<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1997
REGISTRATION NO. 333-25243
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
METRIKA SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
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<S> <C> <C>
DELAWARE 3823 33-0733537
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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5788 PACIFIC CENTER BOULEVARD
SAN DIEGO, CA 92121
(619) 450-9649
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SANDRA L. LAMBERT, SECRETARY
METRIKA SYSTEMS CORPORATION
C/O THERMO ELECTRON CORPORATION
81 WYMAN STREET
P. O. BOX 9046
WALTHAM, MA 02254-9046
(617) 622-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
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<S> <C>
SETH H. HOOGASIAN, ESQ. EDWIN L. MILLER, JR., ESQ.
GENERAL COUNSEL TESTA, HURWITZ & THIBEAULT, LLP
METRIKA SYSTEMS CORPORATION 125 HIGH STREET
C/O THERMO ELECTRON CORPORATION BOSTON, MASSACHUSETTS 02110
81 WYMAN STREET (617) 248-7000
WALTHAM, MASSACHUSETTS 02254-9046
(617) 622-1000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement has become effective.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF REGISTRATION
SECURITIES TO BE REGISTERED OFFERING PRICE(1) FEE(1)
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<S> <C> <C>
Common Stock, $.01 par value................ $51,060,000 $15,473(2)
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</TABLE>
(1) Calculated pursuant Rule 457(o).
(2) The Registrant previously paid $11,919 of the Registration Fee on April 15,
1997.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
MAY 28, 1997
PROSPECTUS
2,000,000 SHARES
METRIKA SYSTEMS CORPORATION
COMMON STOCK
($.01 PAR VALUE)
All of the shares of Common Stock offered hereby are being sold by Metrika
Systems Corporation ("Metrika Systems" or the "Company"), a majority-owned
subsidiary of Thermo Instrument Systems Inc. ("Thermo Instrument"), which is a
majority-owned subsidiary of Thermo Electron Corporation ("Thermo Electron").
Following the offering, Thermo Instrument will own approximately 63% of the
outstanding shares of Common Stock of the Company (assuming no exercise of the
Underwriters' over-allotment option).
Prior to this offering, there has been no public market for the Common Stock of
the Company. It is currently estimated that the initial public offering price
will be between $15.50 and $18.50 per share. See "Underwriting" for information
relating to the factors to be considered in determining the initial public
offering price. Application has been made to list the Common Stock on the
American Stock Exchange.
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT COMPANY(1)
<S> <C> <C> <C>
Per Share................................ $ $ $
Total(2)................................. $ $ $
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</TABLE>
(1) Before deducting expenses payable by the Company estimated at $700,000.
(2) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 300,000 shares of Common Stock solely to cover
over-allotments, if any. If this option is fully exercised, the total Price
to Public, Underwriting Discount and Proceeds to Company before estimated
expenses would be $ , $ and $ , respectively. See
"Underwriting."
The Common Stock is offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the shares of Common Stock will be made at the
office of Salomon Brothers Inc, Seven World Trade Center, New York, New York, or
through the facilities of The Depository Trust Company, on or about
, 1997.
SALOMON BROTHERS INC
LEHMAN BROTHERS
SMITH BARNEY INC.
CAZENOVE & CO.
The date of this Prospectus is , 1997.
<PAGE> 3
ARTWORK DESCRIPTIONS FOR INSIDE FRONT COVER
Photo 1 -- Photo of part of the Company's plastics quality control system. The
photo depicts the Company's sensor hanging from a metal track suspended over a
flat sheet of plastic foil to be scanned. The plastic foil is rolling under the
sensor.
[CAPTION]
The Company's quality control systems for the plastics industry measure and
control the thickness of the plastic film and coatings on web material. The
measurements are made on-line in the process at the point of manufacture,
enabling adjustments to occur immediately, thereby reducing material waste.
Photo 2 -- Photo of the Company's thickness gauge strip system on a steel mill
floor. The photo shows a glowing rolled strip of metal being transported on a
roller table along the mill floor. A C-frame structure containing the Company's
sensors suspends the sensor over the steel strip (however, lower arm of C-frame
structure is not shown because it is obstructed by roller table). Also included
in the photo are various walkways, exhaust vents, industrial tools and gauges.
[CAPTION]
The Company manufactures both hot and cold thickness gauges for use in the
steel industry. The hot gauges can be placed closer to the actuator than
conventional cold gauges, allowing earlier adjustments, thus decreasing waste.
Both systems are sold with or without the Company's automated process
optimization software.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE
PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK
OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
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<PAGE> 4
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Except as otherwise indicated, all information in this
Prospectus (i) assumes that the Underwriters' over-allotment option will not be
exercised and (ii) reflects a one-for-two reverse stock split of the Common
Stock declared and effected in May 1997. Investors should carefully consider the
information set forth under the heading "Risk Factors."
THE COMPANY
Metrika Systems Corporation ("Metrika Systems" or the "Company") develops,
manufactures and markets on-line industrial process optimization systems that
employ proprietary ultra-high speed advanced scientific measurement technologies
for applications in raw materials analysis and finished materials quality
control. The Company pioneered the development of process optimization systems
that provide real-time, non-destructive analysis of the composition of raw
materials in basic materials production processes, including coal, cement and
minerals. The Company also manufactures advanced systems which are used to
measure and control parameters such as material thickness, coating thickness and
coating weight in web-type materials, such as metal strip, rubber and plastic
foils. Customers use these systems to improve product quality and consistency,
lower material costs, reduce energy consumption and minimize waste. The Company
believes that the current total annual worldwide market for process optimization
instruments and systems is in excess of $2 billion. The Company believes its
process optimization products and systems currently address an annual market
segment of approximately $500 million.
The Company's systems make real-time, on-line, non-invasive,
non-destructive, precise measurements of materials using advanced scientific
measurement techniques, including gamma spectroscopy, beta particle detection,
laser spectroscopy, x-ray fluorescence and ultrasound. The Company's systems
incorporate proprietary intelligent sensors that have been developed for
specific production processes along with ultra-high speed signal processing
electronics capable of processing, in some cases, up to one million electronic
impulses per second resulting from the detection of excited particles such as
photons. These systems can be combined with the Company's proprietary real-time
software to form integrated process optimization systems designed to fit the
customer's specific application. The Company has developed a reputation for
rugged and reliable sensor technology capable of operating in hostile industrial
environments. The Company's products can generate significant savings to the
customer as a result of reduced manufacturing costs, reduced material waste,
decreased energy costs and in some cases, savings in capital investment.
The Company's strategy is to capitalize on the large market opportunities
for advanced measurement systems in the basic materials industries and to
exploit its core competencies and proprietary technologies through an evolving
series of optimization systems. As part of this strategy, the Company intends to
expand the geographic scope of its addressed markets. In particular, the Company
intends to expand the market presence of its on-line finished materials quality
control products in Asia, the U.S. and Latin America by drawing on the global
market expertise and existing global sales force of its on-line raw materials
analyzer business. In addition, the Company intends to aggressively pursue
market opportunities for its on-line raw materials analyzer products created by
the rapid infrastructure development and new manufacturing capacity occurring in
Asia and Latin America. Further, the Company intends to pursue opportunities to
retrofit the large existing base of coal mines, coal-burning utilities and
cement plants with its on-line process optimization systems. The Company also
intends to target new industries such as the pharmaceutical, agrochemical,
industrial chemical and glass industries and plans to make strategic
acquisitions of complementary businesses.
The Company operated as two divisions of Thermo Instrument Systems Inc.
("Thermo Instrument") until its incorporation as a Delaware corporation in
November 1996. In connection with the Company's incorporation, Thermo Instrument
transferred to the Company the assets, liabilities and business of its
Gamma-Metrics subsidiary and Radiometrie division ("Radiometrie") in exchange
for 5,000,000 shares of the Company's common stock. Unless the context otherwise
requires, references in this Prospectus to
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the Company or Metrika Systems refer to Metrika Systems Corporation and its
subsidiaries and the predecessor business which constitute the Company. The
Company's on-line raw materials analyzer business is conducted by its
Gamma-Metrics subsidiary based in San Diego, California, and its on-line
finished materials quality control business is conducted by its Radiometrie
division with operations in Erlangen, Germany and Gloucester, England. The
Company's principal executive offices are located at 5788 Pacific Center
Boulevard, San Diego, California 92121, and its telephone number is (619)
450-9649.
THE OFFERING
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Common Stock Offered by the Company.......... 2,000,000 shares
Common Stock to be Outstanding after the
Offering(1)................................ 7,967,833 shares
Proposed AMEX Symbol......................... MKA
Use of Proceeds.............................. General corporate purposes, including possible
acquisitions and research and development
funding.
</TABLE>
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(1) Does not include 312,500 shares of Common Stock reserved for issuance under
the Company's stock-based compensation plans. As of May 27, 1997, options to
purchase 298,000 shares of Common Stock had been granted and were
outstanding under the Company's stock-based compensation plans. See
"Dilution," "Capitalization," "Management -- Compensation of Directors" and
"-- Compensation of Executive Officers" and Notes 2 and 9 to Consolidated
Financial Statements.
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREDECESSOR(1) THE COMPANY(1)(2)
-------------- -------------------------------------
APRIL 1, 1992 THREE MONTHS ENDED
THROUGH FISCAL YEAR ---------------------
JANUARY 13, ------------------------------------- MARCH 30, MARCH 29,
1993(3) 1993(3) 1994 1995 1996 1996(3) 1997(3)
-------------- ------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................. $14,076 $19,809 $38,612 $46,032 $52,047 $11,594 $12,592
Gross Profit............. 4,518 8,397 16,455 20,265 23,520 4,779 5,556
Research and Development
Expenses............... 1,012 1,344 2,259 2,580 3,024 679 1,007
Operating Income
(Loss)................. (456) 1,471 3,940 6,045 7,101 962 1,173
Net Income (Loss)........ (372) 591 1,767 2,852 3,845 449 715
Earnings per Share(4).... .11 .34 .55 .74 .09 .12
Weighted Average
Shares(4).............. 5,193 5,193 5,193 5,219 5,193 5,989
</TABLE>
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<CAPTION>
MARCH 29, 1997
---------------------
AS
ACTUAL ADJUSTED(5)
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<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working Capital........................................................ $10,245 $41,335
Total Assets........................................................... 66,726 97,816
Long-term Obligation................................................... 4,680 4,680
Shareholders' Investment............................................... 26,586 57,676
</TABLE>
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(1) The fiscal year ended January 1, 1994 represents the Company's results of
operations from January 14, 1993, the date Gamma-Metrics (the "Predecessor")
was acquired by Thermo Instrument, through January 1, 1994. In addition, the
results of operations for the fiscal year ended January 1, 1994 include the
results of operations from the Company's on-line finished materials quality
control business, acquired October 1993. The period prior to January 14,
1993 represents the results of Gamma-Metrics prior to its acquisition by
Thermo Instrument.
(2) The Company's 1993, 1994, 1995 and 1996 fiscal years set forth in this table
and referred to elsewhere in this Prospectus, ended on January 1, 1994,
December 31, 1994, December 30, 1995 and December 28, 1996, respectively.
(3) Derived from unaudited financial statements.
(4) Pursuant to Securities and Exchange Commission requirements, earnings per
share for the Company have been presented for all periods subsequent to
January 13, 1993. Weighted average shares for such periods represent
5,000,000 shares issued to Thermo Instrument in connection with the initial
capitalization of the Company, and in fiscal 1996 the effect of shares sold
through a private placement, as well as the incremental effect of the
assumed issuance of the private placement shares and the assumed exercise of
stock options issued within one year prior to the Company's proposed initial
public offering for all periods presented. Weighted average shares for the
three months ended March 29, 1997 reflects the actual issuance of the
private placement shares since the private placement shares were outstanding
for the entire period.
(5) Adjusted to reflect the sale by the Company of 2,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $17.00
per share, after deducting estimated underwriting discounts and commissions
and offering expenses payable by the Company.
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5
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RISK FACTORS
In addition to the other information in this Prospectus, investors should
carefully consider the following risk factors when evaluating an investment in
the shares of Common Stock offered hereby. This Prospectus contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this Prospectus should be read as being applicable
to all forward-looking statements wherever they appear in this Prospectus. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include those
discussed below, as well as those discussed elsewhere in this Prospectus.
Dependence on Capital Spending Policies. The Company's customers include
coal burning utilities, coal mines, cement manufacturers, and manufacturers of
web-type materials such as steel, plastic and rubber. The capital spending
policies of these companies can have a significant effect on the demand for the
Company's products. Such policies are based on a wide variety of factors,
including the resources available to make such purchases, the spending
priorities among various types of process control equipment or techniques and
policies regarding capital expenditures during recessions. Any decrease in
capital spending by these customers could have a material adverse effect on the
Company's business and results of operations. Further, the Company's growth is
dependent in part on construction and upgrade of manufacturing plants in the
basic materials industries. A recession in one or more markets could cause a
slowdown or reduction in capital spending and in new plant construction. Growth
of the Company's on-line finished materials quality control business has
recently been adversely affected by a recession in Germany.
Uncertainty of Market Acceptance of New Products. Certain of the Company's
products represent alternatives to traditional instruments and methods. As a
result, such products may be slow to achieve, or may not achieve, market
acceptance, as customers may seek further validation of the efficiency and
efficacy of the Company's technology. This is particularly true where the
purchase of the product requires a significant capital commitment. Further,
because on-line process control systems are incorporated into a customer's
production line, a decision to invest in these systems involves significant
operating risks if the system fails or shuts down. The Company intends to expand
its product base by adapting its proprietary technologies for new applications
in broader industry segments including the pharmaceutical, agrochemical and
industrial chemical industries. The Company believes that, to a significant
extent, its growth prospects depend on the continuing acceptance by a broader
group of customers and by broader industry segments of its new products and
technologies. There can be no assurance that the Company will be successful in
adapting its proprietary technologies for new applications, in obtaining these
acceptances or, if obtained, that such acceptances will be sustained. The
failure of the Company to obtain and sustain such acceptances could have a
material adverse effect on the Company's business and results of operations.
Technological Change and New Products. The market for on-line process
optimization systems is characterized by changing technology, evolving industry
standards and new product introductions. The Company's future success will
depend in part upon its ability to enhance its existing products and to develop
and introduce new products and technologies to meet changing customer
requirements and to successfully serve broader industry segments. The Company is
currently devoting significant resources toward the enhancement of its existing
products and the development of new products and technologies. There can be no
assurance that the Company will successfully complete the enhancement and
development of these products in a timely fashion or that the Company's current
or future products will satisfy the needs of the on-line process optimization
systems markets. Any failure to complete the enhancement and development of
these products or the failure of the Company's current or future products to
satisfy market needs could have a material adverse effect on the Company's
business and results of operation.
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.
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Promising acquisitions are difficult to identify and complete for a number of
reasons, including competition among prospective buyers, the need for regulatory
approvals, including antitrust approvals, and the high valuations of businesses
resulting from historically high stock prices in many countries. 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 which are not favorable to the
Company and, in the case of equity financing, may result in dilution to the
Company's stockholders.
International Operations and International Sales. In 1994, 1995, 1996 and
the three months ended March 29, 1997, sales originating outside the U.S.
accounted for 59%, 58%, 56% and 45%, respectively, of the Company's total
revenues. In addition, in 1994, 1995, 1996 and the three months ended March 29,
1997, U.S. export sales accounted for 24%, 23%, 26% and 39%, respectively, of
the Company's total revenues. The Company anticipates that sales outside the
U.S. and U.S. export sales will continue to account for a significant percentage
of the Company's total revenues. The Company intends to continue to expand its
presence in international markets. International revenues are subject to a
number of risks, including the following: agreements may be difficult to enforce
and receivables difficult to collect through a foreign country's legal system;
foreign customers may have longer payment cycles; foreign countries may impose
additional withholding taxes or otherwise tax the Company's foreign income,
impose tariffs or adopt other restrictions on foreign trade; U.S. export
licenses may be difficult to obtain; the protection of intellectual property in
foreign countries may be more difficult to enforce; and fluctuations in exchange
rates may affect product demand and may adversely affect the profitability in
U.S. dollars of products and services provided by the Company in foreign markets
where payment for the Company's products and services is made in the local
currency. In 1996, effects of currency translation, due to a stronger U.S.
dollar, decreased revenues by $0.9 million. Further, a significant portion of
the Company's business is conducted in foreign countries, particularly Germany.
Foreign operations are also subject to certain risks such as general economic
conditions in the countries in which the Company operates, unexpected changes in
regulatory requirements, compliance with a variety of foreign laws and
regulations and overlap of different tax structures. Tax rates in certain
foreign countries exceed that of the United States and foreign earnings may be
subject to withholding requirements or the imposition of tariffs, exchange
controls or other restrictions. There can be no assurance that any of these
factors will not have a material adverse effect on the Company's business and
results of operations.
Competition. The Company encounters intense competition in the sale of its
on-line finished materials quality control products. The Company believes that
the principal competitive factors affecting the market for on-line process
optimization systems include quality and reliability, accuracy, price, customer
service and support, ease of use, distribution channels, technical features and
compatibility with customers' manufacturing processes. Certain of the Company's
competitors have greater resources, manufacturing and marketing capabilities,
technical staff and production facilities than those of the Company. As a
result, they may be able to adapt more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
promotion and sale of their products than can the Company. Further, competition
with respect to all of the Company's products could increase if new companies
enter the market or if existing competitors expand their product lines. There
can be no assurance that competitors of the Company will not develop
technological innovations that will render products of the Company obsolete.
Proprietary Rights. Proprietary rights relating to the Company's products
will be protected from unauthorized use by third parties only to the extent that
they are covered by valid and enforceable patents or are maintained in
confidence as trade secrets. The Company has 11 U.S. patents which have
expiration dates ranging from 1998 through 2012. The Company also owns
corresponding foreign patents in a number of jurisdictions throughout the world.
There can be no assurance that any patents now or hereafter owned by the Company
will afford protection against competitors. Proceedings initiated by the Company
to protect its proprietary rights could result in substantial costs to the
Company. There can be no assurance that competitors of the Company, some of whom
have substantially greater
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<PAGE> 9
resources than those of the Company, will not initiate litigation to challenge
the validity of the Company's patents, or that they will not use their resources
to design comparable products that do not infringe the Company's patents. The
Company could incur substantial costs and diversion of management resources with
respect to the defense of any such claims, which could have a material adverse
effect on the Company's business, financial condition, and results of operation.
Furthermore, parties making such claims could secure a judgment awarding
substantial damages, as well as injunctive or other equitable relief, which
could effectively block the Company's ability to make, use, sell, distribute or
market its products and services in the U.S. and abroad. There may also be
pending or issued patents held by parties not affiliated with the Company that
relate to the Company's products or technologies. In the event that a claim
relating to proprietary technology or information is asserted against the
Company, the Company may need to acquire licenses to, or contest the validity
of, any such competitor's proprietary technology. It is likely that significant
funds would be required to contest the validity of any such competitor's
proprietary technology. There can be no assurance that any license required
under any such competitor's proprietary technology would be made available on
acceptable terms or that the Company would prevail in any such contest. There
can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to prevent misappropriation of its
technology or independent development by others of similar technology. In
addition, the laws of some jurisdictions do not protect the Company's
proprietary rights to the same extent as the laws of the U.S. There can be no
assurance that these protections will be adequate.
Dependence on Sole-source Suppliers. Various components of the Company's
products are supplied by sole-source vendors. The Company has not experienced
significant difficulty in obtaining adequate supplies from these vendors, and
has identified alternate suppliers. However, there can be no assurance that the
unanticipated loss of a single vendor would not result in delays in shipment or
in the introduction of new products. Any such delays could have a material
adverse effect on the Company's business or results of operations.
Government Regulations and Approvals. The market for certain of the
Company's products, both in the U.S. and abroad, is subject to or influenced by
various domestic and foreign clean air and consumer protection laws. The Company
designs, develops and markets its products, in part, to meet customer needs
created by existing and anticipated regulations, and any changes in these
regulations may adversely affect consumer demand for the Company's products.
Potential Fluctuations in Quarterly Performance. Many of the Company's
products are large systems that may require significant capital expenditures.
Consequently, the timing of sales of these systems could affect the Company's
quarterly earnings. Further, the Company's quarterly operating results may also
vary significantly depending on a number of other factors, including the size,
timing and shipment of individual orders, changes in pricing by the Company or
its competitors, discount levels, seasonality of revenue, foreign currency
exchange rates, the mix of products sold, the timing of the announcement,
introduction and delivery of new product enhancements by the Company and its
competitors and general economic conditions. Generally, the Company recognizes
product revenues upon shipment of its products. Revenues on substantially all
contracts are recognized using the percentage-of-completion method. Typically,
the Company experiences higher revenues in the second half of each year due to
seasonality experienced by its on-line finished materials quality control
business primarily because customers tend to place their orders earlier in the
year so that they can have the systems installed either during the holiday
season in the third quarter or between Christmas and the New Year. Because
certain operating expenses of the Company are based on anticipated capacity
levels and a high percentage of the Company's expenses are fixed for the short
term, a small variation in the timing of recognition of revenue can cause
significant variations in operating results from quarter to quarter. There can
be no assurance that any of these factors will not have a material adverse
effect on the Company's business or results of operation.
Dependence on Key Personnel. The Company's success depends to a
significant extent upon a number of key employees, including members of senior
management. The loss of the services of one or more of these key employees could
have a material adverse effect on the Company. The Company has not obtained and
does not intend to obtain key-man life insurance policies for any key employee.
The
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Company believes that its future success will depend in part on its ability to
attract, motivate and retain highly skilled technical, managerial and marketing
personnel. Competition for such personnel is intense and there can be no
assurance that the Company will be successful in attracting, motivating and
retaining key personnel. The failure to hire and retain such personnel could
materially adversely affect the Company's business and results of operations.
Shares Eligible for Sale After this Offering. At the conclusion of the
120-day period following the closing of this offering, the Company will file a
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), covering the resale of 967,833 shares of Common Stock held by
existing investors other than Thermo Instrument. The 5,000,000 shares of Common
Stock owned by Thermo Instrument will become eligible for sale under Rule 144
promulgated under the Securities Act commencing in November 1997. In addition,
as long as Thermo Instrument is able to elect a majority of the Company's Board
of Directors, it will have the ability to cause the Company at any time to
register for resale all or a portion of the Common Stock owned by Thermo
Instrument. Thermo Instrument and the Company have agreed not to sell any shares
of Common Stock for a 180-day period after the date of this Prospectus, other
than (i) shares of Common Stock to be sold to the Underwriters in this offering,
(ii) the grant of options to purchase shares of Common Stock pursuant to
existing stock-based compensation plans, and (iii) shares of Common Stock
issuable upon conversion of securities outstanding on the date of this
Prospectus.
Additional shares of Common Stock issuable upon exercise of options granted
under the Company's stock-based compensation plans will become available for
future sale in the public market at prescribed times. Sales of a significant
number of shares of Common Stock in the public market following this offering
could adversely affect the market price of the Common Stock. See "Relationship
with Thermo Electron and Thermo Instrument," "Shares Eligible for Future Sale"
and "Underwriting."
Immediate and Substantial Dilution. Purchasers of the Common Stock offered
hereby will incur an immediate and substantial dilution in the net tangible book
value per share of the Common Stock from the initial public offering price.
Additional dilution is likely to occur upon the exercise of outstanding stock
options. See "Dilution."
No Public Market; Potential Volatility of Stock Price. Prior to this
offering there has been no public market for the Common Stock and there can be
no assurance that an active trading market will develop or be sustained after
this offering. The initial offering price of the Common Stock will be determined
by negotiations between the Company and the Representatives of the Underwriters
and may not be indicative of future market prices. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. Factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new contracts or products by the
Company or its competitors, government regulation and approvals, developments in
patent or other proprietary rights and market conditions for stocks of companies
similar to the Company could have a significant impact on the market price of
the Common Stock. There can be no assurance that the market price of the Common
Stock will not decline below the initial offering price.
Potential Conflict of Interest. For financial reporting purposes the
Company's financial results are included in the consolidated financial
statements of Thermo Instrument and Thermo Electron. The members of the Board of
Directors of the Company who are also affiliated with Thermo Electron or Thermo
Instrument will consider both the short-term and the long-term impact of
operating decisions on the Company as well as the impact of such decisions on
the consolidated financial results of Thermo Instrument and Thermo Electron. The
interest of Thermo Electron and Thermo Instrument on the one hand and the
Company on the other hand may differ. The Company is an indirect subsidiary of
Thermo Electron and is a party to various agreements with Thermo Electron. These
agreements may limit the Company's operating flexibility. See "Relationship with
Thermo Electron and Thermo Instrument."
Lack of Voting Control. The Company's shareholders do not have the right
to cumulate votes for the election of directors. Thermo Instrument, which will
own 63% of the voting stock of the Company after this offering, has the power to
elect the entire Board of Directors of the Company and to approve or
9
<PAGE> 11
disapprove any corporate actions submitted to a vote of the Company's
stockholders. See "Relationship with Thermo Electron and Thermo Instrument" and
"Security Ownership of Certain Beneficial Owners and Management."
Lack of Dividends. The Company anticipates that for the foreseeable future
the Company's earnings, if any, will be retained for use in the business and
that no cash dividends will be paid on the Common Stock. Declaration of
dividends on the Common Stock will depend upon, among other things, future
earnings, the operating and financial condition of the Company, its capital
requirements and general business conditions. See "Dividend Policy."
THE COMPANY
The Company operated as two divisions of Thermo Instrument Systems Inc.
("Thermo Instrument") until its incorporation as a Delaware corporation in
November 1996. In connection with the Company's incorporation, Thermo Instrument
transferred to the Company the assets, liabilities and businesses of its
Gamma-Metrics subsidiary and Radiometrie division in exchange for 5,000,000
shares of the Company's common stock. As of May 27, 1997, Thermo Instrument
beneficially owned approximately 84% of the Company's outstanding Common Stock.
Unless the context otherwise requires, references in this Prospectus to the
Company or Metrika Systems refer to Metrika Systems Corporation and its
subsidiaries and the predecessor business which constitute the Company. The
Company's on-line raw materials analyzer business is conducted by its
Gamma-Metrics subsidiary based in San Diego, California, and its on-line
finished materials quality control business is conducted by its Radiometrie
division with operations in Erlangen, Germany and Gloucester, England. The
Company's principal executive offices are located at 5788 Pacific Center
Boulevard, San Diego, California 92121, and its telephone number is (619)
450-9649.
USE OF PROCEEDS
The net proceeds to be received by the Company from this offering are
estimated to be $31,090,000 ($35,858,500 if the Underwriters' over-allotment
option is exercised in full) assuming an initial offering price of $17.00 per
share and after deducting estimated underwriting discounts and commissions and
offering expenses. The principal purposes of this offering are to increase the
Company's equity capital, to create a public market for the Common Stock and to
facilitate future access by the Company to public equity markets. The Company
intends to use the net proceeds from this offering for general corporate
purposes, including the possible acquisition of one or more businesses, and to
fund research and development with respect to new products. The Company,
however, has no specific agreements or commitments with respect to any
acquisitions that would be material to the Company. Pending these uses, the
Company expects to invest the net proceeds from this offering primarily in
investment grade interest bearing or dividend bearing instruments, either
directly by the Company or pursuant to a repurchase agreement with Thermo
Electron in which the Company would in effect lend excess cash to Thermo
Electron, on a collaterized basis at market interest rates. See "Relationship
with Thermo Electron and Thermo Instrument -- Miscellaneous".
DIVIDEND POLICY
The Company anticipates that for the foreseeable future the Company's
earnings, if any, will be retained for use in the business and that no cash
dividends will be paid on the Common Stock.
10
<PAGE> 12
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 29, 1997, and as adjusted to give effect to the sale of the shares of
Common Stock offered hereby, after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company.
<TABLE>
<CAPTION>
MARCH 29, 1997
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Notes Payable and Current Maturities of Long-term Obligation......... $15,451 $15,451
======= =======
Long-term Obligation................................................. $ 4,680 $ 4,680
------- -------
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000 shares authorized;
5,967,833 shares issued and outstanding and 7,967,833 shares
as adjusted (1)................................................. 60 80
Capital in excess of par value..................................... 26,050 57,120
Retained earnings.................................................. 1,013 1,013
Cumulative translation adjustment.................................. (537) (537)
------- -------
Total Shareholders' Investment............................. 26,586 57,676
------- -------
Total Capitalization (Long-term Obligation and
Shareholders' Investment)................................ $31,266 $62,356
======= =======
</TABLE>
- ---------------
(1) Does not include 312,500 shares of Common Stock reserved for issuance under
the Company's stock-based compensation plans. As of May 27, 1997, options to
purchase 298,000 shares of Common Stock had been granted and were
outstanding under the Company's stock-based compensation plans. See
"Dilution," "Management -- Compensation of Directors" and "-- Compensation
of Executive Officers" and Notes 2 and 9 of Notes to Consolidated Financial
Statements.
11
<PAGE> 13
DILUTION
As of March 29, 1997, the Company had a net tangible book value of
$12,393,000, or $2.08 per share. Net tangible book value per share is determined
by dividing net tangible book value (total tangible assets less total
liabilities) of the Company by the number of shares of Common Stock outstanding.
After giving effect to the sale by the Company of 2,000,000 shares of Common
Stock offered hereby (after deducting the estimated underwriting discounts and
commissions and offering expenses), the pro forma net tangible book value of the
Company as of March 29, 1997 would have been $43,483,000, or $5.46 per share.
This represents an immediate increase in net tangible book value of $3.38 per
share to the existing shareholders and an immediate dilution in net tangible
book value of $11.54 per share to investors purchasing Common Stock in this
offering. See "Risk Factors -- Immediate and Substantial Dilution." The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed price to public................................................. $17.00
------
Net tangible book value per share as of March 29, 1997, before this
offering........................................................... $2.08
Increase per share attributable to this offering...................... 3.38
-----
Pro forma net tangible book value per share as of March 29, 1997, after
this offering(1)(2)................................................... 5.46
------
Dilution per share to new investors(1)(2)............................... $11.54
=======
</TABLE>
- ---------------
(1) If the Underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after this offering would be $5.84,
resulting in an immediate dilution of $11.16 per share to investors
purchasing shares in this offering. See "Underwriting."
(2) If all options outstanding at May 27, 1997 to purchase an aggregate of
298,000 shares of Common Stock at $15.00 per share were exercised in full,
in addition to the Underwriters' exercise of the over-allotment option, the
net tangible book value per share after this offering would be $6.15,
resulting in an immediate dilution of $10.85 per share to investors
purchasing shares in this offering.
The following table sets forth as of March 29, 1997 the number of shares of
Common Stock purchased from the Company, the total consideration paid to the
Company and the average price paid per share by existing shareholders and by
investors purchasing shares of Common Stock in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Thermo Instrument(1)............... 5,000,000 62.8% $12,582,000 20.6% $ 2.52
Other existing investors(2)........ 967,833 12.1 14,518,000 23.8 15.00
New investors...................... 2,000,000 25.1 34,000,000 55.6 17.00
--------- ----- ----------- -----
Total.................... 7,967,833 100.0% $61,100,000 100.0%
========= ===== =========== =====
</TABLE>
- ---------------
(1) Represents the book value of net assets transferred or contributed by Thermo
Instrument to the Company in exchange for 5,000,000 shares of the Company's
Common Stock.
(2) Represents the price paid for shares of Common Stock purchased for cash.
