ------ ------
(152) (729) (515)
----- ------ ------
$ 215 $1,540 $ 692
===== ====== ======
</TABLE>
The Company receives a tax deduction upon exercise of nonqualified stock
options by employees for the difference between the exercise price and the
market price of the Company's common stock on the date of exercise. The
provision for income taxes that is currently payable does not reflect $153,000,
$112,000, and $166,000 of such benefits allocated to capital in excess of par
value in 1997, 1996, and 1995, respectively.
The provision for income taxes in the accompanying statement of income
differs from the provision calculated by applying the statutory federal income
tax rate of 34% to income before provision for income taxes due to the
following:
<TABLE>
<CAPTION>
1997 1996 1995
---- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for Income Taxes at Statutory Rate....... $168 $2,043 $1,144
Increases (Decreases) Resulting From:
Decrease in valuation allowance.................. -- (684) (630)
State income taxes, net of federal tax........... 48 138 114
Nondeductible expenses........................... 63 62 86
Foreign tax rate and tax regulation
differential.................................. 10 15 68
Foreign sales corporation........................ (89) (123) (87)
Other............................................ 15 89 (3)
---- ------ ------
$215 $1,540 $ 692
==== ====== ======
</TABLE>
F-14
<PAGE> 79
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prepaid income taxes in the accompanying balance sheet consist of the
following:
<TABLE>
<CAPTION>
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Prepaid (Deferred) Income Taxes:
Tax loss and credit carryforwards........................ $ 568 $ 652
Accruals and reserves.................................... 199 65
Inventory basis differences.............................. 875 693
Accrued compensation..................................... 470 290
Allowance for doubtful accounts.......................... 174 82
Other.................................................... (108) 20
------ ------
$2,178 $1,802
====== ======
</TABLE>
The Company had a valuation allowance at year-end 1995 that primarily
related to uncertainty surrounding the realization of tax loss and credit
carryforwards and certain other tax assets of the Company. The valuation
allowance was eliminated in 1996. Of the total decrease to the valuation
allowance, $684,000 related to reduced uncertainty surrounding the realizability
of the tax loss and credit carryforwards, and was recorded as a decrease in the
provision for income taxes in 1996. The remaining decrease in the valuation
allowance primarily related to the elimination of related tax loss and credit
carryforwards due to the inability to obtain a benefit prior to the expiration
thereof. The provision for income taxes was reduced by $630,000 in 1995 as a
result of changes in the amount of estimated tax assets and the utilization of a
portion of the Company's tax loss and credit carryforwards.
The Company has federal tax net loss carryforwards, subject to the
limitations described below. These net operating loss carryforwards will begin
to expire in 1999. Pursuant to U.S. Internal Revenue Code Sections 382 and 383,
the utilization of the net operating loss carryforwards is limited to the tax
benefit of a deduction of approximately $240,000 per year with any unused
portion of this annual limitation carried forward to future years. As of January
3, 1998, net operating loss carryforwards totaled $2.5 million, including $0.6
million that have not been benefited since they will expire unused.
A provision has not been made for U.S. or additional foreign taxes on $0.6
million of undistributed earnings of foreign subsidiaries that could be subject
to tax if remitted to the U.S. because the Company currently plans to keep these
amounts permanently reinvested overseas.
7. COMMITMENTS
The Company occupies office and operating facilities under operating leases
expiring at various dates through 2010. The accompanying statement of income
includes expenses from operating leases of $886,000, $555,000, and $381,000 in
1997, 1996, and 1995, respectively. The future minimum payments due under
noncancellable operating leases as of January 3, 1998, are $814,000 in 1998;
$745,000 in 1999; $655,000 in 2000; $312,000 in 2001; $149,000 in 2002; and
$89,000 in 2003 and thereafter. Total future minimum lease payments are
$2,764,000.
8. SHORT- AND LONG-TERM OBLIGATIONS
Short-term Obligations
The Company has lines of credit denominated in certain foreign currencies
to borrow up to approximately $3,638,000. Amounts borrowed under these
arrangements are classified as notes payable in the accompanying balance sheet.
The weighted average interest rate for these borrowings at year-end 1997 and
1996 was 8.0% and 6.3%, respectively. Unused lines of credit were $1,262,000 at
January 3, 1998.
F-15
<PAGE> 80
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term Obligations
Long-term obligations of the Company are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
3 3/4% Subordinated Convertible Debentures, due 2000,
Convertible at $7.83 per Share(a)...................... $ 7,750 $ 9,345
5% Subordinated Convertible Note, due 2003, Convertible
at $3.78 per Share(b).................................. 4,000 4,000
6 3/4% Subordinated Convertible Note, due 2002,
Convertible at $4.27 per Share(b)...................... 6,000 6,000
------- -------
$17,750 $19,345
======= =======
</TABLE>
- ---------------
(a) In lieu of issuing shares of the Company's common stock upon conversion, the
Company has the option to pay holders of the debentures cash equal to the
weighted average market price of the Company's common stock on the last
trading date prior to conversion.
(b) Represents an obligation to Thermedics.
During 1997 and 1996, $895,000 and $17,395,000, respectively, of
convertible obligations were converted into shares of the Company's common
stock.
Short- and long-term obligations in the accompanying balance sheet are
guaranteed on a subordinated basis by Thermo Electron. Thermedics has agreed to
reimburse Thermo Electron in the event Thermo Electron is required to make a
payment under the guarantees.
See Note 10 for fair value information pertaining to the Company's
long-term obligations.
9. 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 1.0% of the
Company's revenues in 1997 and 1996 and 1.20% of the Company's revenues in 1995.
For these services, the Company was charged $446,000, $485,000, and $436,000 in
1997, 1996, and 1995, respectively. Beginning in fiscal 1998, the Company will
pay an annual fee equal to 0.8% of the Company's revenues. The annual fee is
reviewed and adjusted annually by mutual agreement of the parties. 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).
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. 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.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
F-16
<PAGE> 81
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Available-for-sale Investments
At December 28, 1996, the Company's available-for-sale investments included
$1,399,000 (amortized cost of $1,336,000), of 6 1/2% subordinated convertible
debentures, which were purchased on the open market. These debentures, which
were sold in 1997 for a gain of $180,000, had a par value of $1,300,000 and were
issued by Thermo TerraTech Inc., a majority-owned subsidiary of Thermo Electron.
Subordinated Convertible Notes
See Note 8 for subordinated convertible notes of the Company held by
Thermedics.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist mainly of cash and cash
equivalents, available-for-sale investments, accounts receivable, notes payable,
accounts payable, due to parent company and affiliated companies, and
subordinated convertible obligations. The carrying amounts of these financial
instruments, with the exception of available-for-sale investments and
subordinated convertible obligations, approximate fair value due to their
short-term nature.
Available-for-sale investments are carried at fair value in the
accompanying balance sheet. The fair values were determined based on quoted
market prices. See Note 2 for fair value information pertaining to these
financial instruments.
The fair value of the Company's subordinated convertible obligations was
determined based on quoted market prices. The carrying amount and fair value of
the Company's subordinated convertible obligations are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Subordinated Convertible Obligations........ $17,750 $21,263 $19,345 $38,836
</TABLE>
The fair value of subordinated convertible obligations exceeds the carrying
amount primarily due to the market price of the Company's common stock exceeding
the conversion price of the subordinated convertible obligations.
F-17
<PAGE> 82
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. GEOGRAPHICAL INFORMATION
The following table shows data for the Company by geographical area.
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
United States....................................... $31,415 $31,013 $23,375
The Netherlands..................................... 7,509 8,164 6,977
United Kingdom...................................... 4,621 8,565 6,967
Italy............................................... 2,421 3,460 2,143
Transfers among geographical areas(a)............... (1,318) (2,695) (3,136)
------- ------- -------
$44,648 $48,507 $36,326
======= ======= =======
Income Before Provision for Income Taxes:
United States....................................... $ 2,829 $ 5,045 $ 3,343
The Netherlands..................................... 247 798 405
United Kingdom...................................... (1,357) 370 388
Italy............................................... (231) 236 123
Corporate and eliminations(b)....................... (1,312) (806) (838)
------- ------- -------
Total operating income.............................. 176 5,643 3,421
Interest and other income (expense), net............ 318 366 (57)
------- ------- -------
$ 494 $ 6,009 $ 3,364
======= ======= =======
Identifiable Assets:
United States....................................... $33,731 $30,954 $21,816
The Netherlands..................................... 4,147 5,249 5,238
United Kingdom...................................... 5,099 6,561 5,015
Italy............................................... 1,115 1,643 1,914
Corporate(c)........................................ 19,204 29,282 34,862
------- ------- -------
$63,296 $73,689 $68,845
======= ======= =======
Export Revenues Included in United States Revenues
Above(d):
Europe.............................................. $ 4,733 $ 2,150 $ 4,598
Asia................................................ 6,041 7,881 4,994
Other............................................... 1,249 1,513 330
------- ------- -------
$12,023 $11,544 $ 9,922
======= ======= =======
</TABLE>
- ---------------
(a) Transfers among geographical areas are accounted for at prices that are
representative of transactions with unaffiliated parties.
(b) Primarily corporate general and administrative expenses.
(c) Primarily cash and cash equivalents and available-for-sale investments.
(d) In general, export sales are denominated in U.S. dollars.
F-18
<PAGE> 83
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. EARNINGS PER SHARE
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
OCTOBER 3, SEPTEMBER 27,
1998 1997 1997 1996 1995
---------- ------------- ------ ------- -------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BASIC
Net Income............................ $ 604 $ 254 $ 279 $ 4,469 $ 2,672
------ ------ ------ ------- -------
Weighted Average Shares............... 8,707 9,297 9,182 8,827 6,528
------ ------ ------ ------- -------
Basic Earnings per Share.............. $ .07 $ .03 $ .03 $ .51 $ .41
====== ====== ====== ======= =======
DILUTED
Net Income............................ $ 604 $ 254 $ 279 $ 4,469 $ 2,672
Effect of Convertible Obligations..... -- -- -- 731 1,123
------ ------ ------ ------- -------
Income Available to Common
Shareholders, as Adjusted........... $ 604 $ 254 $ 279 $ 5,200 $ 3,795
------ ------ ------ ------- -------
Weighted Average Shares............... 8,707 9,297 9,182 8,827 6,528
Effect of:
Convertible obligations............. -- -- -- 4,553 6,781
Stock options....................... 65 139 123 248 203
------ ------ ------ ------- -------
Weighted Average Shares, as
Adjusted............................ 8,772 9,436 9,305 13,628 13,512
------ ------ ------ ------- -------
Diluted Earnings per Share............ $ .07 $ .03 $ .03 $ .38 $ .28
====== ====== ====== ======= =======
</TABLE>
The computation of diluted earnings per share in each period excludes the
effect of assuming the exercise of certain outstanding stock options because the
effect would be antidilutive. As of January 3, 1998, there were 347,750 of such
options outstanding, with exercise prices ranging from $7.01 to $14.40 per
share.
In addition, the computation of diluted earnings per share for the
nine-month periods ended October 3, 1998, and September 27, 1997, and for 1997
excludes the effect of assuming the conversion of all of the Company's
convertible obligations (Note 8) because the effect would be antidilutive.
F-19
<PAGE> 84
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
1997 FIRST SECOND(A) THIRD FOURTH
- ---- ------- --------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................... $ 9,716 $11,888 $11,132 $11,912
Gross Profit............................... 4,265 5,446 4,983 5,094
Net Income (Loss).......................... (333) 160 427 25
Basic and Diluted Earnings (Loss) per
Share.................................... (.03) .02 .05 --
</TABLE>
<TABLE>
<CAPTION>
1996 FIRST SECOND(A) THIRD FOURTH
- ---- ------- --------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................... $10,621 $11,882 $12,800 $13,204
Gross Profit............................... 5,231 5,729 6,330 6,860
Net Income................................. 937 1,132 1,194 1,206
Earnings per Share:
Basic.................................... .12 .13 .13 .13
Diluted.................................. .09 .10 .10 .10
</TABLE>
- ---------------
(a) Reflects the April 1997 acquisition of Milmega.
(b) Reflects the July 1996 acquisition of Pacific Power.
14. SUBSEQUENT EVENTS
Offer to Acquire the Outstanding Common Stock of the Company
On March 31, 1998, the Company received a proposal from its parent company,
Thermedics Inc., to acquire, through a merger, all of the outstanding shares of
the Company's common stock that Thermedics does not own, at a price of $7.00 per
share in cash. In addition, the proposal contemplates the redemption of the
Company's $5.3 million principal amount of 3 3/4% convertible subordinated
debentures due 2000. As of October 3, 1998, Thermedics owned 66% of the
outstanding common stock of the Company. Thermedics is a 70%-owned subsidiary of
Thermo Electron Corporation, which in turn owns approximately 3% of the
outstanding common stock of the Company.
