<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THERMOSPECTRA CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
1,211,746
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
The filing fee of $3,878 represents 1/50th of 1.0% of the product of
(a) 1,211,746 shares of Common Stock of the Registrant times (b) $16.00
per share, which is the cash amount per share to be received by the
stockholders in the merger proposal to which this Proxy Statement
relates.
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$19,387,936
-----------------------------------------------------------------------
(5) Total fee paid:
$3,878
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
[LOGO]
, 1999
8 EAST FORGE PARKWAY
FRANKLIN, MASSACHUSETTS 02038
Dear Stockholder:
I am pleased to invite you to a Special Meeting of the stockholders of
ThermoSpectra Corporation ("ThermoSpectra") at which you will be asked to
approve an Agreement and Plan of Merger dated as of May 21, 1999 (the "Merger
Agreement") by and among ThermoSpectra, Thermo Instrument Systems Inc., the
parent company of ThermoSpectra ("Thermo Instrument"), and TS Acquisition
Corporation, a newly-formed subsidiary of Thermo Instrument (the "Merger Sub").
The Special Meeting will take place at 10:00 a.m. on , ,
1999 at the offices of Thermo Electron Corporation, 81 Wyman Street, Waltham,
Massachusetts 02454.
Under the terms of the Merger Agreement, the Merger Sub would merge with and
into ThermoSpectra, with ThermoSpectra being the surviving corporation (the
"Merger"). Each issued and outstanding share of ThermoSpectra common stock
(other than shares held by Thermo Instrument, Thermo Electron Corporation and
stockholders who are entitled to and who have perfected their dissenters' rights
under Delaware law) would be converted into the right to receive $16.00 in cash,
without interest. ThermoSpectra would become a private company. The Merger is
more fully described in the Merger Agreement, which is attached as Appendix A to
the enclosed Proxy Statement. If you choose to dissent from approval of the
Merger Agreement and wish to seek appraisal of the fair value of your shares of
ThermoSpectra common stock, please refer to the sections of the Proxy Statement
regarding the rights of dissenting stockholders under Delaware law.
A special committee of the ThermoSpectra Board of Directors (the "Special
Committee"), acting in the interests of the stockholders of ThermoSpectra other
than Thermo Instrument, Thermo Electron Corporation and the directors and
officers of ThermoSpectra, Thermo Instrument and Thermo Electron Corporation
(the "Minority Stockholders"), evaluated the merits of, and negotiated the terms
of, the Merger. The Special Committee received an opinion from its financial
advisor, Tucker Anthony Cleary Gull, as to the fairness of the Merger from a
financial point of view to the Minority Stockholders. Please read carefully the
written opinion of Tucker Anthony Cleary Gull, dated May 21, 1999, which is
attached as Appendix B to the enclosed Proxy Statement. The Special Committee
recommended that ThermoSpectra's Board of Directors approve the Merger
Agreement.
ThermoSpectra's Board of Directors and the Special Committee believe that
the proposed Merger is both substantively and procedurally fair to the Minority
Stockholders of ThermoSpectra, and the Board of Directors unanimously recommends
that stockholders vote "FOR" approval of the Merger Agreement. In considering
the recommendation of the Board of Directors with respect to the Merger
Agreement, stockholders should be aware that five of the seven members of the
ThermoSpectra Board of Directors are either directors of Thermo Instrument or
Thermo Electron Corporation, or employees of Thermo Electron Corporation or its
affiliates, and thus have interests that are in addition to, or different from,
your interests as stockholders of ThermoSpectra.
Delaware law requires that a majority of the outstanding shares of
ThermoSpectra common stock entitled to vote at the Special Meeting vote in favor
of the Merger Agreement for the Merger Agreement to be approved. Thermo
Instrument, which owns approximately 82% of ThermoSpectra's outstanding common
stock, and Thermo Electron Corporation, which owns approximately 10% of
ThermoSpectra's outstanding common stock, intend to vote their shares in favor
of the Merger Agreement, thus assuring that the Merger Agreement will be
approved. Only stockholders of record at the close of business on , 1999
will receive notice of and be able to vote at the Special Meeting or any
adjournment or adjournments thereof.
<PAGE>
The accompanying Proxy Statement provides you with a summary of the proposed
Merger and additional information about the parties involved and their
interests. Please give all this information your careful attention. You can also
obtain other information about ThermoSpectra, Thermo Instrument and Thermo
Electron Corporation from documents filed with the Securities and Exchange
Commission.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE TAKE THE TIME
TO VOTE BY COMPLETING AND MAILING THE ENCLOSED PROXY CARD TO US TODAY. IF YOU
DATE, SIGN AND MAIL YOUR PROXY CARD WITHOUT INDICATING HOW YOU WISH TO VOTE,
YOUR PROXY WILL BE COUNTED AS A VOTE IN FAVOR OF APPROVAL OF THE MERGER
AGREEMENT. YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES THAT
YOU OWN.
Your Board of Directors believes that the transaction with Thermo Instrument
is in the best interests of ThermoSpectra and its stockholders, including its
Minority Stockholders, and has unanimously approved it. Your Board of Directors
unanimously recommends that stockholders vote for the approval of the Merger
Agreement. On behalf of the Board of Directors, I urge you to sign, date and
return the enclosed Proxy Card today.
Please do not send any stock certificates to us now. Assuming the Merger
Agreement is approved, we will send you instructions concerning the surrender of
your shares.
Thank you for your interest and participation.
Yours very truly,
BARRY S. HOWE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
[LOGO]
NOTICE OF SPECIAL MEETING
, 1999
TO THE HOLDERS OF THE COMMON STOCK OF
THERMOSPECTRA CORPORATION
I am pleased to give you notice of and cordially invite you to attend in
person or by proxy the Special Meeting of the stockholders of ThermoSpectra
Corporation, a Delaware corporation (the "Company" or "ThermoSpectra"), which
will be held on , , 1999, at 10:00 a.m., at the offices of Thermo
Electron Corporation, 81 Wyman Street, Waltham, Massachusetts 02454, and at any
adjournment or adjournments thereof (the "Special Meeting"). At the Special
Meeting, stockholders will:
1. Consider and vote on a proposal to approve an Agreement and Plan of
Merger dated as of May 21, 1999 (the "Merger Agreement") pursuant to
which TS Acquisition Corporation, a newly-formed company (the "Merger
Sub"), will be merged with and into ThermoSpectra (the "Merger"). Upon
the Merger, each stockholder of the Company (other than stockholders who
perfect their dissenters' rights, Thermo Instrument Systems Inc. ("Thermo
Instrument") and Thermo Electron Corporation) will become entitled to
receive $16.00 in cash, without interest, for each outstanding share of
common stock, $.01 par value, of the Company (the "Common Stock") owned
by such stockholder immediately prior to the effective time of the
Merger. A copy of the Merger Agreement is attached as Appendix A to and
is described in the accompanying Proxy Statement.
2. Transact such other business as may properly come before the Special
Meeting.
Only stockholders of record at the close of business on , 1999
will receive notice of and be able to vote at the Special Meeting.
The accompanying Proxy Statement describes the Merger Agreement, the
proposed Merger and the actions to be taken in connection with the Merger. The
Company's Bylaws require that the holders of a majority of the outstanding
shares of Common Stock entitled to vote be present or represented by proxy at
the Special Meeting in order to constitute a quorum for the transaction of
business. It is important that your shares be represented at the Special Meeting
regardless of the number of shares you hold. Whether or not you are able to be
present in person, please sign and return promptly the enclosed Proxy Card in
the accompanying envelope, which requires no postage if mailed in the United
States. You may revoke your proxy in the manner described in the accompanying
Proxy Statement at any time before it is voted at the Special Meeting.
Stockholders who properly demand appraisal prior to the stockholder vote at
the Special Meeting, who do not vote in favor of adoption of the Merger
Agreement and who otherwise comply with the provisions of Section 262 of the
General Corporation Law of the State of Delaware (the "DGCL") will be entitled,
if the Merger is completed, to statutory appraisal of the fair value of their
shares of Common Stock. See "RIGHTS OF DISSENTING STOCKHOLDERS" in the
accompanying Proxy Statement and the full text of Section 262 of the DGCL, which
is attached as Appendix C to and is described in the accompanying Proxy
Statement, for a description of the procedures that you must follow in order to
exercise your appraisal rights.
This Notice, the Proxy Card and Proxy Statement enclosed herewith are sent
to you by order of the Board of Directors.
SANDRA L. LAMBERT
SECRETARY
<PAGE>
WHETHER OR NOT YOU PLAN TO ATTEND, IT IS IMPORTANT THAT YOUR SHARES ARE
REPRESENTED AT THE SPECIAL MEETING. TO APPROVE AND ADOPT THE MERGER AGREEMENT,
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK
ENTITLED TO VOTE THEREON IS REQUIRED. YOU ARE REQUESTED TO PROMPTLY COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED.
YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER
DESCRIBED IN THE ATTACHED PROXY STATEMENT. ANY STOCKHOLDER PRESENT AT THE
SPECIAL MEETING MAY REVOKE SUCH HOLDER'S PROXY AND VOTE PERSONALLY ON THE MERGER
AGREEMENT AT THE SPECIAL MEETING.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. IN CONSIDERING THE RECOMMENDATION OF THE BOARD
OF DIRECTORS WITH RESPECT TO THE MERGER, STOCKHOLDERS OTHER THAN THERMO
INSTRUMENT, THERMO ELECTRON CORPORATION AND THE DIRECTORS AND OFFICERS OF THE
COMPANY, THERMO INSTRUMENT AND THERMO ELECTRON CORPORATION (THE "MINORITY
STOCKHOLDERS"), SHOULD BE AWARE THAT CERTAIN OFFICERS AND DIRECTORS OF THE
COMPANY HAVE CERTAIN INTERESTS THAT ARE IN ADDITION TO, OR DIFFERENT FROM, THE
INTERESTS OF THE MINORITY STOCKHOLDERS. SEE "SPECIAL FACTORS-- CONFLICTS OF
INTEREST."
IF A PROPERLY EXECUTED PROXY CARD IS SUBMITTED AND NO INSTRUCTIONS ARE
GIVEN, THE SHARES OF COMMON STOCK REPRESENTED BY THAT PROXY WILL BE VOTED "FOR"
APPROVAL OF THE MERGER AGREEMENT.
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES TO THE COMPANY AT THIS TIME.
<PAGE>
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of ThermoSpectra
Corporation, a Delaware corporation (the "Company" or "ThermoSpectra"), in
connection with the solicitation by its Board of Directors (the "Board" or the
"Board of Directors") of proxies to be used at a Special Meeting of stockholders
to be held on , , 1999, at 10:00 a.m., at the offices of
Thermo Electron Corporation, 81 Wyman Street, Waltham, Massachusetts 02454, and
at any adjournment or adjournments thereof (the "Special Meeting"). A committee
of the Board of Directors has fixed the close of business on , 1999
as the record date (the "Record Date") for the determination of stockholders
entitled to notice of, and to vote at, the Special Meeting.
The Special Meeting has been called to consider and vote on a proposal to
approve an Agreement and Plan of Merger dated as of May 21, 1999 (the "Merger
Agreement"), which is attached to this Proxy Statement as Appendix A. Pursuant
to the Merger Agreement, TS Acquisition Corporation (the "Merger Sub"), a
newly-formed Delaware corporation, will be merged with and into ThermoSpectra
(the "Merger"), with ThermoSpectra being the surviving corporation (the
"Surviving Corporation"). ThermoSpectra is a majority-owned subsidiary of, and
the Merger Sub is a wholly owned subsidiary of, Thermo Instrument Systems Inc.,
a Delaware corporation ("Thermo Instrument"), which in turn is a majority-owned
subsidiary of Thermo Electron Corporation, a Delaware corporation ("Thermo
Electron"). The Merger Sub was organized by Thermo Instrument solely to
facilitate the Merger.
In the Merger, each outstanding share of common stock, $.01 par value, of
ThermoSpectra (the "Common Stock") (other than shares held by stockholders who
are entitled to and who have perfected their Dissenters' Rights (as defined
below), shares held by ThermoSpectra in treasury and shares held by Thermo
Instrument and Thermo Electron) will be canceled and converted automatically
into the right to receive $16.00 in cash, payable to the holder thereof, without
interest. See "THE MERGER." On August 11, 1998, the last trading day prior to
the date Thermo Electron first publicly announced the proposal to take
ThermoSpectra private, the closing price per share of Common Stock reported in
the consolidated transaction reporting system was $9.375. On May 20, 1999, the
last trading day prior to the public announcement of the financial terms of the
proposed Merger, the closing price per share of Common Stock reported in the
consolidated transaction reporting system was $11.50. On , 1999, the
last trading day prior to the printing of this Proxy Statement, the closing
price per share of Common Stock reported in the consolidated transaction
reporting system was $ .
The directors and officers of ThermoSpectra immediately prior to the Merger
shall be the initial directors and officers of the Surviving Corporation;
however, Thermo Instrument intends to appoint a board of directors comprised
solely of members of the Surviving Corporation's and Thermo Instrument's
management after the Merger. All options to purchase Common Stock immediately
prior to the Merger shall be assumed by Thermo Instrument and converted into
options to purchase the common stock, $.10 par value, of Thermo Instrument. See
"THE MERGER--Assumption of ThermoSpectra Stock Options by Thermo Instrument."
Under Delaware law, approval of the Merger Agreement at the Special Meeting
will require the affirmative vote of holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Special Meeting. Thermo
Instrument, which owns approximately 82% of the outstanding Common Stock, and
Thermo Electron, which owns approximately 10% of the outstanding Common Stock,
intend to vote their shares in favor of the Merger Agreement, thus assuring that
the Merger Agreement will be approved.
The Board of Directors recommends that stockholders vote "FOR" approval and
adoption of the Merger Agreement. In considering the recommendation of the Board
of Directors with respect to the Merger, stockholders other than Thermo
Instrument, Thermo Electron and the directors and officers of the Company,
Thermo Instrument and Thermo Electron (the "Minority Stockholders"), should be
aware that certain officers and directors of the Company have certain interests
that are in addition to, or different from, the interests of the Minority
Stockholders. See "SPECIAL FACTORS--Conflicts of Interest."
<PAGE>
Stockholders should read and consider carefully the information contained in
this Proxy Statement. This Proxy Statement, the Notice of Special Meeting and
the enclosed Proxy Card are first being mailed to stockholders of the Company on
or about , 1999.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER................................................ 6
SUMMARY............................................................................... 8
Date, Time and Place of the Special Meeting......................................... 8
Purpose of the Special Meeting...................................................... 8
Record Date and Quorum.............................................................. 8
Vote Required and Revocation of Proxies............................................. 8
Parties to the Merger............................................................... 9
The Merger.......................................................................... 10
Effective Time of the Merger and Payment for Shares................................. 10
Assumption of ThermoSpectra Stock Options by Thermo Instrument...................... 10
The Special Committee's and the Board's Recommendation.............................. 11
Opinion of Financial Advisor........................................................ 12
Purpose and Reasons of Thermo Instrument and Thermo Electron for the Merger......... 12
Position of Thermo Instrument and Thermo Electron as to Fairness of the Merger...... 13
Conflicts of Interest............................................................... 14
Certain Effects of the Merger....................................................... 15
Conditions to the Merger, Termination and Expenses.................................. 15
Federal Income Tax Consequences..................................................... 16
Rights of Dissenting Stockholders................................................... 16
Accounting Treatment................................................................ 17
Market Prices of Common Stock and Dividends......................................... 17
SPECIAL FACTORS....................................................................... 18
Background of the Merger............................................................ 18
The Special Committee's and the Board's Recommendation.............................. 23
Opinion of Financial Advisor........................................................ 25
Purpose and Reasons of Thermo Instrument and Thermo Electron for the Merger......... 32
Position of Thermo Instrument and Thermo Electron as to Fairness of the Merger...... 32
Conflicts of Interest............................................................... 33
Certain Effects of the Merger....................................................... 34
Conduct of ThermoSpectra's Business After the Merger................................ 35
Conduct of ThermoSpectra's Business if the Merger is Not Consummated................ 35
THE SPECIAL MEETING................................................................... 36
Proxy Solicitation.................................................................. 36
Record Date and Quorum Requirement.................................................. 36
Voting Procedures................................................................... 36
Voting and Revocation of Proxies.................................................... 37
Effective Time...................................................................... 37
THE MERGER............................................................................ 38
Conversion of Securities............................................................ 38
Assumption of ThermoSpectra Stock Options by Thermo Instrument...................... 39
Deferred Compensation Plan for Directors............................................ 39
Transfer of Shares.................................................................. 40
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Conditions.......................................................................... 40
Representations and Warranties...................................................... 40
Covenants........................................................................... 41
Indemnification and Insurance....................................................... 42
Termination, Amendment and Waiver................................................... 42
Source of Funds..................................................................... 43
Expenses............................................................................ 43
Accounting Treatment................................................................ 43
Regulatory Approvals................................................................ 43
RIGHTS OF DISSENTING STOCKHOLDERS..................................................... 44
FEDERAL INCOME TAX CONSEQUENCES....................................................... 46
BUSINESS OF THE COMPANY............................................................... 47
Overview............................................................................ 47
Imaging and Inspection Instruments.................................................. 47
Temperature Control Instruments..................................................... 48
Test and Measurement Instruments.................................................... 48
Properties.......................................................................... 49
SELECTED FINANCIAL INFORMATION........................................................ 50
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 52
Overview............................................................................ 52
Results of Operations............................................................... 53
Liquidity and Capital Resources..................................................... 56
Market Risk......................................................................... 57
Year 2000........................................................................... 57
CERTAIN PROJECTED FINANCIAL DATA...................................................... 60
Projections......................................................................... 61
FORWARD-LOOKING STATEMENTS............................................................ 62
MANAGEMENT............................................................................ 65
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................ 67
Principal Stockholder............................................................... 67
Management.......................................................................... 67
CERTAIN TRANSACTIONS.................................................................. 69
CERTAIN INFORMATION CONCERNING THE MERGER SUB, THERMO INSTRUMENT AND THERMO
ELECTRON............................................................................ 73
The Merger Sub...................................................................... 73
Thermo Instrument................................................................... 73
Thermo Electron..................................................................... 73
INDEPENDENT PUBLIC ACCOUNTANTS........................................................ 73
STOCKHOLDER PROPOSALS................................................................. 73
ADDITIONAL INFORMATION................................................................ 74
AVAILABLE INFORMATION................................................................. 74
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 75
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS............................................ F-1
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
APPENDICES
APPENDIX A--Agreement and Plan of Merger.............................................. A-1
APPENDIX B--Opinion of Tucker Anthony Cleary Gull..................................... B-1
APPENDIX C--Text of Section 262 of the General Corporation Law of the State of
Delaware............................................................................ C-1
APPENDIX D-- Information Concerning Directors and Executive Officers of the Company,
Thermo Instrument, the Merger Sub and Thermo Electron..................... D-1
APPENDIX E--Information Concerning Transactions in the Common Stock of the Company.... E-1
</TABLE>
5
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
1. WHEN AND WHERE IS THE THERMOSPECTRA SPECIAL MEETING?
The ThermoSpectra Special Meeting will take place on , , 1999,
at 10:00 a.m., at the offices of Thermo Electron Corporation, 81 Wyman Street,
Waltham, Massachusetts 02454.
2. WHAT PROPOSALS ARE THERMOSPECTRA STOCKHOLDERS VOTING ON?
ThermoSpectra stockholders are being asked to approve the Merger Agreement.
The Merger Agreement provides that a wholly owned subsidiary of Thermo
Instrument will merge with and into ThermoSpectra and, as a result, Thermo
Instrument and Thermo Electron will collectively own all of the outstanding
Common Stock of ThermoSpectra.
3. WHAT WILL THERMOSPECTRA STOCKHOLDERS RECEIVE IN THE MERGER?
In the Merger, ThermoSpectra stockholders will receive $16.00 in cash per
share of Common Stock. The amount of cash consideration to be paid to
ThermoSpectra stockholders will equal approximately $19.4 million in the
aggregate.
On August 11, 1998, the last trading day prior to the date Thermo Electron
first publicly announced the proposal to take ThermoSpectra private, the closing
price per share of Common Stock reported in the consolidated transaction
reporting system was $9.375. On May 20, 1999, the last trading day prior to the
public announcement of the financial terms of the proposed Merger, the closing
price per share of Common Stock reported in the consolidated transaction
reporting system was $11.50. On , 1999, the last trading day prior
to the printing of this Proxy Statement, the closing price per share of Common
Stock reported in the consolidated transaction reporting system was $ .
4. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
For federal income tax purposes, each stockholder's receipt of $16.00 per
share in the Merger will be treated as a taxable sale of the holder's Common
Stock. Each stockholder's gain or loss per share will equal the difference
between $16.00 and the stockholder's basis in the share of Common Stock.
ThermoSpectra stockholders should consult their tax advisors for a full
understanding of the tax consequences of the Merger. No gain or loss for federal
income tax purposes will be recognized by ThermoSpectra, Thermo Instrument or
the Merger Sub by reason of the Merger.
5. WHY IS THERMOSPECTRA'S BOARD OF DIRECTORS RECOMMENDING APPROVAL OF THE
MERGER AGREEMENT?
ThermoSpectra's Board of Directors believes, based on the recommendation of
its Special Committee, that the proposed transaction is fair to, and in the best
interests of, ThermoSpectra and its stockholders other than Thermo Instrument,
Thermo Electron and the directors and officers of the Company, Thermo Instrument
and Thermo Electron.
6. WHAT RIGHTS DO STOCKHOLDERS HAVE IF THEY OPPOSE THE MERGER?
Stockholders who wish to dissent from the Merger may seek appraisal of the
fair value of their shares, but only if they strictly comply with all of the
procedures under Delaware law that are summarized on pages 44-46 of this Proxy
Statement.
7. WHAT STOCKHOLDER VOTE IS REQUIRED TO APPROVE THE MERGER AGREEMENT?
Under Delaware law, a majority of the outstanding shares of Common Stock
entitled to vote must vote to approve the Merger Agreement. Thermo Instrument
and Thermo Electron collectively own approximately 92% of the outstanding Common
Stock and intend to vote in favor of approval of the Merger Agreement.
Accordingly, the vote approving the Merger Agreement is assured.
6
<PAGE>
8. WHAT HAPPENS IF I DO NOT INSTRUCT A BROKER HOLDING MY SHARES AS TO HOW TO
VOTE THEM OR I ABSTAIN FROM VOTING?
If your shares are held by a broker as nominee, your broker will not be able
to vote your shares without instructions from you. If your broker is unable to
vote your shares or if you abstain, it will have the effect of voting against
approval of the Merger Agreement; however, Thermo Instrument and Thermo Electron
own sufficient shares to satisfy the voting requirement for approval of the
Merger Agreement.
9. WHO IS ENTITLED TO VOTE?
Holders of record of Common Stock at the close of business on ,
1999, the record date for the Special Meeting, are entitled to vote at the
Special Meeting.
10. WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
We are working to complete all aspects of the Merger as quickly as possible.
We currently expect the Merger to be completed by , 1999.
11. WHAT DO I NEED TO DO NOW?
After you have carefully read this Proxy Statement, please complete, sign
and mail your Proxy Card in the enclosed return envelope as soon as possible.
That way, your shares can be represented at the Special Meeting. If your shares
are held by a broker as nominee, you should receive a Proxy Card from your
broker.
ThermoSpectra stockholders must return their Proxy Cards before the Special
Meeting in order for their votes to be counted at the Special Meeting.
12. CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY CARD?
You may change your vote at any time before the vote takes place at the
Special Meeting. To do so, you can attend the Special Meeting and vote in
person, you can complete and send a new Proxy Card with a later date or you can
send a written notice stating you would like to revoke your proxy. The notice
should be sent to: ThermoSpectra Corporation, c/o Thermo Electron Corporation,
81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, Attention:
Corporate Secretary.
13. SHOULD I SEND IN MY THERMOSPECTRA STOCK CERTIFICATES NOW?
No. You should continue to hold your certificates for Common Stock. After
the Merger Agreement is approved, you will receive a package containing
instructions on how to exchange your shares of Common Stock for cash.
14. WHAT WILL HAPPEN TO THE THERMOSPECTRA STOCK OPTIONS?
Options to purchase Common Stock outstanding on the effective date of the
Merger, whether or not then exercisable, will be assumed by Thermo Instrument
and converted into options to purchase the common stock of Thermo Instrument.
15. WHO SHOULD I CALL IF I HAVE ANY ADDITIONAL QUESTIONS?
You should call ThermoSpectra Investor Relations at (781) 622-1111.
16. WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
We are not aware of any other matters to be voted on at the Special Meeting.
If any other matters properly come before the Special Meeting, including a
motion to adjourn the Special Meeting for the purpose of soliciting additional
proxies, the persons named on the accompanying Proxy Card will vote the shares
represented by all properly executed proxies on such matters in their
discretion, except that shares represented by proxies that have been voted
"AGAINST" approval of the Merger Agreement will not be used to vote "FOR"
adjournment of the Special Meeting for the purpose of allowing additional time
to solicit additional votes "FOR" the Merger Agreement.
7
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. Reference is made to, and this Summary is qualified in its
entirety by, the more detailed information contained elsewhere or incorporated
by reference in this Proxy Statement. Stockholders should read this Proxy
Statement and its appendices in their entirety before voting.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The Special Meeting of stockholders of ThermoSpectra Corporation, a Delaware
corporation (the "Company" or "ThermoSpectra"), will be held on , ,
1999, at 10:00 a.m., at the offices of Thermo Electron Corporation, 81 Wyman
Street, Waltham, Massachusetts 02454.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the stockholders of the Company will consider and
vote on a proposal to approve an Agreement and Plan of Merger dated as of May
21, 1999 (the "Merger Agreement"), which is attached to this Proxy Statement as
Appendix A. The Merger Agreement provides that TS Acquisition Corporation (the
"Merger Sub"), a newly-formed Delaware corporation that is a wholly owned
subsidiary of Thermo Instrument Systems Inc., a Delaware corporation ("Thermo
Instrument"), would merge with and into ThermoSpectra (the "Merger").
ThermoSpectra would be the surviving corporation (the "Surviving Corporation")
in the Merger, and each outstanding share of common stock, $.01 par value, of
ThermoSpectra (the "Common Stock"), other than shares held by stockholders who
are entitled to and who have perfected their Dissenters' Rights (as defined
below), shares held by ThermoSpectra in treasury and shares held by Thermo
Instrument and Thermo Electron Corporation, a Delaware corporation ("Thermo
Electron"), will be converted automatically into the right to receive $16.00 in
cash, payable to the holders thereof, without interest (the "Cash Merger
Consideration"). See "THE MERGER."
RECORD DATE AND QUORUM
A committee of the Board of Directors of the Company (the "Board" or the
"Board of Directors") has fixed the close of business on , 1999 as the
record date (the "Record Date") for the determination of stockholders entitled
to notice of, and to vote at, the Special Meeting. Each holder of record of
Common Stock at the close of business on the Record Date is entitled to one vote
for each share then held on each matter submitted to a vote of stockholders. At
the close of business on the Record Date, there were shares of Common
Stock outstanding. The holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Special Meeting must be present in person or
represented by proxy to constitute a quorum for the transaction of business.
Abstentions will be counted as shares present and entitled to vote for purposes
of determining a quorum; however, broker non-votes will not be counted as shares
present and entitled to vote for purposes of determining a quorum. See "THE
SPECIAL MEETING--Record Date and Quorum Requirement."
VOTE REQUIRED AND REVOCATION OF PROXIES
Under Delaware law, holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Special Meeting must vote to approve the
Merger Agreement. For the purposes of this vote, a failure to vote, a vote to
abstain and a broker non-vote will each have the same legal effect as a vote
cast against approval of the Merger Agreement. Thermo Instrument, which owns
approximately 82% of the outstanding Common Stock, and Thermo Electron, which
owns approximately 10% of the outstanding Common Stock, own enough shares of
Common Stock to vote to approve the Merger Agreement under Delaware law without
the vote of any other holders of Common Stock and intend to vote their shares in
favor of the Merger Agreement. See "THE SPECIAL MEETING--Voting Procedures."
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A stockholder who returns a proxy may revoke it at any time before the
stockholder's shares are voted at the Special Meeting. The proxy may be revoked
by written notice to the Secretary of the Company received prior to the Special
Meeting, by executing and returning a later-dated proxy or by voting by ballot
at the Special Meeting. See "THE SPECIAL MEETING--Voting and Revocation of
Proxies."
If a properly executed Proxy Card is submitted and no instructions are
given, the shares of Common Stock represented by that Proxy Card will be voted
"FOR" the approval of the proposed Merger Agreement.
The Board is not aware of any other matters to be voted on at the Special
Meeting. If any other matters properly come before the Special Meeting,
including a motion to adjourn the Special Meeting for the purpose of soliciting
additional proxies, the persons named on the accompanying Proxy Card will vote
the shares represented by all properly executed proxies on such matters in their
discretion, except that shares represented by proxies that have been voted
"AGAINST" approval of the Merger Agreement will not be used to vote "FOR"
adjournment of the Special Meeting for the purpose of allowing additional time
to solicit additional votes "FOR" the Merger Agreement. See "THE SPECIAL
MEETING--Voting Procedures."
PARTIES TO THE MERGER
THE COMPANY
The Company develops, manufactures and markets imaging and inspection,
temperature control and test and measurement instruments. These instruments are
generally combined with proprietary operations and analysis software to provide
industrial and research customers with integrated systems that address their
specific needs. The Company's imaging and inspection products include X-ray
instruments, X-ray sources and X-ray imaging systems, as well as an assortment
of scanning probe and confocal laser scanning microscopes, all of which are used
in a variety of analytical- and inspection-oriented applications. The imaging
and inspection products also include systems that rework and repair printed
circuit boards that have failed quality control inspection. The Company's
temperature control instruments include temperature control systems for
analytical, laboratory, industrial, research and development, laser and
semiconductor applications. The Company's test and measurement instruments
include data-acquisition systems, digital oscilloscopes and recording systems
used primarily in product development and process monitoring settings.
The principal executive offices of the Company are located at 8 East Forge
Parkway, Franklin, Massachusetts 02038, and its telephone number is (508)
553-5155. See "BUSINESS OF THE COMPANY."
THE MERGER SUB
The Merger Sub is a newly-formed Delaware corporation organized at the
direction of Thermo Instrument for the sole purpose of effecting the Merger and
has not conducted any prior business.
The principal executive offices of the Merger Sub are located at 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, and its telephone
number is (781) 622-1000. See "CERTAIN INFORMATION CONCERNING THE MERGER SUB,
THERMO INSTRUMENT AND THERMO ELECTRON."
THERMO INSTRUMENT
Thermo Instrument develops, manufactures and markets analytical instruments
used to identify complex chemical compounds, toxic metals and other elements in
a broad range of liquids and solids. Thermo Instrument also develops and
manufactures instruments used to monitor radioactivity and air pollution; life
sciences instruments and consumables; and imaging, inspection, measurement and
control
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instruments. These products are used for multiple applications in a range of
industries, including industrial processing, food and beverage production, life
sciences research and medical diagnostics.
The principal executive offices of Thermo Instrument are located at 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, and its telephone
number is (781) 622-1000. See "CERTAIN INFORMATION CONCERNING THE MERGER SUB,
THERMO INSTRUMENT AND THERMO ELECTRON."
THE MERGER
The Merger Agreement provides that subject to satisfaction of certain
conditions, the Merger Sub will be merged with and into ThermoSpectra, and that
following the Merger, the separate existence of the Merger Sub will cease and
ThermoSpectra will continue as the Surviving Corporation. At the effective time
of the Merger, which shall be the date and time of filing of the Certificate of
Merger with the Secretary of State of the State of Delaware (the "Effective
Time") (and the date on which the Effective Time occurs being the "Effective
Date"), and subject to the terms and conditions set forth in the Merger
Agreement, each share of issued and outstanding Common Stock (other than shares
as to which Dissenters' Rights (as defined below) are properly perfected and not
withdrawn, shares held by ThermoSpectra in treasury and shares held by Thermo
Instrument and Thermo Electron) will, by virtue of the Merger, be canceled and
converted into the right to receive the Cash Merger Consideration. As a result
of the Merger, ThermoSpectra's Common Stock will no longer be publicly traded
and will be 100% owned by Thermo Instrument and Thermo Electron. The aggregate
consideration payable in the Merger, assuming no Dissenters' Rights (as defined
below) are exercised, is approximately $19.4 million. See "THE MERGER."
EFFECTIVE TIME OF THE MERGER AND PAYMENT FOR SHARES
The Effective Time is currently expected to occur as soon as practicable
after the Special Meeting, subject to approval of the Merger Agreement at the
Special Meeting and satisfaction or waiver of the terms and conditions of the
Merger Agreement. See "--Conditions to the Merger, Termination and Expenses" and
"THE MERGER--Conditions." Detailed instructions with regard to the surrender of
stock certificates, together with a letter of transmittal, will be forwarded to
stockholders by the Company's transfer agent, American Stock Transfer & Trust
Company (the "Payment Agent"), promptly following the Effective Time.
Stockholders should not submit their stock certificates to the Payment Agent
until they have received such materials. The Payment Agent will send payment of
the Cash Merger Consideration to stockholders as promptly as practicable
following receipt by the Payment Agent of their stock certificates and other
required documents. No interest will be paid or accrued on the cash payable upon
the surrender of stock certificates. See "THE MERGER--Conversion of Securities."
Stockholders should not send any stock certificates to the Company or the
Payment Agent at this time.
ASSUMPTION OF THERMOSPECTRA STOCK OPTIONS BY THERMO INSTRUMENT
At the Effective Time, each outstanding option to purchase shares of Common
Stock (each, a "ThermoSpectra Stock Option") under the ThermoSpectra Stock
Option Plans (as defined below), whether or not exercisable, will be assumed by
Thermo Instrument. Each ThermoSpectra Stock Option so assumed by Thermo
Instrument will continue to have, and be subject to, the same terms and
conditions set forth in the applicable ThermoSpectra Stock Option Plan
immediately prior to the Effective Time, except that (i) each ThermoSpectra
Stock Option will be exercisable (or will become exercisable in accordance with
its terms) for that number of whole shares of common stock, $.10 par value per
share, of Thermo Instrument ("Thermo Instrument Common Stock") equal to the
product of the number of shares of Common Stock that were issuable upon exercise
of such ThermoSpectra Stock Option immediately prior to the Effective Time
multiplied by a fraction (the "Exchange Ratio"), the numerator of which is the
Cash Merger Consideration and the denominator of which is the closing price (the
"Closing Price") of Thermo
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Instrument Common Stock on the day immediately preceding the Effective Date as
reported by the American Stock Exchange, Inc. (the "AMEX"), rounded down to the
nearest whole number of shares of Thermo Instrument Common Stock, and (ii) the
per share exercise price for the shares of Thermo Instrument Common Stock
issuable upon exercise of each such assumed ThermoSpectra Stock Option will be
equal to the quotient determined by dividing the exercise price per share of
Common Stock at which such ThermoSpectra Stock Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio, rounded up to the
nearest whole cent.
At the Effective Time, each outstanding option to purchase shares of Common
Stock (each a "ThermoSpectra ESPP Stock Option") under the ThermoSpectra
Employees' Stock Purchase Plan (the "ThermoSpectra ESPP") will also be assumed
by Thermo Instrument. Each ThermoSpectra ESPP Stock Option so assumed by Thermo
Instrument will continue to have, and be subject to, the same terms and
conditions as set forth in the ThermoSpectra ESPP immediately prior to the
Effective Time except that (i) the assumed option shall be exercisable for
shares of Thermo Instrument Common Stock; (ii) the purchase price per share of
Thermo Instrument Common Stock shall be the lower of (a) 85% of (x) the per
share market value of the Common Stock on the grant date of the option divided
by (y) the Exchange Ratio, with the resulting price rounded up to the nearest
whole cent, and (b) 85% of the market value of Thermo Instrument Common Stock as
of the exercise date of the option; and (iii) the $25,000 limit under Section
9.2(i) of the ThermoSpectra ESPP shall be applied by taking into account Thermo
Instrument's assumption of the ThermoSpectra ESPP Stock Options in accordance
with Section 423(b)(8) of the Internal Revenue Code of 1986, as amended, and
applicable regulations.
See "THE MERGER--Assumption of ThermoSpectra Stock Options by Thermo
Instrument."
THE SPECIAL COMMITTEE'S AND THE BOARD'S RECOMMENDATION
In December 1998, the Board appointed a committee (the "Special Committee")
of two directors, Messrs. Joseph A. Baute and David J. Beaubien (who are not
officers or employees of the Company, Thermo Instrument, the Merger Sub or
Thermo Electron and who are not directors of Thermo Electron, Thermo Instrument
or the Merger Sub), to act on behalf of, and in the interests of, the
stockholders of the Company other than Thermo Instrument, Thermo Electron and
the directors and officers of the Company, Thermo Instrument and Thermo Electron
(the "Minority Stockholders") in evaluating the merits of, and negotiating the
terms of, any proposed transaction with Thermo Instrument. The members of the
Special Committee hold options to acquire an aggregate of 2,000 shares of Common
Stock, at exercise prices of $15.33, which will be assumed by Thermo Instrument
and converted into options to acquire shares of Thermo Instrument Common Stock
on the same terms as all the other holders of ThermoSpectra Stock Options. See
"THE MERGER--Assumption of ThermoSpectra Stock Options by Thermo Instrument."
Further, deferred units equal to 103 shares of Common Stock have accumulated
under the Company's deferred compensation plan for directors for the benefit of
Mr. Baute, which units will be converted into the right to receive the Cash
Merger Consideration per unit for an aggregate cash payment of $1,648. See "THE
MERGER--Deferred Compensation Plan for Directors."
The members of the Special Committee unanimously recommended to the
Company's Board that the Merger Agreement, with the terms and provisions they
negotiated, be approved and that it be recommended to the stockholders of the
Company for adoption and approval. In connection with its recommendation, the
Special Committee considered the opinion of its financial advisor, Tucker
Anthony Cleary Gull ("Tucker Cleary"), that the consideration of $16.00 per
share in cash payable under the Merger Agreement is fair, from a financial point
of view, to the Minority Stockholders. See "SPECIAL FACTORS--Opinion of
Financial Advisor." As part of their deliberations, the members of the Special
Committee determined that the Merger is substantively and procedurally fair to
the Minority Stockholders.
Following the unanimous recommendation of the Special Committee, the Board
of Directors unanimously approved the Merger Agreement, declared its
advisability and recommended that the stockholders
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of the Company approve the Merger Agreement. In connection with its
recommendation, the Board also considered the opinion of Tucker Cleary and
adopted the analysis of the Special Committee with regard to both the
substantive and procedural fairness of the Merger. In reaching their respective
decisions to recommend approval of the Merger Agreement, the Special Committee
and the Board also considered the factors set forth elsewhere in this Proxy
Statement. See "SPECIAL FACTORS--The Special Committee's and the Board's
Recommendation."
In considering the recommendation of the Board of Directors with respect to
the Merger, the Minority Stockholders should be aware that certain officers and
directors of the Company have certain interests that are in addition to, or
different from, the interests of the Minority Stockholders. See "SPECIAL
FACTORS--Conflicts of Interest."
The Board unanimously recommends that the ThermoSpectra stockholders vote
"FOR" approval of the Merger Agreement.
OPINION OF FINANCIAL ADVISOR
Tucker Cleary provided its oral opinion to the Special Committee on May 20,
1999, that, as of the date of such opinion, the consideration of $16.00 per
share in cash payable under the Merger Agreement was fair, from a financial
point of view, to the Minority Stockholders of the Company. Tucker Cleary
subsequently confirmed its oral opinion in writing on May 21, 1999. The full
text of the written opinion of Tucker Cleary dated May 21, 1999, which sets
forth assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion, is attached hereto as Appendix B and
is incorporated herein by reference. The opinion of Tucker Cleary referred to
herein does not constitute a recommendation as to how any stockholder should
vote with respect to the Merger Agreement. Holders of shares of Common Stock are
urged to, and should, read the opinion in its entirety. See "SPECIAL
FACTORS--Opinion of Financial Advisor."
The Special Committee retained Tucker Cleary as financial advisor to assist
it in evaluating the merits of, and negotiating the terms of, any proposed
transaction with Thermo Instrument. Pursuant to the terms of Tucker Cleary's
engagement letter dated February 2, 1999 with the Special Committee, the Company
paid Tucker Cleary a retainer fee of $50,000 and a fee of $100,000 for the
preparation and delivery of its written fairness opinion dated May 21, 1999
(which fee was payable regardless of the conclusions expressed therein). In
addition, the Company has agreed to pay Tucker Cleary an additional $75,000 if
the Merger is consummated. The Company has also agreed to reimburse Tucker
Cleary up to $10,000 for its out-of-pocket expenses, including the reasonable
fees and disbursements of its counsel, arising in connection with its
engagement, and to indemnify Tucker Cleary, its affiliates and their respective
directors, officers, employees and agents to the fullest extent permitted by law
against certain liabilities, including liabilities under the federal securities
laws, relating to or arising out of its engagement, except for liabilities found
to have resulted from the bad faith, gross negligence or intentional or reckless
misconduct of Tucker Cleary.
PURPOSE AND REASONS OF THERMO INSTRUMENT AND THERMO ELECTRON FOR THE MERGER
The purpose of Thermo Instrument and Thermo Electron for engaging in the
transactions contemplated by the Merger Agreement is for Thermo Instrument to
acquire all of the outstanding shares of Common Stock, other than the shares
held by Thermo Electron. In determining to acquire such shares of Common Stock
at this time, Thermo Instrument and Thermo Electron considered the following
factors: (i) the latest market trends in the markets in which the Company
competes, primarily the cyclicality of the semiconductor industry; (ii) the
substantial debt owed by the Company to, primarily, Thermo Electron; (iii) the
reduction in the amount of public information available to competitors about
ThermoSpectra's business that would result from the termination of the Company's
obligations under the Securities and Exchange Commission reporting requirements;
(iv) the elimination of additional burdens on management
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associated with public reporting and other tasks resulting from the Company's
public company status; (v) the decrease in costs, particularly those associated
with being a public company; and (vi) the greater flexibility that the Company's
management would have to focus on long-term business goals, as opposed to
quarterly earnings, as a private company.
Thermo Instrument also considered the advantages and disadvantages of
certain alternatives to taking ThermoSpectra private, including leaving
ThermoSpectra as a public majority-owned subsidiary of Thermo Instrument. Thermo
Instrument considered the number of ThermoSpectra shares held by the Minority
Stockholders, recent trends in the price of the Common Stock and the relative
lack of liquidity for the Common Stock. Thermo Instrument reviewed the net
overall cost of the transaction and its benefits, including its contribution to
Thermo Instrument's earnings. Thermo Instrument also explored alternative uses
for the cash proposed to be used for this transaction. After consideration of
these various factors, Thermo Instrument decided to make a proposal to
ThermoSpectra to acquire for cash, through a merger, all of the outstanding
shares of Common Stock that it and Thermo Electron did not own at a price of
$16.00 per share, which represented a premium of (i) approximately 71% over the
closing price of the Common Stock reported in the consolidated transaction
reporting system on August 11, 1998, the day immediately prior to Thermo
Electron's first public announcement of the proposal to take ThermoSpectra
private and (ii) approximately 39% over the closing price of the Common Stock
reported in the consolidated transaction reporting system on May 20, 1999, the
day immediately prior to the public announcement of the financial terms of
Thermo Instrument's proposal. Thermo Instrument proposed to structure the
transaction as a cash merger in order to transfer ownership of the equity
interest in the Company in a single transaction and provide the stockholders
other than Thermo Instrument and Thermo Electron with prompt payment in cash in
exchange for their shares. See "SPECIAL FACTORS--Purpose and Reasons of Thermo
Instrument and Thermo Electron for the Merger."
Thermo Electron beneficially owns, in the aggregate, directly and indirectly
through Thermo Instrument, approximately 92% of the outstanding Common Stock.
See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--Principal
Stockholder."
POSITION OF THERMO INSTRUMENT AND THERMO ELECTRON AS TO FAIRNESS OF THE MERGER
Thermo Instrument and Thermo Electron considered the analyses and findings
of (i) Tucker Cleary with respect to the fairness, from a financial point of
view, of the consideration of $16.00 per share in cash payable under the Merger
Agreement to the Minority Stockholders (see "SPECIAL FACTORS--Opinion of
Financial Advisor") and (ii) the Special Committee and the Board with respect to
the fairness of the Merger to the Minority Stockholders (see "SPECIAL
FACTORS--The Special Committee's and the Board's Recommendation"). As of the
date of the Merger Agreement, each of Thermo Instrument and Thermo Electron
adopted the analyses and findings of the Special Committee and the Board with
respect to the fairness of the Merger. Based on the analyses and findings of
Tucker Cleary and the Special Committee, Thermo Instrument and Thermo Electron
believe that the Merger is both procedurally and substantively fair to the
Minority Stockholders and that the Cash Merger Consideration is fair to the
Minority Stockholders from a financial point of view. Neither Thermo Instrument
nor Thermo Electron attached specific weights to any factors in reaching its
respective belief as to fairness. Thermo Instrument and Thermo Electron are not
making any recommendation as to how the Minority Stockholders should vote on the
Merger Agreement. See "SPECIAL FACTORS--Position of Thermo Instrument and Thermo
Electron as to Fairness of the Merger."
The Minority Stockholders should be aware that certain officers and
directors of Thermo Instrument and Thermo Electron are also officers and
directors of the Company and have certain interests that are in addition to, or
different from, the interests of the Minority Stockholders. See "SPECIAL
FACTORS-- Conflicts of Interest." Thermo Instrument and Thermo Electron
considered these potential conflicts of interest and based in part thereon,
Thermo Instrument's proposed offer was conditioned on, among other
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things, the approval of the Merger by the Special Committee and the receipt by
the Special Committee of a fairness opinion from an investment banking firm.
CONFLICTS OF INTEREST
In considering the recommendation of the Board with respect to the Merger,
stockholders should be aware that certain officers and directors of
ThermoSpectra have interests in connection with the Merger that present them
with actual or potential conflicts of interest, which are described in more
detail under "SPECIAL FACTORS--Conflicts of Interest."
THE SPECIAL COMMITTEE
Mr. Baute and Mr. Beaubien, members of the Special Committee, hold options
to acquire an aggregate of 2,000 shares of Common Stock, at exercise prices of
$15.33, which will be assumed by Thermo Instrument and converted into options to
acquire shares of Thermo Instrument Common Stock on the same terms as all the
other holders of ThermoSpectra Stock Options. See "THE MERGER--Assumption of
ThermoSpectra Stock Options by Thermo Instrument." Further, deferred units equal
to 103 shares of Common Stock have accumulated under the Company's deferred
compensation plan for directors for the benefit of Mr. Baute, which units will
be converted into the right to receive the Cash Merger Consideration per unit
for an aggregate cash payment of $1,648. See "THE MERGER--Deferred Compensation
Plan for Directors." The Special Committee formally met 20 times, either in
person or telephonically, from December 1998 through the date of this Proxy
Statement and, in addition, had numerous informal discussions and consultations
in person and telephonically. As compensation for serving on the Special
Committee, the Board has authorized that each member of the Special Committee
receive a one-time special retainer fee of $20,000 and additional fees of $1,000
for each meeting attended in person and $500 for each meeting attended
telephonically. Mr. Baute is also a member of the board of directors of Metrika
Systems Corporation, a majority-owned subsidiary of Thermo Instrument, and Mr.
Beaubien is also a member of the board of directors of ONIX Systems Inc., a
majority-owned subsidiary of Thermo Instrument. See "SPECIAL FACTORS--Conflicts
of Interest" and "MANAGEMENT."
THE THERMOSPECTRA DIRECTORS AND EXECUTIVE OFFICERS
The members of the Board of Directors, other than the members of the Special
Committee, and executive officers of ThermoSpectra own in the aggregate 40,610
shares of Common Stock and will receive a payment for their shares of Common
Stock in the aggregate amount of $649,760 upon consummation of the Merger. In
addition, such Board members and executive officers hold options to acquire an
aggregate of 360,300 shares of Common Stock, with exercise prices ranging from
$9.53 to $14.98, which will be assumed by Thermo Instrument and converted into
options to acquire shares of Thermo Instrument Common Stock on the same terms as
all the other holders of ThermoSpectra Stock Options. See "THE
MERGER--Assumption of ThermoSpectra Stock Options by Thermo Instrument."
Further, deferred units equal to 22 shares of Common Stock have accumulated
under the Company's deferred compensation plan for directors for the benefit of
Elias P. Gyftopoulos, which units will be converted into the right to receive
the Cash Merger Consideration per unit for an aggregate cash payment of $352.
See "THE MERGER--Deferred Compensation Plan for Directors." Such Board members
and executive officers also beneficially own shares of common stock of Thermo
Instrument and Thermo Electron as set forth in more detail under "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--Management." Further,
certain members of the Board and certain executive officers hold directorship or
officer positions with Thermo Instrument and/or Thermo Electron. See
"MANAGEMENT."
