-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RI8x2mxtz0kspEg4I2nxmcgvXX5NtzJ2+gUx73E5ipyZTko6yZS5mSwyzii1lZiE mzCqa+vEjDubvC7epc134w== /in/edgar/work/20000714/0000912057-00-032059/0000912057-00-032059.txt : 20000920 0000912057-00-032059.hdr.sgml : 20000920 ACCESSION NUMBER: 0000912057-00-032059 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20000714 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRUKER DALTONICS INC CENTRAL INDEX KEY: 0001109354 STANDARD INDUSTRIAL CLASSIFICATION: [3826 ] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-34820 FILM NUMBER: 673461 BUSINESS ADDRESS: STREET 1: 44 MANNING ROAD CITY: BILLERICA STATE: MA ZIP: 01821 MAIL ADDRESS: STREET 1: 44 MANNING RD CITY: BILLERICA STATE: MA ZIP: 01821 S-1/A 1 s-1a.txt FORM S-1/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON July 14, 2000 REGISTRATION NO. 333-34820 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 4 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ BRUKER DALTONICS INC. (Exact name of registrant as specified in its charter) DELAWARE 3826 04-3110160 (State or other jurisdiction (Primary Standard (I.R.S. Employer of Industrial Identification No.) incorporation or organization) Classification Code Number)
15 Fortune Drive Billerica, MA 01821 (978) 663-3660 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------------------------ Frank H. Laukien, Ph.D. Chairman, President and Chief Executive Officer Bruker Daltonics Inc. 15 Fortune Drive Billerica, MA 01821 (978) 663-3660 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------ COPIES TO: Richard M. Stein, Esquire Geoffrey B. Davis, Esquire Hutchins, Wheeler & Dittmar Ropes & Gray A Professional Corporation One International Place 101 Federal Street Boston, MA 02110 Boston, MA 02110 (617) 951-7000 (617) 951-6600
------------------------------ Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. / / If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering. / / If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. / / If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the earlier registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. / / -------------------------- The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to Completion, Dated July 14, 2000 [LOGO] 7,500,000 Shares Common Stock This is the initial public offering of Bruker Daltonics Inc., and we are offering 7,500,000 shares of our common stock. We anticipate the initial public offering price will be between $10.00 and $12.00 per share. We have applied to list our common stock on the Nasdaq National Market under the symbol "BDAL." Investing in our common stock involves risks. See "Risk Factors" beginning on page 6. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Underwriting Price to Discounts and Proceeds to Public Commissions Bruker Daltonics Per Share $11.00 $0.77 $10.23 Total $82,500,000 $5,775,000 $76,725,000
We have granted the underwriters the right to purchase up to 1,125,000 additional shares to cover over-allotments. UBS Warburg LLC CIBC World Markets Thomas Weisel Partners LLC The date of this prospectus is , 2000 INSIDE FRONT COVER Enabling Life Science Tools for the Post-Genomic Era Bruker Daltonics Logo image centered - --Genetic Variation: SNPs, Pharmacogenomics and Personalized Medicine (image) - --Proteomics (image) - --Biomarkers, Substance Detection and Pathogen Identification (image) - --Molecular Biology and Basic Medical Research (image) - --Drug Discovery, Combinatorial Chemistry and High-throughput Screening (image) - --Metabolic Profiling (image) Our Broad Range of Applications (footer) INSIDE FOLDOUT PANELS 1 AND 2 Bruker Daltonics logo (top left) Bruker logo (top right)
Our Related Our Mass Spectrometry (MS) Technology Platforms + TechnologiesU Solutions for Target Markets - ------------------------------------------------- -------------------- ------------------------------- (Our Array of Life Science Tools) (Our Diversified Customer Base) MALDI-TOF MS (image) Consumables LIFE SCIENCE INDUSTRIES ESI-TOF MS AnchorChip-TM- Pharmaceuticals (image) Fourier Transform MS Microarrays Biotechnology Ion Trap MS (image) (image) Agricultural Biotech (image) Substance Detection and Pathogen Robotics (image) Molecular Diagnostics Identification Tools (image) Automation OTHER LIFE SCIENCE MARKETS Bioinformatics Universities (image) (image) Medical Schools Government (NIH, NSF, etc.) SECURITY AND DEFENSE
PROSPECTUS SUMMARY THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS, BEFORE MAKING AN INVESTMENT DECISION. Bruker Daltonics We are a leading developer and provider of innovative life science tools based on mass spectrometry. Our substantial investment in research and development allows us to design, manufacture and market a broad array of products intended to meet the rapidly growing needs of our diverse customer base. Our customers include pharmaceutical companies, biotechnology companies, agricultural biotechnology companies, molecular diagnostics companies, academic institutions and government agencies. Mass spectrometers are sophisticated devices that provide highly accurate molecular information on a given sample. Our mass spectrometry-based systems often combine automated sample preparation robots, advanced mass spectrometry instrumentation which analyzes the sample, reagent kits containing chemicals and other testing products that are consumed in performing the sample analysis and bioinformatics software which analyzes the data produced by the sample analysis. Our systems offer integrated solutions for applications in multiple existing and emerging markets including (a) the study of genes and their function, or genomics, (b) the separation, identification, characterization and study of proteins and their function, or proteomics, (c) the measurement of products related to the metabolism of substances and disease pathways, or metabolic and biomarker profiling, (d) drug discovery and development, (e) tests for specific molecules or biological pathways referred to as molecular assays and diagnostics, (f) molecular and systems biology and (g) basic medical research. We market our life science systems both through our direct sales force and through strategic distribution arrangements with Agilent Technologies, PerkinElmer, Sequenom, MWG-Biotech and others. We are also a worldwide leader in supplying mass spectrometry-based systems for substance detection and pathogen identification in security and defense applications. Our Products Our life science solutions incorporate instruments that are based on one of four core mass spectrometry technology platforms. Each of these platforms utilizes a different type of mass spectrometry technology, including (a) matrix-assisted laser desorption ionization, or MALDI, time-of-flight mass spectrometry, (b) electrospray ionization, or ESI, time-of-flight mass spectrometry, (c) Fourier transform mass spectrometry and (d) ion trap mass spectrometry. We also employ our mass spectrometry technology in our substance detection and pathogen identification systems. Our Solutions Our product lines integrate sophisticated mass spectrometers with automated preparation and measurement of the samples to be analyzed and, where appropriate, bioinformatics software that uses advanced computing techniques to manage and analyze the data produced by our mass spectrometers. These products address many of the analytical needs of the life science industry across a broad range of applications. 1 Our automated systems allow our customers to generate and evaluate large volumes of accurate, high-quality data on a cost-effective basis. We believe that this enhanced throughput and high-quality data improves our customers' ability to apply bioinformatics to validate lead targets, understand disease pathways and analyze lead compounds. Our customers also use our products in molecular biology and other basic medical research. In addition, our automated, integrated mass spectrometry technology forms the basis of our substance detection and pathogen identification products used in security and defense markets. We believe that our products offer the following advantages to our customers: - high degree of automation; - integrated solutions; - accurate results; - increased productivity; and - cost efficiency. Our Strategy Our strategy is to continue to be a leading provider of mass spectrometry and related systems for use in the life sciences, as well as in substance detection and pathogen identification. Key elements of our strategy include: - provide a broad array of tools for a wide range of applications; - develop new platforms, enhanced products and new applications; - build alliances and pursue acquisitions; - generate recurring revenue; - develop and expand our bioinformation business; and - leverage our intellectual property. Bruker Daltonics was incorporated in Massachusetts in February 1991, as Bruker Federal Systems Corporation. In February 2000, we reincorporated in Delaware as Bruker Daltonics Inc. Our principal executive offices are located at 15 Fortune Drive, Billerica, Massachusetts 01821, and our telephone number is (978) 663-3660. Information about Bruker Daltonics is available at www.daltonics.bruker.com. The information on our website is not incorporated by reference into and does not form a part of this prospectus. Daltonics and the Daltonics logo are trademarks of Bruker Daltonics. All other trademarks, tradenames or copyrights referred to in this prospectus are the property of their respective owners. 2 The Offering Common stock offered by Bruker Daltonics..... 7,500,000 shares Common stock to be outstanding after this offering........................ 53,000,000 shares Use of proceeds.............................. General corporate purposes, including research and development, expansion of sales and marketing capabilities and working capital, including funding potential strategic acquisitions, and repayment of our outstanding bank debt. For more detailed information, see "Use of Proceeds" on page 18. Proposed Nasdaq National Market symbol....... BDAL
The number of shares to be outstanding upon completion of this offering is based on 45,500,000 shares outstanding as of July 12, 2000. This number excludes 2,120,000 shares of common stock that will be reserved for issuance under our stock option plan upon completion of this offering, of which 762,750 shares were subject to outstanding options. For a more detailed description of our capitalization, please see "Capitalization" on page 19. See "Risk Factors" and other information included in this Prospectus for a discussion of factors you should consider before investing in the shares of our common stock. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES: - THE UNDERWRITERS HAVE NOT EXERCISED THEIR OPTION TO PURCHASE ADDITIONAL SHARES; AND - THE SEVEN-FOR-ONE COMMON STOCK SPLIT COMPLETED IN FEBRUARY 2000. 3 Summary Financial Data (in thousands, except per share data)