The Company appointed a special committee, comprised of certain of its
directors, to evaluate the proposal with the assistance of a financial advisor,
HSBC Securities, Inc. In September 1998, the Company's Board of Directors, upon
recommendation of the special committee, voted to proceed with the Thermedics'
proposal. The merger is still subject to, among other things, approval by the
holders of a majority of the Company's shares, excluding Thermedics, Thermo
Electron, and the directors and officers of Thermedics, Thermo Electron and the
Company; and clearance by the Securities and Exchange Commission (SEC) of the
proxy materials regarding the proposed transaction. Once SEC clearance is
obtained, the Company intends to submit the proposal to a vote of its
shareholders and, if approved, close the transaction in the first quarter of
1999.
In late March and early April, 1998, four putative class actions were filed
in the Court of Chancery of the State of Delaware in and for New Castle County
by stockholders of the Company. On October 6, 1998, the Court of Chancery
entered an order consolidating these four actions under the caption In re Thermo
Voltek Corp. Shareholders Litigation, Consolidated C.A. 16287 (the "Action").
The complaint in the Action names the Company, Thermedics, Thermo Electron, and
directors of the Company as defendants and alleges, among other things, that the
Company's directors violated the fiduciary duties of loyalty, good faith, and
fair dealing that they owed to all stockholders of the Company other than the
named defendants and the affiliates of the named defendants because the proposed
price of $7.00 per share to be paid to the Company's stockholders under the
terms of the proposed Merger Agreement was allegedly unfair and grossly
inadequate. The
F-20
<PAGE> 85
THERMO VOLTEK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
complaints further allege that the Company, Thermedics, and Thermo Electron have
violated their alleged fiduciary duty of fair dealing by proposing the merger
transaction at the time. The complaints request that the Court of Chancery,
among other things, declare that the Action is a proper class action and enjoin
the proposed transaction or order that any transaction be approved by a majority
of the Voltek stockholders other than the named defendants and their affiliates.
On November 17, 1998, the Company, Thermedics, Thermo Electron, and the
individual defendants filed an answer to the complaint in the Action in which
they deny the allegations of any violation of law or breaches of any duty to the
plaintiffs or the purported class set forth in the complaints. Thermedics filed
a motion to dismiss the complaint for, among other things, procedural and
jurisdictional defects and failure to state a claim upon which relief can be
granted, which is currently pending before the court. The parties are currently
conducting discovery. Due to the inherent uncertainty of litigation, the outcome
of this matter cannot be estimated.
Sale of Universal Voltronics Division
In November 1998, the Company sold substantially all of the assets,
excluding real property, of its Universal Voltronics division, to an unrelated
buyer. The purchase price for the transferred assets was $2.5 million in cash,
subject to a post-closing adjustment. The Company expects to realize a nominal
gain from the sale. Universal Voltronics had unaudited revenues and operating
income of $4.4 million and $0.7 million, respectively, in the first nine months
of 1998, and in 1997 had revenues and an operating loss of $3.9 million and
$31,000, respectively.
F-21
<PAGE> 86
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 87
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THERMEDICS INC.
TV ACQUISITION CORPORATION
AND
THERMO VOLTEK CORP.
DATED AS OF NOVEMBER 24, 1998
A-1
<PAGE> 88
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER............................................... A-5
1.1. The Merger.................................................. A-5
1.2. Effective Time; Closing..................................... A-5
1.3. Effect of the Merger........................................ A-5
1.4. Certificate of Incorporation; Bylaws........................ A-5
1.5. Directors and Officers...................................... A-5
1.6. Effect on Capital Stock..................................... A-5
1.7. Surrender of Certificates................................... A-6
1.8. No Further Ownership Rights in Thermo Voltek Common Stock... A-7
1.9. Lost, Stolen or Destroyed Certificates...................... A-7
1.10. Dissenting Shares........................................... A-7
1.11. Taking of Necessary Action; Further Action.................. A-7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THERMO VOLTEK......... A-8
2.1. Organization of Thermo Voltek............................... A-8
2.2. Thermo Voltek Capital Structure............................. A-8
2.3. Authority................................................... A-8
2.4. Board Approval.............................................. A-9
2.5. Fairness Opinion............................................ A-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THERMEDICS AND MERGER
SUB.............................................................. A-9
3.1. Organization................................................ A-9
3.2. Authority................................................... A-9
3.3. Financial Resources......................................... A-10
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME..................... A-10
4.1. Conduct of Business by Thermo Voltek........................ A-10
4.2. Certain Actions by Thermo Voltek............................ A-10
ARTICLE V ADDITIONAL AGREEMENTS.................................... A-11
5.1. Schedule 13E-3; Proxy Statement; Other Filings.............. A-11
5.2. Meeting of Thermo Voltek Stockholders....................... A-12
5.3. Access to Information....................................... A-12
5.4. Public Disclosure........................................... A-12
5.5. Legal Requirements.......................................... A-13
5.6. Notification of Certain Matters............................. A-13
5.7. Best Efforts and Further Assurances......................... A-13
5.8. Stock Options............................................... A-13
5.9. Thermedics Form S-8......................................... A-13
5.10. Indemnification; Insurance.................................. A-14
5.11. Deferred Compensation Plan.................................. A-14
</TABLE>
A-2
<PAGE> 89
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VI CONDITIONS TO THE MERGER................................ A-14
6.1. Conditions to Obligations of Each Party to Effect the
Merger...................................................... A-14
6.2. Additional Conditions to Obligations of Thermo Voltek....... A-14
6.3. Additional Conditions to the Obligations of Thermedics and
Merger Sub.................................................. A-15
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...................... A-15
7.1. Termination................................................. A-15
7.2. Notice of Termination; Effect of Termination................ A-16
7.3. Fees and Expenses........................................... A-16
7.4. Amendment................................................... A-16
7.5. Extension; Waiver........................................... A-16
ARTICLE VIII GENERAL PROVISIONS.................................... A-16
8.1. Non-Survival of Representations and Warranties.............. A-16
8.2. Notices..................................................... A-17
8.3. Counterparts................................................ A-17
8.4. Entire Agreement............................................ A-17
8.5. Severability................................................ A-17
8.6. Other Remedies; Specific Performance........................ A-18
8.7. Governing Law............................................... A-18
8.8. Assignment.................................................. A-18
</TABLE>
A-3
<PAGE> 90
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of November
24, 1998 is by and among Thermedics Inc. ("Thermedics"), a Massachusetts
corporation, TV Acquisition Corporation ("Merger Sub"), a Delaware corporation
and a wholly-owned subsidiary of Thermedics, and Thermo Voltek Corp. ("Thermo
Voltek"), a Delaware corporation.
RECITALS
A. Thermedics and its parent, Thermo Electron Corporation ("Thermo
Electron"), own 66% and 3%, respectively, of the outstanding shares of Common
Stock, par value $0.05 per share, of Thermo Voltek (the "Thermo Voltek Common
Stock"), and Thermedics desires to acquire the remaining outstanding shares of
Thermo Voltek Common Stock.
B. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), Thermedics
and Thermo Voltek will enter into a business combination transaction pursuant to
which Merger Sub will merge with and into Thermo Voltek (the "Merger").
C. The Board of Directors of Thermedics (i) has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Thermedics, and (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
D. The Board of Directors of Thermo Voltek, on the recommendation of a
special committee of the Board of Directors consisting of all directors of
Thermo Voltek that are not officers or directors of Thermedics or Thermo
Electron (the "Special Committee"), (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Thermo
Voltek and fair to, and in the best interests of, Thermo Voltek and its
stockholders other than Thermedics and Thermo Electron, (ii) has approved and
deemed advisable this Agreement, the Merger and the other transactions
contemplated by this Agreement and (iii) has recommended the approval of this
Agreement by the stockholders of Thermo Voltek.
E. Thermedics, Thermo Voltek and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
A-4
<PAGE> 91
ARTICLE I
THE MERGER
1.1. THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the DGCL, Merger Sub shall be merged with and into
Thermo Voltek, the separate corporate existence of Merger Sub shall cease and
Thermo Voltek shall continue as the surviving corporation. Thermo Voltek as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
1.2. EFFECTIVE TIME; CLOSING. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger (the "Certificate of Merger") with the Secretary of
State of the State of Delaware in accordance with the relevant provisions of the
DGCL (the time of such filing, or such later time as may be agreed in writing by
the parties and specified in the Certificate of Merger, being the "Effective
Time" and the date on which the Effective Time occurs being the "Effective
Date") as soon as practicable on the Closing Date (as herein defined). Unless
the context otherwise requires, the term "Agreement" as used herein refers
collectively to this Agreement and the Certificate of Merger. The closing of the
Merger (the "Closing") shall take place at the offices of Palmer & Dodge LLP at
a time and date to be specified by the parties, which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI, or at such other time, date and location as the parties hereto
agree in writing (the "Closing Date"). At the Closing, (i) Thermo Voltek shall
deliver to Thermedics the various certificates and instruments required under
Article VI, (ii) Thermedics and Merger Sub shall deliver to Thermo Voltek the
various certificates and instruments required under Article VI, and (iii) Thermo
Voltek and Merger Sub shall execute and file the Certificate of Merger with the
Secretary of State of the State of Delaware.
1.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the DGCL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the property, rights, privileges, powers and
franchises of Thermo Voltek and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Thermo Voltek and Merger
Sub shall become the debts, liabilities and duties of the Surviving Corporation.
1.4. CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of Thermo
Voltek, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation.
(b) The Bylaws of Thermo Voltek, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5. DIRECTORS AND OFFICERS. The directors of Thermo Voltek immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, to serve until their respective successors are duly elected or
appointed and qualified. The officers of Thermo Voltek immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, to serve
until their successors are duly elected or appointed or qualified.
1.6. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, Thermo Voltek or the
holders of any of the following securities:
(a) Conversion of Thermo Voltek Common Stock. Each share of Thermo
Voltek Common Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of Thermo Voltek Common Stock held in
the treasury of Thermo Voltek, by Thermedics or Thermo Electron or
Dissenting Shares, as defined in Section 1.10 hereof) will be automatically
converted into the right to receive Seven Dollars ($7.00) in cash (the
"Exchange Price") upon surrender of the certificate representing such share
of Thermo Voltek Common Stock in the manner provided in Section 1.7 (or in
the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit (and bond, if required) in the manner provided in Section 1.9).
A-5
<PAGE> 92
(b) Stock Options. All options to purchase Thermo Voltek Common Stock
then outstanding under Thermo Voltek's 1985 Stock Option Plan, 1990 Stock
Option Plan, 1994 Equity Incentive Plan and 1994 Director Stock Option
Plan, each as amended, (together, the "Thermo Voltek Stock Option Plans")
shall be assumed by Thermedics in accordance with Section 5.8 hereof.
(c) Capital Stock of Merger Sub. Each share of Common Stock, par
value $.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding, be cancelled and
retired without payment of any consideration therefor and cease to exist.
(d) Treasury Stock; Affiliate Stock. Each share of Thermo Voltek
Common Stock issued and outstanding and owned by Thermedics and Thermo
Electron shall be converted into one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. All
treasury shares held by Thermo Voltek immediately prior to the Effective
Time shall cease to be outstanding, be cancelled and retired without
payment of any consideration therefor and cease to exist.
(e) Adjustments to Exchange Price. The Exchange Price shall be
adjusted to reflect fully the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Thermo Voltek Common Stock), recapitalization or other
like change without receipt of consideration with respect to Thermo Voltek
Common Stock occurring on or after the date hereof and prior to the
Effective Time.
1.7. SURRENDER OF CERTIFICATES.
(a) Payment Agent. Thermedics shall authorize one or more persons to act
as the payment agent (the "Payment Agent") in the Merger.
(b) Thermedics to Provide Exchange Consideration. Promptly after the
Effective Time, Thermedics shall deposit with the Payment Agent in trust for the
benefit of the holders of certificates (the "Certificates") representing shares
of Thermo Voltek Common Stock converted pursuant to Section 1.6(a) for payment
in accordance with this Article I cash in an amount equal to the product of the
Exchange Price multiplied by the number of shares of Thermo Voltek Common Stock
entitled to payment pursuant to Section 1.6(a).