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INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that for a period of six years after the
Effective Time, Thermo Instrument will, and will cause the Surviving Corporation
to, fulfill and honor in all respects the indemnification obligations of
ThermoSpectra, pursuant to ThermoSpectra's Certificate of Incorporation and
Bylaws, each as in effect immediately prior to the Effective Time, to those
individuals who were directors, including the members of the Special Committee,
or officers of ThermoSpectra at the Effective Time. In addition, the directors
and officers of the Company will be provided with continuing directors' and
officers' liability insurance coverage for a period of six years following the
Merger, subject to certain limitations. See "SPECIAL FACTORS--Conflicts of
Interest" and "THE MERGER--Indemnification and Insurance."
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, the entire equity interest in the Company will be
beneficially owned by Thermo Electron, directly and indirectly through Thermo
Instrument. Thermo Electron and Thermo Instrument will have complete control
over the conduct of the Company's business and will have 100% interest in the
net book value and net earnings of the Company and any future increases in the
value of the Company. Thermo Instrument's and Thermo Electron's combined
ownership of the Company prior to the transaction contemplated herein aggregated
approximately 92%. Upon completion of this transaction, Thermo Instrument's and
Thermo Electron's aggregate interest in the Company's net book value of $129.9
million on April 3, 1999 and net earnings of $1.8 million and $4,000 for the
year ended January 2, 1999 and the three months ended April 3, 1999,
respectively, would increase from approximately 92% of such amounts to 100% of
such amounts. The Minority Stockholders will no longer have any interest in, and
will not be stockholders of, ThermoSpectra and therefore will not participate in
ThermoSpectra's future earnings and potential growth and will no longer bear the
risk of any decreases in the value of the Company. Instead, the stockholders of
the Company other than Thermo Instrument, Thermo Electron and holders who
perfect their Dissenters' Rights (as defined below) will have the right to
receive the Cash Merger Consideration for each share held.
In addition, the Common Stock will no longer be traded on the AMEX and price
quotations with respect to sales of shares in the public market will no longer
be available. The registration of the Common Stock under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), will be terminated, and this
termination will eliminate the Company's obligation to file periodic financial
and other information with the Securities and Exchange Commission (the
"Commission") and will make most other provisions of the Exchange Act
inapplicable. See "SPECIAL FACTORS--Certain Effects of the Merger."
CONDITIONS TO THE MERGER, TERMINATION AND EXPENSES
Each party's obligation to effect the Merger is subject to satisfaction of a
number of conditions, including with respect to one or both parties: (i) the
Merger Agreement shall have been approved and adopted by the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote thereon in accordance with the provisions of Section 251 of the General
Corporation Law of the State of Delaware (the "DGCL"); (ii) no court,
administrative agency or commission or other governmental or regulatory body or
authority or instrumentality shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree, injunction or
other order that is in effect and that has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger; (iii) the
representations and warranties of the parties shall be true and correct in all
material respects as of the Effective Time, except as permitted by the Merger
Agreement; and (iv) each of the parties shall have performed or complied in all
material respects with all agreements and covenants required by the Merger
Agreement to be performed by them on or prior to the Effective Time. Certain
conditions that have not been satisfied may be waived by the other party. See
"THE MERGER--
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Conditions." Even if the stockholders approve the Merger Agreement, there can be
no assurance that the Merger will be consummated.
At any time prior to the Effective Time, whether before or after approval of
the Merger Agreement by the stockholders of ThermoSpectra, the Merger Agreement
may be terminated by the mutual written consent of the board of directors of
Thermo Instrument and the Board of Directors of ThermoSpectra (upon approval of
the Special Committee). In addition, either Thermo Instrument or ThermoSpectra
(upon approval of the Special Committee), in accordance with the provisions of
the Merger Agreement, may terminate the Merger Agreement prior to the Effective
Time, whether before or after approval of the Merger Agreement by the
stockholders of ThermoSpectra, if (i) the Merger has not been consummated by
October 31, 1999, subject to certain exceptions, (ii) a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
issues an order, decree or ruling or takes any other action enjoining,
restraining or otherwise prohibiting the Merger and such order, decree or ruling
is final and nonappealable or (iii) the approval of the stockholders of
ThermoSpectra necessary to consummate the Merger has not been obtained, subject
to certain exceptions. See "THE MERGER--Termination, Amendment and Waiver."
In addition, Thermo Instrument may terminate the Merger Agreement prior to
the Effective Time, whether before or after approval of the Merger Agreement by
the stockholders of ThermoSpectra, if ThermoSpectra breaches any representation,
warranty, covenant or agreement and fails to cure such breach within ten
business days after written notice of such breach from Thermo Instrument.
ThermoSpectra may terminate the Merger Agreement prior to the Effective Time,
whether before or after approval of the Merger Agreement by the stockholders of
ThermoSpectra, if (i) ThermoSpectra's Board of Directors, upon approval of the
Special Committee, determines in good faith on the advice of outside legal
counsel that the Board's fiduciary duties under applicable law require it to do
so or (ii) Thermo Instrument breaches any representation, warranty, covenant or
agreement and fails to cure such breach within ten business days after written
notice of such breach from ThermoSpectra. See "THE MERGER--Termination,
Amendment and Waiver."
Each of the parties has agreed to pay its own costs and expenses in
connection with the Merger Agreement, whether or not the Merger is consummated.
See "THE MERGER--Expenses."
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, the receipt of the Cash Merger
Consideration by holders of Common Stock pursuant to the Merger will be a
taxable sale of the holder's Common Stock. All holders of Common Stock should
consult their tax advisors to determine the effect of the Merger under federal,
state, local and foreign tax laws. See "FEDERAL INCOME TAX CONSEQUENCES."
RIGHTS OF DISSENTING STOCKHOLDERS
Any stockholder of ThermoSpectra who does not vote in favor of the proposal
to approve the Merger Agreement and who complies strictly with the applicable
provisions of Section 262 of the DGCL has the right to dissent and be paid cash
for the fair value of such holder's shares of Common Stock ("Dissenters'
Rights"). The applicable provisions of Section 262 of the DGCL are attached to
this Proxy Statement as Appendix C. To perfect Dissenters' Rights with respect
to the Merger, a ThermoSpectra stockholder must follow the procedures set forth
therein precisely. These procedures are summarized in this Proxy Statement under
"RIGHTS OF DISSENTING STOCKHOLDERS."
Shares of Common Stock held by persons properly exercising Dissenters'
Rights will not be converted into the Cash Merger Consideration in the Merger
and after the Effective Time will represent only the right to receive such
consideration as is determined to be due such dissenting stockholder pursuant to
Section 262 of the DGCL. If after the Effective Time any dissenting stockholder
(i) fails to perfect or loses such right to payment or appraisal pursuant to
Section 262 of the DGCL or (ii) withdraws such demand for
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<PAGE>
appraisal within 60 days after the Effective Date pursuant to Section 262 of the
DGCL, each share of Common Stock of such stockholder shall be treated as a share
that had been converted as of the Effective Time into the right to receive the
Cash Merger Consideration.
ACCOUNTING TREATMENT
The Merger will be accounted for as the acquisition of a minority interest
by Thermo Instrument, using the purchase method of accounting.
MARKET PRICES OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the AMEX (symbol: THS). The following table
sets forth, for the periods indicated, the high and low sales prices of the
Company's Common Stock as reported in the consolidated transaction reporting
system.
<TABLE>
<CAPTION>
HIGH LOW
--------- ----------
<S> <C> <C>
1997
First Quarter.......................................................... $ 15.125 $ 11.75
Second Quarter......................................................... 14.50 11.375
Third Quarter.......................................................... 13.625 9.75
Fourth Quarter......................................................... 13.625 9.00
1998
First Quarter.......................................................... 10.75 8.625
Second Quarter......................................................... 12.75 8.625
Third Quarter.......................................................... 12.00 9.25
Fourth Quarter......................................................... 11.75 8.25
1999
First Quarter.......................................................... 12.00 10.00
Second Quarter......................................................... 15.875 9.6875
Third Quarter (through July 12, 1999).................................. 16.00 9.6875
</TABLE>
On August 11, 1998, the last trading day prior to the date Thermo Electron
first publicly announced the proposal to take ThermoSpectra private, the high,
low and closing sales price per share of Common Stock reported in the
consolidated transaction reporting system was $9.375, $9.25 and $9.375,
respectively. On May 20, 1999, the last trading day prior to the public
announcement of the financial terms of the proposed Merger, the high, low and
closing sales price per share of Common Stock reported in the consolidated
transaction reporting system was $11.50, $11.25 and $11.50, respectively. On
, 1999, the last trading day prior to the printing of this Proxy
Statement, the high, low and closing sales price per share of Common Stock
reported in the consolidated transaction reporting system was $ ,
$ and $ , respectively.
As of , 1999, there were holders of record of Common Stock and
approximately persons or entities holding in nominee name.
The Company has never paid any cash dividends on its Common Stock. Pursuant
to the Merger Agreement, the Company has agreed not to pay any dividends on the
Common Stock prior to the earlier of the termination of the Merger Agreement or
the Effective Time.
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<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE MERGER
During the beginning of August 1998, Thermo Instrument's and Thermo
Electron's senior management initially considered Thermo Instrument's
acquisition of the minority stockholder interest in ThermoSpectra in connection
with a proposed corporate reorganization of Thermo Electron and certain of its
subsidiaries. Thermo Instrument's and Thermo Electron's management examined
several factors, including the potential benefits to ThermoSpectra's business if
it were to become part of a larger business unit. Thermo Instrument and Thermo
Electron also considered the following factors: (i) the reduction in the amount
of public information available to competitors about ThermoSpectra's business
that would result from the termination of the Company's obligations under the
Commission reporting requirements; (ii) the elimination of additional burdens on
management associated with public reporting and other tasks resulting from the
Company's public company status; (iii) the decrease in costs, particularly those
associated with being a public company; and (iv) the greater flexibility that
the Company's management would have to focus on long-term business goals, as
opposed to quarterly earnings, as a private company. Thermo Instrument and
Thermo Electron also considered the relatively low volume of trading in the
Common Stock and that the Merger would result in immediate availability of
enhanced liquidity for the Minority Stockholders. Management of both Thermo
Instrument and Thermo Electron also considered that, by acquiring the minority
stockholder interest in ThermoSpectra, it would advance the goal of Thermo
Electron's proposed corporate reorganization to reduce the number of
majority-owned, public subsidiaries of Thermo Electron. Management of Thermo
Instrument and Thermo Electron also considered recent trends in the price of the
Common Stock, although ThermoSpectra's current stock price was not a significant
factor in the timing of Thermo Instrument's or Thermo Electron's decision to
propose acquiring the minority stockholder interest in ThermoSpectra. In
mid-August 1998, management of Thermo Instrument and Thermo Electron decided to
propose to their respective board of directors that Thermo Instrument make an
offer to acquire all of the shares of Common Stock that Thermo Instrument and
Thermo Electron did not already own for either cash or shares of Thermo
Instrument common stock.
On August 10 and 11, 1998, the board of directors of Thermo Electron held a
special meeting at which Thermo Electron's and Thermo Instrument's management
presented the proposal for Thermo Instrument to acquire all of the shares of
Common Stock that Thermo Instrument and Thermo Electron did not already own, as
a part of a proposed corporate reorganization of Thermo Electron and certain of
its subsidiaries. The Thermo Electron board of directors discussed several
factors presented by management regarding this proposal, including (i) the
potential benefits to ThermoSpectra's business if it were to become part of a
larger business unit; (ii) the reduction in the amount of public information
available to competitors about ThermoSpectra's business that would result from
the termination of the Company's obligations under the Commission reporting
requirements; (iii) the elimination of additional burdens on management
associated with public reporting and other tasks resulting from the Company's
public company status; and (iv) the decrease in costs, particularly those
associated with being a public company. The Thermo Electron board of directors
also considered the relatively low volume of trading in the Common Stock and
that the Merger would result in immediate availability of enhanced liquidity for
the Minority Stockholders. In addition, the Thermo Electron board of directors
considered the advantages and disadvantages of certain alternatives to acquiring
the minority stockholder interest in ThermoSpectra, including leaving
ThermoSpectra as a majority-owned, public subsidiary of Thermo Instrument. The
Thermo Electron board of directors also discussed that, by acquiring the
minority stockholder interest in ThermoSpectra, it would advance the goal of
Thermo Electron's proposed corporate reorganization to reduce the number of
Thermo Electron's majority-owned, public subsidiaries. After consideration of
these various factors, Thermo Electron's board authorized a proposed corporate
reorganization, which included Thermo Instrument acquiring all of the shares of
Common Stock that Thermo Instrument and Thermo Electron did not already own for
either cash or Thermo Instrument common stock. On August 12, 1998, Thermo
Electron issued a press release announcing its proposed corporate
reorganization.
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<PAGE>
On September 24 and 25, 1998, the board of directors of Thermo Instrument
held a meeting at which the proposed plan to acquire the minority stockholder
interest in ThermoSpectra was discussed. Thermo Instrument's management reviewed
the considerations set forth above.
On December 3, 1998, the board of directors of Thermo Electron held a
meeting at which the proposed plan to acquire the minority stockholder interest
in ThermoSpectra was discussed. Thermo Instrument's and Thermo Electron's
management reviewed the considerations set forth above. After discussing the
advantages and disadvantages of acquiring the minority stockholder interest in
ThermoSpectra, Thermo Electron's board authorized a modified corporate
reorganization plan, which included Thermo Instrument taking ThermoSpectra
private by acquiring all of the shares of ThermoSpectra that Thermo Instrument
and Thermo Electron did not already own for cash. On December 10, 1998, Thermo
Electron issued a press release announcing its modified proposed corporate
reorganization.
On December 4, 1998, the board of directors of Thermo Instrument held a
meeting at which the proposed plan to acquire the minority stockholder interest
in ThermoSpectra was discussed. Thermo Instrument's management reviewed the
considerations set forth above.
On December 8, 1998, ThermoSpectra's Board held a meeting during which all
members were present in person or by telephone. The Board's first action was to
appoint Messrs. Joseph A. Baute and David J. Beaubien as directors of the
Company. The Board next determined that because Thermo Instrument was its
majority stockholder, it was desirable to appoint a Special Committee, to act on
behalf of, and in the interests of, the Minority Stockholders, for the purpose
of evaluating the merits of, and negotiating the terms of, any proposed
transaction with Thermo Instrument. The Board appointed Messrs. Baute and
Beaubien to serve as members of the Special Committee. The Board also authorized
the Special Committee to retain a financial advisor, a legal advisor and any
other advisors it deemed necessary to assist it in carrying out its
responsibilities. Additionally, the Board granted the Special Committee and its
advisors access to all of the officers and members of management of
ThermoSpectra and its subsidiaries, including its books, records, projections
and financial statements that were deemed necessary by the Special Committee and
its advisors for their review. The Board noted that Mr. Baute was also a
director of Metrika Systems Corporation, a majority-owned subsidiary of Thermo
Instrument, and that Mr. Beaubien was a director of ONIX Systems Inc., a
majority-owned subsidiary of Thermo Instrument. The Board determined that these
directorships did not prevent either member from fulfilling his duties as a
member of the Special Committee.
On December 21, 1998, the Company received an unsolicited offer to purchase
certain assets of one of its Test and Measurement businesses for approximately
$4 million and the assumption of certain liabilities. The Company subsequently
rejected the offer due to its proposed participation in the corporate
reorganization of Thermo Electron, the inadequacy of the proposed price and its
review of various strategic alternatives for this business.
In December 1998 and early January 1999, the Special Committee conducted
interviews with and considered three law firms to act as its legal advisor.
Following such investigation, on December 31, 1998 the Special Committee
retained Goodwin, Procter & Hoar LLP ("Goodwin Procter") of Boston to act as its
legal advisor. In making its decision, the Special Committee took into account
that Goodwin Procter (i) had neither currently nor in the past represented
Thermo Electron or any of its subsidiaries and (ii) was located in Boston, close
to the corporate offices of the Company, Thermo Instrument and Thermo Electron.
On January 19, 1999 the Special Committee convened a meeting with Goodwin
Procter, which meeting included discussions relating to the scope of the duties
of the members of the Special Committee, the scope of the Special Committee's
authority and the requirement that the members of the Special Committee be
independent. The members of the Special Committee affirmed their independence,
their understanding of their obligations and their intent to get the best result
for the Minority Stockholders. The
19
<PAGE>
members of the Special Committee also determined that they would not recommend a
transaction if they did not believe it was at a fair price and was not the best
transaction available for the Minority Stockholders. At this time, the Special
Committee noted that it had requested that Thermo Instrument not disclose the
terms of any proposed offer to the Special Committee until the Special Committee
had chosen its financial advisor and completed its independent due diligence
analysis. The Special Committee discussed its plans to visit various
ThermoSpectra facilities and to pursue discussions with management about the
business, financial condition and prospects of the Company. The Special
Committee then interviewed four investment banking firms that had previously
submitted proposals to serve as the Special Committee's financial advisor in
evaluating the terms of any proposed offer from Thermo Instrument.
On January 20, 1999, the Special Committee reconvened telephonically with
Goodwin Procter. After due deliberation, the Special Committee retained Tucker
Anthony Cleary Gull ("Tucker Cleary") as its financial advisor to assist in the
evaluation of any proposed offer from Thermo Instrument. Since it had been over
eight years since Tucker Cleary had provided any investment banking services to
Thermo Electron or its subsidiaries, the Special Committee concluded that there
was no current conflict of interest as a result of such prior work. Tucker
Cleary agreed to assist the Special Committee in, among other things:
- reviewing ThermoSpectra's business plan, growth strategies and historic
operating and financial performance;
- preparing an analysis of ThermoSpectra to determine valuation parameters
for ThermoSpectra;
- assisting in evaluating and negotiating the terms and conditions of any
proposed offer from Thermo Instrument; and
- providing a written opinion as to the fairness, from a financial point of
view, of the consideration to be received by the Minority Stockholders in
connection with any proposed offer from Thermo Instrument.
On January 29, 1999, the Special Committee met with representatives from
Goodwin Procter and Tucker Cleary at the Company's NESLAB Instruments, Inc.
("NESLAB") facility in Portsmouth, New Hampshire. The Special Committee, Goodwin
Procter and Tucker Cleary toured the facilities and were given a business
presentation by Mr. Barry Howe, President and Chief Executive Officer of
ThermoSpectra. Following the presentation and tour, the members of the Special
Committee held a meeting to discuss the presentation, the Company's financial
statements, their impressions of the NESLAB facility, the Company's investments,
the Company's business focus and the outlook of certain of its industry
segments, as well as ThermoSpectra's corporate history and its role in Thermo
Electron's overall business and structure. They further discussed the timing of
Thermo Instrument's proposed offer, the historic trends in ThermoSpectra's stock
price and stockholder expectations.
Following its selection in January, Tucker Cleary pursued its diligence
review and analysis, including preparation of a financial model that
incorporated financial projections provided by ThermoSpectra's management (the
"Projections"), review of the valuations of comparable public companies and the
financial terms of comparable merger transactions, and preparation of discounted
cash flow valuations. Tucker Cleary also made visits to the companies comprising
ThermoSpectra's Temperature Control business, as well as to the larger companies
and divisions within ThermoSpectra's Test and Measurement and Imaging and
Inspection businesses.
On February 25, 1999 and February 26, 1999, the boards of directors of
Thermo Electron and Thermo Instrument, respectively, held special meetings to
discuss, among other things, a proposed transaction with ThermoSpectra. Thermo
Electron's and Thermo Instrument's management discussed the advantages and
disadvantages of acquiring the minority stockholder interest in ThermoSpectra,
as described above. Thermo Electron and Thermo Instrument also discussed (i) the
cyclicality of one of the Company's primary industries, the semiconductor
industry and (ii) the burden on ThermoSpectra of, at that time, its
20
<PAGE>
$67.3 million borrowings from, primarily, Thermo Electron in connection with
various past acquisitions and Thermo Instrument's and Thermo Electron's
increased flexibility to cancel or postpone payment of these borrowings if
ThermoSpectra were to become a private subsidiary of Thermo Instrument and
Thermo Electron. In addition, Thermo Electron and Thermo Instrument reviewed the
net overall cost of the transaction and explored alternative uses for the cash
proposed to be used for this transaction. After consideration of these various
factors, the Thermo Electron board authorized Thermo Instrument to make an offer
to ThermoSpectra to acquire, through a merger, all of the outstanding shares of
ThermoSpectra Common Stock that Thermo Instrument and Thermo Electron did not
already own for cash, and the Thermo Instrument board authorized its management
to negotiate such a transaction with ThermoSpectra.
On March 8, 1999, Goodwin Procter provided the members of the Special
Committee with a memorandum of certain principles governing their duties and
responsibilities as independent directors representing the Minority Stockholders
in evaluating and negotiating the terms of the offer.
On March 10, 1999, the members of the Special Committee met with Goodwin
Procter and Tucker Cleary. Tucker Cleary discussed the Projections and noted
that the Projections included an assumption that the Company's operating margins
in the future periods would be substantially greater than actual historical
operating margins and substantially greater than the actual operating margins
realized by comparable companies. Tucker Cleary modified this assumption to
reduce the forecast operating margins and presented a revised version of the
Projections (the "Revised Projections"). Tucker Cleary noted that using the
Projections and a discounted cash flow analysis, which was only one component of
its overall aggregate analysis, produced a range of $19.37 to $22.37 per share.
The same calculation using the Revised Projections resulted in a per share
valuation range of $12.16 to $14.06. Tucker Cleary concluded, based upon its
aggregate preliminary analysis and valuation of the Company, that a price in the
range of $13.50 to $15.00 per share of Common Stock would be fair to the
Minority Stockholders. The members of the Special Committee discussed the
appropriateness of the various analyses presented with Tucker Cleary and Goodwin
Procter.
On March 19, 1999, the members of the Special Committee met to review Tucker
Cleary's analysis and to prepare for Thermo Instrument's presentation and offer.
The Special Committee decided in advance that it would defer any response to the
offer until it had fully considered the offer, reviewed its underlying
assumptions and analyses, and assessed the merits of the offer. Later that same
day, representatives from Thermo Electron and Thermo Instrument presented Thermo
Instrument's offer of $13.00 per share for the shares of Common Stock owned by
the Minority Stockholders. The Special Committee instructed Tucker Cleary to
review Thermo Instrument's offer and underlying financial analysis.
On March 24, 1999, the members of the Special Committee held a telephonic
meeting with Goodwin Procter and Tucker Cleary. Tucker Cleary reviewed Thermo
Instrument's financial analysis of ThermoSpectra, noting that Thermo Instrument
had utilized a discounted cash flow methodology that was different from that
used by Tucker Cleary. The Special Committee also discussed the propriety of
using the Revised Projections in Tucker Cleary's various valuation analyses,
since among other things, the Projections were prepared by ThermoSpectra
management who had the greatest insight into ThermoSpectra's operations and
prospects. After discussing the relative merits of different valuation
methodologies, the Special Committee directed Tucker Cleary to prepare a revised
discounted cash flow analysis of the Company, using the Projections and taking
into account certain different assumptions proposed by Tucker Cleary, primarily
relating to terminal growth rates and working capital needs, underlying Thermo
Instrument's March 19, 1999 financial analysis of ThermoSpectra.
On March 29, 1999, after reviewing Tucker Cleary's report on its revisions
to Thermo Instrument's discounted cash flow analysis of the Projections, the
members of the Special Committee held two telephonic meetings. Goodwin Procter
was present at both meetings and Tucker Cleary was present at only the second
meeting. Tucker Cleary concluded that $19.65 per share of Common Stock, which
was the result of its revisions to Thermo Instrument's discounted cash flow
analysis of the Projections, would be the price
21
<PAGE>
that would have been produced by Thermo Instrument's own analysis had they used
the different assumptions proposed by Tucker Cleary. The Special Committee
determined that $19.65 should be the Special Committee's counter-offer to Thermo
Instrument's offer of $13.00 per share.
On March 31, 1999, the Company received an unsolicited offer to purchase its
Test and Measurement businesses for up to approximately $22 million and the
assumption of certain liabilities. The Company subsequently rejected the offer
due to its proposed participation in the corporate reorganization of Thermo
Electron, the inadequacy of the proposed price and its review of various
strategic alternatives for these businesses.
On April 7, 1999, ThermoSpectra's Board held a regularly scheduled meeting
during which all members were present in person or by telephone. The Board
attended to various unrelated matters and then heard a brief update from the
members of the Special Committee. The members of the Special Committee reported
to the Board that they had retained Goodwin Procter and Tucker Cleary as their
legal and financial advisors, respectively, and that they were currently in
negotiations with Thermo Instrument's management over the terms of the offer.
On April 9, 1999, the members of the Special Committee held a telephonic
consultation with Goodwin Procter and Tucker Cleary. The members of the Special
Committee deliberated over the various valuation methodologies and Thermo
Instrument's modified offer of a range of $13.00 to $15.00 per share that had
been communicated to the Special Committee on April 7, 1999 by Mr. Earl R.
Lewis, President and Chief Executive Officer of Thermo Instrument.
On April 23, 1999, the members of the Special Committee met with Mr. Lewis.
At this meeting, Mr. Lewis raised the per share price of the offer to $15.50.
The Special Committee responded with a counter-offer of $17.00 per share.
On April 26, 1999, the members of the Special Committee had a telephonic
meeting with Mr. Lewis and Dr. George N. Hatsopoulos, Chairman and then Chief
Executive Officer of Thermo Electron, regarding the $15.50 per share price
offered by Thermo Instrument. The Special Committee responded that $15.50 was an
unacceptably low price and that the Special Committee would consider a per share
price of $17.00 to be fair.
On April 27, 1999, the members of the Special Committee held a telephonic
meeting with Goodwin Procter and Tucker Cleary. After a discussion of applicable
legal requirements, the Special Committee's responsibilities and the
applicability of the various pricing models, the members of the Special
Committee determined that it would continue its efforts to obtain a price higher
than $15.50 per share.
On April 29, 1999, in a telephonic meeting of the members of the Special
Committee with Mr. Lewis, a price of $16.00 per share was offered and agreed
upon as fair to the Minority Stockholders.
In May, counsel for Thermo Instrument and Goodwin Procter prepared,
negotiated and agreed upon the terms of the Merger Agreement.
On May 18, 1999, Thermo Instrument provided the Special Committee with
written confirmation of its proposed offer to purchase the shares of Common
Stock of the Minority Stockholders for $16.00 per share in cash, without
interest.
On May 20, 1999, Tucker Cleary met with the members of the Special Committee
to give its final report on the terms of the proposed Merger and render its oral
opinion to the Special Committee that the proposal by Thermo Instrument of
$16.00 per share in cash was fair, from a financial point of view, to the
Minority Stockholders. Tucker Cleary reviewed the various factors it considered
in rendering its opinion, which are described below under "--Opinion of
Financial Advisor." The full Board of ThermoSpectra then met to hear the report
of Tucker Cleary and to review the terms of the Merger Agreement. The members of
the Special Committee then recommended to the full Board that it accept Thermo
Instrument's offer and approve the Merger Agreement in the form presented at the
meeting. The Board
22
<PAGE>
unanimously approved the Merger Agreement, declared its advisability and
recommended that the stockholders vote in favor of the proposed Merger.
Also on May 20, 1999, the Merger Agreement was presented to the board of
directors of Thermo Instrument at a special meeting of the board. Thermo
Instrument's board of directors unanimously approved the Merger Agreement.
On May 21, 1999, the Merger Agreement was presented to the board of
directors of Thermo Electron at a special meeting of the board. Thermo
Electron's board of directors unanimously approved the Merger Agreement. The
Merger Agreement was then duly executed by the parties. Tucker Cleary rendered
its written opinion to the Special Committee on May 21, 1999, to the effect
that, as of that date, the $16.00 per share consideration to be received
pursuant to the proposed Merger was fair, from a financial point of view, to the
Minority Stockholders. On the same day, ThermoSpectra issued a press release
announcing that, based on the recommendation of the Special Committee, its Board
had approved the Merger Agreement with Thermo Instrument.
THE SPECIAL COMMITTEE'S AND THE BOARD'S RECOMMENDATION
The Special Committee and the ThermoSpectra Board believe that the terms of
the Merger are fair to, and in the best interests of, the Minority Stockholders.
In reaching this conclusion, the Special Committee has determined that the
Merger is both substantively and procedurally fair, and is therefore entirely
fair, to the Minority Stockholders. The Board has adopted the analysis of the
Special Committee with regard to both the substantive and procedural fairness of
the Merger. Accordingly, the ThermoSpectra Board has unanimously approved the
Merger Agreement and unanimously recommends its approval by the stockholders.
In reaching their decisions to approve the Merger Agreement and recommend
its approval to the stockholders, the Special Committee and the ThermoSpectra
Board considered the following factors, which constitute all of the material
factors considered by the Special Committee and the Board:
- THE CURRENT AND HISTORICAL MARKET PRICES OF THE COMMON STOCK. The Special
Committee and the Board considered the declining per share price of the
Common Stock prior to the time of Thermo Instrument's offer, the
possibility that the price would remain depressed and the premium that
$16.00 per share offered over such price.
- INFORMATION CONCERNING THE FINANCIAL PERFORMANCE, CONDITION, BUSINESS
OPERATIONS AND PROSPECTS OF THERMOSPECTRA. The Special Committee and the
Board considered the historical, current and potential future performance
of ThermoSpectra and determined that the price per share offered by Thermo
Instrument was a substantial premium to the Minority Stockholders, given
the current performance and the uncertainty of future performance of
ThermoSpectra.
- THE EFFECTS OF THE MERGER ON MINORITY STOCKHOLDERS, INCLUDING THE PREMIUM
OVER THE MARKET PRICE OF THE COMMON STOCK IMMEDIATELY PRIOR TO THE PUBLIC
ANNOUNCEMENT OF THE FINANCIAL TERMS OF THERMO INSTRUMENT'S PROPOSAL. The
Special Committee and the Board concluded that the $16.00 per share price
proposed by Thermo Instrument, which represented premiums of approximately
61%, 44% and 39% over the per share price on dates four weeks, one week
and one day, respectively, prior to announcement of the financial terms of
the offer on May 21, 1999, would enable the Minority Stockholders to
obtain a higher price for their stock than would otherwise be available in
the market at that time. The purchase by Thermo Instrument would also
eliminate the exposure of the Minority Stockholders to any future or
continued declines in the price of the Common Stock.
- TERMS OF THE MERGER AGREEMENT. The terms of the Merger Agreement,
including (i) the amount and form of the consideration, (ii) the limited
number of conditions to the obligations of Thermo Instrument, including
the lack of a financing condition, (iii) the right of the ThermoSpectra
Board, upon recommendation of the Special Committee, to terminate the
Merger Agreement if the Board
23
<PAGE>
determines that the Board's fiduciary duties to the ThermoSpectra
stockholders require it to do so, and (iv) the absence of a termination
fee in the event ThermoSpectra terminates the Merger Agreement. The
Special Committee and the Board believed that the foregoing made the
consummation of the transaction more likely than it would if more
significant conditions were placed on the completion of the transaction or
if Thermo Instrument did not have the independent financial resources to
complete the transaction. Further, the Special Committee and the Board
believed that the ability of the Board to terminate the Merger Agreement
without payment of a termination fee in the event its fiduciary duties to
the ThermoSpectra stockholders required it to do so provided the Board the
freedom to protect the interests of the Minority Stockholders.
- CURRENT MARKET TRENDS IN THE INDUSTRIES IN WHICH THERMOSPECTRA COMPETES,
PRIMARILY THE SEMICONDUCTOR INDUSTRY. The Special Committee and the Board
considered the fact that the semiconductor industry suffered a serious
decline as a result of unstable Asian markets and general volatility in
this industry.
- THE FINANCIAL PERFORMANCE AND PROFITABILITY OF THERMOSPECTRA, INCLUDING
DECLINING SALES AND PROFITABILITY AND UNCERTAINTY REGARDING ITS FUTURE
GROWTH PROSPECTS. The Special Committee and the Board determined that the
Merger would shift the risk of the future financial performance of
ThermoSpectra from the Minority Stockholders, who do not have the power to
control ThermoSpectra, entirely to Thermo Instrument, which does have the
power to control ThermoSpectra and is in a better position to manage and
bear that risk.
- THE MARKET PRICE AND RELATIVE LACK OF LIQUIDITY FOR THE COMMON STOCK AND
THE LIQUIDITY THAT WOULD BE REALIZED BY STOCKHOLDERS FROM THE ALL-CASH
OFFER. The Special Committee and the Board believed that the liquidity to
be realized by the Minority Stockholders would be beneficial to such
stockholders since Thermo Instrument's and Thermo Electron's combined
significant ownership of the Common Stock (i) resulted in a relatively
small public float that necessarily limited the amount of trading in the
Common Stock and (ii) decreased the likelihood that a proposal to acquire
the Common Stock would be made by an independent entity without the
consent of Thermo Instrument.
- THE UNAVAILABILITY OF A THIRD PARTY BUYER FOR THE COMPANY. Thermo
Instrument and Thermo Electron stated their current intention to retain
their majority holdings in the Company, which foreclosed the opportunity
to consider an alternative transaction with a third party purchaser of the
Company or otherwise provide liquidity to the Minority Stockholders.
- THE OPINION OF TUCKER CLEARY THAT THE CONSIDERATION OF $16.00 PER SHARE IN
CASH IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO THE MINORITY
STOCKHOLDERS. The Special Committee and the Board reviewed the independent
financial analyses performed by Tucker Cleary, including analyses of
relative value and discounted cash flows that assume ThermoSpectra will
continue as a going concern, and found them to be reasonable and believed
that Tucker Cleary's conclusion that the price offered by Thermo
Instrument was fair, from a financial point of view, to the Minority
Stockholders was a reasonable conclusion based on the analyses performed.
- THE POSITIVE ASPECTS OF THE COMPANY, INCLUDING ITS HIGH QUALITY PRODUCTS,
HIGHLY REGARDED MANAGEMENT TEAM, LEADING MARKET POSITION IN CERTAIN
PRODUCT AREAS, DIVERSIFIED CUSTOMER BASE AND STRONG EXISTING PRODUCT
PORTFOLIO. The Special Committee and the Board believed that these aspects
were potential contributors to the future success of ThermoSpectra and
weighed in favor of continuing ThermoSpectra as an independent entity.
However, these positive aspects were offset by the many other
considerations listed above.
In determining that the Merger is fair to the Minority Stockholders, the
Special Committee and the Board considered the above factors as a whole and did
not assign specific or relative weights to them. In the view of the Special
Committee and the Board, each of the factors listed above, except as otherwise
indicated, reinforced their belief that the transaction was in the best
interests of the Minority Stockholders.
24
<PAGE>
This belief was further reinforced by their recognition that the Special
Committee was formed to provide independent consideration of the transaction and
that the Special Committee had engaged Goodwin Procter and Tucker Cleary to
assist the Special Committee in its negotiation and evaluation of the
transaction. As the Special Committee and the Board believed that the Special
Committee, with the assistance of Goodwin Procter and Tucker Cleary, would
adequately protect the interests of the Minority Stockholders, no other
unaffiliated representative was retained to act solely on behalf of the Minority
Stockholders for the purposes of negotiating the terms of the Merger or the
Merger Agreement.
The Special Committee and the Board did not consider the Cash Merger
Consideration as compared to any implied liquidation value because it was not
contemplated that the Company be liquidated, whether or not the Merger would be
completed.
THE SPECIAL COMMITTEE AND THE THERMOSPECTRA BOARD, BY A UNANIMOUS VOTE, HAVE
APPROVED THE MERGER AGREEMENT, BELIEVE THAT THE TERMS OF THE MERGER ARE FAIR TO
THE MINORITY STOCKHOLDERS AND THE BOARD UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT.
In considering the recommendation of the Special Committee and the Board
with respect to the Merger Agreement, stockholders should be aware that certain
members of the Special Committee and the Board have certain interests in the
Merger that are different from, or in addition to, the interests of stockholders
generally and that represent actual or potential conflicts of interest. The
Special Committee and the Board were aware of these interests and considered
them, among other matters, in approving the Merger Agreement. See "--Conflicts
of Interest."
In order to aid the evaluation of the Company by the Special Committee and
Tucker Cleary and Tucker Cleary's assessment of the fairness, from a financial
point of view, of the consideration of $16.00 per share in cash payable to the
Minority Stockholders pursuant to the Merger Agreement, the Company furnished
the Special Committee and Tucker Cleary with certain projected financial data
prepared by the Company's management. See "CERTAIN PROJECTED FINANCIAL DATA."
OPINION OF FINANCIAL ADVISOR
The Special Committee retained Tucker Cleary to act as its financial advisor
and to render an opinion to the Special Committee as to the fairness, from a
financial point of view, of the consideration to be received by the Minority
Stockholders of the Company pursuant to the proposed transaction with Thermo
Instrument.
The Special Committee selected Tucker Cleary for a number of reasons,
including its knowledge of the instrumentation segment of the technology
industry and its experience and reputation in the area of valuation and
financial advisory work generally, and in relation to transactions of the size
and nature of the proposed transaction specifically. Tucker Cleary is a
nationally recognized investment banking firm and is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, private placements
and valuations for corporate and other purposes. From time to time, Tucker
Cleary and its affiliates may hold long or short positions in the Common Stock,
the common stock of Thermo Electron or the common stock of Thermo Instrument.
Tucker Cleary rendered its written opinion to the Special Committee on May
21, 1999, to the effect that, as of that date, the consideration to be received
pursuant to the proposed Merger was fair, from a financial point of view, to the
Minority Stockholders. Tucker Cleary has not been requested to, and will not,
update its opinion unless the Special Committee requests such an update. The
Special Committee has advised Tucker Cleary that it will not seek an update to
the fairness opinion unless:
- there is a material modification to the terms of the proposed
consideration or other material amendment to the Merger Agreement that the
Special Committee determines would be reasonably likely to impact the
overall fairness of the Merger to the Minority Stockholders; or
25
<PAGE>
- a material event occurs that the Special Committee determines would be
reasonably likely to affect Tucker Cleary's opinion if the opinion was
reissued taking into account such event.
The Special Committee has informed Tucker Cleary that, as of the date of
this Proxy Statement, there has been no change in the terms of the proposed
consideration and there has been no material event that the Special Committee
believes could affect Tucker Cleary's opinion since Tucker Cleary rendered such
opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF TUCKER CLEARY DATED MAY 21, 1999,
WHICH SETS FORTH THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY TUCKER CLEARY IN
RENDERING ITS OPINION, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT AND IS
INCORPORATED HEREIN BY REFERENCE. THE TUCKER CLEARY OPINION IS DIRECTED TO THE
SPECIAL COMMITTEE AND PERTAINS ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THE MINORITY STOCKHOLDERS PURSUANT
TO THE PROPOSED MERGER, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
THERMOSPECTRA STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO
THE APPROVAL OF THE MERGER AGREEMENT. THE SUMMARY OF TUCKER CLEARY'S OPINION SET
FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
WRITTEN OPINION ATTACHED HERETO AS APPENDIX B. HOLDERS OF COMMON STOCK ARE URGED
TO READ THE ENTIRE OPINION CAREFULLY.
In conducting its investigation and analysis and in arriving at its opinion,
Tucker Cleary reviewed the information and took into account the financial and
economic factors as it deemed relevant and material under the circumstances. The
material actions Tucker Cleary undertook in its analysis were as follows:
- reviewed internal financial information concerning the business and
operations of ThermoSpectra that was furnished to Tucker Cleary by the
Company's management for purposes of its analysis, as well as publicly
available information, including but not limited to ThermoSpectra's recent
filings with the Commission;
- reviewed the Merger Agreement in the form presented to the Special
Committee;
- compared the historical market prices and trading activity of the Common
Stock with those of other publicly traded companies that Tucker Cleary
deemed relevant;
- compared the financial position and operating results of ThermoSpectra
with those of other publicly traded companies that Tucker Cleary deemed
relevant;
- compared the proposed financial terms of the Merger with the financial
terms of other merger and acquisition transactions that Tucker Cleary
deemed relevant; and
- held discussions with members of ThermoSpectra's senior management
concerning the Company's historical and current financial condition and
operating results, as well as the future prospects of the Company.
Tucker Cleary also reviewed relevant industry market research studies,
company research reports and key economic and market indicators, including
interest rates, inflation rates, consumer spending levels, manufacturing
productivity levels, unemployment rates and general stock market performance.
Other than as set forth above, Tucker Cleary did not review any additional
information in preparing its opinion that, independently, was material to its
analysis. As a part of its engagement, Tucker Cleary was not requested to, and
did not, solicit third party indications of interest in acquiring ThermoSpectra.
The Special Committee did not place any limitation upon Tucker Cleary with
respect to the procedures followed or factors considered by Tucker Cleary in
rendering its opinion.
26
<PAGE>
In arriving at its opinion, Tucker Cleary assumed and relied upon the
accuracy and completeness of all of the financial and other information that was
publicly available or provided to Tucker Cleary by, or on behalf of, the
Company, and did not independently verify that information. Tucker Cleary
assumed, with the Special Committee's consent, that:
- all material assets and liabilities (contingent or otherwise, known or
unknown) of the Company are as set forth in its financial statements;
- obtaining all regulatory and other approvals and third party consents
required for consummation of the proposed Merger would not have a material
effect on the anticipated benefits of the transaction; and
- the Merger would be consummated in accordance with the terms set forth in
the Merger Agreement, without any amendment thereto and without waiver by
the Company or Thermo Instrument of any of the conditions to their
respective obligations thereunder.
Tucker Cleary assumed that the Projections examined by it were reasonably
prepared based upon the best available estimates and good faith judgments of the
Company's senior management as to the future performance of ThermoSpectra. In
conducting its review, Tucker Cleary did not obtain an independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of
ThermoSpectra. Tucker Cleary's opinion did not predict or take into account any
possible economic, monetary or other changes which may occur, or information
which may become available, after the date of its written opinion.
SUMMARY OF ANALYSES
The following is a summary of the material financial analyses performed by
Tucker Cleary in connection with rendering its opinion.
ANALYSIS OF THERMOSPECTRA'S VALUATION PREMIUM. Tucker Cleary compared the
premium to be received by the Minority Stockholders of ThermoSpectra as
represented by the proposed consideration of $16.00 per share in cash to the
closing price of the Common Stock one week prior to the May 21, 1999 date of its
written opinion.
- Tucker Cleary calculated that the proposed consideration of $16.00 per
share represented a premium of 43.8% over the closing price of $11.125 for
the Common Stock on May 14, 1999, one week prior to the date of its
written opinion.
Tucker Cleary reviewed comparable transactions in the following categories:
(i) 103 acquisitions between January 1994 and March 1999 of a minority interest
(ranging from 10.0% to 47.0%) in a public company that remained a public company
following the transaction; and (ii) 23 acquisitions between February 1994 and
January 1999 of a remaining minority interest (ranging from 10.0% to 48.1%) in a
public company that went private as a result of the transaction. Tucker Cleary
noted that the ThermoSpectra transaction represents a remaining minority
interest transaction. Tucker Cleary further noted that an acquisition of a
minority interest or a remaining minority interest differs from an acquisition
of a 100% interest. In a 100% acquisition, the acquiring company purchases, and
the financial terms of the transaction reflect, a control premium. The
acquisition of a minority interest in a public company does not, generally,
involve a control premium. While the acquisition of a remaining minority
interest does not, generally, involve a control premium, it nevertheless is
impacted by the fact that stockholders do not have the alternative to retain
their publicly traded stock in the subject company. Accordingly, premiums paid
in remaining interest transactions generally are greater than premiums paid in
minority interest transactions. Tucker Cleary's analysis produced the following
adjusted mean premiums (the adjusted mean excludes the high and low values in
calculating the average) over the one-week-prior stock price in the comparable
transactions as compared to the 43.8% premium in the proposed transaction:
27
<PAGE>
- the adjusted mean premium over the stock price one week prior to the
announcement of the 103 acquisitions of a minority interest in a public
company was 14.3%, with a range of 1.5% to 50.7%; and
- the adjusted mean premium over the stock price one week prior to the
announcement of the 23 remaining minority interest transactions was 18.8%,
with a range of 3.8% to 50.6%. Tucker Cleary again noted that these
transactions are most comparable to the ThermoSpectra transaction.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES COMPARABLE TO
THERMOSPECTRA. Tucker Cleary noted that the profile of the Company's business
in aggregate is unique. As a result, Tucker Cleary reviewed publicly available
financial information as of the most recently reported period and stock market
information as of May 14, 1999 for publicly traded companies that Tucker Cleary
deemed relevant to each of the Company's three business segments: (i)
Temperature Control segment; (ii) Test and Measurement segment; and (iii)
Imaging and Inspection segment. For each comparable company, Tucker Cleary
calculated multiples of enterprise value to the latest twelve months ("LTM")
earnings before interest and taxes ("EBIT"), LTM earnings before interest,
taxes, depreciation and amortization ("EBITDA") and LTM Revenues. Tucker Cleary
then calculated the implied gross enterprise value for each business segment
based on the adjusted mean of these comparable group multiples and the
corresponding business segment financial data for the LTM ending April 3, 1999,
which financial data is based on actual results for the nine months ending
January 2, 1999 and estimated results for the three months ending April 3, 1999.
Tucker Cleary compared the financial characteristics of the Company's
Temperature Control segment to the following companies:
<TABLE>
<C> <S> <C> <C>
1. Cerprobe Corporation 5. Applied Materials, Inc.
2. GenRad, Inc. 6. Credence Systems Corporation
3. IFR Systems, Inc. 7. KLA--Tencor Corporation
4. Keithley Instruments, Inc.
</TABLE>
The following table sets forth the calculation of implied gross enterprise
values for the Temperature Control segment:
TEMPERATURE CONTROL SEGMENT
<TABLE>
<CAPTION>
COMPARABLE
GROUP MULTIPLES
SEGMENT ----------------- IMPLIED GROSS
FINANCIAL DATA ENTERPRISE
-------------- VALUES
(IN THOUSANDS) ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
LTM EBIT $ 5,912 17.7x $ 104,434
LTM EBITDA $ 7,350 13.6x $ 100,012
LTM Revenues $ 54,768 0.9x $ 47,310
</TABLE>
Tucker Cleary compared the financial characteristics of the Company's
Imaging and Inspection segment to the following companies:
<TABLE>
<C> <S> <C> <C>
1. American Science and Engineering, Moore Products Company
Inc. 6.
2. Barringer Technologies, Inc. 7. Robotic Vision Systems, Inc.
3. Bio-Rad Laboratories, Inc. 8. Oxford Instruments plc
4. Cognex, Inc. 9. PPT Vision, Inc.
5. Invision Technologies, Inc. 10. Veeco Instruments Inc.
</TABLE>
28
<PAGE>
The following table sets forth the calculation of implied gross enterprise
values for the Imaging and Inspection segment:
IMAGING AND INSPECTION SEGMENT
<TABLE>
<CAPTION>
COMPARABLE
GROUP MULTIPLES
SEGMENT --------------- IMPLIED GROSS
FINANCIAL DATA ENTERPRISE
-------------- VALUES
(IN THOUSANDS) ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
LTM EBIT $ 4,295 10.8x $ 46,582
LTM EBITDA $ 5,946 9.4x $ 55,603
LTM Revenues $ 86,026 0.9x $ 74,205
</TABLE>
Tucker Cleary compared the financial characteristics of the Company's Test
and Measurement segment to the following companies:
<TABLE>
<C> <S> <C> <C>
1. Astro-Med, Inc. 7. Newport Corporation
2. Cyber Optics Corp. 8. Tektronix Inc.
3. Faro Technologies, Inc. 9. TSI Incorporated
4. Keithley Instruments, Inc. 10. Yokogawa Electronic Corporation
5. K-Tron International, Inc. 11. Zygo Corp.
6. Nanometrics Incorporated
</TABLE>
The following table sets forth the calculation of implied gross enterprise
values for the Test and Measurement segment:
TEST AND MEASUREMENT SEGMENT
<TABLE>
<CAPTION>
COMPARABLE
GROUP MULTIPLES
SEGMENT ------------------- IMPLIED GROSS
FINANCIAL DATA ENTERPRISE
-------------- VALUES
(IN THOUSANDS) ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
LTM EBIT $ 1,984 9.2x $ 18,212
LTM EBITDA $ 2,812 7.6x $ 21,434
LTM Revenues $ 41,053 0.9x $ 37,328
</TABLE>
Tucker Cleary then calculated the aggregate implied gross enterprise value
of the Company as follows:
<TABLE>
<CAPTION>
IMPLIED GROSS ENTERPRISE VALUE BASED ON
MULTIPLES OF:
-------------------------------------------
THERMOSPECTRA SEGMENT LTM EBIT LTM REVENUES
- ------------------------------------ ----------- LTM EBITDA --------------
--------------
(IN THOUSANDS)
<S> <C> <C> <C>
Temperature Control $ 104,434 $ 100,012 $ 47,310
Imaging and Inspection 46,582 55,603 74,205
Test and Measurement 18,212 21,434 37,328
----------- -------------- --------------
Aggregate $ 169,228 $ 177,049 $ 158,843
----------- -------------- --------------
----------- -------------- --------------
</TABLE>
Tucker Cleary then calculated the implied equity value per share of the
Company based on the above aggregate implied gross enterprise values by adding
the cash balance ($18,094,000) and subtracting the amount of outstanding debt
($57,326,000) of the Company, each as of April 3, 1999. The resulting amounts
were then divided by the number of outstanding shares of Common Stock as of
April 30, 1999. These calculations produced per share values equal to $8.48,
$8.99 and $7.80, based upon multiples of LTM EBIT, LTM EBITDA and LTM Revenues,
respectively. Tucker Cleary compared these amounts to the Company's
one-week-prior stock price of $11.125 and the proposed consideration of $16.00
per share.