Three Months Year Ended December 31, Ended March 31, ------------------------------------------------------------------- ------------------- 1995 1996 1997 1998 1999 1999 2000 ----------- ----------- ----------- ----------- ----------- -------- -------- (unaudited) Consolidated/Combined Statements of Operations Data (1): Product revenue............. $ 30,076 $ 43,942 $ 49,247 $ 40,157 $ 60,620 $ 10,879 $ 14,035 Other revenue............... 2,049 2,130 1,878 2,050 4,070 1,019 564 ---------- ---------- ---------- ---------- ---------- -------- -------- Net revenue............... 32,125 46,072 51,125 42,207 64,690 11,898 14,599 Costs and operating expenses: Cost of product revenue... 16,424 20,329 24,538 19,672 31,618 5,497 6,574 Sales and marketing....... 2,806 6,123 7,178 7,435 11,345 2,256 2,564 General and administrative.......... 1,795 1,717 2,120 2,212 3,411 618 1,108 Research and development............. 9,419 8,812 9,166 13,049 15,138 3,088 3,600 Patent litigation costs... -- 1,901 5,525 -- 538 538 303 ---------- ---------- ---------- ---------- ---------- -------- -------- Total costs and operating expenses.. 30,444 38,882 48,527 42,368 62,050 11,997 14,149 ---------- ---------- ---------- ---------- ---------- -------- -------- Operating income (loss) from continuing operations..... 1,681 7,190 2,598 (161) 2,640 (99) 450 Other income (expense)...... 196 2 127 174 130 140 (25) Interest expense, net....... (1,341) (1,032) (743) (901) (907) (267) (103) ---------- ---------- ---------- ---------- ---------- -------- -------- Income (loss) from continuing operations before provision for income taxes.............. 536 6,160 1,982 (888) 1,863 (226) 322 Provision (benefit) for income taxes.............. 9 2,265 1,627 -- 987 (120) 185 ---------- ---------- ---------- ---------- ---------- -------- -------- Income (loss) from continuing operations..... 527 3,895 355 (888) 876 (106) 137 Income from discontinued operations, net of income taxes..................... 372 368 209 383 373 90 37 ---------- ---------- ---------- ---------- ---------- -------- -------- Net income (loss)........... $ 899 $ 4,263 $ 564 $ (505) $ 1,249 $ (16) $ 174 ========== ========== ========== ========== ========== ======== ======== Net income (loss) per share-basic and diluted Income (loss) from continuing operations... $ 0.01 $ 0.08 $ 0.01 $ (0.02) $ 0.02 $ 0.00 $ 0.00 Income from discontinued operations, net of income taxes............ 0.01 0.01 0.00 0.01 0.01 0.00 0.00 ---------- ---------- ---------- ---------- ---------- -------- -------- Net income (loss) per share..................... $ 0.02 $ 0.09 $ 0.01 $ (0.01) $ 0.03 $ 0.00 $ 0.00 ========== ========== ========== ========== ========== ======== ======== Shares used in computing net income (loss) per share-basic and diluted... 45,500 45,500 45,500 45,500 45,500 45,500 45,500
4
March 31, 2000 -------------------------- Actual As Adjusted (2) -------- --------------- (unaudited) Consolidated Balance Sheet Data (1): Cash and cash equivalents................................... $ 3,905 $ 64,210 Working capital............................................. 13,335 76,271 Total assets................................................ 71,238 131,543 Total debt.................................................. 14,920 -- Total stockholders' equity.................................. 9,751 84,976
- ---------- (1) In December 1998, Bruker Daltonics Inc. acquired Bruker Daltonik GmbH and its subsidiary Bruker Saxonia Analytik GmbH. Since these companies were under common ownership prior to the acquisition, the financial data is shown on a combined basis for all years presented. (2) The adjusted balance sheet data reflects the receipt of the net proceeds from the sale of 7,500,000 shares of common stock by Bruker Daltonics Inc. in this offering at an assumed initial public offering price of $11.00 per share, after underwriting discounts and commissions and estimated offering expenses. 5 RISK FACTORS ANY INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER WITH THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE YOU DECIDE WHETHER TO BUY OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD SUFFER SIGNIFICANTLY. IN THIS CASE, THE MARKET PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK. Risks Related to Our Business If our products fail to achieve and sustain sufficient market acceptance across their broad intended range of applications in the life sciences, we will not generate expected revenue. Our business strategy depends on our ability to successfully commercialize a broad range of products based on mass spectrometry for use in a variety of life science applications. We have only recently commercially launched many of our current products for sale to these markets, and many of our products have achieved only limited sales. The commercial success of our life science products depends on our obtaining continued and expanding market acceptance of our mass spectrometry tools by pharmaceutical and biotechnology companies and academic and government research laboratories across the wide range of applications covered by our product offerings. We may fail to achieve or sustain substantial market acceptance for our products across the full range of our intended life science applications or in one or more of our principal intended life science applications. Any such failure could decrease our sales and revenue. To succeed, we must convince substantial numbers of pharmaceutical and biotechnology companies and other laboratories to replace their existing techniques with mass spectrometry techniques employing our systems. Limited funding available for capital acquisitions by our customers, as well as our customers' own internal purchasing approval policies, could hinder market acceptance of our products. Our intended life science customers may be reluctant to make the substantial capital investment generally needed to acquire our products or to incur the training and other costs involved with replacing their existing systems with our products. We also may not be able to convince our intended life science customers that our systems are an attractive and cost-effective alternative to other technologies and systems for the acquisition, analysis and management of molecular information. Because of these and other factors, our products may fail to gain or sustain market acceptance. Our products compete in markets that are subject to rapid technological change, and most of our products are based on a range of mass spectrometry technologies one or more of which could be made obsolete by new technology. The market for life science discovery tools is characterized by rapid technological change and frequent new product introductions. Rapidly changing technology could make some or all of our life science product lines obsolete unless we are able to continually improve our existing products and develop new products. Because substantially all of our life science products are based on mass spectrometry, we are particularly vulnerable to any technological advances that would make mass spectrometry obsolete as the basis for bioanalytical systems in any of our life science markets. To meet the evolving needs of our customers, we must rapidly and continually enhance our current and planned products and services and develop and introduce new products and services. Our business model calls for us to derive a significant portion of our revenues each year from products that did not exist in the previous year. However, we may experience difficulties which may delay or prevent the 6 successful development, introduction and marketing of new products or product enhancements. In addition, our product lines are based on complex technologies which are subject to rapid change as new technologies are developed and introduced in the marketplace. We may have difficulty in keeping abreast of the rapid changes affecting each of the different markets we serve or intend to serve. If we fail to develop and introduce products in a timely manner in response to changing technology, market demands or the requirements of our customers, our product sales may decline, and we could experience significant losses. We offer and plan to offer a broad product line and have incurred and expect to continue to incur substantial expenses for development of new products and enhanced versions of our existing products. The speed of technological change in our life science markets may prevent us from being able to successfully market some or all of our products for the length of time required to recover their often significant development costs. Failure to recover the development costs of one or more products or product lines could decrease our profitability or cause us to experience significant losses. We face substantial competition. In each market, for each of our life science products, we face substantial competition from major competitors, including competitors who also offer products based on mass spectrometry technology. We expect that competition in our life science markets will increase significantly as more biotechnology and pharmaceutical companies adopt automated high-throughput bioanalytical instruments as tools for drug discovery, drug development, proteomics, genomics and metabolomics. Currently, our principal competition comes from established companies providing products using existing technologies, including mass spectrometry and other technologies, which perform many of the same functions for which we market our products. Our competitors may develop or market products that are more effective or commercially attractive than our current or future products or that may render our products obsolete. Many of our competitors have substantially greater financial, operational, marketing and technical resources than we do. In addition to the risks applicable to our life science products, our substance detection and pathogen identification products are subject to a number of additional risks, including lengthy product development and contract negotiation periods and certain risks inherent in long-term government contracts. Our substance detection and pathogen identification products are subject to many of the same risks associated with our life science products, including vulnerability to rapid technological change, dependence on mass spectrometry technology and substantial competition. In addition, our substance detection and pathogen identification products are generally sold to government agencies under long-term contracts. These contracts generally involve lengthy pre-contract negotiations and product development. We may be required to devote substantial working capital and other resources prior to obtaining product orders. As a result, we may incur substantial costs before we recognize revenue from these products. Moreover, in return for larger, longer term contracts, our customers for these products often demand more stringent acceptance criteria. Their criteria may also cause delay in our ability to recognize revenue from sales of these products. Furthermore, we may not be able to accurately predict in advance our costs to fulfill our obligations under these long-term contracts. If we fail to accurately predict our