(c) Exchange Procedures. Promptly after the Effective Time, Thermedics
shall cause the Payment Agent to mail to each holder of record (as of the
Effective Time) of a Certificate (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Payment
Agent and shall be in such form and have such other provisions as Thermedics may
reasonably specify) and (ii) instructions for effecting the exchange of the
Certificates for the Exchange Price. Upon surrender of a Certificate for
cancellation to the Payment Agent or to such other agent or agents as may be
appointed by Thermedics, together with such letter of transmittal duly completed
and validly executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive in exchange therefor payment of
the Exchange Price multiplied by the number of shares of Thermo Voltek Common
Stock represented by such Certificate, without interest, and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each outstanding
Certificate will be deemed from and after the Effective Time, for all corporate
purposes, to evidence only the right to receive payment of the Exchange Price
for each share of Thermo Voltek Common Stock represented on such Certificate.
(d) Transfers of Ownership. If payment of the Exchange Price is to be made
to any person other than the person in whose name the Certificate surrendered in
exchange therefor is registered, it will be a condition of such payment that the
Certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the person requesting such payment will have paid to
Thermedics or any agent designated by it any transfer or other taxes required by
reason of payment to a person other than the registered holder of the
Certificate surrendered, or established to the satisfaction of Thermedics or any
agent designated by it that such tax has been paid or is not payable.
(e) No Liability. Notwithstanding anything to the contrary in this Section
1.7, neither the Payment Agent, Thermedics, the Surviving Corporation nor any
party hereto shall be liable to a holder of shares of
A-6
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Thermo Voltek Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) Responsibility; Term. The Payment Agent shall make the payments
referred to in Section 1.6(a) out of the funds supplied by Thermedics. Promptly
following the date that is six months after the Effective Date, the Payment
Agent shall, upon request by Thermedics, deliver to Thermedics all cash,
Certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Payment Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing shares of Thermo
Voltek Common Stock may surrender such Certificate to Thermedics and (subject to
applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Exchange Price multiplied by the number of shares of Thermo Voltek
Common Stock represented by such Certificate, without any interest thereon, but
shall have no greater rights against Thermedics than as may be accorded to
general creditors of Thermedics under applicable law.
1.8. NO FURTHER OWNERSHIP RIGHTS IN THERMO VOLTEK COMMON STOCK. All
amounts paid upon the surrender of shares of Thermo Voltek Common Stock in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of Thermo Voltek Common
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Thermo Voltek Common Stock that were
outstanding immediately prior to the Effective Time. If after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.9. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Payment Agent shall
pay the aggregate Exchange Price in respect of such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof; provided, however, that, as a condition precedent to the payment
thereof, the owner of such lost, stolen or destroyed Certificates shall deliver
a bond in such sum as it may reasonably direct as indemnity against any claim
that may be made against Thermedics or the Payment Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed, unless Thermedics
waives such requirement in writing.
1.10. DISSENTING SHARES. Notwithstanding any other provision of this
Agreement, shares of Thermo Voltek Common Stock that are outstanding immediately
prior to the Effective Time and which are held by stockholders who shall have
demanded properly in writing appraisal of such shares in accordance with DGCL
Section 262 and who shall not have withdrawn such demand or otherwise forfeited
appraisal rights (collectively, the "Dissenting Shares") shall not be converted
into or represent the right to receive the Exchange Price. Such stockholders
shall, as of the Effective Time, cease to retain any rights with respect to the
Thermo Voltek Common Stock, except as provided in the DGCL including the right
to receive payment of the appraised value of the shares held by them in
accordance with the provisions of Section 262, provided that all Dissenting
Shares held by stockholders (i) who shall have failed to perfect or lost their
rights to appraisal of such shares under Section 262, or (ii) who have
effectively withdrawn their demand for appraisal within 60 days after the
Effective Date and agree to accept the terms offered upon merger in accordance
with Section 262(e), shall thereupon be, or be deemed to have been, converted
into and to have become exchangeable, as of the Effective Time, for the right to
receive, without any interest thereon, the Exchange Price, upon surrender, in
the manner provided in Section 1.7, of the Certificates that formerly evidenced
such shares without the prior consent of Thermedics.
1.11. TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Thermo Voltek and Merger Sub, the officers and directors of
Thermo Voltek and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action, so long as such action is consistent with this Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THERMO VOLTEK
Thermo Voltek represents and warrants to Thermedics and Merger Sub as
follows:
2.1. ORGANIZATION OF THERMO VOLTEK. Thermo Voltek and each of its
subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, has the corporate or similar power to own, lease
and operate its property and to carry on its business as now being conducted and
as proposed by Thermo Voltek to be conducted, and is duly qualified to do
business and in good standing as a foreign corporation or other legal entity in
each jurisdiction in which the failure to be so qualified would have a material
adverse effect on Thermo Voltek.
2.2. THERMO VOLTEK CAPITAL STRUCTURE.
The authorized capital stock of Thermo Voltek consists of 25,000,000 shares
of Common Stock, par value $0.05 per share, of which there were 8,686,583 shares
issued and outstanding as of October 3, 1998, and 1,253,282 shares in treasury
as of October 3, 1998. All outstanding shares of Thermo Voltek Common Stock are
duly authorized, validly issued, fully paid and non-assessable and are not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Thermo Voltek or any agreement or document to which
Thermo Voltek is a party or by which it is bound. As of November 19, 1998, (i)
an aggregate of 1,035,814 shares of Thermo Voltek Common Stock, net of
exercises, were reserved for issuance to employees, consultants and non-employee
directors pursuant to the Thermo Voltek Stock Option Plans, under which options
are outstanding for an aggregate of 721,646 shares, and (ii) an aggregate of
3,135,304 shares of Thermo Voltek Common Stock were reserved for issuance upon
conversion of convertible debentures of Thermo Voltek. All shares of Thermo
Voltek Common Stock subject to issuance as aforesaid, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable.
2.3. AUTHORITY.
(a) Thermo Voltek has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Thermo Voltek, subject only to the adoption of
this Agreement by Thermo Voltek's stockholders and the filing and recording of
the Certificate of Merger pursuant to the DGCL. Under the DGCL, Thermo Voltek's
stockholders may adopt this Agreement by vote of the holders of a majority of
the outstanding shares of Thermo Voltek Common Stock. This Agreement has been
duly executed and delivered by Thermo Voltek, and assuming the due
authorization, execution and delivery by Thermedics and Merger Sub, constitutes
the valid and binding obligation of Thermo Voltek, enforceable in accordance
with its terms. The execution and delivery of this Agreement by Thermo Voltek do
not, and the performance of this Agreement by Thermo Voltek will not, (i)
conflict with or violate the Certificate of Incorporation or Bylaws of Thermo
Voltek, (ii) subject to obtaining the adoption by Thermo Voltek's stockholders
of this Agreement as contemplated in Section 5.2 and compliance with the
requirements set forth in Section 2.3(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Thermo Voltek or
any of its material subsidiaries or by which its or their respective properties
is bound, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair the rights of Thermo Voltek or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Thermo Voltek or any of its
material subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Thermo Voltek or any of its material subsidiaries is a party
or by which Thermo Voltek or any of its material subsidiaries or its or any of
their properties are bound or affected, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, defaults or other occurrences that
would not have a material adverse effect on Thermo Voltek or the Surviving
Corporation; provided, however, that consummation of the transactions
contemplated hereunder shall give the holders of Thermo Voltek's
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3 3/4% Convertible Subordinated Debentures due 2000 the right to cause Thermo
Voltek to redeem such Debentures for a cash amount equal to 100% of the
principal amount to be redeemed plus accrued interest.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental or regulatory body or authority or instrumentality
("Governmental Entity") is required by or with respect to Thermo Voltek in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated, except for (i) the filing of the Certificate
of Merger with the Secretary of State of Delaware, (ii) the filing of the Proxy
Statement (as defined in Section 5.1) with the U.S. Securities and Exchange
Commission ("SEC") in accordance with the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws.
2.4. BOARD APPROVAL. The Board of Directors of Thermo Voltek, upon
recommendation of the Special Committee, has, as of the date of this Agreement,
determined unanimously (i) that the Merger is fair to, and in the best interests
of Thermo Voltek and its stockholders, and (ii) to recommend that the
stockholders of Thermo Voltek approve this Agreement.
2.5. FAIRNESS OPINION. Thermo Voltek has received an opinion from HSBC
Securities, Inc. dated September 23, 1998 and confirmed as of November 5, 1998
that, as of such date, the consideration to be received by Thermo Voltek's
stockholders in the Merger is fair from a financial point of view to Thermo
Voltek's stockholders other than Thermedics and Thermo Electron.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THERMEDICS AND MERGER SUB
Thermedics and Merger Sub represent and warrant to Thermo Voltek as
follows:
3.1. ORGANIZATION. Thermedics is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, each has the
corporate power to own, lease and operate its property and to carry on its
business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on Thermedics or Merger Sub.
3.2. AUTHORITY.
(a) Each of Thermedics and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Thermedics and Merger Sub, subject only to the filing and recording of the
Certificate of Merger pursuant to the DGCL. This Agreement has been duly
executed and delivered by each of Thermedics and Merger Sub and, assuming
the due authorization, execution and delivery of this Agreement by Thermo
Voltek, this Agreement constitutes the valid and binding obligation of each
of Thermedics and Merger Sub, enforceable in accordance with its terms. The
execution and delivery of this Agreement by each of Thermedics and Merger
Sub do not, and the performance of this Agreement by each of Thermedics and
Merger Sub will not, (i) conflict with or violate the Articles of
Organization or Bylaws of Thermedics or the Certificate of Incorporation or
Bylaws of Merger Sub, (ii) subject to compliance with the requirements set
forth in Section 3.2(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Thermedics or any of
its material subsidiaries (including Merger Sub, but excluding Thermo
Voltek and its subsidiaries) or by which its or any of their respective
properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Thermedics' rights or alter the
rights or obligations of any third party under, or give to others
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any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of Thermedics or any of its material subsidiaries (including Merger
Sub, but excluding Thermo Voltek and its subsidiaries) pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Thermedics or
any of its material subsidiaries (including Merger Sub, but excluding
Thermo Voltek and its subsidiaries) is a party or by which Thermedics or
any of its material subsidiaries (including Merger Sub, but excluding
Thermo Voltek and its subsidiaries) or its or any of their respective
properties are bound or affected, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, defaults or other occurrences
that would not have a material adverse effect on Thermedics or Merger Sub.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Thermedics or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Certificate of Merger
with the Secretary of State of Delaware, (ii) the filing of the Schedule
13E-3 (as defined in Section 5.1) with the SEC in accordance with the
Exchange Act, and (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws.
3.3. FINANCIAL RESOURCES. Thermedics has the financial resources to
consummate the transactions contemplated by this Agreement and to pay the
consideration in the Merger provided for in Section 1.6(a).
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1. CONDUCT OF BUSINESS BY THERMO VOLTEK. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Effective Time, Thermo Voltek shall,
except as otherwise contemplated by this Agreement or consented to by
Thermedics, carry on its business in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings.
4.2. CERTAIN ACTIONS BY THERMO VOLTEK. In addition, notwithstanding
Section 4.1 above, without the prior consent of Thermedics, Thermo Voltek shall
not do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize
cash payments in exchange for any options granted under any of such plans;
(b) Enter into any material partnership arrangements, joint
development agreements or strategic alliances;
(c) Grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
pursuant to written agreements outstanding, or policies existing, on the
date hereof, or adopt any new severance plan;
(d) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(e) Issue, deliver, sell, authorize or propose the issuance, delivery
or sale of, any shares of capital stock or any securities convertible into
shares of capital stock, or subscriptions, rights, warrants or options
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to acquire any shares of capital stock or any securities convertible into
shares of capital stock, or enter into other agreements or commitments of
any character obligating it to issue any such shares or convertible
securities, other than the issuance of shares of Thermo Voltek Common Stock
pursuant to the exercise of stock options therefor or conversion of
outstanding convertible debentures outstanding as of the date of this
Agreement;
(f) Cause, permit or propose any amendments to its Certificate of
Incorporation or Bylaws;
(g) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a material portion of the assets
of, or by any other manner, any business or any corporation, partnership
interest, association or other business organization or division thereof,
or otherwise acquire or agree to acquire any assets or enter into any joint
ventures, strategic partnerships or alliances;
(h) Sell, lease, license, encumber or otherwise dispose of any
properties or assets that are material, individually or in the aggregate,
to the business of Thermo Voltek;
(i) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or
sell any debt securities or warrants or guarantee any debt securities of
others;
(j) Adopt or amend any employee benefit or stock purchase or option
plan, or enter into any employment contract, pay any special bonus or
special remuneration to any director or employee, or increase the salaries
or wage rates of its officers or employees, except increases in amounts
consistent with policies and past practices;
(k) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business;
(l) Make any grant of exclusive rights to any third party; or
(m) Agree in writing or otherwise to take any of the actions described
in this Section 4.2.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. SCHEDULE 13E-3; PROXY STATEMENT; OTHER FILINGS.