12
<PAGE> 14
SELECTED FINANCIAL INFORMATION
The selected financial information below for the fiscal year ended December
31, 1994 and as of and for the fiscal years ended December 30, 1995 and December
28, 1996 has been derived from the Company's Consolidated Financial Statements,
which have been audited by Arthur Andersen LLP, independent public accountants,
as indicated in their report included elsewhere in this Prospectus. This
information should be read in conjunction with the Company's Consolidated
Financial Statements and related notes included elsewhere in this Prospectus.
The selected financial information as of and for the fiscal year ended January
1, 1994 and the period from April 1, 1992 through January 13, 1993, and as of
and for the three-month periods ended March 30, 1996 and March 29, 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 three months
ended March 29, 1997 are not necessarily indicative of results for the entire
year.
<TABLE>
<CAPTION>
PREDECESSOR(1) THE COMPANY(1)
-------------- -------------------------------------
APRIL 1, 1992 FISCAL YEAR THREE MONTHS ENDED
THROUGH ------------------------------------- ---------------------
JANUARY 13, MARCH 30, MARCH 29,
1993 1993 1994 1995 1996 1996 1997
-------------- ------- ------- ------- ------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... $14,076 $19,809 $38,612 $46,032 $52,047 $11,594 $12,592
------- ------- ------- ------- ------- ------- -------
Costs and Operating Expenses:
Cost of revenues............. 9,558 11,412 22,157 25,767 28,527 6,815 7,036
Selling, general and
administrative expenses.... 3,962 5,582 10,256 11,640 13,395 3,138 3,376
Research and development
expenses................... 1,012 1,344 2,259 2,580 3,024 679 1,007
------- ------- ------- ------- ------- ------- -------
14,532 18,338 34,672 39,987 44,946 10,632 11,419
------- ------- ------- ------- ------- ------- -------
Operating Income (Loss).......... (456) 1,471 3,940 6,045 7,101 962 1,173
Interest Expense................. (36) (274) (718) (1,146) (796) (216) (201)
Interest Income.................. -- 36 34 21 101 1 220
------- ------- ------- ------- ------- ------- -------
Income (Loss) Before Income
Taxes.......................... (492) 1,233 3,256 4,920 6,406 747 1,192
Provision for (Benefit from)
Income Taxes................... (120) 642 1,489 2,068 2,561 298 477
------- ------- ------- ------- ------- ------- -------
Net Income (Loss)................ $ (372) $ 591 $ 1,767 $ 2,852 $ 3,845 $ 449 $ 715
======= ======= ======= ======= ======= ======= =======
Earnings per Share(2)............ $ .11 $ .34 $ .55 $ .74 $ .09 $ .12
======= ======= ======= ======= ======= =======
Weighted Average Shares(2)....... 5,193 5,193 5,193 5,219 5,193 5,989
======= ======= ======= ======= ======= =======
BALANCE SHEET DATA (AT END OF
PERIOD):
Working Capital.................. $ 7,688 $(7,084) $(4,665) $(8,070) $ 8,705 $(7,824) $10,245
Total Assets..................... 15,109 46,184 49,261 53,974 66,766 49,520 66,726
Long-term Obligation............. 1,816 -- 6,780 6,470 5,223 6,136 4,680
Shareholders' Investment......... 9,373 19,113 14,095 9,382 24,861 9,377 26,586
</TABLE>
- ---------------
(1) The fiscal year ended January 1, 1994 represents the Company's results of
operations from January 14, 1993, the date Gamma-Metrics (the "Predecessor")
was acquired by Thermo Instrument, through January 1, 1994. In addition, the
results of operations for the fiscal year ended January 1, 1994 include the
results of operations from the Company's on-line finished materials quality
control business, acquired October 1993. The period prior to January 14,
1993 represents the results of Gamma-Metrics prior to its acquisition by
Thermo Instrument.
(2) Pursuant to Securities and Exchange Commission requirements, earnings per
share for the Company have been presented for all periods subsequent to
January 13, 1993. Weighted average shares for such periods represent
5,000,000 shares issued to Thermo Instrument in connection with the initial
capitalization of the Company, and in fiscal 1996 the effect of shares sold
through a private placement, as well as the incremental effect of the
assumed issuance of the private placement shares and the assumed exercise of
stock options issued within one year prior to the Company's proposed initial
public offering for all periods presented. Weighted average shares for the
three months ended March 29, 1997 reflects the actual issuance of the
private placement shares since the private placement shares were outstanding
for the entire period.
13
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company develops, manufactures and markets on-line industrial process
optimization systems that employ proprietary ultra-high speed advanced
scientific measurement technologies for applications in raw materials analysis
and finished quality control. The Company pioneered the development of process
optimization systems that provide real-time, non-destructive analysis of the
composition of raw materials in basic materials production processes, including
coal, cement and minerals. The Company also manufactures advanced systems which
are used to measure and control parameters such as material thickness, coating
thickness and coating weight in web-type materials, such as metal strip, rubber
and plastic foils. Customers use these systems to improve product quality and
consistency, lower material costs, reduce energy consumption and minimize waste.
The Company intends to supplement its internal growth with strategic
acquisitions of complementary businesses. There can be no assurance that such
businesses will be available at prices attractive to the Company. On December
31, 1996, the Company acquired the assets, subject to certain liabilities, of
the Autometrics division of Svedala Industries Inc. ("Autometrics"), a
manufacturer and marketer of on-line analysis instruments for the minerals
processing industry.
A significant portion of the Company's sales are for large systems, the
timing of which can lead to variability in the Company's quarterly revenues and
income. In addition, in 1996 approximately 56% of the Company's revenues
originated outside the U.S. and approximately 26% of the Company's revenues were
exports from the U.S. Revenues originating outside the U.S. represent revenues
of the Company's on-line finished materials quality control business. The
operations of the on-line finished materials quality control business are
located in Germany, the United Kingdom and France, which principally sell in
their local currencies. Exports from the Company's U.S. operation are
denominated in U.S. dollars. The Company generally seeks to charge its customers
in the same currency as its operating costs. However, the Company's financial
performance and competitive position can be affected by currency exchange rate
fluctuations. Since the operations of the on-line finished materials quality
control business are conducted in Europe, principally Germany, the Company's
operating results could be adversely affected by capital spending and economic
conditions in Europe. The Company's operating results have been adversely
affected by a recession in Germany. The Company's strategy is to expand its
on-line finished materials quality control business in the U.S. and Asian
markets, which in turn may reduce the Company's exposure to European market
conditions.
14
<PAGE> 16
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly financial
information for each of the four quarters in the period ended December 28, 1996
and for the quarter ended March 29, 1997. The Company believes that this
information has been presented on the same basis as the audited financial
statements appearing elsewhere in this Prospectus and, in the opinion of the
Company, includes all adjustments (consisting only of normal, recurring
adjustments) necessary to present fairly the unaudited quarterly results when
read in conjunction with the audited financial statements of the Company and
related notes thereto included elsewhere in the Prospectus. The operating
results for any quarter are not necessarily indicative of the operating results
for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------
MARCH 30, JUNE 29, SEPT. 28, DEC. 28, MARCH 29,
1996 1996 1996 1996 1997
--------- ------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................... $11,594 $12,589 $13,584 $14,280 $12,592
Cost of Revenues....................... 6,815 7,125 7,382 7,205 7,036
------- ------- ------- ------- -------
Gross Profit........................... 4,779 5,464 6,202 7,075 5,556
Operating Expenses..................... 3,817 3,972 4,019 4,611 4,383
------- ------- ------- ------- -------
Operating Income....................... 962 1,492 2,183 2,464 1,173
Net Income............................. 449 830 1,146 1,420 715
Earnings per Share..................... .09 .16 .22 .27 .12
Weighted Average Shares................ 5,193 5,193 5,193 5,298 5,989
Gross Profit Margin.................... 41% 43% 46% 50% 44%
Operating Income Margin................ 8% 12% 16% 17% 9%
Net Income Margin...................... 4% 7% 8% 10% 6%
</TABLE>
Revenues increased from $11.6 million in the first quarter of 1996 to $14.3
million in the fourth quarter of 1996, principally due to sales growth at the
on-line raw materials analyzer business, resulting from increased sales in
international markets. Revenues decreased to $12.6 million in the first quarter
of 1997 from $14.3 million the fourth quarter of 1996, principally due to a $2.1
million decrease in sales at the on-line finished materials quality control
business, resulting primarily from a decrease in demand at the German operations
of this business. Improvement in the gross profit margin from 41% in the first
quarter of 1996 to 43% in the second quarter of 1996 reflects improvement at the
on-line finished materials quality control business due to higher costs incurred
in the first quarter of 1996 related to the introduction of new products, offset
in part by a decrease in gross profit margin at the on-line raw materials
analyzer business primarily due to shipments of older, lower-margin products.
The increase in gross profit margin from 46% in the third quarter of 1996 to 50%
in the fourth quarter of 1996 reflects margin improvement at the on-line raw
materials analyzer business principally due to manufacturing efficiencies as a
result of an increase in volume, and margin improvement at the on-line finished
materials quality control business primarily due to a reduction in manufacturing
costs relating to new products. The decrease in the gross profit margin from the
fourth quarter of 1996 to the first quarter of 1997 was primarily due to a
decrease at the on-line finished materials quality control business, resulting
primarily from a decrease in volume.
RESULTS OF OPERATIONS
Three Months Ended March 29, 1997 Compared With Three Months Ended
March 30, 1996
Revenues increased 9% to $12.6 million in the three months ended March 29,
1997 from $11.6 million in the three months ended March 30, 1996, reflecting an
increase of $2.3 million at the on-line raw materials analyzer business
primarily due to increased sales in international markets and the inclusion of
$0.7 million in revenues from Autometrics, acquired December 31, 1996. These
increases were offset in part by a $1.1 million decrease in revenues at the
on-line finished materials quality control business due
15
<PAGE> 17
to a decrease in demand at the German operations of this business. Revenues
decreased $0.2 million due to the unfavorable effects of currency translation
due to the strengthening of the U.S. dollar. The future sales growth of the
Company will depend in part upon increasing industry acceptance of its on-line
raw materials analyzers, as well as the Company's ability to further penetrate
the U.S. and Asian markets for its on-line finished materials quality control
systems.
The gross profit margin increased to 44% in the three months ended March
29, 1997 from 41% in the three months ended March 30, 1996. The gross profit
margin at the on-line finished goods quality control business improved to 39% in
the three months ended March 29, 1997 from 34% in the three months ended March
30, 1996 due to higher costs incurred in the 1996 period related to the
introduction of new products, and an increase in higher-margin sales resulting
from the introduction of such new products. These improvements were offset in
part by a decrease in gross profit margin at the on-line raw materials business
from 52% in the three months ended March 30, 1996 to 48% in the three months
ended March 29, 1997 resulting principally from the inclusion of lower-margin
revenues at Autometrics.
Selling, general and administrative expenses as a percentage of revenues
were 27% in the three months ended March 29, 1997 and March 30, 1996. Research
and development expenses increased to $1.0 million in the three months ended
March 29, 1997 from $0.7 million in the three months ended March 30, 1996,
primarily due to an increase in product development expenses at the on-line raw
materials analyzer business.
Interest income increased $0.2 million in the three months ended March 29,
1997 primarily due to interest earned on the invested net proceeds from the
Company's December 1996 private placement.
The effective tax rate was 40% in the three months ended March 29, 1997 and
March 30, 1996. The rate exceeds the statutory federal income tax rate primarily
due to the impact of state income taxes, nondeductible amortization of costs in
excess of net assets of acquired companies and foreign tax rate and tax law
differences.
1996 Compared With 1995
Revenues increased 13% to $52.0 million in 1996 from $46.0 million in 1995,
reflecting sales growth at both the on-line raw materials analyzer and finished
materials quality control businesses. Revenues increased $3.4 million at the
on-line raw materials analyzer business primarily due to growing acceptance of
its product line in international markets, and $3.5 million at the on-line
finished materials quality control business largely due to the introduction of
its quality control product line in Asia. Revenues decreased $0.9 million due to
the unfavorable effect of currency translation due to the strengthening of the
U.S. dollar.
The gross profit margin increased to 45% in 1996 from 44% in 1995. The
gross profit margin at the on-line raw materials analyzer business improved to
51% in 1996 from 44% in 1995 primarily due to product redesign and increased
sales of products which have lower manufacturing costs. The improvement was
offset in part by a decrease in the gross profit margin at the on-line finished
materials quality control business to 41% in 1996 from 44% in 1995, resulting
principally from additional costs associated with the continued introduction of
new products in the German operations of this business.
Selling, general and administrative expenses as a percentage of revenues
increased to 26% in 1996 from 25% in 1995, primarily due to increased marketing
efforts in international markets resulting in an increase in staffing and higher
travel expenses at the Company's on-line finished materials quality control
operations in Germany. Research and development expenses increased to $3.0
million in 1996 from $2.6 million in 1995, principally due to an increase in
product development expenses at the on-line finished materials quality control
business in Germany.
Interest expense decreased to $0.8 million in 1996 from $1.1 million in
1995 due to a decrease in short-term borrowings at the on-line finished
materials quality control business, as well as a decline in interest rates.
Interest income increased $0.1 million in 1996 primarily due to higher average
invested
16
<PAGE> 18
balances of the Company's foreign operations, as well as interest earned on the
invested net proceeds from the Company's December 1996 private placement.
The effective tax rate was 40% in 1996 and 42% in 1995. These rates exceed
the statutory federal income tax rate primarily due to the impact of state
income taxes, nondeductible amortization of costs in excess of net assets of
acquired companies and foreign tax rate and tax law differences. The effective
tax rate decreased in 1996 primarily due to proportionately less income before
provision for income taxes from Germany, which is taxed at a higher rate.
1995 Compared With 1994
Revenues increased 19% to $46.0 million in 1995 from $38.6 million in 1994,
primarily due to a $3.5 million increase in sales at the on-line raw materials
analyzer business resulting from the introduction of the cross-belt analyzer
product line, as well as a $1.8 million increase in sales at the on-line
finished materials quality control business. Revenues increased $2.1 million due
to the favorable effects of currency translation due to the weakening of the
U.S. dollar.
The gross profit margin increased to 44% in 1995 from 43% in 1994,
principally due to an improvement in the gross profit margin at the on-line raw
materials analyzer business to 44% in 1995 from 40% in 1994 resulting from
product redesign and an increase in sales of products which have lower
manufacturing costs. The gross profit margin at the on-line finished materials
quality control business was unchanged at 44% in 1995 and 1994. Improvement in
the gross profit margin at the Company's operations in the United Kingdom and
France was offset by a decrease in gross profit margin at the German operations
resulting principally from additional costs associated with the introduction of
new products.
Selling, general and administrative expenses as a percentage of revenues
decreased to 25% in 1995 from 27% in 1994 largely due to an increase in
revenues. Research and development expenses increased to $2.6 million in 1995
from $2.3 million in 1994, primarily due to an increase in product development
expenses at the German division of the on-line finished materials quality
control business.
Interest expense increased to $1.1 million in 1995 from $0.7 million in
1994, primarily due to an increase in short-term borrowings at the on-line
finished materials quality control business.
The effective tax rate was 42% in 1995 and 46% in 1994. These rates exceed
the statutory federal income tax rate primarily due to the impact of state
income taxes, nondeductible amortization of costs in excess of net assets of
acquired companies and foreign tax rate and tax law differences. The effective
tax rate decreased in 1995 primarily due to proportionately less income before
provision for income taxes from Germany, which is taxed at a higher rate, and
increased benefits from a foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $10.2 million at March 29, 1997, compared
with $8.7 million at December 28, 1996. Included in working capital are cash and
cash equivalents of $17.4 million at March 29, 1997, compared with $20.2 million
at December 28, 1996. Additionally, included in working capital are short-term
borrowings and advances to or from parent company and affiliated companies of
$15.3 million at March 29, 1997 and $18.9 million at December 28, 1996 (see
Notes 5 and 6 to Consolidated Financial Statements).
During the three months ended March 29, 1997, $0.8 million was provided by
operating activities. Cash provided by the Company's operating results was
reduced primarily by a $2.4 million increase in inventories and unbilled
contract costs and fees, which was offset in part by a $1.3 million increase in
accounts payable. The increase in inventories and unbilled contract costs and
fees occurred principally at the on-line finished materials quality control
business, and resulted primarily from the timing of billing on
percentage-of-completion contracts.
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During the three months ended March 29, 1997, the Company expended $1.4
million for investing activities. On December 31, 1996, the Company acquired the
assets, subject to certain liabilities, of Autometrics for $1.3 million in cash
(see Note 9 to Consolidated Financial Statements).
The Company's financing activities used $2.5 million of cash in the three
months ended March 29, 1997. During the three months ended March 29, 1997, the
Company increased its short-term borrowings by $4.6 million and repaid $0.2
million of its long-term obligation. A decrease in due to parent company and
affiliated companies used $6.9 million in cash during the three months ended
March 29, 1997 (see Note 5 to Consolidated Financial Statements).
The Company plans to make capital expenditures of approximately $0.7
million in the remainder of 1997. Although the Company expects positive cash
flow from its existing operations, the Company anticipates it will require
significant amounts of cash for the possible acquisition of complementary
businesses and technologies. The Company expects that it will finance these
acquisitions through a combination of internal funds, including the net proceeds
from the sale of shares of Common Stock offered hereby, additional debt or
equity financing and/or short-term borrowings from Thermo Instrument or Thermo
Electron, although it has no agreement with these companies to ensure that funds
will be available, on acceptable terms, or at all. The Company believes that its
existing resources are sufficient to meet the capital requirements of its
existing businesses for the foreseeable future, including at least the next 24
months.
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<PAGE> 20
BUSINESS
The Company develops, manufactures and markets on-line industrial process
optimization systems that employ proprietary ultra-high speed advanced
scientific measurement technologies for applications in raw materials analysis
and finished materials quality control. The Company pioneered the development of
process optimization systems that provide real-time, non-destructive analysis of
the composition of raw materials in basic materials production processes,
including coal, cement and minerals. The Company also manufactures advanced
systems which are used to measure and control parameters such as material
thickness, coating thickness and coating weight in web-type materials, such as
metal strip, rubber and plastic foils. Customers use these systems to improve
product quality and consistency, lower material costs, reduce energy consumption
and minimize waste.
Global competition is driving participants in the basic materials
industries to increase quality and reduce production costs. The optimization of
industrial production processes requires the collection and analysis of data for
both the composition of the materials used in the process as well as for
measuring the variance of the output from composition targets. Manufacturers
traditionally have used off-line sampling techniques and laboratory instruments
to obtain this data. The delays associated with these techniques do not permit
real-time adjustments to the manufacturing process. In order to provide
real-time process and quality control, measurement systems must be integrated
into the customer's production line and must rapidly measure, on a continuous
basis, the stream of the materials used or product produced, rather than a
sample. The systems must also generate precise and reliable measurements of the
materials using non-invasive and non-destructive measuring techniques. Finally,
the systems must rapidly analyze the measurement data and, using this data,
adjust automatically the manufacturing process in real-time, and often under
harsh industrial conditions.
The Company's systems make real-time, on-line, non-invasive,
non-destructive, precise measurements of materials using advanced scientific
measurement techniques, including gamma spectroscopy, beta particle detection,
laser spectroscopy, x-ray fluorescence and ultrasound. The Company's systems
incorporate proprietary intelligent sensors that have been developed for
specific production processes along with ultra-high speed signal processing
electronics capable of processing, in some cases, up to one million electronic
impulses per second resulting from the detection of excited particles such as
photons. These systems can be combined with the Company's proprietary real-time
software to form integrated process optimization systems designed to fit the
customer's specific application. The Company has developed a reputation for
rugged and reliable sensor technology capable of operating in hostile industrial
environments. The Company's products can generate significant savings to the
customer as a result of reduced manufacturing costs, reduced material waste,
decreased energy costs and in some cases, savings in capital investment. In many
cases a customer can recoup its investment in one of the Company's systems
within six to eighteen months.
The advent of rugged high-speed analytical measurement instrumentation has
only recently allowed for the development of on-line industrial process
optimization. The markets for the Company's systems, therefore, consist
primarily of the existing industrial facility base which may be retrofitted or
upgraded to incorporate on-line analysis, as well as new industrial facilities
which are expected to be built in the future. For example, the Company believes
only 4% of existing coal mines and coal burning utilities and 7% of existing
cement plants have adopted this technology. Further, the Company estimates that
there are several thousand web-type material production lines, many of which the
Company believes have obsolete measurement and control systems, which could be
upgraded by incorporating the Company's on-line finished materials quality
control systems. The Company believes that the current total annual worldwide
market for process optimization instruments and systems is in excess of $2
billion. The Company believes its process optimization products and systems
currently address an approximately $500 million annual market segment.
The Company's strategy is to capitalize on the large market opportunities
for advanced measurement systems in the basic materials industries and to
exploit its core competencies and proprietary technologies through an evolving
series of optimization systems. As part of this strategy, the Company
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intends to expand the geographic scope of its addressed markets. In particular,
the Company intends to expand the market presence of its on-line finished
materials quality control products in Asia, the U.S. and Latin America by
drawing on the global market expertise and existing global sales force of its
on-line raw materials analyzer business. In addition, the Company intends to
aggressively pursue market opportunities for its on-line raw materials analyzer
products created by the rapid infrastructure development and new manufacturing
capacity occurring in Asia and Latin America. Further, the Company intends to
pursue opportunities to retrofit the large existing base of coal mines,
coal-burning utilities and cement plants with its on-line process optimization
systems. The Company also intends to target new industries such as the
pharmaceutical, agrochemical, industrial chemical and glass industries. For
example, the Company is developing a laser-based spectroscopy system to be used
on-line to analyze the complex molecular structures of chemicals, which the
Company believes can be adapted for use in the pharmaceutical industry. The
Company also plans to make strategic acquisitions of complementary businesses.
On December 31, 1996, the Company acquired substantially all of the assets,
subject to certain liabilities, of the Autometrics division of Svedala
Industries, Inc. Autometrics designs, manufactures and markets on-line analysis
instruments for the minerals processing industry.
In January 1993, Thermo Instrument acquired Gamma-Metrics, a manufacturer
and marketer of on-line raw materials analyzers and in October 1993, Thermo
Instrument acquired all of the assets, subject to certain liabilities, of
Radiometrie, a manufacturer and marketer of on-line finished materials quality
control systems. Gamma-Metrics and Radiometrie operated as two divisions of
Thermo Instrument until the Company's incorporation as a Delaware corporation in
November 1996. In connection with the Company's incorporation, Thermo Instrument
transferred to the Company the assets, liabilities and businesses of the
Gamma-Metrics subsidiary and Radiometrie division in exchange for 5,000,000
shares of the Company's common stock. In December 1996, the Company acquired the
Autometrics business. The Company's on-line raw materials analyzer business is
conducted by its Gamma-Metrics subsidiary based in San Diego, California, and
its on-line finished materials quality control business is conducted by its
Radiometrie division with operations in Erlangen, Germany and Gloucester,
England. The Company's principal executive offices are located at 5788 Pacific
Center Boulevard, San Diego, California 92121, and its telephone number is (619)
450-9649.
On-line Raw Materials Analyzer Business
The Company manufactures on-line process optimization systems which
non-invasively measure and analyze the physical and chemical properties of a
stream of bulk solid materials in real-time. The systems are primarily used to
analyze the composition of raw materials used in certain basic industries, such
as coal, cement and minerals. The analysis technique used in the Company's
process optimization systems involves neutron interrogation. Under neutron
interrogation each element, when activated by neutrons, emits gamma rays of
unique characteristics which allow identification and quantification of the
elements present. Neutron interrogation has a major advantage over other on-line
measuring technologies such as x-rays because neutrons can deeply penetrate the
materials being analyzed. As a result, neutron interrogation allows the entire
stream of the material to be analyzed and eliminates the need for sampling. In
addition, it provides a more accurate analysis of the materials, especially
non-homogeneous materials, and can be used to analyze an extremely broad range
of materials. The systems contain proprietary sensors that detect gamma rays
emitted from the material being analyzed, which is activated by the neutron
source within the analyzer, yielding a composite gamma ray spectrum of the
material analyzed. Through on-line high speed spectroscopy, this spectrum is
then decomposed into its constituent parts by using microprocessors and
sophisticated real-time analytical software. The analyzer can then translate
this data into the elemental composition of the raw materials and can also use
the information to infer certain quality control parameters specific to the
process.
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RAW MATERIALS PROCESS OPTIMIZATION SYSTEM
[DIAGRAM]
[This diagram depicts the Company's raw materials process optimization system
incorporated into a cement manufacturer's production line. The diagram contains
a series of boxes from the left margin to the center of the page depicting
containers, each of which holds high lime, low lime, shale or pyrite. Arrows
from each of the containers depict the release of these materials onto a
conveyer belt which enters a box entitled "Crossbelt Analyzer." An arrow from
the Crossbelt Analyzer to a box entitled "Raw Mill" depicts the flow of the
cement on the conveyer belt. Another arrow from the Crossbelt Analyzer to a box
entitled "Process Optimization Computer" depicts the flow of information which
is generated by the Crossbelt Analyzer and an arrow from the Process
Optimization Computer to the four containers of materials described above
depicts the flow of information from the computer to these containers to
regulate the amount of materials released onto the conveyer belt.]
The Company has developed extensive proprietary know-how and expertise
regarding the measuring capabilities of various on-line sensor technologies
based on the material being analyzed and the ultimate use of the material. The
Company draws on this expertise to modify and adapt its technology to maximize
the efficiency and performance of its sensors in each application. The Company's
systems also employ ultra-high speed microprocessors and electronic signaling
devices which enable the technology to be used on-line and in real-time. The
Company has developed proprietary high speed sophisticated software which
rapidly processes the collected data and compares it to input target parameters.
In this way, a control signal can be generated which is then used to modify
process variables to guide the process to the target parameters. In order to
provide real-time analysis, the Company's systems must be integrated with the
customer's production process, thus subjecting them to hostile conditions. In
response, the Company has designed its systems to be extremely rugged, durable
and accurate despite these demanding conditions.
Continuous on-line full-stream materials analysis provides faster and more
accurate analysis information than is possible with any conventional analysis
system. Traditional methods require numerous samples to be taken mechanically
from the materials at various stages of the production process, followed by
labor intensive sample preparation and laboratory analysis. Conventional
analysis techniques lag the production process and cannot be used effectively
for process control. In contrast, on-line, real-time analysis of the materials,
when coupled with the Company's software products, provides the customer with
immediate data regarding material composition and allows customers to
automatically and continuously adjust their manufacturing processes.
The Company's systems can reduce operating costs through a decrease in raw
material waste and energy use. The continuous monitoring and adjustment of the
manufacturing process enable the customer to use its raw materials more
efficiently. Product quality and consistency are also improved with use of the
Company's systems. For example, one typical application enables customers in the
cement industry to regulate closely the raw mix proportions of cement materials
to produce a more consistent product. Customers building new facilities can save
on capital outlay by reducing their investment in homogenizing
stacker/reclaimers and homogenizing silos, the traditional methods of
homogenizing raw materials. The Company's systems also reduce pollution,
optimize recycling and reduce material waste.
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The Company currently markets the following family of products based on its
neutron interrogation technology.
On-line Coal Analyzer. The Company's on-line coal analyzer analyzes
streams of coal at a rate of up to four hundred tons per hour. The analyzer uses
neutron interrogation to determine the sulfur and ash concentration of the coal
on a continuous basis, and can also simultaneously compute the calorific value
of the coal, among other quality parameters. Customers can use the data to blend
or sort the coal depending on its quality. The Company has developed proprietary
high speed software that can be incorporated into the system to enable the
customer to automatically adjust and control the coal blending and sorting
process on-line.
Coal analyzers are currently used by coal mines and coal-burning utilities.
Increased competition in the coal industry has forced coal producers to reduce
costs while meeting increasingly stringent quality specifications. Coal mines
can use the coal analyzer to improve profitability by blending coals of
different quality to meet specific contract requirements or environmental
regulatory standards, by sorting out low sulfur coal which can be sold for a
premium or by controlling the specific gravity of separation in a coal cleaning
plant to ensure that quality specifications are met without over-cleaning. In
addition to ensuring more consistent quality, on-line coal analysis improves
recovery or yield from the mine, thus extending the life of a mine by reducing
the risk of premature exhaustion of low sulfur reserves that are required to
balance high sulfur reserves. Utility market deregulation and privatization,
coupled with environmental emission standards, has forced coal-burning utilities
to reduce costs while satisfying environmental emissions regulations.
Coal-burning utilities benefit from using on-line coal analyzers by enabling the
utility to accurately and rapidly test the coal to verify that the specification
of coal received under contract meets its specifications; to burn a more
cost-effective blend of high and low sulfur coal without violating environmental
emissions standards; to avoid investment in costly scrubbers; to generate
emission credits by controlling emissions; to improve boiler performance by
burning consistent quality coal; and to provide data verification of continuous
emission monitors.
Fifty-five percent of electricity production today in the U.S. is derived
from coal, and coal is the primary source of electricity in the rest of the
world. Further, it is estimated that approximately 45 new coal mines and
coal-burning utilities will be built each year for the next several years. In
China alone it is estimated that 139 coal-fired utility plants will be built
between 1995 and 2005. The price of an on-line coal analyzer system ranges from
$300,000 to $500,000.
CrossBelt Analyzer. The Company's CrossBelt Analyzer ("CBA") is used
primarily by the cement industry to analyze the composition of cement raw
materials. The CBA is essentially a horizontal tunnel that is easily assembled
around the customer's conveyor belt. The CBA analyzes materials traveling on a
conveyor belt at speeds of up to 600 feet (200 meters) per minute and with
material flow rates in excess of 1,000 tons per hour. The CBA generates data
which provides the elemental composition of the entire stream of materials and
can also use the information to infer certain quality control parameters, such
as lime saturation factor and silica ratio. The CBA can incorporate high speed
proprietary software which allows the customer to automatically control
production processes.
Cement producers purchase the CBA to improve the economics of the plant by
reducing operating costs through the reduction in material waste and fuel costs.
The CBA is incorporated on-line into the customer's production process, which
enables the customer to control the mix of raw materials at the beginning of the
production line or to automatically control the blending of the cement additives
with crushed limestone and clay further down the production line. Both
approaches enable the producer to achieve more uniform cement quality. The CBA
controls the production process by using the analytical data it compiles to
automatically adjust the composition of the additive mix to achieve target
quality levels. This approach helps reduce variations in the materials fed into
the cement kiln yielding several benefits: lower energy consumption in the
cement mills, greater throughput and extended refractory life. Some customers
have reported that the use of the CBA has resulted in the reduction of fuel
costs. Fuel
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costs can constitute a significant percentage of a cement plant's overall
operating costs. For new plants, reduced variations in raw material chemistry
can also translate into major savings in the capital outlay for homogenizing
stacker/reclaimers and for homogenizing silos. This homogenizing equipment is
used to blend uneven raw materials. The price of a CBA system ranges from
$700,000 to $1 million.
The annual consumption of cement is expected to rise from the 1994 figure
of approximately 1.3 billion tons to approximately 1.8 billion tons by the year
2005. In addition, there are currently approximately 1,150 cement plants that
the Company has identified as potential customers for its CBA.
Mineral Slurry Analyzers. The Company recently developed an on-line
analyzer using neutron interrogation for use in the mineral extraction industry
for analyzing mineral slurry, a mixture of fine insoluble materials and water.