costs, due to inflation or other factors we could incur significant losses. Any single long-term contract for our substance detection and pathogen identification products may represent a material portion of our total business volume, and the loss of any such contract could have a material adverse effect on our results of operations. In March 2000, we completed a production contract with the United States 7 government that accounted for 12% and 13% of our net revenue in 1998 and 1999, respectively. Failure to increase other business or to obtain another government contract such as this one would cause our revenue to decline. Also, the presence or absence of such contracts may cause substantial variation in our results of operations between fiscal periods and, as a result, our results of operations for any given fiscal period may not be predictive of our results for subsequent fiscal periods. The resulting uncertainty may have an adverse impact on our stock price. Our success depends on our ability to operate without infringing or misappropriating the proprietary rights of others. Our commercial success depends on avoiding the infringement of other parties' valid patents and proprietary rights as well as the breach of any licenses relating to our technologies and products. There are various third-party patents which may relate to our technology. We may be found in the future to infringe these or other patents or proprietary rights of third parties, either with products we are currently marketing or developing or with new products which we may develop in the future. As described below, a German court has found that sales of our ion trap mass spectrometers in Germany infringe the European patents held by a competitor. If a third party holding rights under a patent successfully asserts an infringement claim with respect to any of our current or future products, we may be prevented from manufacturing or marketing our infringing product in the country or countries covered by the patent we infringe, unless we can obtain a license from the patent holder. We may not be able to obtain such a license on commercially reasonable terms, if at all, especially if the patent holder is a competitor. In addition, even if we can obtain such a license, it may be non-exclusive, which will permit others to practice the same technology licensed to us. We may also be required to pay substantial damages to the patent holder. Under certain circumstances in the United States, these damages may include damages equal to triple the actual damages experienced by the patent holder. If we have supplied infringing products to third parties for marketing by them or licensed third parties to manufacture, use or market infringing products, we may be obligated to indemnify these third parties for any damages they are required to pay to the patent holder and for any losses the third parties may sustain themselves as the result of lost sales or license payments they are required to make to the patent holder. Any successful infringement action brought against us may also adversely affect marketing of the infringing product in other markets not covered by the infringement action, as well as our marketing of other products based on similar technology. Furthermore, we will suffer adverse consequences of a successful infringement action against us even if the action is subsequently reversed on appeal, nullified through another action, or resolved by settlement with the patent holder. The damages or other remedies awarded, if any, may be significant. As a result, any successful infringement action against us could prevent us from selling some or all of our products or cause us to experience significant losses or both. We are currently involved in several legal actions concerning technology for ion trap mass spectrometry with a competitor and various affiliates of the competitor, and a German court has decided that we have infringed two European patents of the competitor. We have been involved for several years in various litigation proceedings with a competitor, Finnigan Corporation, and some of its affiliates regarding the possible infringement by us of some patents of Finnigan concerning technology for ion trap mass spectrometry. Finnigan is a subsidiary of ThermoQuest Corporation which in turn is a subsidiary of Thermo Electron Corporation. The various claims have been, will be or currently are being heard in the United States International Trade Commission, the Court of Appeals for 8 the Federal Circuit, and are pending in the United States District Court for the District of Massachusetts and in various German courts. In addition, we have filed various infringement and antitrust actions against Finnigan and its affiliates. In 1996, 1997, 1998 and 1999, total worldwide sales of our ion trap mass spectrometry products constituted $2.7 million, $3.2 million, $5.0 million and $8.2 million, respectively. A German court has recently decided that we have infringed two Finnigan patents by selling our ion trap mass spectrometer products in Germany. As a result, if the court does not grant our motion to suspend enforcement of the ruling pending our appeal, we will be enjoined from selling our ion trap mass spectrometer products in Germany. We will also be required to pay damages and expenses to Finnigan in amounts to be determined by the German court in these proceedings. In 1999, our German sales of ion trap mass spectrometry products were $2.0 million. Finnigan is seeking to enforce the same European patents against us and Agilent in proceedings in Germany that could prevent us from distributing and delivering our ion trap mass spectrometry products in the United Kingdom, France, Sweden and Switzerland, and similar patents are at issue in the litigation brought by Finnigan in Massachusetts. Finnigan may also seek to show we have committed infringement elsewhere. Should we be found to infringe any patents of Finnigan or its affiliates in these proceedings, we may be liable for monetary damages and could be required to obtain licenses to commercialize our products or to redesign our products so that they do not infringe any of these patents. If we are unable to obtain a license or adopt a non-infringing product design, we could be prevented from developing, manufacturing and selling some of our ion trap mass spectrometry products. We may also have an indemnification obligation to Agilent. In these circumstances, our ion trap business would not develop as contemplated, and our results would materially suffer. For more information on our litigation with Finnigan and its affiliates, please see "Business--Legal Proceedings." We may be involved in other lawsuits to protect or enforce our patents that are brought by us which would be expensive and time consuming. In order to protect or enforce our patent rights, we may initiate patent litigation against third parties. We may also become subject to interference proceedings conducted in the patent and trademark offices of various countries to determine the priority of inventions. The defense and prosecution, if necessary, of intellectual property suits, interference proceedings and related legal and administrative proceedings is costly and diverts our technical and management personnel from their normal responsibilities. We may not prevail in any of these suits. An adverse determination of any litigation or defense proceedings could put our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. For example, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments in the litigation. If securities analysts or investors perceive these results to be negative, it could have a substantial negative effect on the trading price of our stock. If we are unable to effectively protect our intellectual property, third parties may use our technology, which would impair our ability to compete in our markets. Our continued success will depend in significant part on our ability to obtain and maintain meaningful patent protection for our products throughout the world. We rely on 9 patents to protect a significant part of our intellectual property and to enhance our competitive position. However, our presently pending or future patent applications may not issue as patents, and any patent previously issued to us may be challenged, invalidated, held unenforceable or circumvented. Furthermore, the claims in patents which have been issued or which may be issued to us in the future may not be sufficiently broad to prevent third parties from producing competing products similar to our products. In addition, the laws of various foreign countries in which we compete may not protect our intellectual property to the same extent as do the laws of the United States. Failure to obtain adequate patent protection for our proprietary technology could materially impair our ability to be commercially competitive. In addition to patent protection, we also rely on protection of trade secrets, know-how and confidential and proprietary information. To maintain the confidentiality of trade secrets and proprietary information, we generally seek to enter into confidentiality agreements with our employees, consultants and strategic partners upon the commencement of a relationship with us. However, we may not obtain these agreements in all circumstances. In the event of unauthorized use or disclosure of this information, these agreements, even if obtained, may not provide meaningful protection for our trade secrets or other confidential information. In addition, adequate remedies may not exist in the event of unauthorized use or disclosure of this information. The loss or exposure of our trade secrets and other proprietary information would impair our competitive advantages and could have a material adverse affect on our operating results, financial condition and future growth prospects. Furthermore, others may have, or may in the future independently develop, substantially similar or superior know-how and technology. We have agreed to share our name, portions of our intellectual property rights and distribution channels with other entities under common control which could result in the loss of our name and to lock in the price of products we may sell to these entities which may not be the best price available for these products. We maintain a sharing agreement with 13 affiliated entities that requires us to share portions of our intellectual property as it existed on February 28, 2000 and our distribution channels with these affiliated companies and their affiliates. We also share the Bruker name with many of these affiliates. We could lose the right to use the Bruker name if (a) we declare bankruptcy, (b) we interfere with another party's use of the name, (c) we take a material action which materially detracts from the goodwill associated with the name, or (d) we suffer a major loss of our reputation in our industry or marketplace. The loss of the Bruker name could result in a loss of goodwill, brand loyalty and sales of our products. In addition, we have agreed to maintain the price of some products purchased from and sold to these affiliates for a period of up to twelve years, subject to yearly adjustments equal to the increase in the Consumer Price Index. Our manufacture and sale of products could lead to product liability claims for which we could have substantial liability. The manufacture and sale of our products exposes us to product liability claims if any of our products cause injury or are found otherwise unsuitable during manufacturing, marketing, sale or customer use. A successful product liability claim brought against us in excess of, or outside the coverage of, our insurance coverage could have a material adverse effect on our business, financial situation and results of operations. We may not be able to maintain product liability insurance on acceptable terms, if at all, and insurance may not provide adequate coverage against potential liabilities. 