(a) The information supplied by Thermo Voltek for inclusion or
incorporation by reference in the Rule 13e-3 Transaction Statement on Schedule
13E-3 (such Schedule as amended or supplemented is referred to herein as the
"Schedule 13E-3") or the proxy statement to be sent to the stockholders of
Thermo Voltek in connection with the meeting of Thermo Voltek's stockholders to
consider the adoption of this Agreement and approval of the Merger (the "Thermo
Voltek Stockholders' Meeting") (such proxy statement as amended or supplemented
is referred to herein as the "Proxy Statement") shall not, on the date the Proxy
Statement is first mailed to Thermo Voltek's stockholders and at the time of the
Thermo Voltek Stockholders' Meeting, contain any untrue statement of a material
fact or omit 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 are made, not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier written
communication with respect to the solicitation of proxies for the Thermo Voltek
Stockholders' Meeting or the Schedule 13E-3 which has become false or
misleading. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
(b) The information supplied by Thermedics and Merger Sub for inclusion in
the Schedule 13E-3 and the Proxy Statement shall not, on the date the Proxy
Statement is first mailed to Thermo Voltek's stockholders, and at the time of
the Thermo Voltek Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the
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statements therein, in light of the circumstances under which they are made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier written communication with respect to the solicitation
of proxies for the Thermo Voltek Stockholders' Meeting or the Schedule 13E-3
which has become false or misleading. The Schedule 13E-3 will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
(c) As promptly as practicable after the execution of this Agreement,
Thermedics and Thermo Voltek will prepare and file with the SEC the Schedule
13E-3 and the Proxy Statement. Thermedics and Thermo Voltek will cause the
Schedule 13E-3 and the Proxy Statement to be mailed to stockholders of Thermo
Voltek at the earliest practicable time. Each party will notify the other
promptly upon the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff or any other government officials for amendments
or supplements to the Schedule 13E-3 or the Proxy Statement or any other filing
or for additional information and will supply the other party with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Proxy Statement, the Schedule 13E-3 or the Merger.
Whenever any event occurs that is required to be set forth in an amendment or
supplement to the Schedule 13E-3 or the Proxy Statement, the relevant party will
promptly inform the other party of such occurrence and cooperate in filing with
the SEC or its staff or any other government officials, and/or mailing to
stockholders of Thermo Voltek, such amendment or supplement.
(d) The Proxy Statement will include the recommendations of the Board of
Directors of Thermo Voltek in favor of approval of this Agreement (except that
the Board of Directors of Thermo Voltek may withdraw, modify or refrain from
making such recommendation to the extent that the Board determines in good faith
on the written advice of outside legal counsel that the Board's fiduciary duties
under applicable law require it to do so).
5.2. MEETING OF THERMO VOLTEK STOCKHOLDERS. Promptly after the date
hereof, Thermo Voltek will take all action necessary in accordance with the DGCL
and its Certificate of Incorporation and Bylaws to convene the Thermo Voltek
Stockholders' Meeting to be held as promptly as practicable for the purpose of
voting upon this Agreement. Unless otherwise required by the fiduciary duties of
the Thermo Voltek Board of Directors, Thermo Voltek will use its best efforts to
solicit from its stockholders proxies in favor of the approval of this Agreement
and the Merger, and will take all other action necessary or advisable to secure
the vote or consent of its stockholders required by the DGCL to obtain such
approvals. Each of Thermedics and Thermo Electron shall vote, or cause to be
voted, all of the Thermo Voltek Common Stock then owned by it and any of its
subsidiaries in favor of the approval of the Merger and the authorization and
adoption of this Agreement.
5.3. ACCESS TO INFORMATION. Thermo Voltek will afford Thermedics and its
accountants, counsel and other representatives reasonable access during normal
business hours to the properties, books, records and personnel of Thermo Voltek
during the period prior to the Effective Time to obtain all information
concerning the business, including the status of product development efforts,
properties, results of operations and personnel of Thermo Voltek, as Thermedics
may reasonably request. Thermedics agrees that it will, and will cause its
representatives and agents to, keep all such information confidential and will
not, and will cause its representatives or agents not to, use any information
obtained pursuant to this Section 5.3 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. Notwithstanding
the foregoing, Thermedics shall not be required to keep confidential any
information (i) which is or becomes generally available to the public, other
than by wrongful disclosure by Thermedics or Merger Sub in violation of this
Agreement, (ii) which was available to Thermedics on a nonconfidential basis
prior to disclosure to Thermedics, or (iii) which becomes available to
Thermedics on a nonconfidential basis from a source other than Thermo Voltek.
5.4. PUBLIC DISCLOSURE. Thermedics and Thermo Voltek will consult with
each other before issuing any press release or otherwise making any public
statement with respect to the Merger or this Agreement and will not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with a national
securities exchange.
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5.5. LEGAL REQUIREMENTS. Each of Thermedics, Merger Sub and Thermo Voltek
will take all reasonable actions necessary or desirable to comply promptly with
all legal requirements that may be imposed on them with respect to the
consummation of the transactions contemplated by this Agreement (including
furnishing all information required in connection with approvals of or filings
with any Governmental Entity, and including using its reasonable best efforts to
defend any litigation prompted hereby) and will promptly cooperate with and
furnish information to any party hereto necessary in connection with any such
requirements imposed upon any of them or their respective subsidiaries in
connection with the consummation of the transactions contemplated by this
Agreement.
5.6. NOTIFICATION OF CERTAIN MATTERS. Thermedics and Merger Sub will give
prompt notice to Thermo Voltek, and Thermo Voltek will give prompt notice to
Thermedics, of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be reasonably likely to cause (a) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
to the Effective Time, or (b) any material failure of Thermedics and Merger Sub
or Thermo Voltek, as the case may be, or of any officer, director, employee or
agent thereof, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement. Notwithstanding the
above, the delivery of any notice pursuant to this section will not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice or the conditions to such party's obligation to consummate the Merger.
5.7. BEST EFFORTS AND FURTHER ASSURANCES. Subject to the respective
rights and obligations of Thermedics and Thermo Voltek under this Agreement,
each of the parties to this Agreement will use its reasonable best efforts to
effectuate the Merger and the other transactions contemplated hereby and to
fulfill and cause to be fulfilled the conditions to closing under this
Agreement, it being understood that such efforts shall not include any
obligation to settle any litigation prompted hereby. Each party hereto, at the
reasonable request of another party hereto, will execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
5.8. STOCK OPTIONS. At the Effective Time, each outstanding option to
purchase shares of Thermo Voltek Common Stock (each a "Thermo Voltek Stock
Option") under the Thermo Voltek Stock Option Plans, whether or not exercisable,
will be assumed by Thermedics. Each Thermo Voltek Stock Option so assumed by
Thermedics under this Agreement will continue to have, and be subject to, the
same terms and conditions set forth in the applicable Thermo Voltek Stock Option
Plan immediately prior to the Effective Time (including, without limitation, any
repurchase rights), except that (i) each Thermo Voltek Stock Option will be
exercisable (or will become exercisable in accordance with its terms) for that
number of whole shares of Thermedics Common Stock equal to the product of the
number of shares of Thermo Voltek Common Stock that were issuable upon exercise
of such Thermo Voltek Stock Option immediately prior to the Effective Time
multiplied by a fraction (the "Exchange Ratio"), the numerator of which is the
Exchange Price and the denominator of which is the closing price of the
Thermedics Common Stock on the day immediately preceding the Effective Date as
reported by the American Stock Exchange, rounded down to the nearest whole
number of shares of Thermedics Common Stock, and (ii) the per share exercise
price for the shares of Thermedics Common Stock issuable upon exercise of such
assumed Thermo Voltek Stock Option will be equal to the quotient determined by
dividing the exercise price per share of Thermo Voltek Common Stock at which
such Thermo Voltek Stock Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
After the Effective Time, Thermedics will issue to each holder of an outstanding
Thermo Voltek Stock Option a notice describing the foregoing assumption of such
Thermo Voltek Stock Option by Thermedics. Thermedics will reserve sufficient
shares of Thermedics Common Stock for issuance under this Section 5.8.
5.9. THERMEDICS FORM S-8. Thermedics agrees to file a registration
statement on Form S-8 or, if required, an amendment to Thermedics' then
effective registration statement on Form S-8, for the shares of Thermedics
Common Stock issuable with respect to the assumed Thermo Voltek Stock Options no
later than thirty (30) business days after the Closing Date and shall keep such
registration statement effective for so long as any such Options remain
outstanding.
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5.10. INDEMNIFICATION; INSURANCE.
(a) From and for a period of six (6) years after the Effective Time,
Thermedics will and will cause the Surviving Corporation to fulfill and honor in
all respects the indemnification obligations of Thermo Voltek pursuant to the
provisions of the Certificate of Incorporation and the Bylaws of Thermo Voltek
as in effect immediately prior to the Effective Time. The Certificate of
Incorporation and Bylaws of the Surviving Corporation will contain the
provisions with respect to indemnification and elimination of liability for
monetary damages set forth in the Certificate of Incorporation and Bylaws of
Thermo Voltek, which provisions will not be amended, repealed or otherwise
modified for a period of six (6) years from the Effective Time in any manner
that would adversely affect the rights thereunder of individuals who, at the
Effective Time, were directors or officers of Thermo Voltek, unless such
modification is required by law.
(b) For a period of six (6) years after the Effective Time, Thermedics
shall cause the Surviving Corporation to, either directly or through
participation in Thermo Electron's umbrella policy, maintain in effect a
directors' and officers' liability insurance policy covering those Thermo Voltek
directors and officers currently covered by Thermo Electron's liability
insurance policy with coverage in amount and scope at least as favorable as
existing coverage for such Thermo Voltek directors and officers (which coverage
may be an endorsement extending the period in which claims may be made under
such existing policy); provided, however, that in no event shall the Surviving
Corporation be required to expend to maintain or procure insurance coverage
pursuant to this Section 5.10, directly or through participation in Thermo
Electron's policy, an amount per annum in excess of 175% of the current annual
premiums allocable and payable by Thermo Voltek (the "Maximum Premium") with
respect to such insurance, or, if the cost of such insurance exceeds the Maximum
Premium, the maximum amount of coverage that can be purchased or maintained for
the Maximum Premium.
5.11. DEFERRED COMPENSATION PLAN. At the Effective Time, each unit of
Common Stock accumulated under the Thermo Voltek directors' deferred
compensation plan (the "Deferred Compensation Plan") will be automatically
converted into the Exchange Price and the amounts then held under the Deferred
Compensation Plan shall be paid to each director who is a participant in
accordance with the Plan.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been (i) approved
and adopted by the requisite vote under the DGCL by the stockholders of
Thermo Voltek, and (ii) approved by the affirmative vote of a majority of
the outstanding shares of Thermo Voltek Common Stock that are voted at the
Thermo Voltek Stockholders' Meeting (other than shares of Thermo Voltek
Common Stock held by Thermedics, Thermo Electron and the officers and
directors of Thermo Voltek, Thermedics and Thermo Electron).
(b) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger.
6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THERMO VOLTEK. The
obligations of Thermo Voltek to consummate and effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
Thermo Voltek:
(a) Representations and Warranties. The representations and
warranties of Thermedics and Merger Sub contained in this Agreement shall
be true and correct on and as of the Effective Time, except for changes
contemplated by this Agreement and except for those representations and
warranties that
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address matters only as of a particular date (which shall remain true and
correct as of such particular date), with the same force and effect as if
made on and as of the Effective Time, except, in all such cases, where the
failure to be so true and correct would not have a material adverse effect
on Thermedics; and Thermo Voltek shall have received a certificate to such
effect signed on behalf of Thermedics by the Chief Executive Officer,
President or Chief Operating Officer of Thermedics; and
(b) Agreements and Covenants. Thermedics and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and Thermo Voltek shall have
received a certificate to such effect signed on behalf of Thermedics by the
Chief Executive Officer, President or Chief Operating Officer of
Thermedics.