The Company has successfully tested its neutron-based mineral slurry analyzer at
a beta test site. Virtually all mined minerals, including iron, copper, nickel
and bauxite, must be separated and purified through a process called
beneficiation whereby the mined minerals are milled and mixed with water to form
a mineral slurry. The mineral of interest is then concentrated through a variety
of separation stages using reagents. The Company's neutron-based mineral slurry
analyzer, which analyzes the entire elemental composition of the slurry, can
greatly improve the efficiency of the beneficiation process by using the
collected data to automatically adjust various process parameters, including the
amount of reagents used in the process. The Company believes its neutron-based
mineral slurry analyzer is suitable for controlling the beneficiation process
for a wide variety of minerals.
On December 31, 1996, the Company acquired substantially all of the assets,
subject to certain liabilities, of Autometrics. Autometrics is a manufacturer of
mineral slurry analyzers. The assets acquired included two complementary product
lines and a customer base of approximately 300 customers, the majority of which
are located in the U.S. The two product lines acquired were Autometrics' on-line
x-ray slurry analyzers and its on-line particle size analyzers.
The x-ray slurry analyzers are used in the mineral extraction industry,
primarily for copper, iron and gold extraction, to measure the percentage of
elements present in mineral slurries and can be designed to automatically
control and adjust the amount of reagents used in the mineral beneficiation
process. The x-ray slurry analyzer uses x-ray fluorescence as its energy source
which is a less expensive energy source than neutron interrogation, and does not
penetrate the materials being analyzed as deeply as neutron interrogation. The
x-ray slurry analyzer provides customers, who do not require a comprehensive
analysis system, a cost-effective alternative to the Company's neutron-based
mineral slurry analyzer.
The on-line particle size analyzers are on-line real-time particle size
measuring instruments which have been used for over 15 years in the mineral
extraction industry. The on-line particle size analyzers use ultrasound together
with proprietary models to determine the particle size distribution and percent
solids in mineral slurries.
The price of the Company's mineral slurry analyzers ranges from $50,000 to
$500,000. The Company believes there are currently over 750 mineral processing
facilities worldwide for all of the Company's products.
Software Products. The Company complements its application specific sensor
technology with process optimization software. These systems use adaptive and
predictive controls to maximize material utilization, as well as to blend raw
materials to meet certain regulatory requirements in a cost-effective manner.
The process to extract, beneficiate and utilize raw materials is difficult to
control due to variances in chemistry, size and shape of the materials, and time
delays in the transport of materials from different points within the handling
system. Traditional process control methods cannot be utilized in these dynamic
and highly variable conditions. The Company's proprietary process control
software can accomplish these optimization tasks by performing model-based
estimation and by adaptively controlling source materials. The Company is the
only provider of process control software of this type for use by customers in
the raw materials segment of the basic materials industry.
A variety of products are manufactured and sold by the Company to address
the disparate needs of the cement, coal and energy industries. For the cement
industry, RAMOS(TM) achieves continuous blending
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for up to six sources of bulk materials and three control parameters, while
PREBOS(TM) is ideal for batch blending, employing up to twelve sources.
COBOS(TM) is used by coal producers and coal-fired utilities to blend coal to a
target composition defined by sulfur, ash or calorific value and thus achieve
optimum fuel composition while meeting emission limits.
FastLab. The Company also offers its FastLab analyzer for rapid analysis
of samples off-line, with minimal sample preparation. The FastLab can be used
for numerous applications such as spot check analysis of raw materials, core
hole analysis, fuel analysis and chemical additives analysis. This product is
suitable for the same markets which use on-line elemental analysis. Its
advantages include its ease of use, its flexibility in handling multiple
material types and sampling locations and its low cost. The price of the
Company's FastLab analyzer ranges from $250,000 to $400,000.
Process Safety Instrumentation. Prior to entering the on-line process
optimization systems business, the Company's principal business was process
safety instrumentation for the nuclear power industry. The Company is a leading
supplier of process safety instrumentation in this industry. The Company's
instrumentation is designed to improve the safety and efficiency of nuclear
power plants. The Company produces several products for this market ranging in
price from $100,000 to $2.5 million. In addition, the Company offers automated
test equipment and some safety-related computer software for nuclear power
plants and other facilities where radioactive materials are used.
On-line Finished Materials Quality Control Business
The Company develops, manufactures and markets gauges and process
optimization systems for industrial manufacturing lines for continuous
production of certain web-type materials. Web-type materials are flat sheet
materials like paper, metal strip, plastic foil, rubber and glass. Typical high
volume products made from web-type materials include all types of vehicle body
and other parts, metals used for refrigerators and similar products,
beverage/food cans, cladding for buildings and rubber tires. The Company's
instruments measure the total thickness, basis weight and coating thickness of
web-type materials such as plastic foils, hot and cold metal strip, rubber,
glass and non-woven fabrics. The measuring technology incorporated in the
Company's products is based on partial absorption, reflection or change in
ionizing or infra-red radiation as well as of white light and laser beams, by
the materials to be measured. The Company's systems can measure a single point
on the material to be measured, several points or generate a "profile" of the
web. Measured values are acquired without contact and without interfering with
the production process, have high measurement accuracy and are extremely
reliable despite hostile environments. The Company offers its measuring gauges
with or without its process optimization systems. The customer's production
process can be regulated automatically by the Company's process optimization
system.
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ON-LINE FINISHED MATERIALS QUALITY CONTROL SYSTEM
[DIAGRAM]
[This diagram depicts the Company's on-line finished materials quality control
system incorporated into a customer's hot dip galvanizing line. The diagram
contains a box depicting the customer's extrusion system. A sheet of web
material enters this box from the left (depicted by an arrow) and emerges at
the top of the box. Immediately after and above the box the material passes
through a hot gauge. The material continues through another box then turns
right over a roller and passes through another box entitled "Hot Dip
Galvanizing Line." It then turns downward over a roller and passes through a
mechanism entitled "Cold Gauges." The material then emerges through a series of
rollers out of the Cold Gauges to the right depicted by an arrow. Both the Hot
Gauge and the Cold Gauges are connected to a computer entitled "Expert System,"
depicting the flow of information from the gauges to the computer and then from
the computer to the line to regulate the thickness or coating thickness of the
material running through the line.]
The Company's products incorporate a variety of measurement gauges such as
x-ray thickness gauges, isotope thickness gauges, x-ray fluorescence coating
gauges or beta-backscatter gauges, depending on the application. One of the
Company's strengths is its proprietary know-how regarding application-specific
technology. The thickness gauges manufactured by the Company basically function
by measuring partial absorption of energy by the material to be measured. The
change in the intensity of the energy emitted is detected by application
specific sensors, then processed by high speed microprocessors, before emerging
as the measured value. These instruments can incorporate the Company's high
speed proprietary software to form a fully integrated process optimization
system for continuous manufacturing processes and improved product quality. The
Company's Fuzzy-Neurocontrol(TM) software provides predictive adaptive control
of the process. This proprietary software allows a more timely control of the
process, adapts the controls to the varying conditions in the process and offers
improved material savings. The Company's Spectracomp(TM) software automatically
and continuously compensates for variations in metal thickness measurements
resulting from changes in the composition of the alloy being measured.
Competitive pressures have necessitated that producers of web-type
materials reduce production costs. The Company's products not only save on raw
materials and energy but they also maximize productivity and product quality.
The total thickness of web-type material, or the coating on it, is measured
accurately at the point of manufacture by the Company's products and are
compared by the system with an input target value. Adjustments can be made to
the manufacturing process early in the process, thereby reducing material waste.
The Company's systems also provide several competitive advantages which afford
the customer additional cost savings. For example, the Company's products can
accurately measure materials closer to the edge of the strip thus reducing
material waste. The Company has developed a reputation for rugged and reliable
instruments that can withstand hostile conditions. Ruggedness is critical to
customers because the Company believes downtime of the production system could
cost a customer up to $100,000 an hour. The Company's proprietary hot gauges can
be placed closer to the actuator (air knife) than conventional cold gauges
allowing adjustments earlier in the production process thus decreasing material
waste. In addition, the Company's systems include an extremely short response
time gauge, sending control signals one inch (2.5 centimeters) after
measurement, while competitors' gauges typically require at least twice this
distance. Costs can also be reduced through reduced start-up and product change
times using the system's comprehensive organized display of the process
parameters. Reducing start-up times at the beginning of the production and
product change saves energy, reduces scrap and saves machine time. Depending
on
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<PAGE> 27
the circumstances, most customers can recoup their investment in a Company
system within six to eighteen months of installation. Prices for the Company's
gauges and process optimization systems typically range from $50,000 to $1
million. Competitive technologies enabling on-line measurement of the thickness,
such as contacting mechanical thickness gauges and pneumatic calipers, exist,
however, the Company believes that use of these technologies results in inferior
accuracy when compared with its own products.
The Company believes there is significant market potential for its products
resulting from several factors including increased demand for on-line
optimization, growing market opportunities in Asia and Latin America, increased
market penetration in the U.S. and the expansion of steel minimills. The Company
estimates that there are currently several thousand production lines worldwide
that currently use or could benefit from on-line process optimization. Asia and
Latin America are experiencing growth in infrastructure development and
manufacturing capacity which will drive demand for the Company's systems. The
Company also believes there are potential opportunities to penetrate the U.S.
markets which are dominated by few competitors. End users in the U.S. are
demanding alternative sources of on-line process optimization. Increased
emphasis on energy efficiency will also create demand for the Company's
products. For example, in the automotive industry, for a given load-carrying
capacity, all types of vehicles are being designed with a lower mass, with the
objective of reducing energy consumption. This leads directly to several trends:
for example, mass-produced road vehicles will use less steel and be made of
thinner steels, plastic sheet parts and even aluminum. (The Audi A8, for example
has an aluminum body.) Likewise, aircraft parts will be fabricated from more
exotic materials such as composites and titanium. These trends indicate lower
volume but higher value manufacture of web-type products and, consequently,
increased demand for the Company's gauges and process optimization systems. The
expansion of steel minimills (recycling) has created competitive pressures in
the steel industry through increased demand for efficiency, which in turn will
also stimulate demand for the Company's gauges and process optimization systems.
COMPETITION
In the coal, cement and mineral industries, the Company competes primarily
on performance and to a lesser extent on price. Competition regarding on-line
coal and cement analyzers is limited at present. Scantech Holdings (formerly
Mineral Control Instrumentation Ltd.) of Australia is the Company's principal
competitor in the on-line coal analyzer market. Scantech Holdings, which entered
the cement industry market in 1993, is also the Company's principal competitor
in this industry. The Company is a recent entrant into the on-line mineral
slurry analyzers market where it competes primarily with Amdel of Australia. The
market for solids and multiphase analyzers for process control generally is
fragmented, with numerous competitors. The Company believes it is a market
leader in the segment of the solids and multiphase analyzer market for on-line
bulk materials analyzers using neutron interrogation.
Competition in the thickness gauging business is highly fragmented with
numerous competitors competing in various end use market segments. As a result,
competition varies according to the end use segment. The Company competes by
quality, performance and price. The Company's largest competitor is Honeywell,
through its recent acquisition of Measurex (USA), which in turn recently
acquired Data Measurement Corporation, the metals gauging division of Loral and
Ohmart. Both Data Measurement and Loral offer systems to the metals industry.
Ohmart is a supplier mainly to the plastics industry. Toshiba and Yokoyawa
(Japan) are at present competing with the Company in Asia. IMS (Germany) and IRM
(Belgium/USA), (formerly the metal gauging division of ABB (Sweden/Switzerland))
compete with the Company worldwide in the metals industry. There are a number of
competitors such as NDC (US), Eurotherm (UK) and Infrared Engineering (UK) which
compete with the Company in the plastics and rubber industry.
Certain of the Company's competitors have greater resources, manufacturing
and marketing capabilities, technical staff and production facilities than those
of the Company. As a result, they may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products than can the Company.
Further,
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competition with respect to all of the Company's products could increase if new
companies enter the market or if existing competitors expand their product
lines. There can be no assurance that competitors of the Company will not
develop technological innovations that will render products of the Company
obsolete.
MARKETING, SALES AND DISTRIBUTION
On-line Raw Materials Analyzer Business. The Company sells its on-line raw
material analyzer products directly to its customers worldwide through its sales
force consisting of 11 persons. The territories of this sales force are
primarily geographical with some segment specialization. In addition, the
Company uses a network of sales and service representatives in 23 countries
around the world to facilitate product distribution worldwide. The primary
function of these representatives is to stay in close contact with customers or
potential customers, gather market information, translate, advertise,
participate in trade shows, arrange meetings and facilitate logistics. The
Company also sells some products to original equipment manufacturers ("OEMs")
who offer the Company's products along with their own or a third party's
products. Sales to OEMs represent approximately 10% of the Company's total
revenues.
On-line Finished Materials Quality Control Business. The Company sells its
on-line finished materials quality control systems primarily in Europe through a
direct sales force of 20 employees, and through a network of 14 distributors and
sales representatives in Europe. In Asia, a sales network is being established
with three agents currently under contract covering China, India and Japan.
Recently, the Company has employed three agents in Latin America covering
Argentina, Brazil and Colombia. In November 1996, an area sales manager was
hired to establish a sales operation addressing countries participating in
NAFTA. In addition, the Company sells its products to OEMs. Sales to OEMs
represented approximately one-third of the Company's total revenues from its
on-line finished materials quality control business for 1996. The Company
intends to further extend its sales network in Asia, North America and Latin
America.
Customer Service and Support. The Company believes that high quality
customer service and support is critical to success in the process optimization
segment of the analytical instrumentation industry. The Company maintains a
staff of engineers to assist customers with installing and integrating their
process optimization system and to provide ongoing spare parts and calibration
services for its on-line raw materials analyzer business. In addition, modems
permit remote diagnostics by customer support personnel from the Company's
headquarters or from satellite support centers. The Company supports its
manufacturing operations for its on-line finished materials quality control
business with a full range of services including application and engineering
support, installation, supervision, commissioning, emergency field service by
remote diagnostics via modems, extensive customer training, consulting and spare
parts.
RESEARCH AND DEVELOPMENT
The Company maintains active programs for the development and introduction
of new products and improvements to existing products. The Company also seeks to
develop new applications for its existing products and technology. In
particular, the Company is actively seeking new applications for its non-
invasive, non-destructive analysis technologies. The Company is also in the
process of developing other applications for its CBA.
With respect to its on-line finished materials quality control business,
the Company is focused on two areas of commercial importance in the metals
industry, the measurement of metal coatings and the cross-profile thickness
measurement of hot steel strip, cold strip and plate. In both areas of
measurement, parameters, particularly accuracy and resolution, are being
tightened in response to end-user needs. In addition, the Company is involved in
numerous other development projects including, among others, development of an
x-ray based tomographic thickness profile system. The object of this system is
to take a snapshot of thickness variations across the sheet at a high transverse
resolution. This system is in the early stages of development. The Company is
also developing a compact fixed energy x-ray source for
27
<PAGE> 29
thin films in the plastic, rubber, glass and other industries which the Company
anticipates introducing to the market in 1997.
Research and development expenses for the Company were $2.3 million, $2.6
million, $3.0 million and $1.0 million in fiscal 1994, 1995 and 1996, and the
three months ended March 29, 1997, respectively. As of March 29, 1997, the
Company had 32 full time employees engaged in research and development.
PATENTS
The Company's policy is to protect its intellectual property rights and to
apply for patent protection when appropriate. The Company is the owner of 11
United States patents as well as corresponding foreign patents having expiration
dates ranging from 1998 through 2012. Patent protection is believed to provide
the Company with competitive advantages with respect to certain instruments. The
Company also considers that technical know-how, trade secrets and trademarks are
important to its business.
There can be no assurance that any patents now or hereafter owned by the
Company will afford protection against competitors. Proceedings initiated by the
Company to protect its proprietary rights could result in substantial costs to
the Company. There can be no assurance that competitors of the Company, some of
whom have substantially greater resources than those of the Company, will not
initiate litigation to challenge the validity of the Company's patents, use
their resources to design comparable products that do not infringe the Company's
patents or initiate claims that the Company's products infringe the competitors'
patents. The Company could incur substantial costs and diversion of management
resources with respect to the defense of any such challenges or claims, which
could have a material adverse effect on the Company's business, financial
condition, and results of operation. Furthermore, parties making such challenges
or claims could secure a judgment awarding substantial damages, as well as
injunctive or other equitable relief, which could effectively block the
Company's ability to make, use, sell, distribute or market its products and
services in the U.S. and abroad. See "Risk Factors -- Proprietary Rights."
FACILITIES
The Company's various businesses are operated from separate facilities. The
Company leases approximately 45,000 square feet in San Diego, California
pursuant to a lease that expires in 2003. The Company uses this facility for
manufacturing, sales and administration for its on-line raw materials analyzer
business. The Company also leases approximately 20,000 square feet in
Gloucester, England, pursuant to a lease expiring in 2001, and owns an
approximately 100,000 square foot facility in Erlangen, Germany, of which
approximately 45,300 square feet are utilized by the Company, with the balance
being used by another Thermo Instrument company. Both of these facilities are
used by the Company for manufacturing, sales and administration for its on-line
finished materials quality control business. In addition, the Company leases
office space throughout the world for its sales and service operations. The
Company believes that these facilities are adequate for its present operations.
PERSONNEL
As of March 29, 1997, the Company had a total of 317 employees, of whom 51
were engaged in research and product development and 266 were engaged in sales,
service, manufacturing and general management. The Company has had no work
stoppages and considers its relations with employees to be good.
BACKLOG
The Company's backlog of firm orders was approximately $26.5 million at
March 30, 1996 and March 29, 1997. The Company includes in backlog only those
orders for which it has received firm purchase orders and for which delivery has
been specified within twelve months. Because of the possibility of customer
changes in delivery schedules, cancellation of orders and potential delays in
product shipments, the Company's backlog as of any particular date may not be
representative of actual sales for any succeeding period.
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<PAGE> 30
RAW MATERIALS
Various components of the Company's products are supplied by sole-source
vendors. The Company has not experienced significant difficulty in obtaining
adequate supplies from these vendors, and has identified alternate suppliers.
However, there can be no assurance that the unanticipated loss of a single
vendor would not result in delays in shipments or the introduction of new
products.
SEASONALITY
The Company's on-line finished materials quality control business
experiences a slowdown in revenues during the first quarter of each calendar
year primarily because its customers tend to place their orders earlier in the
year so that they can have the systems installed either during the holiday
season in the third quarter or between Christmas and the New Year.
LEGAL PROCEEDINGS
The Company is not a party to any litigation that it believes could
reasonably be expected to have a material adverse effect on the Company or its
results of operations.
RELATIONSHIP WITH THERMO ELECTRON
AND THERMO INSTRUMENT
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 Instrument has created the Company
as a privately held subsidiary, and Thermo Instrument and Thermo Electron, and
certain of their subsidiaries, have created several other privately and publicly
held majority-owned subsidiaries. From time to time, Thermo Electron and its
subsidiaries will create other majority-owned subsidiaries as part of its
spin-out strategy. (The Company and the other Thermo Electron subsidiaries are
hereinafter referred to as the "Thermo Subsidiaries.")
Thermo Instrument develops, manufactures, and markets analytical
instruments used to detect and monitor air pollution, radioactivity, complex
chemical compounds and toxic metals and other elements in a broad range of
liquids and solids. For its fiscal year ended December 30, 1995 and December 28,
1996 and the three months ended March 29, 1997, Thermo Instrument had
consolidated revenues of $782,662,000, $1,209,362,000 and $329,120,000,
respectively, and consolidated net income of $79,306,000, $132,751,000 and
$33,587,000, respectively.
Thermo Electron and its subsidiaries develop, manufacture and market
environmental monitoring and analysis instruments and manufacture biomedical
products including heart-assist devices and mammography systems, papermaking and
recycling equipment, alternative-energy systems and other specialized products
and technologies. Thermo Electron and its subsidiaries also provide
environmental and metallurgical services and conduct advanced technology
research and development. For its fiscal year ended December 30, 1995 and
December 28, 1996 and the three months ended March 29, 1997, Thermo Electron had
consolidated revenues of $2,270,291,000, $2,932,558,000 and $763,505,000,
respectively, and consolidated net income of $139,582,000, $190,816,000 and
$52,058,000, respectively.
THE THERMO ELECTRON CORPORATE CHARTER
Thermo Electron and the Thermo Subsidiaries, including the Company,
recognize that the benefits and support that derive from their affiliation are
essential elements of their individual performance. Accordingly, Thermo Electron
and each of the Thermo Subsidiaries 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
29
<PAGE> 31
others, and (4) Thermo Electron and the Thermo Subsidiaries, in the aggregate,
are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit services. Pursuant to
the Charter, Thermo Electron may also provide guarantees of debt obligations of
the Thermo Subsidiaries or may obtain external financing at the parent level for
the benefit of the Thermo Subsidiaries. In certain instances, the Thermo
Subsidiaries may provide credit support to, or on behalf of, the consolidated
entity or may obtain financing directly from external financing sources. Under
the Charter, Thermo Electron is responsible for determining that the Thermo
Group remains in compliance with all covenants imposed by external financing
sources, including covenants related to borrowings of Thermo Electron or other
members of the Thermo Group, and for apportioning such constraints within the
Thermo Group. In addition, Thermo Electron is also responsible for ensuring that
members comply with internal policies and procedures. The cost of the services
provided by Thermo Electron to the Thermo Subsidiaries is covered under existing
corporate services agreements between Thermo Electron and each of the Thermo
Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participates. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Company, can withdraw from participation in the Charter upon 30
days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement in effect between the
withdrawing company and Thermo Electron. The withdrawal from participation does
not terminate outstanding commitments to third parties made by the withdrawing
company, or by Thermo Electron or other members of the Thermo Group, prior to
the withdrawal. However, a withdrawing company is required to continue to comply
with all policies and procedures applicable to the Thermo Group and to provide
certain administrative functions mandated by Thermo Electron so long as the
withdrawing company is controlled by or affiliated with Thermo Electron.
CORPORATE SERVICES AGREEMENT
As provided in the Charter, the Company and Thermo Electron have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including certain legal advice and services, risk management, certain employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and certain financial and other services to the Company. The
annual fee for these services was equal to 1.2% of the Company's revenues for
calendar 1995. Beginning January 1, 1996, the fee was reduced to 1% of the
Company's revenues. The fee is reviewed annually and may be changed by mutual
agreement of the Company and Thermo Electron. During fiscal 1995 and 1996,
Thermo Electron assessed the Company fees of $552,000 and $520,000,
respectively.
Management believes that the service fees charged under the Services
Agreement are reasonable and that the terms of the Services Agreement are fair
to the Company. For items such as employee benefit plans, insurance coverage and
other identifiable costs, Thermo Electron charges the Company based on charges
directly attributable to the Company. The Services Agreement automatically
renews for successive one-year terms, unless canceled by the Company upon 30
days' prior written notice. In addition, the Services Agreement terminates
automatically in the event the Company ceases to be a member of the Thermo Group
or ceases to be a participant in the Charter. In the event of a termination of
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<PAGE> 32
the Services Agreement, the Company will be required to pay a termination fee
equal to the fee that was paid by the Company for services under the Services
Agreement for the nine-month period prior to termination. Following termination,
Thermo Electron may provide certain administrative services on an as-requested
basis by the Company or as required in order to meet the Company's obligations
under Thermo Electron's policies and procedures. Thermo Electron will charge the
Company a fee equal to the market rate for comparable services if such services
are provided following termination.
TAX ALLOCATION AGREEMENT
The Tax Allocation Agreement between the Company and Thermo Electron
outlines the terms under which the Company is to be included in Thermo
Electron's consolidated Federal and state income tax returns. Under current law,
the Company will be included in such tax returns so long as Thermo Instrument
owns at least 80% of the Company's outstanding Common Stock and Thermo Electron
owns at least 80% of Thermo Instrument's outstanding common stock. In years in
which the Company has taxable income it will pay to Thermo Electron amounts
comparable to the taxes it would have paid if it had filed its own separate
company tax returns. Immediately following this offering, Thermo Instrument will
own less than 80% of the Company's outstanding Common Stock and the Company will
not be included in Thermo Electron's consolidated Federal and state income tax
returns for periods commencing thereafter and will be required to file its own
tax returns.
MASTER GUARANTEE REIMBURSEMENT AGREEMENTS
The Company has entered into a Master Guarantee Reimbursement Agreement
with Thermo Electron which provides that the Company will reimburse Thermo
Electron for any costs it incurs in the event it is required to pay third
parties pursuant to any guarantees it issues on the Company's behalf. Thermo
Instrument has entered into a similar agreement with Thermo Electron with regard
to the Company's obligations which are guaranteed by Thermo Electron. The
Company has also entered into a Master Guarantee Reimbursement Agreement with
Thermo Instrument which provides that the Company will reimburse Thermo
Instrument for any costs it incurs in the event that Thermo Instrument is
required to pay Thermo Electron or any other party pursuant to any guarantees it
issues on the Company's behalf.
MISCELLANEOUS
As of March 29, 1997, $15,549,000 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,
United States government agency securities, money market funds, commercial
paper, and other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement will be
readily convertible into cash by the Company. 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.
The Company leases approximately 54,700 square feet of its 100,000 square
foot facility in Erlangen, Germany on a month-to-month basis to another Thermo
Instrument company. The Thermo Instrument company is responsible for paying to
the Company its pro rata share of occupancy expenses, including utilities and
taxes, associated with the facility which payments in 1996 amounted to $368,000
in the aggregate.
The Company has borrowed funds from a wholly owned subsidiary of Thermo
Optek Corporation ("Thermo Optek"), a majority-owned subsidiary of Thermo
Instrument, pursuant to certain promissory notes. The Company had $1,388,000 and
$1,928,000 outstanding under the promissory notes at year-end 1995 and 1996,
respectively. The notes bear interest at a variable rate. The interest rate for
the notes outstanding at year-end 1995 and 1996 was 4.6% and 3.8%, respectively.
The notes were repaid in February 1997. In addition, the Company had $3,617,000
and $2,611,000 of noninterest-bearing advances from Thermo Instrument and
affiliated companies at year-end 1995 and 1996, respectively,
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<PAGE> 33
which were due on demand. In December 1996, the Company borrowed $2,778,000
pursuant to a noninterest-bearing advance from a wholly owned subsidiary of
Thermo Instrument, which was repaid on January 15, 1997. At March 29, 1997, the
Company had $194,000 of noninterest-bearing receivables from Thermo Instrument
and affiliated companies, which are due on demand.
In 1996, the Company paid a ten percent (10%) commission totaling $69,670
to Thermo Sentron Inc., a majority-owned subsidiary of Thermedics Inc., which is
in turn a majority-owned subsidiary of Thermo Electron, for assisting in the
sale by the Company of its products in Australia.
In the first quarter of 1997, the Company purchased several x-ray source
components for $75,000 from Kevex X-Ray Inc., a wholly owned subsidiary of
ThermoSpectra Corporation, which in turn is a majority-owned subsidiary of
Thermo Instrument.
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<PAGE> 34
MANAGEMENT
The Directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Denis A. Helm........................ 57 Chairman of the Board, Chief Executive
Officer and Director
Ernesto A. Corte..................... 58 President and Chief Operating Officer
Werner G. Kramer..................... 50 Executive Vice President
John N. Hatsopoulos.................. 62 Vice President, Chief Financial Officer
and Director
Paul F. Kelleher..................... 54 Chief Accounting Officer
Willard R. Becraft................... 71 Director
Earl R. Lewis........................ 53 Director
John T. Keiser....................... 60 Director
Arvin H. Smith....................... 67 Director
</TABLE>
All of the Company's Directors are elected annually and hold office until
their respective successors are elected and qualified. Executive officers are
elected annually by the Board of Directors and serve at its discretion.
Denis A. Helm has been Chairman of the Board, Chief Executive Officer and
Director of the Company since its inception in November 1996. Mr. Helm has been
President of Thermo Instrument's Thermo Environmental Instruments Inc.
subsidiary since 1981. Thermo Environmental designs, manufactures and
distributes instruments and systems for detecting and monitoring environmental
pollutants. Mr. Helm has also been a Senior Vice President of Thermo Instrument
since 1994 and was a Vice President of Thermo Instrument from 1986 until 1994.
Mr. Helm is Vice Chairman and a Director of Thermo BioAnalysis Corporation.
Ernesto A. Corte has been President and Chief Operating Officer of the
Company since its inception in November 1996 and President of the Company's
Gamma-Metrics subsidiary, a manufacturer and marketer of on-line raw materials
analyzers, since its acquisition by Thermo Instrument in 1993. Mr. Corte founded
Gamma-Metrics in 1980 and was Chairman of the Board, Chief Executive Officer and
President of Gamma-Metrics prior to its acquisition in 1993.
Werner G. Kramer has been Executive Vice President of the Company since its
inception in November 1996. Mr. Kramer has been President of the Company's
Eberline Radiometrie Instruments GmbH subsidiary and President of Radiometrie's
parent company, Thermo Instrument Systems GmbH, since 1993. Prior to that, Mr.
Kramer was Executive Vice President of the Industrial Gauging Division of FAG
Kugelfischer since 1983. FAG Kugelfischer is a large German company which
manufactures ball bearings.
John N. Hatsopoulos has been Vice President, Chief Financial Officer and
Director of the Company since its inception in November 1996. Mr. Hatsopoulos
has been a Vice President and Chief Financial Officer of Thermo Instrument since
1988. Mr. Hatsopoulos has been President of Thermo Electron since January 1997,
Chief Financial Officer of Thermo Electron since 1988 and was an Executive Vice
President of Thermo Electron from 1986 until January 1997. He is also a Director
of LOIS/USA Inc., Thermedics Inc., Thermo Ecotek Corporation, Thermo Fibergen
Inc., Thermo Fibertek Inc., Thermo Instrument Systems Inc., Thermo Power
Corporation, Thermo TerraTech Inc., ThermoTrex Corporation and Thermedics
Detection Inc.
Paul F. Kelleher has been Chief Accounting Officer of the Company since its
inception in November 1996. Mr. Kelleher has been Vice President, Finance of
Thermo Electron since 1987 and served as its Controller from 1982 to January
1996. He is also a Director of ThermoLase Corporation.
Willard R. Becraft has been a Director of the Company since May 1997. Mr.
Becraft is a consultant in advanced instrumentation and control technology
development. He was an executive vice president of Northwest Instrument Systems,
Inc., a business he co-founded to develop specific instrumentation
33
<PAGE> 35
services with applications in the environmental field, for more than five years
prior to his retirement in July 1996. Mr. Becraft spent more than 30 years of
his business career with the General Electric Company in various management
capacities, and was responsible for managing research and development and
product development activities in instrumentation and control, fusion energy,
solar energy, jet engines and spacecraft systems.
Earl R. Lewis has been a Director of the Company since its inception in
November 1996. Mr. Lewis has been President of Thermo Instrument since March
1997 and Chief Operating Officer of Thermo Instrument since January 1996. He was
an Executive Vice President of Thermo Instrument from January 1996 to March 1997
and was Vice President from 1990 through 1995. Mr. Lewis also has been Director
and Chief Executive Officer of Thermo Optek, which is a majority-owned
subsidiary of Thermo Instrument that manufactures optical spectroscopy
instruments and affiliated components, since August 1995, Chairman of the Board
of Thermo Optek since April 1997 and President of Thermo Optek from August 1995
to April 1997. Mr. Lewis served as President of Thermo Jarrell Ash, a subsidiary
of Thermo Optek that manufactures atomic spectrometers, through December 1995,
and for more than five years prior to that date. Mr. Lewis is also Director of
Thermo BioAnalysis Corporation, ThermoQuest Corporation, ThermoSpectra
Corporation and Trex Medical Corporation.