10 Our business could be harmed if our collaborations fail to advance our product development. Demand for our products will depend in part upon the extent to which our collaborations with pharmaceutical and biotechnology companies are successful in developing, or helping us to develop, new products and new applications for our existing products. In addition, we collaborate with academic institutions on product development. We have limited or no control over the resources that any collaborator may devote to our products. Any of our present or future collaborators may not perform their obligations as expected. If we fail to enter into or maintain appropriate collaboration agreements or if any of these events occur, we may not be able to develop some of our new products, which could materially impede our ability to generate revenue. If we lose our strategic partners, it could impair our marketing efforts. A substantial portion of our sales of selected products consists of sales to third parties who incorporate our products in their systems. These third parties are responsible for the marketing and sales of their systems. We have little or no control over their marketing and sales activities or how they use their resources. Our present or future strategic partners may or may not purchase sufficient quantities of products from us or perform appropriate marketing and sales activities. These failures by our present or future strategic partners, or our inability to maintain or enter into new arrangements with strategic partners for product distribution, could materially impede the growth of our business and our ability to generate sufficient revenue. Any reduction in the capital resources or government funding of our customers could reduce our sales and impede our ability to generate revenue. A significant portion of our sales are capital purchases by our customers. The spending policies of our customers could have a significant effect on the demand for our products. These policies are based on a wide variety of factors, including the resources available to make purchases, the spending priorities among various types of equipment, policies regarding spending during recessionary periods and changes in the political climate. Any changes in capital spending or changes in the capital budgets of our customers could significantly reduce demand for our products. The capital resources of our biotechnology and other corporate customers may be limited by the availability of equity or debt financing. Any significant decline in research and development expenditures by our life science customers could significantly decrease our sales. We are dependent, both directly and indirectly, upon general health care spending patterns, particularly in the research and development budgets of the pharmaceutical and biotechnology industries, as well as upon the financial condition of various governments and government agencies. Since our inception, both we and our academic collaborators have benefited from various governmental contracts and research grants. Whether we or our academic collaborators will continue to be able to attract these grants depends not only on the quality of our products, but also on general spending patterns of public institutions. There exists the risk of a potential decrease in the level of governmental spending allocated to scientific and medical research which could substantially reduce or even eliminate our grants. Our status as a public company may reduce our ability to obtain research grants from the German government in the future because the German government focuses on funding small or private companies with limited access to capital. In addition, we make a substantial portion of our sales to non-profit and government entities which are dependent on continued high levels of government support for scientific research. Any decline in this support could decrease the ability of these customers to purchase our products. 11 We may not be able to expand our sales and service staff to meet demand for our products and services. We need to expand our direct marketing and sales force as well as our service and support staff. Our future revenue and profitability will depend on our ability to expand our team of marketing and service personnel. Because our products are technical in nature, we believe that our marketing, sales and support staff must have scientific or technical expertise and experience. Competition for employees with these skills is intense. We may not be able to continue to attract and retain sufficient qualified sales and service people, and we may not be able to grow and maintain an efficient and effective sales, marketing and support department. If we fail to continue to attract or retain qualified people, then our business could suffer. We plan significant growth, and there is a risk that we will not be able to manage this growth. Our success will depend on the expansion of our operations. Effective growth management will place increased demands on our management, operational and financial resources. To manage our growth, we must expand our facilities, augment our operational, financial and management systems, and hire and train additional qualified personnel. Our failure to manage this growth effectively could impair our ability to generate revenue or could cause our expenses to increase more rapidly than revenue, resulting in operating losses. If ethical and other concerns surrounding the use of genetic information, gene therapy or genetically modified organisms become widespread, we may have less demand for our products. Genetic testing has raised ethical issues regarding confidentiality and appropriate uses of the resulting information. For these reasons, governmental authorities may limit or prohibit genetic testing. Gene therapy and genetically modified organism content in food has raised safety concerns. Government regulation or market forces could reduce the demand for our life science tools for use in applications related to these markets. This could reduce the potential markets for our products which could decrease our sales. We are dependent upon various key personnel and must recruit additional qualified personnel for a number of management positions. Our success is highly dependent on the continued services of key management, technical and scientific personnel. Our management and other employees may voluntarily terminate their employment with us at any time upon short notice. The loss of the services of any member of our senior management, technical or scientific staff may significantly delay or prevent the achievement of product development and other business objectives. Our chief executive officer also is and has been chairman of the board of directors of an affiliated company and a management officer of another affiliate, which may reduce the time and attention he can devote to our management. In June 2000, our chief financial officer resigned, and we have not yet hired a new chief financial officer. Our future success will also depend on our ability to identify, recruit and retain additional qualified scientific, technical and managerial personnel. Competition for qualified personnel is intense, particularly in the areas of information technology, engineering and science, and the process of hiring suitably qualified personnel is often lengthy. If we are unable to hire and retain a sufficient number of qualified employees, our ability to conduct and expand our business could be seriously reduced. 12 We are dependent in our operations upon a limited number of suppliers and contract manufacturers. We currently purchase components used in our mass spectrometry instruments from a limited number of outside sources. The reliance on a limited number of suppliers could result in time delays associated with redesigning a product due to an inability to obtain an adequate supply of required components and reduced control over pricing, quality and timely delivery. Any interruption in the supply of components could have an adverse effect on our business, results of operations and financial condition. If we fail to expand our international presence, our revenue will not grow as expected. International sales account and are expected to continue to account for a significant portion of our total revenues. In 1999, international sales totaled $38.5 million, or 59.4% of our net revenue. International expansion will require that we hire additional personnel. If we fail to hire additional personnel or develop and maintain relationships with foreign customers and partners, we may not be able to expand our international sales and would suffer decreased profits. International sales and operations are and will remain subject to a number of additional risks not typically present in domestic operations, including: - changes in regulatory requirements; - the imposition of government controls; - political and economic instability or conflicts; - costs and risks of deploying systems in foreign countries; - limited intellectual property rights; and - the burden of complying with a wide variety of complex foreign laws and treaties. Our international operations are and will remain subject to the risks associated with the imposition of legislation and regulation relating to the import or export of high technology products. We cannot predict whether tariffs or restrictions upon the importation or exportation of our products will be implemented by the United States or other countries. If these tariffs or restrictions are imposed, our revenues or profits could suffer. We may lose money when we exchange foreign currency received from international sales into U.S. dollars. A significant portion of our business is conducted in currencies other than the US dollar, which is our reporting currency. As a result, currency fluctuations among the US dollar and the currencies in which we do business have caused and will continue to cause foreign currency transaction gains and losses. We recognize foreign currency gains or losses arising from our operations in the period incurred. We cannot predict the effects of exchange rate fluctuations upon our future operating results because of the number of currencies involved, the