Tucker Cleary performed a sensitivity analysis on these calculations by
basing additional calculations on the Company's Projections for the year ending
January 1, 2000. These calculations resulted in per share
29
<PAGE>
values of $13.72, $18.94 and $8.15 based upon multiples of projected EBIT,
EBITDA and Revenues. Tucker Cleary noted that these per share values were not
comparable to the comparable company calculations and the per share values
derived therefrom discussed above. However, Tucker Cleary believed that they
were consistent with its above historical analysis and compared these per share
values to the Company's one-week-prior stock price of $11.125 and the proposed
consideration of $16.00 per share.
ANALYSIS OF SELECTED COMPARABLE 100% ACQUISITION TRANSACTIONS. Tucker
Cleary reviewed 103 transactions that Tucker Cleary deemed relevant. The
transactions were 100% acquisitions and were chosen based on a review of
acquired companies that possessed general business, operating and financial
characteristics representative of companies in the industries in which
ThermoSpectra's businesses operate. Tucker Cleary noted that none of the
selected transactions reviewed were identical to the proposed transaction and
that, accordingly, the analysis of comparable transactions necessarily involves
complex consideration and judgments concerning differences in financial and
operating characteristics of ThermoSpectra and other factors that would affect
the acquisition value of comparable transactions including, among others, the
general market conditions prevailing in the equity capital markets at the time
of such transactions.
For each comparable transaction, Tucker Cleary calculated multiples of
enterprise value to LTM EBIT, LTM EBITDA and LTM Revenues. Tucker Cleary then
calculated the implied gross enterprise value of ThermoSpectra based upon the
adjusted mean of these multiples. Tucker Cleary calculated the implied equity
value per share by adding the cash balance ($18,094,000) and subtracting the
amount of outstanding debt ($57,326,000) of the Company, each as of April 3,
1999. The resulting amounts were divided by the number of outstanding shares of
Common Stock as of April 30, 1999. These calculations produced per share values
of $3.13, $10.20 and $12.79 based upon the Company's LTM EBIT, LTM EBITDA and
LTM Revenues for the twelve months ending April 3, 1999, respectively. Tucker
Cleary performed a sensitivity analysis for these calculations based upon the
Company's projected EBIT, EBITDA and Revenues for the year ending January 1,
2000. These calculations produced per share values of $12.97, $23.09 and $13.50,
respectively. While Tucker Cleary noted that values associated with 100%
acquisitions differed from those in a remaining minority interest acquisition
such as the proposed transaction, Tucker Cleary compared these per share values
to the proposed consideration of $16.00.
DISCOUNTED CASH FLOW ANALYSIS. Tucker Cleary performed a discounted cash
flow analysis of ThermoSpectra using ThermoSpectra's Projections for 1999
through 2003, without taking into account any potential cost savings and
efficiencies that may be realized following the Merger. In such analysis, Tucker
Cleary assumed terminal value multiples of 11.0x to 13.0x EBIT in the year 2003
and discount rates of 15.7% to 17.7%. Selection of an appropriate discount rate
is an inherently subjective process and is affected by numerous factors. The
discount rates used by Tucker Cleary were selected based upon its calculation of
ThermoSpectra's weighted average cost of capital. This analysis produced present
values of the Common Stock ranging from $17.37 to $22.10 per share. Tucker
Cleary also performed a sensitivity analysis, resulting in the Revised
Projections, taking into account the possibility that ThermoSpectra may be able
to attain an operating margin in future years of only 11.0% compared to a range
of projected operating margins of 14.0% in 2000 to 17.4% in 2003 in the
Projections. Tucker Cleary noted that the Company's historical operating margins
were 9.7% in 1994, 8.5% in 1995, 8.8% in 1996, 6.4% in 1997 and 5.4% in 1998 and
3.3% in the quarter ending April 3, 1999. Tucker Cleary also noted that the
operating margins in the Projections were substantially in excess of the
operating margins achieved by comparable companies. This analysis produced
present values of ThermoSpectra's Common Stock ranging from $10.71 to $13.72.
Tucker Cleary noted that the per share present values in its discounted cash
flow analysis represented values attributable to a 100% acquisition. As such,
these values included a control premium that was not comparable to this
remaining minority interest transaction. While Tucker Cleary compared the above
present values per share to the proposed consideration of $16.00 per share, it
did so only with reference to this context. Tucker Cleary also compared these
present values per share to the per share values of $3.13 to
30
<PAGE>
$23.09 derived from its analysis of comparable merger and acquisition
transactions involving 100% acquisitions discussed above.
Tucker Cleary also reviewed and analyzed a discounted cash flow analysis
presented to the Special Committee by Thermo Instrument as support for its
initial offer of $13.00 per share made on March 19, 1999. The methodology of
this analysis differed from that used by Tucker Cleary in its analyses. Tucker
Cleary advised the Special Committee that it believed two assumptions upon
which, in part, Thermo Instrument's analysis was based were disputable. These
assumptions included (i) the terminal growth rate of the business (Thermo
Instrument's analysis used 2% and Tucker Cleary proposed a 5% growth rate) and
(ii) the requirement for net operating assets, or working capital, based upon
the expected growth rate (Thermo Instrument's analysis indicated a requirement
that was substantially in excess of what Tucker Cleary believed such requirement
to be).
At the request of the Special Committee, Tucker Cleary modified Thermo
Instrument's discounted cash flow analysis in these two areas. These changes
resulted in a per share present value of $19.65. Subsequently, in response to
these proposed modifications, Tucker Cleary and Thermo Instrument management
discussed the appropriateness of such modifications. It was agreed that the
analysis should be modified to cover a five-year period rather than a 10-year
period. On this basis it was agreed that the modifications were appropriate.
This analysis resulted in a per share present value of $16.41. Tucker Cleary
noted that this per share value was based upon the Projections, not the Revised
Projections, and was attributable to a 100% acquisition rather than a remaining
minority interest transaction.
The foregoing summary does not purport to be a complete description of the
analyses performed by Tucker Cleary. The preparation of a fairness opinion is a
complex process and is not susceptible to partial analysis or summary
description. Tucker Cleary believes that its analyses must be considered as a
whole, and that selecting portions of such analysis without considering all
analyses and factors, would create an incomplete view of the processes
underlying its opinion. Tucker Cleary did not attempt to assign specific weights
to particular analyses. However, there were no specific factors reviewed by
Tucker Cleary that did not support its opinion. Any estimates contained in
Tucker Cleary's analyses are not necessarily indicative of actual values, which
may be significantly more or less favorable than as set forth therein. Estimates
of values of companies do not purport to be appraisals or necessarily to reflect
the prices at which companies may actually be sold. Because such estimates are
inherently subject to uncertainty, Tucker Cleary does not assume responsibility
for their accuracy.
Pursuant to the terms of Tucker Cleary's engagement letter dated February 2,
1999 with the Special Committee, the Company paid Tucker Cleary a retainer fee
of $50,000 and a fee of $100,000 for the preparation and delivery of its written
fairness opinion dated May 21, 1999 (which fee was payable regardless of the
conclusions expressed therein). In addition, the Company has agreed to pay
Tucker Cleary an additional $75,000 if the Merger is consummated. The Company
has also agreed to reimburse Tucker Cleary up to $10,000 for its out-of-pocket
expenses, including the reasonable fees and disbursements of its counsel,
arising in connection with its engagement, and to indemnify Tucker Cleary, its
affiliates and their respective directors, officers, employees and agents to the
fullest extent permitted by law against certain liabilities, including
liabilities under the federal securities laws, relating to or arising out of its
engagement, except for liabilities found to have resulted from the bad faith,
gross negligence or intentional or reckless misconduct of Tucker Cleary.
In the past, Tucker Cleary has not performed investment banking services for
ThermoSpectra or received any compensation from ThermoSpectra, other than as
provided for in the engagement letter. Additionally, it has been over eight
years since Tucker Cleary has provided any investment banking services to Thermo
Electron or its subsidiaries.
31
<PAGE>
PURPOSE AND REASONS OF THERMO INSTRUMENT AND THERMO ELECTRON FOR THE MERGER
The purpose of Thermo Instrument and Thermo Electron for engaging in the
transactions contemplated by the Merger Agreement is for Thermo Instrument to
acquire all of the outstanding shares of Common Stock, other than the shares
held by Thermo Electron. In determining to acquire such shares of Common Stock
at this time, Thermo Instrument and Thermo Electron considered the following
factors: (i) the latest market trends in the markets in which the Company
competes, primarily the cyclicality of the semiconductor industry; (ii) the
substantial debt owed by the Company to, primarily, Thermo Electron; (iii) the
reduction in the amount of public information available to competitors about
ThermoSpectra's business that would result from the termination of the Company's
obligations under the Commission reporting requirements; (iv) the elimination of
additional burdens on management associated with public reporting and other
tasks resulting from the Company's public company status; (v) the decrease in
costs, particularly those associated with being a public company; and (vi) the
greater flexibility that the Company's management would have to focus on
long-term business goals, as opposed to quarterly earnings, as a private
company.
Thermo Instrument also considered the advantages and disadvantages of
certain alternatives to taking ThermoSpectra private, including leaving
ThermoSpectra as a public majority-owned subsidiary of Thermo Instrument. Thermo
Instrument considered the number of ThermoSpectra shares held by the Minority
Stockholders, recent trends in the price of the Common Stock and the relative
lack of liquidity for the Common Stock. Thermo Instrument reviewed the net
overall cost of the transaction and its benefits, including its contribution to
Thermo Instrument's earnings. Thermo Instrument also explored alternative uses
for the cash proposed to be used for this transaction. After consideration of
these various factors, Thermo Instrument decided to make a proposal to
ThermoSpectra to acquire for cash, through a merger, all of the outstanding
shares of Common Stock that it and Thermo Electron did not own at a price of
$16.00 per share, which represented a premium of (i) approximately 71% over the
closing price of the Common Stock reported in the consolidated transaction
reporting system on August 11, 1998, the day immediately prior to Thermo
Electron's first public announcement of the proposal to take ThermoSpectra
private and (ii) approximately 39% over the closing price of the Common Stock
reported in the consolidated transaction reporting system on May 20, 1999, the
day immediately prior to the public announcement of the financial terms of
Thermo Instrument's proposal. Thermo Instrument proposed to structure the
transaction as a cash merger in order to transfer ownership of the equity
interest in the Company in a single transaction and provide the stockholders
other than Thermo Instrument and Thermo Electron with prompt payment in cash in
exchange for their shares.
Thermo Electron beneficially owns, in the aggregate, directly and indirectly
through Thermo Instrument, approximately 92% of the outstanding Common Stock.
See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--Principal
Stockholder."
POSITION OF THERMO INSTRUMENT AND THERMO ELECTRON AS TO FAIRNESS OF THE MERGER
Thermo Instrument and Thermo Electron considered the analyses and findings
of (i) Tucker Cleary with respect to the fairness, from a financial point of
view, of the consideration of $16.00 per share in cash payable under the Merger
Agreement to the Minority Stockholders (see "--Opinion of Financial Advisor")
and (ii) the Special Committee and the Board with respect to the fairness of the
Merger to the Minority Stockholders (see "--The Special Committee's and the
Board's Recommendation"). As of the date of the Merger Agreement, each of Thermo
Instrument and Thermo Electron adopted the analyses and findings of the Special
Committee and the Board with respect to the fairness of the Merger. Based on the
analyses and findings of Tucker Cleary and the Special Committee, Thermo
Instrument and Thermo Electron believe that the Merger is both procedurally and
substantively fair to the Minority Stockholders and that the Cash Merger
Consideration is fair to the Minority Stockholders from a financial point of
view. Neither Thermo Instrument nor Thermo Electron attached specific weights to
any factors in reaching its
32
<PAGE>
respective belief as to fairness. Thermo Instrument and Thermo Electron are not
making any recommendation as to how the Minority Stockholders should vote on the
Merger Agreement.
Certain officers and directors of Thermo Instrument and Thermo Electron are
also officers and directors of the Company and have certain interests that are
in addition to, or different from, the interests of the Minority Stockholders.
See "--Conflicts of Interest." Thermo Instrument and Thermo Electron considered
these potential conflicts of interest and based in part thereon, Thermo
Instrument's proposed offer was conditioned on, among other things, the approval
of the Merger by the Special Committee and the receipt by the Special Committee
of a fairness opinion from an investment banking firm.
CONFLICTS OF INTEREST
In considering the recommendation of the Board with respect to the Merger,
the Minority Stockholders should be aware that certain officers and directors of
ThermoSpectra have interests in connection with the Merger that present them
with actual or potential conflicts of interest, as summarized below. The Special
Committee and the Board were aware of these interests and did not view them
either positively or negatively, but considered them among the other matters
described above under "--The Special Committee's and the Board's
Recommendation."
Following consummation of the Merger, the current officers and directors of
ThermoSpectra will continue as the initial officers and directors of the
Surviving Corporation; however, Thermo Instrument intends to appoint a board of
directors comprised solely of members of the Surviving Corporation's and Thermo
Instrument's management after the Merger. Officers and directors who own Common
Stock will receive the Cash Merger Consideration on the same terms as all the
other stockholders.
SPECIAL COMMITTEE
As compensation for serving on the Special Committee, which formally met on
20 occasions, either in person or telephonically, from December 1998 through the
date of this Proxy Statement, the Board has authorized that each member of the
Special Committee receive a one-time special retainer fee of $20,000 and
additional fees of $1,000 for each meeting attended in person and $500 for each
meeting attended telephonically.
The members of the Special Committee hold options to acquire an aggregate of
2,000 shares of Common Stock, at exercise prices of $15.33, which will be
assumed by Thermo Instrument and converted into options to acquire shares of
Thermo Instrument Common Stock on the same terms as all the other holders of
ThermoSpectra Stock Options. See "THE MERGER--Assumption of ThermoSpectra Stock
Options by Thermo Instrument." Further, deferred units equal to 103 shares of
Common Stock have accumulated under the Company's deferred compensation plan for
directors for the benefit of Mr. Baute, which units will be converted into the
right to receive the Cash Merger Consideration per unit for an aggregate cash
payment of $1,648. See "THE MERGER--Deferred Compensation Plan for Directors."
Mr. Baute is also a member of the board of directors of Metrika Systems
Corporation, a majority-owned subsidiary of Thermo Instrument, and Mr. Beaubien
is also a member of the board of directors of ONIX Systems Inc., a
majority-owned subsidiary of Thermo Instrument. See "MANAGEMENT." Mr. Baute and
Mr. Beaubien, as compensation for serving on the board of directors of Metrika
Systems Corporation and ONIX Systems Inc., respectively, also each receive an
annual retainer fee of $4,000 and additional fees of $1,000 for each regular
board meeting attended in person and $500 for each board meeting attended
telephonically and for participating in certain meetings of committees of the
board of directors.
33
<PAGE>
THE THERMOSPECTRA DIRECTORS AND EXECUTIVE OFFICERS
The members of the Board of Directors, other than the members of the Special
Committee, and executive officers of ThermoSpectra own in the aggregate 40,610
shares of Common Stock and will receive a payment for their shares of Common
Stock in the aggregate amount of $649,760 upon consummation of the Merger. In
addition, such Board members and executive officers hold options to acquire an
aggregate of 360,300 shares of Common Stock, with exercise prices ranging from
$9.53 to $14.98, which will be assumed by Thermo Instrument and converted into
options to acquire shares of Thermo Instrument Common Stock on the same terms as
all the other holders of ThermoSpectra Stock Options. See "THE
MERGER--Assumption of ThermoSpectra Stock Options by Thermo Instrument."
Further, deferred units equal to 22 shares of Common Stock have accumulated
under the Company's deferred compensation plan for directors for the benefit of
Elias P. Gyftopoulos, which units will be converted into the right to receive
the Cash Merger Consideration per unit for an aggregate cash payment of $352.
See "THE MERGER--Deferred Compensation Plan for Directors." See "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--Management," for
information regarding beneficial ownership by the Board and executive officers
of Common Stock and common stock of Thermo Instrument and Thermo Electron.
Further, certain members of the Board and certain executive officers hold
directorship or officer positions with Thermo Instrument and/or Thermo Electron.
For a description of such positions, see "MANAGEMENT."
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that for a period of six years after the
Effective Time, Thermo Instrument will, and will cause the Surviving Corporation
to, fulfill and honor in all respects the indemnification obligations of
ThermoSpectra, pursuant to ThermoSpectra's Certificate of Incorporation and
Bylaws, each as in effect immediately prior to the Effective Time, to those
individuals who were directors, including the members of the Special Committee,
or officers of ThermoSpectra at the Effective Time. The Surviving Corporation's
Certificate of Incorporation and Bylaws will contain the provisions with respect
to indemnification and elimination of liability for monetary damages currently
set forth in ThermoSpectra's Certificate of Incorporation and Bylaws, and such
provisions will not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights of those individuals who were directors or officers of ThermoSpectra at
the Effective Time, unless such modification is required by law. See "THE
MERGER--Indemnification and Insurance."
In addition, Thermo Instrument will cause the Surviving Corporation, either
directly or through participation in Thermo Electron's umbrella policy, to
maintain in effect, for a period of six years after the Effective Time, a
directors' and officers' liability insurance policy covering the ThermoSpectra
directors and officers who, at the Effective Time, were then covered by Thermo
Electron's liability insurance policy, with coverage providing substantially the
same amount and scope as such director's and officer's existing coverage.
However, in no event will the Surviving Corporation be required to pay premiums
for such insurance in excess of 175% of the current annual premiums, as adjusted
for inflation each year, allocable to and paid by ThermoSpectra. See "THE
MERGER--Indemnification and Insurance."
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, the entire equity interest in the Company will be
beneficially owned by Thermo Electron, directly and indirectly through Thermo
Instrument. Thermo Electron and Thermo Instrument will have complete control
over the conduct of the Company's business and will have 100% interest in the
net book value and net earnings of the Company and any future increases in the
value of the Company. Thermo Instrument's and Thermo Electron's combined
ownership of the Company prior to the
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transaction contemplated herein aggregated approximately 92%. Upon completion of
this transaction, Thermo Instrument's and Thermo Electron's aggregate interest
in the Company's net book value of $129.9 million on April 3, 1999 and net
earnings of $1.8 million and $4,000 for the year ended January 2, 1999 and the
three months ended April 3, 1999, respectively, would increase from
approximately 92% of such amounts to 100% of such amounts. The Minority
Stockholders will no longer have any interest in, and will not be stockholders
of, ThermoSpectra and therefore will not participate in ThermoSpectra's future
earnings and potential growth and will no longer bear the risk of any decreases
in the value of the Company. Instead, the stockholders of the Company other than
Thermo Instrument, Thermo Electron and holders who perfect their Dissenters'
Rights will have the right to receive the Cash Merger Consideration for each
share held.
In addition, upon consummation of the Merger, the Common Stock will no
longer be traded on the AMEX, price quotations with respect to sales of shares
in the public market will no longer be available and the registration of the
Common Stock under the Exchange Act will be terminated. The termination of
registration of the Common Stock under the Exchange Act will eliminate the
Company's obligation to file periodic financial and other information with the
Commission and will make most of the provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b) and the requirement of
furnishing a proxy or information statement in connection with stockholders'
meetings, no longer applicable.
For federal income tax purposes, the receipt of the Cash Merger
Consideration by holders of Common Stock pursuant to the Merger will be a
taxable sale of the holder's Common Stock. See "FEDERAL INCOME TAX
CONSEQUENCES."
CONDUCT OF THERMOSPECTRA'S BUSINESS AFTER THE MERGER
ThermoSpectra, Thermo Instrument and Thermo Electron are continuing to
evaluate ThermoSpectra's business, assets, practices, operations, properties,
corporate structure, capitalization, management and personnel and discuss what
changes, if any, will be desirable. Subject to the foregoing, for the
foreseeable future, Thermo Instrument and Thermo Electron expect that the
day-to-day business and operations of ThermoSpectra will be conducted
substantially as they are currently being conducted by ThermoSpectra. Thermo
Instrument and Thermo Electron are considering the sale of certain ThermoSpectra
businesses, but do not currently have any commitment or agreement for any such
sales. Additionally, Thermo Electron and Thermo Instrument do not currently
contemplate any material change in the composition of ThermoSpectra's current
management except that Thermo Instrument intends to appoint a board of directors
comprised solely of members of the Surviving Corporation's and Thermo
Instrument's management after the Merger.
CONDUCT OF THERMOSPECTRA'S BUSINESS IF THE MERGER IS NOT CONSUMMATED
If the Merger is not consummated, the Board of Directors expects that the
Company's current management will continue to operate the Company's business
substantially as presently operated, except with respect to certain businesses
that are being considered for sale. See "--Conduct of ThermoSpectra's Business
After the Merger."
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<PAGE>
THE SPECIAL MEETING
PROXY SOLICITATION
This Proxy Statement is being delivered to ThermoSpectra's stockholders in
connection with the solicitation by the Board of proxies to be voted at the
Special Meeting to be held on , , 1999 at 10:00 a.m., local time, at
the offices of Thermo Electron Corporation, 81 Wyman Street, Waltham,
Massachusetts 02454. All expenses incurred in connection with solicitation of
the enclosed proxy will be paid by the Company. Officers, directors and regular
employees of the Company, who will receive no additional compensation for their
services, may solicit proxies by telephone or personal call. The Company has
requested brokers and nominees who hold stock in their names to furnish this
proxy material to their customers and the Company will reimburse such brokers
and nominees for their related out-of-pocket expenses. This Proxy Statement and
the accompanying Proxy Card are first being mailed to stockholders of the
Company on or about , 1999.
RECORD DATE AND QUORUM REQUIREMENT
A committee of the Board has fixed the close of business on , 1999 as
the Record Date for the determination of stockholders entitled to notice of, and
to vote at, the Special Meeting. Each holder of record of Common Stock at the
close of business on the Record Date is entitled to one vote for each share then
held on each matter submitted to a vote of stockholders. At the close of
business on the Record Date, there were shares of Common Stock issued and
outstanding held by holders of record and by approximately persons or
entities holding in nominee name.
The holders of a majority of the outstanding shares entitled to vote at the
Special Meeting must be present in person or represented by proxy to constitute
a quorum for the transaction of business. Abstentions will be counted as shares
present or represented at the Special Meeting for purposes of determining
whether a quorum exists. If you hold your shares of Common Stock through a
broker, bank or other nominee, generally the nominee may only vote the Common
Stock that it holds for you in accordance with your instructions. However, if it
has not timely received your instructions, the nominee may only vote on matters
for which it has discretionary voting authority. Brokers will not have
discretionary voting authority with respect to the proposal to approve the
Merger Agreement. If a nominee cannot vote on a particular matter because it
does not have discretionary voting authority, this is a "broker non-vote" on
that matter. Broker non-votes will not be counted as shares present and entitled
to vote for purposes of determining the presence or absence of a quorum for the
transaction of business at the Special Meeting.
VOTING PROCEDURES
Under Delaware law, holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Special Meeting must vote to approve the
Merger Agreement. The Merger Agreement is attached to this Proxy Statement as
Appendix A. For the purposes of the vote required under Delaware law, a failure
to vote, a vote to abstain and a broker non-vote will each have the same legal
effect as a vote cast against approval of the Merger Agreement. Thermo
Instrument, which owns approximately 82% of the outstanding Common Stock, and
Thermo Electron, which owns approximately 10% of the outstanding Common Stock,
own enough shares of Common Stock to vote to approve the Merger Agreement under
Delaware law without the vote of the Minority Stockholders and intend to vote
their shares in favor of the Merger Agreement.
If a properly executed Proxy Card is submitted and no instructions are
given, the shares of Common Stock represented by that Proxy Card will be voted
"FOR" approval of the proposed Merger Agreement.
The Board is not aware of any other matters to be voted on at the Special
Meeting. If any other matters properly come before the Special Meeting,
including a motion to adjourn the Special Meeting for
36
<PAGE>
the purpose of soliciting additional proxies, the persons named on the
accompanying Proxy Card will vote the shares represented by all properly
executed proxies on such matters in their discretion, except that shares
represented by proxies that have been voted "AGAINST" approval of the Merger
Agreement will not be used to vote "FOR" adjournment of the Special Meeting for
the purpose of allowing additional time to solicit additional votes "FOR" the
Merger Agreement.
Under Delaware law, holders of Common Stock who comply with certain notice
requirements, do not vote in favor of the Merger Agreement and comply with
certain other procedures will have the right to dissent and to be paid cash for
the fair value of their shares as finally determined in accordance with the
procedures under Delaware law. The fair value, as finally determined, may be
more or less than the consideration to be received by other stockholders of
ThermoSpectra under the terms of the Merger Agreement. Failure to follow such
procedures under Delaware law precisely will result in the loss of Dissenters'
Rights. See "RIGHTS OF DISSENTING STOCKHOLDERS."
VOTING AND REVOCATION OF PROXIES
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised by (i) filing with the Secretary of ThermoSpectra an instrument
revoking it, (ii) submitting a duly executed proxy bearing a later date or (iii)
voting in person at the Special Meeting. Subject to such revocation, all shares
represented by each properly executed proxy received by the Secretary of
ThermoSpectra will be voted in accordance with the instructions indicated
thereon, and if no instructions are indicated, will be voted to approve the
Merger Agreement. The shares represented by the accompanying Proxy Card and
entitled to vote will be voted if the Proxy Card is properly signed and received
by the Secretary of the Company prior to the Special Meeting.
EFFECTIVE TIME
The Merger will be effective as soon as practicable following stockholder
approval of the Merger Agreement at the Special Meeting and satisfaction or
waiver of the terms and conditions set forth in the Merger Agreement, and upon
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware. See "THE MERGER--Conditions."
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<PAGE>
THE MERGER
The Merger Agreement provides that the Merger Sub, a newly-formed Delaware
corporation that is a wholly owned subsidiary of Thermo Instrument, will be
merged with and into ThermoSpectra, and that following the Merger, the separate
existence of the Merger Sub will cease and ThermoSpectra will continue as the
Surviving Corporation.
The terms of and conditions to the Merger are contained in the Merger
Agreement that is included in full as Appendix A to this Proxy Statement and is
incorporated herein by reference. The discussion in this Proxy Statement of the
Merger, and the summary description of all material terms of the Merger
Agreement that is contained in this section, are subject to and qualified in
their entirety by reference to the more complete information set forth in the
Merger Agreement.
CONVERSION OF SECURITIES
At the Effective Time, subject to the terms, conditions and procedures set
forth in the Merger Agreement, each share of Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares held by stockholders
exercising Dissenters' Rights, shares held in treasury by ThermoSpectra and
shares held by Thermo Instrument and Thermo Electron) will, by virtue of the
Merger, be converted into the right to receive the Cash Merger Consideration.
Except for the right to receive the Cash Merger Consideration, from and after
the Effective Time, all shares (other than shares held by stockholders
exercising Dissenters' Rights, shares held in treasury by ThermoSpectra and
shares held by Thermo Instrument and Thermo Electron), by virtue of the Merger
and without any action on the part of the holders, will no longer be outstanding
and will be canceled and retired and will cease to exist. Each holder of a stock
certificate formerly representing any shares (other than shares held by
stockholders exercising Dissenters' Rights, shares held in treasury by
ThermoSpectra and shares held by Thermo Instrument and Thermo Electron) will
after the Effective Time cease to have any rights with respect to such shares
other than the right to receive the Cash Merger Consideration for such shares
upon surrender of the stock certificate.
No interest will be paid or accrued on the amount payable upon the surrender
of any stock certificate. Payment to be made to a person other than the
registered holder of the stock certificate surrendered is conditioned upon the
stock certificate so surrendered being properly endorsed and otherwise in proper
form for transfer, as determined by the Payment Agent. Further, the person
requesting such payment will be required to pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the stock certificate surrendered or establish to the satisfaction of the
Payment Agent that such tax has been paid or is not payable. Six months
following the Effective Date, Thermo Instrument may require the Payment Agent to
deliver to it any funds made available to the Payment Agent that have not been
disbursed to holders of stock certificates formerly representing shares
outstanding prior to the Effective Time. After such time and with respect to
cash payable upon due surrender of their stock certificates, holders of
ThermoSpectra stock certificates will have no greater rights against Thermo
Instrument than as may be accorded to general creditors of Thermo Instrument.
Notwithstanding the foregoing, neither the Payment Agent nor any party to the
Merger Agreement will be liable to any holder of stock certificates formerly
representing shares for any amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
At the Effective Time, subject to the terms, conditions and procedures set
forth in the Merger Agreement, each share of Common Stock issued and outstanding
immediately prior to the Effective Time held by Thermo Instrument and Thermo
Electron will, by virtue of the Merger, be converted at the Effective Time into
one share of common stock of the Surviving Corporation. Each share of the Merger
Sub's common stock that is issued and outstanding immediately prior to the
Merger will, at the Effective Time, cease to be outstanding, be canceled and
retired without payment of any consideration therefor and cease to exist. All
shares held in treasury by ThermoSpectra immediately prior to the Effective Time
will,
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<PAGE>
at the Effective Time, cease to be outstanding, be canceled and retired without
payment of any consideration therefor and cease to exist. Shares of Common Stock
held by persons properly exercising Dissenters' Rights will not be converted
into the Cash Merger Consideration in the Merger and after the Effective Time
will represent only the right to receive such consideration as is determined to
be due such dissenting stockholder pursuant to Section 262 of the DGCL. See
"RIGHTS OF DISSENTING STOCKHOLDERS."
ASSUMPTION OF THERMOSPECTRA STOCK OPTIONS BY THERMO INSTRUMENT
ThermoSpectra has, from time to time, issued options to acquire Common Stock
pursuant to its Park Scientific Instruments Corporation 1988 Incentive Stock
Plan, Equity Incentive Plan, Employees Equity Incentive Plan and Directors'
Stock Option Plan, each as amended (collectively, the "ThermoSpectra Stock
Option Plans"). At the Effective Time, each outstanding ThermoSpectra Stock
Option under the ThermoSpectra Stock Option Plans, whether or not exercisable,
will be assumed by Thermo Instrument. Each ThermoSpectra Stock Option so assumed
by Thermo Instrument will continue to have, and be subject to, the same terms
and conditions set forth in the applicable ThermoSpectra Stock Option Plan
immediately prior to the Effective Time, except that (i) each ThermoSpectra
Stock Option will be exercisable (or will become exercisable in accordance with
its terms) for that number of whole shares of Thermo Instrument Common Stock
equal to the product of the number of shares of Common Stock that were issuable
upon exercise of such ThermoSpectra Stock Option immediately prior to the
Effective Time multiplied by the Exchange Ratio (as defined below), rounded down
to the nearest whole number of shares of Thermo Instrument Common Stock, and
(ii) the per share exercise price for the shares of Thermo Instrument Common
Stock issuable upon exercise of such assumed ThermoSpectra Stock Option will be
equal to the quotient determined by dividing the exercise price per share of
Common Stock at which such ThermoSpectra Stock Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio, rounded up to the
nearest whole cent. The Exchange Ratio is a fraction, the numerator of which is
the Cash Merger Consideration and the denominator of which is the closing price
of Thermo Instrument Common Stock on the day immediately preceding the Effective
Date as reported by the AMEX.
At the Effective Time, each outstanding option to purchase shares of Common
Stock (each a "ThermoSpectra ESPP Stock Option") under the ThermoSpectra
Employees' Stock Purchase Plan (the "ThermoSpectra ESPP") will also be assumed
by Thermo Instrument. Each ThermoSpectra ESPP Stock Option so assumed by Thermo
Instrument will continue to have, and be subject to, the same terms and
conditions as set forth in the ThermoSpectra ESPP immediately prior to the
Effective Time except that (i) the assumed option shall be exercisable for
shares of Thermo Instrument Common Stock; (ii) the purchase price per share of
Thermo Instrument Common Stock shall be the lower of (a) 85% of (x) the per
share market value of the Common Stock on the grant date of the option divided
by (y) the Exchange Ratio, with the resulting price rounded up to the nearest
whole cent, and (b) 85% of the market value of Thermo Instrument Common Stock as
of the exercise date of the option; and (iii) the $25,000 limit under Section
9.2(i) of the ThermoSpectra ESPP shall be applied by taking into account Thermo
Instrument's assumption of the ThermoSpectra ESPP Stock Options in accordance
with Section 423(b)(8) of the Internal Revenue Code of 1986, as amended, and
applicable regulations.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
At the Effective Time, the ThermoSpectra deferred compensation plan for
directors (the "Deferred Compensation Plan") will terminate, and ThermoSpectra
will distribute to each participant the sum in cash equal to the balance of
stock units credited to his deferred compensation account under the Deferred
Compensation Plan as of the Effective Time multiplied by the Cash Merger
Consideration.
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<PAGE>
TRANSFER OF SHARES
Shares of Common Stock will not be transferred on the stock transfer books
at or after the Effective Time. If certificates representing such shares are
presented to ThermoSpectra after the Effective Time, such shares will be
canceled and exchanged for the Cash Merger Consideration.
CONDITIONS
Each party's obligation to effect the Merger is subject to the satisfaction
of each of the following conditions at or prior to the Effective Time:
(i) the Merger Agreement and the transactions contemplated therein shall
have been approved and adopted by the affirmative vote of the holders of
a majority of the outstanding shares of Common Stock entitled to vote
thereon in accordance with the DGCL; and
(ii) no court, administrative agency or commission or other governmental or
regulatory body or authority or instrumentality shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order that is in effect
and that has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
The obligations of ThermoSpectra to effect the Merger are subject to the
satisfaction of each of the following conditions at or prior to the Effective
Time, unless waived in writing by ThermoSpectra (upon approval of the Special
Committee):
(i) the representations and warranties of the Merger Sub and Thermo
Instrument in the Merger Agreement shall be true and correct in all
material respects on and as of the Effective Time, except as otherwise
permitted by the Merger Agreement;
(ii) the Merger Sub and Thermo Instrument shall have performed or complied
in all material respects with all agreements and covenants required by
the Merger Agreement to be performed or complied with by them at or
prior to the Effective Time; and
(iii) ThermoSpectra shall have received a certificate of the President, Chief
Executive Officer or Vice President of Thermo Instrument certifying to
the effect of above clauses (i) and (ii).
The obligations of the Merger Sub and Thermo Instrument to effect the Merger
are subject to the satisfaction of each of the following conditions at or prior
to the Effective Time, unless waived in writing by Thermo Instrument:
(i) the representations and warranties of ThermoSpectra in the Merger
Agreement shall be true and correct in all material respects on and as
of the Effective Time, except as otherwise permitted by the Merger
Agreement;
(ii) ThermoSpectra shall have performed or complied in all material respects
with all agreements and covenants required by the Merger Agreement to
be performed or complied with by it on or prior to the Effective Time;
and
(iii) Thermo Instrument shall have received a certificate of the President,
Chief Executive Officer or Vice President of ThermoSpectra certifying
to the effect of above clauses (i) and (ii).
REPRESENTATIONS AND WARRANTIES
ThermoSpectra has made representations and warranties in the Merger
Agreement regarding, among other things, its organization and good standing,
authority to enter into the Merger Agreement and consummate the transactions
contemplated thereby, its capitalization, requisite governmental and other
40
<PAGE>
consents and approvals, the content and submission of forms and reports required
to be filed by ThermoSpectra with the Commission, and its receipt of a fairness
opinion from Tucker Cleary.
Thermo Instrument and the Merger Sub have made representations and
warranties in the Merger Agreement regarding, among other things, their
organization and good standing, authority to enter the Merger Agreement and
consummate the transactions contemplated thereby, adequacy of Thermo
Instrument's financial resources to pay the Cash Merger Consideration, accuracy
of information supplied by Thermo Instrument for submission on forms and reports
required to be filed by ThermoSpectra with the Commission, and requisite
governmental and other consents and approvals.
The representations and warranties of the parties in the Merger Agreement
will expire upon consummation of the Merger. After such expiration, none of the
parties to the Merger Agreement or their respective officers, directors or
principals will have any liability for any such representations or warranties.
COVENANTS
In the Merger Agreement, ThermoSpectra has agreed that during the period
from the date of the Merger Agreement and continuing until the earlier of
termination of the Merger Agreement or the Effective Time, ThermoSpectra will
carry on its business in the usual, regular and ordinary course, substantially
consistent with past practice and will not, without the prior consent of Thermo
Instrument, or unless otherwise permitted by the Merger Agreement:
(i) waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice
options granted under any employee, consultant or director stock plans
or authorize cash payments in exchange for any options granted under any
of such plans;
(ii) enter into any material partnership arrangements, joint development
agreements or strategic alliances;
(iii) grant any severance or termination pay to any officer or employee
except payments in amounts consistent with past practices or pursuant
to written agreements outstanding, or existing policies, or adopt any
new severance plan;
(iv) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or
split, combine or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(v) issue, deliver, sell, authorize or propose the issuance, delivery or
sale of, any shares of its capital stock or any securities convertible
into shares of capital stock, or subscriptions, rights, warrants or
options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into other agreements
or commitments of any character obligating it to issue any such shares
or convertible securities, other than the issuance of shares of Common
Stock pursuant to the exercise of stock options therefor;
(vi) cause, permit or propose any amendments to its Certificate of
Incorporation or Bylaws;
(vii) acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a material portion of the assets
of, or by any other manner, any other business or any corporation,
partnership interest, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any assets
or enter into any joint ventures, strategic partnerships or alliances;
(viii) sell, lease, license, encumber or otherwise dispose of any properties
or assets that are material, individually or in the aggregate, to the
business of ThermoSpectra;
(ix) incur any indebtedness for borrowed money (other than ordinary course
trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such
41
<PAGE>
indebtedness or issue or sell any debt securities or warrants or
guarantee any debt securities of others;
(x) adopt or amend any employee benefit or stock purchase or option plan, or
enter into any employment contract, pay any special bonus or special
remuneration to any director or employee, or increase the salaries or
wage rates of its officers or employees, except increases in amounts
consistent with past practice;
(xi) pay, discharge or satisfy any claim, liability or obligation, other
than the payment, discharge or satisfaction in the ordinary course of
business;
(xii) make any grant of exclusive rights to any third party; or
(xiii) agree in writing or otherwise to take any of the actions described
above.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that for a period of six years after the
Effective Time, Thermo Instrument will, and will cause the Surviving Corporation
to, fulfill and honor in all respects the indemnification obligations of
ThermoSpectra, pursuant to ThermoSpectra's Certificate of Incorporation and
Bylaws, each as in effect immediately prior to the Effective Time, to those
individuals who were directors, including the members of the Special Committee,
or officers of ThermoSpectra at the Effective Time. The Surviving Corporation's
Certificate of Incorporation and Bylaws will contain the provisions with respect
to indemnification and elimination of liability for monetary damages currently
set forth in ThermoSpectra's Certificate of Incorporation and Bylaws, and such
provisions will not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights of those individuals who were directors or officers of ThermoSpectra at
the Effective Time, unless such modification is required by law.
In addition, Thermo Instrument will cause the Surviving Corporation, either
directly or through participation in Thermo Electron's umbrella policy, to
maintain in effect, for a period of six years after the Effective Time, a
directors' and officers' liability insurance policy covering the ThermoSpectra
directors and officers who, at the Effective Time, were then covered by Thermo
Electron's liability insurance policy, with coverage providing substantially the
same amount and scope as such director's and officer's existing coverage.
However, in no event will the Surviving Corporation be required to pay premiums
for such insurance in excess of 175% of the current annual premiums, as adjusted
for inflation each year, allocable to and paid by ThermoSpectra.
TERMINATION, AMENDMENT AND WAIVER
At any time prior to the Effective Time, whether before or after approval of
the Merger Agreement by the stockholders of ThermoSpectra, the Merger Agreement
may be terminated by the mutual written consent of the board of directors of
Thermo Instrument and the Board of Directors of ThermoSpectra (upon approval of
the Special Committee).
In addition, either Thermo Instrument or ThermoSpectra (upon approval of the
Special Committee), in accordance with the provisions of the Merger Agreement,
may terminate the Merger Agreement prior to the Effective Time, whether before
or after approval of the Merger Agreement by the stockholders of ThermoSpectra,
if (i) the Merger has not been consummated by October 31, 1999, unless such
party's action or inaction constitutes a breach of the Merger Agreement and has
been a principal cause of or resulted in the failure of the Merger to be
consummated, (ii) a court of competent jurisdiction or governmental, regulatory
or administrative agency or commission issues an order, decree or ruling or
takes any other action enjoining, restraining or otherwise prohibiting the
Merger and such order, decree, ruling or action is final and nonappealable or
(iii) the approval of the stockholders of ThermoSpectra necessary to consummate
the Merger has not been obtained, unless such party's action or inaction
constitutes a breach of the Merger Agreement and has been the principal cause of
or resulted in the failure to obtain the requisite stockholder approval to
consummate the Merger.
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In addition, Thermo Instrument may terminate the Merger Agreement prior to
the Effective Time, whether before or after approval of the Merger Agreement by
the stockholders of ThermoSpectra, if ThermoSpectra breaches any representation,
warranty, covenant or agreement and fails to cure such breach within ten
business days after written notice of such breach from Thermo Instrument.
ThermoSpectra may terminate the Merger Agreement prior to the Effective
Time, whether before or after approval of the Merger Agreement by the
stockholders of ThermoSpectra, if (i) ThermoSpectra's Board of Directors, upon
approval of the Special Committee, determines in good faith on the advice of
outside legal counsel that the Board's fiduciary duties under applicable law
require it to do so or (ii) Thermo Instrument breaches any representation,
warranty, covenant or agreement and fails to cure such breach within ten
business days after written notice of such breach from ThermoSpectra.
Subject to the provisions of applicable law, the Merger Agreement may be
amended by the parties thereto at any time by written agreement of the parties;
provided, however, that ThermoSpectra may not amend the Merger Agreement without
the approval of the Special Committee.
SOURCE OF FUNDS
The aggregate consideration payable in the Merger is approximately $19.4
million. Thermo Instrument intends to finance the Merger entirely from cash on
hand.
EXPENSES
The parties have agreed to pay their own costs and expenses in connection
with the Merger Agreement and the transactions contemplated thereby. Assuming
the Merger is consummated, the estimated costs and fees in connection with the
Merger and the related transactions that will be paid by ThermoSpectra are as
follows:
<TABLE>
<CAPTION>
COST OR FEE ESTIMATED AMOUNT
- --------------------------------------------------------------------------- -----------------
<S> <C>
Financial advisory fees.................................................... $ 225,000
Legal fees................................................................. 115,000
Accounting fees............................................................ 15,000
Special Committee fees..................................................... 68,000
Printing and mailing fees.................................................. 150,000
Commission filing fees..................................................... 3,878
Other regulatory filing fees............................................... 5,000
Miscellaneous.............................................................. 43,122
--------
$ 625,000
</TABLE>
See "SPECIAL FACTORS--Opinion of Financial Advisor" for a description of the
fees to be paid to Tucker Cleary in connection with its engagement. For a
description of certain fees payable to the members of the Special Committee, see
"SPECIAL FACTORS--Conflicts of Interest."
ACCOUNTING TREATMENT
The Merger will be accounted for as the acquisition of a minority interest
by Thermo Instrument, using the purchase method of accounting.
REGULATORY APPROVALS
No federal or state regulatory approvals are required to be obtained that
have not already been obtained, nor any regulatory requirements complied with,
in connection with the consummation of the Merger by any party to the Merger
Agreement, except for (i) the requirements of the DGCL in connection with
stockholder approvals and consummation of the Merger and (ii) the requirements
of the federal securities laws.
43
<PAGE>
RIGHTS OF DISSENTING STOCKHOLDERS
Under the DGCL, record holders of shares of Common Stock who follow the
procedures set forth in Section 262 and who have not voted in favor of the
Merger Agreement will be entitled to have their shares of Common Stock appraised
by the Court of Chancery of the State of Delaware and to receive payment of the
fair value of such shares together with a fair rate of interest, if any, as
determined by such court. The fair value as determined by the Delaware court is
exclusive of any element of value arising from the accomplishment or expectation
of the Merger. The following is a summary of certain of the provisions of
Section 262 of the DGCL and is qualified in its entirety by reference to the
full text of Section 262, a copy of which is attached hereto as Appendix C.
Under Section 262, where a merger agreement is to be submitted for approval
and adoption at a meeting of stockholders, as in the case of the Special
Meeting, not less than 20 calendar days prior to the meeting, the Company must
notify each of the holders of Common Stock at the close of business on the
Record Date that such appraisal rights are available and include in each such
notice a copy of Section 262. This Proxy Statement constitutes such notice. Any
stockholder wishing to exercise appraisal rights should review the following
discussion and Appendix C carefully because failure to timely and properly
comply with the procedures specified in Section 262 will result in the loss of
appraisal rights under the DGCL.
A holder of shares of Common Stock wishing to exercise appraisal rights must
deliver to the Company, before the vote on the approval and adoption of the
Merger Agreement at the Special Meeting, a written demand for appraisal of such
holder's shares of Common Stock. Such demand will be sufficient if it reasonably
informs the Company of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares. A proxy or vote against
the Merger Agreement will not constitute such a demand. In addition, a holder of
shares of Common Stock wishing to exercise appraisal rights must hold of record
such shares on the date the written demand for appraisal is made and must
continue to hold such shares through the Effective Time.
Only a holder of record of shares of Common Stock is entitled to assert
appraisal rights for the shares of Common Stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder of
record fully and correctly, as the holder's name appears on the stock
certificates. Holders of Common Stock who hold their shares in brokerage
accounts or other nominee forms and wish to exercise appraisal rights should
consult with their brokers to determine the appropriate procedures for the
making of a demand for appraisal by such nominee. All written demands for
appraisal of Common Stock should be sent or delivered to Sandra L. Lambert,
Secretary, ThermoSpectra Corporation, c/o Thermo Electron Corporation, 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, so as to be received
before the vote on the approval and adoption of the Merger Agreement at the
Special Meeting.
If the shares of Common Stock are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of the demand should be
made in that capacity, and if the shares of Common Stock are owned of record by
more than one person, as in a joint tenancy or tenancy in common, the demand
should be executed by or on behalf of all joint owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on behalf
of a holder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the agent
is agent for such owner or owners. A record holder such as a broker holding
Common Stock as nominee for several beneficial owners may exercise appraisal
rights with respect to the Common Stock held for one or more beneficial owners
while not exercising such rights with respect to the Common Stock held for other
beneficial owners; in such case, the written demand should set forth the number
of shares as to which appraisal is sought and where no number of shares is
expressly mentioned the demand will be presumed to cover all Common Stock held
in the name of the record owner.
Within 10 calendar days after the Effective Time, the Company, as the
Surviving Corporation in the Merger, must send a notice as to the effectiveness
of the Merger to each person who has satisfied the
44
<PAGE>
appropriate provisions of Section 262 and who has not voted in favor of the
Merger Agreement. Within 120 calendar days after the Effective Time, the
Company, or any stockholder entitled to appraisal rights under Section 262 and
who has complied with the foregoing procedures, may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
shares of all such stockholders. The Company is not under any obligation, and
has no present intention, to file a petition with respect to the appraisal of
the fair value of the shares of Common Stock. Accordingly, it is the obligation
of the stockholders to initiate all necessary action to perfect their appraisal
rights within the time prescribed in Section 262.
Within 120 calendar days after the Effective Time, any stockholder of record
who has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Company a statement setting
forth the aggregate number of shares of Common Stock with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. Such statement must be mailed within 10 calendar days after a
written request therefor has been received by the Company.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights and will appraise the fair value of the shares of
Common Stock, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. Holders considering
seeking appraisal should be aware that the fair value of their shares of Common
Stock as determined under Section 262 could be more than, the same as or less
than the amount per share that they would otherwise receive if they did not seek
appraisal of their shares of Common Stock. The Delaware Supreme Court has stated
that "proof of value by any techniques or methods that are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in the appraisal proceedings. In addition, Delaware courts have
decided that the statutory appraisal remedy, depending on factual circumstances,
may or may not be a dissenter's exclusive remedy. The Court will also determine
the amount of interest, if any, to be paid upon the amounts to be received by
persons whose shares of Common Stock have been appraised. The costs of the
action may be determined by the Court and taxed upon the parties as the Court
deems equitable. The Court may also order that all or a portion of the expenses
incurred by any holder of shares of Common Stock in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts used in the appraisal proceeding, be charged pro
rata against the value of all the shares of Common Stock entitled to appraisal.
The Court may require stockholders who have demanded an appraisal and who
hold Common Stock represented by certificates to submit their certificates of
Common Stock to the Court for notation thereon of the pendency of the appraisal
proceedings. If any stockholder fails to comply with such direction, the
Court may dismiss the proceedings as to such stockholder.
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
of Common Stock subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends or
other distributions payable to holders of record of shares of Common Stock as of
a date prior to the Effective Time).