6.3. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THERMEDICS AND MERGER
SUB. The obligations of Thermedics and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing,
exclusively by Thermedics:
(a) Representations and Warranties. The representations and
warranties of Thermo Voltek contained in this Agreement shall be true and
correct on and as of the Effective Time, except for changes contemplated by
this Agreement and except for those representations and warranties that
address matters only as of a particular date (which shall remain true and
correct as of such particular date), with the same force and effect as if
made on and as of the Effective Time, except, in all such cases, where the
failure to be so true and correct would not have a material adverse effect
on Thermo Voltek; and Thermedics and Merger Sub shall have received a
certificate to such effect signed on behalf of Thermo Voltek by the Chief
Executive Officer, President or Chief Operating Officer of Thermo Voltek;
and
(b) Agreements and Covenants. Thermo Voltek shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time, and the Thermedics shall have received a
certificate to such effect signed on behalf of Thermo Voltek by the Chief
Executive Officer, President or Chief Operating Officer of Thermo Voltek.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval of the Merger
by the stockholders of Thermo Voltek:
(a) by mutual written consent duly authorized by the Boards of
Directors of Thermedics and Thermo Voltek (upon approval of the Special
Committee);
(b) by either Thermo Voltek (upon approval of the Special Committee)
or Thermedics if the Merger shall not have been consummated by June 30,
1999; provided, however, that the right to terminate this Agreement under
this Section 7.1(b) shall not be available to any party whose action or
failure to act has been a principal cause of or resulted in the failure of
the Merger to occur on or before such date if such action or failure to act
constitutes a breach of this Agreement;
(c) by either Thermo Voltek (upon approval of the Special Committee)
or Thermedics if a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued an
order, decree or ruling or taken any other action (an "Order"), in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree or ruling is final and
nonappealable;
(d) by either Thermo Voltek (upon approval of the Special Committee)
or Thermedics if the required approval of the stockholders of Thermo Voltek
contemplated by this Agreement shall not have been obtained by reason of
the failure to obtain the required vote upon a vote taken at a meeting of
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stockholders duly convened therefor or at any adjournment thereof (provided
that the right to terminate this Agreement under this Section 7.1(d) shall
not be available to Thermo Voltek where the failure to obtain stockholder
approval of Thermo Voltek shall have been caused by the action or failure
to act of Thermo Voltek in breach of this Agreement and the right to
terminate this Agreement under this Section 7.1(d) shall not be available
to Thermedics where the failure to obtain the requisite vote by the
stockholders of Thermo Voltek shall have been caused by the failure of
Thermedics or Thermo Electron to vote their respective shares of Thermo
Voltek Common Stock in favor of the Merger and this Agreement);
(e) by Thermo Voltek if the Thermo Voltek Board of Directors (upon
approval of the Special Committee) determines in good faith on the advice
of outside legal counsel that the Board's fiduciary duties under applicable
law requires it to do so;
(f) by Thermo Voltek (upon approval of the Special Committee), upon a
breach of any representation, warranty, covenant or agreement on the part
of Thermedics set forth in this Agreement, if (i) as a result of such
breach the conditions set forth in Section 6.2(a) or Section 6.2(b) would
not be satisfied as of the time of such breach and (ii) such breach shall
not have been cured by Thermedics within ten (10) business days following
receipt by Thermedics of written notice of such breach from Thermo Voltek;
or
(g) by Thermedics, upon a breach of any representation, warranty,
covenant or agreement on the part of Thermo Voltek set forth in this
Agreement, if (i) as a result of such breach the conditions set forth in
Section 6.3(a) or Section 6.3(b) would not be satisfied as of the time of
such breach and (ii) such breach shall not have been cured by Thermo Voltek
within ten (10) business days following receipt by Thermo Voltek of written
notice of such breach from Thermedics.
7.2. NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of
this Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except that nothing
herein shall relieve any party from liability for any willful breach of this
Agreement.
7.3 FEES AND EXPENSES. All fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, whether or not the Merger is consummated.
7.4. AMENDMENT. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of the parties hereto; provided, however, that Thermo
Voltek may not amend this Agreement without the approval of the Special
Committee.
7.5. EXTENSION; WAIVER. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein; provided, however, that Thermo Voltek may not take
any such actions without the approval of the Special Committee. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Thermo Voltek, Thermedics and Merger Sub contained in this
Agreement shall terminate at the Effective Time, and only the covenants that by
their terms survive the Effective Time shall survive the Effective Time.
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8.2. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Thermedics or Merger Sub, to:
Thermedics Inc.
470 Wildwood Street
Woburn, MA 01888
Attention: President
Telephone: (781) 938-3786
Facsimile: (781) 933-4476
with a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02454
Attention: General Counsel
Telephone: (781) 622-1000
Facsimile: (781) 622-1283
(b) if to Thermo Voltek, to:
Thermo Voltek Corp.
470 Wildwood Street
P.O. Box 2878
Woburn, MA 01888
Attention: President
Telephone: (617) 622-1000
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108
Attention: Stanley Keller
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
8.3. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.4. ENTIRE AGREEMENT. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein (a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; and (b) are not intended to confer upon any other person any rights or
remedies hereunder, except as set forth herein.
8.5. SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
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8.6. OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, regardless of the
laws that might otherwise govern under applicable principles of conflicts of law
thereof, except to the extent that the DGCL applies.
8.8. ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the of the other parties.
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IN WITNESS WHEREOF, Thermedics, Merger Sub, and Thermo Voltek have caused
this Agreement to be signed by themselves or their duly authorized respective
officers, all as of the date first written above.
THERMEDICS INC.
By: /s/ JOHN T. KEISER
------------------------------------
JOHN T. KEISER
PRESIDENT
THERMO VOLTEK CORP.
By: /s/ COLIN I.W. BAXTER
------------------------------------
COLIN I.W. BAXTER
PRESIDENT AND CHIEF OPERATING
OFFICER
TV ACQUISITION CORPORATION
By: /s/ JOHN T. KEISER
------------------------------------
JOHN T. KEISER
PRESIDENT
Thermo Electron Corporation joins this Agreement for the specific purpose
of consenting to the provisions of Section 1.6 hereof and agreeing to perform
its obligations under Section 5.2 hereof.
THERMO ELECTRON CORPORATION
By: /s/ KENNETH J. APICERNO
------------------------------------
KENNETH J. APICERNO
TREASURER
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APPENDIX B
HSBC SECURITIES, INC.
140 Broadway, New York, NY 10005
November 24, 1998
Special Committee of the Board of Directors
Thermo Voltek Corp.
470 Wildwood Street
Woburn, MA 01888-1578
Dear Sirs:
Thermo Voltek Corp. (the "Company"), Thermedics Inc. (the "Buyer") and TV
Acquisition Corporation, a newly formed, wholly owned subsidiary of the Buyer
("Merger Sub"), have entered into an Agreement and Plan of Merger (the
"Agreement"), pursuant to which Merger Sub will merge with and into the Company
(the "Merger") and each share of common stock, par value $0.05 per share (the
"Shares"), of the Company outstanding immediately prior to the Merger (other
than Shares held in treasury or held by the Buyer and Thermo Electron
Corporation or as to which dissenters rights have been perfected) will be
automatically converted into the right to receive $7.00 in cash (the
"Consideration").
You have requested our opinion as to whether the Consideration to be
received by holders of Shares is fair from a financial point of view to such
holders, other than the Buyer and its affiliates.
In arriving at our opinion expressed herein, we have: (1) reviewed the
Agreement; (2) reviewed certain publicly available financial statements and
other information of the Company; (3) reviewed certain internal business plans
and financial forecasts of the Company, as prepared by senior management of the
Company; (4) conducted discussions with senior management of the Company
concerning the matters described in clauses (2) and (3) above; (5) reviewed the
results of operations of the Company and compared them with those of certain
publicly traded companies that we deemed to be relevant; (6) considered the
financial terms, to the extent publicly available, of certain other transactions
that we deemed to be relevant; (7) reviewed the stock market trading price
ranges and valuation multiples for the Shares and compared them with those of
certain publicly traded companies that we deemed to be relevant; and (8)
conducted such other financial studies, analyses and investigations as we deemed
appropriate.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of the Company. With respect
to the financial forecast information furnished to or discussed with us by the
Company, we have assumed that it has been reasonably prepared and reflects the
best currently available estimates and judgment of the Company's management as
to the expected future financial performance of the Company.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, November 24, 1998.
We are acting as financial advisor to the Special Committee of the
Company's Board of Directors in connection with the Merger and will receive a
fee from the Company for our services, payable at the time of delivery of our
opinion as to whether the Consideration to be received by the holders of the
Shares other than the Buyer and its affiliates pursuant to the Merger is fair
from a financial point of view. In addition, the Company has agreed to indemnify
us for certain liabilities arising out of our engagement. In connection with our
engagement to provide financial advisory services to the Special Committee of
the Board of Directors concerning strategic alternatives, we were authorized to
solicit, and did solicit, interest from third parties with
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respect to the acquisition of the Company. In arriving at our opinion, we have
considered the nature, scope and results of such solicitation. We have, in the
past, provided financial advisory and financing services to affiliates of the
Company and may continue to do so and have received, and may receive, fees for
the rendering of such services. In addition, in the ordinary course of our
business, we may actively trade the securities of the Buyer, as well as
securities of affiliates of the Buyer for our own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Special Committee of the
Board of Directors of the Company. Our opinion does not address the merits of
the underlying decision by the Company to engage in the Merger and does not
constitute a recommendation to any shareholder as to how such shareholder should
vote on the proposed Merger or any matter related thereto.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Consideration to be received by the holders of the
Shares pursuant to the Merger is fair from a financial point of view to the
holders of such Shares, other than the Buyer and its affiliates.
Very truly yours,
HSBC SECURITIES, INC.
By: /s/ THOMAS R. CALLAHAN
----------------------------------
THOMAS R. CALLAHAN
EXECUTIVE MANAGING DIRECTOR
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APPENDIX C
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
SECTION 262 APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph(1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to sec.sec. 251, 252, 254, 257,
258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to sec. 228 or
sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
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(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
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<PAGE> 112
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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APPENDIX D
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY, THERMEDICS, THE MERGER SUB AND THERMO ELECTRON
The following individuals are executive officers or directors of the
Company, Thermedics, the Merger Sub or Thermo Electron. Unless otherwise noted,
all such individuals are citizens of the United States. Unless otherwise noted,
the business address of each executive officer and director (i) of the Company
is 470 Wildwood Street, Woburn, Massachusetts 01888; (ii) of Thermedics is 470
Wildwood Street, Woburn, Massachusetts 01888; (iii) of the Merger Sub is 470
Wildwood Street, Woburn, Massachusetts 01888; and (iv) of Thermo Electron is 81
Wyman Street, Waltham, Massachusetts 02454-9046.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
John W. Wood Jr.: Chairman and Chief Executive Officer
John W. Wood Jr. has been a director of the Company and chairman of the
board since 1990. Mr. Wood has been the chief executive officer of the Company
since 1992, and was also the president of the Company from 1992 to January 1997.
Mr. Wood is also a director of Thermedics. For further information, please see
descriptions under "Directors and Executive Officers of Thermedics" and
"Directors and Executive Officers of Thermo Electron", below.
Colin I.W. Baxter: President and Chief Operating Officer
Colin I.W. Baxter has been president and chief operating officer of the
Company since February 1997. Mr. Baxter has been president of the Company's
Kalmus division since May 1995, and from July 1996 to January 1997 was president
of the Company's Pacific Power Source division. Prior to joining the Company,
Mr. Baxter was president and chief executive officer of Dranetz Technologies,
Inc., a designer and manufacturer of electronic instruments for measuring and
monitoring electrical power quality, demand and sequence of events recorders.
Theo Melas-Kyriazi: Chief Financial Officer and Director
Theo Melas-Kyriazi has been a director of the Company since 1990 and has
been chief financial officer of the Company since January 1999. Since March
1998, he has also served as vice president of Thermo Electron and since January
1999, he has served as chief financial officer of Thermedics and Thermo
Electron. Mr. Melas-Kyriazi was treasurer of the Company from January 1991 to
September 1994 and was treasurer of Thermo Electron from May 1988 to August
1994. From August 1994 through March 1998, he served as president and chief
executive officer of ThermoSpectra Corporation, a manufacturer of precision
imaging, inspection, temperature control and test and measurement instruments.
Mr. Melas-Kyriazi is also a director of the following affiliates of Thermo
Electron: ThermoRetec Corporation and ThermoSpectra Corporation. Mr.
Melas-Kyriazi is a citizen of Greece. Mr. Melas-Kyriazi's business address is 81
Wyman Street, Waltham, Massachusetts 02454. For further information, please see
descriptions under "Directors and Executive Officers of Thermedics" and
"Directors and Executive Officers of Thermo Electron", below.
Paul F. Kelleher: Chief Accounting Officer
Paul F. Kelleher has been the chief accounting officer of the Company since
1990. He is a director of ThermoLase Corporation, an affiliate of Thermo
Electron. Mr. Kelleher's business address is 81 Wyman Street, Waltham,
Massachusetts 02454. For further information, please see descriptions under
"Directors and Executive Officers of Thermedics" and "Directors and Executive
Officers of Thermo Electron", below.