variability of currency exposures and the potential volatility of currency exchange rates. Various international tax risks could adversely affect our earnings. We are subject to international tax risks. Distributions of earnings and other payments received from our subsidiaries may be subject to withholding taxes imposed by the countries where they are operating or are formed. If these foreign countries do not have income tax treaties with the United States or the countries where our subsidiaries are incorporated, we 13 could be subject to high rates of withholding taxes on these distributions and payments. We could also be subject to being taxed twice on income related to operations in these non-treaty countries. Because we are unable to reduce the taxable income of one operating company with losses incurred by another operating company located in another country, we may have a higher foreign effective income tax rate than that of other companies in our industry. The amount of the credit that we may claim against our U.S. federal income tax for foreign income taxes is subject to many limitations which may significantly restrict our ability to claim a credit for all of the foreign taxes we pay. Our recent acquisition of ProteiGene involves the purchase of unproven technology which will require substantial resources to develop. We recently acquired ProteiGene, a company in the early stages of developing various biological analysis systems and databases. ProteiGene's approach and technology are not yet proven, and there is a substantial risk that efforts in developing ProteiGene's technology will not yield any marketable products. In addition, the effort we expend on this development will utilize resources which we could otherwise have used in more proven areas of technology. Responding to claims relating to improper handling, storage or disposal of hazardous chemicals and radioactive and biological materials which we use could be time consuming and costly. We use controlled hazardous and radioactive materials in our business. Our facilities in Massachusetts are regulated by the Massachusetts Department of Public Health under 105 CMR 120.200 and 105 CMR 120.750. Our facilities in Germany are regulated under paragraph 3 of the German Federal Radiation Safety Regulations. The risk of accidental contamination or injury from these materials cannot be completely eliminated. If an accident with these substances occurs, we could be held liable for any damages that result. Additionally, an accident could damage our research and manufacturing facilities resulting in delays and increased costs. Risks Related to This Offering Concentration of ownership among our existing principal stockholders may prevent new investors from influencing significant corporate decisions. Following the completion of this offering, our five current stockholders will beneficially own or control approximately 85.8% of the outstanding shares of our common stock. Accordingly, our current stockholders will have the ability to control the outcome of corporate actions requiring stockholder approval, including election of directors, any merger, consolidation or sale of all or substantially all of our assets and any other significant corporate transactions. The concentration of ownership may also delay or prevent a change of control of the Company at a premium price if the current stockholders oppose it. Please see "Management" and "Principal Stockholders" for details on our stock ownership. Our current stockholders have controlling interests in affiliated companies and could take actions which might not be in the best interest of our other stockholders. Our five current stockholders are members of an extended family and are also the direct or indirect owners of a number of affiliated companies along with their respective subsidiaries. Our current stockholders, including our chief executive officer, also hold positions as officers or directors of certain of these affiliates. The interests of our current stockholders as the direct or indirect owners of these affiliates may conflict with their interests 14 as stockholders of Bruker Daltonics. Our current stockholders, in their capacity as Bruker Daltonics stockholders, will have no obligation to act in the best interest of Bruker Daltonics or of other Bruker Daltonics stockholders, and they may cause us to take actions not in the best interests of Bruker Daltonics or to refrain from taking actions that are in our best interests. The market price of our common stock may be highly volatile. The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including: - developments concerning proprietary rights, including patents, by us or a competitor; - conditions or trends in the life sciences; - changes in the market valuations of life sciences or life science tool companies; and - developments concerning our various strategic collaborations. In addition, the stock market in general, and the Nasdaq National Market and the market for life science companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Furthermore, there has been particular volatility in the market prices of securities of biotechnology and life science companies. These broad market and industry factors may seriously harm the market price of our common stock regardless of our operating performance. In the past, following periods of volatility in the market, securities class action litigation has often been instituted against these companies. The commencement of any litigation against us could result in substantial costs and a diversion of management's attention and resources which could seriously harm our ability to achieve our financial goals. Anti-takeover provisions in our charter documents may limit the ability of another party to acquire us which could cause our stock price to decline. Various provisions of our certificate of incorporation and by-laws could delay or prevent a third party from acquiring us, even if doing so might be beneficial to our stockholders. These provisions provide for a classified board of directors of which approximately one third of the directors will be elected each year, allow the authorized number of directors to be changed only by a resolution of the board of directors, establish advance notice requirements for proposals that can be acted upon at stockholder meetings and limit who may call stockholder meetings. These provisions may prevent a merger or acquisition that would be attractive to stockholders and could limit the price investors would be willing to pay in the future for our common stock. New investors in our common stock will experience immediate and substantial dilution. The offering price of our common stock will be substantially higher than the net tangible book value per share of our existing capital stock. As a result, if you purchase common stock in this offering you will incur immediate and substantial dilution of $9.41 in net tangible book value per share of common stock, based on an assumed public offering price of $11.00 per share. You will also experience additional dilution upon the exercise of outstanding stock options. Please see "Dilution" for a more detailed discussion of the dilution new investors will incur in this offering. 15 If our stockholders sell substantial amounts of our common stock after the offering, the market price of our stock may decline. The number of shares of common stock available for sale in the public market is limited by restrictions under federal securities law and under lock up agreements with our underwriters. These lock up agreements restrict our stockholders from disposing of their shares for one hundred eighty days after the date of this prospectus without the prior written consent of UBS Warburg LLC. However, UBS Warburg LLC may release all or any portion of the common stock from the restrictions of the lock up agreements. Any sales of substantial amounts of common stock after the offering, including shares issued upon the exercise of outstanding options, may cause the market price of our common stock to decline. 16 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains "forward-looking statements." These statements may include statements regarding: - our business strategy; - plans for hiring additional personnel; - entering into business combinations or strategic alliances; - intellectual property; - litigation results; - adequacy of anticipated sources of funds, including the proceeds from this offering; and - other statements about our plans, objectives, expectations and intentions contained in this prospectus that are not historical facts. When used in this prospectus, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward looking statements for a number of reasons, including those discussed under "Risk Factors" and elsewhere in this prospectus. Following this offering, we assume no obligation to update any forward-looking statements contained in this prospectus. 17 USE OF PROCEEDS We estimate the net proceeds from the sale of the 7,500,000 shares of common stock offered by us will be $75.2 million, after deducting the estimated underwriting discount and offering expenses. We intend to use the net proceeds of this offering for general corporate purposes, including research and development, expansion of sales and marketing capabilities and working capital, potential strategic acquisitions and repayment of our outstanding bank loans. As of March 31, 2000, we had outstanding debt, including long-term and short-term, in the aggregate of $14.9 million. We intend to use approximately $14.9 million of the net proceeds of the offering to repay this debt. The interest rate on our debt ranges from 4.7% to 7.9% with banks in Germany and the United States. The long-term debt matures in 2003 and 2008. The amounts actually expended for working capital purposes may vary significantly and will depend on a number of factors, including the amount of our future revenues and the other factors described under "Risk Factors." Accordingly, our management will retain broad discretion in the allocation of the net proceeds of this offering. Pending these uses, we intend to invest the proceeds in short-term, investment-grade, interest-bearing investments. DIVIDEND POLICY We have never declared or paid cash dividends on our capital stock. We currently anticipate that we will retain all available funds for use in our business and do not anticipate paying any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon our financial condition, results of operations and capital requirements. 18 CAPITALIZATION The table below sets forth the following information: - our actual capitalization as of March 31, 2000; and - our capitalization as adjusted to reflect the receipt of net proceeds from our sale of 7,500,000 shares of common stock at an assumed initial public offering price of $11.00 per share in this offering, less the underwriting discounts and commissions and estimated offering expenses. You should read this table in conjunction with the Financial Statements and the other financial information included in this prospectus.