If any stockholder who demands appraisal of shares under Section 262 fails
to perfect, or effectively withdraws or loses, the right to appraisal, as
provided in the DGCL, the shares of Common Stock of such holder will be
converted into the right to receive the Cash Merger Consideration in accordance
with the Merger Agreement, without interest. A stockholder will fail to perfect,
or effectively lose, the right to appraisal if no petition for appraisal is
filed within 120 calendar days after the Effective Time. A stockholder may
withdraw a demand for appraisal by delivering to the Company a written
withdrawal of the demand for appraisal and acceptance of the Merger, except that
any such attempt to withdraw made
45
<PAGE>
more than 60 calendar days after the Effective Time will require the written
approval of the Company. Once a petition for appraisal has been filed, such
appraisal proceeding may not be dismissed as to any stockholder without the
approval of the Court.
For federal income tax purposes, stockholders who receive cash for their
shares of Common Stock upon exercise of Dissenters' Rights will realize taxable
gain or loss. See "FEDERAL INCOME TAX CONSEQUENCES."
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the Merger. This discussion is based on currently
existing provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences to the holders of Common Stock as described herein. Special tax
consequences not described below may be applicable to particular classes of
taxpayers, including financial institutions, broker-dealers, persons who are not
citizens or residents of the United States or who are foreign corporations,
foreign partnerships or foreign estates or trusts as to the United States and
holders who acquired their stock through the exercise of an employee stock
option or otherwise as compensation. In addition, the following discussion does
not include any discussion of any state, local or foreign tax consequences that
may result from the Merger.
THIS TAX DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED
UPON PRESENT UNITED STATES FEDERAL INCOME TAX LAW. EACH HOLDER OF COMMON STOCK
SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES
OF THE MERGER TO SUCH HOLDER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL,
STATE, LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECT OF CHANGES IN SUCH TAX
LAWS.
For federal income tax purposes, the receipt of the Cash Merger
Consideration by holders of Common Stock pursuant to the Merger will be a
taxable sale of the holder's Common Stock. Each holder's gain or loss per share
will equal the difference between $16.00 and the holder's basis in the share of
Common Stock. Such gain or loss generally will be a capital gain or loss
provided that the holder has held the Common Stock as a capital asset. Capital
gain or loss will be treated as long-term capital gain or loss if the holder has
held the Common Stock for more than one year, and will be treated as short-term
capital gain or loss if the holder has held the Common Stock for one year or
less.
A holder of Common Stock may be subject to backup withholding at the rate of
31% with respect to Cash Merger Consideration received pursuant to the Merger,
unless the holder (a) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, or (b) provides a correct
taxpayer identification number ("TIN"), certifies as to no loss of exemption
from backup withholding, and otherwise complies with applicable requirements of
the backup withholding rules. To prevent the possibility of backup federal
income tax withholding, each holder must provide the Payment Agent with his or
her correct TIN by completing a Form W-9 or Substitute Form W-9. A holder of
Common Stock who does not provide his or her correct TIN may be subject to
penalties imposed by the Internal Revenue Service (the "IRS"), as well as backup
withholding. Any amount withheld under these rules will be creditable against
the holder's federal income tax liability. Thermo Instrument (or its agent) will
report to the holders of Common Stock and the IRS the amount of any "reportable
payments," as defined in Section 3406 of the Code, and the amount of tax, if
any, withheld with respect thereto.
Neither the Company, Merger Sub nor Thermo Instrument will recognize gain or
loss for federal income tax purposes as a result of the Merger.
46
<PAGE>
BUSINESS OF THE COMPANY
OVERVIEW
ThermoSpectra was incorporated in 1994 as an indirect wholly owned
subsidiary of Thermo Instrument, a publicly traded subsidiary of Thermo
Electron. The Company develops, manufactures and markets imaging and inspection,
temperature control and test and measurement instruments. These instruments are
generally combined with proprietary operations and analysis software to provide
industrial and research customers with integrated systems that address their
specific needs. The Company's imaging and inspection products include X-ray
microanalysis instruments, X-ray fluorescence instruments, nondestructive X-ray
inspection systems, specialty X-ray tubes, as well as confocal laser scanning
microscopes. The Company broadened its product offerings to include scanning
probe microscopes through the acquisitions of Park Scientific Instruments
Corporation ("PSI") in March 1997 and TopoMetrix Corporation ("TopoMetrix") in
October 1998. These two businesses were subsequently combined to form
ThermoMicroscopes Corp. ("ThermoMicroscopes"). In addition, the Company acquired
Sierra Research and Technology Inc. ("SRT") in July 1997, a manufacturer of
systems that rework and repair printed circuit boards that have failed quality
control inspection. The Company expanded into temperature control instruments
with its March 1997 acquisition of NESLAB Instruments, Inc. ("NESLAB"), which
manufactures temperature control systems for analytical, laboratory, industrial,
research and development, laser and semiconductor applications. The Company's
test and measurement instruments include data-acquisition systems, digital
oscillographic recorders and digital storage oscilloscopes used primarily in
product development and process monitoring settings.
IMAGING AND INSPECTION INSTRUMENTS
The Company's Kevex Instruments Inc. ("Kevex Instruments") and NORAN
Instruments Inc. ("NORAN") subsidiaries manufacture X-ray analytical instruments
enhanced by real-time digital imaging technology for the electronics, aerospace
and automotive industries, among others. Product lines in this segment include
several X-ray microanalysis instruments that analyze the chemical composition of
microscopic samples by detecting, collecting, sorting and measuring X-rays
emitted by a sample that has been excited by an energy source. The Company also
manufactures a range of X-ray fluorescence instruments that incorporate an X-ray
source into the instrument to excite the sample. Industrial customers,
universities and government laboratories represent the majority of the end users
of X-ray microanalysis systems. Over 50% of the Company's sales of X-ray
microanalyzers are to electron microscope manufacturers for resale to end-users.
The Company sells its X-ray microanalyzers and X-ray fluorescence instruments in
the United States through a direct sales force; through a combination of direct
salespeople, distributors and sales representatives in Europe, Japan and the
rest of the Pacific Rim; and through original equipment manufacturer ("OEM")
relationships with electron microscope manufacturers.
The Company's Kevex X-Ray Inc. ("Kevex X-Ray") subsidiary is a manufacturer
of specialized X-ray sources used by industrial users for imaging, inspection,
analytical and thickness-gauging applications. Kevex X-Ray also supplies X-ray
sources for advanced medical diagnostic imaging equipment. The Company sells its
X-ray sources primarily to OEMs through a direct sales force in the United
States, a distributor in Japan and through both a direct sales force and
distributors in the remainder of the world.
The Company's Nicolet Imaging Systems ("NIS") division manufactures
real-time, nondestructive X-ray imaging systems for quality-control inspection.
NIS' products are used to inspect high-reliability, high-liability products (for
example, components for the telecommunications industry and those used in airbag
assembly in the automotive industry). The Company's line of X-ray inspection
products are among the most complete on the market, ranging from manual,
industrial inspection systems to fully automated, conveyorized circuit board
analysis systems for high-volume electronics manufacturing. The Company markets
its X-ray inspection systems worldwide through a network of domestic and
international sales representatives.
47
<PAGE>
Through the Company's SRT subsidiary, the Company manufactures systems for
the rework and repair of printed circuit boards that have failed quality-control
inspection. The product line includes systems that remove defective components
from the board, clean away excess solder, redispense solder to the board and
replace components. This is facilitated by proprietary software that allows for
increased automation and ease of use when incorporated into the system. The
Company sells its circuit board-repair systems through a combination of
distributors and sales representatives.
Through its ThermoMicroscopes subsidiary, the Company designs, manufactures
and sells a family of scanning probe microscopes including vacuum, ambient air
and liquid cell systems. Scanning probe microscopy is a new imaging tool that
offers three-dimensional resolution used for studying the surface properties of
materials down to the atomic level. Scanning probe microscopes can measure such
physical surface properties as magnetic fields, surface conductivity and
static-charge distribution. ThermoMicroscopes' instruments are used for
academic, semiconductor, computer storage, materials science, optics and life
sciences applications. The Company sells its scanning probe microscopes through
a direct sales force, representatives and distributors throughout the world.
The Company's NORAN subsidiary also manufactures confocal laser scanning
microscopes that create an image of a sample by rapidly scanning it with a laser
light source. Confocal microscopes provide greatly enhanced depth resolution
over conventional optical microscopes. The Company sells its confocal laser
scanning microscopes through a direct sales force and through distributors and
sales representatives.
Revenues from imaging and inspection systems represented 45%, 46% and 54% of
the Company's total revenues in 1998, 1997 and 1996, respectively. See Note 12
to the Company's Consolidated Financial Statements included elsewhere within
this Proxy Statement for financial information relating to business segments and
geographical information.
TEMPERATURE CONTROL INSTRUMENTS
Through its NESLAB subsidiary, the Company manufactures and markets
precision temperature control systems for analytical, laboratory, industrial,
research and development, laser and semiconductor applications. The laboratory
product line includes constant-temperature bath/circulators and immersion
coolers typically used for cell culture, incubations, refractometer cooling and
general research and development. The industrial product line features
self-contained cooling systems that pump chilled water through water-cooled
equipment such as lasers; analytical instrumentation such as X-ray diffraction;
and, in the semiconductor industry, etchers and ion implanters. The Company
sells its temperature control systems through a direct sales force in the United
States and Europe, and through a network of distributors and sales
representatives in the rest of the world.
Revenues from temperature control systems represented 32% and 28% of the
Company's total revenues in 1998 and 1997, respectively. See Note 12 to the
Company's Consolidated Financial Statements included elsewhere within this Proxy
Statement for financial information relating to business segments and
geographical information.
TEST AND MEASUREMENT INSTRUMENTS
The Company's Nicolet Instrument Technologies and Gould Instrument Systems
subsidiaries manufacture data-acquisition systems, digital oscilloscopes and
recording systems addressing a broad range of applications, primarily in product
development and process monitoring settings. Markets served include automotive,
power, medical research, telecommunications, and television and video. The
product family enables the analysis and display of most common signal types such
as voltage, pressure, current, strain, acceleration and temperature. The Company
markets its test and measurement instruments in the United States and Europe
through a combination of direct salespeople, distributors and sales
representatives, and in the rest of the world through over 90 distributors and
sales representatives.
48
<PAGE>
Revenues from test and measurement instruments represented 23%, 26% and 46%
of the Company's total revenues in 1998, 1997 and 1996, respectively. See Note
12 to the Company's Consolidated Financial Statements included elsewhere within
this Proxy Statement for financial information relating to business segments and
geographical information.
PROPERTIES
The Company owns approximately 119,000 square feet of office, engineering,
laboratory and manufacturing space, which includes approximately 117,000 square
feet in Middleton, Wisconsin and Valencia, California used by the Company's
Imaging and Inspection businesses and approximately 2,000 square feet in Kempen,
Cheshire, United Kingdom used by the Company's Temperature Control businesses.
The Company leases approximately 432,000 square feet of additional office,
engineering, laboratory and manufacturing space under leases expiring from 1999
through 2005. The Company's Imaging and Inspection businesses lease
approximately 151,000 square feet, principally in Sunnyvale, San Diego and
Scotts Valley, California, and Westford, Massachusetts. The Company's Test and
Measurement businesses lease approximately 110,000 square feet, principally in
Valley View, Ohio and Madison, Wisconsin. The Temperature Control businesses of
the Company lease approximately 170,000, principally in Newington, New
Hampshire. In addition, the Company leases approximately 1,000 square feet of
office space in Franklin, Massachusetts.
The Company believes that its facilities are in good condition and are
suitable and adequate for its present operations. With respect to leases
expiring in the near future, in the event the Company does not renew such
leases, the Company believes suitable alternate space is available for lease on
acceptable terms.
49
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected financial information presented below as of and for the years
ended January 2, 1999, and January 3, 1998, and for the year ended 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 Proxy Statement. The
selected financial information presented below as of December 28, 1996, and as
of and for the years ended December 30, 1995, and December 31, 1994, has been
derived from the Company's Consolidated Financial Statements, which have been
audited by Arthur Andersen LLP, but have not been included or incorporated by
reference herein. This information should be read in conjunction with the
Company's Consolidated Financial Statements and related notes included elsewhere
in this Proxy Statement. The selected financial information for the three months
ended April 3, 1999, and April 4, 1998, 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 April 3, 1999, are not
necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------- FISCAL YEAR
APRIL 3, APRIL 4, --------------------------------------------------------
1999 1998 1998(1) 1997(2) 1996(3) 1995(4) 1994
---------- ---------- ---------- ---------- ---------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Revenues................................. $ 41,874 $ 53,067 $ 191,017 $ 198,900 $ 123,199 $ 91,714 $ 42,142
---------- ---------- ---------- ---------- ---------- --------- ---------
Costs and Operating Expenses:
Cost of revenues....................... 25,111 30,397 110,915 115,747 62,900 46,384 21,759
Selling, general, and administrative
expenses............................. 11,637 14,118 53,643 53,182 36,493 28,501 12,136
Research and development expenses...... 3,771 4,513 16,298 17,303 12,910 9,036 4,149
Restructuring costs.................... 758 -- 4,320 953 1,038 -- --
Other nonrecurring income.............. (45) (339) (102) (2,210) (867) -- --
---------- ---------- ---------- ---------- ---------- --------- ---------
41,232 48,689 185,074 184,975 112,474 83,921 38,044
---------- ---------- ---------- ---------- ---------- --------- ---------
Operating Income......................... 642 4,378 5,943 13,925 10,725 7,793 4,098
Interest Income.......................... 188 325 1,333 692 935 820 226
Interest Expense......................... (822) (1,191) (4,337) (4,217) (773) (707) (114)
Gain on Sale of Investment............... -- -- 713 -- -- -- --
---------- ---------- ---------- ---------- ---------- --------- ---------
Income Before Provision for Income
Taxes.................................. 8 3,512 3,652 10,400 10,887 7,906 4,210
Provision for Income Taxes............... 4 1,440 1,827 4,552 4,270 3,312 1,842
---------- ---------- ---------- ---------- ---------- --------- ---------
Net Income............................... $ 4 $ 2,072 $ 1,825 $ 5,848 $ 6,617 $ 4,594 $ 2,368
---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- --------- ---------
Earnings per Share
Basic.................................. $ -- $ .14 $ .12 $ .40 $ .53 $ .41 $ .25
---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- --------- ---------
Diluted................................ $ -- $ .14 $ .12 $ .39 $ .53 $ .40 $ .25
---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- --------- ---------
Weighted Average Shares
Basic.................................. 15,330 15,319 15,324 14,694 12,437 11,229 9,383
---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- --------- ---------
Diluted................................ 15,386 15,337 15,354 14,806 12,570 11,356 9,383
---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- --------- ---------
</TABLE>
50
<PAGE>
SELECTED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------- FISCAL YEAR
APRIL 3, APRIL 4, --------------------------------------------------------
1999 1998 1998(1) 1997(2) 1996(3) 1995(4) 1994
---------- ---------- ---------- ---------- ---------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD)
Working Capital.......................... $ 491 $ 48,949 $ (2,252) $ 53,540 $ 44,683 $ 35,961 $ 27,377
Total Assets............................. 242,923 259,527 249,882 253,397 152,485 122,917 78,701
Long-term Obligations.................... 7,300 57,300 7,300 67,300 22,300 7,300 7,300
Shareholders' Investment................. 129,880 130,649 130,835 128,338 89,621 82,525 53,313
OTHER DATA (UNAUDITED)
Book Value per Share..................... 8.47 8.53 8.54 8.38 7.20 6.64 5.08
Cash Dividends Declared per Share........ -- -- -- -- -- -- --
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)(5)......................... 1.01 3.21 1.67 3.02 7.11 6.39 10.82
</TABLE>
- ------------------------
(1) Reflects the October 1998 acquisition of TopoMetrix Corporation and a $5.4
million pretax charge for restructuring and related costs.
(2) Reflects the March 1997 acquisitions of NESLAB Instruments, Inc. and Park
Scientific Instruments Corporation and the July 1997 acquisition of Sierra
Research and Technology Inc.
(3) Reflects the March 1996 acquisition of Kevex Instruments and Kevex X-Ray.
(4) Reflects the May 1995 acquisition of Gould Instrument Systems, Inc. and the
net proceeds of the Company's initial public offering and private placement
of common stock.
(5) For purposes of computing the ratios of earnings to fixed charges,
"earnings" represent income from continuing operations before taxes, plus
fixed charges. "Fixed charges" for continuing operations consist of interest
on indebtedness and amortization of debt expense and one-third of rental
expense, which is deemed to be the interest component of such rental
expense.
51
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company develops, manufactures, and markets precision instruments in
three segments: Imaging and Inspection, Temperature Control, and Test and
Measurement. These instruments are generally combined with proprietary
operations and analysis software to provide industrial and research customers
with integrated systems that address their specific needs. The Imaging and
Inspection segment includes X-ray microanalysis instruments; X-ray fluorescence
instruments; nondestructive X-ray inspection systems; specialty X-ray tubes; and
confocal laser scanning microscopes. The Company broadened its product offerings
to include scanning probe microscopes through the acquisitions of PSI in March
1997 and TopoMetrix in October 1998 (See Note 3 to the Company's Consolidated
Financial Statements included elsewhere in this Proxy Statement). In addition,
the Company acquired SRT in July 1997, a manufacturer of systems used for the
rework and repair of printed circuit boards (See Note 3 to the Company's
Consolidated Financial Statements included elsewhere in this Proxy Statement).
The Test and Measurement segment consists of digital oscillographic recorders,
digital storage oscilloscopes ("DSO's"), and data acquisition systems. The
Company expanded into the Temperature Control segment through its March 1997
acquisition of NESLAB, which manufactures and markets precision Temperature
Control systems for analytical, laboratory, industrial, research and
development, laser, and semiconductor applications (See Note 3 to the Company's
Consolidated Financial Statements included elsewhere in this Proxy Statement).
The Company's growth strategy has included acquiring complementary
businesses, developing new applications for its technologies to address related
markets segments, and strengthening its presence in selected geographic markets.
Because the Company competes primarily on the basis of its technology in all of
its segments, it will also need to continually improve the technology underlying
the products of any company it acquires. One of the Company's principal goals
during recent quarters has been to improve operating margins. As part of this
plan, the Company completed the divestiture of two low-margin product lines in
December 1997 and January 1998 (See Note 3 to the Company's Consolidated
Financial Statements included elsewhere in this Proxy Statement) and undertook
certain other restructuring actions during 1998 (See Note 4 to the Company's
Consolidated Financial Statements included elsewhere in this Proxy Statement).
A significant portion of the Company's total revenues, primarily in the
Imaging and Inspection and Temperature Control segments, is attributable to the
sale of products and related services to customers in the semiconductor
industry. The semiconductor industry has historically been cyclical and is
characterized by sudden and sharp changes in supply and demand. Demand for the
Company's products and services within the semiconductor industry is dependent
upon, among other things, the level of capital spending by semiconductor
companies. The semiconductor industry has been experiencing a weakness in demand
for its products as a result of the current economic crisis in Asia, excess
manufacturing capacity, and a slowdown in sales of high-end personal computers.
Many semiconductor manufacturers delayed construction or expansion of their
production facilities in response to the foregoing conditions. The slowdown in
semiconductor activity began to affect demand for the Company's products
beginning in the second quarter of 1998. During the first quarter 1999, the
semiconductor industry has shown some increased activity, but not to the levels
experienced prior to this most recent slowdown. Continued fluctuations in the
semiconductor industry could have a significant adverse effect upon the demand
for the Company's products and related services, which could materially
adversely affect the Company's business and future results of operations.
The Company conducts all of its manufacturing operations in the United
States. The Company sells its products worldwide. During 1998, exports to the
Far East represented 15% of total revenues. Asia is experiencing a severe
economic crisis, which has been characterized by sharply reduced economic
activity and liquidity, highly volatile foreign currency exchange and interest
rates, and unstable stock markets. The
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Company's sales to Asia have been, and are expected to continue to be, adversely
affected by the unstable economic conditions there. Additionally, certain of the
Company's customers located outside of the Asian region could be adversely
affected by the unstable economic conditions in Asia.
The Company anticipates that a significant portion of its revenues in all
three segments will be from sales to customers outside the United States. The
Company's business activities outside the United States are conducted through
sales and service subsidiaries and through third-party representatives and
distributors. The results of the Company's international operations are subject
to foreign currency fluctuations, and the exchange rate value of the dollar may
have a significant impact on both revenues and earnings. The Company may use
forward contracts to reduce its exposure to currency fluctuations.
RESULTS OF OPERATIONS
FIRST QUARTER 1999 COMPARED WITH FIRST QUARTER 1998
Total revenues decreased to $41.9 million in the first quarter of 1999 from
$53.1 million in the first quarter of 1998. Revenues at the Imaging and
Inspection segment, excluding the impact of foreign currency translation,
decreased $1.8 million, primarily due to a continued reduction in demand for
semiconductor related products, a downturn in overseas markets, and reduced
demand for products at Kevex Instruments. The decrease in revenues at the
Imaging and Inspection segment was offset in part by an increase of $1.9 million
due to the inclusion of revenues from TopoMetrix, acquired October 1998.
Revenues at the Company's Temperature Control segment, excluding the impact of
foreign currency translation, decreased $6.7 million, principally due to a
severe reduction in capital-equipment expenditures in the semiconductor
industry. Revenues at the Company's Test and Measurement segment, excluding the
impact of foreign currency translation, decreased $3.1 million, primarily due to
decreased demand and a delay in shipments due to facility consolidations related
to restructuring actions that commenced in 1998. The favorable effects of
currency translation due to the strengthening of foreign currencies in countries
in which the Company operates relative to the U.S. dollar increased revenues by
$0.4 million. The Company's total backlog remained at $26.0 million during the
first quarter of 1999 compared to year-end 1998.
Gross profit margin decreased to 40% in the first quarter of 1999 from 43%
in the first quarter of 1998, primarily due to lower sales volume. The decrease
in gross profit margin was offset in part by reduced spending as a result of
restructuring actions commenced in 1998.
Selling, general, and administrative expenses decreased 18% to $11.6 million
in the first quarter of 1999 from $14.1 million in the first quarter of 1998 in
response to reduced revenues and as a result of restructuring actions commenced
in 1998.
Research and development expenses decreased to $3.8 million in the first
quarter of 1999 from $4.5 million in the first quarter of 1998. The decreased
spending primarily resulted from the discontinuation of research and development
efforts on underperforming product lines and completion of efforts relating to
new-product releases.
The Company recorded $0.8 million of restructuring costs in the first
quarter of 1999 (See Note 4 to the Company's Consolidated Financial Statements
included elsewhere in this Proxy Statement). In connection with the closing of
certain facilities, the Company expects to incur approximately $0.4 million of
additional costs in the second quarter of 1999.
Interest income decreased to $0.2 million in the first quarter of 1999 from
$0.3 million in the first quarter of 1998, principally due to lower average
invested balances. Interest expense, related party, decreased due to the
repayment to Thermo Electron of a promissory note.
The tax provision was $4,000 in the first quarter of 1999 and $1.4 million
in the first quarter of 1998. The effective tax rate in 1998 was 41%, which
exceeded the statutory federal income tax rate primarily due
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to the impact of state income taxes and nondeductible amortization of costs in
excess of net assets of acquired companies.
1998 COMPARED WITH 1997
Total revenues decreased $7.9 million to $191.0 million in 1998 from $198.9
million in 1997. Revenues increased $17.6 million due to the inclusion of
revenues for the full year from NESLAB, PSI, and SRT, which were acquired during
1997, in addition to the inclusion of TopoMetrix, acquired October 1998, offset
by the exclusion of revenues from the NIS product lines that were sold in late
1997 and early 1998. Revenues were adversely affected by approximately $4.1
million due to the strengthening in the value of the U.S. dollar relative to
currencies in foreign countries in which the Company operates. Excluding the
impact of acquisitions, dispositions, and foreign exchange, revenues at the
Imaging and Inspection segment decreased $4.5 million in 1998, primarily due to
reduced demand for semiconductor related products, a downturn in overseas
markets, and a large shipment at Kevex Instruments that occurred in the first
quarter of 1997. Revenues at the Temperature Control segment, excluding the
impact of a full year of ownership of NESLAB, decreased $10.2 million in 1998,
due to a severe reduction in capital-equipment expenditures in the semiconductor
industry. Excluding the impact of foreign exchange, revenues at the Test and
Measurement segment decreased $6.6 million in 1998, primarily due to decreased
demand. The Company's backlog decreased $14.4 million during 1998 to $26.0
million, primarily due to the downturn in the semiconductor industry.
Excluding an inventory write-down of $1.1 million in 1998, primarily for
discontinuing certain underperforming products (See Note 4 to the Company's
Consolidated Financial Statements included elsewhere in this Proxy Statement)
and an inventory write-down in 1997 at NIS, the Company's gross profit margin
was 42% in 1998 and 1997. Gross profit margin remained constant as savings
resulting from restructuring actions were offset by lower selling prices at
Kevex Instruments and Gould Instrument Systems Inc. ("Gould") due to decreased
demand.
Selling, general, and administrative expenses as a percentage of revenues
increased to 28% in 1998 from 27% in 1997, primarily due to decreased revenues.
The impact of decreased revenues was offset in part by lower employment and
spending levels at most of the Company's subsidiaries in response to the revenue
decline.
Research and development expenses decreased to $16.3 million in 1998 from
$17.3 million in 1997. Increases due to the inclusion of NESLAB and PSI for the
full period in 1998 were more than offset by decreased spending due to
discontinuing underperforming products, completion of efforts as a result of
new-product releases, and a decrease in professional services.
In addition to the inventory write-downs, the Company recorded restructuring
charges of $4.3 million in 1998, compared with $1.0 million in 1997 (See Note 4
to the Company's Consolidated Financial Statements included elsewhere in this
Proxy Statement). Of the 1998 charges, $3.7 million represents severance costs
and $0.6 million represents facility-closing costs.
Interest income increased to $1.3 million in 1998 from $0.7 million in 1997,
due to higher average invested balances. Interest expense, related party,
primarily represents interest incurred on the $60 million aggregate amount of
promissory notes issued to Thermo Electron in 1997 in connection with
acquisitions.
During 1998, the Company sold its shares of SteriGenics International Inc.
("SteriGenics") common stock that were received in connection with the 1997 sale
of its Linac business, resulting in a gain of $0.7 million.
The effective tax rate was 50% in 1998, compared with 44% in 1997. The
effective tax rates exceeded the statutory federal income tax rate primarily due
to the impact of state income taxes and nondeductible amortization of costs in
excess of net assets of acquired companies for certain of the Company's
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acquisitions. The effective tax rate increased principally due to the larger
relative impact of nondeductible amortization of cost in excess of net assets of
acquired companies.
1997 COMPARED WITH 1996
Revenues were $198.9 million in 1997, compared with $123.2 million in 1996,
an increase of 61%. Revenues increased $76.6 million due to the inclusion of
revenues from NESLAB, PSI, and SRT, which were acquired during 1997, and the
inclusion of revenues for the full year in 1997 from Kevex Instruments and Kevex
X-Ray. Excluding the impact of acquisitions and foreign currency translation,
revenues increased 2% in 1997 compared with 1996. Imaging and Inspection segment
revenues, excluding the impact of acquisitions and foreign currency translation,
increased $6.1 million, or 7%, to $93.1 million in 1997 from $87.0 million in
1996. The increase in revenues resulted primarily from higher demand for
inspection systems manufactured by NIS and X-ray tubes manufactured by Kevex
X-Ray, offset by a decline in demand for confocal laser scanning microscopes at
NORAN. Test and Measurement segment revenues decreased $2.5 million, or 5%, to
$53.0 million in 1997 from $55.5 million in 1996, primarily due to a decline in
demand. The Company's Temperature Control segment was created with the 1997
acquisition of NESLAB.
The gross profit margin declined to 42% in 1997 from 49% in 1996. The
decline in the gross profit margin is primarily attributable to the inclusion of
lower-margin revenues from NESLAB, which has a gross profit margin of 36% in
1997, and to an eight percentage-point deterioration in margin levels at NIS due
to an inventory write-off in the third quarter of 1997 and a change in mix from
higher-margin manual systems to lower-margin automated systems. To a lesser
extent, the gross margin was adversely impacted in 1997 by a deterioration in
the gross profit margin for the Company's test and measurement systems and at
NORAN due in part to the strengthening of the U.S. dollar.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 27% in 1997 from 30% in 1996, primarily due to the inclusion of
lower selling expenses as a percentage of revenues at NESLAB and, to a lesser
extent, lower selling, general, and administrative expenses at Gould as a result
of ongoing expense reductions, including restructuring charges taken in 1997
that reduced employee cost levels at that subsidiary (See Note 4 to the
Company's Consolidated Financial Statements included elsewhere in this Proxy
Statement). These improvements were offset in part by the inclusion of higher
selling, general, and administrative expenses as a percentage of revenues at PSI
and a higher relative expense level at NORAN primarily due to lower revenues.
Research and development expenses increased to $17.3 million in 1997 from
$12.9 million in 1996, due to the inclusion of expenses at acquired businesses,
offset in part by overall reduced research and development spending levels at
the Company's existing operations.
Restructuring costs in both 1997 and 1996 primarily represent severance
costs incurred by Gould (See Note 4 to the Company's Consolidated Financial
Statements included elsewhere in this Proxy Statement).
Other nonrecurring income in 1997 represents the sale of the Company's Linac
business to SteriGenics for $5.0 million in cash and 109,607 shares of
SteriGenics common stock valued at $2.1 million. The Linac business, which had
revenues and operating income in 1997 of $3.7 million and $1.2 million,
respectively, is an electron beam radiation business that offers contract
sterilization services. Other nonrecurring income in 1996 represents a
settlement with the prior owner of Gould, for costs incurred by Gould in
connection with its Acqulab product line (See Note 4 to the Company's
Consolidated Financial Statements included elsewhere in this Proxy Statement).
Interest income decreased to $0.7 million in 1997 from $0.9 million in 1996
due to lower average invested cash balances as a result of cash used to
partially fund the acquisitions of the Kevex businesses, which was paid to
Thermo Instrument in August 1996, and the acquisition of PSI in March 1997.
Interest expense, related party, increased to $4.2 million in 1997 from $0.8
million in 1996 due to borrowings from
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Thermo Electron to fund acquisitions (See Note 8 to the Company's Consolidated
Financial Statements included elsewhere in this Proxy Statement).
The effective tax rate was 44% in 1997, compared with 39% in 1996. The
effective tax rates exceeded the statutory federal income tax rate primarily due
to the impact of state income taxes, nondeductible amortization of cost in
excess of net assets of acquired companies for certain of the Company's
acquisitions and, in 1997, the inability to benefit losses at certain of the
Company's foreign subsidiaries. The increase in the effective tax rate in 1997
was due to the impact of nondeductible amortization of cost in excess of net
assets of acquired companies from the acquisitions of NESLAB and PSI and
increased losses at certain of the Company's foreign subsidiaries that were not
benefited.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $0.5 million at April 3, 1999, compared
with negative working capital of $2.3 million at January 2, 1999. Included in
working capital are cash and cash equivalents of $18.1 million at April 3, 1999,
compared with $20.7 million at January 2, 1999. Also included in working capital
are notes payable to Thermo Electron of $50.0 million at April 3, 1999, and
$60.0 million at January 2, 1999.
During the first quarter of 1999, the Company's operating activities
provided $5.5 million of cash. A decrease in accounts receivable, primarily due
to lower revenues, provided $3.5 million of cash. An increase in accounts
payable, due to the timing of payments, provided $0.7 million of cash. These
increases in cash were reduced in part by the use of $1.1 million of cash to
fund a decrease in other current liabilities, primarily for cash payments
relating to severance and facility-closure costs (See Note 13 to the Company's
Consolidated Financial Statements included elsewhere in this Proxy Statement).
The Company's primary investing activities included $1.0 million expended
for the purchase of property, plant, and equipment and a $0.6 million refund of
a portion of the acquisition purchase price for PSI, which resulted from the
final determination of the post-closing adjustment. During the remainder of
1999, the Company plans to expend approximately $3 million for the purchase of
property, plant, and equipment.
During the first quarter of 1999, the Company's financing activities used
$7.1 million of cash. The Company repaid $10.0 million of borrowings to Thermo
Electron. In addition, short-term borrowings provided $2.8 million of cash.
Net cash provided by operating activities was $21.1 million in 1998. A
decrease in accounts receivable provided $3.6 million of cash and a decrease in
accounts payable used $2.0 million in cash, primarily due to the decline in
revenues and corresponding decline in purchases as result of the downturn in the
semiconductor industry. A decrease in inventories, primarily at the Test and
Measurement segment, provided $3.3 million due to lower sales volume. Other
current liabilities provided $3.8 million primarily due to restructuring costs
that were not paid by the end of 1998. Increases in amounts due to affiliates
provided $3.0 million as a result of the timing of payments at year-end.
The Company's investing activities used $4.7 million of cash in 1998. The
Company used $7.9 million, net of cash acquired, for the acquisition of
TopoMetrix and received $0.8 million of cash from the sale of a product line
(See Note 3 to the Company's Consolidated Financial Statements included
elsewhere in this Proxy Statement) and $2.1 million from the sale of property,
plant, and equipment, primarily from the sale of a building by Gould. During
1998, the Company expended $2.2 million for the purchase of property, plant, and
equipment. The Company sold its shares of SteriGenics common stock for $2.8
million during 1998 (See Note 3 to the Company's Consolidated Financial
Statements included elsewhere in this Proxy Statement).
During 1998, the Company's financing activities consisted primarily of the
repayment of $15.0 million of long-term obligations to Thermo Electron.
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The Company generally expects to have positive cash flow from its existing
operations. Although the Company does not presently intend to actively seek to
acquire additional businesses in the near future, it may acquire one or more
complementary businesses if they are presented to the Company on terms the
Company believes to be attractive. Such acquisitions may require significant
amounts of cash. The Company expects that it would seek to finance any such
acquisitions through a combination of internal funds and/or borrowings from
Thermo Instrument or Thermo Electron, although it has no agreement with these
companies to ensure that any additional funds will be available on acceptable
terms or at all. Thermo Electron has indicated that it will seek repayment from
the Company of its $50 million promissory notes, due in July 1999, only to the
extent the Company's cash flow permits such repayment. Accordingly, the Company
believes that its existing resources and cash provided by operations are
sufficient to meet the capital requirements of its existing businesses for the
foreseeable future, including at least the next 24 months.
MARKET RISK
The Company's exposure to market risk from changes in foreign currency
exchange rates and interest rates, which could affect its future results of
operations and financial condition, has not changed materially from its exposure
at year-end 1998. The Company manages its exposure to these risks through its
regular operating and financing activities.
FOREIGN CURRENCY EXCHANGE RATES
The Company generally views its investment in foreign subsidiaries with a
functional currency other than the Company's reporting currency as long-term.
The Company's investment in foreign subsidiaries is sensitive to fluctuations in
foreign currency exchange rates. The functional currencies of the Company's
foreign subsidiaries are principally denominated in British pounds sterling,
Japanese yen, French francs, Dutch guilders, and German marks. The effect of a
change in foreign exchange rates on the Company's net investment in foreign
subsidiaries is recorded in the "Accumulated Other Comprehensive Items"
component of shareholders' investment. A 10% decrease in year-end 1998
functional currencies, relative to the U.S. dollar, would result in an $875,000
reduction of shareholders' investment.
INTEREST RATES
The Company's cash and cash equivalents and certain long-term obligations
are sensitive to changes in interest rates. Interest rate changes would result
in a change in interest income and expense due to the difference between the
current interest rates on these financial instruments and the variable rate that
these financial instruments may adjust to in the future.
YEAR 2000
The following information constitutes a "Year 2000 Readiness Disclosure"
under the Year 2000 Information and Readiness Disclosure Act. The Company
continues to assess the potential impact of the year 2000 date recognition issue
on the Company's internal business systems, products and operations. The
Company's year 2000 initiatives include (i) testing and upgrading significant
information technology systems and facilities; (ii) testing and developing
upgrades, if necessary, for the Company's current products and certain
discontinued products; (iii) assessing the Year 2000 readiness of its key
suppliers and vendors to determine their year 2000 compliance status; and (iv)
developing a contingency plan.
THE COMPANY'S STATE OF READINESS
The Company has implemented a compliance program to ensure that its critical
information technology systems and facilities will be ready for the year 2000.
The first phase of the program, testing and evaluating the Company's critical
information technology systems and facilities for year 2000 compliance,
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has largely been completed. During phase one, the Company tested and evaluated
its significant computer systems, software applications, and related equipment
for year 2000 compliance. The Company also evaluated the potential year 2000
impact on its critical facilities. The Company is currently in phase two of its
program, during which any noncompliant systems or facilities that were
identified during phase one are prioritized and remediated. The Company is
currently upgrading or replacing its material noncompliant information
technology systems, and this process was approximately 78% complete as of April
13, 1999. In many cases, such upgrades or replacements are being made in the
ordinary course of business, without accelerating previously scheduled upgrades
or replacements. The Company expects that all of its material information
technology systems and critical facilities will be year 2000 compliant by
September 1999.
The Company has also implemented a compliance program to test and evaluate
the year 2000 readiness of the material products that it currently manufactures
and sells. The Company believes that all of such material products are year 2000
compliant. However, as many of the Company's products are complex, interact with
or incorporate third-party products, and operate on computer systems that are
not under the Company's control, there can be no assurance that the Company has
identified all of the year 2000 problems with its current products. The Company
believes that certain of its older products, which it no longer manufactures or
sells, may not be year 2000 compliant. The Company is continuing to test and
evaluate such products. The Company is focusing its efforts on products that are
still under warranty and/ or are early in their expected life. The Company is
offering upgrades and/or identifying potential solutions where reasonably
practicable.
The Company is in the process of identifying and assessing the year 2000
readiness of key suppliers and vendors that are believed to be significant to
the Company's business operations. As part of this effort, the Company has
developed and is distributing questionnaires relating to year 2000 compliance to
its significant suppliers and vendors. The Company has started to follow-up and
monitor the year 2000 compliance progress of significant suppliers and vendors
that indicate that they are not year 2000 compliant or that do not respond to
the Company's questionnaires. The Company has not completed the majority of its
assessment of third party risk, but expects to be substantially completed by
September 1999.
CONTINGENCY PLAN
The Company is developing a contingency plan that will allow its primary
business operations to continue despite disruptions due to year 2000 problems.
This plan may include identifying and securing other suppliers, increasing
inventories and modifying production facilities and schedules. As the Company
continues to evaluate the year 2000 readiness of its business systems and
facilities, products, and significant suppliers and vendors, it will modify and
adjust its contingency plan as may be required.
ESTIMATED COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES
To date, costs incurred in connection with the year 2000 issue have not been
material. The Company does not expect total year 2000 remediation costs to be
material, but there can be no assurance that the Company will not encounter
unexpected costs or delays in achieving year 2000 compliance. Year 2000 costs
were funded from working capital. All internal costs and related external costs,
other than capital additions, related to year 2000 remediation have been and
will continue to be expensed as incurred. The Company does not track the
internal costs incurred for its year 2000 compliance project. Such costs are
principally the related payroll costs for its information systems group.
REASONABLY LIKELY WORST CASE SCENARIO
At this point in time, the Company is not able to determine the most
reasonably likely worst case scenario to result from the year 2000 issue. One
possible worst case scenario would be that certain of the Company's material
suppliers or vendors experience business disruptions due to the year 2000 issue
and are unable to provided materials and services to the Company on time. The
Company's operations could
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be delayed or temporarily shut down, and it could be unable to meet its
obligations to customers in a timely fashion. The Company's business,
operations, and financial condition could be adversely affected in amounts that
cannot be reasonably estimated at this time. If the Company believes that any of
its key suppliers or vendors may not be year 2000 compliant, it will seek to
identify and secure other suppliers or vendors as part of its contingency plan.
RISKS OF THE COMPANY'S YEAR 2000 ISSUES
While the Company is attempting to minimize any negative consequences
arising from the year 2000 issue, there can be no assurance that year 2000
problems will not have a material adverse impact on the Company's business,
operations, or financial condition. While the Company expects that upgrades to
its internal business systems will be completed in a timely fashion, there can
be no assurance that the Company will not encounter unexpected costs or delays.
Despite its efforts to ensure that its material current products are year 2000
compliant, the Company may see an increase in warranty and other claims,
especially those related to Company products that incorporate, or operate using,
third-party software or hardware. In addition, certain of the Company's older
products, which it no longer manufactures or sells, may not be year 2000
compliant, which may expose the Company to claims. If any of the Company's
material suppliers or vendors experience business disruptions due to year 2000
issues, the Company might also be materially adversely affected. There is
expected to be a significant amount of litigation relating to the year 2000
issue and there can be no assurance that the Company will not incur material
costs in defending or bringing lawsuits. In addition, if any year 2000 issues
are identified, there can be no assurance that the Company will be able to
retain qualified personnel to remedy such issues. Any unexpected costs or delays
arising from the year 2000 issue could have a significant adverse impact on the
Company's business, operations, and financial condition in amounts that cannot
be reasonably estimated at this time.
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CERTAIN PROJECTED FINANCIAL DATA
The Company does not, as a matter of course, make public forecasts or
projections as to future sales, earnings or other income statement data, cash
flows or balance sheet and financial position information. However, in order to
aid the evaluation of the Company by the Special Committee and Tucker Cleary,
and Tucker Cleary's assessment of the fairness, from a financial point of view,
of the consideration of $16.00 per share in cash payable to the Minority
Stockholders pursuant to the Merger Agreement, the Company furnished the Special
Committee and Tucker Cleary with certain projections (the "Projections")
prepared by the Company's management. The following summary of the Projections
is included in this Proxy Statement solely because the Projections were made
available to such parties. The Projections do not reflect any of the effects of
the Merger or other changes that may in the future be deemed appropriate
concerning the Company and its assets, business, operations, properties,
policies, corporate structure, capitalization and management in light of the
circumstances then existing. The Company has not updated the Projections to
reflect changes that have occurred since their preparation; the Company believes
that the assumptions were reasonable at the time the Projections were prepared,
given the information known by management at such time.
The Projections were not prepared with a view toward public disclosure or
compliance with published guidelines of the Commission or the American Institute
of Certified Public Accountants regarding forward-looking information or
generally accepted accounting principles. Neither the Company's independent
auditors, nor any other independent accountants, have compiled, examined or
performed any procedures with respect to the prospective financial information
contained in the Projections, nor have they expressed any opinion or given any
form of assurance on such information or its achievability, and assume no
responsibility for, and disclaim any association with, such prospective
financial information. Furthermore, the Projections necessarily make numerous
assumptions, some (but not all) of which are set forth below and many of which
are beyond the control of the Company and may prove not to have been, or may no
longer be, accurate. Additionally, this information, except as otherwise
indicated, does not reflect revised prospects for the Company's businesses,
changes in general business and economic conditions, or any other transaction or
event that has occurred or that may occur and that was not anticipated at the
time such information was prepared. Accordingly, such information is not
necessarily indicative of current values or future performance, which may be
significantly more favorable or less favorable than as set forth below, and
should not be regarded as a representation that they will be achieved.
THE PROJECTIONS ARE NOT GUARANTEES OF PERFORMANCE. THEY INVOLVE RISKS,
UNCERTAINTIES AND ASSUMPTIONS. THE FUTURE RESULTS AND STOCKHOLDER VALUE OF THE
COMPANY MAY MATERIALLY DIFFER FROM THOSE EXPRESSED IN THE PROJECTIONS. MANY OF
THE FACTORS THAT WILL DETERMINE THESE RESULTS AND VALUES ARE BEYOND THE
COMPANY'S ABILITY TO CONTROL OR PREDICT. STOCKHOLDERS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON THE PROJECTIONS. THERE CAN BE NO ASSURANCE THAT THE
PROJECTIONS WILL BE REALIZED OR THAT THE COMPANY'S FUTURE FINANCIAL RESULTS WILL
NOT MATERIALLY VARY FROM THE PROJECTIONS. THE COMPANY DOES NOT INTEND TO UPDATE
OR REVISE THE PROJECTIONS.
The Projections included herein have been prepared by the Company based upon
management's estimates of the total market for its products and the Company's
own performance through 2003, as well as cost reductions (reflected in Selling,
general and administrative expenses) related to the closure of certain
facilities, severance costs for a number of terminated employees, inventory
write-downs for discontinuation of certain underperforming products and other
estimated expense reductions. The projected results for fiscal 1999 set forth in
the Projections were based upon actual results through September 1998 and
management forecasts for the remainder of fiscal 1998.
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PROJECTIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------------------
1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES............................................. $ 188,102 $ 209,659 $ 229,437 $ 251,819 $ 285,080
COSTS AND OPERATING EXPENSES
Cost of revenues................................... 102,135 111,966 121,630 132,314 149,500
Selling, general and administrative expenses....... 49,196 51,473 55,053 57,266 64,996
Research and development expenses.................. 16,892 16,898 17,992 19,200 21,098
Restructuring costs and nonrecurring income, net... 1,055 -- -- -- --
---------- ---------- ---------- ---------- ----------
169,278 180,337 194,675 208,780 235,594
---------- ---------- ---------- ---------- ----------
Operating Income..................................... 18,824 29,322 34,762 43,039 49,486
Interest Income...................................... 500 482 452 452 452
Interest Expense..................................... (4,100) (4,100) (4,100) (4,100) (4,100)
---------- ---------- ---------- ---------- ----------
Income Before Provision for Income Taxes............. 15,224 25,704 31,114 39,391 45,838
Provision for Income Taxes........................... 4,872 9,145 11,364 13,931 17,400
---------- ---------- ---------- ---------- ----------
Net Income........................................... $ 10,352 $ 16,559 $ 19,750 $ 25,460 $ 28,438
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
SELECTED BALANCE SHEET DATA
Accounts Receivable, Net............................. $ 37,441 $ 37,251 $ 39,376 $ 42,741 $ 47,253
Inventories.......................................... 30,572 29,113 30,837 32,638 35,318
Prepaid Income Taxes and Other Current Assets........ 9,015 8,864 8,719 8,755 8,793
---------- ---------- ---------- ---------- ----------
Total Current Assets Excluding Cash and
Investments........................................ 77,028 75,228 78,932 84,134 91,364
Property, Plant, and Equipment:
Balance, beginning of year......................... 16,614 8,103 7,277 6,796 6,417
Additions.......................................... 4,576 3,310 3,349 3,441 3,562
Depreciation expense............................... (9,196) (4,136) (3,830) (3,820) (3,937)
Sales.............................................. (3,891) -- -- -- --
---------- ---------- ---------- ---------- ----------
Balance, end of year............................... 8,103 7,277 6,796 6,417 6,042
Cost in Excess of Net Assets of Acquired Companies... 106,243 102,309 99,028 95,747 92,466
</TABLE>
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FORWARD-LOOKING STATEMENTS
DEPENDENCE ON SEMICONDUCTOR INDUSTRY; INDUSTRY VOLATILITY. A significant
portion of the Company's total revenues, primarily in its Imaging and Inspection
and Temperature Control businesses, is attributable to the sale of products and
related services to customers in the semiconductor industry. The semiconductor
industry has historically been cyclical and is characterized by sudden and sharp
changes in supply and demand. Demand for the Company's products and services
within the semiconductor industry is dependent upon, among other things, the
level of capital spending by semiconductor companies. The semiconductor industry
has been experiencing a weakness in demand for its products as a result of the
current economic crisis in Asia, excess manufacturing capacity and slowdowns in
sales of high-end personal computers. Many semiconductor manufacturers delayed
construction or expansion of their production facilities in response to the
foregoing conditions. The slowdown in semiconductor activity began to affect
demand for the Company's products beginning in the second quarter of 1998.
During the first quarter of 1999, the semiconductor industry has shown some
increased activity, but not to the levels experienced prior to this most recent
slowdown. Continued fluctuations in the semiconductor industry could have a
significant adverse effect upon the demand for the Company's products and
related services, which would materially adversely affect the Company's business
and future results of operations.
POSSIBLE ADVERSE IMPACT OF SIGNIFICANT INTERNATIONAL OPERATIONS. The
Company expects that international sales will continue to represent a
significant portion of its revenues. In 1998, international sales accounted for
approximately half of the Company's total revenues. These sales carry a number
of inherent risks, including risks associated with currency exchange, tariffs
and other potential trade barriers, potentially reduced protection for
intellectual property, the impact of recessionary environments in economies
outside the United States, and generally longer receivable collection patterns.
In addition, exports to the Far East represented 15% of total revenues in 1998.
Exports to Japan represented 7% of total revenues and exports to Taiwan, South
Korea and Singapore, collectively, represented 3% of total revenues. Asia is
experiencing a severe economic crisis, which has been characterized by sharply
reduced economic activity and liquidity, highly volatile
foreign-currency-exchange and interest rates and unstable stock markets. The
Company's sales to Asia have been, and are expected to continue to be, adversely
affected by the unstable economic conditions there. Additionally, certain of the
Company's customers located outside of the Asian region could be adversely
affected by the unstable economic conditions in Asia.