John T. Keiser has been a Director of the Company since its inception in
November 1996. Mr. Keiser has been President of the Thermo Biomedical division
of Thermo Electron since 1994, which manufactures a variety of medical equipment
and instruments, and since 1994, Senior Vice President of Thermedics Inc., a
majority-owned subsidiary of Thermo Electron which develops and manufactures
product quality assurance systems, precision weighing and inspection equipment,
electrochemistry and microweighing products, electronic-test instruments,
explosives-detection devices and moisture-analysis systems and implantable
heart-assist systems and other biomedical products. Mr. Keiser had been
President of the Eberline Instrument division of Thermo Instrument from 1985 to
July 1994, which is a manufacturer of radiation detection and counting
instrumentation and radiation monitoring systems.
Arvin H. Smith has been a Director of the Company since its inception in
November 1996. Mr. Smith has been Director and Chief Executive Officer of Thermo
Instrument since 1986, Chairman of the Board of Thermo Instrument since March
1997 and President from 1986 to March 1997. Mr. Smith has been an Executive Vice
President of Thermo Electron since 1991 and, prior to that time, a Senior Vice
President of that corporation from 1986 to 1991. Mr. Smith is also a Director of
Thermedics, Thermo BioAnalysis Corporation, Thermo Optek, Thermo Power
Corporation, ThermoQuest Corporation and ThermoSpectra Corporation.
COMPENSATION OF DIRECTORS
All Directors who are not employees of the Company, Thermo Instrument or
Thermo Electron receive an annual retainer of $2,000 and a fee of $1,000 per day
for attending meetings of the Board of Directors and $500 per day for
participating in meetings of the Board of Directors held by means of conference
telephone and for participating in certain meetings of committees of the Board
of Directors. Payment of Directors fees is made quarterly. Messrs. Helm,
Hatsopoulos, Lewis, Keiser and Smith are all employees of Thermo Electron
companies and do not receive any cash compensation from the Company for their
services as Directors. Directors are also reimbursed for reasonable
out-of-pocket expenses incurred in attending such meetings.
Directors Deferred Compensation Plan. Under the Company's Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan"), a Director
has the right to defer receipt of his fees until he ceases to serve as a
Director, dies or retires from his principal occupation. In the event of a
change in control or proposed change in control of the Company that is not
approved by the Board of Directors, deferred amounts become payable immediately.
Either of the following is deemed to be a change of control: (a) the occurrence,
without the prior approval of the Board of Directors, of the acquisition,
directly or indirectly, by any person of 50% or more of the outstanding Common
Stock or the outstanding common stock of Thermo Instrument or 25% or more of the
outstanding common stock of Thermo Electron; or (b) the failure of the persons
serving on the Board of Directors immediately prior to any
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<PAGE> 36
contested election of directors or any exchange offer or tender offer for the
Common Stock or the common stock of Thermo Instrument or Thermo Electron to
constitute a majority of the Board of Directors at any time within two years
following any such event. Amounts deferred pursuant to the Deferred Compensation
Plan are valued at the end of each quarter as units of Common Stock. When
payable, amounts deferred may be disbursed solely in shares of Common Stock
accumulated under the Deferred Compensation Plan. As of May 27, 1997, the
Company has reserved 12,500 shares under this plan. The Deferred Compensation
Plan will not become effective until completion of an initial public offering.
No stock options have been granted under this plan.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes compensation for services to the Company in
all capacities awarded to, earned by or paid to the Company's chief executive
officer and two other executive officers for the fiscal year ended December 28,
1996. No other executive officer of the Company who held office at the end of
fiscal 1996 met the definition of "highly compensated" within the meaning of the
Securities and Exchange Commission's executive compensation disclosure rules for
this period. The Company is required to appoint certain executive officers and
full-time employees of Thermo Electron as executive officers of the Company, in
accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron. The
time and effort devoted by these individuals to the Company's affairs is
provided to the Company under the Services Agreement between the Company and
Thermo Electron. Accordingly, the compensation for these individuals is not
reported in the following table. See "Relationship with Thermo Electron and
Thermo Instrument."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING OPTIONS
------------------- (NO. OF SHARES AND ALL OTHER
NAME AND PRINCIPAL POSITION FY SALARY BONUS COMPANY)(1) COMPENSATION(2)
- --------------------------- ---- -------- ------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Denis A. Helm(3)................. 1996 $150,000 $86,400 25,000(MKA) $ 6,681
Chief Executive Officer
Ernesto A. Corte................. 1996 $163,530 $37,000 35,000(MKA) $ 6,750
President and Chief Operating 7,500(TOC)
Officer 5,000(TMQ)
Werner G. Kramer................. 1996 $177,165 $ 0 30,000(MKA) $ 0
Executive Vice President 7,500(TOC)
5,000(TMQ)
</TABLE>
- ---------------
(1) All options to purchase shares of the Company's Common Stock shown in the
table were granted after the end of fiscal 1996 but are included in the
table for clarity of presentation. In addition to grants of options to
purchase Common Stock of the Corporation (designated in the table as MKA),
the named executive officers of the Corporation have been granted options to
purchase common stock of Thermo Electron and certain of its other
subsidiaries as part of Thermo Electron's stock option program. Options have
been granted during the last fiscal year to the named executive officers
(other than the chief executive officer) in the following Thermo Electron
companies: Thermo Optek Corporation (designated in the table as TOC) and
ThermoQuest Corporation (designated in the table as TMQ).
(2) Represents the amount of matching contributions made by the individual's
employer on behalf of the named executive officer participating in the
Thermo Electron 401(k) plan.
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<PAGE> 37
(3) Mr. Helm is a Senior Vice President of Thermo Instrument as well as the
Chief Executive Officer of the Company. Reported in the table under "Annual
Compensation" and "All Other Compensation" are the total amounts paid to Mr.
Helm for his service in all capacities to Thermo Electron companies. For
fiscal years after 1996, the Human Resources Committee of the Board of
Directors of the Company will review total annual compensation to be paid to
Mr. Helm from all sources within the Thermo Electron organization and
approve an allocation of a percentage of annual compensation (salary and
bonus) for the time he devotes to the affairs of the Company. For 1996, none
of Mr. Helm's annual compensation was allocated to the Company. In addition,
Mr. Helm has been granted options to purchase common stock of Thermo
Electron and certain of its subsidiaries other than the Company from time to
time by Thermo Electron or such other subsidiaries. These options are not
reported here as they were granted as compensation for service to Thermo
Electron companies in capacities other than in his capacity as Chief
Executive Officer of the Company.
Stock Options Granted During Fiscal 1996
The following table sets forth information concerning individual grants of
stock options made during fiscal 1996 to the Company's chief executive officer
and the other named executive officers. It has not been the Company's policy in
the past to grant stock appreciation rights, and no rights were granted during
fiscal 1996.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SHARES % OF TOTAL APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM(2)
OPTIONS TO EMPLOYEES IN EXERCISE PRICE ---------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE EXPIRATION DATE 5% 10%
---- --------- --------------- -------------- --------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Denis A. Helm(3)......... 25,000(MKA) 12.3% $15.00 5/23/09 $298,500 $ 802,125
Ernesto A. Corte......... 35,000(MKA) 17.2% $15.00 5/23/09 $417,900 $1,122,975
7,500(TOC) 0.2%(4) $12.00 4/11/08 $ 71,625 $ 192,450
5,000(TMQ) 0.2%(4) $13.00 2/8/08 $ 51,750 $ 139,000
Werner G. Kramer......... 30,000(MKA) 14.8% $15.00 5/23/09 $358,200 $ 962,550
7,500(TOC) 0.2%(4) $12.00 4/11/08 $ 71,625 $ 192,450
5,000(TMQ) 0.2%(4) $13.00 2/8/08 $ 51,750 $ 139,000
</TABLE>
- ---------------
(1) All options to purchase shares of the Common Stock of the Company
(designated in the table as MKA) were granted after the end of fiscal 1996
but are included in the table for clarity of presentation. All of the
options granted during the fiscal year are immediately exercisable, except
the options to purchase shares of the Common Stock of the Company, which are
not exercisable until the earlier of (i) 90 days after the effective date of
the registration of the Company's Common Stock under Section 12 of the
Securities Exchange Act of 1934 and (ii) nine years after the grant date. In
all cases, the shares acquired upon exercise are subject to repurchase by
the granting corporation at the exercise price if the optionee ceases to be
employed by such corporation or another Thermo Electron company. The
granting corporation may exercise its repurchase rights within six months
after the termination of the optionee's employment. For publicly traded
companies, the repurchase rights generally lapse ratably over a five- to
ten-year period, depending on the option term which may vary from seven to
twelve years, provided that the optionee continues to be employed by the
granting corporation or another Thermo Electron company. For companies that
are not publicly traded, the repurchase rights lapse in their entirety on
the ninth anniversary of the grant date. The granting corporation may permit
the holders of all such options to exercise options and satisfy tax
withholding obligations by surrendering shares equal in fair market value to
the exercise price or withholding obligation.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10%, compounded annually from the date the respective options were granted
to their expiration date. The gains shown are net of the option exercise
price,
36
<PAGE> 38
but do not include deductions for taxes or other expenses associated with
the exercise. Actual gains, if any, on stock option exercises will depend on
the future performance of the Common Stock, the option holders' continued
employment through the option period and the date on which the options are
exercised.
(3) Mr. Helm has been granted options to purchase shares of the common stock of
Thermo Electron and its subsidiaries other than the Company. These options
are not reported in the table as they were granted as compensation for
service in capacities other than Mr. Helm's capacity as Chief Executive
Officer of the Company.
(4) These options were granted under stock option plans maintained by Thermo
Electron companies other than the Company and accordingly are reported as a
percentage of total options granted to employees of Thermo Electron and its
subsidiaries.
Stock Options Exercised During Fiscal 1996 and Fiscal Year-end Option
Values
The following table reports certain information regarding stock option
exercises during fiscal 1996 and outstanding stock options held at the end of
fiscal 1996 by the Company's chief executive and the other named executive
officers. No stock appreciation rights were exercised or were outstanding during
fiscal 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF OPTIONS AT FISCAL
SHARES SECURITIES UNDERLYING YEAR-END
ACQUIRED UNEXERCISED OPTIONS -----------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME COMPANY EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(1)
- ---- ------- -------- -------- ---------------------- -----------------
<S> <C> <C> <C> <C> <C>
Denis A. Helm(2)... Metrika Systems -- -- 0/25,000 $--/375,000(3)
Ernesto A. Corte... Metrika Systems -- -- 0/35,000 $--/525,000(3)
Thermo Instrument -- -- 46,875/0 $871,791/--
Thermo Optek -- -- 7,500/0 $ 0/--
ThermoQuest -- -- 5,000/0 $ 0/--
ThermoSpectra -- -- 500/0 $ 938/--
Werner G. Kramer... Metrika Systems -- -- 0/30,000 $--/450,000(3)
Thermo Instrument -- -- 5,700/0 $ 93,704/--
Thermo Optek -- -- 7,500/0 $ 0/--
ThermoQuest -- -- 5,000/0 $ 0/--
ThermoSpectra -- -- 700/0 $ 1,313/--
</TABLE>
- ---------------
(1) All options to purchase shares of the Common Stock of the Company were
granted after the end of fiscal 1996 but are included in the table for
clarity of presentation. All of the options reported outstanding at the end
of the fiscal year were immediately exercisable, except for options to
purchase shares of the common stock of the Company which are not exercisable
until the earlier of (i) 90 days after the effective date of the
registration of such company's common stock under Section 12 of the
Securities Exchange Act and (ii) nine years after the grant date. In all
cases, the shares acquired upon exercise of the options reported in the
table are subject to repurchase by the granting corporation at the exercise
price if the optionee ceases to be employed by such corporation or another
Thermo Electron company. The granting corporation may exercise its
repurchase rights within six months after the termination of the optionee's
employment. For publicly traded companies, the repurchase rights generally
lapse ratably over a five- to ten-year period, depending on the option term
which may vary from seven to twelve years, provided that the optionee
continues to be employed by the granting corporation or another Thermo
Electron company. For companies whose shares are not publicly traded, the
repurchase rights lapse in their entirety on the ninth anniversary of the
grant date.
37
<PAGE> 39
(2) Mr. Helm has been granted options to purchase shares of the common stock of
Thermo Electron and its subsidiaries other than the Company. These options
are not reported here as they were granted as compensation for service to
other Thermo Electron companies in capacities other than in Mr. Helm's
capacity as Chief Executive Officer of the Company.
(3) No public market existed for the shares underlying these options as of May
27, 1997. Accordingly, no value in excess of exercise price has been
attributed to these options.
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 May 27, 1997 with respect to each person who 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 Instrument Systems Inc.(1)........ 5,000,000 84%
1275 Hammerwood Avenue
Sunnyvale, California 94089
</TABLE>
- ---------------
(1) Thermo Instrument is an 82%-owned subsidiary of Thermo Electron and,
therefore, Thermo Electron may be deemed to be a beneficial owner of the
shares of Common Stock beneficially owned by Thermo Instrument. Thermo
Electron disclaims beneficial ownership of these shares. After the sale of
the Common Stock in this offering, Thermo Instrument will own approximately
63% of the outstanding Common Stock (60% if the Underwriters' over-allotment
option is exercised in full).
Thermo Instrument intends to adopt a stock option plan with respect to the
Common Stock that it beneficially owns. Under this plan, options to purchase up
to 100,000 shares of such stock may be granted to any person within the
discretion of the human resources committee of the Board of Directors of Thermo
Instrument, including officers and key employees of Thermo Instrument.
MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 1, 1997 as well as information
regarding the beneficial ownership of the Stock and the common stock of Thermo
Instrument and Thermo Electron, as of March 1, 1997, with respect to (i) each
Director, (ii) each executive officer named in the summary compensation table
above, and (iii) all Directors and current executive officers as a group.
While certain Directors or executive officers of the Company are also
directors and executive officers of Thermo Instrument or its subsidiaries other
than the Company, all such persons disclaim beneficial ownership of the shares
of Common Stock owned by Thermo Instrument.
<TABLE>
<CAPTION>
METRIKA SYSTEMS THERMO INSTRUMENT THERMO ELECTRON
NAME(1) CORPORATION(2) SYSTEMS INC.(3) CORPORATION(4)
- ------- -------------- ----------------- ---------------
<S> <C> <C> <C>
Ernesto A. Corte.......................... 3,500 48,562 1,620
John N. Hatsopoulos....................... 0 81,204 526,768
Denis A. Helm............................. 1,000 161,729 164,378
John T. Keiser............................ 0 117,450 111,397
Werner G. Kramer.......................... 1,000 6,350 0
Willard R. Becraft........................ 0 0 0
Earl R. Lewis............................. 0 128,233 124,184
Arvin H. Smith............................ 0 431,667 513,038
All Directors and Current Executive
Officers as a Group (9 persons)......... 5,500 993,887 1,586,383
</TABLE>
38
<PAGE> 40
- ---------------
(1) Except as reflected in the footnotes to this table, shares of Common Stock
and common stock of Thermo Instrument and Thermo Electron beneficially owned
include shares owned by the indicated person and by that person for the
benefit of minor children, and all share ownership involves sole voting and
investment power.
(2) No Director or executive officer beneficially owned more than 1% of the
Common Stock outstanding as of such date, and all Directors and executive
officers as a group beneficially owned less than 1% of the Common Stock
outstanding as of such date.
(3) Shares of the common stock of Thermo Instrument beneficially owned by Mr.
Corte, Mr. Hatsopoulos, Mr. Helm, Mr. Keiser, Mr. Kramer, Mr. Lewis, Mr.
Smith, and all Directors and executive officers as a group include 46,875,
65,625, 112,500, 56,250, 5,010, 112,500, 234,375 and 648,135 shares,
respectively, that such person or group has the right to acquire within 60
days of March 1, 1997, through the exercise of stock options. Shares
beneficially owned by Mr. Hatsopoulos, Mr. Smith, and all Directors and
executive officers as a group include 529, 530 and 1,455 full shares,
respectively, allocated through March 1, 1997, to their respective accounts
maintained pursuant to Thermo Electron's employee stock ownership plan
("ESOP"), of which the trustees, who have investment power over its assets,
are executive officers of Thermo Electron. Shares beneficially owned by Mr.
Helm include a total of 4,212 shares held in trust for the benefit of minor
children. Shares beneficially owned by Mr. Lewis include 2,390 shares held
by his spouse. No Director or executive officer beneficially owned more than
1% of the common stock of Thermo Instrument outstanding as of March 1, 1997;
all Directors and executive officers as a group beneficially owned 1.02% of
such common stock outstanding as of such date.
(4) Shares of the common stock of Thermo Electron beneficially owned by Mr.
Hatsopoulos, Mr. Helm, Mr. Keiser, Mr. Lewis, Mr. Smith, and all Directors
and executive officers as a group include 429,685, 106,347, 81,297, 121,536,
222,411 and 1,058,850 shares, respectively, that such person or group has
the right to acquire within 60 days of March 1, 1997, through the exercise
of stock options. Shares beneficially owned by Mr. Hatsopoulos, Mr. Smith,
and all Directors and executive officers as a group include 1,934, 1,717 and
4,975 full shares, respectively, allocated through March 1, 1997 to their
respective accounts maintained pursuant to Thermo Electron's ESOP. No other
Director or executive officer beneficially owned more than 1% of such common
stock as of March 1, 1997. All Directors and executive officers as a group
beneficially owned 1.05% of the common stock of Thermo Electron outstanding
as of March 1, 1997.
39
<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
As of March 29, 1997, the Company had 25,000,000 shares of Common Stock
authorized for issuance, of which 5,967,833 were issued and outstanding. As of
March 29, 1997, there were approximately 82 beneficial owners of Common Stock.
Each share of Common Stock is entitled to pro rata participation in
distributions upon liquidation and to one vote on all matters submitted to a
vote of stockholders. Dividends may be paid to the holders of Common Stock when
and if declared by the Board of Directors out of funds legally available
therefor. Holders of Common Stock have no preemptive or similar rights. The
outstanding shares of Common Stock are, and the shares offered hereby when
issued will be, legally issued, fully paid and nonassessable.
The shares of Common Stock have noncumulative voting rights, which means
that the holders of more than 50% of the shares voting can elect all the
Directors if they so choose, and in such event, the holders of the remaining
shares cannot elect any Directors. Prior to this offering, Thermo Instrument
owned 5,000,000 shares of Common Stock, which represented 84% of the outstanding
Common Stock. Upon completion of this Offering, Thermo Instrument (and Thermo
Electron through its majority ownership of Thermo Instrument) will continue to
beneficially own at least 63% of the outstanding Common Stock, and will have the
power to elect all of the members of the Company's Board of Directors.
The Company's Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of Directors. The provisions eliminate a Director's liability for
monetary damages for a breach of fiduciary duty to the fullest extent permitted
by the General Corporation Law of Delaware. The Company's Certificate of
Incorporation also contains provisions to indemnify the Directors and officers
of the Company to the fullest extent permitted by the General Corporation Law of
Delaware. The Company believes that these provisions will assist the Company in
attracting and retaining qualified individuals to serve as Directors and
officers.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, there will be 7,967,833 shares of Common
Stock of the Company outstanding (assuming no exercise of the Underwriters'
over-allotment option). The shares issued in this offering will be freely
tradable without restriction or further registration under the Securities Act,
except that any shares purchased by affiliates of the Company, as that term is
defined in Rule 144 under the Securities Act, may generally only be resold in
compliance with applicable provisions of Rule 144. The Company has agreed,
pursuant to a Stock Purchase Agreement with the shareholders of the Company
other than Thermo Instrument, to file a registration statement under the
Securities Act covering the sale of 967,833 shares of the Common Stock owned by
them (the "Registrable Shares") within 120 days of the closing of this offering.
All fees, costs and expenses of the registration of the Registrable Shares will
be paid by the Company. See "Risk Factors -- Shares Eligible for Sale After this
Offering."
Of such 7,967,833 outstanding shares, 5,000,000 will be owned by Thermo
Instrument. Thermo Instrument has agreed that, without the prior written consent
of the Representatives (as defined below under the caption "Underwriters"), it
will not offer, sell, grant any option to purchase or otherwise dispose of any
shares of the Common Stock within 180 days after the date of this Prospectus,
other than (i) shares of Common Stock to be sold to the Underwriters in this
offering, (ii) the issuance of options and sales of shares of Common Stock
pursuant to existing stock-based compensation plans, and (iii) shares of Common
Stock issuable upon the conversion of securities outstanding on the date of this
Prospectus. Upon expiration of this lock-up agreement, Thermo Instrument may
sell its shares of Common Stock in an offering registered under the Securities
Act or pursuant to an exemption from such registration. So long as Thermo
Instrument is able to elect a majority of the Board of Directors it will be able
to cause the Company at any time to register under the Securities Act all or a
portion of the Common Stock owned by Thermo Instrument or its affiliates, in
which case it would be able to sell such shares without restriction upon
effectiveness of the registration statement. In general, under Rule 144 as
40
<PAGE> 42
currently in effect, a person (or persons whose shares are aggregated) who has
beneficially owned restricted shares for at least one year is entitled to sell,
within any three-month period, a number of such shares that does not exceed the
greater of (i) 1% of the then outstanding shares of Common Stock or (ii) the
average weekly trading volume in the Common Stock during the four calendar weeks
preceding the date of the notice filed pursuant to Rule 144. Sales under Rule
144 are also subject to certain manner of sale restrictions and notice
requirements and to the availability of current public information about the
Company. In addition, a person who is deemed an "affiliate" of the Company must
comply with Rule 144 in any sale of shares of Common Stock not covered by a
registration statement (except, in the case of registered shares acquired by the
affiliate on the open market, for the holding period requirement). A person (or
person whose shares are aggregated) who is not deemed an "affiliate" of the
Company and who has beneficially owned restricted shares for at least two years
is entitled to sell such shares under Rule 144(k) without regard to the volume,
notice and other limitations of Rule 144. In meeting the one and two year
holding periods described above, a holder of restricted shares can include the
holding periods of a prior owner who was not an affiliate.
The Company has reserved 312,500 shares for grants under its existing
stock-based compensation plans. As of May 27, 1997, the Company had options
outstanding to purchase up to 298,000 shares of Common Stock to its employees
and Directors at an exercise price of $15.00 per share. None of such options are
currently exercisable. Ninety days after the completion of the Company's initial
public offering, such options will become immediately exercisable, subject to
repurchase at the exercise price if the optionee ceases to be employed by the
Company. This repurchase right lapses ratably (on an annual basis) over a five
to ten year period depending upon the term of the option. As of May 27,1997, the
repurchase rights had not lapsed with respect to any shares issuable upon
exercise of outstanding options. The Company intends to file registration
statements under the Securities Act to register all shares of Common Stock
issuable under such plans. Shares covered by these registration statements will
be eligible for sale in the public market after the effective date of such
registration statements. Each of the Company, Thermo Instrument and Thermo
Electron has agreed that it will not offer, sell, or grant any option to
purchase or otherwise dispose of any shares of Common Stock (except for the
grant of options and the sale of shares of Common Stock pursuant to stock-based
compensation plans, sales to Thermo Instrument and the issuance of shares as
consideration for the acquisition of one or more businesses (provided that such
shares may not be resold prior to the expiration of 180 days after the date of
this Prospectus)) within 180 days after the date of this Prospectus, without the
prior consent of the Representatives of the Underwriters.
Prior to this offering there has been no public market for the Common
Stock. The effect, if any, of public sales or the availability of shares for
sale at prevailing market prices cannot be predicted. Nevertheless, sales of
substantial amounts of shares in the public market could adversely affect
prevailing market prices.
41
<PAGE> 43
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
by and among the Company and each of the Underwriters named below, for whom
Salomon Brothers Inc, Lehman Brothers Inc., Smith Barney Inc. and Cazenove & Co.
are acting as representatives (the "Representatives"), each of the Underwriters
has severally agreed to purchase from the Company the number of shares of Common
Stock set forth opposite its name in the table below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Salomon Brothers Inc......................................................
Lehman Brothers Inc. .....................................................
Smith Barney Inc..........................................................
Cazenove & Co. ...........................................................
---------
Total........................................................... 2,000,000
=========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares of Common Stock are
purchased. In the event of a default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, purchase commitments of the
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated. The Company has been advised by the Representatives that the
several Underwriters propose initially to offer such shares of Common Stock at
the public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to other dealers. After the initial offering,
the public offering price and such concessions may be changed.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock, at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriters may exercise such option only to cover over-allotments in the sale
of the shares of Common Stock that the Underwriters have agreed to purchase. To
the extent that the Underwriters exercise such option, each Underwriter will
have a firm commitment, subject to certain conditions, to purchase a number of
option shares proportionate to such Underwriter's initial commitment.
The Company, Thermo Instrument and Thermo Electron have agreed that they
will not, without the prior written consent of Salomon Brothers Inc, offer, sell
or contract to sell, or otherwise dispose of, directly or indirectly, or
announce an offer of any shares of Common Stock, options or any securities
convertible into, or exchangeable for, shares of Common Stock during the 180-day
period following the date of this Prospectus; provided, however, that the
Company may issue and sell Common Stock pursuant to any stock option plan in
effect at the date of this Prospectus and the Company may issue Common Stock
issuable upon the conversion of securities outstanding on the date of this
Prospectus. Salomon Brothers Inc in its sole discretion may release any of the
shares subject to the lock-up at any time without notice.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or contribute to payments the Underwriters may be required
to make in respect thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and
42
<PAGE> 44
purchase shares of Common Stock. As an exception to these rules, the
Representatives are permitted to engage in certain transactions that stabilize
the price of the Common Stock. Such transactions may consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.
In addition, if the Representatives over-allot (i.e., if they sell more
shares of Common Stock than are set forth on the cover page of this Prospectus),
and thereby create a short position in the Common Stock in connection with this
offering, the Representatives may reduce that short position by purchasing
Common Stock in the open market. The Representatives also may elect to reduce
any short position by exercising all or part of the over-allotment option
described herein.
The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of this offering.
In general, purchases of a security for the purpose of stabilization to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
this offering.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Representatives have informed the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.
Prior to this offering there has been no public market for the Common
Stock. The price to the public for the shares of Common Stock will be determined
through negotiations between the Company and the Representatives and will be
based on, among other things, the Company's financial and operating history and
condition, the prospects of the Company and its industry in general, the
management of the Company and the market prices of securities of companies
engaged in businesses similar to those of the Company. There can, however, be no
assurance that the prices at which the shares of Common Stock will sell in the
public market after this offering will not be lower than the price at which it
is sold by the Underwriters.
LEGAL OPINIONS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Seth H. Hoogasian, Esq., General Counsel of
Thermo Electron, Thermo Instrument and the Company, and certain legal matters
will be passed upon for the Underwriters by Testa, Hurwitz & Thibeault, Boston,
Massachusetts. Mr. Hoogasian owns or has the right to acquire 2,500 shares of
Common Stock of the Company, 16,737 shares of common stock of Thermo Instrument
and 107,558 shares of common stock of Thermo Electron.
EXPERTS
The financial statements of the Company included in this Prospectus and the
financial statement schedule included in the Registration Statement of which
this Prospectus forms a part have been audited by Arthur Andersen LLP,
independent public accountants, to the extent and for the periods as indicated
in their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
43
<PAGE> 45
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended, with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is made to the
Registration Statement, copies of which may be obtained upon payment of the fees
prescribed by the Commission from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, New York, New York 10048
and at 500 West Madison Street, Chicago, Illinois 60661. The Commission also
maintains a web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company. The address of such site is
http://www.sec.gov.
REPORTS TO SECURITY HOLDERS
The Company intends to furnish holders of the Common Stock offered hereby
with annual reports containing financial statements audited by an independent
public accounting firm and with quarterly reports containing unaudited summary
financial statements for each of the first three quarters of each fiscal year.