March 31, 2000 -------------------------- Actual As Adjusted -------- ----------- (in thousands) Short-term and long-term obligations........................ $14,920 $ -- Stockholders' equity: Common stock, $0.01 par value; 100,000,000 shares authorized, 45,500,000 shares issued and outstanding, actual; and 53,000,000 shares issued and outstanding, as adjusted (1).............................................. 455 530 Additional paid-in-capital.................................. 6,045 81,195 Accumulated other comprehensive loss........................ (3,336) (3,336) Retained earnings........................................... 6,587 6,587 ------- -------- Total stockholders' equity............................ 9,751 84,976 ------- -------- Total capitalization................................ $24,671 $ 84,976 ======= ========
- ------------ (1) The number of shares of common stock does not include 2,120,000 shares of common stock reserved for issuance under our 2000 Stock Option Plan which was adopted in February 2000. Options for 783,135 shares of common stock were granted under the 2000 Stock Option Plan in February 2000. 19 DILUTION Our actual net tangible book value as of March 31, 2000, was approximately $9.0 million, or approximately $0.20 per share of common stock. After giving effect to the sale of 7,500,000 shares of common stock offered by this prospectus at an assumed price of $11.00 per share and after deduction of the underwriting discounts and estimated offering expenses, our adjusted net tangible book value at March 31, 2000, would have been $84.2 million, or $1.59 per share of common stock. Actual net tangible book value per share before the offering has been determined by dividing net tangible book value (total tangible assets less total liabilities) by the number of shares of common stock outstanding at March 31, 2000, as adjusted for the seven-for-one stock split completed in February 2000. The offering will result in an immediate increase in net tangible book value of $1.39 per share to existing stockholders and an immediate dilution in net tangible book value of $9.41 per share to new investors. The following table illustrates this dilution on a per share basis: Assumed initial public offering price per share............. $11.00 Actual net tangible book value per share as of March 31, 2000.................................................... $ 0.20 Increase per share attributable to new investors.......... 1.39 ------ Adjusted net tangible book value per share after this offering.................................................. 1.59 ------ Dilution per share to new investors....................... $ 9.41 ======
The following table summarizes, on an adjusted basis as of March 31, 2000, the difference between the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid by the existing stockholders and by the new investors, before deducting underwriting discounts and commissions and estimated offering expenses, at an assumed initial public offering price of $11.00 per share.
Shares Purchased Total Consideration Average ---------------------- ------------------------ Price Number Percent Amount Percent Per Share ----------- -------- ------------- -------- --------- Existing stockholders............... 45,500,000 85.8% $ 6,500,000 7.3% $ 0.14 New investors....................... 7,500,000 14.2% 82,500,000 92.7% $11.00 ---------- ------ ------------ ------ Total........................... 53,000,000 100% 89,000,000 100% ========== ====== ============ ======
In the preceeding tables, the shares of common stock outstanding exclude 2,120,000 shares of common stock reserved for issuance under our stock option plan, of which 783,135 shares at a weighted average exercise price of $5.29 were subject to outstanding options. None of these options were exercisable at March 31, 2000. If the underwriters exercise their over-allotment in full, the following will occur: - the number of shares of common stock held by existing stockholders will decrease to approximately 84.1% of the total number of shares of our common stock outstanding; and - the number of shares held by new investors will increase to 8,625,000 shares, or approximately 15.9% of the total number of our common stock outstanding after this offering. 20 SELECTED FINANCIAL DATA (in thousands, except per share data) The consolidated and combined statements of operations data for each of the years ended December 31, 1997, 1998, and 1999 and the consolidated and combined balance sheet data as of December 31, 1997, 1998 and 1999 have been derived from our audited financial statements included elsewhere in this prospectus which, for 1998 and 1999, have been audited by Ernst & Young LLP, independent auditors, and for 1997 have been audited by BDO von Riegen, Lienau, Sucker & Partner GmbH, independent auditors. The combined statements of operations data for the years ended December 31, 1995 and 1996 and the combined balance sheet data as of December 31, 1995 and 1996 have been derived from unaudited financial statements not included in this prospectus. The financial statements for 1995 through 1998 are presented on a combined basis due to the common ownership of the Company and its affiliated company in Germany, which was formally acquired in December 1998. The consolidated financial data for the three months ended March 31, 1999 and 2000 are derived from our unaudited consolidated financial statements that appear elsewhere in this prospectus, which include all adjustments that we consider necessary for a fair presentation of the financial position and results of operations for such periods. Historical results are not necessarily indicative of future results. The data presented below have been derived from financial statements that have been prepared in accordance with accounting principles generally accepted in the United States and should be read with the consolidated and combined financial statements, including the notes, and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
Three Months Year Ended December 31, Ended March 31, ---------------------------------------------------- ------------------- 1995 1996 1997 1998 1999 1999 2000 -------- -------- -------- -------- -------- -------- -------- (in thousands, except per share data) (unaudited) Consolidated/Combined Statements of Operations Data: Product revenue.............................. $30,076 $43,942 $49,247 $40,157 $60,620 $10,879 $14,035 Other revenue................................ 2,049 2,130 1,878 2,050 4,070 1,019 564 ------- ------- ------- ------- ------- ------- ------- Net revenue.............................. 32,125 46,072 51,125 42,207 64,690 11,898 14,599 Costs and operating expenses: Cost of product revenue.................... 16,424 20,329 24,538 19,672 31,618 5,497 6,574 Sales and marketing........................ 2,806 6,123 7,178 7,435 11,345 2,256 2,564 General and administrative................. 1,795 1,717 2,120 2,212 3,411 618 1,108 Research and development................... 9,419 8,812 9,166 13,049 15,138 3,088 3,600 Patent litigation costs.................... -- 1,901 5,525 -- 538 538 303 ------- ------- ------- ------- ------- ------- ------- Total costs and operating expenses....... 30,444 38,882 48,527 42,368 62,050 11,997 14,149 ------- ------- ------- ------- ------- ------- ------- Operating income (loss) from continuing operations................................. 1,681 7,190 2,598 (161) 2,640 (99) 450 Other income (expense)....................... 196 2 127 174 130 140 (25) Interest expense, net........................ (1,341) (1,032) (743) (901) (907) (267) (103) ------- ------- ------- ------- ------- ------- ------- Income (loss) from continuing operations before provision for income taxes.......... 536 6,160 1,982 (888) 1,863 (226) 322 Provision (benefit) for income taxes......... 9 2,265 1,627 -- 987 (120) 185 ------- ------- ------- ------- ------- ------- ------- Income (loss) from continuing operations..... 527 3,895 355 (888) 876 (106) 137 Income from discontinued operations, net of income taxes............................... 372 368 209 383 373 90 37 ------- ------- ------- ------- ------- ------- ------- Net income (loss)............................ $ 899 $ 4,263 $ 564 $ (505) $ 1,249 $ (16) $ 174 ======= ======= ======= ======= ======= ======= ======= Net income (loss) per share--basic and diluted Income (loss) from continuing operations... $ 0.01 $ 0.08 $ 0.01 $ (0.02) $ 0.02 $ 0.00 $ 0.00 Income from discontinued operations, net of income taxes............................. 0.01 0.01 0.00 0.01 0.01 0.00 0.00 ------- ------- ------- ------- ------- ------- ------- Net income (loss) per share.................. $ 0.02 $ 0.09 $ 0.01 $ (0.01) $ 0.03 $ 0.00 $ 0.00 ======= ======= ======= ======= ======= ======= ======= Shares used in computing net income (loss) per share--basic and diluted............... 45,500 45,500 45,500 45,500 45,500 45,500 45,500