UNCERTAINTY OF GROWTH. Certain of the markets in which the Company competes
have been flat or declining over the past several years. The Company has
identified a number of strategies it believes will allow it to grow its
business, including, acquiring complementary businesses, developing new
applications for its technologies and strengthening its presence in selected
geographic markets. No assurance can be given that the Company will be able to
successfully implement these strategies, or that these strategies will result in
growth of the Company's business.
POTENTIAL INCREASED COMPETITION. The Company predominantly sells its
products in the high-performance segment of the markets in which it competes.
The products in this segment are generally characterized by superior engineering
and performance and compete more on product specifications than on price. The
other segments of these markets are dominated by companies with substantially
greater financial resources than those of the Company. If these larger companies
enter the high-performance segment of the market, no assurance can be given that
the Company will be able to successfully compete against them.
NEED TO RESPOND TO TECHNOLOGICAL CHANGE. Many of the Company's products are
marketed primarily based on their technologies. In order to be successful, the
Company believes that it will be important to continually improve the technology
underlying its products. No assurance can be given that the Company will be able
to do so or that a competitor of the Company will not develop technology or
products that will render the Company's competing products noncompetitive or
obsolete.
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RISKS ASSOCIATED WITH ACQUISITION STRATEGY. The Company's strategy includes
the acquisition of underperforming businesses and technologies that complement
or augment the Company's existing product lines. Promising acquisitions are
difficult to identify and complete for a number of reasons, including
competition among prospective buyers and the need for regulatory approvals,
including antitrust approvals. Acquisitions completed by the Company may be made
at substantial premiums over the fair value of the net assets of the acquired
companies. There can be no assurance that the Company will be able to complete
future acquisitions or that the Company will be able to successfully integrate
any acquired businesses into its existing businesses or make such businesses
profitable.
RISKS ASSOCIATED WITH PROTECTION, DEFENSE AND USE OF INTELLECTUAL
PROPERTY. The Company holds many patents relating to various aspects of its
products, and believes that proprietary technical know-how is critical to many
of its products. Proprietary rights relating to the Company's products are
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. There can be no assurance that patents will issue from any
pending or future patent applications owned by or licensed to the Company or
that the claims allowed under any issued patents will be sufficiently broad to
protect the Company's technology and, in the absence of patent protection, the
Company may be vulnerable to competitors who attempt to copy the Company's
products or gain access to its trade secrets and know-how. 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
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. 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. The Company has received correspondence alleging that
certain of its products infringe patents owned by third parties, though no
lawsuits have been filed. The Company may need to acquire licenses to, or
contest the validity of, these or any other such patents. There can be no
assurance that any license required under any such patent would be made
available on acceptable terms or that the Company would prevail in any such
contest. In addition, if any such competitor were successful in enforcing such
patents, the Company could be subject to damages and enjoined from manufacturing
and selling any related products. The Company could incur substantial costs in
defending itself in suits brought against it or in suits in which the Company
may assert its patent rights against others. If the outcome of any such
litigation is unfavorable to the Company, the Company's business and results of
operations could be materially adversely affected. Further, the laws of some
jurisdictions do not protect the Company's proprietary rights to the same extent
as the laws of the United States and there can be no assurance that the
available protections will be adequate. In addition, the Company relies on trade
secrets and proprietary know-how that it seeks to protect, in part, by
confidentiality agreements with its collaborators, employees and consultants.
There can be no assurance that these agreements will not be breached, that the
Company would have adequate remedies for any breach or that the Company's trade
secrets will not otherwise become known or be independently developed by
competitors.
RISKS ASSOCIATED WITH CASH MANAGEMENT ARRANGEMENT WITH THERMO ELECTRON. The
Company participates in a cash management arrangement with Thermo Electron.
Under this cash management arrangement, the Company lends its excess cash to
Thermo Electron on an unsecured basis. The Company has the contractual right to
withdraw its funds invested in the cash management arrangement upon 30 days'
prior notice. Thermo Electron is contractually required to maintain cash, cash
equivalents and/or immediately available bank lines of credit equal to at least
50% of all funds invested under the cash management arrangement by all Thermo
Electron subsidiaries other than wholly owned subsidiaries. The funds are held
on an unsecured basis and therefore are subject to the credit risk of Thermo
Electron. The Company's ability to receive its cash upon notice of withdrawal
could be adversely affected if participants in the cash management arrangement
demand withdrawal of their funds in an aggregate amount in excess of the 50%
reserve required to be maintained by Thermo Electron. In the event of a
bankruptcy of Thermo Electron, the Company would be treated as an unsecured
creditor and its right to receive funds from the bankruptcy
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estate would be subordinated to secured creditors and would be treated on a PARI
PASSU basis with all other unsecured creditors. Further, all cash withdrawn by
the Company from the cash management arrangement within one year before the
bankruptcy would be subject to rescission. The inability of Thermo Electron to
return the Company's cash on a timely basis or at all could have a material
adverse effect on the Company's results of operations and financial position.
POTENTIAL IMPACT OF YEAR 2000 ON PROCESSING OF DATE-SENSITIVE
INFORMATION. The Company is currently assessing the potential impact of the
year 2000 on the processing of date-sensitive information by the Company's
computerized information systems and on products sold as well as products
purchased by the Company. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Year 2000."
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MANAGEMENT
The current directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Barry S. Howe.......................... 43 President, Chief Executive Officer and Director
Theo Melas-Kyriazi..................... 39 Chief Financial Officer and Chairman of the Board
Paul F. Kelleher....................... 56 Chief Accounting Officer
Richard S. Melanson.................... 46 Senior Vice President
Christopher J. Barron.................. 51 Vice President
Ronald W. Lindell...................... 48 Vice President
Joseph A. Baute........................ 71 Director
David J. Beaubien...................... 64 Director
Robert E. Finnigan..................... 71 Director
Elias P. Gyftopoulos................... 71 Director
Earl R. Lewis.......................... 55 Director
</TABLE>
All of the Company's directors are elected annually by the stockholders and
hold office until their respective successors are duly elected and qualified.
Executive officers are elected annually by the Board of Directors and serve at
its discretion.
Barry S. Howe has been the president, chief executive officer and a director
of the Company since March 1998. Mr. Howe has been a vice president of Thermo
Instrument since 1994. In March 1999, Mr. Howe was also named interim president
of Thermo Optek Corporation, a majority-owned subsidiary of Thermo Instrument
and a manufacturer of analytical instruments that measure energy and light for
purposes of materials analysis, characterization and preparation. He was chief
executive officer, president and a director of Thermo BioAnalysis Corporation, a
majority-owned subsidiary of Thermo Instrument that manufactures products for
biochemical research, drug discovery and clinical laboratories, from February
1995 to March 1998. From September 1989 to December 1995, he served as the
president of Thermo Separation Products Inc. and its predecessor, a manufacturer
of chromatography instruments and a subsidiary of ThermoQuest Corporation, which
in turn is a majority-owned subsidiary of Thermo Instrument. Mr. Howe is also a
director of Thermo Optek Corporation.
Theo Melas-Kyriazi has been a director of the Company since its inception in
August 1994, chairman of the board since March 1998, and chief financial officer
since January 1999. Mr. Melas-Kyriazi has also been vice president, corporate
strategy of Thermo Electron since March 1998 and chief financial officer since
January 1999, and chief financial officer of Thermo Instrument since January
1999. Prior to his appointment as a vice president at Thermo Electron, Mr.
Melas-Kyriazi served as the Company's president and chief executive officer from
its inception until March 1998. Mr. Melas-Kyriazi was treasurer of Thermo
Instrument and Thermo Electron from 1988 to August 1994. Mr. Melas-Kyriazi is
also a director of ThermoRetec Corporation, an affiliate of Thermo Electron.
Paul F. Kelleher has been the chief accounting officer of the Company since
its inception in August 1994. He has been senior vice president, finance and
administration, of Thermo Electron since June 1997, and served as its vice
president, finance from 1987 until 1997. Mr. Kelleher served as Thermo
Electron's controller from 1982 until January 1996. He is a director of
ThermoLase Corporation, an affiliate of Thermo Electron. Mr. Kelleher also
serves as the chief accounting officer of Thermo Instrument.
Richard S. Melanson joined the Company in October 1997 and was named senior
vice president in December 1997. Mr. Melanson also served as president of NESLAB
Instruments, Inc. from November 1997 to January 1999. From July 1996 to
September 1997, Mr. Melanson was vice president and general manager of Philips
Electroscan Corporation, a supplier of scanning and transmission electron
microscopes, semiconductor defect review tools and focused ion beam systems.
Prior to that time,
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Mr. Melanson held a variety of positions at Electroscan Corporation, a venture
capital financed high technology start-up, including president and chief
executive officer, executive vice president and chief operating officer, and
vice president of manufacturing, since 1986.
Christopher J. Barron has been a vice president of the Company since its
inception in August 1994 and president of Nicolet Instrument Technologies Inc.
since August 1993. Mr. Barron held various positions within Nicolet Instrument
Corporation from May 1988 to August 1993.
Ronald W. Lindell has been a vice president of the Company since its
inception in August 1994 and president of Nicolet Imaging Systems, Inc. since
January 1994. Mr. Lindell was a founder of Imaging Systems International, Inc.
and its president from November 1992 to January 1994 when it was acquired by
Thermo Instrument. From November 1989 to March 1992, he was senior vice
president and general manager of the Industrial Products Division of IRT
Corporation.
Joseph A. Baute has been a director of the Company since December 1998. Mr.
Baute has been a consultant to Markem Corporation, a manufacturer of marking and
printing machinery, specialty inks and printing elements since 1993. Mr. Baute
was the chairman and chief executive officer of Markem Corporation from 1977 and
1979, respectively, until his retirement in 1993. He is also a director of
Houghton-Mifflin Company, INSO Corporation and Metrika Systems Corporation, a
majority-owned subsidiary of Thermo Instrument.
David J. Beaubien has been a director of the Company since December 1998.
Since 1990, Mr. Beaubien has been the chairman of Yankee Environmental Systems
Inc., a manufacturer of solar radiation monitoring instruments. From 1967 until
his retirement in 1991, Mr. Beaubien was a senior vice president of EG&G Inc., a
manufacturer of scientific instruments and manager of US government facilities.
He served as director of the Kidder Peabody Family of Mutual Funds from 1983 to
1995 and of Oriel Instruments Corporation from 1990 to 1996. Mr. Beaubien is
also a director of IEC Electronics, Inc., Paine Webber Pace Mutual Funds and
ONIX Systems Inc., a majority-owned subsidiary of Thermo Instrument.
Robert E. Finnigan has been a director of the Company since April 1997. Dr.
Finnigan served in various executive roles at and was a director of Finnigan
Corporation, an analytical instrument manufacturer, from 1967 to 1990, when it
was acquired by Thermo Instrument. Since 1990, he has served as a consultant,
from time to time, to Thermo Instrument on technology issues, and as an advisor
to Hambrecht & Quist's Environmental Technology Fund, a venture capital fund. He
is also a director of Strategic Diagnostics Inc.
Elias P. Gyftopoulos has been a director of the Company since its inception
in August 1994. He is Professor Emeritus at The Massachusetts Institute of
Technology, where he was the Ford Professor of Mechanical Engineering and of
Nuclear Engineering for more than 20 years until his retirement in 1996. Dr.
Gyftopoulos is also a director of Thermo Electron and the following affiliates
of Thermo Electron: Thermo BioAnalysis Corporation, Thermo Cardiosystems Inc.,
ThermoLase Corporation, ThermoRetec Corporation, Thermo Vision Corporation and
Trex Medical Corporation.
Earl R. Lewis has been a director of the Company since its inception in
August 1994. He was the chairman of the board from June 1995 until March 1998
and was vice chairman of the board from August 1994 to June 1995. Mr. Lewis has
been president and chief executive officer of Thermo Instrument since March 1997
and January 1998, respectively, and was chief operating officer of Thermo
Instrument from January 1996 to January 1998. Prior to that time, he was
executive vice president of Thermo Instrument from January 1996 to March 1997,
senior vice president of Thermo Instrument from January 1994 to January 1996 and
vice president of Thermo Instrument from March 1992 to January 1994. Mr. Lewis
has been chief operating officer, measurement and detection, of Thermo Electron
since September 1998. Prior to his appointment as chief operating officer, Mr.
Lewis served as senior vice president of Thermo Electron from June 1998 to
September 1998 and vice president from September 1996
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to June 1998. Mr. Lewis served as chief executive officer of Thermo Optek
Corporation, a majority-owned subsidiary of Thermo Instrument and a manufacturer
of analytical instruments that measure energy and light for purposes of
materials analysis, characterization and preparation, from its inception in
August 1995 to January 1998, and served as president of its predecessor, Thermo
Jarrell Ash Corporation, for more than five years prior to 1995. Mr. Lewis is
also a director of SpectRx Inc. and the following affiliates of Thermo Electron:
FLIR Systems, Inc., Metrika Systems Corporation, ONIX Systems Inc.,
Spectra-Physics Lasers, Inc., Thermo BioAnalysis Corporation, Thermo Instrument,
Thermo Optek Corporation, ThermoQuest Corporation and Thermo Vision Corporation.
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 April 3, 1999 with respect to the only person
that was known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY PERCENTAGE OF OUTSTANDING
OF BENEFICIAL OWNER OWNED SHARES BENEFICIALLY OWNED
- -------------------------------------------------------------------- ----------------- ---------------------------
<S> <C> <C>
Thermo Electron Corporation (1)..................................... 14,123,670 92.1%
81 Wyman Street
Waltham, MA 02454-9046
</TABLE>
- ------------------------
(1) Thermo Electron beneficially owned 92.1% of the Common Stock outstanding as
of April 3, 1999, of which approximately 82.4% is owned through Thermo
Instrument and approximately 9.7% is owned directly. Thermo Electron,
through Thermo Instrument, has the power to elect all of the members of the
Company's Board of Directors. After the Merger, Thermo Electron will
beneficially own 100% of the outstanding Common Stock.
MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermo Instrument and Thermo Electron, as of January
31, 1999, with respect to (i) each director of the Company, (ii) the chief
executive officer of the Company and other executive officers of the Company
who, during the last completed fiscal year of the Company, met the definition of
"highly compensated" within the meaning of the Commission's executive
compensation disclosure rules (collectively, the "named executive officers") and
(iii) all directors and current executive officers as a group.
While certain directors and executive officers of the Company are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Company, all such persons disclaim beneficial ownership of the shares
of Common Stock owned by Thermo Instrument or by Thermo Electron, as the case
may be.
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<PAGE>
<TABLE>
<CAPTION>
THERMO
THERMOSPECTRA THERMO INSTRUMENT ELECTRON
CORPORATION(2) SYSTEMS INC.(3) CORPORATION(4)
---------------------------- ------------------------ -----------
NUMBER OF PERCENTAGE NUMBER PERCENTAGE NUMBER OF
NAME(1) SHARES OF CLASS OF SHARES OF CLASS SHARES
- -------------------------------------------------- ----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Christopher J. Barron............................. 33,000 * 13,296 * 1,548
Joseph A. Baute................................... 1,103(5) * 0 * 0
David J. Beaubien................................. 1,000(5) * 0 * 0
Robert E. Finnigan................................ 11,000 * 0 * 0
Elias P. Gyftopoulos.............................. 21,022 * 57,743 * 71,856
Barry S. Howe..................................... 119,010 * 138,389 * 75,570
Earl R. Lewis..................................... 55,000 * 338,250 * 204,878
Ronald W. Lindell................................. 37,000 * 3,000 * 1,400
Richard S. Melanson............................... 42,100 * 8,000 * 4,700
Theo Melas-Kyriazi................................ 77,800 * 38,347 * 325,895
All directors and current executive officers as a
group (11 persons).............................. 403,035 2.6 620,389 * 891,702
<CAPTION>
PERCENTAGE
NAME(1) OF CLASS
- -------------------------------------------------- ---------------
<S> <C>
Christopher J. Barron............................. *
Joseph A. Baute................................... *
David J. Beaubien................................. *
Robert E. Finnigan................................ *
Elias P. Gyftopoulos.............................. *
Barry S. Howe..................................... *
Earl R. Lewis..................................... *
Ronald W. Lindell................................. *
Richard S. Melanson............................... *
Theo Melas-Kyriazi................................ *
All directors and current executive officers as a
group (11 persons).............................. *
</TABLE>
- ------------------------
* Reflects ownership of less than 1.0% of the outstanding common stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) The shares of Common Stock beneficially owned by Mr. Barron, Mr. Baute, Mr.
Beaubien, Dr. Finnigan, Dr. Gyftopoulos, Mr. Howe, Mr. Lewis, Mr. Lindell,
Mr. Melanson, Mr. Melas-Kyriazi and all directors and current executive
officers as a group include 33,000, 1,000, 1,000, 10,000, 20,000, 104,000,
50,000, 37,000, 37,100, 64,200 and 362,300 shares, respectively, that such
person or group had the right to acquire within 60 days of January 31, 1999,
through the exercise of stock options. Shares beneficially owned by Mr.
Baute, Dr. Gyftopoulos and all directors and current executive officers as a
group include 103, 22 and 125 shares, respectively, allocated through
January 2, 1999, to their respective accounts maintained under the Company's
Deferred Compensation Plan. Shares beneficially owned by Dr. Finnigan
include 1,000 shares held in a trust of which he and his spouse are the
trustees. No director or named executive officer beneficially owned more
than 1.0% of the Common Stock outstanding as of January 31, 1999; all
directors and current executive officers as a group beneficially owned 2.6%
of the Common Stock outstanding as of such date.
(3) Shares of the common stock of Thermo Instrument beneficially owned by Mr.
Barron, Dr. Gyftopoulos, Mr. Howe, Mr. Lewis, Mr. Lindell, Mr. Melanson, Mr.
Melas-Kyriazi and all directors and current executive officers as a group
include 12,838, 12,648, 113,750, 322,085, 3,000, 8,000, 36,326 and 527,397
shares, respectively, that such person or group had the right to acquire
within 60 days of January 31, 1999, through the exercise of stock options.
Shares of the common stock of Thermo Instrument beneficially owned by Mr.
Melas-Kyriazi and all directors and executive officers as a group include
468 and 963 shares, respectively, allocated through January 31, 1999, to
their respective accounts maintained pursuant to Thermo Electron's employee
stock ownership plan (the "ESOP"), of which the trustees, who have
investment power over its assets, are executive officers of Thermo Electron.
Shares beneficially owned by Mr. Howe include 374 shares held by him in
custodial accounts for the benefit of two minor children. Shares
beneficially owned by Mr. Lewis include 2,987 shares held by his spouse. No
director or named executive officer beneficially owned more than 1.0% of the
common stock of Thermo Instrument outstanding as of January 31, 1999; all
directors and current executive officers as a group did not beneficially own
more than 1.0% of the common stock of Thermo Instrument outstanding as of
such date.
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(4) The shares of the common stock of Thermo Electron beneficially owned by Mr.
Barron, Dr. Gyftopoulos, Mr. Howe, Mr. Lewis, Mr. Lindell, Mr. Melanson, Mr.
Melas-Kyriazi and all directors and current executive officers as a group
include 1,400, 9,125, 69,787, 202,350, 1,400, 4,700, 289,835 and 751,534
shares, respectively, that such person or group had the right to acquire
within 60 days of January 31, 1999, through the exercise of stock options.
Shares of the common stock of Thermo Electron beneficially owned by Mr.
Melas-Kyriazi and all directors and current executive officers as a group
include 1,071 and 2,497 shares, respectively, allocated through January 31,
1999, to accounts maintained pursuant to the ESOP. Shares beneficially owned
by Dr. Gyftopoulos and all the directors and current executive officers as a
group include 152 shares allocated through January 2, 1999 to Dr.
Gyftopoulos' account maintained pursuant to Thermo Electron's deferred
compensation plan for directors. No director or named executive officer
beneficially owned more than 1.0% of the common stock of Thermo Electron
outstanding as of January 31, 1999; all directors and current executive
officers as a group did not beneficially own more than 1.0% of the common
stock of Thermo Electron outstanding as of such date.
(5) The information in the above chart relating to the beneficial ownership of
Common Stock by Messrs. Baute and Beaubien is as of July 2, 1999.
CERTAIN TRANSACTIONS
Thermo Electron has, from time to time, caused certain subsidiaries to sell
minority interests to investors, resulting in several majority-owned private and
publicly held subsidiaries. Thermo Instrument has created the Company as a
majority-owned publicly held subsidiary. The Company and such other
majority-owned Thermo Electron subsidiaries are hereinafter referred to as the
"Thermo Subsidiaries."
Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and each of the
Thermo Subsidiaries, including the Company, have adopted the Thermo Electron
Corporate Charter (the "Charter") to define the relationships and delineate the
nature of such cooperation among themselves. The purpose of the Charter is to
ensure that (1) all of the companies and their stockholders are treated
consistently and fairly, (2) the scope and nature of the cooperation among the
companies, and each company's responsibilities, are adequately defined, (3) each
company has access to the combined resources and financial, managerial and
technological strengths of the others, and (4) Thermo Electron and the Thermo
Subsidiaries, in the aggregate, are able to obtain the most favorable terms from
outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit services. Pursuant to
the Charter, Thermo Electron may also provide guarantees of debt or other
obligations of the Thermo Subsidiaries or may obtain external financing at the
parent level for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on behalf of, the
consolidated entity or may obtain financing directly from external financing
sources. Under the Charter, Thermo Electron is responsible for determining that
the Thermo Group remains in compliance with all covenants imposed by external
financing sources, including covenants related to borrowings of Thermo Electron
or other members of the Thermo Group, and for apportioning such constraints
within the Thermo Group. In addition, Thermo Electron establishes certain
internal policies and procedures applicable to members of the Thermo Group. The
cost of the services
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<PAGE>
provided by Thermo Electron to the Thermo Subsidiaries is covered under existing
corporate services agreements between Thermo Electron and the Thermo
Subsidiaries.
The Charter currently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Company, can withdraw from participation in the Charter upon 30
days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement and tax allocation
agreement (if any) in effect between the withdrawing company and Thermo
Electron. The withdrawal from participation does not terminate outstanding
commitments to third parties made by the withdrawing company, or by Thermo
Electron or other members of the Thermo Group, prior to the withdrawal. In
addition, a withdrawing company is required to continue to comply with all
policies and procedures applicable to the Thermo Group and to provide certain
administrative functions mandated by Thermo Electron so long as the withdrawing
company is controlled by or affiliated with Thermo Electron.
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 general legal advice and services, risk management, employee benefit
administration, tax advice and preparation of tax returns, centralized cash
management and certain financial and other services to the Company. The Company
was assessed an annual fee equal to 1.0% and 0.8% of the Company's revenues for
these services in fiscal 1997 and 1998, respectively. The annual fee will remain
at 0.8% of the Company's total revenues for fiscal 1999. The fee is reviewed
annually and may be changed by mutual agreement of the Company and Thermo
Electron. During fiscal 1997, 1998 and the three months ended April 3, 1999,
Thermo Electron assessed the Company $1,989,000, $1,528,000 and $335,000 in fees
under the Services Agreement. Management believes that the charges under the
Services Agreement are reasonable and that the terms of the Services Agreement
are fair to the Company. In fiscal 1997, 1998 and the three months ended April
3, 1999, the Company paid Thermo Electron an additional $94,000, $67,000 and
$7,000 for certain administrative services required by the Company that were not
covered by the Services Agreement. The Services Agreement automatically renews
for successive one-year terms, unless canceled by the Company upon 30 days'
prior notice. In addition, the Services Agreement terminates automatically in
the event the Company ceases to be a member of the Thermo Group or ceases to be
a participant in the Charter. In the event of a termination of the Services
Agreement, the Company will be required to pay a termination fee equal to the
fee that was paid by the Company for services under the Services Agreement for
the nine-month period prior to termination. Following termination, Thermo
Electron may provide certain administrative services on an as-requested basis by
the Company or as required in order to meet the Company's obligations under
Thermo Electron's policies and procedures. Thermo Electron will charge the
Company a fee equal to the market rate for comparable services if such services
are provided to the Company following termination.
The Company has entered into a Tax Allocation Agreement with Thermo Electron
that outlines the terms under which the Company will be included in Thermo
Electron's consolidated Federal and state income tax returns. Under current law,
the Company will be included in such tax returns so long as Thermo Electron owns
at least 80% of the outstanding common stock of Thermo Instrument, and Thermo
Instrument and Thermo Electron collectively own at least 80% of the outstanding
Common Stock of the Company. 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 its own separate company tax returns. If Thermo
Instrument's and Thermo Electron's equity ownership of the Company were to drop
below 80%, the Company would file its own tax returns. In 1999, because Thermo
Instrument's and Thermo Electron's combined equity ownership of the Company now
exceeds 80%, the Company will be included in
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Thermo Electron's consolidated tax returns and will be assessed for amounts due
to Thermo Electron in accordance with the Tax Allocation Agreement.
From time to time, the Company may transact business with other companies in
the Thermo Group. During fiscal 1997, 1998 and the three months ended April 3,
1999, these transactions included the following:
In March 1997, Thermo Instrument acquired approximately 95% of the
outstanding shares of Life Sciences International PLC ("LSI"), a London Stock
Exchange-listed company. Subsequently, Thermo Instrument acquired the remaining
shares of LSI capital stock. In July 1997, the Company agreed to acquire NESLAB
Instruments, Inc. and its related sales and service entity, NESLAB Instruments
Europa BV in the Netherlands (collectively, "NESLAB"), a global supplier of
temperature control products and former LSI subsidiary, from Thermo Instrument
for approximately $76,222,000. The purchase price represented the sum of the net
tangible book value of the business as of June 28, 1997, plus a percentage of
Thermo Instrument's total cost in excess of net assets acquired associated with
its acquisition of LSI, based on NESLAB's 1996 revenues relative to LSI's 1996
consolidated revenues. The purchase price consisted of 2,759,042 shares of the
Company's Common Stock valued at $31,315,000 issued to Thermo Instrument and the
assumption of $44,907,000 of debt to Thermo Instrument, which was subsequently
paid by borrowing $45,000,000 from Thermo Electron. The purchase price included
$255,000 for the increase in net book value from the date the business was
acquired by Thermo Instrument to June 28, 1997.
To finance the acquisition of IRT Corporation in September 1994, the Company
borrowed $7,300,000 from Thermo Instrument pursuant to a promissory note due
September 2001. In connection with the 1996 acquisition of Kevex Instruments and
Kevex X-Ray, the Company borrowed $15,000,000 from Thermo Electron pursuant to a
promissory note that was paid in August 1998. In connection with the acquisition
of Park Scientific Instruments Corporation in March 1997, the Company borrowed
$10,000,000 from Thermo Electron pursuant to a promissory note that was paid in
March 1999. In connection with the acquisition of NESLAB from Thermo Instrument
in July 1997, the Company borrowed $45,000,000 from Thermo Electron pursuant to
a promissory note due July 1999. To partially finance the acquisition of Sierra
Research and Technology Inc. in July 1997, the Company borrowed $5,000,000 from
Thermo Electron pursuant to a promissory note due July 1999. These notes bear
interest at the 90-day Commercial Paper Composite Rate plus 25 basis points, set
at the beginning of each quarter.
The Company, along with certain other Thermo Subsidiaries, participates in a
notional pool arrangement with Barclays Bank, which includes, as of April 3,
1999, a $67,970,000 credit facility. The Company has access to $323,000 under
this credit facility. Only U.K.-based Thermo Subsidiaries participate in this
arrangement. Under this arrangement the Bank notionally combines the positive
and negative cash balances held by the participants to calculate the net
interest yield/expense for the group. The benefit derived from this arrangement
is then allocated based on balances attributable to the respective participants.
Thermo Electron guarantees all of the obligations of each participant in this
arrangement. As of April 3, 1999, the Company had a positive cash balance of
approximately $1,522,000, based on an exchange rate of $1.6143/GBP 1.00 as of
April 3, 1999. For the three months ended April 3, 1999, the average annual
interest rate earned on GBP deposits by participants in this credit arrangement
was approximately 5.92% and the average annual interest rate paid on overdrafts
was approximately 6.25%.
The Company, along with certain other Thermo Subsidiaries, also participates
in a notional pool arrangement with ABN AMRO. This arrangement consists of a
zero balance arrangement, which includes, as of April 3, 1999, a $22,780,000
credit facility. Only European-based Thermo Subsidiaries participate in this
arrangement. The Company has access to $245,000 under this credit facility.
Funds borrowed by the Company under this arrangement pay interest at a rate set
by Thermo Finance B.V., a wholly-owned subsidiary of Thermo Electron, at the
beginning of each month, based on Netherlands market rates. Funds invested by
the Company under the arrangement earn a rate set by Thermo Finance B.V. at the
beginning of each month, based on Netherlands market rates. Such invested funds
are collateralized with investments
71
<PAGE>
principally consisting of corporate notes, U.S. government-agency securities,
commercial paper, money market funds, and other marketable securities, in the
amount of at least 103% of such obligation. Thermo Electron guarantees all of
the obligations of each participant in this arrangement. As of April 3, 1999,
the Company had a positive cash balance of approximately $254,000, based on an
exchange rate of $.4899/NLG 1.00 as of April 3, 1999. For the three months ended
April 3, 1999, the average annual interest rate earned on NLG deposits by
participants in this credit arrangement was approximately 3.6433% and the
average annual interest rate paid on overdrafts was approximately 4.1667%.
As of April 3, 1999, an additional $6,887,000 of the Company's cash
equivalents were invested in a repurchase agreement with Thermo Electron. This
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 has
adopted, effective June 1, 1999, a new cash management arrangement with Thermo
Electron that replaces the repurchase agreement. Under the new arrangement, the
Company lends excess cash to Thermo Electron and has the contractual right to
withdraw its invested funds upon 30 days' prior notice. Thermo Electron is
contractually required to maintain cash, cash equivalents and/or immediately
available bank lines of credit equal to at least 50% of all funds invested under
the arrangement by all Thermo Electron subsidiaries other than wholly owned
subsidiaries. The Company's funds invested in the new arrangement earn a rate
equal to the 30-day Dealer Commercial Paper Rate as reported in THE WALL STREET
JOURNAL plus 50 basis points, set at the beginning of each month.
As of April 3, 1999, the Company owed Thermo Electron and its other
subsidiaries an aggregate of $3,807,000, excluding the promissory notes
described above, for amounts due under the Services Agreement and related
administrative charges, for other products and services and for miscellaneous
items, net of amounts owed to the Company by Thermo Electron and its other
subsidiaries for products, services and for miscellaneous items. The largest
amount of such net indebtedness owed by the Company to Thermo Electron and its
other subsidiaries since January 3, 1998, was $5,648,000. These amounts do not
bear interest and are expected to be paid in the normal course of business.
In addition, the Company purchases and sells products and services in the
ordinary course of business with other companies affiliated with Thermo
Electron. In fiscal 1997, 1998 and the three months ended April 3, 1999,
purchases from these companies totaled $2,226,000, $2,013,000 and $802,000,
respectively, and sales to these companies totaled $825,000, $1,215,000 and
$132,000, respectively.
The human resources committee of the Company's board of directors
established a stock holding policy that required executive officers of the
Company to acquire and hold a minimum number of shares of Common Stock. In order
to assist the executive officers in complying with this policy, the Company also
adopted a stock holding assistance plan under which the Company may make
interest-free loans to executive officers to enable them to purchase shares of
Common Stock in the open market. The stock holding policy and the stock holding
assistance plan were both subsequently amended to apply only to the chief
executive officer. In 1996, Mr. Melas-Kyriazi received loans in the aggregate
principal amount of $164,831 under the stock holding assistance plan to purchase
12,525 shares of Common Stock, of which amount $131,865 was outstanding as of
April 3, 1999. In 1998, Mr. Howe, Mr. Melas-Kyriazi's successor as president and
chief executive officer of the Company, received a loan in the principal amount
of $141,992 to purchase 15,000 shares of Common Stock, the entire amount of
which was outstanding as of April 3, 1999. These loans are repayable upon the
earlier demand or the fifth anniversary of the date of the loan, unless
otherwise determined by the Committee.
72
<PAGE>
CERTAIN INFORMATION CONCERNING THE MERGER SUB,
THERMO INSTRUMENT AND THERMO ELECTRON
THE MERGER SUB
The Merger Sub is a newly-formed Delaware corporation organized at the
direction of Thermo Instrument for the sole purpose of facilitating the Merger
and has not conducted any prior business.
The principal executive offices of the Merger Sub are located at 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, and its telephone
number is (781) 622-1000.
THERMO INSTRUMENT
Thermo Instrument develops, manufactures and markets analytical instruments
used to identify complex chemical compounds, toxic metals and other elements in
a broad range of liquids and solids. Thermo Instrument also develops and
manufactures instruments used to monitor radioactivity and air pollution; life
sciences instruments and consumables; and imaging, inspection, measurement and
control instruments. These products are used for multiple applications in a
range of industries, including industrial processing, food and beverage
production, life sciences research and medical diagnostics.
The principal executive offices of Thermo Instrument are located at 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, and its telephone
number is (781) 622-1000.
THERMO ELECTRON
Thermo Electron develops, manufactures and markets analytical and monitoring
instruments; biomedical products including heart-assist devices,
respiratory-care equipment and mammography systems; paper recycling and
papermaking equipment; alternative-energy systems; industrial process equipment;
and other specialized products. Thermo Electron also provides a range of
services that include industrial outsourcing, particularly in
environmental-liability management, laboratory analysis and metallurgical
processing; and conducts advanced-technology research and development.
The principal executive offices of Thermo Electron are located at 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, and its telephone
number is (781) 622-1000.
INDEPENDENT PUBLIC ACCOUNTANTS
The Consolidated Balance Sheet as of January 2, 1999 and January 3, 1998,
and the related Consolidated Statements of Income, Cash Flows, and Comprehensive
Income and Shareholders' Investment for each of the three years in the period
ended January 2, 1999, included in this Proxy Statement have been audited by
Arthur Andersen LLP, independent public accountants, as stated in their report.
Representatives of Arthur Andersen LLP are not expected to be at the Special
Meeting.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be included in the proxy statement and
form of proxy relating to the 2000 Annual Meeting of the Stockholders of
ThermoSpectra must be received by the Company for inclusion in the proxy
statement and form of proxy no later than December 14, 1999. Notices of
stockholder proposals submitted outside the processes of Rule 14a-8 under the
Exchange Act (relating to proposals to be presented at the meeting but not
included in the Company's proxy statement and form of proxy), will be considered
untimely, and thus the Company's proxy may confer discretionary voting authority
on the persons named in the proxy with regard to such proposals, if received
after March 1, 2000.
73
<PAGE>
ADDITIONAL INFORMATION
Pursuant to the requirements of Section 13(e) of the Exchange Act, and Rule
13e-3 promulgated thereunder, the Company, as issuer of the class of equity
securities that is the subject of the Rule 13e-3 transaction, together with the
Merger Sub, Thermo Instrument and Thermo Electron, have filed a Schedule 13E-3
with the Commission with respect to the transactions contemplated by the Merger
Agreement. As permitted by the rules and regulations of the Commission, this
Proxy Statement omits certain information, exhibits and undertakings contained
in the Schedule 13E-3. Such additional information can be inspected at and
obtained from the Commission in the manner set forth below under "AVAILABLE
INFORMATION."
Statements contained in this Proxy Statement or in any document incorporated
herein by reference as to the contents of any contract or other document
referred to herein or therein are not necessarily complete and in each instance
reference is made to such contract or other document filed as an exhibit to the
Schedule 13E-3 or such other document, and each such statement shall be deemed
qualified in its entirety by such reference.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements, and other
information with the Commission. The reports, proxy statements, and other
information filed with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington D.C. 20549 and at the following Regional Offices of
the Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company. The same information is also available on the
Internet at http://www.FreeEDGAR.com. The Common Stock is listed on the AMEX,
and such material that relates to the Company may also be inspected at the
offices of the American Stock Exchange, Inc., 86 Trinity Place, New York, New
York 10006-1881. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS,
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT,
IN CONNECTION WITH THE MERGER, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY,
THERMO INSTRUMENT, THERMO ELECTRON OR THE MERGER SUB. THE DELIVERY OF THIS PROXY
STATEMENT SHALL NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY, THE MERGER SUB, THERMO INSTRUMENT AND THERMO ELECTRON SINCE THE DATE
HEREOF OR THAT THE INFORMATION IN THIS PROXY STATEMENT OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN IS CURRENT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF OR THEREOF.
74
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
(File No. 1-13876) are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1999;
2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended April 3, 1999;
3. The Company's Current Report on Form 8-K, filed with the Commission
on May 25, 1999, regarding the entering into of the Merger Agreement with
Thermo Instrument; and
4. The description of the Common Stock that is contained in the
Company's Registration Statement on Form 8-A filed under the Exchange Act,
as such description may be amended from time to time.
Copies of the documents listed above (other than exhibits thereto that are
not specifically incorporated by reference herein) are available, without
charge, to any person, including any beneficial owner of Common Stock, to whom
this Proxy Statement is delivered, upon oral or written request to Sandra L.
Lambert, Secretary, ThermoSpectra Corporation, c/o Thermo Electron Corporation,
81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046 (telephone
(781) 622-1000).
Any statements contained in a document incorporated or deemed to be
incorporated herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded. All information
appearing in this Proxy Statement is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated herein by reference.
75
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................. F-2
Consolidated Statement of Income for the three months ended April 3, 1999, and April 4, 1998, and the
years ended January 2, 1999, January 3, 1998, and December 28, 1996.................................... F-3
Consolidated Balance Sheet as of April 3, 1999, January 2, 1999, and January 3, 1998..................... F-4
Consolidated Statement of Cash Flows for the three months ended April 3, 1999, and April 4, 1998, and the
years ended January 2, 1999, January 3, 1998, and December 28, 1996.................................... F-6
Consolidated Statement of Comprehensive Income and Shareholders' Investment for the three months ended
April 3, 1999, and the years ended January 2, 1999, January 3, 1998, and December 28, 1996............. F-8
Notes to Consolidated Financial Statements............................................................... F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of ThermoSpectra Corporation:
We have audited the accompanying consolidated balance sheet of ThermoSpectra
Corporation (a Delaware corporation and 82%-owned subsidiary of Thermo
Instrument Systems Inc.) and subsidiaries as of January 2, 1999, and January 3,
1998, and the related consolidated statements of income, cash flows, and
comprehensive income and shareholders' investment for each of the three years in
the period ended January 2, 1999. 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
ThermoSpectra Corporation and subsidiaries as of January 2, 1999, and January 3,
1998, and the results of their operations and their cash flows for each of the
three years in the period ended January 2, 1999, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 16, 1999 (except with
respect to certain matters discussed
in Note 16, as to which
the date is June 1, 1999)
F-2
<PAGE>
THERMOSPECTRA CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
APRIL 3, APRIL 4,
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES (Notes 8 and 12).......................... $ 41,874 $ 53,067 $ 191,017 $ 198,900 $ 123,199
--------- --------- --------- --------- ---------
Costs and Operating Expenses:
Cost of revenues (Note 8)........................ 25,111 30,397 110,915 115,747 62,900
Selling, general, and administrative expenses
(Note 8)....................................... 11,637 14,118 53,643 53,182 36,493
Research and development expenses................ 3,771 4,513 16,298 17,303 12,910
Restructuring costs (Note 4)..................... 758 -- 4,320 953 1,038
Other nonrecurring income (Notes 3 and 4)........ (45) (339) (102) (2,210) (867)
--------- --------- --------- --------- ---------
41,232 48,689 185,074 184,975 112,474
--------- --------- --------- --------- ---------
Operating Income................................... 642 4,378 5,943 13,925 10,725
Interest Income.................................... 188 325 1,333 692 935
Interest Expense................................... -- -- (3) (66) --
Interest Expense, Related Party (Note 8)........... (822) (1,191) (4,334) (4,151) (773)
Gain on Sale of Investment (Note 3)................ -- -- 713 -- --
--------- --------- --------- --------- ---------
Income Before Provision for Income Taxes........... 8 3,512 3,652 10,400 10,887
Provision for Income Taxes (Note 6)................ 4 1,440 1,827 4,552 4,270
--------- --------- --------- --------- ---------
NET INCOME......................................... $ 4 $ 2,072 $ 1,825 $ 5,848 $ 6,617
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
EARNINGS PER SHARE (Note 13)
Basic............................................ $ -- $ .14 $ .12 $ .40 $ .53
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted.......................................... $ -- $ .14 $ .12 $ .39 $ .53
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
WEIGHTED AVERAGE SHARES (Note 13)
Basic............................................ 15,330 15,319 15,324 14,694 12,437
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted.......................................... 15,386 15,337 15,354 14,806 12,570
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
THERMOSPECTRA CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 3,
1999 1998 1997
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................. $ 18,094 $ 20,717 $ 20,672
Available-for-sale investments, at quoted market value
(cost of $2,056 in 1997; Note 2)......................... -- -- 2,083
Accounts receivable, less allowances of $2,240, $2,386, and
$1,934................................................... 36,756 41,016 43,015
Inventories................................................ 31,134 31,745 34,785
Prepaid income taxes (Note 6).............................. 13,119 10,188 7,337
Other current assets....................................... 2,364 2,271 1,774
----------- --------- ---------
101,467 105,937 109,666
----------- --------- ---------
Property, Plant, and Equipment, at Cost, Net................. 16,625 16,991 20,391
----------- --------- ---------
Patents, Trademarks, and Other Assets........................ 6,923 7,280 8,108
----------- --------- ---------
Cost in Excess of Net Assets of Acquired Companies (Note
3)......................................................... 117,908 119,674 115,232
----------- --------- ---------
$ 242,923 $ 249,882 $ 253,397
----------- --------- ---------
----------- --------- ---------
</TABLE>
F-4
<PAGE>
THERMOSPECTRA CORPORATION
CONSOLIDATED BALANCE SHEET (CONTINUED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
APRIL 3,
1999 1998 1997
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable (includes $50,000, $60,000, and $15,000 due
to Thermo Electron; Notes 3 and 8)....................... $ 52,747 $ 60,000 $ 15,000
Accounts payable........................................... 12,419 11,822 12,842
Accrued payroll and employee benefits...................... 4,695 6,239 6,987
Accrued installation and warranty expenses................. 4,532 4,362 4,495
Deferred revenue........................................... 3,835 4,360 4,695
Accrued income taxes....................................... 7,507 3,735 2,050
Other accrued expenses (Notes 3 and 4)..................... 11,434 13,143 8,496
Due to affiliated companies................................ 3,807 4,528 1,561
----------- --------- ---------
100,976 108,189 56,126
----------- --------- ---------
Deferred Income Taxes (Note 6)............................... 2,946 1,651 356
----------- --------- ---------
Other Deferred Items......................................... 1,821 1,907 1,277
----------- --------- ---------
Long-term Obligations, Due to Related Party (Notes 3 and
8)......................................................... 7,300 7,300 67,300
----------- --------- ---------
Commitments and Contingencies (Notes 7 and 8)
Shareholders' Investment (Notes 3, 5, and 10):
Common stock, $.01 par value, 25,000,000 shares authorized;
15,335,839, 15,327,620, and 15,313,506 shares issued..... 153 153 153
Capital in excess of par value............................. 111,630 111,549 111,262
Retained earnings.......................................... 19,767 19,763 17,938
Treasury stock at cost, 423 shares......................... (7) (7) (7)
Accumulated other comprehensive items (Note 14)............ (1,663) (623) (1,008)
----------- --------- ---------
129,880 130,835 128,338
----------- --------- ---------
$ 242,923 $ 249,882 $ 253,397
----------- --------- ---------
----------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
THERMOSPECTRA CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
APRIL 3, APRIL 4,
1999 1998 1998 1997 1996
---------- --------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.......................................... $ 4 $ 2,072 $ 1,825 $ 5,848 $ 6,617
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 1,929 1,814 7,073 6,615 4,493
Provision for losses on accounts receivable....... (3) 14 689 521 199
Gain on sales of building, investment, and
business, net (Note 3).......................... (45) (339) (815) (2,210) --
Other noncash expenses............................ 241 493 2,554 1,417 839
Deferred income tax benefit....................... -- -- (1,432) (40) (796)
Changes in current accounts, excluding the effects
of acquisitions and dispositions:
Accounts receivable............................. 3,463 1,974 3,597 (733) (3,444)
Inventories..................................... 246 83 3,260 4,873 (3,105)
Other current assets............................ (141) (257) (170) (81) 335
Accounts payable................................ 709 1 (1,988) (2,330) 2,123
Due to affiliated companies..................... 232 4,227 2,967 (2,699) 426
Other current liabilities....................... (1,124) (183) 3,841 (2,829) (2,238)
Other............................................. -- -- (343) 34 (21)
---------- --------- ---------- ----------- ----------
Net cash provided by operating activities..... 5,511 9,899 21,058 8,386 5,428
---------- --------- ---------- ----------- ----------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired (Note 3)......... -- -- (7,943) (21,142) (22,521)
Proceeds from sale of product lines and business
(Note 3).......................................... -- 750 750 4,980 --
Refund of acquisition purchase price (Note 4)....... 595 -- -- -- 1,103
Purchases of property, plant, and equipment......... (971) (519) (2,199) (2,595) (2,762)
Proceeds from sale of property, plant, and
equipment......................................... 137 1,657 2,052 91 168
Proceeds from sale and maturities of
available-for-sale investments (Note 3)........... -- -- 2,769 -- 3,000
Purchases of available-for-sale investments......... -- -- -- -- (3,000)
Other, net.......................................... 243 10 (111) (926) (733)
---------- --------- ---------- ----------- ----------
Net cash provided by (used in) investing
activities.................................. $ 4 $ 1,898 $ (4,682) $ (19,592) $ (24,745)
---------- --------- ---------- ----------- ----------
</TABLE>
F-6
<PAGE>
THERMOSPECTRA CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
APRIL 3, APRIL 4,
1999 1998 1998 1997 1996
---------- --------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
FINANCING ACTIVITIES
Repayment of long-term obligation to Thermo
Electron.......................................... $ (10,000) $ -- $ (15,000) $ -- $ --
Proceeds from issuance of long-term obligations to
Thermo Electron (Note 8).......................... -- -- -- 60,000 15,000
Payment to Thermo Instrument for debt assumed in
connection with acquisition of NESLAB (Note 3).... -- -- -- (44,907) --
Net proceeds from issuance of Company common
stock............................................. 81 30 48 561 74
Change in short-term borrowings and Other........... 2,818 (42) 239 (674) 552
---------- --------- ---------- ----------- ----------
Net cash provided by (used in) financing
activities.................................. (7,101) (12) (14,713) 14,980 15,626
---------- --------- ---------- ----------- ----------
Exchange Rate Effect on Cash.......................... (1,037) (198) (1,618) 318 (35)
---------- --------- ---------- ----------- ----------
Increase (Decrease) in Cash and Cash Equivalents...... (2,623) 11,587 45 4,092 (3,726)
Cash and Cash Equivalents at Beginning of Period...... 20,717 20,672 20,672 16,580 20,306
---------- --------- ---------- ----------- ----------
Cash and Cash Equivalents at End of Period............ $ 18,094 $ 32,259 $ 20,717 $ 20,672 $ 16,580
---------- --------- ---------- ----------- ----------
---------- --------- ---------- ----------- ----------
CASH PAID FOR
Interest............................................ $ 731 $ 2,303 $ 4,335 $ 4,217 $ 773
Income Taxes........................................ $ -- $ 64 $ 1,158 $ 4,490 $ 3,419
NONCASH ACTIVITIES
Common stock received from sale of business (Note
3)................................................ $ -- $ -- $ -- $ 2,056 $ --
Fair value of assets of acquired companies.......... $ -- $ -- $ 10,519 $ 114,495 $ 29,757
Cash paid for acquired companies.................... -- -- (7,967) (24,379) (22,525)
Stock options issued in connection with acquisition
of PSI............................................ -- -- -- (1,693) --
Stock issuable to Thermo Instrument in connection
with acquisition of NESLAB........................ -- -- -- (31,315) --
Debt assumed in connection with acquisition of
NESLAB............................................ -- -- -- (44,907) --
---------- --------- ---------- ----------- ----------
Liabilities assumed of acquired companies......... $ -- $ -- $ 2,552 $ 12,201 $ 7,232
---------- --------- ---------- ----------- ----------
---------- --------- ---------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
THERMOSPECTRA CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND SHAREHOLDERS' INVESTMENT
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
APRIL 3,
1999 1998 1997 1996
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
COMPREHENSIVE INCOME
Net Income........................................................ $ 4 $ 1,825 $ 5,848 $ 6,617
----------- --------- --------- ---------
Other Comprehensive Items, Net (Note 14):
Foreign currency translation adjustment......................... (1,040) 412 (776) 23
Unrealized gain (loss) on available-for-sale investments........ -- (27) 27 --
----------- --------- --------- ---------
(1,040) 385 (749) 23
----------- --------- --------- ---------
$ (1,036) $ 2,210 $ 5,099 $ 6,640
----------- --------- --------- ---------
----------- --------- --------- ---------
SHAREHOLDERS' INVESTMENT
Common Stock, $.01 Par Value:
Balance at beginning of period.................................. $ 153 $ 153 $ 124 $ 124
Stock issued to Thermo Instrument in connection with acquisition
of NESLAB (Note 3)............................................ -- -- 28 --
Issuance of Company common stock................................ -- -- 1 --
----------- --------- --------- ---------
Balance at end of period........................................ 153 153 153 124
----------- --------- --------- ---------
Capital in Excess of Par Value:
Balance at beginning of period.................................. 111,549 111,262 77,416 76,955
Stock issued to Thermo Instrument in connection with acquisition
of NESLAB (Note 3)............................................ -- -- 31,287 --
Stock options issued in connection with acquisition of PSI (Note
3)............................................................ -- -- 1,693 --
Issuance of Company common stock................................ 81 48 562 79
Capital contribution from parent company........................ -- 125 -- --
Tax benefit related to employees' and directors' stock plans.... -- 114 304 382
----------- --------- --------- ---------
Balance at end of period........................................ 111,630 111,549 111,262 77,416
----------- --------- --------- ---------
Retained Earnings:
Balance at beginning of period.................................. 19,763 17,938 12,345 5,728
Net income...................................................... 4 1,825 5,848 6,617
Deemed distribution to Thermo Instrument in connection with
acquisition of NESLAB (Note 3)................................ -- -- (255) --
----------- --------- --------- ---------
Balance at end of period........................................ 19,767 19,763 17,938 12,345
----------- --------- --------- ---------
Treasury Stock:
Balance at beginning of period.................................. (7) (7) (5) --
Purchases of Company common stock............................... -- -- (2) (5)
----------- --------- --------- ---------
Balance at end of period........................................ (7) (7) (7) (5)
----------- --------- --------- ---------
Accumulated Other Comprehensive Items (Note 14):
Balance at beginning of period.................................. (623) (1,008) (259) (282)
Other comprehensive items, net.................................. (1,040) 385 (749) 23
----------- --------- --------- ---------
Balance at end of period........................................ (1,663) (623) (1,008) (259)
----------- --------- --------- ---------
$ 129,880 $ 130,835 $ 128,338 $ 89,621
----------- --------- --------- ---------
----------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
ThermoSpectra Corporation (the Company) develops, manufactures, and markets
imaging and inspection, temperature control, and test and measurement
instruments, which represent 45%, 32%, and 23% of the Company's 1998 revenues,
respectively. The Company sells its products on a worldwide basis (Note 12).