Elias P. Gyftopoulos: Director
Elias P. Gyftopoulos has been a director of the Company since 1994. He is
Professor Emeritus at The Massachusetts Institute of Technology, where he was
the Ford Professor of Mechanical Engineering and of
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<PAGE> 114
Nuclear Engineering for more than 20 years until his retirement in 1996. Dr.
Gyftopoulos is also a director of Thermo Electron and the following affiliates
of Thermo Electron: Thermo BioAnalysis Corporation, Thermo Cardiosystems Inc.,
ThermoLase Corporation, ThermoRetec Corporation, ThermoSpectra Corporation,
Thermo Vision Corporation and Trex Medical Corporation. His business address is
The Massachusetts Institute of Technology, Room 24-109, 77 Massachusetts Avenue,
Cambridge, Massachusetts 02139. For further information, please see description
under "Directors and Executive Officers of Thermo Electron", below.
William W. Hoover: Director
William W. Hoover has been a director of the Company since 1986. Mr. Hoover
is a retired U.S. Air Force Major General and former assistant secretary of the
U.S. Department of Energy. Since 1993, Mr. Hoover has been president of Hoover
Associates, a consulting firm. Prior to 1993, Mr. Hoover was executive vice
president of Air Transport Association of America, a position he held for more
than five years. Mr. Hoover's business address is 81 Wyman Street, Waltham,
Massachusetts 02454.
Sandra L. Lambert: Director
Sandra L. Lambert has been a director of the Company since 1990. Ms.
Lambert has been secretary of the Company since January 1991 and secretary and
senior counsel of Thermo Electron since July 1990. For more than five years
prior to that time, she was associate general counsel of Thermo Electron. Ms.
Lambert also serves as clerk of Thermedics. Her business address is 81 Wyman
Street, Waltham, Massachusetts 02454.
Peter Richman: Director
Peter Richman has been a director of the Company since 1993. Mr. Richman
was a consultant to Thermedics and its subsidiaries, including the Company, on
corporate development and acquisition strategies from March 1993 to March 1995.
For more than five years prior to that time, he was president and chief
executive officer of KeyTek Instrument Corp., a manufacturer of electromagnetic
compatibility testing equipment that was purchased in 1993 by the Company. Mr.
Richman is also a director of Thermo Sentron Inc., a majority-owned subsidiary
of Thermedics. Mr. Richman's business address is 81 Wyman Street, Waltham,
Massachusetts 02454.
DIRECTORS AND EXECUTIVE OFFICERS OF THERMEDICS
John T. Keiser: President and Chief Executive Officer
John T. Keiser has been president of Thermedics since March 1998, chief
executive officer since December 1998, and was a senior vice president of
Thermedics from 1994 until March 1998. Mr. Keiser has been a director of
Thermedics since April 1997. Mr. Keiser was president of the Eberline Instrument
division of Thermo Instrument Systems Inc. ("Thermo Instrument"), a
majority-owned subsidiary of Thermo Electron, from 1985 to July 1994. Mr. Keiser
is also a director of the following affiliates of Thermo Electron: Metrika
Systems Corporation, Thermedics Detection Inc., ThermoTrex Corporation,
ThermoLase Corporation, Trex Medical Corporation, Thermo Sentron Inc. and Thermo
Cardiosystems Inc. For further information, please see descriptions under
"Directors and Executive Officers of the Merger Sub" and "Directors and
Executive Officers of Thermo Electron", below.
Paul F. Kelleher: Chief Accounting Officer
Paul F. Kelleher has been the chief accounting officer of Thermedics since
1985. For further information, please see descriptions under "Directors and
Executive Officers of the Company", above, and "Directors and Executive Officers
of Thermo Electron", below.
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<PAGE> 115
Theo Melas-Kyriazi: Chief Financial Officer
Theo Melas-Kyriazi has been the chief financial officer of Thermedics since
January 1999. For further information, please see descriptions under "Directors
and Executive Officers of the Company", above, and "Directors and Executive
Officers of Thermo Electron", below.
John W. Wood Jr.: Chairman of the Board
John W. Wood Jr. has been a director of Thermedics since 1984 and has been
chairman of the board since March 1998. For further information, please see
descriptions under "Directors and Executive Officers of the Company", above, and
"Directors and Executive Officers of Thermo Electron", below.
T. Anthony Brooks: Director
T. Anthony Brooks has been a director of Thermedics since September 1998.
Mr. Brooks was a Managing Director of Lehman Brothers Inc. for more than five
years until his retirement in January 1997. From 1991 to 1994, Mr. Brooks was
head of Lehman Brothers' Global Equity Capital Markets division, and from 1995
to 1996, Mr. Brooks was head of Lehman Brothers' European Equity division. Mr.
Brooks' business address is 81 Wyman Street, Waltham, Massachusetts 02454.
Peter O. Crisp: Director
Peter O. Crisp has been a director of Thermedics since 1983. Mr. Crisp was
a general partner of Venrock Associates, a venture capital investment firm, for
more than five years until his retirement in September 1997. Mr. Crisp is also a
director of American Superconductor Corporation, Evans & Sutherland Computer
Corporation, United States Trust Corporation, Thermo Electron and the following
affiliates of Thermo Electron: Thermo Power Corporation and ThermoTrex
Corporation. His address is 103 Horseshoe Road, Mill Neck, New York 11765. For
further information, please see description under "Directors and Executive
Officers of Thermo Electron", below.
Paul F. Ferrari: Director
Paul Ferrari has been a director of Thermedics since 1991. Since 1991, he
has been a consultant to various companies, including Thermo Electron and its
subsidiaries. Mr. Ferrari was a vice president of Thermo Electron from 1988
until his retirement at the end of 1990, its secretary from 1981 to 1990, and
its treasurer from 1967 to 1988. He served as Thermedics' clerk from 1983 to
1990 and its treasurer from 1983 to 1988. Mr. Ferrari is also a director of
General Scanning Inc. and ThermoTrex Corporation, an affiliate of Thermo
Electron. Mr. Ferrari's business address is 81 Wyman Street, Waltham,
Massachusetts 02454.
George N. Hatsopoulos: Director
George N. Hatsopoulos has been a director of Thermedics since 1983. Dr.
Hatsopoulos is also a director of Photoelectron Corporation, Thermo Electron and
the following affiliates of Thermo Electron: Thermo Fibertek Inc., Thermo
Instrument, Thermo Optek Corporation, ThermoQuest Corporation and ThermoTrex
Corporation. For further information, please see description under "Directors
and Executive Officers of Thermo Electron", below.
John N. Hatsopoulos: Director
John N. Hatsopoulos has been a director of Thermedics since March 1995. Mr.
Hatsopoulos was chairman of the board of Thermedics from March 1995 to March
1998. He served as Thermedics' chief financial officer from 1988 through
December 1998 and its senior vice president from December 1997 through December
1998. He was a vice president of Thermedics from 1986 through December 1997. Mr.
Hatsopoulos is also a director of LOIS/USA Inc., U S Liquids Inc. and the
following affiliates of Thermo Electron: Thermo Ecotek Corporation, Thermo
Fibertek Inc., Thermo Instrument Systems Inc., Thermo Power Corporation and
Thermo TerraTech Inc. Mr. Hatsopoulos' business address is 81 Wyman Street,
Waltham,
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<PAGE> 116
Massachusetts 02454. For further information, please see description under
"Directors and Executive Officers of Thermo Electron", below.
Nicholas T. Zervas: Director
Nicholas T. Zervas has been a director of Thermedics since 1987. Dr. Zervas
has been Chief of Neurosurgical Service, Massachusetts General Hospital, since
1977. Dr. Zervas is also a director of the following affiliates of Thermo
Electron: Thermo Cardiosystems Inc., ThermoLase Corporation and ThermoTrex
Corporation. His business address is Massachusetts General Hospital,
Neurosurgery Department, Boston, Massachusetts 02114.
DIRECTORS AND EXECUTIVE OFFICERS OF THE MERGER SUB
John T. Keiser has been the Merger Sub's president and sole director since
the Merger Sub's formation in November 1998. Mr. Keiser's business address is 81
Wyman Street, Waltham, Massachusetts 02454. For further information, please see
description under "Directors and Executive Officers of Thermedics", above, and
"Directors and Executive Officers of Thermo Electron", below.
DIRECTORS AND EXECUTIVE OFFICERS OF THERMO ELECTRON
George N. Hatsopoulos: Director, Chairman of the Board and Chief Executive
Officer
Dr. Hatsopoulos has been the chairman of the board and chief executive
officer of Thermo Electron since he founded that company in 1956, and was
president of Thermo Electron from 1956 to January 1997. For further information,
please see description under "Directors and Executive Officers of Thermedics",
above.
John N. Hatsopoulos: Director and Vice Chairman of the Board
John N. Hatsopoulos was the chief financial officer of Thermo Electron from
1988 through December 1998. Mr. Hatsopoulos became a director of Thermo Electron
in September 1997, and became vice chairman of the board of Thermo Electron in
September 1998. Mr. Hatsopoulos served as the president of Thermo Electron from
January 1997 until September 1998. Prior to being named president of Thermo
Electron in January 1997, Mr. Hatsopoulos served as an executive vice president,
a position he had held since 1986. For further information, please see
description under "Directors and Executive Officers of Thermedics", above.
Arvin H. Smith: President
Mr. Smith became president of Thermo Electron in September 1998. Prior to
that time, Mr. Smith had been an executive vice president of Thermo Electron
since 1991 and was a senior vice president of Thermo Electron from 1986 to 1991.
Mr. Smith served as president and chief executive officer of Thermo Instrument
from 1986 to March 1997 and January 1998, respectively. Mr. Smith has been a
director of Thermo Instrument, an affiliate of Thermo Electron, since 1986, and
chairman of the board since March 1997.
Brian D. Holt: Chief Operating Officer, Energy & Environmental
Mr. Holt became chief operating officer, energy & environmental, of Thermo
Electron in September 1998. Mr. Holt has been President and Chief Executive
Officer of Thermo Ecotek Corporation ("Thermo Ecotek"), a majority-owned
subsidiary of Thermo Electron, since February 1994, and has been a director of
Thermo Ecotek since January 1995. For more than five years prior to his
appointment as an officer of Thermo Ecotek, he was president and chief executive
officer of Pacific Generation Company, a financier, builder, owner and operator
of independent power facilities. Mr. Holt is also a director of KFx, Inc. and
the following affiliates of Thermo Electron: Thermo Power Corporation,
ThermoRetec Corporation, The Randers Group Incorporated and Thermo TerraTech
Inc. Mr. Holt's business address is 245 Winter Street, Suite 300, Waltham,
Massachusetts 02451.
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John T. Keiser: Chief Operating Officer, Biomedical & Advanced Technology
In September 1998, Mr. Keiser became chief operating officer, biomedical
and new technologies, of Thermo Electron. He has also been the president of
Thermo Biomedical Inc., a wholly owned subsidiary of Thermo Electron, since
1994. Mr. Keiser's business address is 81 Wyman Street, Waltham, Massachusetts
02454. For further information, please see description under "Directors and
Executive Officers of Thermedics" and "Directors and Executive Officers of the
Merger Sub", above.
Earl R. Lewis: Chief Operating Officer, Instrumentation
Mr. Lewis became chief operating officer, instrumentation, of Thermo
Electron in September 1998, and had been a vice president of Thermo Electron
since September 1996. Mr. Lewis has been a director and the chief executive
officer of Thermo Instrument since January 1998, and has been president of
Thermo Instrument since March 1997. He was chief operating officer of Thermo
Instrument from January 1996 to January 1998. Prior to that time, he was
executive vice president of Thermo Instrument from January 1996 to March 1997,
senior vice president from January 1994 to January 1996, and vice president from
March 1992 to January 1994. Prior to his appointment as Thermo Instrument's
chief executive officer, Mr. Lewis was also chief executive officer of Thermo
Optek Corporation, a majority-owned subsidiary of Thermo Instrument, from its
inception in August 1995 to January 1998 and was the president of its
predecessor, Thermo Jarrell Ash Corporation for more than five years prior to
1995. Mr. Lewis is also a director of the following affiliates of Thermo
Electron: Metrika Systems Corporation, ONIX Systems Inc., Thermo BioAnalysis
Corporation, Thermo Optek Corporation, ThermoQuest Corporation, ThermoSpectra
Corporation and Thermo Vision Corporation.
William A. Rainville: Chief Operating Officer, Recycling and Resource Recovery
Mr. Rainville became chief operating officer, recycling and resource
recovery, of Thermo Electron in September 1998. Prior to that time, Mr.