44
<PAGE> 46
METRIKA SYSTEMS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants............................................. F-2
Consolidated Statement of Income for the years ended December 31, 1994, December 30,
1995 and December 28, 1996 and the three months ended March 30, 1996 and March 29,
1997............................................................................... F-3
Consolidated Balance Sheet as of December 30, 1995 and December 28, 1996, and March
29, 1997........................................................................... F-4
Consolidated Statement of Cash Flows for the years ended December 31, 1994,
December 30, 1995 and December 28, 1996 and the three months ended March 30, 1996
and March 29, 1997................................................................. F-5
Consolidated Statement of Shareholders' Investment for the years ended December 31,
1994, December 30, 1995 and December 28, 1996 and the three months ended March 29,
1997............................................................................... F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>
F-1
<PAGE> 47
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Metrika Systems Corporation:
We have audited the accompanying consolidated balance sheet of Metrika
Systems Corporation (a Delaware corporation and 84%-owned subsidiary of Thermo
Instrument Systems Inc.) and subsidiaries as of December 30, 1995 and December
28, 1996, and the related consolidated statements of income, cash flows and
shareholders' investment for each of the three years in the period ended
December 28, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We 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 Metrika
Systems Corporation and subsidiaries as of December 30, 1995 and December 28,
1996, and the results of their operations and their cash flows for each of the
three years in the period ended December 28, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 31, 1997 (except with respect to
certain matters discussed in Note 9, as to
which the date is May 27, 1997)
F-2
<PAGE> 48
METRIKA SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 30, MARCH 29,
1994 1995 1996 1996 1997
------- ------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues (Note 8)......................... $38,612 $46,032 $52,047 $11,594 $12,592
------- ------- ------- ------- -------
Costs and Operating Expenses:
Cost of revenues........................ 22,157 25,767 28,527 6,815 7,036
Selling, general and administrative
expenses (Note 5).................... 10,256 11,640 13,395 3,138 3,376
Research and development expenses....... 2,259 2,580 3,024 679 1,007
------- ------- ------- ------- -------
34,672 39,987 44,946 10,632 11,419
------- ------- ------- ------- -------
Operating Income.......................... 3,940 6,045 7,101 962 1,173
Interest Expense (Note 5)................. (718) (1,146) (796) (216) (201)
Interest Income........................... 34 21 101 1 220
------- ------- ------- ------- -------
Income Before Provision for Income
Taxes................................... 3,256 4,920 6,406 747 1,192
Provision for Income Taxes (Note 4)....... 1,489 2,068 2,561 298 477
------- ------- ------- ------- -------
Net Income................................ $ 1,767 $ 2,852 $ 3,845 $ 449 $ 715
======= ======= ======= ======= =======
Earnings per Share........................ $ .34 $ .55 $ .74 $ .09 $ .12
======= ======= ======= ======= =======
Weighted Average Shares................... 5,193 5,193 5,219 5,193 5,989
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 49
METRIKA SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 29,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 1,302 $20,229 $17,398
Accounts receivable, less allowances of $478, $440 and
$624................................................ 11,458 10,896 10,692
Unbilled contract costs and fees....................... 5,285 1,706 3,159
Inventories............................................ 5,676 6,347 7,789
Prepaid income taxes and other current assets
(Note 4)............................................ 1,795 1,457 1,958
Due from parent company and affiliated companies....... -- -- 194
------- ------- -------
25,516 40,635 41,190
------- ------- -------
Property, Plant and Equipment, at Cost, Net.............. 13,527 12,100 11,343
------- ------- -------
Other Assets............................................. 1,146 926 880
------- ------- -------
Cost in Excess of Net Assets of Acquired Companies....... 13,785 13,105 13,313
------- ------- -------
$53,974 $66,766 $66,726
======= ======= =======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable and current maturities of long-term
obligation (Note 6)................................. $14,351 $11,578 $15,451
Accounts payable....................................... 1,642 2,463 3,823
Accrued payroll and employee benefits.................. 1,570 2,225 2,596
Customer deposits...................................... 5,057 3,377 2,679
Accrued installation and warranty costs................ 684 1,350 1,851
Billings in excess of contract costs and fees.......... 3,186 470 623
Other accrued expenses................................. 2,091 3,150 3,922
Due to parent company and affiliated companies (Note
5).................................................. 5,005 7,317 --
------- ------- -------
33,586 31,930 30,945
------- ------- -------
Accrued Pension Costs (Note 2)........................... 4,536 4,752 4,515
------- ------- -------
Long-term Obligation (Note 6)............................ 6,470 5,223 4,680
------- ------- -------
Commitments (Note 7)
Shareholders' Investment (Notes 2 and 3):
Net parent company investment.......................... 11,433 -- --
Common stock, $.01 par value, 25,000,000 shares
authorized; 5,967,833 shares issued and outstanding
in 1996 and 1997.................................... -- 60 60
Capital in excess of par value......................... -- 26,050 26,050
Retained earnings...................................... -- 298 1,013
Cumulative translation adjustment...................... (2,051) (1,547) (537)
------- ------- -------
9,382 24,861 26,586
------- ------- -------
$53,974 $66,766 $66,726
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 50
METRIKA SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 30, MARCH 29,
1994 1995 1996 1996 1997
------- ------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.................................... $ 1,767 $ 2,852 $ 3,845 $ 449 $ 715
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 1,789 1,866 1,792 430 421
Provision for losses on accounts
receivable............................... 26 225 -- -- 79
Deferred income tax expense................ 1,237 357 69 --
Other noncash items........................ 200 597 (87) 120 96
Changes in current accounts, excluding the
effects of acquisition:
Accounts receivable...................... (4,162) (2,031) 307 2,497 652
Inventories and unbilled contract costs
and fees.............................. (304) (1,905) 2,708 1,107 (2,392)
Other current assets..................... 63 (555) 208 (87) (496)
Accounts payable......................... 196 458 842 285 1,319
Billings in excess of contract costs and
fees.................................. 1,655 795 (2,749) (2,707) 164
Other current liabilities................ (1,406) 1,866 871 135 243
------- ------- ------- ------- -------
Net cash provided by operating
activities..................... 1,061 4,525 7,806 2,229 801
------- ------- ------- ------- -------
INVESTING ACTIVITIES:
Acquisition, net of cash acquired............. -- -- -- -- (1,347)
Purchases of property, plant and equipment.... (845) (910) (671) (351) (132)
Other......................................... (39) 28 26 121 37
------- ------- ------- ------- -------
Net cash used in investing
activities..................... (884) (882) (645) (230) (1,442)
------- ------- ------- ------- -------
FINANCING ACTIVITIES:
Net proceeds from issuance of Company common
stock (Note 3)............................. -- -- 13,528 -- --
Net transfers to parent company prior to
capitalization of the Company.............. (6,277) (6,020) (2,398) (449) --
Increase (decrease) in due to parent company
and affiliated companies................... 4,978 1,418 2,683 22 (6,887)
Increase (decrease) in short-term
obligations................................ (5,845) 2,855 (1,886) (1,411) 4,550
Proceeds from issuance of long-term
obligation................................. 7,420 -- -- -- --
Repayment of long-term obligation............. -- (694) (791) (202) (169)
------- ------- ------- ------- -------
Net cash provided by (used in)
financing activities........... 276 (2,441) 11,136 (2,040) (2,506)
------- ------- ------- ------- -------
Exchange Rate Effect on Cash.................... (229) (1,084) 630 (57) 316
------- ------- ------- ------- -------
Increase (Decrease) in Cash and Cash
Equivalents................................... 224 118 18,927 (98) (2,831)
Cash and Cash Equivalents at Beginning of
Period........................................ 960 1,184 1,302 1,302 20,229
------- ------- ------- ------- -------
Cash and Cash Equivalents at End of Period...... $ 1,184 $ 1,302 $20,229 $ 1,204 $17,398
======= ======= ======= ======= =======
CASH PAID FOR:
Interest...................................... $ 720 $ 1,144 $ 794 $ 219 $ 138
======= ======= ======= ======= =======
Income taxes.................................. $ -- $ 55 $ 393 $ -- $ 8
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 51
METRIKA SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COMMON
PARENT STOCK, CAPITAL IN CUMULATIVE
COMPANY $.01 PAR EXCESS OF RETAINED TRANSLATION
INVESTMENT VALUE PAR VALUE EARNINGS ADJUSTMENT
----------- --------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1994............. $ 19,111 $-- $-- $ -- $ 2
Net income.......................... 1,767 -- -- -- --
Net transfer to parent company...... (6,277) -- -- -- --
Translation adjustment.............. -- -- -- -- (508)
--------- ----- ------- ------- -------
BALANCE DECEMBER 31, 1994........... 14,601 -- -- -- (506)
Net income.......................... 2,852 -- -- -- --
Net transfer to parent company...... (6,020) -- -- -- --
Translation adjustment.............. -- -- -- -- (1,545)
--------- ----- ------- ------- -------
BALANCE DECEMBER 30, 1995........... 11,433 -- -- -- (2,051)
Net income before capitalization of
the Company....................... 3,547 -- -- -- --
Net transfer to parent company...... (2,398) -- -- -- --
Capitalization of the Company....... (12,582) 50 12,532 -- --
Net income after capitalization of
the Company....................... -- -- -- 298 --
Net proceeds from private placement
of Company common stock (Note 3).. -- 10 13,518 -- --
Translation adjustment.............. -- -- -- -- 504
--------- ----- ------- ------- -------
BALANCE DECEMBER 28, 1996........... -- 60 26,050 298 (1,547)
(UNAUDITED)
Net income.......................... -- -- -- 715
Translation adjustment.............. -- -- -- -- 1,010
--------- ----- ------- ------- -------
BALANCE MARCH 29, 1997.............. $ -- $ 60 $26,050 $ 1,013 $ (537)
========= ===== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 52
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Metrika Systems (the "Company") develops, manufactures and markets on-line
industrial process optimization systems that employ proprietary ultra-high speed
advanced scientific measurement technologies for applications in raw materials
analysis and finished materials quality control. The Company manufactures
process optimization systems that provide real-time, non-destructive analysis of
the composition of raw materials in basic materials production processes,
including coal, cement and minerals. The Company also manufactures systems which
are used primarily to measure and control parameters such as material thickness,
coating thickness and coating weight in web-type materials, such as metal strip,
rubber and plastic foils. Customers use these systems to improve product quality
and consistency, lower material costs, reduce energy consumption and minimize
waste.
Relationship with Thermo Instrument Systems Inc. and Thermo Electron
Corporation
The Company operated as two divisions of Thermo Instrument Systems Inc.
("Thermo Instrument") until its incorporation as a Delaware corporation in
November 1996. In connection with the Company's incorporation, Thermo Instrument
transferred to the Company the assets, liabilities and businesses of the
Gamma-Metrics subsidiary and Radiometrie division in exchange for 5,000,000
shares of the Company's common stock. As of December 28, 1996, Thermo Instrument
owned 5,000,000 shares of the Company's common stock, representing 84% of such
stock outstanding. As of December 28, 1996, Thermo Instrument is a 82%-owned
subsidiary of Thermo Electron Corporation ("Thermo Electron").
The accompanying financial statements include the assets, liabilities,
income and expenses of the Company as included in Thermo Instrument's
consolidated financial statements. The accompanying financial statements do not
include Thermo Instrument's general corporate debt, which is used to finance
operations of all of its respective business segments, or an allocation of
Thermo Instrument's interest expense. The Company had positive cash flow from
operations for all periods presented.
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 1994, 1995 and 1996 are for the fiscal years ended December
31, 1994, December 30, 1995 and December 28, 1996, respectively.
Revenue Recognition
Generally, the Company recognizes product revenues upon shipment of its
products. The Company provides a reserve for its estimate of warranty and
installation costs at the time of shipment. Revenues and profits on contracts
which due to their complexity extend over multiple quarterly reporting periods
are recognized using the percentage-of-completion method. Revenues recorded
under the percentage-of-completion method were $14,884,000 in 1994, $17,523,000
in 1995 and $18,611,000 in 1996. The percentage of completion is determined by
relating the actual costs incurred to date to management's estimate of total
costs to be incurred on each contract. If a loss is indicated on any contract in
process, a provision is made currently for the entire loss. Contracts generally
provide for the billing of customers upon the attainment of certain milestones
in each contract. Revenues earned on contracts in process in excess of billings
are classified as unbilled contract costs and fees in the accompanying balance
sheet. There are no significant amounts included in the accompanying balance
sheet that are not expected to
F-7
<PAGE> 53
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
be recovered from existing contracts at current contract values, or that are not
expected to be collected within one year, including amounts that are billed but
not paid under retainage provisions.
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 (Note 2). 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
The Company, Thermo Instrument and Thermo Electron entered into a tax
allocation agreement under which the Company and Thermo Instrument are included
in Thermo Electron's consolidated federal and certain state income tax returns.
The agreement provides that in years in which the Company has taxable income, it
will pay to Thermo Electron amounts comparable to the taxes the Company would
have paid if it had filed separate tax returns. Upon completion of the proposed
initial public offering, Thermo Instrument's ownership of the Company will drop
below 80% and the Company will be required to file its own federal income tax
return.
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," the Company recognizes deferred income taxes
based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in which the
differences are expected to be reflected in the tax return.
Earnings per Share
Pursuant to certain Securities and Exchange Commission requirements,
earnings per share have been presented for all periods. Weighted average shares
for all periods represent the 5,000,000 shares issued to Thermo Instrument in
connection with the initial capitalization of the Company, and in 1996 the
effect of shares sold through a private placement, as well as the effect of the
assumed issuance of private placement shares and the assumed exercise of stock
options issued within one year prior to the Company's proposed initial public
offering in all periods.
Cash and Cash Equivalents
Prior to its incorporation, the cash receipts and disbursements of the
Company's domestic operations were combined with other Thermo Instrument
corporate cash transactions and balances. Therefore, cash of the Company's
domestic operations through November 1996 is not included in the accompanying
balance sheet.
As of December 28, 1996, $15,672,000 of the Company's cash equivalents were
invested in a repurchase agreement with Thermo Electron. Under this agreement,
the Company in effect lends excess cash to Thermo Electron, which Thermo
Electron collateralizes with investments principally consisting of U.S.
government agency securities, corporate notes, commercial paper, money market
funds and other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company and have an original maturity of three
months or less. The repurchase agreement earns a rate based on the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter. Cash equivalents of $978,000 and $4,443,000 at year-end 1995 and
1996, respectively, at the Company's foreign operations were invested in
interest-bearing accounts. Cash and cash equivalents are carried at cost, which
approximates market value.
F-8
<PAGE> 54
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories are stated at the lower of cost (on a weighted average basis)
or market value and include materials, labor and manufacturing overhead. The
components of inventories are as follows:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Raw material and supplies.............................. $3,289 $4,207
Work in process........................................ 2,045 1,230
Finished goods......................................... 342 910
------ ------
$5,676 $6,347
====== ======
</TABLE>
Property, Plant and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives of the property as follows: buildings, 40 years; machinery and
equipment, 3 to 10 years; and leasehold improvements, the shorter of the term of
the lease or the life of the asset. Property, plant and equipment consists of
the following:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land................................................. $ 2,011 $ 1,861
Buildings............................................ 9,286 8,594
Machinery, equipment and leasehold improvements...... 5,108 5,501
------- -------
16,405 15,956
Less: Accumulated depreciation and amortization...... 2,878 3,856
------- -------
$13,527 $12,100
======= =======
</TABLE>
Other Assets
Other assets in the accompanying balance sheet consists primarily of
acquired technology and the cost of acquired patents that are being amortized
using the straight-line method over their estimated useful lives, ranging from 5
to 20 years. Accumulated amortization was $705,000 and $925,000 at year-end 1995
and 1996, respectively.
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired companies
is amortized using the straight-line method over 40 years. Accumulated
amortization was $1,196,000 and $1,627,000 at year-end 1995 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
F-9
<PAGE> 55
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
currency transaction gains and losses are included in the accompanying statement
of income and are not material for the three years presented.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, notes payable and current maturities of
long-term obligation, accounts payable, due to parent company and affiliated
companies and long-term obligation. The Company's long-term obligation bears
interest at a variable market rate and therefore, the carrying amount
approximates fair value (Note 6). The carrying amounts of the Company's
remaining financial instruments approximate fair value due to their short-term
nature.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Statements
The financial statements as of March 29, 1997 and for the three-month
periods ended March 30, 1996 and March 29, 1997, are unaudited but, in the
opinion of management, reflect all adjustments of a normal recurring nature
necessary for a fair presentation of results for these interim periods. The
results of operations for the three-month period ended March 29, 1997 are not
necessarily indicative of the results to be expected for the entire year.
2. EMPLOYEE BENEFIT PLANS
Stock-based Compensation Plans
Stock Option Plans
In November 1996, the Company adopted a stock-based compensation plan for
its key employees, directors, and others, which permits the grant of stock and
stock-based awards as determined by the human resources committee of the
Company's Board of Directors (the "Board Committee"), including restricted
stock, stock options, stock bonus shares or performance-based shares. The option
recipients and the terms of options granted under this plan are determined by
the Board Committee. Options granted generally vest and become immediately
exercisable on the ninth anniversary of the grant date, unless the Company's
common stock becomes publicly traded prior to such date. In such an event,
options become exercisable 90 days after the Company becomes subject to the
Securities Exchange Act of 1934, but will be subject to certain transfer
restrictions and the right of the Company to repurchase shares issued upon
exercise of the options at the exercise price, upon certain events. The
restrictions and repurchase rights generally will be deemed to have lapsed
ratably over periods ranging from five to ten years after the first anniversary
of the grant date, depending on the term of the option, which generally ranges
from ten to twelve years. Nonqualified stock options may be granted at any price
determined by the Board Committee, although incentive stock options must be
granted at not less than the fair market value of the Company's stock on the
date of grant. As of March 31, 1997, no options have been granted under this
plan. In addition to the Company's stock-based compensation plans, certain
officers and key employees may also participate in the stock-based compensation
plans of Thermo Electron and Thermo Instrument.
F-10
<PAGE> 56
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 Thermo Instrument
and Thermo Electron. Under this program, shares of Thermo Instrument's and
Thermo Electron's common stock can 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.
401(k) Savings Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in Thermo Electron's 401(k) savings plan. Contributions to the
401(k) savings plan are made by both the employee and the Company. Company
contributions are based upon the level of employee contributions. The Company
contributed and charged to expense $175,000, $178,000, and $176,000 in fiscal
1994, 1995 and 1996, respectively.
Defined Benefit Pension Plans
The Company's German subsidiary has a defined benefit pension plan covering
substantially all of its full-time employees. Benefits are based on a percentage
of eligible earnings for each year of service in excess of ten.
Net periodic pension costs included the following components:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost..................................................... $169 $168 $186
Interest cost on projected benefit obligation.................... 230 257 293
Amortization of unrecognized obligation.......................... -- (13) --
---- ---- ----
$399 $412 $479
==== ==== ====
</TABLE>
The funded status of the Company's defined benefit pension plan is as
follows:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits..................................................... $3,323 $3,093
Non-vested benefits................................................. 114 77
------ ------
Accumulated benefit obligation................................. 3,437 3,170
Effect of projected future salary increases.............................. 1,016 307
------ ------
Projected benefit obligation............................................. 4,453 3,477
Plan assets at fair value................................................ -- --
------ ------
Plan assets less than projected benefit obligation....................... 4,453 3,477
Unrecognized net gain.................................................... 83 1,275
------ ------
$4,536 $4,752
====== ======
</TABLE>
F-11
<PAGE> 57
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Actuarial assumptions used to determine the net periodic pension costs
during 1994, 1995 and 1996 were:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Discount rate.................................................. 7.0% 6.7% 6.5%
Rate of increase in salary levels.............................. 3.5% 3.6% 1.5%
</TABLE>
In addition, the Company's United Kingdom subsidiary participates in a
multi-employer defined benefit pension plan covering substantially all of its
full-time employees. The Company contributed to the plan and charged to expense
$80,000, $119,000 and $134,000 in 1994, 1995 and 1996, respectively.
3. COMMON STOCK
In December 1996, the Company issued 967,833 shares of its common stock in
a private placement at $15.00 per share, for net proceeds of $13,528,000.
At December 28, 1996, the Company had reserved 300,000 unissued shares of
its common stock for possible issuance under stock-based compensation plans.
4. INCOME TAXES
The components of income before provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic.................................................... $ 763 $2,845 $4,583
Foreign..................................................... 2,493 2,075 1,823
------ ------ ------
$3,256 $4,920 $6,406
====== ====== ======
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable (receivable):
Federal................................................ $ (16) $1,209 $1,864
State.................................................. 18 226 363
Foreign................................................ 250 276 265
------ ------ ------
252 1,711 2,492
------ ------ ------
Deferred (prepaid), net:
Federal................................................ 359 (165) (273)
State.................................................. 53 (24) (40)
Foreign................................................ 825 546 382
------ ------ ------
1,237 357 69
------ ------ ------
$1,489 $2,068 $2,561
====== ====== ======
</TABLE>
F-12
<PAGE> 58
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory rate................ $1,107 $1,673 $2,178
Increases (decreases) resulting from:
State income taxes, net of federal tax................. 47 133 213
Foreign tax rate and tax law differential.............. 227 117 27
Tax benefit of foreign sales corporation............... (36) (113) (140)
Amortization of cost in excess of net assets of
acquired companies................................... 111 111 111
Other.................................................. 33 147 172
------ ------ ------
$1,489 $2,068 $2,561
====== ====== ======
</TABLE>
Prepaid income taxes in the accompanying balance sheet consist of the
following:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
Reserves and accruals............................................... $ 756 $ 577
Inventory basis difference.......................................... 197 307
Accrued compensation................................................ 105 105
------ ----
$1,058 $ 989
====== ====
</TABLE>
A provision has not been made for U.S. or additional foreign taxes on $6.7
million of undistributed earnings of foreign subsidiaries that could be subject
to taxation if remitted to the U.S. because the Company currently plans to keep
these amounts permanently reinvested overseas. The Company believes that any
additional U.S. tax liability due upon remittance of such earnings would be
immaterial due to available U.S. foreign tax credits.
F-13
<PAGE> 59
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. 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 pays Thermo Electron annually an amount equal to 1.0% of the
Company's revenues. The Company paid an annual fee equal to 1.25% and 1.20% of
the Company's revenues in 1994 and 1995, respectively. The annual fee is
reviewed and adjusted annually by mutual agreement of the parties. For these
services, the Company was charged $483,000, $552,000 and $520,000 in 1994, 1995
and 1996, respectively. 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 relationships 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.
Due to parent company and affiliated companies
The Company has borrowed funds from a wholly owned subsidiary of Thermo
Optek Corporation, a majority-owned subsidiary of Thermo Instrument, pursuant to
certain promissory notes. The Company had $1,388,000 and $1,928,000 outstanding
under the promissory notes at year-end 1995 and 1996, respectively. The notes
bear interest at a variable rate. The interest rate for the notes outstanding at
year-end 1995 and 1996 was 4.6% and 3.8%, respectively. The notes were repaid in
February 1997. In addition, the Company had $3,617,000 and $2,611,000 of
noninterest-bearing advances from Thermo Instrument and affiliated companies at
year-end 1995 and 1996, respectively, which are due on demand.
In December 1996, the Company borrowed $2,778,000 pursuant to a
noninterest-bearing advance from a wholly owned subsidiary of Thermo Instrument,
which was repaid on January 15, 1997.
Other Related Party Services
The Company leases office and manufacturing space in Germany to a wholly
owned subsidiary of Thermo Instrument pursuant to an arrangement whereby the
Company charges the Thermo Instrument subsidiary its allocated share of the
occupancy expenses of the Company's German facility, based on space utilized.
Pursuant to this arrangement, the Company recorded $302,000, $367,000 and
$368,000 in 1994, 1995 and 1996, respectively, as a reduction in selling,
general and administrative expenses in the accompanying statement of income.
F-14
<PAGE> 60
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. SHORT- AND LONG-TERM OBLIGATIONS
Short-term Obligations
Notes payable and current maturities of long-term obligation in the
accompanying balance sheet includes $13,523,000 and $10,813,000 at year-end 1995
and 1996, respectively, of amounts borrowed under lines of credit at the
Company's foreign subsidiaries. The weighted average interest rate for these
borrowings at year-end 1995 and 1996 was 5.0% and 4.1%, respectively. Unused
lines of credit aggregated $7,794,000 at December 28, 1996. As of December 28,
1996, $1,400,000 of the total lines of credit are secured by property at the
Company's German subsidiary and the remainder is guaranteed by Thermo Electron.
Long-term Obligation
In October 1994, the Company's German subsidiary borrowed 11,500,000 German
deutsche marks pursuant to a promissory note, payable in monthly installments of
99,200 German deutsche marks with a final payment in October 2004. The balance
outstanding was $7,297,000 and $5,988,000 at year-end 1995 and 1996,
respectively. The loan is secured by property at the Company's German subsidiary
with a net book value of $9,746,000 at year-end 1996. The note bears interest at
a variable rate, which was 4.7% and 3.75% at year-end 1995 and 1996,
respectively.
The annual repayment requirements of the long-term obligation as of
December 28, 1996, are $765,000 in each year from 1997 through 2001 and
$2,163,000 in 2002 and thereafter.
7. COMMITMENTS
The Company leases portions of its office and operating facilities under
various operating lease arrangements. The accompanying statements of income
includes expenses from operating leases of $601,000, $650,000 and $632,000 in
1994, 1995 and 1996, respectively. Future minimum payments due under
noncancelable operating leases at December 28, 1996, are $622,000 in 1997;
$534,000 in each year from 1998 through 2000; $513,000 in 2001; and $1,345,000
in 2002 and thereafter. Total future minimum lease payments are $4,082,000.
F-15
<PAGE> 61
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. CONCENTRATION OF RISK AND GEOGRAPHICAL INFORMATION
Various components of the Company's products are supplied by sole-source
vendors. The Company has not experienced significant difficulty in obtaining
adequate supplies from these vendors, and has identified alternate suppliers.
However, 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.
The following table shows data for the Company by geographical area.
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
United States......................................... $16,004 $19,492 $22,875
Germany............................................... 15,899 18,205 18,279
United Kingdom........................................ 5,336 7,190 8,679
France................................................ 1,677 1,974 2,385
Transfers between geographical areas(a)............... (304) (829) (171)
------- ------- -------
$38,612 $46,032 $52,047
======= ======= =======
Income before provision for income taxes:
United States......................................... $ 1,223 $ 3,397 $ 5,084
Germany............................................... 2,297 1,653 593
United Kingdom........................................ 588 1,192 1,485
France................................................ 315 356 467
Corporate and eliminations(b)......................... (483) (553) (528)
------- ------- -------
Total operating income................................ 3,940 6,045 7,101
Interest expense, net................................. (684) (1,125) (695)
------- ------- -------
Income before provision for income taxes.............. $ 3,256 $ 4,920 $ 6,406
======= ======= =======
Identifiable assets:
United States......................................... $23,267 $23,313 $19,571
Germany............................................... 21,534 25,027 24,496
United Kingdom........................................ 3,440 3,748 5,176
France................................................ 1,020 1,886 1,745
Corporate(c).......................................... -- -- 15,778
------- ------- -------
$49,261 $53,974 $66,766
======= ======= =======
Export revenues included in United States revenues
above(d):
Asia.................................................. $ 5,795 $ 3,528 $ 7,328
Other................................................. 3,621 7,070 6,091
------- ------- -------
$ 9,416 $10,598 $13,419
======= ======= =======
</TABLE>
- ---------------
(a) Transfers between geographical areas are accounted for at prices that are
representative of transactions with unaffiliated parties.
(b) Primarily general and administrative expenses.
(c) Primarily cash and cash equivalents.
(d) In general, export sales are denominated in U.S. dollars.
F-16
<PAGE> 62
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SUBSEQUENT EVENT
Acquisition
On December 31, 1996, the Company acquired the assets, subject to certain
liabilities, of the Autometrics division of Svedala Industries Inc.
("Autometrics"), for $1,347,000 in cash. Autometrics is a manufacturer and
marketer of on-line analysis instruments for the minerals processing industry.
The acquisition has been accounted for using the purchase method of
accounting and its results of operations have been included in the accompanying
financial statements from its date of acquisition. The cost of the acquisition
exceeded the estimated fair value of the acquired net assets by $400,000, which
is being amortized over 40 years. Allocation of the purchase price was based on
an estimate of the fair value of the net assets acquired and is subject to
adjustment upon finalization of the purchase price allocation. To date no
information has been gathered that would cause the Company to believe that the
final allocation of the purchase price will be materially different than the
preliminary estimate.
Based on unaudited data, the following table presents selected financial
information for the Company and Autometrics on a pro forma basis, assuming the
Companies had been combined since the beginning of 1996. Pro forma data is not
presented for the three months ended March 29, 1997 since the results of the
Company and Autometrics were combined for substantially the entire period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 30, 1996
-------------------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C>
Revenues.............................................. $12,074
Net income............................................ 206
Earnings per share.................................... .04
</TABLE>
Stock-based Compensation Plans
In May 1997, the Board Committee granted options to purchase 298,000 shares
of the Company's common stock at $15.00 per share, which was the fair market
value on the date of grant.
Stock Split
In May 1997, the Company declared and effected a one-for-two reverse stock
split. All share and per share information has been restated to reflect the
stock split.
F-17
<PAGE> 63
ARTWORK DESCRIPTIONS FOR INSIDE BACK COVER
Photo 3 -- Photo of the Company's Coal Analyzer in the field. The Coal
Analyzer sits in an open field two stories high and is supported and surrounded
by scaffolding with walkways for access to the analyzer. On the right of the
Coal Analyzer, a covered conveyor belt is shown bringing coal to the top of the
analyzer and a second conveyor belt is shown taking the analyzed coal away from
the bottom of the analyzer.
[CAPTION]
The Company's On-line Coal Analyzer uses neutron interrogation to determine the
sulfur and ash concentration of the coal, and can analyze streams of coal at a
rate of up to four hundred tons per hour. Customers then use this data to blend
and sort coal to improve its quality and to optimize combustion processes.
Photo 4 -- Photo of the Company's Cross Belt Analyzer in a cement plant. The
Company's Cross Belt Analyzer sits on a platform in a corrugated metal
building, which also supports a conveyor belt transporting raw material through
the Cross Belt Analyzer. Scaffolding and walkways surround the analyzer for
access to it.
[CAPTION]
The Company's Cross Belt Analyzer ("CBA") is currently used primarily by the
cement industry to analyze the composition of raw materials. The CBA analyzes
materials at rates in excess of 1,000 tons per hour, and can incorporate
high-speed proprietary software which allows the customer to automatically
control and optimize production processes.
<PAGE> 64
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH SOLICITATION.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
The Company........................... 10
Use of Proceeds....................... 10
Dividend Policy....................... 10
Capitalization........................ 11
Dilution.............................. 12
Selected Financial Information........ 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 19
Relationship with Thermo Electron and
Thermo Instrument................... 29
Management............................ 33
Security Ownership of Certain
Beneficial Owners and Management.... 38
Description of Capital Stock.......... 40
Shares Eligible for Future Sale....... 40
Underwriting.......................... 42
Legal Opinions........................ 43
Experts............................... 43
Additional Information................ 44
Reports to Security Holders........... 44
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS OR WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,000,000 SHARES
METRIKA SYSTEMS
CORPORATION
COMMON STOCK
($.01 PAR VALUE)
SALOMON BROTHERS INC
LEHMAN BROTHERS
SMITH BARNEY INC.
CAZENOVE & CO.
PROSPECTUS
DATED , 1997
<PAGE> 65
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
for the Securities and Exchange Commission (the "Commission") registration fee,
the NASD filing fee and the American Stock Exchange listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee...................... $ 15,473
NASD filing.............................................................. 4,433
American Stock Exchange listing fee...................................... 45,000
Legal fees and expenses.................................................. 150,000
Accounting fees and expenses............................................. 270,000
Blue Sky fees and expenses (including legal fees)........................ 10,000
Printing and engraving expenses.......................................... 120,000
Transfer agent fees...................................................... 5,000
Miscellaneous............................................................ 80,094
--------
Total.......................................................... $700,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and the Registrant's Certificate of
Incorporation and By-Laws limit the monetary liability of directors to the
Registrant and to its stockholders and provide for indemnification of the
Registrant's officers and directors for liabilities and expenses that they may
incur in such capacities. In general, officers and directors are indemnified
with respect to actions taken in good faith in a manner reasonably believed to
be in, or not opposed to, the best interests of the Registrant, and with respect
to any criminal action or proceeding, actions that the indemnitee had no
reasonable cause to believe were unlawful. The Registrant also has
indemnification agreements with its directors and officers that provide for the
maximum indemnification allowed by law. Reference is made to the Registrant's
Certificate of Incorporation, By-Laws and form of Indemnification Agreement for
Officers and Directors incorporated by reference as Exhibits 3.1, 3.2 and 10.12
hereto, respectively.
Thermo Electron has an insurance policy which insures the directors and
officers of Thermo Electron and its subsidiaries, including the Registrant,
against certain liabilities which might be incurred in connection with the
performance of their duties.
Under the Underwriting Agreement, the Underwriters are obligated, under
certain circumstances, to indemnify directors and officers of the Registrant
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"). Reference is made to the form of
Underwriting Agreement filed as Exhibit 1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On November 26, 1996, the Registrant issued 5,000,000 shares of Common
Stock (adjusted to reflect a one-for-two reverse stock split effected in May
1997) to Thermo Instrument System Inc. in exchange for the assets, liabilities
and business of its Gamma-Metrics subsidiary and Radiometrie division at the
time of the incorporation of the Registrant. Exemption from registration of this
transaction is claimed under Section 4(2) of the Securities Act.
On December 16, 1996 the Registrant sold an aggregate of 833,333 shares of
Common Stock to accredited investors for an aggregate purchase price of
$12,500,000, pursuant to Regulation D of the Commission promulgated under the
Securities Act. On December 27, 1996, the Registrant sold an
II-1
<PAGE> 66
aggregate of 134,500 shares of Common Stock to accredited investors for an
aggregate purchase price of $2,017,500 pursuant to Regulation D of the
Commission promulgated under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
See the Exhibit Index included immediately preceding the exhibits to this
Registration Statement.
(b) FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules as of December 28, 1996 and the Report of
Independent Accountants on such schedules are included in this Registration
Statement. All other schedules are omitted because they are not applicable or
are not required under Regulation S-X.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Certificate of
Incorporation and By-Laws of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE> 67
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Waltham,
Commonwealth of Massachusetts, on this 27th day of May, 1997.