RELATIONSHIP WITH THERMO INSTRUMENT SYSTEMS INC. AND THERMO ELECTRON CORPORATION
The Company was incorporated in August 1994 as an indirect, wholly owned
subsidiary of Thermo Instrument Systems Inc. As of January 2, 1999, Thermo
Instrument owned 12,637,417 shares of the Company's common stock, representing
82% of such stock outstanding. Thermo Instrument is an 85%-owned subsidiary of
Thermo Electron Corporation. As of January 2, 1999, Thermo Electron owned
1,491,453 shares of the Company's common stock, representing 10% of such stock
outstanding.
Thermo Electron has announced a proposed reorganization involving certain of
Thermo Electron's subsidiaries, including the Company. As part of this
reorganization, Thermo Electron announced that the Company may be taken private
(Note 16).
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 1998, 1997, and 1996 are for the fiscal years ended January 2,
1999, January 3, 1998, and December 28, 1996, respectively. Fiscal years 1998
and 1996 each included 52 weeks; 1997 included 53 weeks.
REVENUE RECOGNITION
The Company recognizes product revenue upon shipment. The Company provides a
reserve for its estimate of warranty and installation costs at the time of
shipment. Deferred revenue in the accompanying balance sheet consists of
unearned revenue on service contracts, which is recognized as revenue over the
life of the service contract. Substantially all of the deferred revenue included
in the accompanying 1998 balance sheet will be recognized within one year.
SOFTWARE DEVELOPMENT COSTS
In accordance with Statement of Financial Accounting Standards (SFAS) No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed," software development costs are expensed as incurred until
technological feasibility has been established. The Company believes that, under
its current process for developing software, the software is essentially
completed concurrently with the establishment of technological feasibility.
Accordingly, no software development costs have been capitalized.
F-9
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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 5). 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 shareholders' investment.
INCOME TAXES
The Company's initial public offering in August 1995 resulted in a reduction
of Thermo Instrument's equity ownership of the Company below 80% and, as a
result, the Company was required to file its own federal income tax returns for
1996 through 1998. Thermo Instrument's equity ownership of the Company now
exceeds 80%, therefore, effective January 3, 1999, the Company will be included
in Thermo Electron's consolidated tax return as provided for under a tax
allocation agreement between the Company and Thermo Instrument. This agreement
provides that, in years that the Company has taxable income, the Company will
pay to Thermo Instrument amounts comparable to the taxes the Company would have
paid if it had filed separate tax returns.
In accordance with 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
Basic earnings per share have been computed by dividing net income by the
weighted average number of shares outstanding during the year. Diluted earnings
per share have been computed assuming the exercise of stock options, as well as
their related income tax effects.
CASH AND CASH EQUIVALENTS
At year-end 1998 and 1997, $10,323,000 and $14,311,000, respectively, of the
Company's cash equivalents were invested in a repurchase agreement with Thermo
Electron. Under this agreement, the Company in effect lends excess cash to
Thermo Electron, which Thermo Electron collateralizes with investments
principally consisting of corporate notes, U.S. government-agency securities,
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. 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 (Note 16).
At year-end 1998, $147,000 of the Company's cash equivalents, denominated in
Dutch guilders, were invested in a repurchase agreement with a wholly owned
subsidiary of Thermo Electron under terms similar to those outlined in the above
agreement, except that the rate earned is based on Netherlands market rates, set
at the beginning of each month.
The Company, along with other subsidiaries of Thermo Electron, participates
in a notional pool arrangement with Barclays Bank, which includes a $71 million
credit facility. The Company has access to $2,423,000 under this credit
facility, which is included in the amount available for use as discussed in
F-10
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Note 9. Only U.K.-based subsidiaries of Thermo Electron participate in this
arrangement. Under this arrangement, Barclays notionally combines the positive
and negative cash balances held by the participants to calculate the net
interest yield/expense for the group. The benefit derived from this arrangement
is then allocated based on balances attributable to the respective participants.
Thermo Electron guarantees all of the obligations of each participant in this
arrangement. At year-end 1998 and 1997, the Company had a positive cash balance
under this arrangement of $1,958,000 and $44,000, respectively.
At year-end 1998 and 1997, the Company's cash equivalents also included
investments in short-term certificates of deposit held by the Company's foreign
operations, which have an original maturity of three months or less. Cash
equivalents are carried at cost, which approximates market value.
INVENTORIES
Inventories are stated at the lower of cost (on a first-in, first-out basis)
or market value and include materials, labor, and manufacturing overhead. The
components of inventories are:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw Materials and Supplies................................ $ 18,355 $ 16,850
Work in Process........................................... 5,899 7,096
Finished Goods............................................ 7,491 10,839
--------- ---------
$ 31,745 $ 34,785
--------- ---------
--------- ---------
</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 and improvements, 5 to 30
years; machinery and equipment, 2 to 10 years; and leasehold improvements, the
shorter of the term of the lease or the life of the asset. Property, plant, and
equipment consists of:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Land...................................................... $ 2,424 $ 3,067
Buildings................................................. 6,238 6,910
Machinery, Equipment, and Leasehold Improvements.......... 21,855 21,131
--------- ---------
30,517 31,108
Less: Accumulated Depreciation and Amortization........... 13,526 10,717
--------- ---------
$ 16,991 $ 20,391
--------- ---------
--------- ---------
</TABLE>
PATENTS, TRADEMARKS, AND OTHER ASSETS
Patents, trademarks, and other assets in the accompanying balance sheet
includes the costs of acquired patents and trademarks that are amortized using
the straight-line method over an estimated useful life of 3 to 20 years. These
assets were $4,028,000 and $4,826,000, net of accumulated amortization of
$2,965,000 and $2,135,000, at year-end 1998 and 1997, respectively.
F-11
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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 $8,015,000 and $4,927,000 at year-end 1998 and 1997,
respectively. The Company assesses the future useful life of this asset whenever
events or changes in circumstances indicate that the current useful life has
diminished. The Company considers the future undiscounted cash flows of the
acquired businesses in assessing the recoverability of this asset. If impairment
occurs, 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 in the
"Accumulated other comprehensive items" component of shareholders' investment
(Note 14). Foreign currency transaction gains and losses are included in the
accompanying statement of income and are not material for the three years
presented.
FORWARD CONTRACTS
The Company uses short-term forward foreign exchange contracts to manage
exposures related to firm purchase and sale commitments that are denominated in
currencies other than its subsidiaries' local currencies. These contracts
principally hedge transactions denominated in U.S. dollars, British pound
sterling, Japanese yen, French francs, and German marks. The purpose of the
Company's foreign currency hedging activities is to protect the Company's local
currency cash flows related to these commitments from fluctuations in foreign
exchange rates. Gains and losses arising from forward foreign exchange contracts
are recorded as an offset to the gains and losses resulting from the
transactions being hedged. The Company does not enter into speculative foreign
currency agreements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRESENTATION
Certain amounts in 1997 and 1996 have been reclassified to conform to the
presentation in the 1998 financial statements.
INTERIM FINANCIAL STATEMENTS
The financial statements as of April 3, 1999, and for the three-month
periods ended April 3, 1999, and April 4, 1998, 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
F-12
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
operations for the three-month period ended April 3, 1999, are not necessarily
indicative of the results to be expected for the entire year.
2. AVAILABLE-FOR-SALE INVESTMENTS
The Company's marketable equity securities are considered available-for-sale
investments and are carried at market value, with the difference between cost
and market value, net of related tax effects, recorded in the "Accumulated Other
Comprehensive Items" component of shareholders' investment. Available-for-sale
investments in the accompanying 1997 balance sheet represent common stock
received in connection with the sale of its Linac business (Note 3).
3. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
In October 1998, the Company acquired the assets, subject to certain
liabilities, of TopoMetrix Corporation, a scanning probe microscope
manufacturing business, for approximately $7,967,000 in cash, subject to a
post-closing adjustment. The cost of this acquisition exceeded the estimated
fair value of the net assets by $7,061,000. The businesses of Park Scientific
Instruments Corporation (PSI) and TopoMetrix were combined and renamed
ThermoMicroscopes Corporation.
In July 1997, the Company acquired Sierra Research and Technology Inc.
(SRT), a manufacturer of systems used for the rework and repair of printed
circuit boards, for $7,638,000 in cash. The cost of this acquisition exceeded
the estimated fair value of the net assets by $6,368,000. To partially finance
the acquisition, the Company borrowed $5,000,000 from Thermo Electron (Note 8).
In March 1997, Thermo Instrument acquired Life Sciences International PLC
(LSI), a London Stock Exchange-listed company. In July 1997, the Company agreed
to acquire NESLAB Instruments, Inc. and its related sales and service entity,
NESLAB Instruments Europa BV in the Netherlands, (collectively, NESLAB), a
global supplier of temperature control systems and former LSI subsidiary, from
Thermo Instrument for $76,222,000. The purchase price represents the sum of the
net tangible book value of the business as of June 28, 1997, plus a percentage
of Thermo Instrument's total cost in excess of net assets acquired associated
with its acquisition of LSI, based on NESLAB's 1996 revenues relative to LSI's
1996 consolidated revenues. The Company believes that this allocation
methodology is reasonable and in accordance with the guidance provided by
Securities and Exchange Commission Staff Accounting Bulletin (SAB) 55 (Topic
1:B).
The purchase price of NESLAB consisted of 2,759,042 shares of Company common
stock valued at $31,315,000 issued to Thermo Instrument and the assumption of
$44,907,000 of debt to Thermo Instrument, which was subsequently paid. To repay
the debt assumed from Thermo Instrument, the Company borrowed $45,000,000 from
Thermo Electron (Note 8). The cost of this acquisition exceeded the estimated
fair value of the net assets by $57,774,000.
Because the Company and NESLAB were deemed for accounting purposes to be
under control of their common majority owner, Thermo Instrument, the transaction
has been accounted for in a manner similar to a pooling of interests.
Accordingly, the accompanying financial statements include the results of NESLAB
from March 12, 1997, the date the business was acquired by Thermo Instrument and
the shares issued have been treated as outstanding from that date. The purchase
price included $255,000 for the
F-13
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
increase in net book value from the date the business was acquired by Thermo
Instrument to June 28, 1997. This amount was recorded as a reduction in retained
earnings.
In March 1997, the Company acquired PSI, a manufacturer of scanning-probe
microscopes used in industry and academia to test and measure the topography and
other surface properties of materials, for $16,702,000 in cash, including the
repayment of $1,300,000 of bank debt. In addition, the Company assumed
outstanding PSI stock options, which were converted into stock options that are
exercisable into 144,941 shares of Company common stock at a weighted average
exercise price of $3.07 per share, with an aggregate value of $1,693,000 as of
the date of the merger agreement. The cost of this acquisition exceeded the
estimated fair value of the net assets by $14,132,000. To partially finance the
acquisition, the Company borrowed $10,000,000 from Thermo Electron (Note 8).
In March 1996, Thermo Instrument acquired a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons plc, a
wholly owned subsidiary of Rhone-Poulenc Rorer, Inc. Pursuant to an agreement
executed in August 1996, the Company acquired Kevex Instruments and Kevex X-Ray
(the Kevex businesses), which were formerly part of Fisons, from Thermo
Instrument for $21,567,000 in cash. To partially finance the acquisition, the
Company borrowed $15,000,000 from Thermo Electron, which was repaid in 1998
(Note 8). The purchase price was determined based on the net book value of the
Kevex businesses at March 29, 1996, and a pro rata allocation of Thermo
Instrument's total cost in excess of the net assets of acquired companies
recorded in connection with the acquisition of the Fisons businesses. The
Company believes that this allocation methodology is reasonable and in
accordance with the guidance provided by SAB 55 (Topic 1:B). The cost of this
acquisition exceeded the estimated fair value of the net assets by $10,046,000.
Kevex Instruments is a manufacturer of X-ray microanalyzers and X-ray
fluorescence instruments and Kevex X-Ray is a manufacturer of specialty X-ray
sources.
Because the Company and the Kevex businesses were deemed for accounting
purposes to be under control of their common majority owner, Thermo Instrument,
the transaction has been accounted for in a manner similar to a pooling of
interests. Accordingly, the Company's 1996 financial statements include the
results of the Kevex businesses from March 29, 1996, the date these businesses
were acquired by Thermo Instrument. During 1996, the Company acquired two
additional companies for an aggregate $900,000 in cash.
Except for NESLAB and the Kevex businesses, the acquisitions described above
have been accounted for using the purchase method of accounting and their
results of operations have been included in the accompanying financial
statements from their respective dates of acquisition. Allocation of the
purchase price for these acquisitions was based on estimates of the fair value
of the net assets acquired and, for TopoMetrix, is subject to adjustment. The
Company has gathered no information that indicates the final allocation of
purchase price for TopoMetrix will differ materially from the preliminary
estimate.
In connection with these acquisitions, the Company has undertaken
restructuring activities at the acquired businesses. The Company's restructuring
activities, which were accounted for in accordance with Emerging Issues Task
Force Pronouncement (EITF) 95-3, primarily have included reductions in staffing
levels and the abandonment of excess facilities. In connection with these
restructuring activities, as part of the cost of the acquisitions, the Company
established reserves as detailed below, primarily for severance and excess
facilities. In accordance with EITF 95-3, the Company finalizes its
restructuring plans no later
F-14
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
than one year from the respective dates of the acquisitions. A summary of the
changes in accrued acquisition expenses is:
<TABLE>
<CAPTION>
ABANDONMENT
OF EXCESS
SEVERANCE FACILITIES TOTAL
----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE AT DECEMBER 30, 1995.................................. $ 570 $ 989 $ 1,559
Reserves established...................................... 730 378 1,108
Usage..................................................... (551) (1,035) (1,586)
Decrease due to finalization of restructuring plan,
recorded as a decrease to cost in excess of net assets
of acquired companies................................... (191) (114) (305)
----- ----------- ---------
BALANCE AT DECEMBER 28, 1996.................................. 558 218 776
Reserves established...................................... 173 588 761
Usage..................................................... (390) (127) (517)
Decrease due to finalization of restructuring plan,
recorded as a decrease to cost in excess of net assets
of acquired companies................................... (155) (226) (381)
Currency translation adjustment........................... -- (53) (53)
----- ----------- ---------
BALANCE AT JANUARY 3, 1998.................................... 186 400 586
Reserves established...................................... 145 602 747
Usage..................................................... (226) (450) (676)
Decrease due to finalization of restructuring plan,
recorded as a decrease to cost in excess of net assets
of acquired companies................................... (75) (166) (241)
Currency translation adjustment........................... -- 30 30
----- ----------- ---------
BALANCE AT JANUARY 2, 1999.................................... 30 416 446
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
Usage...................................................... -- (234) (234)
----- ----------- ---------
BALANCE AT APRIL 3, 1999...................................... $ 30 $ 182 $ 212
----- ----------- ---------
----- ----------- ---------
</TABLE>
Unresolved matters at January 2, 1999, primarily included completion of
abandonment of excess facilities for TopoMetrix. Accrued acquisition expenses
are included in other accrued expenses in the accompanying balance sheet.
Based on unaudited data, the following table presents selected financial
information for the Company, NESLAB, PSI, and the Kevex businesses, on a pro
forma basis, assuming that the Company and these acquired businesses had been
combined since the beginning of 1996. The effect of the acquisitions not
included in the pro forma data was not material to the Company's results of
operations.
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS EXCEPT
<S> <C> <C>
PER SHARE AMOUNTS)
Revenues................................................ $ 210,412 $ 202,813
Net Income.............................................. 3,736 3,280
Earnings per Share:
Basic................................................. .25 .22
Diluted............................................... .24 .21
</TABLE>
F-15
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
The pro forma results are not necessarily indicative of future operations or
the actual results that would have occurred had the acquisitions of NESLAB, PSI,
and the Kevex businesses been made at the beginning of 1996.
DISPOSITIONS
In January 1998, the Company's Nicolet Imaging Systems subsidiary sold its
security screening product line to OSI Systems, Inc. for $750,000 in cash for a
nominal loss. The product line represented less than 1.0% of the Company's
revenues. During 1998, the Company sold real estate for a gain of $106,000.
In December 1997, the Company sold its Linac business to SteriGenics
International, Inc. for $4,980,000 in cash and 109,607 shares of SteriGenics
common stock valued at $2,056,000, resulting in a gain of $2,210,000. The Linac
business is an electron beam radiation business that offers contract
sterilization services. The Company sold its shares of SteriGenics common stock
in 1998 and realized a gain of $713,000.
4. RESTRUCTURING COSTS AND OTHER NONRECURRING INCOME
During 1998, the Company recorded restructuring and related costs of
$5,399,000. Restructuring costs of $4,320,000, which were accounted for in
accordance with EITF 94-3, consist of $3,712,000 related to severance costs for
259 employees across all functions and $608,000 related primarily to
facility-closing costs. The charge for facility-closing costs includes $490,000
for write-downs of related fixed assets. In addition, the Company recorded an
inventory write-down totaling $1,079,000 related to the discontinuation of
certain underperforming products, which is included in cost of revenues in the
accompanying statement of income. As of January 2, 1999, the Company had
terminated 182 employees and had expended $1,371,000 of the established
reserves. During the first quarter of 1999, the Company terminated 30 additional
employees and recorded additional restructuring costs of $758,000. Such costs
consist of $259,000 related to severance costs for four employees at a foreign
sales office, $155,000 for facility-closure costs, and $344,000 related to
certain business relocation and related costs. A summary of the changes in
accrued restructuring costs, included in other accrued expenses in the
accompanying balance sheet, follows:
<TABLE>
<CAPTION>
ABANDONMENT
OF EXCESS
SEVERANCE FACILITIES OTHER TOTAL
----------- ------------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 3, 1998............ $ 953 $ -- $ -- $ 953
Charged to expense.................. 3,712 608 -- 4,320
Usage............................... (2,206) (608) -- (2,814)
----------- ----- --------- ---------
BALANCE AT JANUARY 2, 1999............ 2,459 -- -- 2,459
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
Charged to expense.................. 259 155 344 758
Usage............................... (1,360) (155) (344) (1,859)
Currency translation adjustment..... (21) -- -- (21)
----------- ----- --------- ---------
BALANCE AT APRIL 3, 1999.............. $ 1,337 $ -- $ -- $ 1,337
----------- ----- --------- ---------
----------- ----- --------- ---------
</TABLE>
F-16
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. RESTRUCTURING COSTS AND OTHER NONRECURRING INCOME (CONTINUED)
In connection with the Company's restructuring activities, the Company
expects to incur approximately $400,000 of additional costs that, pursuant to
the requirements of EITF 94-3, are not permitted as charges until incurred.
These additional costs primarily include costs for certain employee and business
relocation and related costs. The Company plans to complete implementation of
its restructuring plan in the second quarter of 1999.
In 1997, the Company's Gould Instrument Systems, Inc. subsidiary incurred a
$953,000 restructuring charge, related primarily to severance costs for 40
employees terminated during 1997. Other accrued expenses in the accompanying
1997 balance sheet includes a reserve of $244,000 associated with these actions
which was expended during 1998.
In 1996, Gould incurred $1,038,000 in connection with a restructuring plan,
which included the termination of approximately 40 employees.
In 1996, the Company finalized negotiations with the former owner of Gould
in connection with amounts claimed by the Company for the discontinuance of the
Acqulab product line, which was sold to the Company as part of the 1995 purchase
of Gould. Of the $1,970,000 settlement received, $1,103,000 related to a
reduction of the purchase price principally for the unrealized earning potential
of the Acqulab product line, resulting in a reduction of "Cost in excess of net
assets of acquired companies" in 1996. The remaining $867,000 related to a
reimbursement of expenses incurred subsequent to the acquisition of Gould for
the ongoing development of Acqulab. This amount is classified as other
nonrecurring income in the accompanying 1996 statement of income.
5. EMPLOYEE BENEFIT PLANS
STOCK-BASED COMPENSATION PLANS
STOCK OPTION PLANS
The Company has stock-based compensation plans for its key employees,
directors, and others, which permit the grant of a variety of stock and
stock-based awards as determined by the human resources committee of the
Company's Board of Directors (the Board Committee), including restricted stock,
stock options, stock bonus shares, or performance-based shares. The option
recipients and the terms of options granted under these plans are determined by
the Board Committee. As of year-end 1998, only nonqualified stock options have
been awarded under these plans. Generally, options granted to date are
exercisable immediately, but are subject to certain transfer restrictions and
the right of the Company to repurchase shares issued upon exercise of the
options at the exercise price, upon certain events. The restrictions and
repurchase rights generally lapse ratably over a one- to ten-year period,
depending on the term of the option, which generally ranges from five to twelve
years. Nonqualified stock options may be granted at any price determined by the
Board Committee, although incentive stock options must be granted at not less
than the fair market value of the Company's common stock on the date of grant.
To date, all options have been granted at fair market value. The Company also
has a directors' stock option plan that provides for the grant of stock options
to outside directors pursuant to a formula approved by the Company's
shareholders. Options granted under this plan have the same general terms as
options granted under the stock-based compensation plans described above, except
that the restrictions and repurchase rights generally lapse ratably over a
four-year period and the option term is five years. 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-17
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. EMPLOYEE BENEFIT PLANS (CONTINUED)
In November 1998, the Company's employees, excluding its officers and
directors, were offered the opportunity to exchange previously granted options
to purchase shares of Company common stock for an amount of options equal to
half of the number of options previously held, exercisable at a price equal to
the fair market value at the time of the exchange offer. Holders of options to
acquire 87,000 shares at a weighted average exercise price of $14.50 per share
elected to participate in this exchange and, as a result, received options to
purchase 43,500 shares of Company common stock at $11.41 per share, which are
included in the 1998 grants in the table below. The other terms of the new
options are the same as the exchanged options except that the holders may not
sell shares purchased pursuant to such new options for six months from the
exchange date. The options exchanged were canceled by the Company.
A summary of the Company's stock option activity is:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(SHARES IN THOUSANDS)
Options Outstanding, Beginning of
Year.................................. 1,256 $11.23 971 $12.10 862 $11.32
Issued upon acquisition of PSI........ -- -- 145 3.07 -- --
Granted............................... 370 10.73 374 10.46 183 15.26
Exercised............................. (14) 3.44 (105) 4.20 (8) 10.00
Forfeited............................. (306) 12.17 (129) 12.02 (66) 10.89
Canceled due to exchange.............. (87) 14.50 -- -- -- --
----- -------- --------
Options Outstanding, End of Year........ 1,219 $10.70 1,256 $11.23 971 $12.10
----- -------- -------- -------- -------- --------
----- -------- -------- -------- -------- --------
Options Exercisable..................... 1,212 $10.74 1,238 $11.35 971 $12.10
----- -------- -------- -------- -------- --------
----- -------- -------- -------- -------- --------
Options Available for Grant............. 388 172 121
----- -------- --------
----- -------- --------
</TABLE>
A summary of the status of the Company's stock options at January 2, 1999,
is:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------
WEIGHTED
AVERAGE WEIGHTED
NUMBER REMAINING AVERAGE
OF CONTRACTUAL EXERCISE
RANGE OF EXERCISE PRICES SHARES LIFE PRICE
- ---------------------------------------- ------------- ------------ -----------
(IN
THOUSANDS)
<S> <C> <C> <C>
$ 2.55--$ 6.20.......................... 36 6.1 years $ 3.37
6.21-- 9.85.......................... 163 6.8 years 9.50
9.86-- 13.50.......................... 847 7.1 years 10.42
13.51-- 17.15.......................... 173 6.5 years 14.73
-----
$ 2.55--$17.15.......................... 1,219 6.9 years $ 10.70
-----
-----
</TABLE>
The information disclosed above for options outstanding at January 2, 1999,
does not differ materially for options exercisable.
F-18
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. EMPLOYEE BENEFIT PLANS (CONTINUED)
EMPLOYEE STOCK PURCHASE PROGRAM
Effective November 1, 1996, substantially all of the Company's full-time
U.S. employees are eligible to participate in an employee stock purchase program
sponsored by the Company and Thermo Electron, under which employees can purchase
shares of the Company's and Thermo Electron's common stock. Prior to November 1,
1996, the program was sponsored by Thermo Instrument and Thermo Electron. Prior
to the 1998 program year, the applicable shares of common stock could 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 were subject to a six-month
resale restriction. Effective November 1, 1998, the applicable shares of common
stock may be purchased at 85% of the lower of the fair market value at the
beginning or end of the plan year, and the shares purchased are subject to a
one-year resale restriction.
Shares are purchased through payroll deductions of up to 10% of each
participating employee's gross wages. No shares were issued under this program
during 1998. During 1997, the Company issued 9,852 shares of its common stock
under this program.
PRO FORMA STOCK-BASED COMPENSATION EXPENSE
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-based Compensation," which sets forth a fair-value
based method of recognizing stock-based compensation expense. As permitted by
SFAS No. 123, the Company has elected to continue to apply APB No. 25 to account
for its stock-based compensation plans. Had compensation cost for awards granted
under the Company's stock-based compensation plans been determined based on the
fair value at the grant dates consistent with the method set forth under SFAS
No. 123, the effect on the Company's net income and earnings per share would
have been:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
Net Income:
As reported.................................................... $ 1,825 $ 5,848 $ 6,617
Pro forma...................................................... 1,070 5,343 6,277
Basic Earnings per Share:
As reported.................................................... .12 .40 .53
Pro forma...................................................... .07 .36 .50
Diluted Earnings per Share:
As reported.................................................... .12 .39 .53
Pro forma...................................................... .07 .36 .50
</TABLE>
Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
expense may not be representative of the amount to be expected in future years.
Pro forma compensation expense for options granted is reflected over the vesting
period; therefore, future pro forma compensation expense may be greater as
additional options are granted.
F-19
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. EMPLOYEE BENEFIT PLANS (CONTINUED)
The weighted average fair value per share of options granted was $4.04,
$3.74, and $5.80 in 1998, 1997, and 1996, respectively. The fair value of each
option grant was estimated on the grant date using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Volatility............................................... 28% 28% 26%
Risk-free Interest Rate.................................. 5.3% 5.9% 6.6%
Expected Life of Options................................. 5.6 years 5.0 years 5.4 years
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions, including expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
401(K) SAVINGS PLANS
Substantially all of the Company's full-time U.S. employees are eligible to
participate in 401(k) savings plans. Contributions to the 401(k) savings plans
are made by both the employee and the Company. Company contributions are based
upon the level of employee contributions. For these plans, the Company
contributed and charged to expense $1,350,000, $1,427,000, and $689,000 in 1998,
1997, and 1996, respectively.
6. INCOME TAXES
The components of income before provision for income taxes are:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic.......................................... $ 2,306 $ 10,719 $ 8,969
Foreign........................................... 1,346 (319) 1,918
--------- --------- ---------
$ 3,652 $ 10,400 $ 10,887
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-20
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
The components of the provision for income taxes are:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently Payable:
Federal.......................................... $ 2,207 $ 3,834 $ 3,427
State............................................ 529 600 774
Foreign.......................................... 523 158 865
--------- --------- ---------
3,259 4,592 5,066
--------- --------- ---------
Net Deferred (Prepaid):
Federal.......................................... (1,248) (112) (608)
State............................................ (280) (24) (129)
Foreign.......................................... 96 96 (59)
--------- --------- ---------
(1,432) (40) (796)
--------- --------- ---------
$ 1,827 $ 4,552 $ 4,270
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company receives a tax deduction upon exercise of nonqualified stock
options by employees for the difference between the exercise price and the
market price of the underlying common stock on the date of exercise. The
provision for income taxes that is currently payable does not reflect $114,000,
$304,000, and $382,000 of such benefits that have been allocated to capital in
excess of par value in 1998, 1997, and 1996, respectively. In addition, the
provision for income taxes that is currently payable does not reflect $1,024,000
of tax benefits used to reduce cost in excess of net assets of acquired
companies in 1996.
F-21
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (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:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for Income Taxes at Statutory Rate........ $ 1,242 $ 3,536 $ 3,702
Increases (Decreases) Resulting From:
State income taxes, net of federal tax............ 164 380 426
Foreign tax rate and tax law differential......... 163 362 154
Amortization of cost in excess of net assets of
acquired companies.............................. 841 685 146
Tax benefit of foreign sales corporation.......... (362) (295) (268)
Other, net........................................ (221) (116) 110
--------- --------- ---------
$ 1,827 $ 4,552 $ 4,270
--------- --------- ---------
--------- --------- ---------
</TABLE>
Prepaid and deferred income taxes in the accompanying balance sheet consist
of:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Prepaid Income Taxes:
Tax loss carryforwards................................... $ 10,133 $ 9,052
Reserves and accruals.................................... 5,439 4,152
Inventory basis difference............................... 4,749 3,185
--------- ---------
20,321 16,389
Less: Valuation allowance................................ 10,133 9,052
--------- ---------
$ 10,188 $ 7,337
--------- ---------
--------- ---------
Deferred Income Taxes:
Fixed and intangible assets.............................. $ 1,651 $ 356
--------- ---------
--------- ---------
</TABLE>
At year-end 1998, the Company had foreign and federal tax loss carryforwards
of $23,497,000 and $6,088,000, respectively. The valuation allowance relates to
uncertainty surrounding the realization of the tax loss carryforwards, for which
realization is limited to the future income of certain subsidiaries. The federal
tax loss carryforwards expire in the years 2008 through 2010. Foreign tax loss
carryforwards of $313,000 expire in 2006, while the remainder do not expire. Any
resulting benefit from the loss carryforwards will first be used to reduce "Cost
in excess of net assets of acquired companies," with any remaining benefit used
to reduce other acquired intangible assets.
A provision has not been made for U.S. or additional foreign taxes on
$5,695,000 of undistributed earnings of foreign subsidiaries that could be
subject to taxation if remitted to the U.S. because the Company plans to keep
these amounts permanently reinvested overseas.
F-22
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases portions of its office and operating facilities under
various operating lease arrangements. The accompanying statement of income
includes expenses from operating leases of $2,333,000, $2,171,000, and
$2,818,000 in 1998, 1997, and 1996, respectively, net of sublease income of
$847,000 and $893,000 in 1998 and 1997, respectively. Future minimum payments
due under noncancelable operating leases at January 2, 1999, were $2,093,000 in
1999; $1,937,000 in 2000; $1,589,000 in 2001; $1,438,000 in 2002; $1,312,000 in
2003; and $1,580,000 in 2004 and thereafter. Total future minimum lease payments
are $9,949,000 and have not been reduced by minimum sublease rental income of
$3,744,000 due through 2004 and thereafter under noncancelable operating
subleases. See Note 8 for office and manufacturing space leased from related
parties.
CONTINGENCIES
The Company has received correspondence alleging that certain of its
products infringe patents owned by third parties, though no lawsuits have been
filed. The Company does not believe that its products infringe the intellectual
property rights of these parties; however, given the inherent uncertainty of
dispute resolution, there can be no assurance that the outcome of any such
lawsuit, if filed, would not result in a material adverse effect on the
Company's results of operations or financial position.
8. 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 currently pays Thermo Electron annually an amount equal to 0.8% of
the Company's revenues. In 1997 and 1996, the Company paid an amount equal to
1.0% of the Company's revenues. For these services, the Company was charged
$1,528,000, $1,989,000, and $1,232,000 in 1998, 1997, and 1996, respectively.
The fee is reviewed and adjusted annually by mutual agreement of the parties.
Management believes that the service fee charged by Thermo Electron is
reasonable and that such fees are representative of the expenses the Company
would have incurred on a stand-alone basis. The corporate services agreement is
renewed annually but can be terminated upon 30 days' prior notice by the Company
or upon the Company's withdrawal from the Thermo Electron Corporate Charter (the
Thermo Electron Corporate Charter defines the relationship among Thermo Electron
and its majority-owned subsidiaries). For additional items such as employee
benefit plans, insurance coverage, and other identifiable costs, Thermo Electron
charges the Company based upon costs attributable to the Company.
OPERATING LEASES
In addition to the operating leases discussed in Note 7, the Company leases
certain office and manufacturing space from subsidiaries of Thermo Instrument
under two leases expiring in 2000 and 2001. The accompanying statement of income
includes expenses from these operating leases of $899,000, $602,000, and
$208,000 in 1998, 1997, and 1996, respectively. At January 2, 1999, future
minimum payments due under these leases are $906,000 in 1999, $739,000 in 2000,
and $236,000 in 2001. Total future minimum lease payments under these leases are
$1,881,000.
F-23
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. RELATED-PARTY TRANSACTIONS (CONTINUED)
OTHER RELATED-PARTY TRANSACTIONS
The Company purchases and sells products and services in the ordinary course
of business with other companies affiliated with Thermo Electron. Sales of
products to such affiliated companies totaled $1,215,000, $825,000, and $240,000
in 1998, 1997, and 1996, respectively. Purchases of products and services from
such affiliated companies totaled $2,013,000, $2,226,000, and $1,310,000 in
1998, 1997, and 1996, respectively. During 1998, the Company sold a product line
to Thermo Optek for $125,000.
REPURCHASE AGREEMENT
The Company invests excess cash in repurchase agreements with Thermo
Electron as discussed in Notes 1 and 16.
SHORT- AND LONG-TERM OBLIGATIONS
The accompanying balance sheet includes the following amounts borrowed from
Thermo Instrument and Thermo Electron to finance the acquisitions of certain
companies (Note 3):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Promissory Notes to Thermo Electron, Due:
August 1998........................................................... $ -- $ 15,000
March 1999............................................................ 10,000 10,000
July 1999............................................................. 50,000 50,000
Promissory Note to Thermo Instrument, Due September 2001................ 7,300 7,300
--------- ---------
$ 67,300 $ 82,300
--------- ---------
--------- ---------
</TABLE>
These notes bear interest at the 90-day Commercial Paper Composite Rate plus
25 basis points, set at the beginning of each quarter. The interest rate for the
notes outstanding at year-end 1998 and 1997 was 5.36% and 5.76%, respectively.
9. LINES OF CREDIT
Unused amounts available under outstanding lines of credit were $3,345,000
and $3,249,000 at year-end 1998 and 1997, respectively. Borrowings under lines
of credit are guaranteed by Thermo Electron or Thermo Instrument.
10. COMMON STOCK
At January 2, 1999, the Company had reserved 1,672,000 unissued shares of
its common stock for possible issuance under stock-based compensation plans.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, notes payable to Thermo Electron, accounts
payable, due to affiliated companies, long-term obligations due to related
party, and forward foreign exchange contracts. Available-for-sale investments
were carried at fair value in the accompanying 1997 balance sheet (Note 2). The
Company's long-term
F-24
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
obligations (Note 8) bear interest at a variable market rate and, therefore, the
carrying amounts approximate fair value. The carrying amounts of the Company's
remaining financial instruments, with the exception of forward foreign exchange
contracts, approximate fair value due to their short-term nature.
The notional amounts of forward foreign exchange contracts outstanding
totaled $1,519,000 and $2,041,000 at year-end 1998 and 1997, respectively. The
fair value of the Company's forward foreign exchange contracts receivable was
$19,000 and $3,000 at year-end 1998 and 1997, respectively. The fair value of
such contracts is the estimated amount that the Company would receive upon
termination of the contracts, taking into account the change in foreign exchange
rates.
12. BUSINESS SEGMENTS AND GEOGRAPHICAL INFORMATION
The Company organizes and manages its business by functional operating
entity. The Company operates in three segments: Imaging and Inspection,
Temperature Control, and Test and Measurement. In classifying operational
entities into a particular segment, the Company aggregates businesses with
similar economic characteristics, products and services, production processes,
customers, and methods of distribution.
The Company, through its Imaging and Inspection segment, designs,
manufactures, and markets instruments and systems used in the analysis of
material samples by industrial, academic, and government laboratories. Principal
products manufactured by this segment include X-ray microanalysis systems that
analyze the chemical composition of microscopic samples; X-ray sources for
imaging, inspection, analytical, and thickness-gauging applications; X-ray
imaging systems for quality-control inspections; systems for the rework and
repair of printed circuit boards that have failed quality-control inspection;
scanning probe microscopes that measure physical surface properties; and
confocal laser scanning microscopes that create high-resolution
three-dimensional images.
The Temperature Control segment manufactures and markets precision
temperature control systems for analytical, laboratory, industrial, research and
development, laser, and semiconductor applications.
The Test and Measurement segment manufactures data-acquisition systems,
digital oscilloscopes, and recording systems used primarily in product
development and process monitoring settings.
F-25
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. BUSINESS SEGMENTS AND GEOGRAPHICAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
APRIL 3, APRIL 4,
1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BUSINESS SEGMENT INFORMATION
Revenues:
Imaging and Inspection.................................... $ 21,413 $ 22,993 $ 85,824 $ 91,771 $ 66,755
Temperature Control....................................... 12,033 18,592 61,198 56,288 --
Test and Measurement...................................... 8,428 11,482 43,995 50,841 56,444
---------- ---------- ---------- ---------- ----------
$ 41,874 $ 53,067 $ 191,017 $ 198,900 $ 123,199
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Income Before Provision for Income Taxes:
Imaging and Inspection.................................... $ 181 $ 1,691 $ 1,580 $ 7,422 $ 9,219
Temperature Control....................................... 527 2,592 7,070 6,698 --
Test and Measurement...................................... 370 690 (967) 2,713 3,942
Corporate (a)............................................. (436) (595) (1,740) (2,908) (2,436)
---------- ---------- ---------- ---------- ----------
Total operating income.................................... 642 4,378 5,943 13,925 10,725
Interest income and other expense, net.................... (634) (866) (2,291) (3,525) 162
---------- ---------- ---------- ---------- ----------
$ 8 $ 3,512 $ 3,652 $ 10,400 $ 10,887
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Assets:
Imaging and Inspection.................................... $ 110,695 $ 104,026 $ 84,547
Temperature Control....................................... 77,356 83,509 --
Test and Measurement...................................... 42,227 43,658 50,926
Corporate (b)............................................. 19,604 22,204 17,012
---------- ---------- ----------
$ 249,882 $ 253,397 $ 152,485
---------- ---------- ----------
---------- ---------- ----------
Depreciation and Amortization:
Imaging and Inspection.................................... $ 3,019 $ 2,896 $ 2,109
Temperature Control....................................... 2,469 1,911 --
Test and Measurement...................................... 1,582 1,808 2,384
Corporate................................................. 3 -- --
---------- ---------- ----------
$ 7,073 $ 6,615 $ 4,493
---------- ---------- ----------
---------- ---------- ----------
Capital Expenditures:
Imaging and Inspection.................................... $ 1,083 $ 1,857 $ 2,215
Temperature Control....................................... 477 516 --
Test and Measurement...................................... 621 222 547
Corporate................................................. 18 -- --
---------- ---------- ----------
$ 2,199 $ 2,595 $ 2,762
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-26
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. BUSINESS SEGMENTS AND GEOGRAPHICAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
GEOGRAPHICAL INFORMATION
Revenues (c):
United States............................................. $ 165,363 $ 176,717 $ 94,493
Germany................................................... 11,495 12,217 14,673
England................................................... 10,853 12,546 14,260
Other..................................................... 29,324 25,393 19,291
Transfers among geographical areas (d).................... (26,018) (27,973) (19,518)
---------- ---------- ----------
$ 191,017 $ 198,900 $ 123,199
---------- ---------- ----------
---------- ---------- ----------
Long-lived Assets (e):
United States............................................. $ 18,462 $ 20,684 $ 20,361
International............................................. 863 2,104 2,190
---------- ---------- ----------
$ 19,325 $ 22,788 $ 22,551
---------- ---------- ----------
---------- ---------- ----------
Export Revenues Included in United States Revenues Above
(f)....................................................... $ 59,413 $ 59,433 $ 36,472
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ------------------------
(a) Primarily general and administrative expenses.
(b) Primarily cash, cash equivalents, and available-for-sale investments.
(c) Revenues are attributed to countries based on selling location.
(d) Transfers among geographical areas are accounted for at prices that are
representative of transactions with unaffiliated parties.
(e) Includes property, plant, and equipment, net, and other long-term tangible
assets.
(f) In general, export revenues are denominated in U.S. dollars.
F-27
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. EARNINGS PER SHARE
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
APRIL 3, APRIL 4,
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BASIC
Net income..................................... $ 4 $ 2,072 $ 1,825 $ 5,848 $ 6,617
--------- --------- --------- --------- ---------
Weighted Average Shares........................ 15,330 15,319 15,324 14,694 12,437
--------- --------- --------- --------- ---------
Basic Earnings per Share....................... $ -- $ .14 $ .12 $ .40 $ .53
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
DILUTED
Net Income..................................... $ 4 $ 2,072 $ 1,825 $ 5,848 $ 6,617
--------- --------- --------- --------- ---------
Weighted Average Shares........................ 15,330 15,319 15,324 14,694 12,437
Effect of Stock Options........................ 56 18 30 112 133
--------- --------- --------- --------- ---------
Weighted Average Shares, as Adjusted........... 15,386 15,337 15,354 14,806 12,570
--------- --------- --------- --------- ---------
Diluted Earnings per Share..................... $ -- $ .14 $ .12 $ .39 $ .53
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The computation of diluted earnings per share for each period excludes the
effect of assuming the exercise of certain outstanding stock options because the
effect would be antidilutive. As of January 2, 1999, there were 311,075 of such
options outstanding, with exercise prices ranging from $11.03 to $17.15 per
share.
14. COMPREHENSIVE INCOME
During the first quarter of 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." This pronouncement sets forth requirements for
disclosure of the Company's comprehensive income and accumulated other
comprehensive items. In general, comprehensive income combines net income and
"Other comprehensive items, net," which represents certain amounts that are
reported as components of shareholders' investment in the accompanying balance
sheet, including foreign currency translation adjustments and unrealized net of
tax gains and losses from available-for-sale investments.
Accumulated other comprehensive items in the accompanying balance sheet
consists of:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Cumulative Translation Adjustment.......................................... $ (623) $ (1,035)
Net Unrealized Gain on Available-for-sale Investments...................... -- 27
--------- ---------
$ (623) $ (1,008)
--------- ---------
--------- ---------
</TABLE>
F-28
<PAGE>
THERMOSPECTRA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
1998 FIRST SECOND THIRD(A) FOURTH
- -------------------------------------------------------- --------- --------- --------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................................ $ 53,067 $ 49,058 $ 44,052 $ 44,840
Gross Profit............................................ 22,670 20,624 16,485 20,323
Net Income (Loss)....................................... 2,072 1,488 (2,503) 768
Basic and Diluted Earnings (Loss) per Share............. .14 .10 (.16) .05
<CAPTION>
1997 FIRST(B) SECOND THIRD FOURTH(C)
- -------------------------------------------------------- --------- --------- --------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................................ $ 37,177 $ 49,692 $ 52,271 $ 59,760
Gross Profit............................................ 16,275 21,702 20,249 24,927
Net Income.............................................. 1,188 1,337 705 2,618
Basic and Diluted Earnings per Share.................... .09 .09 .05 .17
</TABLE>
- ------------------------
(a) Reflects a $5.4 million pretax charge for restructuring and related costs.
(b) Reflects the March 1997 acquisitions of NESLAB and PSI.
(c) Reflects a $2.2 million gain from the sale of the Company's Linac business.
16. SUBSEQUENT EVENTS
PROPOSED MERGER
On May 21, 1999, the Company entered into a definitive agreement and plan of
merger with Thermo Instrument under which Thermo Instrument would acquire all of
the outstanding shares of Company common stock held by minority shareholders.
The Board of Directors of the Company unanimously approved the merger agreement
based on a recommendation by a special committee of the Board of Directors,
consisting solely of outside directors of the Company. Under the terms of the
merger agreement, the Company would become a wholly owned subsidiary of Thermo
Instrument. Each issued and outstanding share of Company common stock not
already owned by Thermo Instrument would be converted into the right to receive
$16.00 in cash. Following the merger, the Company's common stock would cease to
be publicly traded. The completion of this merger is subject to shareholder
approval of the merger agreement and the completion of review by the Securities
and Exchange Commission of certain required filings. Thermo Electron and Thermo
Instrument intend to vote all of their shares of common stock of the Company in
favor of approval of the merger agreement and, therefore, approval of the merger
agreement is assured. This merger is expected to be completed in the third
quarter of fiscal 1999.
CASH MANAGEMENT ARRANGEMENT
Effective June 1, 1999, the Company and Thermo Electron commenced use of a
new domestic cash management arrangement. Under the new arrangement, amounts
advanced to Thermo Electron by the Company for domestic cash management purposes
bear interest at the 30-day Dealer Commercial Paper Rate plus 50 basis points
set at the beginning of each month. Thermo Electron is contractually required to
maintain cash, cash equivalents, and/or immediately available bank lines of
credit equal to at least 50% of all funds invested under this cash management
arrangement by all Thermo Electron subsidiaries other than wholly owned
subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice. The
Company will report amounts invested in this arrangement as "advance to
affiliate" in its balance sheet, beginning in the second quarter of fiscal 1999.
F-29
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THERMO INSTRUMENT SYSTEMS INC.
TS ACQUISITION CORPORATION
AND
THERMOSPECTRA CORPORATION
DATED AS OF MAY 21, 1999
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<TABLE>
<S> <C> <C>
ARTICLE I THE MERGER...................................................................... A-4
1.1. The Merger..................................................................... A-4
1.2. Effective Time; Closing........................................................ A-4
1.3. Effect of the Merger........................................................... A-5
1.4. Certificate of Incorporation; Bylaws........................................... A-5
1.5. Directors and Officers......................................................... A-5
1.6. Effect on Capital Stock........................................................ A-5
1.7. Surrender of Certificates...................................................... A-6
1.8. No Further Ownership Rights in ThermoSpectra Common Stock...................... A-7
1.9. Lost, Stolen or Destroyed Certificates......................................... A-7
1.10. Dissenting Shares.............................................................. A-7
1.11. Taking of Necessary Action; Further Action..................................... A-7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THERMOSPECTRA................................ A-8
2.1. Organization of ThermoSpectra.................................................. A-8
2.2. ThermoSpectra Capital Structure................................................ A-8
2.3. Authority...................................................................... A-8
2.4. Board Approval................................................................. A-9
2.5. Fairness Opinion............................................................... A-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THERMO INSTRUMENT AND
MERGER SUB............................................................................... A-9
3.1. Organization................................................................... A-9
3.2. Authority...................................................................... A-9
3.3. Financial Resources............................................................ A-10
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME............................................ A-10
4.1. Conduct of Business by ThermoSpectra........................................... A-10
4.2. Certain Actions by ThermoSpectra............................................... A-10
ARTICLE V ADDITIONAL AGREEMENTS........................................................... A-11
5.1. Schedule 13E-3; Proxy Statement; Other Filings................................. A-11
5.2. Meeting of ThermoSpectra Stockholders.......................................... A-12
5.3. Access to Information.......................................................... A-13
5.4. Public Disclosure.............................................................. A-13
5.5. Legal Requirements............................................................. A-13
5.6. Notification of Certain Matters................................................ A-13
5.7. Best Efforts and Further Assurances............................................ A-13
5.8. Stock Option and Employee Stock Purchase Plans................................. A-13
5.9. Thermo Instrument Form S-8..................................................... A-14
5.10. Indemnification; Insurance..................................................... A-14
5.11. Deferred Compensation Plan..................................................... A-15
ARTICLE VI CONDITIONS TO THE MERGER....................................................... A-15
6.1. Conditions to Obligations of Each Party to Effect the Merger................... A-15
6.2. Additional Conditions to Obligations of ThermoSpectra.......................... A-15
6.3. Additional Conditions to the Obligations of Thermo Instrument and Merger A-16
Sub............................................................................