21 SELECTED FINANCIAL DATA (Continued) (in thousands, except per share data)
As of December 31, March 31, ---------------------------------------------------- ----------- 1995 1996 1997 1998 1999 2000 -------- -------- -------- -------- -------- ----------- (unaudited) ----------- Consolidated/Combined Balance Sheet Data:........ Cash and cash equivalents........................ $ 1,715 $ 3,766 $ 2,021 $ 1,135 $ 2,443 $ 3,905 Working capital.................................. (14,936) (14,759) (8,845) 6,338 12,080 13,335 Total assets..................................... 49,134 62,105 52,249 63,841 67,309 71,238 Total debt....................................... 17,797 19,033 8,496 17,924 15,340 14,920 Total stockholders' equity....................... 6,312 9,996 9,870 10,340 10,058 9,751
22 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS TOGETHER WITH "SELECTED FINANCIAL DATA" AND OUR FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION AND ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. Overview We are a leading developer and provider of innovative life science tools based on mass spectrometry. We are also a worldwide leader in supplying mass spectrometry-based systems for substance detection and pathogen identification in security and defense applications. We maintain technical centers in Europe, North America and Japan, as well as customer support facilities in many industrialized and developing countries. We allocate substantial capital and resources to research and development and are party to various collaborations and strategic alliances. Our diverse customer base includes pharmaceutical companies, biotechnology companies, academic institutions and government agencies. Effective December 21, 1998, Bruker Daltonics Inc. acquired all of the shares of Bruker Daltonik GmbH for $5.4 million. The transaction represented an exchange between entities under common control and, accordingly, the assets acquired and liabilities assumed have been accounted for at historical cost in a manner similar to that of pooling-of-interests accounting. In addition, all periods presented have been restated to reflect the businesses on a combined basis. Acquisitions In December 1999, we acquired a 49% interest in ProteiGene, Inc. from a related party. ProteiGene is a biomarker research and development company specializing in the application of mass spectrometry and bioinformatics for medical and microbiology cell and tissue analysis. The acquisition cost was $50,000 in cash, the estimated fair market value, and was accounted for as a purchase. In March 2000, we acquired the remaining 51% interest in ProteiGene for $26,000 from an unrelated party. In June 1999, we purchased the assets of Viking Instruments Corporation, a developer and manufacturer of transportable gas chromatrograph mass spectrometers. These instruments are used for laboratory and field analysis of soil, air and water for the identification and quantification of a wide variety of organic compounds and pollutants. The acquisition cost was $150,000, and the results of operations are included in the accompanying consolidated financial statements from the date of acquisition. In connection with the acquisition, $100,000 was expensed as purchased in-process research and development, $25,000 was allocated to core technology and classified as an intangible, $20,000 was allocated to inventory and $5,000 was allocated to fixed assets. The amortization period is five years for the intangibles and three to five years for the fixed assets. The $100,000 in-process research and development was attributed to the Viking 573, a transportable gas chromatrograph mass spectrometer, and supported by a discounted probable cash flow analysis on a project-by-project basis modified to reflect the stage of 23 completion of the in-process research and development expenditures. As of June 22, 1999, the feasibility of the acquired technology had not been established, and the acquired technology had no future alternative uses. In connection with the Viking 573 project, we invested an additional $313,000 out of operational cash flows through December 31, 1999. We shipped our first unit in December 1999 which was accepted by the customer in January 2000. We expect $1.2 million in revenues from this product line in 2000. Discontinued Operations In 1999, we decided to dispose of our analytical infrared sales group. In March 2000, we completed the divestiture to a related party, Bruker Optik GmbH, without a gain or loss. Our former analytical infrared sales group sold and serviced instruments, not manufactured by us, in Germany only. The infrared sales group generated revenues of $2.7 million in fiscal 1999. Amounts previously reported have been reclassified as discontinued operations and are not included in this discussion. Significant Accounting Policies CUSTOMER DEPOSITS. Under the terms and conditions of contracts with many of our customers, we require a portion of the purchase price in the form of an advance deposit. We record these deposit amounts as a liability until the associated revenue is recognized at the time of acceptance of the system. REVENUE RECOGNITION. We recognize revenue from system sales, including hardware with embedded software, when a product is accepted by the customer, except when sold through an independent distributor, a strategic distribution partner or an unconsolidated Bruker affiliated distributor which assumes responsibility for installation, in which case the system sale is recognized when the products are shipped to the distributor and title has transferred to the distributor. Our distributors do not have price protection rights or rights to return; however our products are warranted to be free from defect for a period of, typically, one year. Revenue from accessories and parts is recognized upon shipment, and revenue from services when performed. COST OF PRODUCT REVENUE. Cost of product revenue includes all direct materials, direct labor, benefits and indirect costs related to generating revenue. These indirect costs include indirect labor, materials and supplies, equipment rental and depreciation of production equipment, test equipment and facilities as related to production space revenue. SALES AND MARKETING. Sales and marketing expenses include salaries, sales commissions, benefits, travel, occupancy costs and related expenses for our direct sales force, sales support and marketing functions. We have expanded our sales and marketing organization substantially since 1997, adding subsidiaries and sales representatives in China, France, Japan, Scandinavia, Switzerland, the United Kingdom and Taiwan. Sales and marketing expenses also include costs associated with supporting our distribution channel partners for our time-of-flight and ion trap mass spectrometry products. We expect that sales and marketing expenses will continue to increase in the future as we further expand our global distribution capabilities and introduce new products. GENERAL AND ADMINISTRATIVE. General and administrative expenses include salaries, benefits and expenses for our executive, finance, legal, human resources and internal systems support personnel. In addition, general and administrative expenses include occupancy costs, fees for professional services and depreciation of office equipment. We expect general and 24 administrative expenses to increase as we continue to expand our administrative infrastructure to support the anticipated growth of our business, including the costs associated with being a public company. RESEARCH AND DEVELOPMENT. Research and development expenses include costs for the development of new technologies and products. These expenses include materials, salaries, benefits, occupancy costs and related expenses for development personnel. We expense research and development costs as incurred. We expect to increase spending on research and development in order to develop new products and applications. PATENT LITIGATION COSTS. Patent litigation costs include actual and estimated legal fees associated with litigation in connection with our intellectual property, particularly the Finnigan litigation. These costs may increase depending upon the outcome of the current legal proceedings. Results of Operations The following table sets forth certain items included in our results of operations for the three years ended December 31, 1997, 1998 and 1999 and for the three months ended March 31, 1999 and 2000, expressed as a percentage of our net revenue for these periods.