METRIKA SYSTEMS CORPORATION
By: /s/ DENIS A. HELM
-------------------------------
Denis A. Helm,
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
DENIS A. HELM* Chief Executive Officer & May 27, 1997
- --------------------------------------------- Director
Denis A. Helm
JOHN N. HATSOPOULOS* Vice President, Chief May 27, 1997
- --------------------------------------------- Financial Officer &
John N. Hatsopoulos Director
PAUL F. KELLEHER* Chief Accounting Officer May 27, 1997
- ---------------------------------------------
Paul F. Kelleher
ARVIN H. SMITH* Director May 27, 1997
- ---------------------------------------------
Arvin H. Smith
EARL R. LEWIS* Director May 27, 1997
- ---------------------------------------------
Earl R. Lewis
JOHN T. KEISER* Director May 27, 1997
- ---------------------------------------------
John T. Keiser
Director May 27, 1997
- ---------------------------------------------
Willard R. Becraft
</TABLE>
* The undersigned Sandra L. Lambert, by signing her name hereto, does
hereby execute this Amendment No. 1 to Registration Statement on behalf of each
of the above-named persons pursuant to powers of attorney by such persons and
filed with the Securities and Exchange Commission.
/s/ SANDRA L. LAMBERT
------------------------------
Sandra L. Lambert
Attorney-in-fact
II-3
<PAGE> 68
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Metrika Systems Corporation:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Metrika Systems Corporation included in
Metrika Systems Corporation's Form S-1 and have issued our report thereon dated
March 31, 1997 (except with respect to certain matters discussed in Note 9, as
to which the date is May 27, 1997). Our audits were made for the purpose of
forming an opinion on the basic consolidated financial statements taken as a
whole. Metrika Systems Corporation's schedule of Valuation and Qualifying
Accounts, included in Schedule II on page S-2, is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states, in all material respects, the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 31, 1997
S-1
<PAGE> 69
SCHEDULE II
METRIKA SYSTEMS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT PROVISION BALANCE
BEGINNING CHARGED ACCOUNTS TRANSLATION AT END OF
OF YEAR TO EXPENSE WRITTEN-OFF ADJUSTMENT YEAR
---------- ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts for
the Fiscal Year Ended:
1994............................. $229 $ 26 $ -- $ 3 $ 258
1995............................. $258 $ 225 $(11) $ 6 $ 478
1996............................. $478 $ -- $(36) $ (2) $ 440
</TABLE>
S-2
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ---------------------- ----
<S> <C> <C>
1 Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended, of the Registrant
3.2* By-Laws of the Registrant
4 Specimen Common Stock Certificate
5 Opinion of Seth H. Hoogasian with respect to the validity of the securities
being offered
10.1* Corporate Services Agreement dated as of November 26, 1996, between Thermo
Electron Corporation ("Thermo Electron") and the Registrant
10.2* Thermo Electron Corporate Charter, as amended and restated effective January
3, 1993 (filed as Exhibit 10.1 to Thermo Electron's Annual Report on Form 10-K
for the fiscal year ended January 3, 1993 [File No. 1-8002] and incorporated
herein by reference)
10.3* Tax Allocation Agreement dated as of November 26, 1996 between Thermo Electorn
Inc. and the Registrant
10.4* Master Repurchase Agreement dated as of November 26, 1996 between Thermo
Electron and the Registrant
10.5* Master Guarantee Reimbursement Agreement dated as of November 26, 1996 between
Thermo Electron and the Registrant
10.6* Master Guarantee Reimbursement Agreement dated as of November 26, 1996 between
Thermo Instrument and the Registrant
10.7* Deferred Compensation Plan for Directors of the Registrant
10.8* Indemnification Agreement dated as of November 26, 1996 between Thermo
Instrument and the Registrant
10.9* Letter Agreement dated as of December 4, 1996 between Thermo Instrument and
the Registrant
10.10* Indemnification Agreement dated as of December 4, 1996 between Thermo
Instrument and the Registrant
10.11* Triple Net Lease Agreement dated January 1, 1995 between Gamma-Metrics, as
lessee and Radnor/Collins/Sorrento Partnership as lessor, for property located
at 5788 Pacific Center Boulevard, San Diego, California.
10.12* Form of Indemnification Agreement for Officers and Directors
10.13 Promissory Notes dated as of June 26, 1995, October 1, 1995, December 1, 1995
and December 1, 1996 in the aggregate principal amount of DM3,000,000 issued
by Thermo Instrument Systems GmbH, a wholly owned subsidary of the Registrant
to Nicolet Instrument GmbH, a wholly owned subsidiary of Thermo Optek
Corporation.
10.14* Equity Incentive Plan of the Registrant
10.15 Lease Agreement dated as of October 1, 1993 between Thermo Instrument Systems
GmbH (the Registrant's subsidiary), as lessor, and ESM Eberline Instruments
Strahlen und Umweltmesstechnik GmbH, as lessee.
In addition to the stock-based compensation plans of the Registrant, the
executive officers of the Registrant may be granted awards under stock-based
compensation plans of the Registrant's parent companies, Thermo Electron and
Thermo Instrument, for services rendered to the Registrant or to such
affiliated corporations. Thermo Electron's plans were filed as Exhibits 10.23
through 10.45 to the Annual Report on Form 10-K of Thermo Electron for the
fiscal year ended December 28, 1996 [File No. 1-8002] and Thermo Instrument's
plans were filed as Exhibits 10.18 through 10.27 to the Annual Report on Form
10-K of Thermo Instrument for the fiscal year ended December 28, 1996 [File
No. 1-9786], and are incorporated herein by reference.
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ---------------------- -----
<S> <C> <C>
11 Statement Re: Computation of Earnings per Share
21 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Seth H. Hoogasian, Esq. (included in Exhibit 5)
24* Power of Attorney
27 Financial Data Schedule
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 1
METRIKA SYSTEMS CORPORATION
2,000,000 SHARES*
COMMON STOCK
($.01 PAR VALUE)
UNDERWRITING AGREEMENT
----------------------
New York, New York
__________, 1997
SALOMON BROTHERS INC
LEHMAN BROTHERS INC.
SMITH BARNEY INC.
CAZENOVE & CO.
As Representatives of the several Underwriters
c/o SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Metrika Systems Corporation, a Delaware corporation (the "Company"),
proposes to sell to the underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
representatives, 2,000,000 shares of Common Stock, $.01 par value ("Common
Stock") of the Company (the "Underwritten Securities"). The Company also
proposes to grant to the Underwriters an option to purchase up to 300,000
additional shares of Common Stock (the "Option Securities"; the Option
Securities, together with the Underwritten Securities, being hereinafter called
the "Securities").
The Company currently is a majority-owned subsidiary of Thermo Instrument
Systems Inc., a Delaware corporation ("Thermo Instrument"), which is, in turn, a
majority-owned subsidiary of Thermo Electron Corporation, a Delaware corporation
("Thermo Electron"). To the extent provided herein and for good and valuable
consideration, each of Thermo Instrument and Thermo Electron has become a party
to this Underwriting Agreement.
1. REPRESENTATIONS AND WARRANTIES. The Company, Thermo Instrument and
Thermo Electron, jointly and severally, represent and warrant to, and agree
with, each Underwriter as set forth below in this Section 1. Certain terms used
in this Section 1 are
- -------------------
* Plus an option to purchase from Metrika Systems Corporation up to 300,000
additional shares to cover over-allotments.
<PAGE> 2
-2-
defined in paragraph (c) hereof. The following representations, warranties and
agreements shall be deemed to apply to each Subsidiary (as defined in Section
14) of the Company, unless the context does not permit
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (File Number 333- ) on Form S-1,
including a related preliminary prospectus, for the registration under the
Securities Act of 1933, as amended (the "Act"), of the offering and sale of the
Securities. The Company may have filed one or more amendments thereto, including
the related preliminary prospectus, each of which has previously been furnished
to you. The Company will next file with the Commission either (A) prior to
effectiveness of such registration statement, a further amendment to such
registration statement (including the form of final prospectus) or (B) after
effectiveness of such registration statement, a final prospectus in accordance
with Rules 430A and 424(b)(1) or (4). In the case of clause (B), the Company has
included in such registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information) required by the Act and the rules
thereunder to be included in the Prospectus with respect to the Securities and
the offering thereof. As filed, such amendment and form of final prospectus, or
such final prospectus, shall contain all Rule 430A Information, together with
all other such required information, with respect to the Securities and the
offering thereof and, except to the extent the Representatives shall agree in
writing to a modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not completed at
the Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Prospectus) as
the Company has advised you, prior to the Execution Time, will be included or
made therein. Upon your request, but not without your agreement, the Company
also will file a Rule 462(b) Registration Statement in accordance with Rule
462(b). To the extent applicable, the copies of the Registration Statement and
each amendment thereto (including all exhibits filed therewith), any Preliminary
Prospectus or Prospectus (in each case, as amended or supplemented) furnished to
the Underwriters have been and will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to the
Commission's Electronic Data Gathering, Analysis and Retrieval System, except to
the extent permitted by Regulation S-T.
(b) On the Effective Date, the Registration Statement did or will, and
when the Prospectus is first filed (if required) in accordance with Rule 424(b)
and on the Closing Date and on any date on which shares sold in respect of the
Underwriters' over-allotment option are purchased, if such date is not the
Closing Date (the Closing Date and each other such date being referred to herein
as a "Settlement Date"), the Prospectus (and any supplements thereto) will,
comply in all material respects with the applicable requirements of the Act and
the rules thereunder; on the Effective Date, the Registration Statement did not
or will not 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 not misleading; and, on the Effective Date, the Prospectus,
if not filed pursuant to Rule 424(b), did not or will not, and on the date of
any filing pursuant to Rule 424(b) and on each Settlement Date, the Prospectus
(together with any supplement thereto) will not, include any untrue statement of
a material fact or omit to state a material fact necessary in order to
<PAGE> 3
-3-
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company, Thermo
Instrument and Thermo Electron make no representations or warranties as to the
information contained in or omitted from the Registration Statement or the
Prospectus (or any supplement thereto) in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Underwriter through the Representatives specifically for inclusion in the
Registration Statement or the Prospectus (or any supplement thereto).
(c) The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "the Effective Date" shall mean each date that the
Registration Statement, any post-effective amendment or amendments thereto and
any Rule 462(b) Registration Statement became or become effective. "Execution
Time" shall mean the date and time that this Agreement is executed and
delivered by the parties hereto. "Preliminary Prospectus" shall mean any
preliminary prospectus referred to in paragraph (a) above and any preliminary
prospectus included in the Registration Statement at the Effective Date that
omits Rule 430A Information. "Prospectus" shall mean the prospectus relating to
the Securities that is first filed pursuant to Rule 424(b) after the Execution
Time or, if no filing pursuant to Rule 424(b) is required, shall mean the form
of final prospectus relating to the Securities included in the Registration
Statement at the Effective Date. "Registration Statement" shall mean the
registration statement referred to in paragraph (a) above, including exhibits
and financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto or any Rule
462(b) Registration Statement becomes effective prior to the Closing Date (as
hereinafter defined), shall also mean such registration statement as so amended
or such Rule 462(b) Registration Statement, as the case may be. Such term shall
include any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A. "Rule 424", "Rule 430A" and "Rule 462"
refer to such rules under the Act. "Rule 430A Information" means information
with respect to the Securities and the offering thereof permitted to be omitted
from the Registration Statement when it becomes effective pursuant to Rule
430A. "Rule 462(b) Registration Statement" shall mean a registration statement
and any amendments thereto filed pursuant to Rule 462(b) relating to the
offering covered by the initial registration statement (file number 333- ).
For purposes of this Agreement, all references to the Registration Statement,
any Preliminary Prospectus, the Prospectus, or any amendment or supplement to
any of the foregoing, shall be deemed to include the respective copies thereof
filed with the Commission pursuant to EDGAR.
(d) The accounting firm(s) whose report(s) appear in the Prospectus
are independent certified public accountants as required by the Act and the
rules thereunder. The financial statements and schedules (including the related
notes) included in the Registration Statement, any Preliminary Prospectus or the
Prospectus present fairly, in all material respects, the financial condition,
results of operations and cash flows of the entities purported to be shown
thereby at the dates and for the periods indicated and have been prepared in
accordance with generally accepted accounting principles.
<PAGE> 4
-4-
(e) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus, and is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the business conducted by it or the location of the properties
owned or leased by it makes such qualification necessary except where the
failure to so qualify or be in good standing would not have a material adverse
effect on the Company and its Subsidiaries taken as a whole; and, except as
described in the Prospectus, the Company holds all material licenses,
certificates and permits from governmental authorities necessary for the conduct
of its business as described in the Prospectus.
(f) All of the outstanding shares of Common Stock have been, and the
Securities, upon issuance and delivery and payment therefor in the manner herein
described, will be, duly authorized, validly issued, fully paid and
nonassessable. Other than as described in the Prospectus, there are no
preemptive rights or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of Common Stock pursuant
to the Company's corporate charter, by-laws or other governing documents or any
agreement or other instrument to which the Company is a party or by which it may
be bound. Neither the filing of the Registration Statement nor the offering or
sale of the Securities as contemplated by this Agreement gives rise to any
rights, other than those which have been waived or satisfied and other than as
described in the Prospectus, for or relating to the registration of any shares
of Common Stock or other securities of the Company. The capitalization of the
Company as of __________ is as set forth in the Prospectus and the Common Stock
conforms to the description thereof contained in the Prospectus. All of the
outstanding shares of capital stock of each Subsidiary (as defined in Section
14) of the Company have been duly authorized and validly issued, are fully paid
and nonassessable and are owned directly or indirectly by the Company, free and
clear of any claim, lien, encumbrance, security interest, restriction upon
voting or transfer or any other claim of any third party.
(g) Except as described in or contemplated by the Registration
Statement and the Prospectus, there has not been any material adverse change in,
or any adverse development which materially affects, the condition (financial or
other), results of operations, business or prospects of the Company on a
consolidated basis from the date as of which information is given in the
Prospectus.
(h) The Company is not, and would not be with the giving of notice or
lapse of time or both, in violation of or in default under, nor will the
execution or delivery hereof or consummation of the transactions contemplated
hereby result in a violation of, or constitute a default under, the corporate
charter, by-laws or other governing documents of the Company, or any material
agreement, indenture or other instrument to which the Company is a party or by
which it is bound, or to which any of its properties is subject, nor will the
performance by the Company of its obligations hereunder violate any existing
law, rule, administrative regulation or decree of any court or any governmental
agency or body having jurisdiction over the Company or any of its properties, or
result in the creation or imposition
<PAGE> 5
-5-
of any lien, charge, claim or encumbrance upon any property or asset of the
Company, which would be material to the Company and its Subsidiaries taken as a
whole. Except for permits and similar authorizations required under the Act and
the securities or "Blue Sky" laws of certain jurisdictions and for such permits
and authorizations as have been obtained, no consent, approval, authorization or
order of any U.S. court, governmental agency or body or any financial
institution is required in connection with the consummation by the Company of
the transactions contemplated by this Agreement.
(i) This Agreement has been duly authorized, executed and delivered by
the Company.
(j) The Company owns, or has valid rights to use, all items of real
and personal property which are material to the business of the Company and its
Subsidiaries taken as a whole, free and clear of all liens, encumbrances and
claims which may materially interfere with the business, properties, financial
condition or results of operations of the Company on a consolidated basis.
(k) Except as described in the Prospectus, there is no litigation or
governmental proceeding to which the Company or Thermo Instrument or Thermo
Electron is a party or to which any property of the Company is subject or which
is pending or, to the knowledge of the Company, Thermo Instrument or Thermo
Electron, contemplated against the Company or Thermo Instrument that is required
to be disclosed in the Prospectus and that is not so disclosed.
(l) The Company is not in violation of any law, ordinance,
governmental rule or regulation or court decree to which it is subject, which
violation could have a material adverse effect on the condition (financial or
other), results of operations, business or prospects of the Company on a
consolidated basis.
(m) The Company owns or possesses adequate licenses or other rights to
use all intellectual property rights, including patents, trademarks, service
marks, trade names, copyrights or know-how, necessary to conduct its business as
described or referred to in the Prospectus, and, except as disclosed in the
Prospectus, none of Thermo Electron, Thermo Instrument or the Company has
received any notice of infringement of or conflict with (or knows of any such
infringement of or conflict with) rights or claims of others with respect to any
patents, trademarks, service marks, trade names, copyrights or know-how, that if
the subject of an unfavorable decision, ruling or finding, would result in a
material adverse effect upon the Company on a consolidated basis, and, except as
disclosed in the Prospectus, all products or processes referred to in the
Prospectus and relating to the business of the Company now conducted by it do
not infringe upon or conflict with any right or patent, or with any discovery,
invention, product or process which is the subject of any patent application
known to the Company or Thermo Electron, in a manner which would materially and
adversely affect the Company on a consolidated basis.
(n) The Corporate Services Agreement between the Company and Thermo
Electron (the "Services Agreement"), and the other agreements between the
Company and
<PAGE> 6
-6-
Thermo Instrument or Thermo Electron pursuant to which the Company was initially
organized and capitalized (collectively, the "Organization Agreements"), and the
Tax Allocation Agreement between Thermo Electron and the Company (all of the
foregoing agreements being referred to herein as the "Inter-corporate
Agreements") each has been duly and validly authorized, executed and delivered
by the Company and is the valid and binding agreement of the Company enforceable
in accordance with its terms, except as provided by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) (collectively, "applicable
bankruptcy laws"). The execution, delivery and performance of the
Inter-corporate Agreements by the Company, the consummation of the transactions
therein contemplated and compliance with the terms thereof do not and will not
result in a violation of, or constitute a default under, the corporate charter,
by-laws or other governing documents of the Company, or any agreement, indenture
or other instrument to which the Company is a party or by which it is bound, or
to which any of its properties is subject, and do not and will not violate any
existing law, rule, administrative regulation or decree of any court or any
governmental agency or body having jurisdiction over the Company or any of its
properties, or result in the creation or imposition of any lien, charge, claim
or encumbrance upon any property or asset of the Company, which would be
material to the Company and its Subsidiaries taken as a whole. No consent,
approval, authorization or order of any court, governmental agency or body or
financial institution is required in connection with the consummation of the
transactions contemplated by such Inter-corporate Agreements.
(o) Neither the Company nor Thermo Electron nor Thermo Instrument or
any other Subsidiary of Thermo Electron has taken and none of such companies
shall take, directly or indirectly, any action designed to cause or result in,
or which has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Securities.
(p) The Securities have been approved for listing on the American
Stock Exchange, subject only to official notice of issuance.
1A. REPRESENTATIONS AND WARRANTIES OF THERMO INSTRUMENT AND THERMO
ELECTRON. Thermo Instrument and Thermo Electron each represent and warrant to,
and agree with, each Underwriter that:
(a) Each of Thermo Instrument and Thermo Electron has been duly organized
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate and
other) to own or lease its properties and conduct its business, and is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the business conducted by it or the location of the properties
owned or leased by it makes such qualification necessary, except where the
failure to so qualify or be in good standing would not have a material adverse
effect on Thermo Electron and its Subsidiaries taken as a whole.
<PAGE> 7
-7-
(b) There has not been any material adverse change in, or any adverse
development which materially affects, the condition (financial or other),
results of operations, business or prospects of Thermo Electron and its
Subsidiaries taken as a whole, from the date as of which information is given in
the most recent quarterly or annual report filed by Thermo Electron pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), except any
as may have been disclosed to the public.
(c) Neither Thermo Instrument nor Thermo Electron is, nor with the giving
of notice or lapse of time or both would be, in violation of or in default
under, nor will the execution or delivery hereof or consummation of the
transactions contemplated hereby result in a violation of, or constitute a
default under, the corporate charter, by-laws or other governing documents of
Thermo Instrument or Thermo Electron, or any material agreement, indenture or
other instrument to which Thermo Instrument or Thermo Electron is a party or by
which any of them is bound, or to which any of their properties is subject, nor
will the performance by Thermo Instrument or Thermo Electron of its obligations
hereunder violate any existing law, rule, administrative regulation or decree of
any court or any governmental agency or body having jurisdiction over Thermo
Instrument or Thermo Electron or any of their respective properties, or result
in the creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of Thermo Instrument or Thermo Electron, which would be
material to Thermo Electron and its Subsidiaries taken as a whole. Except for
permits and similar authorizations required under the Securities Act and the
securities or "Blue Sky" laws of certain jurisdictions and for such permits and
authorizations as have been obtained, no consent, approval, authorization or
order of any court, governmental agency or body or financial institution is
required in connection with the consummation by Thermo Instrument and Thermo
Electron of the transactions contemplated by this Agreement.
(d) This Agreement has been duly authorized, executed and delivered by
Thermo Instrument and Thermo Electron.
(e) Thermo Instrument owns, and will own as of each Closing Date (as
defined below), of record and beneficially, the number of shares of Common Stock
of the Company set forth in the Prospectus, free and clear of any liens,
encumbrances, claims or restrictions, except that certain of such shares are
reserved for issuance pursuant to stock option and other benefit plans under
which options to purchase Common Stock of the Company owned by Thermo Instrument
are granted to certain employees, directors or consultants of Thermo Electron
and its Subsidiaries.
(f) The most recent Annual Report on Form 10-K of Thermo Instrument and of
Thermo Electron and any subsequent reports filed pursuant to the Exchange Act
complied as of the date thereof in all material respects with the Exchange Act
and the rules and regulations thereunder.
(g) The transfer by Thermo Instrument to the Company of certain stock
and/or assets, as described in the Prospectus and in the Organization
Agreements, has been completed by all required corporate and other action. Each
of the Inter-corporate
<PAGE> 8
-8-
Agreements to which Thermo Instrument is a party has been duly and validly
authorized, executed and delivered by Thermo Instrument and is the valid and
binding agreement of Thermo Instrument enforceable in accordance with its terms,
except as provided by applicable bankruptcy laws. The execution, delivery and
performance of each of the Inter-corporate Agreements to which Thermo Instrument
is a party by Thermo Instrument, the consummation of the transactions therein
contemplated and compliance with the terms thereof do not and will not result in
a violation of, or constitute a default under, the corporate charter, by-laws or
other governing documents of Thermo Instrument, or any agreement, indenture or
other instrument to which Thermo Instrument is a party or by which it is bound,
or to which any of its properties is subject, and do not and will not violate
any existing law, rule, administrative regulation or decree of any court or any
governmental agency or body having jurisdiction over Thermo Instrument or any of
its properties, or result in the creation or imposition of any lien, charge,
claim or encumbrance upon any property or asset of Thermo Instrument, which
would be material to Thermo Instrument. No consent, approval, authorization or
order of any court, governmental agency or body or financial institution is
required in connection with the consummation by Thermo Instrument of the
transactions contemplated by the Inter-corporate Agreements to which Thermo
Instrument is a party, except such as have been obtained.
(h) The Services Agreement has been duly and validly authorized, executed
and delivered by Thermo Electron and is the valid and binding agreement of
Thermo Electron, enforceable in accordance with its terms.
2. Purchase and Sale.
-----------------
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to sell to
each Underwriter, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $______ per share, the amount
of the Underwritten Securities set forth opposite such Underwriter's name in
Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up to
300,000 shares of the Option Securities at the same purchase price per share as
the Underwriters shall pay for the Underwritten Securities. Said option may be
exercised only to cover over-allotments in the sale of the Underwritten
Securities by the Underwriters. Said option may be exercised in whole or in part
at any time (but not more than once) on or before the 30th day after the date of
the Prospectus upon written or telegraphic notice by the Representatives to the
Company setting forth the number of shares of the Option Securities as to which
the several Underwriters are exercising the option and the Settlement Date.
Delivery of certificates for the shares of Option Securities by the Company, and
payment therefor to the Company, shall be made as provided in Section 3 hereof.
The number of shares of the Option Securities to be purchased by each
Underwriter shall be the same percentage of the total number of shares of the
Option Securities to be purchased by the several Underwriters as
<PAGE> 9
-9-
such Underwriter is purchasing of the Underwritten Securities, subject to such
adjustments as you in your absolute discretion shall make to eliminate any
fractional shares.
3. DELIVERY AND PAYMENT. Delivery of and payment for the Underwritten
Securities and the Option Securities (if the option provided for in Section 2(b)
hereof shall have been exercised on or before the second business day prior to
the Closing Date) shall be made at 10:00 AM, Eastern time, on __________, 1997,
or such later date (not later than __________, 1997) as the Representatives
shall designate, which date and time may be postponed by agreement among the
Representatives and the Company or as provided in Section 9 hereof (such date
and time of delivery and payment for the Securities being herein called the
"Closing Date"). Delivery of the Securities shall be made to the Representatives
for the respective accounts of the several Underwriters against payment by the
several Underwriters through the Representatives of the aggregate purchase price
thereof to or upon the order of the Company by certified or official bank check
or checks drawn on or by a New York Clearing House bank and payable in same day
funds or by wire transfer of New York Clearing House bank same day funds.
Delivery of the Underwritten Securities and the Option Securities shall be made
at such location as the Representatives shall reasonably designate at least one
business day in advance of the Closing Date and payment for such Securities
shall be made at the office of Testa, Hurwitz & Thibeault, LLP, Boston,
Massachusetts. Certificates for the Securities shall be registered in such names
and in such denominations as the Representatives may request not less than two
full business days in advance of the Closing Date.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Representatives in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
If the option provided for in Section 2(b) hereof is exercised after the
second business day prior to the Closing Date, the Company will deliver (at the
expense of the Company) to the Representatives, at Seven World Trade Center, New
York, New York, on the date specified by the Representatives (which shall be
within three business days after exercise of said option), certificates for the
Option Securities in such names and denominations as the Representatives shall
have requested against payment of the purchase price thereof to or upon the
order of the Company by certified or official bank check or checks drawn on or
by a New York Clearing House bank and payable in same day funds or by wire
transfer of New York Clearing House bank same day funds. If settlement for the
Option Securities occurs after the Closing Date, the Company will deliver to the
Representatives on the Settlement Date for the Option Securities, and the
obligation of the Underwriters to purchase the Option Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof.
4. OFFERING BY UNDERWRITERS. It is understood that the several Underwriters
propose to offer the Securities for sale to the public as set forth in the
Prospectus.
<PAGE> 10
-10-
5. AGREEMENTS. The Company, Thermo Instrument and Thermo Electron, jointly
and severally, agree with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment thereof, to
become effective. Prior to the termination of the offering of the Securities,
the Company will not file any amendment of the Registration Statement,
supplement to the Prospectus or any Rule 462(b) Registration Statement without
your prior consent. Subject to the foregoing sentence, if the Registration
Statement has become or becomes effective pursuant to Rule 430A, or filing of
the Prospectus is otherwise required under Rule 424(b), the Company will cause
the Prospectus, properly completed, and any supplement thereto to be filed with
the Commission pursuant to the applicable paragraph of Rule 424(b) within the
time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. Upon your request, the Company will cause
the Rule 462(b) Registration Statement, completed in compliance with the Act and
the applicable rules and regulations thereunder, to be filed with the Commission
pursuant to Rule 462(b) and will provide evidence satisfactory to the
Representatives of such filing. The Company will promptly advise the
Representatives (i) when the Registration Statement, if not effective at the
Execution Time, and any amendment thereto, shall have become effective, (ii)
when the Prospectus, any supplement thereto or any Rule 462(b) Registration
Statement shall have been filed (if required) with the Commission pursuant to
Rule 424(b), (iii) when, prior to termination of the offering of the Securities,
any amendment to the Registration Statement shall have been filed or become
effective, (iv) of any request by the Commission for any amendment of the
Registration Statement or any Rule 462(b) Registration Statement or supplement
to the Prospectus or for any additional information, (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for that purpose
and (vi) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose. The Company
will use its best efforts to prevent the issuance of any such stop order and, if
issued, to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend the Registration Statement
or supplement the Prospectus to comply with the Act or the rules thereunder, the
Company promptly will (i) prepare and file with the Commission, subject to the
second sentence of paragraph (a) of this Section 5, an amendment or supplement
which will correct such statement or omission or effect such compliance and (ii)
supply any supplemented Prospectus to you in such quantities as you may
reasonably request.
(c) As soon as practicable, the Company will make generally available to
its security holders and to the Representatives an earnings statement or
statements of the
<PAGE> 11
-11-
Company which will satisfy the provisions of Section 11(a) of the Act and Rule
158 under the Act.
(d) The Company will furnish to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration Statement
(including exhibits thereto) and to each other Underwriter a copy of the
Registration Statement (without exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, as many
copies of each Preliminary Prospectus and the Prospectus and any supplement
thereto as the Representatives may reasonably request. The Company will furnish
or cause to be furnished to the Representatives copies of all reports on Form SR
required by Rule 463 under the Act. The Company will pay the expenses of
printing or other production of all documents relating to the offering.
(e) The Company will arrange for the qualification of the Securities for
sale under the laws of such jurisdictions as the Representatives may designate,
will maintain such qualifications in effect so long as required for the
distribution of the Securities and will pay the fee of the National Association
of Securities Dealers, Inc., in connection with its review of the offering.
(f) The Company, Thermo Instrument and Thermo Electron shall not, during
the 180-day period following the date of the Prospectus, except with the prior
written consent of Salomon Brothers Inc, offer for sale, sell or otherwise
dispose of, directly or indirectly, or announce the offering of, any shares of
Common Stock (except for the issuance of shares of Common Stock pursuant to
existing stock option, purchase and compensation plans, or upon conversion of
any currently outstanding convertible securities described in the Prospectus,
except for sales of shares of Common Stock by the Company to Thermo Instrument),
or sell or grant options, rights or warrants with respect to any shares of
Common Stock (other than the grant of options pursuant to existing stock option,
purchase and compensation plans), otherwise than in accordance with this
Agreement or as contemplated in the Prospectus. The Company, Thermo Instrument
and Thermo Electron will not permit any employee stock option, director stock
option or other stock option to purchase Common Stock of the Company granted by
it to be exercised, and the Common Stock issued upon exercise of the stock
option to be sold, prior to the expiration of the 180-day period following the
date of this Prospectus, without the prior written consent of Salomon Brothers
Inc.
6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The obligations of
the Underwriters to purchase the Underwritten Securities and the Option
Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company, Thermo Instrument and
Thermo Electron contained herein as of the Execution Time, the Closing Date and
any Settlement Date pursuant to Section 3 hereof, to the accuracy of the
statements of the Company, Thermo Instrument and Thermo Electron made in any
certificates pursuant to the provisions hereof, to the performance by the
Company, Thermo Instrument and Thermo Electron of their respective obligations
hereunder and to the following additional conditions:
<PAGE> 12
-12-
(a) If the Registration Statement has not become effective prior to the
Execution Time, unless the Representatives agree in writing to a later time, the
Registration Statement will become effective not later than (i) 6:00 PM Eastern
time on the date of determination of the public offering price, if such
determination occurred at or prior to 3:00 PM Eastern time on such date, or (ii)
12:00 Noon on the business day following the day on which the public offering
price was determined, if such determination occurred after 3:00 PM Eastern time
on such date; if filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b), the Prospectus, and any such supplement, will
be filed in the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been instituted
or threatened.
(b) The Company shall have furnished to the Representatives the opinion of
Seth H. Hoogasian, General Counsel of the Company, Thermo Instrument and Thermo
Electron, dated the Closing Date, to the effect that:
(i) Each of the Company and its Subsidiaries has been duly organized
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to
own or lease its properties and conduct its business as described in the
Prospectus, and is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the business conducted by it or the
location of the properties owned or leased by it makes such qualification
necessary, except where the failure to so qualify or be in good standing would
not have a material adverse effect on the Company and its Subsidiaries taken as
a whole.