Rainville had been a senior vice president of Thermo Electron since March 1993
and was a vice president of Thermo Electron from 1986 to 1993. Mr. Rainville has
been president and chief executive officer of Thermo Fibertek Inc. ("Thermo
Fibertek"), a majority-owned subsidiary of Thermo Electron, since its inception
in 1991 and a director since January 1992. From 1984 until January 1993, Mr.
Rainville was the president and chief executive officer of Thermo Web Systems
Inc., a subsidiary of Thermo Fibertek. Mr. Rainville is also a director of the
following affiliates of Thermo Electron: Thermo Ecotek, Thermo Fibergen Inc.,
ThermoRetec Corporation, and Thermo TerraTech Inc. Mr. Rainville's business
address is 245 Winter Street, Waltham, Massachusetts 02451.
Theo Melas-Kyriazi: Chief Financial Officer and Vice President
Theo Melas-Kyriazi has been chief financial officer of Thermo Electron
since January 1999 and vice president since March 1998. In addition, Mr.
Melas-Kyriazi was treasurer of Thermo Electron from May 1988 to August 1994. For
further information, please see description under "Directors and Executive
Officers of the Company" and "Directors and Executive Officers of Thermedics",
above.
Paul F. Kelleher: Senior Vice President, Finance & Administration
Paul F. Kelleher has been senior vice president, finance & administration,
of Thermo Electron since June 1997, and served as its vice president, finance
from 1987 until 1997. Mr. Kelleher served as Thermo Electron's controller from
1982 until January 1996. For further information, please see description under
"Directors and Executive Officers of the Company" and "Directors and Executive
Officers of Thermedics", above.
John W. Wood Jr.: Senior Vice President
John W. Wood Jr. has been senior vice president of Thermo Electron since
December 1995, and prior to that time had been a vice president of Thermo
Electron since September 1994. For further information, please see descriptions
under "Directors and Executive Officers of the Company" and "Directors and
Executive Officers of Thermedics", above.
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Peter G. Pantazelos: Executive Vice President, Corporate Development
Peter G. Pantazelos has been executive vice president, corporate
development of Thermo Electron since 1968.
John M. Albertine: Director
John M. Albertine has been a director of Thermo Electron since 1986. Dr.
Albertine is chairman of the board and chief executive officer of Albertine
Enterprises, Inc., an economic- and public-policy consulting and full-service
mergers and acquisitions firm he founded in 1990. Dr. Albertine is also a
director of American Precision Industries, Inc., Intermagnetics General Corp.
and U.S. Cast Products Inc. His business address is Albertine Enterprises, Inc.,
1156 15th Street N.W., Suite 505, Washington, D.C. 20005.
Peter O. Crisp: Director
Peter O. Crisp has been a director of Thermo Electron since 1974. For
further information, please see description under "Directors and Executive
Officers of Thermedics", above.
Elias P. Gyftopoulos: Director
Elias P. Gyftopoulos has been a director of Thermo Electron since 1976. For
further information, please see description under "Directors and Executive
Officers of the Company", above.
Frank Jungers: Director
Frank Jungers has been a director of Thermo Electron since 1978. Mr.
Jungers has been a consultant on business and energy matters since 1977. Mr.
Jungers was employed by the Arabian American Oil Company from 1974 through 1977
as chairman and chief executive officer. Mr. Jungers is also a director of The
AES Corporation, Donaldson, Lufkin & Jenrette, Georgia-Pacific Corporation, and
the following affiliates of Thermo Electron: Thermo Ecotek, ThermoQuest
Corporation and ONIX Systems Inc. His business address is 822 NW Murray, Suite
242, Portland, Oregon 97229.
Robert A. McCabe: Director
Robert A. McCabe has been a director of Thermo Electron since 1962. He has
served as president of Pilot Capital Corporation, which is engaged in private
investments and provides acquisition services, since 1987. Prior to that time
Mr. McCabe was a managing director of Lehman Brothers Inc., an investment
banking firm. Mr. McCabe is also a director of Borg-Warner Security Corporation,
Church & Dwight Company, Morrison-Knudsen Corporation and Thermo Optek
Corporation, an affiliate of Thermo Electron. His business address is Pilot
Capital Corporation, 444 Madison Avenue, Suite 2103, New York, New York 10022.
Donald E. Noble: Director
Donald E. Noble has been a director of Thermo Electron since 1983. For more
than 20 years, from 1959 to 1980, Mr. Noble served as the Chief Executive
Officer of Rubbermaid, Incorporated, first with the title of president and then
as chairman of the board. Mr. Noble is also a director of the following
affiliates of Thermo Electron: Thermo Fibertek Inc., Thermo Sentron Inc. and
Thermo TerraTech Inc. His business address is Rubbermaid Incorporated, 1147
Akron Road, Wooster, Ohio 44691.
Robert W. O'Leary: Director
Robert W. O'Leary has been a director of Thermo Electron since June 1998.
Mr. O'Leary has served since 1995 as the chairman and chief executive officer of
Premier, Inc., a strategic healthcare alliance. Mr. O'Leary had served as
chairman and chief executive officer of American Healthcare Systems from March
1995 until its merger with Premier in late 1995, and as chairman and chief
executive officer of American
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Medical International, Inc. from 1991 to 1995. His business address is Premier,
Inc., 12225 El Camino Real, San Diego, California 92130.
Hutham S. Olayan: Director
Hutham S. Olayan has been a director of Thermo Electron since 1987. She has
served since 1995 as president and a director of Olayan America Corporation, a
member of the Olayan Group, and as president and a director of Competrol Real
Estate Limited, another member of the Olayan Group, from 1986 until its merger
into Olayan America Corporation in 1997. The surviving company is engaged in
private investments, including real estate, and advisory services. In addition,
from 1985 to 1994, Ms. Olayan served as president and a director of Crescent
Diversified Limited, another member of the Olayan Group engaged in private
investments. Ms. Olayan is also a director of Trex Medical Corporation, an
affiliate of Thermo Electron. Her business address is Suite 1100, 505 Park
Avenue, New York, New York 10022. Ms. Olayan is a citizen of Saudi Arabia.
Richard F. Syron: Director
Richard F. Syron has been a director of Thermo Electron since September
1997. Since April 1994, Dr. Syron has been the chairman and chief executive
officer of the American Stock Exchange Inc. From January 1989 through April
1994, he was the president and chief executive officer of the Federal Reserve
Bank of Boston. Prior to that time, he held a variety of senior positions with
the Federal Home Loan Bank of Boston, the Federal Reserve Bank of Boston, the
Board of Governors of the Federal Reserve System and the U.S. Department of
Treasury. Dr. Syron is also a director of Dreyfus Corporation and The John
Hancock Corporation. His business address is 86 Trinity Place, New York, New
York 10006.
Roger D. Wellington: Director
Roger D. Wellington has been a director of Thermo Electron since 1986. Mr.
Wellington is the president and chief executive officer of Wellington
Consultants, Inc. and of Wellington Associates, Inc., international business
consulting firms he founded in 1994 and 1989, respectively. Prior to 1989, Mr.
Wellington served as chairman of the board of Augat Inc., a manufacturer of
electromechanical components and systems, for more than five years. Prior to
1988, Mr. Wellington also served as the chief executive officer and president of
Augat Inc. for more than ten years. Mr. Wellington is also a director of
Photoelectron Corporation.
To the knowledge of the Company, all of the above-listed officers and
directors intend to tender their shares of Common Stock in connection with the
Merger and to vote to approve the Merger Agreement.
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<PAGE> 121
APPENDIX E
INFORMATION CONCERNING TRANSACTIONS IN
THE COMMON STOCK OF THE COMPANY
The following sets forth information with respect to purchases of Voltek
Common Stock by Voltek, Thermedics, the Merger Sub and Thermo Electron since the
commencement of Voltek's second full fiscal year preceding the date of this
Proxy Statement.
<TABLE>
<CAPTION>
AVERAGE PURCHASE
NUMBER OF RANGE OF PRICES PRICE PER SHARE
SHARES PURCHASED PAID PER SHARE DURING
QUARTER/YEAR PURCHASER DURING QUARTER DURING QUARTER ($)(1) QUARTER ($)(1)
- ------------ --------------- ---------------- --------------------- ----------------
<S> <C> <C> <C> <C>
2nd Quarter 1996....... Thermedics 186,450(2) 13.3333 - 14.3333(2) 14.1638(2)
3rd Quarter 1996....... Thermo Electron 700(2) 12.625(2) 12.625(2)
3rd Quarter 1996....... Thermedics 100,400(2) 10.5 - 12.625(2) 10.7388(2)
4th Quarter 1996....... Thermo Electron 51,000 9.875 - 11.5 10.9047
4th Quarter 1996....... Thermedics 34,600 11.875 - 13.125 12.5719
1st Quarter 1997....... Thermo Electron 76,500 10.125 - 11.875 11.5395
1st Quarter 1997....... Thermedics 354,000 10.25 - 12.25 10.9835
2nd Quarter 1997....... Thermo Electron 110,000 8.0 - 8.375 8.0341
2nd Quarter 1997....... Thermedics 126,000 9.0 - 9.5 9.1982
2nd Quarter 1997....... Voltek 1,038,400 7.0 - 8.75 8.0853
3rd Quarter 1997....... Thermedics 314,275 7.125 7.125
3rd Quarter 1997....... Voltek 79,100 6.0 - 6.375 6.1595
4th Quarter 1997....... Thermedics 5,600 6.5 - 7.0 6.9464
1st Quarter 1998....... Voltek 188,700 5.0 5.0
</TABLE>
- ---------------
(1) Prices per share of Voltek Common Stock are net of commissions paid by the
respective purchasers.
(2) The number of shares and the purchase prices per share for purchases of
Voltek Common Stock by Thermedics and Thermo Electron in the second and
third quarters of 1996 have been restated to reflect a three-for-two stock
split, effected in the form of a 50% stock dividend, in August 1996.
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<PAGE> 122
The following chart sets forth information with respect to options granted
by Voltek since the commencement of Voltek's second full fiscal year preceding
the date of this Proxy Statement to directors and executive officers of Voltek,
Thermedics, the Merger Sub and Thermo Electron.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
DATE OF COVERED EXERCISE
NAME RELATIONSHIP GRANT BY OPTIONS PRICE
- ---- ------------ -------- ---------- --------
<S> <C> <C> <C> <C>
Colin I.W. Baxter............ President and Chief Operating 12/12/96 5,000 $10.45
Officer, Voltek
Colin I.W. Baxter............ President and Chief Operating 3/13/97 75,000 $10.28
Officer, Voltek
Colin I.W. Baxter............ President and Chief Operating 3/13/97 700 $10.28
Officer, Voltek
Colin I.W. Baxter............ President and Chief Operating 2/25/98 1,200 $ 5.00
Officer, Voltek
Colin I.W. Baxter............ President and Chief Operating 9/08/98 20,000 $ 6.56
Officer, Voltek
Elias P. Gyftopoulos......... Director, Voltek and Thermo 5/20/96 1,500 $14.05
Electron
Elias P. Gyftopoulos......... Director, Voltek and Thermo 6/02/97 1,000 $ 8.30
Electron
Elias P. Gyftopoulos......... Director, Voltek and Thermo 6/01/98 1,000 $ 7.00
Electron
William W. Hoover............ Director, Voltek 5/20/96 1,500 $14.05
William W. Hoover............ Director, Voltek 6/02/97 1,000 $ 8.30
William W. Hoover............ Director, Voltek 6/01/98 1,000 $ 7.00
Peter Richman................ Director, Voltek 5/20/96 1,500 $14.05
Peter Richman................ Director, Voltek 6/02/97 1,000 $ 8.30
Peter Richman................ Director, Voltek 6/01/98 1,000 $ 7.00
John W. Wood Jr.............. Chairman and Chief Executive 3/7/96 2,100 $12.78
Officer, Voltek; Chairman of
the Board, Thermedics; Senior
Vice President, Thermo
Electron
John W. Wood Jr.............. Chairman and Chief Executive 3/13/97 2,100 $10.28
Officer, Voltek; Chairman of
the Board, Thermedics; Senior
Vice President, Thermo
Electron
John W. Wood Jr.............. Chairman and Chief Executive 2/25/98 1,800 $ 5.00
Officer, Voltek; Chairman of
the Board, Thermedics; Senior
Vice President, Thermo
Electron
</TABLE>
E-2
<PAGE> 123
The following chart sets forth information with respect to options to
purchase Voltek Common Stock that have been exercised by directors and executive
officers of Voltek, Thermedics, the Merger Sub and Thermo Electron since the
commencement of Voltek's second full fiscal year preceding the date of this
Proxy Statement.