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................................. A-16
7.1. Termination.................................................................... A-16
7.2. Notice of Termination; Effect of Termination................................... A-17
7.3. Fees and Expenses.............................................................. A-17
7.4. Amendment...................................................................... A-17
7.5. Extension; Waiver.............................................................. A-17
ARTICLE VIII GENERAL PROVISIONS........................................................... A-18
8.1. Non-Survival of Representations and Warranties................................. A-18
8.2. Notices........................................................................ A-18
8.3. Counterparts................................................................... A-18
8.4. Entire Agreement............................................................... A-18
8.5. Severability................................................................... A-19
8.6. Other Remedies; Specific Performance........................................... A-19
8.7. Governing Law.................................................................. A-19
8.8. Assignment..................................................................... A-19
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of May 21, 1999
is by and among Thermo Instrument Systems Inc., a Delaware corporation ("Thermo
Instrument"), TS Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Thermo Instrument ("Merger Sub"), and ThermoSpectra
Corporation, a Delaware corporation ("ThermoSpectra").
RECITALS
A. Thermo Instrument and its parent, Thermo Electron Corporation ("Thermo
Electron"), own approximately 82% and 10%, respectively, of the outstanding
shares of common stock, par value $.01 per share, of ThermoSpectra (the
"ThermoSpectra Common Stock"), and Thermo Instrument desires to acquire the
remaining outstanding shares of ThermoSpectra Common Stock.
B. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), Thermo
Instrument and ThermoSpectra will enter into a business combination transaction
pursuant to which Merger Sub will merge with and into ThermoSpectra (the
"Merger").
C. The Board of Directors of Thermo Instrument (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of Thermo Instrument, and (ii) has approved this Agreement, the Merger and the
other transactions contemplated by this Agreement.
D. The Board of Directors of ThermoSpectra, on the recommendation of a
special committee of the Board of Directors consisting of all directors of
ThermoSpectra that are not (a) officers or directors of Thermo Instrument or
Thermo Electron or (b) officers of ThermoSpectra (the "Special Committee") that
this Agreement, including the Exchange Price (as defined below), is fair to, and
in the best interests of, the stockholders of ThermoSpectra (other than Thermo
Instrument and Thermo Electron), (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of
ThermoSpectra and fair to, and in the best interests of, ThermoSpectra and its
stockholders, (ii) has approved and deemed advisable this Agreement, the Merger
and the other transactions contemplated by this Agreement and (iii) has
recommended the approval of this Agreement by the stockholders of ThermoSpectra.
E. Thermo Instrument, ThermoSpectra and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1. THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the DGCL, Merger Sub shall be merged with and into
ThermoSpectra, the separate corporate existence of Merger Sub shall cease and
ThermoSpectra shall continue as the surviving corporation. ThermoSpectra as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
1.2. EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware in accordance with the relevant provisions of the DGCL
(the time of such filing, or such later time as may be agreed in writing by the
parties and specified in the Certificate of Merger, being the "Effective Time"
and the date on which the Effective Time occurs being
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the "Effective Date") as soon as practicable on the Closing Date (as herein
defined). Unless the context otherwise requires, the term "Agreement" as used
herein refers collectively to this Agreement and the Certificate of Merger. The
closing of the Merger (the "Closing") shall take place at the executive offices
of Thermo Electron at a time and date to be specified by the parties, which
shall be no later than the second business day after the satisfaction or waiver
of the conditions set forth in Article VI, or at such other time, date and
location as the parties hereto agree in writing (the "Closing Date"). At the
Closing, (i) ThermoSpectra shall deliver to Thermo Instrument the various
certificates and instruments required under Article VI, (ii) Thermo Instrument
and Merger Sub shall deliver to ThermoSpectra the various certificates and
instruments required under Article VI and (iii) ThermoSpectra and Merger Sub
shall execute and file the Certificate of Merger with the Secretary of State of
the State of Delaware.
1.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of ThermoSpectra and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of ThermoSpectra and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4. CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of
ThermoSpectra, as in effect immediately prior to the Effective Time, shall
be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of Incorporation.
(b) The Bylaws of ThermoSpectra, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5. DIRECTORS AND OFFICERS. The directors of ThermoSpectra immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, to serve until their respective successors are duly elected or
appointed and qualified. The officers of ThermoSpectra immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, to serve
until their successors are duly elected or appointed or qualified.
1.6. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, ThermoSpectra or the
holders of any of the following securities:
(a) CONVERSION OF THERMOSPECTRA COMMON STOCK. Each share of
ThermoSpectra Common Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of ThermoSpectra Common Stock held in
the treasury of ThermoSpectra, by Thermo Instrument or Thermo Electron or
Dissenting Shares, as defined in Section 1.10 hereof) will be automatically
converted into the right to receive Sixteen Dollars ($16.00) in cash (the
"Exchange Price") upon surrender of the certificate representing such share
of ThermoSpectra Common Stock in the manner provided in Section 1.7 (or in
the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit (and bond, if required) in the manner provided in Section 1.9).
(b) STOCK OPTIONS. All options to purchase ThermoSpectra Common Stock
then outstanding under the Park Scientific Instruments Corporation 1988
Incentive Stock Plan, ThermoSpectra's Equity Incentive Plan, ThermoSpectra's
Employees Equity Incentive Plan and ThermoSpectra's Directors' Stock Option
Plan, each as amended (together, the "ThermoSpectra Stock Option Plans"),
shall be converted into options to purchase Thermo Instrument common stock,
par value $.10 per share ("Thermo Instrument Common Stock"), in accordance
with Section 5.8 hereof.
(c) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock, par value
$.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall cease to be
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<PAGE>
outstanding, be cancelled and retired without payment of any consideration
therefor and cease to exist.
(d) TREASURY STOCK; AFFILIATE STOCK. Each share of ThermoSpectra
Common Stock issued and outstanding and owned by Thermo Instrument and
Thermo Electron shall be converted into one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. All
treasury shares held by ThermoSpectra immediately prior to the Effective
Time shall cease to be outstanding, be cancelled and retired without payment
of any consideration therefor and cease to exist.
(e) ADJUSTMENTS TO EXCHANGE PRICE. The Exchange Price shall be
adjusted to reflect fully the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into ThermoSpectra Common Stock), recapitalization or other like
change without receipt of consideration with respect to ThermoSpectra Common
Stock occurring on or after the date hereof and prior to the Effective Time.
1.7. SURRENDER OF CERTIFICATES.
(a) PAYMENT AGENT. Thermo Instrument shall authorize one or more
persons to act as the payment agent (the "Payment Agent") in the Merger.
(b) THERMO INSTRUMENT TO PROVIDE EXCHANGE CONSIDERATION. Immediately
prior to the Effective Time, Thermo Instrument shall deposit with the
Payment Agent, in trust for the benefit of the holders of certificates (the
"Certificates") representing shares of ThermoSpectra Common Stock converted
pursuant to Section 1.6(a) for payment in accordance with this Article I,
cash in an amount equal to the product of the Exchange Price multiplied by
the number of shares of ThermoSpectra Common Stock entitled to conversion
for payment pursuant to Section 1.6(a).
(c) EXCHANGE PROCEDURES. Promptly after, and in no event more than
five days after, the Effective Time, Thermo Instrument shall cause the
Payment Agent to mail to each holder of record (as of the Effective Time) of
a Certificate (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Payment Agent and shall
be in such form and have such other provisions as Thermo Instrument may
reasonably specify) and (ii) instructions for effecting the exchange of the
Certificates for the Exchange Price. Upon surrender of a Certificate for
cancellation to the Payment Agent or to such other agent or agents as may be
appointed by Thermo Instrument, together with such letter of transmittal
duly completed and validly executed in accordance with the instructions
thereto, the holder of such Certificate shall be entitled to receive in
exchange therefor payment of the Exchange Price multiplied by the number of
shares of ThermoSpectra Common Stock represented by such Certificate,
without interest, and the Certificate so surrendered shall forthwith be
cancelled. Until so surrendered, each outstanding Certificate will be deemed
from and after the Effective Time, for all corporate purposes, to evidence
only the right to receive payment of the Exchange Price for each share of
ThermoSpectra Common Stock represented on such Certificate.
(d) TRANSFERS OF OWNERSHIP. If payment of the Exchange Price is to be
made to any person other than the person in whose name the Certificate
surrendered in exchange therefor is registered, it will be a condition of
such payment that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting
such payment will have paid to Thermo Instrument or any agent designated by
it any transfer or other taxes required by reason of payment to a person
other than the registered holder of the Certificate surrendered, or
established to the satisfaction of Thermo Instrument or any agent designated
by it that such tax has been paid or is not payable.
(e) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.7, neither the Payment Agent, Thermo Instrument, the Surviving
Corporation nor any party hereto shall be liable to
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<PAGE>
a holder of shares of ThermoSpectra Common Stock for any amount properly
paid to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) RESPONSIBILITY; TERM. The Payment Agent shall make the payments
referred to in Section 1.6(a) out of the funds supplied by Thermo
Instrument. Promptly following the date that is six months after the
Effective Date, the Payment Agent shall, upon request by Thermo Instrument,
deliver to Thermo Instrument all cash, Certificates and other documents in
its possession relating to the transactions described in this Agreement, and
the Payment Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing shares of ThermoSpectra Common Stock may
surrender such Certificate to Thermo Instrument and (subject to applicable
abandoned property, escheat and similar laws) receive in exchange therefor
the Exchange Price multiplied by the number of shares of ThermoSpectra
Common Stock represented by such Certificate, without any interest thereon,
but shall have no greater rights against Thermo Instrument than as may be
accorded to general creditors of Thermo Instrument under applicable law.
1.8. NO FURTHER OWNERSHIP RIGHTS IN THERMOSPECTRA COMMON STOCK. All
amounts paid upon the surrender of shares of ThermoSpectra Common Stock in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of ThermoSpectra Common
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of ThermoSpectra Common Stock that were
outstanding immediately prior to the Effective Time. If after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged for rights to receive the applicable
aggregate Exchange Price as provided in this Article I.
1.9. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Payment Agent shall pay the
aggregate Exchange Price in respect of such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof; provided, however, that, as a condition precedent to the payment
thereof, the owner of such lost, stolen or destroyed Certificates shall deliver
a bond in such sum as Thermo Instrument or the Payment Agent may reasonably
direct as indemnity against any claim that may be made against Thermo Instrument
or the Payment Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed, unless Thermo Instrument waives such requirement in
writing.
1.10. DISSENTING SHARES. Notwithstanding any other provision of this
Agreement, shares of ThermoSpectra Common Stock that are outstanding immediately
prior to the Effective Time and which are held by stockholders who shall have
demanded properly in writing appraisal of such shares in accordance with DGCL
Section 262 and who shall not have withdrawn such demand or otherwise forfeited
appraisal rights (collectively, the "Dissenting Shares") shall not be converted
into or represent the right to receive the Exchange Price. Such stockholders
shall, as of the Effective Time, cease to retain any rights with respect to the
ThermoSpectra Common Stock, except as provided in the DGCL, including the right
to receive payment of the appraised value of the shares held by them in
accordance with the provisions of Section 262, provided that all Dissenting
Shares held by stockholders (i) who shall have failed to perfect or lost their
rights to appraisal of such shares under Section 262, or (ii) who have withdrawn
their demand for appraisal within 60 days after the Effective Date and accept
the terms offered upon the Merger in accordance with Section 262(e), shall
thereupon be, or be deemed to have been, converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Exchange Price, upon surrender, in the manner provided in
Section 1.7, of the Certificates that formerly evidenced such shares without the
prior consent of Thermo Instrument.
1.11. TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of ThermoSpectra and Merger Sub, the officers and directors of
ThermoSpectra and
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Merger Sub are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action, so long
as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THERMOSPECTRA
ThermoSpectra represents and warrants to Thermo Instrument and Merger Sub as
follows:
2.1. ORGANIZATION OF THERMOSPECTRA. ThermoSpectra and each of its
subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, has the corporate or similar power to own, lease
and operate its property and to carry on its business as now being conducted and
as proposed by ThermoSpectra to be conducted, and is duly qualified to do
business and in good standing as a foreign corporation or other legal entity in
each jurisdiction in which the failure to be so qualified would have a material
adverse effect on ThermoSpectra.
2.2. THERMOSPECTRA CAPITAL STRUCTURE. The authorized capital stock of
ThermoSpectra consists of 25,000,000 shares of Common Stock, par value $.01 per
share, of which there were 15,335,839 shares issued and outstanding as of April
3, 1999, and 423 shares in treasury as of April 3, 1999. All outstanding shares
of ThermoSpectra Common Stock are duly authorized, validly issued, fully paid
and nonassessable and are not subject to preemptive rights created by statute,
the Certificate of Incorporation or Bylaws of ThermoSpectra or any agreement or
document to which ThermoSpectra is a party or by which it is bound. As of May 5,
1999, an aggregate of 1,650,043 shares of ThermoSpectra Common Stock, net of
exercises, were reserved for issuance to employees, consultants and non-employee
directors pursuant to the ThermoSpectra Stock Option Plans, under which options
are outstanding for an aggregate of 1,188,655 shares. All shares of
ThermoSpectra Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, would be duly authorized, validly issued, fully paid and
nonassessable.
2.3. AUTHORITY.
(a) ThermoSpectra has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of ThermoSpectra, subject only to the
adoption of this Agreement by ThermoSpectra's stockholders and the filing
and recording of the Certificate of Merger pursuant to the DGCL. Under the
DGCL, ThermoSpectra's stockholders may adopt this Agreement by vote of the
holders of a majority of the outstanding shares of ThermoSpectra Common
Stock. This Agreement has been duly executed and delivered by ThermoSpectra,
and assuming the due authorization, execution and delivery by Thermo
Instrument and Merger Sub, constitutes the valid and binding obligation of
ThermoSpectra, enforceable in accordance with its terms. The execution and
delivery of this Agreement by ThermoSpectra do not, and the performance of
this Agreement by ThermoSpectra will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws of ThermoSpectra, (ii) subject to
obtaining the adoption by ThermoSpectra's stockholders of this Agreement as
contemplated in Section 5.2 and compliance with the requirements set forth
in Section 2.3(b) below, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to ThermoSpectra or any of its material
subsidiaries or by which its or their respective properties is bound, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair the
rights of ThermoSpectra or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of ThermoSpectra or any of
its material subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
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or obligation to which ThermoSpectra or any of its material subsidiaries is
a party or by which ThermoSpectra or any of its material subsidiaries or its
or any of their properties are bound or affected, except, with respect to
clauses (ii) and (iii), for any such conflicts, violations, defaults or
other occurrences that would not have a material adverse effect on
ThermoSpectra or the Surviving Corporation.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental or regulatory body or authority or instrumentality
("Governmental Entity") is required by or with respect to ThermoSpectra in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the
filing of the Certificate of Merger with the Secretary of State of Delaware,
(ii) the filing of the Proxy Statement (as defined in Section 5.1) and the
Schedule 13E-3 (as defined in Section 5.1) with the U.S. Securities and
Exchange Commission ("SEC") in accordance with the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and (iii) such other consents,
approvals, orders, authorizations, registrations, declarations and filings
as may be required under applicable federal and state securities laws.
2.4. BOARD APPROVAL. The Board of Directors of ThermoSpectra, upon
recommendation of the Special Committee that this Agreement, including the
Exchange Price, is fair to, and in the best interests of, the stockholders of
ThermoSpectra (other than Thermo Instrument and Thermo Electron), has, as of the
date of this Agreement, unanimously (i) adopted a resolution approving this
Agreement and declaring its advisability, (ii) determined that the Merger is
fair to, and in the best interests of, ThermoSpectra and its stockholders, and
(iii) determined to recommend that the stockholders of ThermoSpectra approve
this Agreement.
2.5. FAIRNESS OPINION. The Special Committee of ThermoSpectra has received
an opinion from Tucker Anthony Incorporated dated May 21, 1999 that, as of such
date, the consideration to be received by ThermoSpectra's stockholders in the
Merger is fair, from a financial point of view, to ThermoSpectra's stockholders
other than Thermo Instrument and Thermo Electron.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THERMO INSTRUMENT AND MERGER SUB
Thermo Instrument and Merger Sub represent and warrant to ThermoSpectra as
follows:
3.1. ORGANIZATION. Thermo Instrument is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, each has the corporate power
to own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have a material adverse effect on Thermo
Instrument or Merger Sub.
3.2. AUTHORITY.
(a) Each of Thermo Instrument and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Thermo
Instrument and Merger Sub, subject only to the filing and recording of the
Certificate of Merger pursuant to the DGCL. This Agreement has been duly
executed and delivered by each of Thermo Instrument and Merger Sub and,
assuming the due authorization, execution and delivery of this Agreement by
ThermoSpectra, this Agreement constitutes the valid and binding obligation
of each of Thermo Instrument and Merger Sub, enforceable in accordance with
its terms. The execution and delivery of
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this Agreement by each of Thermo Instrument and Merger Sub do not, and the
performance of this Agreement by each of Thermo Instrument and Merger Sub
will not, (i) conflict with or violate the Certificate of Incorporation or
Bylaws of Thermo Instrument or the Certificate of Incorporation or Bylaws of
Merger Sub, (ii) subject to compliance with the requirements set forth in
Section 3.2(b) below, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Thermo Instrument or any of its
material subsidiaries (including Merger Sub, but excluding ThermoSpectra and
its subsidiaries) or by which its or any of their respective properties is
bound or affected, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a
default) under, or impair Thermo Instrument's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of
Thermo Instrument or any of its material subsidiaries (including Merger Sub,
but excluding ThermoSpectra and its subsidiaries) pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Thermo Instrument or
any of its material subsidiaries (including Merger Sub, but excluding
ThermoSpectra and its subsidiaries) is a party or by which Thermo Instrument
or any of its material subsidiaries (including Merger Sub, but excluding
ThermoSpectra and its subsidiaries) or its or any of their respective
properties are bound or affected, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, defaults or other occurrences
that would not have a material adverse effect on Thermo Instrument or Merger
Sub.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Thermo Instrument or Merger Sub in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Certificate of Merger
with the Secretary of State of Delaware, (ii) the filing of the Schedule
13E-3 (as defined in Section 5.1) with the SEC in accordance with the
Exchange Act, and (iii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable federal and state securities laws.
3.3. FINANCIAL RESOURCES. Thermo Instrument has the financial resources to
consummate the transactions contemplated by this Agreement and to pay the
consideration in the Merger provided for in Section 1.6(a).
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1. CONDUCT OF BUSINESS BY THERMOSPECTRA. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, ThermoSpectra shall,
except as otherwise contemplated by this Agreement or consented to by Thermo
Instrument, carry on its business in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings.
4.2. CERTAIN ACTIONS BY THERMOSPECTRA. In addition, notwithstanding
Section 4.1 above, without the prior consent of Thermo Instrument, ThermoSpectra
shall not do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize
cash payments in exchange for any options granted under any of such plans;
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(b) Enter into any material partnership arrangements, joint development
agreements or strategic alliances;
(c) Grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
pursuant to written agreements outstanding, or policies existing, on the
date hereof, or adopt any new severance plan;
(d) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(e) Issue, deliver, sell, authorize or propose the issuance, delivery
or sale of, any shares of capital stock or any securities convertible into
shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or any securities convertible into
shares of capital stock, or enter into other agreements or commitments of
any character obligating it to issue any such shares or convertible
securities, other than the issuance of shares of ThermoSpectra Common Stock
pursuant to the exercise of stock options therefor;
(f) Cause, permit or propose any amendments to its Certificate of
Incorporation or Bylaws;
(g) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a material portion of the assets of, or
by any other manner, any business or any corporation, partnership interest,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets or enter into any joint ventures,
strategic partnerships or alliances;
(h) Sell, lease, license, encumber or otherwise dispose of any
properties or assets that are material, individually or in the aggregate, to
the business of ThermoSpectra;
(i) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or
sell any debt securities or warrants or guarantee any debt securities of
others;
(j) Adopt or amend any employee benefit or stock purchase or option
plan, or enter into any employment contract, pay any special bonus or
special remuneration to any director or employee, or increase the salaries
or wage rates of its officers or employees, except increases in amounts
consistent with policies and past practices;
(k) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business;
(l) Make any grant of exclusive rights to any third party; or
(m) Agree in writing or otherwise to take any of the actions described
in this Section 4.2.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. SCHEDULE 13E-3; PROXY STATEMENT; OTHER FILINGS.
(a) ThermoSpectra agrees that the information supplied by ThermoSpectra
for inclusion or incorporation by reference in the Rule 13e-3 Transaction
Statement on Schedule 13E-3 (such Schedule, as amended or supplemented, is
referred to herein as the "Schedule 13E-3") or the proxy statement to be
sent to the stockholders of ThermoSpectra in connection with the meeting of
ThermoSpectra's stockholders to consider the adoption of this Agreement and
approval of the Merger
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(the "ThermoSpectra Stockholders' Meeting") (such proxy statement, as
amended or supplemented, is referred to herein as the "Proxy Statement")
shall not, on the date the Proxy Statement is first mailed to
ThermoSpectra's stockholders and at the time of the ThermoSpectra
Stockholders' Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not false or misleading; or omit to state any material
fact necessary to correct any statement in any earlier written communication
with respect to the solicitation of proxies for the ThermoSpectra
Stockholders' Meeting or the Schedule 13E-3 that has become false or
misleading.
(b) Thermo Electron, Thermo Instrument and Merger Sub agree that the
information supplied by Thermo Electron, Thermo Instrument and Merger Sub
for inclusion in the Schedule 13E-3 and the Proxy Statement shall not, on
the date the Proxy Statement is first mailed to ThermoSpectra's
stockholders, and at the time of the ThermoSpectra Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not false or misleading; or omit to state any material fact necessary
to correct any statement in any earlier written communication with respect
to the solicitation of proxies for the ThermoSpectra Stockholders' Meeting
or the Schedule 13E-3 that has become false or misleading.
(c) As promptly as practicable after the execution of this Agreement,
Thermo Electron, Thermo Instrument and ThermoSpectra will jointly prepare
and file with the SEC the Schedule 13E-3 and the Proxy Statement. Thermo
Electron, Thermo Instrument and ThermoSpectra will cause the Schedule 13E-3
and the Proxy Statement to be mailed to stockholders of ThermoSpectra at the
earliest practicable time. Each party will notify the other promptly upon
the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff or any other government officials for amendments or
supplements to the Schedule 13E-3 or the Proxy Statement or any other filing
or for additional information and will supply the other party with copies of
all correspondence between such party or any of its representatives, on the
one hand, and the SEC, or its staff or any other government officials, on
the other hand, with respect to the Proxy Statement, the Schedule 13E-3 or
the Merger. Whenever any event occurs that is required to be set forth in an
amendment or supplement to the Schedule 13E-3 or the Proxy Statement, the
relevant party will promptly inform the other party of such occurrence and
cooperate in filing with the SEC or its staff or any other government
officials, and/or mailing to stockholders of ThermoSpectra, such amendment
or supplement.
(d) The Proxy Statement will include the recommendation of the Board of
Directors of ThermoSpectra in favor of approval of this Agreement (except
that the Board of Directors of ThermoSpectra may withdraw, modify or refrain
from making such recommendation to the extent that the Board determines in
good faith on the written advice of outside legal counsel that the Board's
fiduciary duties under applicable law require it to do so).
5.2. MEETING OF THERMOSPECTRA STOCKHOLDERS. Promptly after the date
hereof, ThermoSpectra will take all action necessary in accordance with the DGCL
and its Certificate of Incorporation and Bylaws to convene the ThermoSpectra
Stockholders' Meeting to be held as promptly as practicable for the purpose of
voting upon this Agreement. Unless otherwise required by the fiduciary duties of
the ThermoSpectra Board of Directors, ThermoSpectra will use its best efforts to
solicit from its stockholders proxies in favor of the approval of this Agreement
and the Merger, and will take all other action necessary or advisable to secure
the vote or consent of its stockholders required by the DGCL to obtain such
approvals. Each of Thermo Instrument and Thermo Electron shall vote, or cause to
be voted, all of the ThermoSpectra Common Stock then owned by it and any of its
subsidiaries in favor of the approval of this Agreement and the Merger.
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5.3. ACCESS TO INFORMATION. ThermoSpectra will afford Thermo Instrument
and its accountants, counsel and other representatives reasonable access during
normal business hours to the properties, books, records and personnel of
ThermoSpectra during the period prior to the Effective Time to obtain all
information concerning the business, including the status of product development
efforts, properties, results of operations and personnel of ThermoSpectra, as
Thermo Instrument may reasonably request. Thermo Instrument agrees that it will,
and will cause its representatives and agents to, keep all such information
confidential and will not, and will cause its representatives or agents not to,
use any information obtained pursuant to this Section 5.3 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Notwithstanding the foregoing, Thermo Instrument shall not be
required to keep confidential any information (i) which is or becomes generally
available to the public, other than by wrongful disclosure by Thermo Instrument
or Merger Sub in violation of this Agreement, (ii) which was available to Thermo
Instrument on a nonconfidential basis prior to disclosure to Thermo Instrument,
or (iii) which becomes available to Thermo Instrument on a nonconfidential basis
from a source other than ThermoSpectra.
5.4. PUBLIC DISCLOSURE. Thermo Instrument and ThermoSpectra will consult
with each other before issuing any press release or otherwise making any public
statement with respect to the Merger or this Agreement and will not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with a national
securities exchange.
5.5. LEGAL REQUIREMENTS. Each of Thermo Instrument, Merger Sub and
ThermoSpectra will take all reasonable actions necessary or desirable to comply
promptly with all legal requirements that may be imposed on them with respect to
the consummation of the transactions contemplated by this Agreement (including
furnishing all information required in connection with approvals of or filings
with any Governmental Entity, and including using its reasonable best efforts to
defend any litigation prompted hereby) and will promptly cooperate with and
furnish information to any party hereto necessary in connection with any such
requirements imposed upon any of them or their respective subsidiaries in
connection with the consummation of the transactions contemplated by this
Agreement.
5.6. NOTIFICATION OF CERTAIN MATTERS. Thermo Instrument and Merger Sub
will give prompt notice to ThermoSpectra, and ThermoSpectra will give prompt
notice to Thermo Instrument, of the occurrence, or failure to occur, of any
event, which occurrence or failure to occur would be reasonably likely to cause
(a) any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
to the Effective Time, or (b) any material failure of Thermo Instrument and
Merger Sub or ThermoSpectra, as the case may be, or of any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement.
Notwithstanding the above, the delivery of any notice pursuant to this section
will not limit or otherwise affect the remedies available hereunder to the party
receiving such notice or the conditions to such party's obligation to consummate
the Merger.
5.7. BEST EFFORTS AND FURTHER ASSURANCES. Subject to the respective rights
and obligations of Thermo Instrument and ThermoSpectra under this Agreement,
each of the parties to this Agreement will use its reasonable best efforts to
effectuate the Merger and the other transactions contemplated hereby and to
fulfill and cause to be fulfilled the conditions to closing under this
Agreement, it being understood that such efforts shall not include any
obligation to settle any litigation prompted hereby. Each party hereto, at the
reasonable request of another party hereto, will execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
5.8. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS.
(a) At the Effective Time, each outstanding option to purchase shares of
ThermoSpectra Common Stock (each a "ThermoSpectra Stock Option") under the
ThermoSpectra Stock Option Plans, whether or not exercisable, will be
assumed by Thermo Instrument. Each ThermoSpectra Stock
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Option so assumed by Thermo Instrument under this Agreement will continue to
have, and be subject to, the same terms and conditions set forth in the
applicable ThermoSpectra Stock Option Plan immediately prior to the
Effective Time (including, without limitation, any repurchase rights),
except that (i) each ThermoSpectra Stock Option will be exercisable (or will
become exercisable in accordance with its terms) for that number of whole
shares of Thermo Instrument Common Stock equal to the product of the number
of shares of ThermoSpectra Common Stock that were issuable upon exercise of
such ThermoSpectra Stock Option immediately prior to the Effective Time
multiplied by a fraction (the "Exchange Ratio"), the numerator of which is
the Exchange Price and the denominator of which is the closing price of the
Thermo Instrument Common Stock on the day immediately preceding the
Effective Date as reported by the American Stock Exchange, rounded down to
the nearest whole number of shares of Thermo Instrument Common Stock, and
(ii) the per share exercise price for the shares of Thermo Instrument Common
Stock issuable upon exercise of such assumed ThermoSpectra Stock Option will
be equal to the quotient determined by dividing the exercise price per share
of ThermoSpectra Common Stock at which such ThermoSpectra Stock Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent. After the Effective Time, Thermo
Instrument will issue to each holder of an outstanding ThermoSpectra Stock
Option a notice describing the foregoing assumption of such ThermoSpectra
Stock Option by Thermo Instrument.
(b) At the Effective Time, each outstanding option to purchase shares of
ThermoSpectra Common Stock (each, a "ThermoSpectra ESPP Stock Option") under
the ThermoSpectra Employees' Stock Purchase Plan ("ThermoSpectra ESPP") will
be assumed by Thermo Instrument. Each ThermoSpectra ESPP Stock Option so
assumed by Thermo Instrument will continue to have, and be subject to, the
same terms and conditions as are set forth in the ThermoSpectra ESPP
immediately prior to the Effective Time except that (i) the assumed option
shall be exercisable for shares of Thermo Instrument Common Stock; (ii) the
purchase price per share of Thermo Instrument Common Stock shall be the
lower of (A) eighty-five percent (85%) of (x) the per-share Market Value of
ThermoSpectra Common Stock on the Grant Date divided by (y) the Exchange
Ratio, with the resulting price rounded up to the nearest whole cent, and
(B) eighty-five percent (85%) of the Market Value of Thermo Instrument
Common Stock as of the Exercise Date; and (iii) the $25,000 limit under
Section 9.2(i) of the ThermoSpectra ESPP shall be applied by taking into
account Thermo Instrument's assumption of the ThermoSpectra ESPP Stock
Options in accordance with Section 423(b)(8) of the Internal Revenue Code of
1986, as amended, and applicable regulations. For purposes of this
subsection, "Market Value," "Grant Date," and "Exercise Date" shall have the
meaning given them in the ThermoSpectra ESPP.
(c) Thermo Instrument will reserve sufficient shares of Thermo
Instrument Common Stock for issuance under this Section 5.8.
5.9. THERMO INSTRUMENT FORM S-8. Thermo Instrument agrees to file a
registration statement on Form S-8 or, if required, an amendment to Thermo
Instrument's then effective registration statement on Form S-8, for (i) the
shares of Thermo Instrument Common Stock issuable with respect to the assumed
ThermoSpectra Stock Options no later than the Closing Date and (ii) for the
shares of Thermo Instrument Common Stock issuable with respect to the assumed
ThermoSpectra ESPP Stock Options no later than October 31, 1999, and shall, in
each case, keep such registration statement effective for so long as any such
options remain outstanding.
5.10. INDEMNIFICATION; INSURANCE.
(a) From and for a period of six (6) years after the Effective Time,
Thermo Instrument will and will cause the Surviving Corporation to fulfill
and honor in all respects the indemnification obligations of ThermoSpectra
pursuant to the provisions of the Certificate of Incorporation and the
Bylaws of ThermoSpectra as in effect immediately prior to the Effective
Time. The Certificate of Incorporation
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and Bylaws of the Surviving Corporation will contain the provisions with
respect to indemnification and elimination of liability for monetary damages
set forth in the Certificate of Incorporation and Bylaws of ThermoSpectra,
which provisions will not be amended, repealed or otherwise modified for a
period of six (6) years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who, at the Effective
Time, were directors or officers of ThermoSpectra, unless such modification
is required by law.
(b) For a period of six (6) years after the Effective Time, Thermo
Instrument shall cause the Surviving Corporation to, either directly or
through participation in Thermo Electron's umbrella policy, maintain in
effect a directors' and officers' liability insurance policy covering those
ThermoSpectra directors and officers currently covered by Thermo Electron's
liability insurance policy with coverage providing substantially the same
amount and scope as existing coverage for such ThermoSpectra directors and
officers (which coverage may be an endorsement extending the period in which
claims may be made under such existing policy); provided, however, that in
no event shall the Surviving Corporation be required to expend to maintain
or procure insurance coverage pursuant to this Section 5.10, directly or
through participation in Thermo Electron's policy, an amount per annum in
excess of 175% of the current annual premiums, as adjusted for inflation
each year, allocable and payable by ThermoSpectra (the "Maximum Premium")
with respect to such insurance, or, if the cost of such insurance exceeds
the Maximum Premium, the maximum amount of coverage that can be purchased or
maintained for the Maximum Premium.
5.11. DEFERRED COMPENSATION PLAN. At the Effective Time, the ThermoSpectra
deferred compensation plan for directors (the "Deferred Compensation Plan") will
terminate, and ThermoSpectra will distribute to each participant the sum in cash
equal to the balance of stock units credited to his or her deferred compensation
account under the Deferred Compensation Plan as of the Effective Time multiplied
by the Exchange Price.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been approved and
adopted by the requisite vote under the DGCL by the stockholders of
ThermoSpectra.
(b) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger.
6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THERMOSPECTRA. The
obligations of ThermoSpectra to consummate and effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
ThermoSpectra:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Thermo Instrument and Merger Sub contained in this Agreement shall be
true and correct on and as of the Effective Time, except for changes
contemplated by this Agreement and except for those representations and
warranties that address matters only as of a particular date (which shall
remain true and correct as of such particular date), with the same force and
effect as if made on and as of the Effective Time, except, in all such
cases, where the failure to be so true and correct would not have a material
adverse effect on Thermo Instrument; and ThermoSpectra shall have received a
certificate to such effect
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signed on behalf of Thermo Instrument by the President, Chief Executive
Officer or Vice President of Thermo Instrument; and
(b) AGREEMENTS AND COVENANTS. Thermo Instrument and Merger Sub shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and ThermoSpectra shall have
received a certificate to such effect signed on behalf of Thermo Instrument
by the President, Chief Executive Officer or Vice President of Thermo
Instrument.
6.3. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THERMO INSTRUMENT AND
MERGER SUB. The obligations of Thermo Instrument and Merger Sub to consummate
and effect the Merger shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by Thermo Instrument:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of ThermoSpectra contained in this Agreement shall be true and correct on
and as of the Effective Time, except for changes contemplated by this
Agreement and except for those representations and warranties that address
matters only as of a particular date (which shall remain true and correct as
of such particular date), with the same force and effect as if made on and
as of the Effective Time, except, in all such cases, where the failure to be
so true and correct would not have a material adverse effect on
ThermoSpectra; and Thermo Instrument and Merger Sub shall have received a
certificate to such effect signed on behalf of ThermoSpectra by the
President, Chief Executive Officer or Vice President of ThermoSpectra; and
(b) AGREEMENTS AND COVENANTS. ThermoSpectra shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Thermo Instrument shall have received a certificate to
such effect signed on behalf of ThermoSpectra by the President, Chief
Executive Officer or Vice President of ThermoSpectra.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval of this
Agreement by the stockholders of ThermoSpectra:
(a) by mutual written consent duly authorized by the Boards of Directors
of Thermo Instrument and ThermoSpectra (upon approval of the Special
Committee);
(b) by either ThermoSpectra (upon approval of the Special Committee) or
Thermo Instrument if the Merger shall not have been consummated by October
31, 1999; provided, however, that the right to terminate this Agreement
under this Section 7.1(b) shall not be available to any party whose action
or failure to act has been a principal cause of or resulted in the failure
of the Merger to occur on or before such date if such action or failure to
act constitutes a breach of this Agreement;
(c) by either ThermoSpectra (upon approval of the Special Committee) or
Thermo Instrument if a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued an
order, decree or ruling or taken any other action (an "Order"), in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree or ruling is final and
nonappealable;
(d) by either ThermoSpectra (upon approval of the Special Committee) or
Thermo Instrument if the required approval of the stockholders of
ThermoSpectra contemplated by this Agreement shall not have been obtained by
reason of the failure to obtain the required vote upon a vote taken at a
meeting of stockholders duly convened therefor or at any adjournment thereof
(provided that the
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right to terminate this Agreement under this Section 7.1(d) shall not be
available to ThermoSpectra where the failure to obtain stockholder approval
of ThermoSpectra shall have been caused by the action or failure to act of
ThermoSpectra in breach of this Agreement and the right to terminate this
Agreement under this Section 7.1(d) shall not be available to Thermo
Instrument where the failure to obtain the requisite vote by the
stockholders of ThermoSpectra shall have been caused by the failure of
Thermo Instrument or Thermo Electron to vote their respective shares of
ThermoSpectra Common Stock in favor of the Merger and this Agreement);
(e) by ThermoSpectra if the ThermoSpectra Board of Directors (upon
approval of the Special Committee) determines in good faith on the advice of
outside legal counsel that the Board's fiduciary duties under applicable law
require it to do so;
(f) by ThermoSpectra (upon approval of the Special Committee), upon a
breach of any representation, warranty, covenant or agreement on the part of
Thermo Instrument set forth in this Agreement, if (i) as a result of such
breach the conditions set forth in Section 6.2(a) or Section 6.2(b) would
not be satisfied as of the time of such breach and (ii) such breach shall
not have been cured by Thermo Instrument within ten (10) business days
following receipt by Thermo Instrument of written notice of such breach from
ThermoSpectra; or
(g) by Thermo Instrument, upon a breach of any representation, warranty,
covenant or agreement on the part of ThermoSpectra set forth in this
Agreement, if (i) as a result of such breach the conditions set forth in
Section 6.3(a) or Section 6.3(b) would not be satisfied as of the time of
such breach and (ii) such breach shall not have been cured by ThermoSpectra
within ten (10) business days following receipt by ThermoSpectra of written
notice of such breach from Thermo Instrument.
7.2. NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice by the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except that (i) the
confidentiality obligations of Thermo Instrument contained in Section 5.3 shall
survive any such termination and (ii) nothing herein shall relieve any party
from liability for any breach of this Agreement.
7.3. FEES AND EXPENSES. All fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, whether or not the Merger is consummated.
7.4. AMENDMENT. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of the parties hereto; provided, however, that
ThermoSpectra may not amend this Agreement without the approval of the Special
Committee.
7.5. EXTENSION; WAIVER. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein; provided, however, that ThermoSpectra may not take
any such actions without the approval of the Special Committee. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
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ARTICLE VIII
GENERAL PROVISIONS
8.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of ThermoSpectra, Thermo Instrument and Merger Sub contained in
this Agreement shall terminate at the Effective Time, and only the covenants
that by their terms survive the Effective Time shall survive the Effective Time.
8.2. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Thermo Instrument or Merger Sub, to:
Thermo Instrument Systems Inc.
860 West Airport Freeway, Suite 301
Hurst, TX 76054
Attention: President
Telephone: (817) 485-6663
Facsimile: (817) 485-8256
with a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02454
Attention: General Counsel
Telephone: (781) 622-1000
Facsimile: (781) 622-1283
(b) if to ThermoSpectra, to:
ThermoSpectra Corporation
8 East Forge Parkway
Franklin, MA 02038
Attention: President
Telephone: (508) 528-0551
Facsimile: (508) 520-9570
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Richard A. Soden, Esq.
Telephone: (617) 570-1533
Facsimile: (617) 523-1231
8.3. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
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8.4. ENTIRE AGREEMENT. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein (a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; and (b) are not intended to confer upon any other person any rights or
remedies hereunder, except as set forth herein.
8.5. SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.6. OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, regardless of the
laws that might otherwise govern under applicable principles of conflicts of law
thereof, except to the extent that the DGCL applies.
8.8. ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties.
[The rest of this page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, Thermo Instrument, Merger Sub and ThermoSpectra have
caused this Agreement to be signed by themselves or their duly authorized
respective officers, all as of the date first written above.
<TABLE>
<S> <C> <C>
THERMO INSTRUMENT SYSTEMS INC.
By: /s/ EARL R. LEWIS
-----------------------------------------
Name: Earl R. Lewis
Title: President and Chief Executive
Officer
</TABLE>
<TABLE>
<S> <C> <C>
TS ACQUISITION CORPORATION
By: /s/ EARL R. LEWIS
-----------------------------------------
Name: Earl R. Lewis
Title: President
</TABLE>
<TABLE>
<S> <C> <C>
THERMOSPECTRA CORPORATION
By: /s/ THEO MELAS-KYRIAZI
-----------------------------------------
Name: Theo Melas-Kyriazi
Title: Chairman of the Board and Chief
Financial Officer
</TABLE>
Thermo Electron Corporation joins this Agreement for the specific purpose of
consenting to the provisions of Section 1.6 hereof and agreeing to perform its
obligations under Sections 5.1 and 5.2 hereof.
<TABLE>
<S> <C> <C>
THERMO ELECTRON CORPORATION
By: /s/ SANDRA L. LAMBERT
-----------------------------------------
Name: Sandra L. Lambert
Title: Vice President and Secretary
</TABLE>
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<PAGE>
APPENDIX B
TUCKER CLEARY
May 21, 1999
Special Committee of the Board of Directors
ThermoSpectra Corporation
8 East Forge Parkway
Franklin, MA 02038
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, of the consideration to be received by the minority shareholders of
ThermoSpectra Corporation (the "Company" or "THS") pursuant to an Agreement and
Plan of Merger (the "Merger Agreement") by and between the Company and Thermo
Instrument Systems Inc. ("THI"). We understand that at the time of the merger
(the "Merger") each share of common stock, par value $0.01 per share of the
Company (the "Common Stock"), other than shares held by dissenting shareholders,
if any, will be converted into the right to receive $16.00 per share in cash.
Tucker Anthony Cleary Gull ("Tucker Cleary") as part of its investment
banking business is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for corporate and other
purposes. In connection with the procedures outlined herein and in the
preparation of this fairness opinion, Tucker Cleary was not authorized by the
Company to solicit, nor have we solicited, third party indications of interest
for the acquisition of the Company. Tucker Cleary has not evaluated any
indications of interest for the Company other than the proposal submitted by
THI. Tucker Cleary will receive fees for the rendering of this opinion and any
subsequent opinions issued in connection with the Merger.
In arriving at our opinion, we have among other things:
(i) Reviewed a draft of the Merger Agreement;
(ii) Reviewed certain historical financial and other information concerning
the Company for the five fiscal years ended January 2, 1999 and the
first quarter ending April 3, 1999;
(iii) Held discussions with the senior management of the Company with respect
to the Company's past and current financial performance, financial
condition and future prospects;
(iv) Reviewed certain internal financial and other data and other
information of the Company, including financial projections prepared by
management;
(v) Reviewed historical trading activity and ownership data of the Common
Stock and considered the prospects for dividends and price movement;
(vi) Analyzed certain publicly available information of other companies that
we deemed comparable or otherwise relevant to our inquiry, and compared
the Company, from a financial point of view, with certain of these
companies;
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(vii) Compared the consideration to be received by the holders of the Common
Stock pursuant to the Merger Agreement with the consideration received
by stockholders in other acquisitions of companies that we deemed
comparable or otherwise relevant to our inquiry; and
(viii) Conducted such other financial studies, analyses and investigations and
reviewed such other information as we deemed appropriate to enable us
to render our opinion. In our review, we have also taken into account
an assessment of general economic, market and financial conditions and
certain industry trends and related matters.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial information
publicly available or provided to us by the Company and have not attempted to
verify any of such information. We have assumed that (i) the financial
projections of the Company provided to us have been prepared on a basis
reflecting the best currently available estimates and judgments of the Company's
management as to the future financial performance and results and (ii) that such
financial projections will be realized in the amounts and in the time periods
currently estimated by management. We did not make or obtain any independent
evaluations or appraisals of any assets or liabilities of the Company, nor did
we verify any of the Company's books or records. Our opinion is necessarily
based upon market, economic and other conditions as they exist and can be
evaluated as of the date of this letter.
This opinion is being furnished for the use and benefit of the Special
Committee of the Board of Directors of the Company and is not a recommendation
to the shareholders of the Company. Tucker Cleary has advised the Special
Committee that it does not believe any person other than the Special Committee
has the legal right to rely on the opinion and, absent any controlling
precedent, would resist any assertion otherwise.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received by the minority holders of the
Common Stock pursuant to the Merger Agreement is fair to such stockholders from
a financial point of view.
Very truly yours,
/s/ Tucker Anthony Cleary Gull
TUCKER ANTHONY CLEARY GULL
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<PAGE>
APPENDIX C
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
SECTION 262 APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph(1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series
of stock of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice to all
such holders on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or
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assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall
be not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion,
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permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the surviving
or resulting corporation pursuant to subsection (f) of this section and who has
submitted such stockholder's certificates of stock to the Register in Chancery,
if such is required, may participate fully in all proceedings until it is
finally determined that such stockholder is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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APPENDIX D
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY, THERMO INSTRUMENT, THE MERGER SUB AND THERMO ELECTRON
The following individuals are executive officers or directors of the
Company, Thermo Instrument, the Merger Sub or Thermo Electron. Unless otherwise
noted, all such individuals are citizens of the United States. Unless otherwise
noted, the business address of each executive officer and director (i) of the
Company is 8 East Forge Parkway, Franklin, Massachusetts 02038; (ii) of Thermo
Instrument is 81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046;
(iii) of the Merger Sub is 81 Wyman Street, P.O. Box 9046, Waltham,
Massachusetts 02454-9046; and (iv) of Thermo Electron is 81 Wyman Street, P.O.
Box 9046, Waltham, Massachusetts 02454-9046.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
CHRISTOPHER J. BARRON: Vice President
Christopher J. Barron has been a vice president of the Company since its
inception in August 1994 and president of Nicolet Instrument Technologies Inc.
since August 1993. Mr. Barron held various positions within Nicolet Instrument
Corporation from May 1988 to August 1993. Mr. Barron's business address is 5225
Verona Road, Building 4, Madison, Wisconsin 53711.
JOSEPH A. BAUTE: Director
Joseph A. Baute has been a director of the Company since December 1998. Mr.
Baute has been a consultant to Markem Corporation, a manufacturer of marking and
printing machinery, specialty inks and printing elements since 1993. Mr. Baute
was the chairman and chief executive officer of Markem Corporation from 1977 and
1979, respectively, until his retirement in 1993. He is also a director of
Houghton-Mifflin Company, INSO Corporation and Metrika Systems Corporation, a
majority-owned subsidiary of Thermo Instrument.
DAVID J. BEAUBIEN: Director
David J. Beaubien has been a director of the Company since December 1998.
Since 1990, Mr. Beaubien has been the chairman of Yankee Environmental Systems
Inc., a manufacturer of solar radiation monitoring instruments. From 1967 until
his retirement in 1991, Mr. Beaubien was a senior vice president of EG&G Inc., a
manufacturer of scientific instruments and manager of US government facilities.
He served as director of the Kidder Peabody Family of Mutual Funds from 1983 to
1995 and of Oriel Instruments Corporation from 1990 to 1996. Mr. Beaubien is
also a director of IEC Electronics, Inc., Paine Webber Pace Mutual Funds and
ONIX Systems Inc., a majority-owned subsidiary of Thermo Instrument. Mr.
Beaubien's business address is 101 Industrial Boulevard, Turner Falls,
Massachusetts 01376.
ROBERT E. FINNIGAN: Director
Robert E. Finnigan has been a director of the Company since April 1997. Dr.
Finnigan served in various executive roles at and was a director of Finnigan
Corporation, an analytical instrument manufacturer, from 1967 to 1990, when it
was acquired by Thermo Instrument. Since 1990, he has served as a consultant,
from time to time, to Thermo Instrument on technology issues, and as an advisor
to Hambrecht & Quist's Environmental Technology Fund, a venture capital fund. He
is also a director of Strategic Diagnostics Inc.
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ELIAS P. GYFTOPOULOS: Director
Elias P. Gyftopoulos has been a director of the Company since its inception
in August 1994. He is Professor Emeritus at The Massachusetts Institute of
Technology, where he was the Ford Professor of Mechanical Engineering and of
Nuclear Engineering for more than 20 years until his retirement in 1996. Dr.
Gyftopoulos is also a director of Thermo Electron and the following affiliates
of Thermo Electron: Thermo BioAnalysis Corporation, Thermo Cardiosystems Inc.,
ThermoLase Corporation, ThermoRetec Corporation, Thermo Vision Corporation and
Trex Medical Corporation. Dr. Gyftopoulos' business address is The Massachusetts
Institute of Technology, Room 24-109, 77 Massachusetts Avenue, Cambridge,
Massachusetts 02139. For further information, please see description under
"Directors and Executive Officers of Thermo Electron," below.