(ii) Each of Thermo Electron and its Significant Subsidiaries (as
defined in Section 14) has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus;
(iii) the Company's authorized capital stock and outstanding capital
stock is as set forth in the Prospectus under the caption "Description of
Capital Stock"; the capital stock of the Company conforms as to legal matters in
all material respects to the description thereof contained in the Prospectus
under the caption "Description of Capital Stock"; the outstanding shares of
Common Stock have been duly and validly authorized and issued and are fully paid
and nonassessable; the Securities have been duly and validly authorized, and,
when issued and delivered to and paid for by the Underwriters pursuant to this
Agreement, will be fully paid and nonassessable; the Securities are duly
authorized for listing, subject to official notice of issuance, on the Nasdaq
National Market; the certificates for the Securities are in valid and sufficient
form; there are no preemptive or other rights to subscribe for or to purchase,
or any restriction upon the voting or transfer of, any of the Securities
pursuant to the Company's corporate charter, by-laws, other governing documents,
or any agreement or other instrument known to such counsel to which the Company
or a Subsidiary thereof is a party or by which the Company or a Subsidiary
thereof may be bound or to which any of their respective properties is subject;
and, to such counsel's knowledge, neither the filing of
<PAGE> 13
-13-
the Registration Statement nor the offering or sale of the Securities as
contemplated by this Agreement gives rise to any rights for or relating to the
registration of any shares of Common Stock except such as have been waived or
satisfied; and all of the outstanding shares of capital stock of each Subsidiary
of the Company have been duly and validly authorized and issued and are fully
paid and nonassessable and are owned directly or indirectly by the Company free
and clear of any claim, lien, encumbrance or security interest known to such
counsel (except for certain obligations of the Company pursuant to stock and
employee benefit plans maintained for the benefit of employees, officers,
directors and consultants of the Company and its Subsidiaries);
(iv) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental agency,
authority or body or any arbitrator involving the Company or any Subsidiary
required to be disclosed in the Registration Statement which is not adequately
disclosed in the Prospectus under the caption "Business--Legal Proceedings," and
there is no franchise, contract or other document required to be described in
the Registration Statement or Prospectus, or to be filed as an exhibit, which is
not described or filed as required;
(v) the Registration Statement has become effective under the Act; any
required filing of the Prospectus, and any supplements thereto, pursuant to Rule
424(b) has been made in the manner and within the time period required by Rule
424(b); to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued, no proceedings for
that purpose have been instituted or threatened and the Registration Statement
and the Prospectus (other than the financial statements and schedules and other
financial, statistical and accounting information contained therein as to which
such counsel need express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the rules thereunder;
(vi) this Agreement has been duly authorized, executed and delivered
by the Company, Thermo Instrument and Thermo Electron;
(vii) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental agency or body is required
for the consummation of the transactions contemplated herein, except (a) such as
have been obtained under the Act, (b) such as may be required under the blue sky
and state securities laws of any jurisdiction applicable to the offering and
sale of the Securities by the Underwriters and such as may be required for the
clearance of the underwriting arrangements relating to such offering and sale
with the NASD (as to which such counsel need express no opinion), and (c) such
other approvals (specified in such opinion) as have been obtained; and
(viii) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in a breach or
violation of, or constitute a default under any law or the charter or by-laws of
the Company (or any of its Subsidiaries), Thermo Instrument or Thermo Electron,
or the terms of any indenture or other agreement or instrument known to such
counsel and to which the Company (or any of its Subsidiaries), Thermo Instrument
or
<PAGE> 14
-14-
Thermo Electron, is a party or bound or any judgment, injunction, order or
decree known to such counsel to be applicable to the the Company (or any of its
Subsidiaries), Thermo Instrument or Thermo Electron, of any court, regulatory
body, administrative agency, governmental body or arbitrator having jurisdiction
over the the Company (or any of its Subsidiaries), Thermo Instrument or Thermo
Electron.
(ix) Each of the Inter-corporate Agreements has been duly authorized,
executed and delivered by the Company, Thermo Instrument and Thermo Electron, as
the case may be, and is the valid and binding agreement of each of the parties
thereto enforceable in accordance with its terms except as provided by
applicable bankruptcy laws. The execution, delivery and performance of each of
the Inter-corporate Agreements by each of the parties thereto, the consummation
of the transactions therein contemplated and compliance with the terms thereof
do not and will not result in a violation of, or constitute a default under the
corporate charter, by-laws or other governing documents of the Company (or any
of its Subsidiaries), Thermo Instrument or Thermo Electron, or any material
agreement, indenture or other instrument known to such counsel to which the
Company (or any of its Subsidiaries), Thermo Instrument or Thermo Electron is a
party or by which any of them is bound, or to which any of their properties is
subject and do not and will not violate any existing law, rule, administrative
regulation or decree of any court or any governmental agency or body having
jurisdiction over the Company, Thermo Instrument or Thermo Electron or any of
their properties, or, to such counsel's knowledge, result in the creation or
imposition of any lien, charge, claim or encumbrance upon any property or asset
of the Company, Thermo Instrument or Thermo Electron, which would be material to
the Company or to Thermo Electron and their respective Subsidiaries taken as a
whole. Except for permits and similar authorizations required under the
Securities Act and the securities or "Blue Sky" laws of certain jurisdictions
and for such permits and authorizations as have been obtained, no consent,
approval, authorization or order of any court, governmental agency or body or,
to the knowledge of such counsel, financial institution is required in
connection with the consummation of the transactions contemplated by the
Inter-corporate Agreements.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent accountants of the Company, representatives
of the Underwriters and representatives of counsel for the Underwriters, at
which the contents of the Registration Statement and the Prospectus and related
matters were discussed and, although such counsel need not pass upon, and need
not assume any responsibility for, the accuracy, completeness or fairness of any
statement contained in the Registration Statement or the Prospectus (except for
those statements referred to in the opinions expressed in the first two clauses
of subsection (ii) above) and has made no independent check or verification
thereof, such counsel shall state that on the basis of the foregoing, no facts
have come to such counsel's attention that has led such counsel to believe that
the Registration Statement, as of the date thereof, included any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading or
that the Prospectus, as of its date or the date of such opinion, included or
includes any untrue statement of a material fact or omitted or omits to
<PAGE> 15
-15-
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that such
counsel need express no opinion or belief with respect to the financial
statements, financial statement schedules and other financial, accounting and
statistical data included therein.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the
Commonwealth of Massachusetts, the United States or the General Corporation Law
of the State of Delaware, to the extent such counsel deems proper and as
specified in such opinion, upon the opinion of other counsel of good standing
whom such counsel believes to be reliable and who are satisfactory to counsel
for the Underwriters and (B) as to matters of fact, to the extent such counsel
deems proper, on certificates of responsible officers of the Company and public
officials. References to the Prospectus in this paragraph (b) include any
supplements thereto.
(c) The Representatives shall have received from Testa, Hurwitz &
Thibeault, LLP, counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, with respect to the issuance and sale of the Securities, the
Registration Statement, the Prospectus (together with any supplement thereto)
and other related matters as the Representatives may reasonably require, and the
Company shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(d) The Company shall have furnished to the Representatives a certificate
of the Company, signed by the Chairman of the Board or the President and the
principal financial or accounting officer of the Company, dated the applicable
Settlement Date, to the effect that the signers of such certificate have
carefully examined the Registration Statement, the Prospectus, any supplements
to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct on and as of the date of the certificate
with the same effect as if made on the date of the certificate, and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
applicable Settlement Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the Company's knowledge, threatened; and
(iii) since the date of the most recent financial statements included
in the Prospectus (exclusive of any supplement thereto), there has been no
material adverse change in the condition (financial or other), earnings,
business or properties of the Company on a consolidated basis, whether or
not arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).
<PAGE> 16
-16-
(e) Thermo Instrument shall have furnished to the Representatives a
certificate of Thermo Instrument, signed by its President or a Vice President
and by its Treasurer or Secretary, dated the applicable Settlement Date, to the
effect that the signers of such certificate have carefully examined the
Registration Statement, the Prospectus, any supplements to the Prospectus and
this Agreement and that:
(i) the representations and warranties of Thermo Instrument in this
Agreement are true and correct on and as of the date of the certificate
with the same effect as if made on the date of the certificate, and Thermo
Instrument has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
applicable Settlement Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to Thermo Instrument's knowledge, threatened; and
(iii) since the date of the most recent financial statements included
in the Prospectus (exclusive of any supplement thereto), there has been no
material adverse change in the condition (financial or other), earnings,
business or properties of the Company on a consolidated basis, whether or
not arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).
(f) Thermo Electron shall have furnished to the Representatives a
certificate of Thermo Electron, signed by its President or a Vice President and
by its Treasurer or Secretary, dated the applicable Settlement Date, to the
effect that the signers of such certificate have carefully examined the
Registration Statement, the Prospectus, any supplements to the Prospectus and
this Agreement and that:
(i) the representations and warranties of Thermo Electron in this
Agreement are true and correct on and as of the date of the certificate
with the same effect as if made on the date of the certificate, and Thermo
Electron has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
applicable Settlement Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to Thermo Instrument's knowledge, threatened; and
(iii) since the date of the most recent financial statements included
in the Prospectus (exclusive of any supplement thereto), there has been no
material adverse change in the condition (financial or other), earnings,
business or properties of the Company on a consolidated basis, whether or
not arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).
<PAGE> 17
-17-
(g) On the date of this Agreement and on each Settlement Date you shall
have received a letter from each accounting firm whose report appears in the
Prospectus, dated the date of this Underwriting Agreement or such Settlement
Date, as the case may be, and addressed to you, confirming that they are
independent certified public accountants within the meaning of the Act and the
rules thereunder, and stating, as of the date of such letter (or, with respect
to matters involving changes or developments since the respective dates as of
which specified financial information is given in the Prospectus, as of a date
not more than five days prior to the date of each such letter), the conclusions
and findings of each such firm with respect to the financial information and
other matters covered by its letter delivered to you concurrently with the
execution of this Agreement, and with respect to each letter delivered on a
Settlement Date confirming the conclusions and findings set forth in such prior
letter.
(h) Subsequent to the Execution Time or, if earlier, the dates as of which
information is given in the Registration Statement (exclusive of any amendment
thereof) and the Prospectus (exclusive of any supplement thereto), there shall
not have been (i) any change or decrease specified in the letter or letters
referred to in paragraph (g) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the business or
properties of the Company the effect of which, in any case referred to in clause
(i) or (ii) above, is, in the judgment of the Representatives, so material and
adverse as to make it impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of any
supplement thereto).
(i) Prior to the applicable Settlement Date, the Company shall have
furnished to the Representatives such further information, certificates and
documents as the Representatives may reasonably request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the applicable Settlement Date by the Representatives.
Notice of such cancellation shall be given to the Company in writing or by
telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be delivered
at the office of Testa, Hurwitz & Thibeault, LLP, , counsel for the
Underwriters, at 125 High Street, Boston, Massachusetts, on the applicable
Settlement Date.
7. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the Securities
provided for herein is not consummated because any condition to the obligations
of the Underwriters set forth in Section 6 hereof is not satisfied, because of
any termination pursuant to Section 10 hereof or because of any refusal,
inability or failure on the part of the
<PAGE> 18
-18-
Company, Thermo Instrument or Thermo Electron to perform any agreement herein or
comply with any provision hereof other than by reason of a default by any of the
Underwriters, the Company (or Thermo Instrument or Thermo Electron) will
reimburse the Underwriters severally upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of the
Securities.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company, Thermo Instrument and
Thermo Electron, jointly and severally, agree to indemnify and hold harmless
each Underwriter, the directors, officers, employees and agents of each
Underwriter and each person who controls any Underwriter within the meaning of
either the Act or the Securities Exchange Act of 1934 (the "Exchange Act")
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement made by the Company, Thermo Instrument or Thermo Electron in
Section 1 hereof or by Thermo Instrument or Thermo Electron in Section 1A
hereof, (ii) any untrue statement or alleged untrue statement of a material fact
contained in the registration statement for the registration of the Securities
as originally filed or in any amendment thereof, or in any Preliminary
Prospectus or the Prospectus, or in any amendment thereof or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (iii) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or relating
in any manner to, the Securities or the offering contemplated hereby, and which
is included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon matters covered by clause (i) or (ii) above
(provided that the Company, Thermo Instrument and Thermo Electron shall not be
liable under this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly or indirectly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter through
its gross negligence or willful misconduct); and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that (i) the Company,
Thermo Instrument and Thermo Electron will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representatives specifically for inclusion therein and (ii) with respect to
any untrue statement or omission of a material fact made in any Preliminary
Prospectus, the indemnity agreement contained in this Section 8(a) shall not
inure to the benefit of any Underwriter (or any of the directors, officers,
employees and agents of such Underwriter or any controlling person of such
Underwriter) from whom the person asserting any such loss, claim, damage or
liability purchased the Securities concerned, to the extent that any such loss,
claim, damage or liability of such Underwriter occurs under the
<PAGE> 19
-19-
circumstances where it shall have been determined by a court of competent
jurisdiction by final and nonappealable judgment that (w) the Company had
previously furnished copies of the Prospectus to the Underwriters, (x) delivery
of the Prospectus was required by the Act to be made to such person, (y) the
untrue statement or omission of a material fact contained in the Preliminary
Prospectus was corrected in the Prospectus and (z) there was not sent or given
to such person, at or prior to the written confirmation of the sale of such
Securities to such person, a copy of the Prospectus. This indemnity agreement
will be in addition to any liability which the Company, Thermo Instrument and
Thermo Electron may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who signs the
Registration Statement, Thermo Instrument and Thermo Electron, and each person
who controls the Company within the meaning of either the Act or the Exchange
Act, to the same extent as the foregoing indemnity from the Company, Thermo
Instrument and Thermo Electron to each Underwriter, but only with reference to
written information relating to such Underwriter furnished to the Company by or
on behalf of such Underwriter through the Representatives specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any Underwriter
may otherwise have. The Company, Thermo Instrument and Thermo Electron
acknowledge that the statements set forth in the last paragraph of the cover
page and under the heading "Underwriting" in any Preliminary Prospectus and the
Prospectus constitute the only information furnished in writing by or on behalf
of the several Underwriters for inclusion in any Preliminary Prospectus or the
Prospectus, and you, as the Representatives, confirm that such statements are
correct.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party
<PAGE> 20
-20-
and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, (iii)
the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company, Thermo Instrument, Thermo
Electron and the Underwriters agree to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively
"Losses") to which the Company and one or more of the Underwriters may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Company, Thermo Instrument and Thermo Electron on the one hand,
and by the Underwriters on the other, from the offering of the Securities;
provided, however, that in no case shall any Underwriter (except as may be
provided in any agreement among underwriters relating to the offering of the
Securities) be responsible for any amount in excess of the underwriting discount
or commission applicable to the Securities purchased by such Underwriter
hereunder. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company, Thermo Instrument and Thermo Electron,
on the one hand, and the Underwriters on the other, shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company, Thermo Instrument and Thermo Electron on the
one hand, and of the Underwriters on the other, in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company, Thermo
Instrument and Thermo Electron shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses), and benefits received by
the Underwriters shall be deemed to be equal to the total underwriting discounts
and commissions, in each case as set forth on the cover page of the Prospectus.
Relative fault shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by the Company, Thermo
Instrument or Thermo Electron on the one hand, or the Underwriters on the other.
The Company, Thermo Instrument and Thermo Electron and the Underwriters agree
that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 8,
<PAGE> 21
-21-
each person who controls an Underwriter within the meaning of either the Act or
the Exchange Act and each director, officer, employee and agent of an
Underwriter shall have the same rights to contribution as such Underwriter, and
each person who controls the Company within the meaning of either the Act or the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company, as well as Thermo Instrument and
Thermo Electron, shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of this paragraph
(d).
9. DEFAULT BY AN UNDERWRITER. If any one or more Underwriters shall fail to
purchase and pay for any of the Securities agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representatives shall determine in order that the required
changes in the Registration Statement and the Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company and any nondefaulting Underwriter for damages occasioned by its default
hereunder.
10. TERMINATION. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to the Company prior
to delivery of and payment for the Securities, if prior to such time (i) trading
in the Company's Common Stock shall have been suspended by the Commission or the
American Stock Exchange or trading in securities generally on the New York Stock
Exchange or the American Stock Exchange shall have been suspended or limited or
minimum prices shall have been established on either the New York Stock Exchange
or the American Stock Exchange, (ii) a banking moratorium shall have been
declared either by Federal, New York State or Massachusetts authorities or (iii)
there shall have occurred any outbreak or escalation of hostilities, declaration
by the United States of a national emergency or war or other calamity or crisis
the effect of which on financial markets is such as to make it, in the judgment
of the Representatives, impracticable or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Prospectus
(exclusive of any supplement thereto).
<PAGE> 22
-22-
11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective agreements,
representations, warranties, indemnities and other statements of the Company or
its officers, or of Thermo Instrument or Thermo Electron, and of the
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or the Company or any of the officers, directors or controlling
persons referred to in Section 8 hereof, and will survive delivery of and
payment for the Securities. The provisions of Sections 7 and 8 hereof shall
survive the termination or cancellation of this Agreement.
12. NOTICES. All communications hereunder will be in writing and effective
only on receipt, and, if sent to the Representatives, will be mailed, delivered
or telefaxed and confirmed to them, care of Salomon Brothers Inc, at Seven World
Trade Center, New York, New York, 10048, attention: Legal Department; or, if
sent to the Company, will be mailed, delivered or telefaxed and confirmed to it
at 5788 Pacific Center Boulevard, San Diego, California 92121, attention:
President, with a copy to Seth H. Hoogasian, Esq, c/o Thermo Electron
Corporation, 81 Wyman Street, Waltham, Massachusetts 02254-9046.
13. SUCCESSORS. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 8 hereof, and no other
person will have any right or obligation hereunder.
14. DEFINITIONS. For purposes of this Agreement, (a) "Business Day" means
any day on which the American Stock Exchange is open for trading and (b)
"Subsidiary" has the meaning set forth in Rule 405 under the Act.
15. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
[Remainder of page intentionally left blank]
<PAGE> 23
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and the several Underwriters.
Very truly yours,
METRIKA SYSTEMS CORPORATION
By:
-----------------------------------
Name:
Title:
THERMO INSTRUMENT SYSTEMS INC.
By:
-----------------------------------
Name:
Title:
THERMO ELECTRON CORPORATION
By:
-----------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON BROTHERS INC
LEHMAN BROTHERS INC.
SMITH BARNEY INC.
CAZENOVE & CO.
By: SALOMON BROTHERS INC
By:
-----------------------------------
Name:
Title:
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
<PAGE> 24
<TABLE>
SCHEDULE I
<CAPTION>
Number of Shares of
Underwritten Securities
Underwriters To Be Purchased
- ------------ -----------------------
<S> <C>
Salomon Brothers Inc. ............................
Lehman Brothers Inc. .............................
Smith Barney Inc. ................................
Cazenove & Co. ...................................
TOTAL............................................. 2,000,000
=========
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
METRIKA SYSTEMS CORPORATION
Metrika Systems Corporation (the "Corporation"), a corporation organized
and existing under the laws of the State of Delaware, hereby certifies as
follows, pursuant to Section 242 of the General Corporation Law of the State of
Delaware:
1. That Article FOURTH of the Certificate of Incorporation of the
Corporation is hereby amended to effect a reverse stock split and that such
amendment is hereby effected by deleting said Article in its entirety and
inserting the following in substitution therefor:
"FOURTH: The total number of shares of Common Stock which the Corporation
shall have authority to issue is twenty-five million (25,000,000), and the par
value of each of the such share is one cent ($.01). Each share of Common Stock,
$.01 par value per share, issued at the close of business on the date that this
Certificate of Amendment to the Corporation's Certificate of Incorporation
becomes effective shall automatically be converted into one-half (1/2) of a
validly issued, fully paid and nonassessable share of Common Stock, $.01 par
value. Upon this amendment becoming effective, each certificate representing
shares of Common Stock, $.01 par value, immediately prior to the effectiveness
of this Certificate of Amendment, shall represent one-half (1/2) of a share of
Common Stock, $.01 par value, from and after the effectiveness of this
Certificate of Amendment. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issued upon the
effectiveness of this Certificate of Amendment. Each Stockholder who would
otherwise be entitled to receive a fractional share will be paid cash in lieu of
such fractional share in the sum of such Stockholder's fractional interest
multiplied by $15.00."
2. That the Board of Directors of the Corporation in a written action in
lieu of a meeting dated May 27, 1997, duly adopted the following resolution:
RESOLVED: That the Directors recommend that the Stockholders of the
Corporation approve an amendment to the Corporation's Certificate
of Incorporation declaring a reverse stock split of one share for
every two shares (1:2) of the Common Stock of the Corporation,
said split to be accomplished by issuing to the holders of record
of the Common Stock of the Corporation one share of Common Stock
for every two shares of Common Stock held by such holders as of
the date the Amendment to the Corporation's Certificate of
Incorporation is filed with the office of the Delaware Secretary
of State.
1
<PAGE> 2
3. That the amendment to the Corporation's Certificate of Incorporation
was duly adopted by the affirmative vote of Stockholders of the Corporation
holding in excess of 50% of the shares of Common Stock, $.01 par value per
share, of the Corporation in accordance with the provisions of Section 242 of
the General Corporation Law of the State of Delaware.
4. That, in accordance with Section 228 of the General Corporation Law of
the State of Delaware, written notice of such amendment has been given to each
Stockholder of the Corporation who has not consented to such amendment.
IN WITNESS WHEREOF, Metrika Systems Corporation has caused this Certificate
of Amendment to be signed by Ernesto A. Corte, its President, and attested by
Sandra L. Lambert, its Secretary, this 27th day of May, 1997.
METRIKA SYSTEMS CORPORATION
By: /s/ Ernesto A. Corte
---------------------------
Ernesto A. Corte
President
ATTEST:
By: /s/ Sandra L. Lambert
-----------------------------
Sandra L. Lambert
Secretary
2
<PAGE> 1
Exhibit 4
[FRONT OF STOCK CERTIFICATE]
METRIKA SYSTEMS CORPORATION
MKA
COMMON STOCK Incorporated under the laws of the COMMON STOCK
State of Delaware CUSIP 59159M 10 6
THIS CERTIFIES THAT
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF ONE CENT ($.01) EACH
OF THE COMMON STOCK OF
METRIKA SYSTEMS CORPORATION, transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to the laws of the State of Delaware
and the Certificate of Incorporation and the By-Laws of the Corporation, as the
same may be from time to time amended, to all of which the holder by acceptance
hereof assents. This certificate is not valid unless countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
[ METRIKA SYSTEMS CORPORATION ]
[ Corporate Seal ]
Secretary President
Countersigned:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
TRANSFER AGENT
(New York)
By: ____________________________
Authorized Signature
<PAGE> 2
[BACK OF STOCK CERTIFICATE]
METRIKA SYSTEMS CORPORATION
<TABLE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _________ Custodian ___________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act _______________________
survivorship and not as (State)
tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, __________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
________________________________________________________________________________
____________________________________________________ Shares of the capital stock
represented by the within Certificate, and do hereby irrevocably constitute and
appoint ________________________________________________________________________
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated, _______________________________
________________________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the Certificate, in every particular, without
alteration or enlargement, or any change whatever.
<PAGE> 1
Exhibit 5
May 23, 1997
Metrika Systems Corporation
5788 Pacific Center Boulevard
San Diego, CA 92121
Re: Registration Statement on Form S-1 (Registration No. 333-25243) Relating to
Shares of the Common Stock, $.01 par value, of Metrika Systems Corporation
---------------------------------------------------------------------------
Ladies and Gentlemen:
I am General Counsel to Metrika Systems Corporation, a Delaware corporation
(the "Company"), and have acted as counsel in connection with the registration
under the Securities Act of 1933, as amended (the "Securities Act"), on Form S-1
(the "Registration Statement"), of shares of the Company's Common Stock, $.01
par value per share (the "Common Stock") with a proposed maximum aggregate
offering price of $51,060,000. Such shares, together with any shares of Common
Stock registered under a registration statement related to the offering
contemplated by the Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act (a "462(b) Registration
Statement"), are collectively referred to herein as the "Shares."
I or a member of my legal staff have reviewed the corporate proceedings
taken by the Company with respect to the authorization of the issuance of the
Shares. I or a member of my legal staff have also examined and relied upon
originals or copies, certified or otherwise authenticated to my satisfaction, of
all corporate records, documents, agreements or other instruments of the Company
and have made all investigations of law and have discussed with the Company's
representatives all questions of fact that I have deemed necessary or
appropriate.
Based upon and subject to the foregoing, I am of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
corporate good standing under the laws of the State of Delaware.
<PAGE> 2
2. The issuance and sale of the Shares registered pursuant to the
Registration Statement have been duly authorized by the Company and the issuance
and sale of the Shares registered pursuant to a 462(b) Registration Statement
will have been duly authorized by the Company prior to their issuance and sale.
3. The Shares, when issued and sold in accordance with the provisions of
the Underwriting Agreement between the Company and the several Underwriters
named on Schedule I thereto (in the form of Exhibit 1 to the Registration
Statement) will be validly issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement or any 462(b) Registration Statement.
Very truly yours,
/s/ Seth H. Hoogasian
Seth H. Hoogasian
General Counsel
<PAGE> 1
Exhibit 10.13
CONTRACT BETWEEN LENDER
Nicolet Instrument GmbH
Senefelderstr. 162
63069 Offenbach
BORROWER
Thermo Instrument Systems GmbH
Frauenauracher Str. 96
91056 Erlangen
Conditions of Loan between Nicolet Instrument GmbH, Offenbach, and Thermo
Instrument Systems GmbH, Erlangen:
Amount: DM 698,607.74
Account: 8202566
Bank: Commerzbank Erlangen
Date: June 26, 1995
Monthly: Monthly Demand Note
Notice: Notice Demand 8 days before end of any month
Floating Interest Rate: 0.1% below Commerzbank Lending Rate
Interest payment: Monthly
Offenbach, June 26, 1995
Nicolet Instrument GmbH Thermo Instrument Systems GmbH
/s/ Heine Evers /s/ H. Sickmann
Dr. Evers ppa. H. Sickmann
The foregoing is a fair and accurate English translation of the referenced
document.
Metrika Systems Corporation
/s/ Jonathan W. Painter
-----------------------------------
Treasurer
<PAGE> 2
CONTRACT BETWEEN LENDER
Nicolet Instrument GmbH
Senefelderstr. 162
63069 Offenbach
BORROWER
Thermo Instrument Systems GmbH
Frauenauracher Str. 96
91056 Erlangen
Conditions of Loan between Nicolet Instrument GmbH, Offenbach, and Thermo
Instrument Systems GmbH, Erlangen:
Amount: DM 1,000,000.00
Account: 8202566
Bank: Commerzbank Erlangen
Date: October 1, 1995
Monthly: Monthly Demand Note
Notice: Notice Demand 8 days before end of any month
Floating Interest Rate: 0.1% below Commerzbank Lending Rate
Interest payment: Monthly
Offenbach, October 1, 1995
Nicolet Instrument GmbH Thermo Instrument Systems GmbH
/s/ Heine Evers /s/ H. Sickmann
Dr. Evers ppa. H. Sickmann
The foregoing is a fair and accurate English translation of the referenced
document.
Metrika Systems Corporation
/s/ Jonathan W. Painter
-----------------------------------
Treasurer
<PAGE> 3
CONTRACT BETWEEN LENDER
Nicolet Instrument GmbH
Senefelderstr. 162
63069 Offenbach
BORROWER
Thermo Instrument Systems GmbH
Frauenauracher Str. 96
91056 Erlangen
Conditions of Loan between Nicolet Instrument GmbH, Offenbach, and Thermo
Instrument Systems GmbH, Erlangen:
Amount: DM 301,392.26
Account: 8202566
Bank: Commerzbank Erlangen
Date: December 1, 1995
Monthly: Monthly Demand Note
Notice: Notice Demand 8 days before end of any month
Floating Interest Rate: 0.1% below Commerzbank Lending Rate
Interest payment: Monthly
Offenbach, December 1, 1995
Nicolet Instrument GmbH Thermo Instrument Systems GmbH
/s/ Heine Evers /s/ H. Sickmann
Dr. Evers ppa. H. Sickmann
The foregoing is a fair and accurate English translation of the referenced
document.
Metrika Systems Corporation
/s/ Jonathan W. Painter
-----------------------------------
Treasurer
<PAGE> 4
CONTRACT BETWEEN LENDER
Nicolet Instrument GmbH
Senefelderstr. 162
63069 Offenbach
BORROWER
Thermo Instrument Systems GmbH
Frauenauracher Str. 96
91056 Erlangen
Conditions of Loan between Nicolet Instrument GmbH, Offenbach, and Thermo
Instrument Systems GmbH, Erlangen:
Amount: DM 1,000,000.00
Account: 8202566
Bank: Commerzbank Erlangen
Date: December 1, 1996
Monthly: Monthly Demand Note
Notice: Notice Demand 8 days before end of any month
Floating Interest Rate: 0.1% below Commerzbank Lending Rate
Interest payment: Monthly
Offenbach, December 1, 1996
Nicolet Instrument GmbH Thermo Instrument Systems GmbH
/s/ Heine Evers /s/ H. Sickmann
Dr. Evers ppa. H. Sickmann
The foregoing is a fair and accurate English translation of the referenced
document.
Metrika Systems Corporation
/s/ Jonathan W. Painter
-----------------------------------
Treasurer
<PAGE> 1
Exhibit 10.15
LEASE
-----
THIS LEASE (this "Lease") is made as of October 1, 1993, by and between
THERMO INSTRUMENT SYSTEMS GMBH ("Lessor") and ESM EBERLINE INSTRUMENTS STRAHLEN
UND UMWELTMESSTECHNIK GMBH ("Lessee").
For and in consideration of the premises and mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEMISE OF PREMISES. Lessor does hereby lease to Lessee, and Lessee
does hereby lease from Lessor, those certain premises (the "Premises")
consisting of approximately 54,700 square feet of floor area in the building
known and numbered as Frauenauracher Strasse 96, 91056 Erlangen, Germany (the
"Building"), together with all rights, privileges, appurtenances and amenities
belonging to or in any way appertaining to the Premises. The Premises are shown
outlined in red on the floor plan attached hereto as EXHIBIT A and incorporated
herein by this reference. The Building and the parcel of real property on which
the Building is located are hereinafter collectively referred to as the
"Property."
2. TERM. The term of this Lease shall be for a period of ten (10) years
(the "Term"), commencing on October 1, 1993 (the "Commencement Date") and
continuing through and including September 30, 2003; provided, however, that
Lessee shall have the right to terminate this Lease at any time upon no less
than thirty (30) days' prior written notice to Lessor.
3. RENT. Lessee hereby agrees to pay rent to Lessor in an amount equal to
192,000.00 DM per annum, calculated at the rate of 3.51 DM per square foot (the
"Rent"). All Rent shall be paid monthly in advance on the first day of each
calendar month. Rent for any partial month shall be prorated on a daily basis..