<TABLE>
<CAPTION>
NUMBER OF
SHARES AVERAGE
EXERCISE RECEIVED UPON EXERCISE
NAME RELATIONSHIP DATE EXERCISE PRICE
- ---- ------------ -------- ------------- --------
<S> <C> <C> <C> <C>
Paul F. Ferrari.......... Director, Thermedics 4/08/97 3,748 $2.92
John N. Hatsopoulos...... Director, Thermedics; Vice 3/05/97 7,498 $2.92
Chairman of the Board, Thermo
Electron
William W. Hoover........ Director, Voltek 3/12/96 2,250 $1.33
William W. Hoover........ Director, Voltek 9/12/96 3,600 $1.08
William W. Hoover........ Director, Voltek 11/14/97 3,898 $1.08
William W. Hoover........ Director, Voltek 1/11/99 7,498 $1.59
Sandra L. Lambert........ Director, Voltek 10/4/96 7,498 $2.92
Theo Melas-Kyriazi....... Chief Financial Officer and 3/21/97 7,498 $2.92
Director, Voltek; Chief Financial
Officer, Thermedics; Chief
Financial Officer and Vice
President, Thermo Electron
Peter Richman............ Director, Voltek 1/4/99 37,650 $3.62
John W. Wood Jr.......... Chairman and Chief Executive 11/27/96 1,125 $3.35
Officer, Voltek; Chairman of the
Board, Thermedics; Senior Vice
President, Thermo Electron
John W. Wood Jr.......... Chairman and Chief Executive 11/27/96 7,498 $2.92
Officer, Voltek; Chairman of the
Board, Thermedics; Senior Vice
President, Thermo Electron
</TABLE>
E-3
<PAGE> 124
OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICERS AND DIRECTORS OF VOLTEK
The following table sets forth the beneficial ownership of Common Stock, as
of January 31, 1999, with respect to (i) each director and executive officer of
the Company and (ii) all directors and current executive officers as a group.
While certain directors and executive officers of the Company are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Company, all such persons disclaim beneficial ownership of the shares
of Common Stock owned by Thermedics or by Thermo Electron, as the case may be.
<TABLE>
<CAPTION>
THERMO
VOLTEK CORP.(2)
-----------------------
NUMBER OF PERCENTAGE
NAME(1) SHARES OF CLASS
- ------- --------- ----------
<S> <C> <C>
Colin I.W. Baxter...................................... 149,207 1.7
Elias P. Gyftopoulos................................... 5,250 *
William W. Hoover...................................... 23,892 *
Sandra L. Lambert...................................... 1,912 *
Theo Melas-Kyriazi..................................... 5,581 *
Peter Richman.......................................... 45,726 *
John W. Wood Jr........................................ 96,971 1.1
Paul F. Kelleher....................................... 10,000 *
All directors and current executive officers as a group
(8 persons).......................................... 338,539 3.8
</TABLE>
- ---------------
* Reflects ownership of less than 1.0% of the outstanding common stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) The shares of Common Stock beneficially owned by Mr. Baxter, Dr.
Gyftopoulos, Mr. Hoover, Mr. Richman, Mr. Wood and all directors and
executive officers as a group include 131,900, 4,250, 7,400, 3,500, 82,350
and 229,400 shares, respectively, that such person or group has the right to
acquire within 60 days of January 31, 1999, through the exercise of stock
options. Shares beneficially owned by Mr. Richman and all directors and
executive officers as a group include 3,576 full shares allocated through
January 31, 1999, to his account maintained under the Company's deferred
compensation plan for directors. Except for Mr. Wood, who beneficially owned
1.1% of the Company's Common Stock outstanding as of January 31, 1999, and
Mr. Baxter, who beneficially owned 1.7% of the Company's Common Stock
outstanding as of January 31, 1999, no director or executive officer
beneficially owned more than 1.0% of the Common Stock outstanding as of
January 31, 1999; all directors and current executive officers as a group
beneficially owned 3.8% of the Common Stock outstanding as of such date.
E-4
<PAGE> 125
OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICERS AND DIRECTORS OF THERMEDICS
The following table sets forth the beneficial ownership of Common Stock, as
of January 31, 1999, with respect to (i) each director and executive officer of
Thermedics and (iii) all directors and current executive officers as a group.
While certain directors and executive officers of Thermedics are also
directors and executive officers of Thermo Electron or its subsidiaries other
than Thermedics, all such persons disclaim beneficial ownership of the shares of
Common Stock owned by Thermo Electron or Thermedics, as the case may be.
<TABLE>
<CAPTION>
THERMO
VOLTEK CORP.(2)
-----------------------
NUMBER OF PERCENTAGE
NAME (1) SHARES OF CLASS
- -------- --------- ----------
<S> <C> <C>
T. Anthony Brooks...................................... 0 *
Peter O. Crisp......................................... 2,250 *
Paul F. Ferrari........................................ 2,250 *
George N. Hatsopoulos.................................. 0 *
John N. Hatsopoulos.................................... 0 *
John T. Keiser......................................... 0 *
John W. Wood Jr........................................ 96,971 1.1
Nicholas T. Zervas..................................... 2,250 *
David H. Fine.......................................... 0 *
Paul F. Kelleher....................................... 10,000 *
Theo Melas-Kyriazi..................................... 5,581 *
Victor L. Poirier...................................... 0 *
All directors and current executive officers as a group
(12 persons)......................................... 119,302 1.4
</TABLE>
- ---------------
* Reflects ownership of less than 1.0% of the outstanding common stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) The shares of Common Stock beneficially owned by Mr. Crisp, Mr. Ferrari, Mr.
Wood, Mr. Zervas and all directors and executive officers as a group include
2,250, 2,250, 82,350, 2,250 and 89,100 shares, respectively, that such
person or group has the right to acquire within 60 days of January 31, 1999,
through the exercise of stock options. Except for Mr. Wood, who beneficially
owned 1.1% of the Company's Common Stock outstanding as of January 31, 1999,
no director or executive officer beneficially owned more than 1.0% of the
Common Stock outstanding as of January 31, 1999; all directors and current
executive officers as a group beneficially owned 1.4% of the Common Stock
outstanding as of such date.
E-5
<PAGE> 126
OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICERS AND DIRECTORS OF THERMO ELECTRON
The following table sets forth the beneficial ownership of Common Stock, as
of January 31, 1999, with respect to (i) each director and executive officer of
Thermo Electron and (ii) all directors and current executive officers as a
group.
While certain directors and executive officers of Thermo Electron are also
directors and executive officers of majority-owned subsidiaries of Thermo
Electron, all such persons disclaim beneficial ownership of the shares of Common
Stock owned by Thermo Electron or by such majority-owned subsidiaries, as the
case may be.
<TABLE>
<CAPTION>
THERMO
VOLTEK CORP.(2)
-----------------------
NUMBER OF PERCENTAGE
NAME(1) SHARES OF CLASS
- ------- --------- ----------
<S> <C> <C>
John M. Albertine...................................... 1,500 *
Peter O. Crisp......................................... 2,250 *
Elias P. Gyftopoulos................................... 5,250 *
George N. Hatsopoulos.................................. 0 *
John N. Hatsopoulos.................................... 0 *
Brian D. Holt.......................................... 0 *
Frank Jungers.......................................... 1,500 *
John T. Keiser......................................... 0 *
Paul F. Kelleher....................................... 10,000 *
Earl R. Lewis.......................................... 0 *
Robert A. McCabe....................................... 3,300 *
Theo Melas-Kyriazi..................................... 5,581 *
Donald E. Noble........................................ 1,500 *
Hutham S. Olayan....................................... 1,500 *
Robert W. O'Leary...................................... 0 *
Peter G. Pantazelos.................................... 0 *
William A. Rainville................................... 0 *
Arvin H. Smith......................................... 0 *
Richard F. Syron....................................... 0 *
Roger D. Wellington.................................... 1,500 *
John W. Wood Jr........................................ 96,971 1.1
All directors and current executive officers
as a group (21 persons).............................. 130,852 1.5
</TABLE>
- ---------------
* Reflects ownership of less than 1.0% of the outstanding common stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) The shares of Common Stock beneficially owned by Mr. Albertine, Mr. Crisp,
Dr. Gyftopoulos, Mr. Jungers, Mr. McCabe, Mr. Noble, Ms. Olayan, Mr.
Wellington, Mr. Wood and all directors and executive officers as a group
include 1,500, 2,250, 4,250, 1,500, 1,500, 1,500, 1,500, 1,500, 82,350 and
97,850 shares, respectively, that such person or group has the right to
acquire within 60 days of January 31, 1999, through the exercise of stock
options. Except for Mr. Wood, who beneficially owned 1.1% of the Company's
Common Stock outstanding as of January 31, 1999, no director or executive
officer beneficially owned more than 1.0% of the Common Stock outstanding as
of January 31, 1999; all directors and current executive officers as a group
beneficially owned 1.5% of the Common Stock outstanding as of such date.
E-6
<PAGE> 127
OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICERS AND DIRECTORS OF THE MERGER SUB
Please see "Ownership of Common Stock by Executive Officers and Directors
of Thermedics", above, for information regarding the ownership of Common Stock
by John T. Keiser, the sole director and executive officer of the Merger Sub.
TRANSACTIONS IN THE VOLTEK COMMON STOCK
The following sets forth information with respect to transactions in the
Voltek Common Stock effected during the 60 days preceding the date of this Proxy
Statement by Voltek, Thermedics, the Merger Sub, Thermo Electron or the
directors and executive officers of any of Voltek, Thermedics, the Merger Sub or
Thermo Electron.
On January 4, 1999, Peter Richman, a director of Voltek, acquired 37,650
shares of Voltek Common Stock through the exercise of stock options at an
average exercise price of $3.62 per share.
On January 11, 1999, William W. Hoover, a director of Voltek, acquired
7,498 shares of Voltek Common Stock through the exercise of stock options at an
exercise price of $1.59 per share.
No other transactions in the Voltek Common Stock were effected during the
60 days preceding the date of this Proxy Statement by Voltek, Thermedics, the
Merger Sub, Thermo Electron or the directors and executive officers of any of
Voltek, Thermedics, the Merger Sub or Thermo Electron.
E-7
<PAGE> 1
[ATTACHMENT A TO PROXY STATEMENT]
FORM OF PROXY
THERMO VOLTEK CORP.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 25, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Colin I.W. Baxter, John W. Wood Jr. and
Kenneth J. Apicerno, or any one of them in the absence of the others, as
attorneys and proxies of the undersigned, with full power of substitution, for
and in the name of the undersigned, to represent the undersigned at the Special
Meeting of the stockholders of Thermo Voltek Corp., a Delaware corporation (the
"Company"), to be held on March 25, 1999, at 10:00 a.m., at the offices of
Thermo Electron Corporation, 81 Wyman Street, Waltham, Massachusetts 02454-9046,
and at any adjournment or adjournments thereof, and to vote all shares of common
stock of the Company standing in the name of the undersigned on February 11,
1999, with all of the powers the undersigned would possess if personally present
at such meeting.
(IMPORTANT--TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
<PAGE> 2
SPECIAL MEETING OF STOCKHOLDERS
THERMO VOLTEK CORP.
MARCH 25, 1999
1. To consider and vote on a proposal to approve an Agreement and Plan of
Merger dated as of November 24, 1998 (the "Merger Agreement") pursuant to which
TV Acquisition Corporation, a newly-formed company and wholly owned subsidiary
of Thermedics Inc., will be merged (the "Merger") with and into the Company and
each stockholder of the Company (other than stockholders who are entitled to and
have perfected their dissenters' rights, shares held by the Company in treasury
and shares held by Thermedics Inc. and Thermo Electron Corporation) will become
entitled to receive $7.00 in cash, without interest, for each outstanding share
of common stock, $.05 par value, of the Company owned by such stockholder
immediately prior to the effective time of the Merger. A copy of the Merger
Agreement is attached as Appendix A to and is described in the accompanying
Proxy Statement.
[ ] For [ ] Against [ ] Abstain
2. To consider and act in their discretion upon such other matters as may
properly come before the Special Meeting or any adjournment or adjournments
thereof.
[ ] For [ ] Against [ ] Abstain
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS SET
FORTH ABOVE IF NO INSTRUCTION TO THE CONTRARY IS INDICATED OR IF NO INSTRUCTION
IS GIVEN.
Copies of the Notice of Special Meeting and of the Proxy Statement have
been received by the undersigned.
PLEASE DATE, SIGN AND PROMPTLY
RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE.
Signature(s) ___________________________
Date_____________________________________
Note: This proxy should be dated, signed
by the stockholder(s) exactly as his or
her name appears hereon, and returned
promptly in the enclosed envelope.
Persons signing in a fiduciary capacity
should so indicate. If shares are held by
joint tenants or as community property,
both should sign.
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD BACK AS SOON AS POSSIBLE!