BARRY S. HOWE: President, Chief Executive Officer and Director
Barry S. Howe has been the president, chief executive officer and a director
of the Company since March 1998. Mr. Howe has been a vice president of Thermo
Instrument since 1994. In March 1999, Mr. Howe was also named interim president
of Thermo Optek Corporation, a majority-owned subsidiary of Thermo Instrument
and a manufacturer of analytical instruments that measure energy and light for
purposes of materials analysis, characterization and preparation. He was chief
executive officer, president and a director of Thermo BioAnalysis Corporation, a
majority-owned subsidiary of Thermo Instrument that manufactures products for
biochemical research, drug discovery and clinical laboratories, from February
1995 to March 1998. From September 1989 to December 1995, he served as the
president of Thermo Separation Products Inc. and its predecessor, a manufacturer
of chromatography instruments and a subsidiary of ThermoQuest Corporation, which
in turn is a majority-owned subsidiary of Thermo Instrument. Mr. Howe is also a
director of Thermo Optek Corporation. For further information, please see
description under "Directors and Executive Officers of Thermo Instrument,"
below.
PAUL F. KELLEHER: Chief Accounting Officer
Paul F. Kelleher has been the chief accounting officer of the Company since
its inception in August 1994. He has been senior vice president, finance and
administration, of Thermo Electron since June 1997, and served as its vice
president, finance from 1987 until 1997. Mr. Kelleher served as Thermo
Electron's controller from 1982 until January 1996. He is a director of
ThermoLase Corporation, an affiliate of Thermo Electron. Mr. Kelleher also
serves as the chief accounting officer of Thermo Instrument. Mr. Kelleher's
business address is 81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts
02454-9046. For further information, please see descriptions under "Directors
and Executive Officers of Thermo Instrument" and "Directors and Executive
Officers of Thermo Electron," below.
EARL R. LEWIS: Director
Earl R. Lewis has been a director of the Company since its inception in
August 1994. He was the chairman of the board from June 1995 until March 1998
and was vice chairman of the board from August 1994 to June 1995. Mr. Lewis has
been president and chief executive officer of Thermo Instrument since March 1997
and January 1998, respectively, and was chief operating officer of Thermo
Instrument from January 1996 to January 1998. Prior to that time, he was
executive vice president of Thermo Instrument from January 1996 to March 1997,
senior vice president of Thermo Instrument from January 1994 to January 1996 and
vice president of Thermo Instrument from March 1992 to January 1994. Mr. Lewis
has been chief operating officer, measurement and detection, of Thermo Electron
since September 1998. Prior to his appointment as chief operating officer, Mr.
Lewis served as senior vice president of Thermo Electron from June 1998 to
September 1998 and vice president from September 1996 to June 1998. Mr. Lewis
served as chief executive officer of Thermo Optek Corporation, a majority-owned
subsidiary of Thermo Instrument and a manufacturer of analytical instruments
that measure energy and
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light for purposes of materials analysis, characterization and preparation, from
its inception in August 1995 to January 1998, and served as president of its
predecessor, Thermo Jarrell Ash Corporation, for more than five years prior to
1995. Mr. Lewis is also the president and sole director of the Merger Sub. Mr.
Lewis is also a director of SpectRx Inc. and the following affiliates of Thermo
Electron: FLIR Systems, Inc., Metrika Systems Corporation, ONIX Systems Inc.,
Spectra-Physics Lasers, Inc., Thermo BioAnalysis Corporation, Thermo Instrument,
Thermo Optek Corporation, ThermoQuest Corporation and Thermo Vision Corporation.
Mr. Lewis' business address is 81 Wyman Street, P.O. Box 9046, Waltham,
Massachusetts 02454-9046. For further information, please see descriptions under
"Directors and Executive Officers of Thermo Instrument," "Director and Executive
Officer of the Merger Sub" and "Directors and Executive Officers of Thermo
Electron," below.
RONALD W. LINDELL: Vice President
Ronald W. Lindell has been a vice president of the Company since its
inception in August 1994 and president of Nicolet Imaging Systems, Inc. since
January 1994. Mr. Lindell was a founder of Imaging Systems International, Inc.
and its president from November 1992 to January 1994 when it was acquired by
Thermo Instrument. From November 1989 to March 1992, he was senior vice
president and general manager of the Industrial Products Division of IRT
Corporation. Mr. Lindell's business address is 8221 Arjons Drive, Suite F, San
Diego, California 92126.
RICHARD S. MELANSON: Senior Vice President
Richard S. Melanson joined the Company in October 1997 and was named senior
vice president in December 1997. Mr. Melanson also served as president of NESLAB
Instruments, Inc. from November 1997 to January 1999. From July 1996 to
September 1997, Mr. Melanson was vice president and general manager of Philips
Electroscan Corporation, a supplier of scanning and transmission electron
microscopes, semiconductor defect review tools and focused ion beam systems,
with offices located at 66 Concord Street, Wilmington, Massachusetts 01887.
Prior to that time, Mr. Melanson held a variety of positions at Electroscan
Corporation, a venture capital financed high technology start-up, also with
offices at 66 Concord Street, Wilmington, Massachusetts 01887, including
president and chief executive officer, executive vice president and chief
operating officer, and vice president of manufacturing, since 1986. Mr.
Melanson's business address is 245 Winter Street, Suite 300, Waltham,
Massachusetts 02451.
THEO MELAS-KYRIAZI: Chief Financial Officer and Chairman of the Board
Theo Melas-Kyriazi has been a director of the Company since its inception in
August 1994, chairman of the board since March 1998, and chief financial officer
since January 1999. Mr. Melas-Kyriazi has also been vice president, corporate
strategy of Thermo Electron since March 1998 and chief financial officer since
January 1999, and chief financial officer of Thermo Instrument since January
1999. Prior to his appointment as a vice president at Thermo Electron, Mr.
Melas-Kyriazi served as the Company's president and chief executive officer from
its inception until March 1998. Mr. Melas-Kyriazi was treasurer of Thermo
Instrument and Thermo Electron from 1988 to August 1994. Mr. Melas-Kyriazi is
also a director of ThermoRetec Corporation, an affiliate of Thermo Electron. Mr.
Melas-Kyriazi is a citizen of Greece. Mr. Melas-Kyriazi's business address is 81
Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046. For further
information, please see descriptions under "Directors and Executive Officers of
Thermo Instrument" and "Directors and Executive Officers of Thermo Electron,"
below.
DIRECTORS AND EXECUTIVE OFFICERS OF THERMO INSTRUMENT
FRANK BORMAN: Director
Frank Borman has been a director of Thermo Instrument since May 1986. Col.
Borman has been the chairman of DBT Online, Inc. ("DBT") since August 1996. From
September 1995 until August 1996, he
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<PAGE>
served as the chief executive officer and a director of Patlex Corporation
("Patlex"), which became a subsidiary of DBT in August 1996. Col. Borman served
as the chairman and chief executive officer of Patlex from 1988 to December
1992, and as chairman of AutoFinance Group, Inc. ("AFG") from December 1992 to
September 1995, during the period that Patlex was a subsidiary of AFG. Col.
Borman is a member of the Board of Trustees of the National Geographic Society.
He serves as a director of American Superconductor Corporation, The Home Depot,
Inc. and Thermo Power Corporation, an affiliate of Thermo Electron. Col.
Borman's business address is P.O. Box 1139, Fairacres, New Mexico 88033-1139.
RICHARD W.K. CHAPMAN: Senior Vice President
Richard W.K. Chapman, has been the chief executive officer, president and a
director of ThermoQuest Corporation, a majority-owned subsidiary of Thermo
Instrument, since its inception in June 1995. He served as president of Finnigan
Corporation ("Finnigan"), a subsidiary of ThermoQuest Corporation, from 1992 to
1995, and as marketing director of Finnigan from 1989 to 1995. He has been
senior vice president of Thermo Instrument since July 1998 and was a vice
president of Thermo Instrument from 1992 until July 1998. Dr. Chapman's business
address is 2215 Grand Avenue Parkway, Austin, Texas 78728.
GEORGE N. HATSOPOULOS: Director
George N. Hatsopoulos has been a director of Thermo Instrument since May
1986. From 1986 until March 1997, Dr. Hatsopoulos also served as chairman of the
board of Thermo Instrument. Dr. Hatsopoulos has been the chairman of the board
of directors of Thermo Electron since he founded Thermo Electron in 1956. He was
also the chief executive officer and president of Thermo Electron from 1956
until June 1999 and January 1997, respectively. Dr. Hatsopoulos is also a
director of Photoelectron Corporation and the following affiliates of Thermo
Electron: Thermedics Inc., Thermo Ecotek Corporation, Thermo Fibertek Inc.,
Thermo Optek Corporation, ThermoQuest Corporation and ThermoTrex Corporation.
Dr. Hatsopoulos is the brother of Mr. John N. Hatsopoulos, a director of Thermo
Instrument and a director and vice chairman of the board of directors of Thermo
Electron. For further information, please see description under "Directors and
Executive Officers of Thermo Electron," below.
JOHN N. HATSOPOULOS: Director
John N. Hatsopoulos has been a director of Thermo Instrument since May 1986.
He was its chief financial officer from 1988 until his retirement in December
1998. He was also vice president of Thermo Instrument from 1988 until 1997, and
senior vice president from 1997 until 1998. Mr. Hatsopoulos has also been a
director of Thermo Electron since September 1997 and the vice chairman of the
board of directors of Thermo Electron since September 1998. He was the president
of Thermo Electron from January 1997 until September 1998, its chief financial
officer from 1988 until his retirement in December 1998, and an executive vice
president from 1986 until 1997. Mr. Hatsopoulos is also a director of LOIS/USA
Inc., US Liquids Inc. and the following affiliates of Thermo Electron:
Thermedics Inc., Thermo Ecotek Corporation, Thermo Fibertek Inc., Thermo Power
Corporation and Thermo TerraTech Inc. Mr. Hatsopoulos is the brother of Dr.
George N. Hatsopoulos, a director of Thermo Instrument and the chairman of the
board of directors of Thermo Electron. For further information, please see
description under "Directors and Executive Officers of Thermo Electron," below.
DENIS A. HELM: Executive Vice President
Denis A. Helm has been executive vice president of Thermo Instrument since
January 1999, and was a senior vice president of Thermo Instrument from 1994 to
1998, and a vice president from 1986 until 1994. From 1981 to 1998, Mr. Helm
also served as president of Thermo Instrument's Thermo Environmental Instruments
Inc. subsidiary, a manufacturer of instruments and systems for detecting and
monitoring environmental pollutants. Mr. Helm has also been chairman of the
board and a director of Metrika
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<PAGE>
Systems Corporation, a majority-owned subsidiary of Thermo Instrument, since its
inception in November 1996, and served as its chief executive officer from
November 1996 until February 1998. Mr. Helm's business address is 8 East Forge
Parkway, Franklin, Massachusetts 02038.
BARRY S. HOWE: Vice President
Barry S. Howe has been a vice president of Thermo Instrument since 1994. Mr.
Howe has been the president, chief executive officer and a director of
ThermoSpectra since March 1998. In March 1999, Mr. Howe was also named interim
president of Thermo Optek Corporation, a majority-owned subsidiary of Thermo
Instrument and a manufacturer of analytical instruments that measure energy and
light for purposes of materials analysis, characterization and preparation. He
was chief executive officer, president and a director of Thermo BioAnalysis
Corporation, a majority-owned subsidiary of Thermo Instrument that manufactures
products for biochemical research, drug discovery and clinical laboratories,
from February 1995 to March 1998. From September 1989 to December 1995, he
served as the president of Thermo Separation Products Inc. and its predecessor,
a manufacturer of chromatography instruments and a subsidiary of ThermoQuest
Corporation, which in turn is a majority-owned subsidiary of Thermo Instrument.
Mr. Howe is also a director of Thermo Optek Corporation. Mr. Howe's business
address is 8 East Forge Parkway, Franklin, Massachusetts 02038. For further
information, please see description under "Directors and Executive Officers of
the Company," above.
PAUL F. KELLEHER: Chief Accounting Officer
Paul F. Kelleher has been the chief accounting officer of Thermo Instrument
since May 1986. He has been senior vice president, finance and administration,
of Thermo Electron since June 1997, and served as its vice president, finance
from 1987 until 1997. Mr. Kelleher served as Thermo Electron's controller from
1982 until January 1996. He is a director of ThermoLase Corporation, an
affiliate of Thermo Electron. Mr. Kelleher also serves as the chief accounting
officer of ThermoSpectra. For further information, please see descriptions under
"Directors and Executive Officers of the Company," above, and "Directors and
Executive Officers of Thermo Electron," below.
EARL R. LEWIS: President, Chief Executive Officer and Director
Earl R. Lewis has been president, and chief executive officer and a
director, of Thermo Instrument since March 1997 and January 1998, respectively,
and was chief operating officer of Thermo Instrument from January 1996 to
January 1998. Prior to that time, he was executive vice president of Thermo
Instrument from January 1996 to March 1997, senior vice president of Thermo
Instrument from January 1994 to January 1996 and vice president of Thermo
Instrument from March 1992 to January 1994. Mr. Lewis has been chief operating
officer, measurement and detection, of Thermo Electron since September 1998.
Prior to his appointment as chief operating officer, Mr. Lewis served as senior
vice president of Thermo Electron from June 1998 to September 1998 and vice
president from September 1996 to June 1998. Mr. Lewis is also a director of
ThermoSpectra, was the chairman of the board of ThermoSpectra from June 1995
until March 1998, and was vice chairman of the board from August 1994 to June
1995. Mr. Lewis also served as chief executive officer of Thermo Optek
Corporation, a majority-owned subsidiary of Thermo Instrument and a manufacturer
of analytical instruments that measure energy and light for purposes of
materials analysis, characterization and preparation, from its inception in
August 1995 to January 1998, and served as president of its predecessor, Thermo
Jarrell Ash Corporation, for more than five years prior to 1995. Mr. Lewis is
also the president and sole director of the Merger Sub. Mr. Lewis is also a
director of SpectRx Inc. and the following affiliates of Thermo Electron: FLIR
Systems, Inc., Metrika Systems Corporation, ONIX Systems Inc., Spectra-Physics
Lasers, Inc., Thermo BioAnalysis Corporation, Thermo Optek Corporation,
ThermoQuest Corporation and Thermo Vision Corporation. For further information,
please see descriptions under "Directors and Executive Officers of
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<PAGE>
the Company," above, and "Director and Executive Officer of the Merger Sub" and
"Directors and Executive Officers of Thermo Electron," below.
THEO MELAS-KYRIAZI: Chief Financial Officer
Theo Melas-Kyriazi has been chief financial officer of Thermo Instrument
since January 1999. He has also been a director of ThermoSpectra since its
inception in August 1994, chairman of the board since March 1998, and chief
financial officer since January 1999. Mr. Melas-Kyriazi has also been vice
president, corporate strategy of Thermo Electron since March 1998 and chief
financial officer since January 1999. Prior to his appointment as a vice
president at Thermo Electron, Mr. Melas-Kyriazi served as ThermoSpectra's
president and chief executive officer from its inception in August 1994 until
March 1998. Mr. Melas-Kyriazi was treasurer of Thermo Instrument and Thermo
Electron from 1988 to August 1994. Mr. Melas-Kyriazi is also a director of
ThermoRetec Corporation, an affiliate of Thermo Electron. Mr. Melas-Kyriazi is a
citizen of Greece. For further information, please see descriptions under
"Directors and Executive Officers of the Company," above, and "Directors and
Executive Officers of Thermo Electron," below.
ARVIN H. SMITH: Director
Arvin H. Smith has been a director of Thermo Instrument since May 1986, and
chairman of the board since March 1997. He was also president and chief
executive officer of Thermo Instrument from 1986 to March 1997 and January 1998,
respectively. Mr. Smith was the president of Thermo Electron from September 1998
until June 1999. He was executive vice president of Thermo Electron from 1991
until September 1998 and senior vice president from 1986 to 1991. Mr. Smith is
also a director of ONIX Systems Inc. Mr. Smith's business address is 860 West
Airport Freeway, Suite 301, Hurst, Texas 76054.
RICHARD F. SYRON: Director
Richard F. Syron has been a director of Thermo Instrument since June 1999.
Dr. Syron has also been the president and chief executive officer of Thermo
Electron since June 1999 and a director of Thermo Electron since September 1997.
From April 1994 to May 1999, Dr. Syron was the chairman and chief executive
officer of the American Stock Exchange, Inc., which has offices located at 86
Trinity Place, New York, New York 10006. From January 1989 through April 1994,
he was the president and chief executive officer of the Federal Reserve Bank of
Boston. Prior to that time, he held a variety of senior positions with the
Federal Home Loan Bank of Boston, the Federal Reserve Bank of Boston, the Board
of Governors of the Federal Reserve System and the U.S. Department of Treasury.
Dr. Syron is also a director of Dreyfus Corporation and The John Hancock
Corporation. For further information, please see description under "Directors
and Executive Officers of Thermo Electron," below.
POLYVIOS C. VINTIADIS: Director
Polyvios C. Vintiadis has been a director of Thermo Instrument since July
1993. Mr. Vintiadis has been the chairman and chief executive officer of
TowerMarc Corporation, a real estate development company, since 1984. Prior to
joining TowerMarc, Mr. Vintiadis was a principal of Morgens, Waterfall &
Vintiadis, Inc., a financial services firm, with whom he remains associated. For
more than 20 years prior to that time, Mr. Vintiadis was employed by Arthur D.
Little & Company, Inc. Mr. Vintiadis is also a director of The Randers Killam
Group Inc. and Thermo TerraTech Inc. Mr. Vintiadis' business address is 2
Pickwick Plaza, 4th Floor, Greenwich, Connecticut 06830.
DIRECTOR AND EXECUTIVE OFFICER OF THE MERGER SUB
EARL R. LEWIS: President and Director
Earl R. Lewis has been the Merger Sub's president and sole director since
the Merger Sub's formation in May 1999. For further information, please see
descriptions under "Directors and Executive Officers of
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<PAGE>
the Company" and "Directors and Executive Officers of Thermo Instrument," above,
and "Directors and Executive Officers of Thermo Electron," below.
DIRECTORS AND EXECUTIVE OFFICERS OF THERMO ELECTRON
JOHN M. ALBERTINE: Director
John M. Albertine has been a director of Thermo Electron since 1986. Dr.
Albertine serves as the chairman of the board and chief executive officer of
Albertine Enterprises, Inc., an economic and public policy consulting and
full-service mergers and acquisitions firm he founded in 1990. Dr. Albertine is
also a director of American Precision Industries, Inc., Intermagnetics General
Corp. and U.S. Cast Products Inc. Dr. Albertine's business address is Albertine
Enterprises, Inc., 1156 15(th) Street N.W., Suite 505, Washington, DC 20005.
SAMUEL W. BODMAN: Director
Samuel W. Bodman has been a director of Thermo Electron since May 1999.
Since 1988, Mr. Bodman has served as the chairman and chief executive officer of
Cabot Corporation, a manufacturer of specialty chemicals and materials. Mr.
Bodman is a director of Cabot Oil & Gas Corporation, John Hancock Mutual Life
Insurance Company, Security Capital Group Incorporated and Westvaco Corporation.
Mr. Bodman's business address is Cabot Corporation, 75 State Street, Boston,
Massachusetts 02109.
PETER O. CRISP: Director
Peter O. Crisp has been a director of Thermo Electron since 1974. Mr. Crisp
was a general partner of Venrock Associates, a venture capital investment firm,
for more than five years until his retirement in September 1997. He has been
vice chairman of Rockefeller Financial Services, Inc. since December 1997. Mr.
Crisp is also a director of American Superconductor Corporation, Evans &
Sutherland Computer Corporation, NovaCare Inc. and United States Trust
Corporation, as well as the following affiliates of Thermo Electron: Thermo
Power Corporation, Thermedics Inc. and ThermoTrex Corporation. Mr. Crisp's
business address is Venrock, Inc., 30 Rockefeller Plaza, New York, New York
10112.
ELIAS P. GYFTOPOULOS: Director
Elias P. Gyftopoulos has been a director of Thermo Electron since 1976. Dr.
Gyftopoulos is Professor Emeritus of the Massachusetts Institute of Technology,
where he was the Ford Professor of Mechanical Engineering and of Nuclear
Engineering for more than 20 years until his retirement in 1996. Dr. Gyftopoulos
is also a director of the following affiliates of Thermo Electron: Thermo
BioAnalysis Corporation, Thermo Cardiosystems Inc., ThermoLase Corporation,
ThermoRetec Corporation, ThermoSpectra, Thermo Vision Corporation and Trex
Medical Corporation. Dr. Gyftopoulos' business address is Massachusetts
Institute of Technology, Room 24-109, 77 Massachusetts Avenue, Cambridge,
Massachusetts 02139. For further information, please see description under
"Directors and Executive Officers of the Company," above.
GEORGE N. HATSOPOULOS: Chairman of the Board and Director
George N. Hatsopoulos has been a director and the chairman of the board of
directors of Thermo Electron since he founded Thermo Electron in 1956. He was
also the chief executive officer and president of Thermo Electron from 1956
until June 1999 and January 1997, respectively. Dr. Hatsopoulos is also a
director of Photoelectron Corporation and the following affiliates of Thermo
Electron: Thermedics Inc., Thermo Ecotek Corporation, Thermo Fibertek Inc.,
Thermo Instrument, Thermo Optek Corporation, ThermoQuest Corporation and
ThermoTrex Corporation. Dr. Hatsopoulos is the brother of Mr. John N.
Hatsopoulos, a director of Thermo Instrument and a director and vice chairman of
the board of directors
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<PAGE>
of Thermo Electron. For further information, please see description under
"Directors and Executive Officers of Thermo Instrument," above.
JOHN N. HATSOPOULOS: Vice Chairman of the Board and Director
John N. Hatsopoulos has been a director of Thermo Electron since September
1997 and the vice chairman of the board of directors since September 1998. He
was the president of Thermo Electron from January 1997 until September 1998, its
chief financial officer from 1988 until his retirement in December 1998, and an
executive vice president from 1986 until 1997. Mr. Hatsopoulos is also a
director of LOIS/ USA Inc., US Liquids Inc. and the following affiliates of
Thermo Electron: Thermedics Inc., Thermo Ecotek Corporation, Thermo Fibertek
Inc., Thermo Instrument, Thermo Power Corporation and Thermo TerraTech Inc. Mr.
Hatsopoulos is the brother of Dr. George N. Hatsopoulos, a director of Thermo
Instrument and a director and chairman of the board of directors of Thermo
Electron. For further information, please see description under "Directors and
Executive Officers of Thermo Instrument," above.
BRIAN D. HOLT: Chief Operating Officer, Environmental and Energy
Brian D. Holt became the chief operating officer, environmental and energy,
of Thermo Electron in September 1998. Mr. Holt has been the president and chief
executive officer of Thermo Ecotek Corporation, a majority-owned subsidiary of
Thermo Electron, since February 1994, and has been a director of Thermo Ecotek
Corporation since January 1995. For more than five years prior to his
appointment as an officer of Thermo Ecotek Corporation, he was the president and
chief executive officer of Pacific Generation Company, a financier, builder,
owner and operator of independent power facilities. Mr. Holt is also a director
of KFx, Inc. and the following affiliates of Thermo Electron: Thermo Power
Corporation, ThermoRetec Corporation, The Randers Killam Group Inc. and Thermo
TerraTech Inc. Mr. Holt's business address is 245 Winter Street, Waltham,
Massachusetts 02451.
FRANK JUNGERS: Director
Frank Jungers has been a director of Thermo Electron since 1978. Mr. Jungers
has been a consultant on business and energy matters since 1977. From 1974
through 1977, Mr. Jungers was employed by the Arabian American Oil Company as
the chairman and chief executive officer. Mr. Jungers is also a director of The
AES Corporation, Donaldson, Lufkin & Jenrette, Inc., Georgia-Pacific
Corporation, Statia Terminals Group N.V. and the following affiliates of Thermo
Electron: ONIX Systems Inc., Thermo Ecotek Corporation and ThermoQuest
Corporation. Mr. Jungers' business address is 822 N.W. Murray, Suite 242,
Portland, Oregon 97229.
JOHN T. KEISER: Chief Operating Officer, Biomedical and Emerging Technologies
John T. Keiser became the chief operating officer, biomedical and emerging
technologies, of Thermo Electron in September 1998. Mr. Keiser has been
president of Thermedics Inc., a majority-owned subsidiary of Thermo Electron,
since March 1994, its chief executive officer since December 1998 and its senior
vice president from 1994 until March 1998. Mr. Keiser was the president of the
Eberline Instrument division of Thermo Instrument from 1985 to July 1994. Mr.
Keiser is also a director of the following affiliates of Thermo Electron:
Metrika Systems Corporation, Thermedics Detection Inc., ThermoTrex Corporation,
ThermoLase Corporation, Trex Medical Corporation, Thermo Sentron Inc. and Thermo
Cardiosystems Inc. He has also been the president of Thermo Biomedical Inc., a
wholly owned subsidiary of Thermo Electron, since 1994.
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<PAGE>
PAUL F. KELLEHER: Senior Vice President, Finance and Administration
Paul F. Kelleher has been the senior vice president, finance and
administration, of Thermo Electron since June 1997, and served as its vice
president, finance from 1987 until 1997. Mr. Kelleher served as Thermo
Electron's controller from 1982 until January 1996. Mr. Kelleher is also the
chief accounting officer of ThermoSpectra and Thermo Instrument. For further
information, please see descriptions under "Directors and Executive Officers of
the Company" and "Directors and Executive Officers of Thermo Instrument," above.
EARL R. LEWIS: Chief Operating Officer, Measurement and Detection
Earl R. Lewis became the chief operating officer, measurement and detection
of Thermo Electron in September 1998, and had been a vice president of Thermo
Electron since September 1996. Mr. Lewis has been a director and chief executive
officer of Thermo Instrument since January 1998, and has been president of
Thermo Instrument since March 1997. He was the chief operating officer of Thermo
Instrument from January 1996 to January 1998. Prior to that time, he was an
executive vice president of Thermo Instrument from January 1996 to March 1997, a
senior vice president from January 1994 to January 1996 and a vice president
from March 1992 to January 1994. Prior to his appointment as Thermo Instrument's
chief executive officer, Mr. Lewis was also the chief executive officer of
Thermo Optek Corporation, a majority-owned subsidiary of Thermo Instrument, from
its inception in August 1995 to January 1998 and was the president of its
predecessor, Thermo Jarrell Ash Corporation for more than five years prior to
1995. He is also the president and sole director of the Merger Sub. Mr. Lewis is
also a director of the following affiliates of Thermo Electron: Metrika Systems
Corporation, ONIX Systems Inc., Spectra-Physics Lasers, Inc., Thermo BioAnalysis
Corporation, Thermo Optek Corporation, ThermoQuest Corporation, ThermoSpectra
and Thermo Vision Corporation. For further information, please see descriptions
under "Directors and Executive Officers of the Company," "Director and Executive
Officer of the Merger Sub" and "Directors and Executive Officers of Thermo
Instrument," above.
ROBERT A. MCCABE: Director
Robert A. McCabe has been a director of Thermo Electron since 1962. He has
been the chairman of Pilot Capital Corporation, which is engaged in private
investments, since 1998. Mr. McCabe was president of Pilot Capital Corporation
from 1987 to 1998. Prior to that time, Mr. McCabe was a managing director of
Lehman Brothers Inc., an investment banking firm. Mr. McCabe is also a director
of Atlantic Bank & Trust Company, Borg-Warner Security Corporation, Church &
Dwight Company and Thermo Optek Corporation, an affiliate of Thermo Electron.
Mr. McCabe's business address is Pilot Capital Corporation, 444 Madison Avenue,
Suite 2103, New York, New York 10022.
THEO MELAS-KYRIAZI: Chief Financial Officer and Vice President
Theo Melas-Kyriazi has been the chief financial officer of Thermo Electron
since January 1999 and a vice president since March 1998. In addition, Mr.
Melas-Kyriazi was the treasurer of Thermo Electron from May 1988 to August 1994.
From August 1994 through March 1998, he served as the president and chief
executive officer of ThermoSpectra. Mr. Melas-Kyriazi is also the chief
financial officer of ThermoSpectra and Thermo Instrument. Mr. Melas-Kyriazi is
also a director of ThermoRetec Corporation and is the chairman of the board of
directors of ThermoSpectra, both affiliates of Thermo Electron. For further
information, please see descriptions under "Directors and Executive Officers of
the Company" and "Directors and Executive Officers of Thermo Instrument," above.
DONALD E. NOBLE: Director
Donald E. Noble has been a director of Thermo Electron since 1983. Mr. Noble
has announced his intention to retire from the board of directors in September
1999. For more than 20 years, from 1959 to
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<PAGE>
1980, Mr. Noble served as the chief executive officer of Rubbermaid,
Incorporated, first with the title of president and then as the chairman of the
board. Mr. Noble is also a director of the following affiliates of Thermo
Electron: Thermo Fibertek Inc., Thermo Power Corporation, Thermo Sentron Inc.
and Thermo TerraTech Inc. Mr. Noble's business address is 345 North Market
Street, Suite G-05, Wooster, Ohio 44691.
HUTHAM S. OLAYAN: Director
Hutham S. Olayan has been a director of Thermo Electron since 1987. She has
served since 1995 as the president and a director of Olayan America Corporation,
a member of the Olayan Group, and as the president and a director of Competrol
Real Estate Limited, another member of the Olayan Group, from 1986 until its
merger into Olayan America Corporation in 1997. The surviving company is engaged
in private investments, including real estate, and advisory services. In
addition, from 1985 to 1994, Ms. Olayan served as the president and a director
of Crescent Diversified Limited, another member of the Olayan Group engaged in
private investments. Ms. Olayan is also a director of Trex Medical Corporation,
an affiliate of Thermo Electron. Ms. Olayan is a citizen of Saudi Arabia. Ms.
Olayan's business address is Suite 1100, 505 Park Avenue, New York, New York
10022.
ROBERT W. O'LEARY: Director
Robert W. O'Leary has been a director of Thermo Electron since June 1998. He
has been the president and the chairman of Premier Inc., a strategic alliance of
not-for-profit health care and hospital systems, since 1995. From 1990 to 1995,
Mr. O'Leary was the chairman of American Medical International, Inc., one of the
three predecessor entities of Premier Inc. Mr. O'Leary's business address is
Premier, Inc., 12225 El Camino Real, San Diego, California 92130.
WILLIAM A. RAINVILLE: Chief Operating Officer, Recycling and Resource Recovery
William A. Rainville became the chief operating officer, recycling and
resource recovery, of Thermo Electron in September 1998. Prior to that time, Mr.
Rainville had been a senior vice president of Thermo Electron since March 1993
and was a vice president of Thermo Electron from 1986 to 1993. Mr. Rainville has
been the president and chief executive officer of Thermo Fibertek Inc., a
majority-owned subsidiary of Thermo Electron, since its inception in 1991 and a
director since January 1992. From 1984 until January 1993, Mr. Rainville was the
president and chief executive officer of Thermo Web Systems Inc., a subsidiary
of Thermo Fibertek Inc. Mr. Rainville is also a director of the following
affiliates of Thermo Electron: Thermo Ecotek Corporation, Thermo Fibergen Inc.,
ThermoRetec Corporation, and Thermo TerraTech Inc. Mr. Rainville's business
address is 245 Winter Street, Waltham, Massachusetts 02451.
RICHARD F. SYRON: President, Chief Executive Officer and Director
Richard F. Syron has been the president and chief executive officer of
Thermo Electron since June 1999 and a director of Thermo Electron since
September 1997. From April 1994 to May 1999, Dr. Syron was the chairman and
chief executive officer of the American Stock Exchange, Inc., which has offices
located at 86 Trinity Place, New York, New York 10006. From January 1989 through
April 1994, he was the president and chief executive officer of the Federal
Reserve Bank of Boston. Prior to that time, he held a variety of senior
positions with the Federal Home Loan Bank of Boston, the Federal Reserve Bank of
Boston, the Board of Governors of the Federal Reserve System and the U.S.
Department of Treasury. Dr. Syron is also a director of Dreyfus Corporation and
The John Hancock Corporation. For further information, please see description
under "Directors and Executive Officers of Thermo Instrument," above.
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ROGER D. WELLINGTON: Director
Roger D. Wellington has been a director of Thermo Electron since 1986. Mr.
Wellington serves as the president and chief executive officer of Wellington
Consultants, Inc. and of Wellington Associates Inc., international business
consulting firms he founded in 1994 and 1989, respectively. Prior to 1989, Mr.
Wellington served as the chairman of the board of Augat Inc., a manufacturer of
electromechanical components and systems, for more than five years. Prior to
1988, Mr. Wellington also served as the chief executive officer and president of
Augat Inc. for more than ten years. Mr. Wellington is also a director of
Photoelectron Corporation and Thermo Fibergen Inc., an affiliate of Thermo
Electron.
To the knowledge of the Company, all of the above-listed officers and
directors intend to vote to approve the Merger Agreement.
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<PAGE>
APPENDIX E
INFORMATION CONCERNING TRANSACTIONS IN
THE COMMON STOCK OF THE COMPANY
The following sets forth information with respect to purchases of Common
Stock by ThermoSpectra, Thermo Instrument, the Merger Sub and Thermo Electron
since the commencement of ThermoSpectra's second full fiscal year preceding the
date of this Proxy Statement.
<TABLE>
<CAPTION>
RANGE OF PRICES AVERAGE PURCHASE
NUMBER OF PAID PER SHARE PRICE PER SHARE
SHARES PURCHASED DURING QUARTER DURING
QUARTER/YEAR PURCHASER DURING QUARTER ($)(1) QUARTER ($)(1)
- ---------------------------------- ------------------ ----------------- -------------------- -------------------
<S> <C> <C> <C> <C>
1st Quarter 1997.................. Thermo Electron 287,200 12.500--15.125 14.484
2nd Quarter 1997.................. Thermo Electron 216,400 11.625--14.500 12.983
3rd Quarter 1997.................. Thermo Electron 117,800 10.313--13.313 11.255
4th Quarter 1997.................. Thermo Electron 155,800 9.000--13.000 11.255
1st Quarter 1998.................. Thermo Electron 152,300 8.625--10.500 9.771
2nd Quarter 1998.................. Thermo Electron 272,400 9.375--11.375 10.478
3rd Quarter 1998.................. Thermo Electron 140,900 9.688--12.125 10.369
3rd Quarter 1998.................. Thermo Instrument 390,200 9.750--10.250 9.910
4th Quarter 1998.................. Thermo Electron 39,500 11.000--11.375 11.337
4th Quarter 1998.................. Thermo Instrument 490,700 8.500--11.750 10.385
</TABLE>
- ------------------------
(1) Prices per share of Common Stock are net of commissions paid by the
respective purchasers.
The following chart sets forth information with respect to options granted
by ThermoSpectra since the commencement of ThermoSpectra's second full fiscal
year preceding the date of this Proxy Statement to directors and executive
officers of ThermoSpectra, Thermo Instrument, the Merger Sub and Thermo
Electron.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
DATE OF COVERED EXERCISE
NAME RELATIONSHIP GRANT BY OPTIONS PRICE
- ------------------------------------------- ------------------------------------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Christopher J. Barron...................... Vice President, ThermoSpectra 5/20/98 7,000 $ 10.68
Christopher J. Barron...................... Vice President, ThermoSpectra 9/25/98 1,000 $ 10.13
Joseph A. Baute............................ Director, ThermoSpectra 5/27/99 1,000 $ 15.33
David J. Beaubien.......................... Director, ThermoSpectra 5/27/99 1,000 $ 15.33
Robert E. Finnigan......................... Director, ThermoSpectra 4/28/97 10,000 $ 11.93
Robert E. Finnigan......................... Director, ThermoSpectra 5/27/99 1,000 $ 15.33
Elias P. Gyftopoulos....................... Director, ThermoSpectra 5/27/99 1,000 $ 15.33
Barry S. Howe.............................. President, Chief Executive Officer and
Director, ThermoSpectra; Vice President,
Thermo Instrument 5/20/98 100,000 $ 10.68
Ronald W. Lindell.......................... Vice President, ThermoSpectra 5/20/98 6,000 $ 10.68
Ronald W. Lindell.......................... Vice President, ThermoSpectra 9/25/98 1,000 $ 10.13
Richard S. Melanson........................ Senior Vice President, ThermoSpectra 12/04/97 35,000 $ 9.53
Richard S. Melanson........................ Senior Vice President, ThermoSpectra 9/25/98 2,100 $ 10.13
Theo Melas-Kyriazi......................... Chief Financial Officer and Chairman of the
Board, ThermoSpectra; Chief Financial
Officer, Thermo Instrument; Vice President
and Chief Financial Officer, Thermo
Electron 3/06/97 2,000 $ 14.98
Theo Melas-Kyriazi......................... Chief Financial Officer and Chairman of the
Board, ThermoSpectra; Chief Financial
Officer, Thermo Instrument; Vice President
and Chief Financial Officer, Thermo
Electron 3/11/98 7,200 $ 10.00
</TABLE>
E-1
<PAGE>
The following chart sets forth information with respect to options to
purchase Common Stock that have been exercised by directors and executive
officers of ThermoSpectra, Thermo Instrument, the Merger Sub and Thermo Electron
since the commencement of ThermoSpectra's second full fiscal year preceding the
date of this Proxy Statement.
<TABLE>
<CAPTION>
NUMBER OF
SHARES AVERAGE
EXERCISE RECEIVED UPON EXERCISE
NAME RELATIONSHIP DATE EXERCISE PRICE
- ---------------------------------------- ---------------------------------------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
John N. Hatsopoulos..................... Director, Thermo Instrument; Vice
Chairman of the Board, Thermo Electron 3/02/99 8,000 $ 10.00
John N. Hatsopoulos..................... Director, Thermo Instrument; Vice
Chairman of the Board, Thermo Electron 3/02/99 4,400 $ 9.30
</TABLE>
OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following table sets forth the beneficial ownership of Common Stock, as
of January 31, 1999, with respect to (i) each director and current executive
officer of the Company and (ii) all directors and current executive officers as
a group.
While certain directors and executive officers of the Company are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Company, all such persons disclaim beneficial ownership of the shares
of Common Stock owned by Thermo Instrument or by Thermo Electron, as the case
may be.
<TABLE>
<CAPTION>
THERMOSPECTRA CORPORATION(2)
----------------------------
NUMBER OF PERCENTAGE
NAME(1) SHARES OF CLASS
- ------------------------------------------------------------------------------------------ ----------- ---------------
<S> <C> <C>
Christopher J. Barron..................................................................... 33,000 *
Joseph A. Baute........................................................................... 1,103(3) *
David J. Beaubien......................................................................... 1,000(3) *
Robert E. Finnigan........................................................................ 11,000 *
Elias P. Gyftopoulos...................................................................... 21,022 *
Barry S. Howe............................................................................. 119,010 *
Paul F. Kelleher.......................................................................... 5,000 *
Earl R. Lewis............................................................................. 55,000 *
Ronald W. Lindell......................................................................... 37,000 *
Richard S. Melanson....................................................................... 42,100 *
Theo Melas-Kyriazi........................................................................ 77,800 *
All directors and current executive officers as a group (11 persons)...................... 403,035 2.6
</TABLE>
- ------------------------
* Reflects ownership of less than 1.0% of the outstanding Common Stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) The shares of Common Stock beneficially owned by Mr. Barron, Mr. Baute, Mr.
Beaubien, Dr. Finnigan, Dr. Gyftopoulos, Mr. Howe, Mr. Kelleher, Mr. Lewis,
Mr. Lindell, Mr. Melanson, Mr. Melas-Kyriazi and all directors and current
executive officers as a group include 33,000, 1,000, 1,000, 10,000, 20,000,
104,000, 5,000, 50,000, 37,000, 37,100, 64,200 and 362,300 shares,
respectively, that such person or group had the right to acquire within 60
days of January 31, 1999, through the exercise of stock options. Shares
beneficially owned by Mr. Baute, Dr. Gyftopoulos and all directors and
current executive officers as a group include 103, 22 and 125 shares,
respectively, allocated
E-2
<PAGE>
through January 2, 1999, to their respective accounts maintained under the
Company's Deferred Compensation Plan. Shares beneficially owned by Dr.
Finnigan include 1,000 shares held in a trust of which he and his spouse are
the trustees. No director or current executive officer beneficially owned
more than 1.0% of the Common Stock outstanding as of January 31, 1999; all
directors and current executive officers as a group beneficially owned 2.6%
of the Common Stock outstanding as of such date.
(3) The information in the above chart relating to the beneficial ownership of
Common Stock by Messrs. Baute and Beaubien is as of July 2, 1999.
OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICERS AND DIRECTORS OF THERMO
INSTRUMENT
The following table sets forth the beneficial ownership of Common Stock, as
of January 31, 1999, with respect to (i) each director and current executive
officer of Thermo Instrument and (iii) all directors and current executive
officers of Thermo Instrument as a group.
While certain directors and executive officers of Thermo Instrument are also
directors and executive officers of Thermo Electron or its subsidiaries other
than Thermo Instrument, all such persons disclaim beneficial ownership of the
shares of Common Stock owned by Thermo Electron or Thermo Instrument, as the
case may be.
<TABLE>
<CAPTION>
THERMOSPECTRA CORPORATION(2)
----------------------------
NUMBER OF PERCENTAGE
NAME(1) SHARES OF CLASS
- ------------------------------------------------------------------------------------------ ----------- ---------------
<S> <C> <C>
Frank Borman.............................................................................. 1,500 *
Richard W.K. Chapman...................................................................... 4,000 *
George N. Hatsopoulos..................................................................... 24,750 *
John N. Hatsopoulos....................................................................... 24,400 *
Denis A. Helm............................................................................. 4,000 *
Barry S. Howe............................................................................. 119,010 *
Paul F. Kelleher.......................................................................... 5,000 *
Earl R. Lewis............................................................................. 55,000 *
Theo Melas-Kyriazi........................................................................ 77,800 *
Arvin H. Smith............................................................................ 20,000 *
Richard F. Syron.......................................................................... 0 *
Polyvios C. Vintiadis..................................................................... 1,500 *
All directors and current executive officers as a group (12 persons)...................... 336,960 2.2
</TABLE>
- ------------------------
* Reflects ownership of less than 1.0% of the outstanding Common Stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) The shares of Common Stock beneficially owned by Col. Borman, Dr. Chapman,
Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr. Howe, Mr. Kelleher,
Mr. Lewis, Mr. Melas-Kyriazi, Mr. Smith, Mr. Vintiadis and all directors and
current executive officers as a group include 1,500, 4,000, 24,750, 24,400,
4,000, 104,000, 5,000, 50,000, 64,200, 20,000, 1,500 and 303,350 shares,
respectively, that such person or group had the right to acquire within 60
days of January 31, 1999, through the exercise of stock options. No director
or current executive officer beneficially owned more than 1.0% of the Common
Stock outstanding as of January 31, 1999; all directors and current
executive officers as a group beneficially owned 2.2% of the Common Stock
outstanding as of such date.
E-3
<PAGE>
OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICERS AND DIRECTORS OF THERMO ELECTRON
The following table sets forth the beneficial ownership of Common Stock, as
of January 31, 1999, with respect to (i) each director and current executive
officer of Thermo Electron and (ii) all directors and current executive officers
as a group.
While certain directors and executive officers of Thermo Electron are also
directors and executive officers of majority-owned subsidiaries of Thermo
Electron, all such persons disclaim beneficial ownership of the shares of Common
Stock owned by Thermo Electron or by such majority-owned subsidiaries, as the
case may be.
<TABLE>
<CAPTION>
THERMOSPECTRA CORPORATION(2)
----------------------------
NUMBER OF PERCENTAGE
NAME(1) SHARES OF CLASS
- ------------------------------------------------------------------------------------------ ----------- ---------------
<S> <C> <C>
John M. Albertine......................................................................... 1,000 *
Samuel W. Bodman.......................................................................... 0 *
Peter O. Crisp............................................................................ 1,000 *
Elias P. Gyftopoulos...................................................................... 21,022 *
George N. Hatsopoulos..................................................................... 24,750 *
John N. Hatsopoulos....................................................................... 24,400 *
Brian D. Holt............................................................................. 0 *
Frank Jungers............................................................................. 1,500 *
John T. Keiser............................................................................ 1,500 *
Paul F. Kelleher.......................................................................... 5,000 *
Earl R. Lewis............................................................................. 55,000 *
Robert A. McCabe.......................................................................... 1,500 *
Theo Melas-Kyriazi........................................................................ 77,800 *
Donald E. Noble........................................................................... 4,000 *
Hutham S. Olayan.......................................................................... 1,000 *
Robert W. O'Leary......................................................................... 0 *
William A. Rainville...................................................................... 10,000 *
Richard F. Syron.......................................................................... 0 *
Roger D. Wellington....................................................................... 1,000 *
All directors and current executive officers as a group (19 persons)...................... 230,472 1.5
</TABLE>
- ------------------------
* Reflects ownership of less than 1.0% of the outstanding Common Stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) The shares of Common Stock beneficially owned by Dr. Albertine, Mr. Crisp,
Dr. Gyftopoulos, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Jungers, Mr.
Keiser, Mr. Kelleher, Mr. Lewis, Mr. McCabe, Mr. Melas-Kyriazi, Mr. Noble,
Ms. Olayan, Mr. Rainville, Mr. Wellington and all directors and current
executive officers as a group include 1,000, 1,000, 20,000, 24,750, 24,400,
1,500, 1,500, 5,000, 50,000, 1,500, 64,200, 1,000, 1,000, 10,000, 1,000 and
207,850 shares, respectively, that such person or members of the group had
the right to acquire within 60 days of January 31, 1999, through the
exercise of stock options. Shares beneficially owned by Dr. Gyftopoulos and
all directors and current executive officers as a group include 22 shares
allocated through January 2, 1999 to his account maintained pursuant to the
Company's Deferred Compensation Plan. No director or current executive
officer beneficially owned more than 1.0% of the Common Stock outstanding as
of January 31, 1999; all directors and current executive officers as a group
beneficially owned 1.5% of the Common Stock outstanding as of such date.
E-4
<PAGE>
OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICERS AND DIRECTORS OF THE MERGER SUB
Please see "Ownership of Common Stock by Executive Officers and Directors of
the Company," "Ownership of Common Stock by Executive Officers and Directors of
Thermo Instrument" and "Ownership of Common Stock by Executive Officers and
Directors of Thermo Electron," above, for information regarding the ownership of
Common Stock by Earl R. Lewis, the sole director and executive officer of the
Merger Sub.
TRANSACTIONS IN THE COMMON STOCK
There were no transactions in the Common Stock effected during the 60 days
preceding the date of this Proxy Statement by ThermoSpectra, Thermo Instrument,
the Merger Sub, Thermo Electron or, to the best knowledge of the Company, the
directors and executive officers of any of ThermoSpectra, Thermo Instrument, the
Merger Sub or Thermo Electron.
E-5
<PAGE>
[ATTACHMENT A TO PROXY STATEMENT]
FORM OF PROXY
THERMOSPECTRA CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD , 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Barry S. Howe, Theo Melas-Kyriazi
and Kenneth J. Apicerno, or any one of them in the absence of the others, as
attorneys and proxies of the undersigned, with full power of substitution,
for and in the name of the undersigned, to represent the undersigned at the
Special Meeting of the stockholders of ThermoSpectra Corporation, a Delaware
corporation (the "Company"), to be held on , , 1999, at
10:00 a.m., at the offices of Thermo Electron Corporation, 81 Wyman Street,
Waltham, Massachusetts 02454-9046, and at any adjournment or adjournments
thereof, and to vote all shares of common stock of the Company standing in
the name of the undersigned on , 1999, with all of the powers the
undersigned would possess if personally present at such meeting.
(IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
<PAGE>
SPECIAL MEETING OF STOCKHOLDERS
THERMOSPECTRA CORPORATION
, 1999
1. To consider and vote on a proposal to approve an Agreement and Plan
of Merger dated as of May 21, 1999 (the "Merger Agreement") pursuant to which TS
Acquisition Corporation, a newly-formed company and wholly owned subsidiary of
Thermo Instrument Systems Inc., will be merged (the "Merger") with and into the
Company and each stockholder of the Company (other than stockholders who are
entitled to and have perfected their dissenters' rights, shares held by the
Company in treasury and shares held by Thermo Instrument Systems Inc. and Thermo
Electron Corporation) will become entitled to receive $16.00 in cash, without
interest, for each outstanding share of common stock, $.01 par value, of the
Company owned by such stockholder immediately prior to the effective time of the
Merger. A copy of the Merger Agreement is attached as Appendix A to and is
described in the accompanying Proxy Statement.
[ ] For [ ] Against [ ] Abstain
2. To consider and act in their discretion upon such other matters as
may properly come before the Special Meeting or any adjournment or adjournments
thereof.
[ ] For [ ] Against [ ] Abstain
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS
SET FORTH ABOVE IF NO INSTRUCTION TO THE CONTRARY IS INDICATED OR IF NO
INSTRUCTION IS GIVEN.
Copies of the Notice of Special Meeting and of the Proxy Statement have
been received by the undersigned.
PLEASE DATE, SIGN AND PROMPTLY RETURN THIS
PROXY IN THE ENCLOSED ENVELOPE.
Signature(s)
--------------------------------
Date
---------------------------------------
Note: This proxy should be dated, signed by the
stockholder(s) exactly as his or her name appears
hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity
should so indicate. If shares are held by joint
tenants or as community property, both should sign.
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD BACK AS SOON AS POSSIBLE!