4. USE. Lessee may use and occupy the Premises for any lawful purpose.
5. MAINTENANCE.
------------
5.1 BY LESSOR. Lessor shall, at Lessor's sole cost and expense,
maintain throughout the Term of this Lease the foundation, floorslab, exterior
walls, load-bearing interior walls, structural portions, roof, gutters,
downspouts, doors, heating, ventilation and air conditioning ("HVAC") equipment
and electrical wiring of the Building, and all utility lines, pipes and plumbing
serving but located outside of the Building (including without limitation all
underground utility lines, pipes an plumbing), in good, clean, safe and, with
respect to the roof, watertight condition and repair. Lessor shall also perform,
at Lessor's sole cost and expense, all landscaping of the Property and all
maintenance of all paved areas located on the Property, including without
limitation all snow and ice removal therefrom. Lessor shall make all repairs and
replacements without, to the extent practicable, interfering with the conduct of
Lessee's business. If during such repairs or replacements the Premises are
rendered wholly or partially unsuitable for
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<PAGE> 2
the operation of Lessee's business, there shall be an equitable abatement of
Rent until such time as such repairs and replacements have been completed.
Notwithstanding anything to the contrary contained herein, in no event shall
Lessor be obligated to make any repairs or replacements which are required as
the result of the negligence or willful misconduct of Lessee, its agents,
employees, representatives or contractors, or the failure of Lessee to perform
any of its obligations under this Lease, all of which repairs and replacements
shall be made by Lessee at Lessee's sole cost and expense.
5.2 BY LESSEE. Lessee shall, at Lessee's sole cost and expense,
maintain in good condition and repair throughout the Term of this Lease all
non-structural, interior portions of the Premises the maintenance of which is
not the responsibility of Lessor under Subsection 5.1 above. Notwithstanding
anything to the contrary contained herein, in no event shall Lessee be obligated
to make any repairs or replacements which would constitute items of expense
properly chargeable to "capital account under generally accepted accounting
principles consistently applied ("GAAP") or which are required as the result of
the negligence or willful misconduct of Lessor, its agents, employees,
representatives or contractors, or the failure of Lessor to perform any of its
obligations under this Lease, all of which repairs and replacements shall be
made by Lessor at Lessor's sole cost and expense.
6. LEGAL REQUIREMENTS. Lessor agrees that, during the Term of this Lease,
Lessor shall, at Lessor's sole cost and expense, promptly observe and comply
with, and conform the Premises to, all present and future ordinances, laws,
rules and regulations affecting the Premises whether the same are in force and
effect at the time of the Commencement Date or may in the future be passed,
enacted, or directed (collectively, "Legal Requirements"), and Lessor shall pay
all costs , expenses, liabilities, losses, damages, fines, penalties, claims and
demands, including without limitation reasonable attorneys' fees, that may in
any manner arise out of or be imposed because of the failure of Lessor to comply
with the provisions of this Section 6. Notwithstanding the foregoing, Lessee
shall comply, at Lessee's sole cost and expense, with all Legal Requirements to
the extent such compliance is necessitated by reason of the special nature of
Lessee's particular and specific use of the Premises. Each party shall have the
right, upon giving notice to the other, to contest any obligations imposed upon
such party pursuant to the provisions of this Section 6 and to defer its
respective compliance during the pendency of such contest, provided the
enforcement of such Legal Requirement is stayed during such contest and such
contest will not subject the other party to criminal penalty or interfere with
Lessee's use and occupancy of the Premises or jeopardize the title to the
Property. Each party shall cooperate reasonably with the other in any such
contest.
7. UTILITIES. Lessee agrees to pay to Lessor, as additional rent, all
charges for electricity, gas, water, garbage, sewage, telephone and other
utilities used or consumed in the Premises.
8. TAXES, ASSESSMENT AND INSURANCE.
--------------------------------
8.1 TAXES AND ASSESSMENTS. Lessor agrees to pay, at Lessor's sole
cost and expense, all taxes and special and general assessments which may be
levied upon the Property
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<PAGE> 3
during the Term hereof at the time when the same become due and payable. Lessee
agrees to pay, at Lessee's sole cost and expense, all taxes and special and
general assessments which may be levied upon Lessee's personal property located
upon the Premises during the Term of this Lease at the time when the same become
due and payable.
In addition, Lessee agrees to pay to Lessor, as additional rent, with
respect to each tax year or portion thereof included in the Term, Lessee's Pro
Rata Share (as hereinafter defined) of the real estate taxes (exclusive of
betterment and special assessments) that are applicable to the Property during
the Term (the "Real Estate Taxes"). Lessee's Pro Rata Share shall be a
percentage equal to that proportion which the floor area of the Premises bears
to the total floor area of the Building. Lessee will pay to Lessor, within
thirty (30) days following Lessee's receipt of a copy of the applicable tax bill
therefor, Lessee's Pro Rata Share of the Real Estate Taxes covered by such bill.
If this Lease shall not be in force and effect for all of a particular tax year,
Lessee's payment of Real Estate Taxes as provided for herein shall be pro-rated
so that the amount payable by Lessee shall be based on the actual number of days
that this Lease shall be in force and effect during such tax year. If Lessor
shall obtain or receive any abatement, refund or rebate in Real Estate Taxes
theretofore paid by Lessee under this Lease, Lessor shall promptly forward to
Lessee Lessee's Pro Rata Share thereof, less Lessee's Pro Rata Share of the cost
incurred by Lessor in obtaining the same. Lessee shall not, in any event, be
liable for any interest or penalty charges payable with respect to any Real
Estate Taxes. The term "Real Estate Taxes" shall in no event be deemed to
include any income, excess profits, excise, franchise, estate, succession,
inheritance, gift, mortgage lien, documentary stamp or transfer taxes.
8.2 INSURANCE. Lessee agrees to carry and maintain in full force and
effect during the Term of this Lease, at Lessee's sole cost and expense, with
reputable companies duly authorized to transact business in the Federal Republic
of Germany, (i) public liability insurance naming Lessor as an Additional
Insured (to the extent of Lessee's negligence) and covering bodily injury and
property damage liability, with limits of coverage of not less than $1,000,000
for each person and $1,000,00 the aggregate for bodily injury or death for each
accident, and $1,000,000 for property damage for each accident, and (ii) a
policy of All-Risk insurance covering all Lessee Alterations (as defined in
Section 9 below) on a full replacement cost basis. Lessor agrees to carry and
maintain in full force and effect during the Term of this Lease, at Lessor's
sole cost and expense, a policy of All-Risk insurance, with extended coverage
endorsement, insuring the Building on a full replacement cost basis (excluding
any Lessee Alterations, which shall be insured by Lessee as aforesaid). Each
party shall, upon request, furnish to the other party certificates of all
insurance required to be maintained by such party under this Lease.
Notwithstanding anything to the contrary contained in this Lease, Lessor and
Lessee each hereby waives all rights of recovery against the other party, and
such other party's insurance carrier (by way of subrogation or otherwise), for
all losses, damages or injuries to the Property, any improvements thereon or any
personal property of either party therein, to the extent such waiver does not
invalidate the insurance coverage of either party and to the extent such losses,
damages or injuries are covered by insurance the damaged party is required to
carry hereunder or otherwise elects to maintain; provided, however, that the
foregoing waiver by either party shall not apply with respect to any loss,
damage or injury to the extent caused by the negligence or willful misconduct of
the other party, its agents, employees, representatives or contractors.
3
<PAGE> 4
9. ALTERATIONS. Lessee shall have the right to make non-structural,
interior alterations, additions, betterments or improvements to the Premises
without Lessor's consent; provided, however, that any such alterations,
additions, betterments or improvements which may have an impact on the exterior
walls or roof of the Building shall be subject to Lessor's prior consent, which
consent shall not be unreasonably withheld, conditioned or delayed. Any and all
alterations, additions, betterments and improvements made by Lessee ("Lessee
Alterations") shall be at Lessee's sole cost and expense and in compliance with
all applicable ordinances, laws, rules and regulations. Lessee agrees to remove
or bond over any mechanics', materialmen's or other liens created against or
imposed upon the Property, or any part thereof, as a result of any Lessee
Alterations. All Lessee Alterations shall become the property of Lessor upon the
expiration or earlier termination of this Lease. Lessee's trade fixtures,
equipment and personal property located on the Premises, however installed or
located, shall be and remain the property of Lessee and may be removed at any
time by Lessee from the Premises.
10. CONDEMNATION. If any part of the Premises shall be taken for public
use by right of eminent domain or transferred by agreement under threat of such
taking, this Lease shall terminate as of the earlier of the date of such taking
or agreement or the date title is vested in the condemnor or transferee. All
rights to damages or compensation with respect to such taking shall belong to
Lessor in all cases, except that Lessee shall have the right to prove and
collect in a separate action the value of the trade fixtures and Lessee
Alterations installed by it and moving expenses. In the event of the termination
of this Lease under the provisions of this Section 10, all Rent paid in advance
shall be apportioned and returned to Lessee as of the date of such termination.
Notwithstanding the foregoing, in the event that only a part of the Premises
shall be so taken and the part not so taken shall, in Lessee's opinion, be
sufficient for the operation of Lessee's business, Lessee, at its election, may
retain the part not so taken and this Lease shall continue in full force and
effect with a reduction in Rent in corresponding proportion to the reduction in
square footage. In the event of a partial taking where Lessee elects to continue
this Lease in accordance with the provisions of the immediately preceding
sentence, Lessor shall promptly restore, at Lessor's sole cost and expense, the
remainder of the Premises as nearly equivalent as practicable to its condition
immediately prior to such taking. If Lessor fails to so restore the Premises
within ninety (90) days from the date that possession of the portion of the
Premises taken is delivered to the condemning authority (including any and all
periods of Excusable Delay), then, in such event, Lessee may elect to terminate
this Lease by no less than ten (10) days' prior written notice to Lessor given
no later than thirty (30) days after the expiration of the aforesaid ninety
(90)-day period.
11. CASUALTY. In the event that less than fifty percent (50%) of the
Premises is damaged or destroyed by fire, the elements, or any other cause or
casualty, Lessor shall proceed with due diligence to repair the Premises
(excluding any Lessee Alterations) to a condition as nearly equivalent as
practicable to their condition immediately prior to such damage or destruction.
Within fifteen (15) days of such damage or destruction, Lessor shall notify
Lessee if the same can be so repaired within sixty (60) days of such damage or
destruction. If such repairs are not, or if Lessor notifies Lessee that the same
cannot be, completed as aforesaid within said sixty (60)-day period (including
any and all periods of Excusable Delay), Lessee may, at Lessee's
4
<PAGE> 5
option, terminate this Lease as of the date of such damage or destruction upon
written notice to Lessor given no less than five (5) business days after
Lessee's receipt of Lessor's notice or the expiration of said sixty (60)-day
period, as the case may be. Upon termination of this Lease, all Rent paid in
advance shall be apportioned as of the date of the damage or destruction.
In the event that more than fifty percent (50%) of the Premises is damaged
or destroyed by fire, the elements, or other cause or casualty, Lessor or Lessee
shall have the option to terminate this Lease upon written notice given to the
other party no later than ten (10) business days after the date of the
occurrence of such damage or destruction. Any such termination shall be
effective as of the date of such damage or destruction. If neither party elects
to exercise its option to terminate, Lessor shall proceed with due diligence to
repair the Premises (excluding any Lessee Alterations) to a condition as nearly
equivalent as practicable to their condition immediately prior to such damage or
destruction. Within fifteen (15) days of such damage or destruction, Lessor
shall notify Lessee if the same can be so repaired within ninety (90) days of
such damage or destruction. If such repairs are not, or if Lessor notifies
Lessee that the same cannot be, completed as aforesaid within said ninety
(90)-day period (including any and all periods of Excusable Delay), Lessee may,
at Lessee's option, terminate this Lease as of the date of such damage or
destruction upon written notice to Lessor given no less than five (5) business
days after Lessee's receipt of Lessor's notice or the expiration of said ninety
(90)-day period, as the case may be. Upon termination of this Lease, all Rent
paid in advance shall be apportioned as of the date of the damage or
destruction. A just proportion of the Rent according to the nature and extent of
the damage shall be abated until the completion of any restoration performed by
Lessor pursuant to this Section 11.
12. SUBORDINATION. This Lease shall be subject and subordinate to the lien
of any first mortgage of the entire fee interest of the Property to a bona fide
lending, thrift or banking institution, pension fund or insurance company to
provide construction and/or permanent financing and any renewals, modifications
or extensions thereof, provided that a Subordination, Recognition and
Non-Disturbance Agreement (a "Subordination Agreement") is executed,
acknowledged and delivered by such mortgagee to Lessee. Such Subordination
Agreement must be in form suitable for recording and must contain substantially
the following provisions:
(a) The mortgagee consents to and approves this Lease;
(b) Lessee shall not be named or joined as a party defendant in any
suit, action or proceeding for the foreclosure of the mortgage or to
enforce any rights under the mortgage or note or other obligation secured
thereby;
(c) The possession by Lessee of the Premises and Lessee's rights
thereto shall not be disturbed, affected or impaired by, nor will this
Lease or the Term be terminated or otherwise affected by, (i) any suit,
action or proceeding upon the mortgage or the note or other obligation
secured thereby, or the foreclosure of the mortgage or the enforcement of
any rights under the mortgage or any other documents held by the mortgagee,
or by any judicial sale or execution or other sale of the Prop or by any
deed given in lieu of foreclosure, or by the exercise of any other rights
given to the mortgagee by any other
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<PAGE> 6
documents or as a matter of law or (ii) any default under the mortgage or
the note or other obligation secured thereby;
(d) If the mortgagee takes possession of the Property or starts
collecting rent or becomes the owner of the Property by reason of
foreclosure of the mortgage or otherwise, or if the Property shall be sold
as a result of any action or proceeding to foreclose the mortgage or by a
deed given in lieu of foreclosure, this Lease shall continue in full force
and effect, without necessity for executing any new lease, as a direct
lease between Lessee, as tenant thereunder, and the mortgagee or t owner of
the Property, as landlord thereunder, upon all of the same terms,
covenants, and provisions contained in this Lease, and in such event the
mortgagee or new owner shall be bound to Lessee under all of the terms,
covenants and provisions of this Lease for the remainder of the Term
hereof, which terms, covenants and provisions such mortgagee or new owner
hereby agrees to assume and perform;
(e) The mortgagee must acknowledge and agree that all trade fixtures,
equipment and personal property owned by Lessee located or installed in or
on the Premises, regardless of the manner or mode of attachment, shall be
and remain the property of Lessee and may be removed by Lessee at any time.
In no event (including a default under this Lease or the mortgage) shall
the mortgagee have any liens, rights or claims in Lessee's property unless
such property or any part thereof shall be deem fixtures; and the mortgagee
expressly waives all rights of levy, distraint, or execution with respect
to said property; and
(f) Such Subordination Agreement shall bind and inure to the benefit
of and be enforceable by the parties thereto and their respective heirs,
personal representatives, successors and assigns.
The term "mortgage", as used herein, includes mortgages, deeds of trust or
other similar instruments and modifications, consolidations, extensions,
renewals, replacements and substitutes thereof. In the event of the existence of
any mortgage at the time this Lease is executed and to which this Lease would
otherwise be subordinate, Lessor shall obtain a Subordination Agreement in the
form set forth above simultaneously with, or before the date of, Lessee's
execution of this Lease.
13. LESSOR'S WARRANTIES. To induce Lessee to execute this Lease, and in
consideration thereof, Lessor represents, warrants and covenants as follows:
(a) Lessor has good fee simple title to the Property, including the
Premises.
(b) As of the Commencement Date, (i) the Premises shall be in
compliance with all applicable laws, codes, ordinances, orders, rules and
regulations of any governmental or other public authority, and (ii) there shall
be no restrictions or other legal impediments, either imposed by law (including
without limitation applicable zoning and building codes or ordinances) or by
instrument, which would prevent the use of the Premises for the intended uses
hereunder.
6
<PAGE> 7
(c) This Lease and the Premises are not in violation of the provisions
of any instrument executed by Lessor or any instrument which places any
restrictions or burdens on the Premises.
14. ASSIGNMENT AND SUBLETTING. Lessee may not assign this Lease or sublet
the Premises, in whole or in part, without the express written consent of
Lessor.
15. LESSEE'S DEFAULT.
-----------------
15.1 EVENT OF DEFAULT. Each of the following events shall constitute
an "Event of Default" of Lessee:
(a) Lessee's failure to pay when due any payment of Rent or other
sum which it is obligated to pay by any provision of this Lease, which failure
continues for ten (10) days after written notice thereof by Lessor to Lessee;
and
(b) Lessee's failure to perform any of its other obligations under
the provisions of this Lease, which failure continues for thirty (30) days after
written notice thereof by Lessor to Lessee (or, if such failure cannot
reasonably be cured in thirty (30) days, if Lessee fails to commence to cure the
same within said thirty (30)-day period and thereafter diligently to prosecute
such cure to completion).
15.2 LESSOR'S REMEDIES. If any Event of Default occurs, Lessor shall
have the right, at the option of Lessor, to terminate this Lease upon three (3)
days written notice to Lessee, and thereupon to re-enter and take possession of
the Premises. If any Event of Default occurs, Lessor shall further have the
right, at its option, from time to time, without terminating this Lease, to
re-enter and relet the Premises, or any part thereof, as the agent and for the
account of Lessee upon such terms and conditions as Lessor may deem advisable or
satisfactory, in which event the rents received on such re-letting shall be
applied first to the expenses of such re-letting and collection including, but
not limited to, necessary renovation and alterations of the Premises, reasonable
attorneys' fees, any real estate commissions paid, and thereafter toward payment
of all sums due or to become due to Lessor hereunder, and if a sufficient sum
shall not be thus realized or secured to pay such sums and other charges, (i) at
Lessor's option, Lessee shall pay Lessor any deficiency immediately upon demand
therefor, and Lessor may bring an action therefor as such deficiency shall
arise, or (ii) at Lessor's option, the present value of the entire deficiency,
which is subject to ascertainment for the remaining Term of this Lease, less the
amount Lessee proves could have been reasonably avoided by Lessor, shall be
immediately due and payable by Lessee. Lessor shall not, in any event, be
required to pay Lessee any surplus of any sums received by Lessor on a
re-letting of the Premises in excess of the Rent provided in this Lease.
If any Event of Default occurs, Lessor, in addition to other rights and
remedies it may have, shall have the right in accordance with applicable law to
remove all or any part of Lessee's property from the Premises and any property
removed may be stored in any public warehouse or elsewhere at the cost of, and
for the account of, Lessee, and Lessor shall not be responsible for
7
<PAGE> 8
the care or safekeeping thereof whether in transport, storage or otherwise, and
Lessee hereby waives any and all claims against Lessor for loss, destruction
and/or damage or injury which may be occasioned by any of the aforesaid acts.
No such re-entry or taking possession of the Premises by Lessor shall be
construed as an election on Lessor's part to terminate this Lease unless a
written notice of such intention is given to Lessee. Notwithstanding any such
re-letting without termination, Lessor may at all times thereafter elect to
terminate this Lease for such previous Event of Default. Notwithstanding
anything to the contrary contained herein, Lessor agrees to use reasonable
efforts to mitigate its damages following the occurrence of an Event of Default.
16. LESSOR'S DEFAULT. In the event of a default by Lessor under this
Lease, which default is not cured within sixty (60) days after written notice
thereof by Lessee to Lessor, Lessee may, but shall not be obligated to, cure
such default and reimburse itself for the cost thereof out of payments
thereafter accruing hereunder (with any unreimbursed balance remaining upon the
expiration or earlier termination of this Lease to be promptly paid by Lessor to
Lessee).
17. ENVIRONMENTAL. Lessor agrees to indemnify, defend and hold harmless
Lessee, its parent, subsidiaries and affiliates, and their respective officers,
directors, shareholders and employees, from and against any and all liabilities,
losses, damages, suits, actions, causes of action, costs, expenses (including
without limitation reasonable attorneys' fees and disbursements and court
costs), penalties, fines, demands, judgments, claims or liens (including without
limitation liens or claims imposed under any environmental legislation) arising
from or in connection with the presence at the time of Lessee's taking
possession of the Premises of Hazardous Materials (as hereinafter defined) on,
in or under, or the subsequent removal thereof from, the Property.
Lessee agrees to indemnify, defend and hold harmless Lessor from and
against any and all liabilities, losses, damages, suits, actions, causes of
action, costs, expenses (including without limitation reasonable attorneys' fees
and disbursements and court costs), penalties, fines, demands, judgments, claims
or liens (including without limitation liens or claims imposed under any
environmental legislation) arising from or in connection with the use, storage,
release or discharge by Lessee of Hazardous Materials on, in or under, or the
subsequent removal thereof from, the Property.
For purposes of this Section 17, the term "Hazardous Materials" shall
include without limitation (A) any petroleum product, any flammable, explosive
or radioactive material, or any hazardous or toxic waste, substance or material,
including without limitation substances defined as "hazardous substances",
"hazardous materials," "solid waste" or "toxic substances" under any laws
relating to hazardous or toxic materials and substances, air pollution
(including noise and odors), water pollution, liquid and solid waste,
pesticides, drinking water, community and employee health, environmental land
use management, stormwater, sediment control, nuisances, radiation, wetlands,
endangered species, environmental permitting or petroleum products, which would
be applicable to the Property if the same were located in the Commonwealth of
Massachusetts, USA, which laws may include, but not be limited to, the Federal
Insecticide,
8
<PAGE> 9
Fungicide, and Rodenticide Act, as amended; the Toxic Substances Control Act;
the Clean Water Act; the National Environmental Policy Act, as amended; the
Solid Waste Disposal Act, as amended; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986; the Hazardous Materials Transportation Act, as
amended; the Resource Conservation and Recovery Act, as amended; the Clean Air
Act, as amended; the Emergency Planning and Community Right-to-Know Act, as
amended; the Occupational Safety and Health Act, as amended; comparable state
laws and ordinances; and all rules and regulations promulgated pursuant to such
laws and ordinances; and (B) any other substances or materials which are subject
to comparable regulation by the Federal Republic of Germany or any other public
or governmental authority having jurisdiction over the Property.
The provisions of this Section 17 shall survive the expiration or earlier
termination of this Lease.
18. INDEMNIFICATION. Lessee shall indemnify, defend with competent and
experienced counsel and hold harmless Lessor from and against any and all
damages, liabilities, actions, causes of action, suits, claims, demands, losses,
costs and expenses (including without limitation reasonable attorneys' fees and
disbursements and court costs) to the extent arising from or in connection with
the negligence or willful misconduct of Lessee, its agents, employees,
representatives or contractors.
Lessor shall indemnify, defend with competent and experienced counsel and
hold harmless Lessee, its parent, subsidiaries and affiliates, and their
respective officers, directors, shareholders and employees, from and against any
and all damages, liabilities, actions, causes of action, suits, claims, demands,
losses, costs and expenses (including without limitation reasonable attorneys'
fees and disbursements and court costs) to the extent arising from or in
connection with the negligence or willful misconduct of Lessor, its agents,
employees, representatives or contractors.
The party seeking indemnification under this Section (the "Indemnified
Party") shall provide prompt written notice of any third party claim to the
party from whom indemnification is sought (the "Indemnifying Party"). The
Indemnifying Party shall have the right to assume exclusive control of the
defense of such claim or, at the option of the Indemnifying Party, to settle the
same. The Indemnified Party agrees to cooperate reasonably with the Indemnifying
Party in connection with the performance of the Indemnifying Party's obligations
under this Section.
The provisions of this Section shall survive the expiration or earlier
termination of this Lease.
19. PREVAILING PARTY. If any action at law or in equity is brought to
enforce or interpret the provisions of this Lease, the prevailing party in such
action shall be entitled to reimbursement of the reasonable attorneys' fees and
disbursements and court costs incurred by said prevailing party in connection
with such action.
9
<PAGE> 10
20. EXCUSABLE DELAY. Except as otherwise expressly provided herein, in any
case where either party hereto is required to perform any act, delays caused by
or resulting from acts of God, war, civil commotion, labor difficulties,
shortages of labor, materials or equipment, government regulations, or other
causes beyond such party's reasonable control (individually, an "Excusable
Delay") shall not be counted in determining the time during which the
performance of such act shall be completed, whether such time be designated by a
fixed date, a fixed time or "a reasonable time."
21. BROKERAGE. Each of the parties hereto represents and warrants to the
other that there are no claims for brokerage commissions or finder's fees in
connection with the execution of this Lease. Each party shall indemnify and hold
harmless the other party from and against any and all claims for brokerage fees,
commissions or other charges arising from the dealings of such party in
connection with this Lease.
22. HOLDING OVER. Lessor agrees that no holding over by Lessee after the
expiration of this Lease shall operate to extend or renew this Lease, and that
any such holding over shall be construed as a tenancy from month to month at one
hundred fifty percent (150%) of the monthly Rent in effect when such holding
over shall have commenced, and such tenancy shall be subject to all the terms,
conditions, covenants and agreements of this Lease.
23. QUIET ENJOYMENT. Lessor agrees that, so long as Lessee is not in
default hereunder beyond the expiration of all applicable notice and cure
periods, Lessee may peaceably and quietly have, hold and enjoy the Premises
during the Term of this Lease, as the same may be extended, without any manner
of hindrance, disturbance or molestation.
24. SUCCESSORS AND ASSIGNS. It is understood and agreed by and between the
parties hereto that the agreements, covenants, terms, conditions, provisions and
undertakings in this Lease shall extend to and be binding upon the permitted
assigns and successors-in-interest of the respective parties hereto, as if they
were in every case named and expressed, and shall be construed as covenants
running with the land; and wherever reference is made to either of the parties
hereto, it shall be held to include and apply also to the heirs, personal
representatives, beneficiaries, successors and permitted assigns of such party,
as if in each and every case so expressed.
25. NOTICES. Whenever, by the terms of this Lease, notice, demand or other
communication shall or may be given to either party, the same shall be in
writing and addressed as follows:
If to Lessor:
Thermo Instrument Systems GmbH
Frauenauracher Strasse 96
91056 Erlangen
Germany
Attention: President
10
<PAGE> 11
with a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02254
U.S.A.
Attention: General Counsel
If to Lessee:
ESM Eberline Instruments Strahlen und Umweltmesstechnik GmbH
Frauenauracher Strasse 96
91056 Erlangen
Germany
Attention: President
with a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02254
U.S.A.
Attention: General Counsel
or to such other address or addresses as shall from time to time be designated
by written notice by either party to the other as herein provided. All notices
shall be sent by registered or certified mail, postage pre-paid and return
receipt requested, or by Federal Express or other comparable courier providing
proof of delivery, and shall be deemed duly given and received (i) if mailed, on
the third business day following the mailing thereof, or (ii) if sent by
courier, the date of its receipt (or, if such day is not a business day, the
next succeeding business day).
26. YIELD UP. Lessee agrees on or before the expiration date of the Term
of this Lease, as the same may be extended, to remove its trade fixtures,
equipment and personal property, to repair any damage caused by such removal, to
surrender all keys to the Premises and to yield up the Premises in the same
order and repair in which Lessee is obligated to maintain the Premises by the
provisions of this Lease, reasonable wear and tear and damage by casualty or
taking excepted.
27. MISCELLANEOUS. This Lease shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, U.S.A.. This
Lease constitutes the entire agreement between Lessor and Lessee with respect to
the subject matter hereof and shall not be supplemented, amended, varied or
modified in any manner except by an instrument in writing signed by duly
authorized representatives of both parties. No delay or omission on the part of
either party to this Lease in requiring performance by the other party or in
11
<PAGE> 12
exercising any right hereunder shall operate as a waiver of any provision hereof
or of any right hereunder, and the waiver, omission or delay in requiring
performance or exercising any right hereunder on any one occasion shall not be
construed as a bar to or waiver of such performance or right on any future
occasion. Any and all rights and remedies which either party may have under this
Lease, at law or in equity, shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted by law. Section
headings and the organization of this Lease are for descriptive purposes only
and shall not control or alter the meaning of this Lease. The individuals
executing this Lease hereby represent and warrant that they are empowered and
duly authorized to so execute this Lease on behalf of the parties they
represent.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as a sealed
instrument as of the date first above written.
LESSOR:
THERMO INSTRUMENT SYSTEMS GMBH
By: /s/ Werner Kramer
-----------------------------------------
Werner Kramer
Managing Director
LESSEE:
ESM EBERLINE INSTRUMENTS STRAHLEN
UND UMWELTMESSTECHNIK GMBH
By: /s/ Ulrich Engel
-----------------------------------------
Ulrich Engel
Managing Director
12
<PAGE> 1
EXHIBIT 11
METRIKA SYSTEMS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR -----------------------
------------------------------------ MARCH 30, MARCH 29,
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
COMPUTATION OF PRIMARY EARNINGS PER
SHARE:
Net Income (a)......................... $1,767,000 $2,852,000 $3,845,000 $ 449,000 $ 715,000
----------- ----------- ----------- ----------- -----------
Shares:
Weighted average shares
outstanding....................... 5,000,000 5,000,000 5,032,051 5,000,000 5,967,833
Add: Shares issuable from assumed
issuance of private placement
shares and the assumed exercise
of options (as determined by the
application of the treasury
stock method)................... 193,086 193,086 187,351 193,086 21,035
----------- ----------- ----------- ----------- -----------
Weighted averages shares, as adjusted
(b)............................... 5,193,086 5,193,086 5,219,402 5,193,086 5,988,868
----------- ----------- ----------- ----------- -----------
Primary Earnings per Share (a)/(b)..... $ .34 $ .55 $ .74 $ .09 $ .12
=========== =========== =========== =========== ===========
</TABLE>
<PAGE> 1
Exhibit 21
----------
<TABLE>
<CAPTION>
SUBSIDIARIES
Subsidiary Jurisdiction % Ownership
- ---------- ------------ -----------
<S> <C> <C>
Eberline Radiometrie S.A France 100%
Thermo Instruments Systems Ltd. U.K. 100%
Thermo Instrument Systtems GmbH Germany 100%
Eberline Instruments GmbH Germany 100%
Gamma-Metrics California 100%
Gamma-Metrics International F.S.C. Inc. Guam 100%
Radiometrie U.S.A., Inc. California 100%
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Metrika Systems Corporation:
As independent public accountants, we hereby consent to the use of our
reports dated March 31, 1997 (except with respect to certain matters discussed
in Note 9, as to which the date is May 27, 1997) (and to all references to our
Firm) included in or made a part of this Registration Statement on Form S-1 and
related Prospectus of Metrika Systems Corporation.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METRIKA
SYSTEMS CORPORATION TWELVE AND THREE MONTHS ENDED 12/28/96 AND 3/29/97,
RESPECTIVELY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-28-1996 JAN-3-1998
<PERIOD-END> DEC-28-1996 MAR-29-1997
<CASH> 20,229 17,398
<SECURITIES> 0 0
<RECEIVABLES> 11,783 11,316
<ALLOWANCES> 440 624
<INVENTORY> 6,347 7,789
<CURRENT-ASSETS> 40,635 41,190
<PP&E> 15,956 15,352
<DEPRECIATION> 3,856 4,009
<TOTAL-ASSETS> 66,766 66,726
<CURRENT-LIABILITIES> 31,930 30,945
<BONDS> 5,223 4,680
0 0
0 0
<COMMON> 119 119
<OTHER-SE> 24,742 26,467
<TOTAL-LIABILITY-AND-EQUITY> 66,766 66,726
<SALES> 52,047 12,592
<TOTAL-REVENUES> 52,047 12,592
<CGS> 28,527 7,036
<TOTAL-COSTS> 28,527 7,036
<OTHER-EXPENSES> 3,024 1,007
<LOSS-PROVISION> 0 79
<INTEREST-EXPENSE> 796 201
<INCOME-PRETAX> 6,406 1,192
<INCOME-TAX> 2,561 477
<INCOME-CONTINUING> 3,845 715
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,845 715
<EPS-PRIMARY> .74 .12
<EPS-DILUTED> 0 0
</TABLE>