Three Months Year Ended Ended December 31, March 31, ------------------------------ ------------------- 1997 1998 1999 1999 2000 -------- -------- -------- -------- -------- (unaudited) Revenue: Product revenue...................................... 96.3% 95.1% 93.7% 91.4% 96.1% Other revenue........................................ 3.7 4.9 6.3 8.6 3.9 ----- ----- ----- ----- ----- Net revenue...................................... 100.0 100.0 100.0 100.0 100.0 Costs and operating expenses: Cost of product revenue.............................. 48.0 46.6 48.9 46.2 45.0 Sales and marketing.................................. 14.0 17.6 17.5 19.0 17.6 General and administrative........................... 4.2 5.3 5.3 5.2 7.5 Research and development............................. 17.9 30.9 23.4 26.0 24.7 Patent litigation costs.............................. 10.8 0.0 0.8 4.5 2.1 ----- ----- ----- ----- ----- Total costs and operating expenses............... 94.9 100.4 95.9 100.9 96.9 ----- ----- ----- ----- ----- Operating income (loss) from continuing operations..... 5.1 (0.4) 4.1 (0.9) 3.1 Other income (expense)................................. 0.3 0.4 0.2 1.2 (0.2) Interest expense, net.................................. (1.5) (2.1) (1.4) (2.2) (0.7) ----- ----- ----- ----- ----- Income (loss) from continuing operations, before income taxes................................................ 3.9 (2.1) 2.9 (1.9) 2.2 Provision for income taxes............................. 3.2 0.0 1.5 (1.0) 1.3 ----- ----- ----- ----- ----- Income (loss) from continuing operations............... 0.7 (2.1) 1.4 (0.9) 0.9 Income from discontinued operations, net of income taxes................................................ 0.4 0.9 0.5 0.8 0.3 ----- ----- ----- ----- ----- Net income (loss)...................................... 1.1% (1.2)% 1.9% (0.1)% 1.2% ===== ===== ===== ===== =====
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999 PRODUCT REVENUE. Total product revenue increased $3.2 million, or 29.0%, to $14.0 million in 2000 compared to $10.9 million in 1999. Product revenue via affiliated distributors 25 increased $777,000, or 124.7%, to $1.4 million in 2000 compared to $623,000 in 1999. Life science product revenue and substance detection product revenue as a percentage of net revenue was 64.3% and 31.9%, respectively, in 2000 as compared to 61.7% and 29.7%, respectively, in 1999. The increase in product revenue in 2000 was fueled by strong demand for our life science products by new and existing customers, led by our high-end MALDI time-of-flight product line. OTHER REVENUE. Other revenue decreased $456,000, or 44.7%, to $564,000 in 2000 compared to $1.0 million in 1999. This decrease was due to the completion of certain projects for early-stage research and development which were funded by grants from the German government and the Advanced Technology Program of the National Institute of Standards and Technologies in the United States. While we historically have obtained significant funding under grant awards for early-stage research and development activity, we anticipate this funding will be significantly reduced in the future, since these grants are typically provided to small or private companies with limited access to capital. COST OF PRODUCT REVENUE. Cost of product revenue increased $1.1 million, or 19.6%, to $6.6 million in 2000 compared to $5.5 million in 1999. The cost of product revenue as a percentage of product revenue was 46.8% in 2000 as compared to 50.5% in 1999. This decrease is due to a combination of stronger revenues from our high-end MALDI time-of-flight product which has lower cost of product revenue, increased efficiencies in the manufacturing operations and lower material costs driven by an increase in volume discounts. SALES AND MARKETING. Sales and marketing expenses increased $307,000, or 13.6%, to $2.6 million in 2000 compared to $2.3 million in 1999. The dollar increase was due to higher sales commissions earned by our direct sales force as a result of an increase in the number of units sold and the addition of several distribution subsidiaries not in operation during the three months ended March 31, 1999. Sales and marketing expenses as a percentage of net revenues were 17.6% in 2000 and 19.0% in 1999, reflecting improved operating leverage as our revenue base has grown. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased $491,000, or 79.4%, to $1.1 million in 2000 compared to $618,000 in 1999. As a percentage of net revenues, general and administrative expenses increased from 5.2% in 1999 to 7.5% in 2000. These dollar increases were due to increased staffing and personnel-related costs incurred to manage and support our growth, the addition of several distribution subsidiaries not in operation during the three months ended March 31, 1999, the associated costs related to the reincorporation of the Company, the development of the Employee Stock Option Plan and a research and development tax study. RESEARCH AND DEVELOPMENT. Research and development expenses increased $512,000, or 16.6%, to $3.6 million in 2000 compared to $3.1 million in 1999. As a percentage of net revenues, research and development expenses decreased from 26.0% in 1999 to 24.7% in 2000. The dollar increase in 2000 was due to increased staffing and the related personnel costs incurred for late-stage testing of our new product introductions, including APEX III, BioTOF II, esquire3000, MAP II/8 and OmniFLEX, in March 2000. PATENT LITIGATION COSTS. Patent litigation costs were $303,000 in 2000 compared with $538,000 in 1999 all resulting from our ongoing litigation with Finnigan. We may incur additional litigation costs in 2000. 26 INTEREST EXPENSE, NET. Interest expense decreased $165,000, or 61.6%, to $103,000 in 2000 compared to $267,000 in 1999. The decrease related to a significant reduction of our short-term borrowing with our German lines of credit. The interest expense is the result of our long and short-term borrowings from banks in the United States and Germany. INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES. Income from discontinued operations net of income taxes decreased $53,000, or 59.1%, to $37,000 in 2000 compared to $90,000 in 1999. Income from discontinued operations is related to the disposal of our infrared sales group in March 2000. Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 PRODUCT REVENUE. Total product revenue increased $20.5 million, or 51.0%, to $60.6 million in 1999 compared to $40.2 million in 1998. Product revenue via affiliated distributors increased $503,000, or 5.1%, to $10.3 million in 1999 compared to $9.8 million in 1998. Life science product revenue and substance detection product revenue as a percentage of net revenue was 50.6% and 43.1%, respectively, in 1999 as compared to 42.1% and 53.0%, respectively, in 1998. The increase in product revenue in 1999 was fueled by strong demand for our life science products by new and existing customers, led by our Fourier transform mass spectrometry, MALDI time-of-flight and esquire product lines. Additionally, $8.1 million of our 1999 substance detection and pathogen identification product revenue was due to the completion of a large non-recurring contract. OTHER REVENUE. Other revenue increased $2.0 million, or 98.6%, to $4.1 million in 1999 compared to $2.0 million in 1998. This increase was due to additional grant funding for early stage research and development from the German government and from the Advanced Technology Program of the National Institute of Standards and Technologies in the United States. COST OF PRODUCT REVENUE. Cost of product revenue increased $11.9 million, or 60.7%, to $31.6 million in 1999 compared to $19.7 million in 1998. The cost of product revenue as a percentage of product revenue was 52.2% in 1999 as compared to 49.0% in 1998. The increase as a percentage of product revenue was due to lower revenue from our substance detection and pathogen identification product, which historically has a lower cost of product revenue than our life science products. Additionally, we have increased manufacturing capacity to meet future projected product sales growth. This increased capacity had an adverse effect on cost of product. We anticipate improved leverage of our fixed manufacturing costs, and declines in cost of product revenue as a percentage of sales, as our product revenue increases. We are also seeking to improve our gross margin by developing new, more integrated systems and higher margin consumables for the life science market. SALES AND MARKETING. Sales and marketing expenses increased $3.9 million, or 52.6%, to $11.3 million in 1999 compared to $7.4 million in 1998. As a percentage of net revenues, sales and marketing expenses remained relatively consistent. The increase was due to sales commissions and bonuses earned by our direct sales force as a result of an increase in the number of units sold and the expansion of our global distribution capabilities. The dollar increase was also due to an increase in sales personnel and the associated recruiting, training, travel, commissions and office space costs necessary to support a larger sales organization. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased $1.2 million, or 54.2%, to $3.4 million in 1999 compared to $2.2 million in 1998. The dollar increases were due to increased staffing and personnel related costs incurred to manage and 27 support our growth and the costs associated with the incorporation of our foreign subsidiary offices. As a percentage of net revenues, general and administrative expenses remained relatively consistent. RESEARCH AND DEVELOPMENT. Research and development expenses increased $2.1 million, or 16.0%, to $15.1 million in 1999 compared to $13.0 million in 1998. As a percentage of net revenues, research and development decreased to 23.4% as compared to 30.9%. The dollar increase in 1999 was due to increased staffing and the related personnel costs incurred for late stage testing of our new product introductions, including APEX III, BioTOF II, esquire3000, MAP II/8 and OmniFLEX, in March 2000. These increased expenses represented a lower percentage of revenue due to the significant increase in revenues during fiscal 1999. PATENT LITIGATION COSTS. Patent litigation costs were $538,000 in 1999. This increase reflects a revised estimate of our legal costs associated with our intellectual property litigation. We may incur additional litigation costs in 2000, primarily due to the Finnigan litigation. INTEREST EXPENSE, NET. Interest expense increased $7,000, or 0.8%, to $908,000 in 1999 compared to $901,000 in 1998. The interest expense is the result of our long and short-term borrowings from banks in the United States and Germany. PROVISION FOR INCOME TAXES. Provision for income taxes was $987,000 in 1999 compared to $0 in 1998. The effective tax rate in 1999 was 53.0% which reflected a blended tax rate from the various countries in which we operate. In 1999, we benefited from utilization of tax loss carryforwards in Germany. In the United States, we were unable to recognize a tax benefit on our loss. There was no income tax expense in 1998 as a result of the loss for the year. INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES. Income from discontinued operations net of income taxes decreased $10,000, or 2.6%, to $373,000 in 1999 compared to $383,000 in 1998. Income from discontinued operations is related to the disposal of our infrared sales group in March 2000. Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 PRODUCT REVENUE. Total product revenue decreased $9.1 million, or 18.5%, to $40.2 million in 1998 compared to $49.2 million in 1997. Product revenue via affiliated distributors decreased $4.5 million, or 31.2% to $9.8 million in 1998 compared to $14.3 million in 1997. Life science product revenue and substance detection product revenue as a percentage of net revenue was 42.1% and 53.0%, respectively, in 1998 as compared to 42.1% and 54.2%, respectively, in 1997. The decrease in product revenue in 1998 compared to 1997 was due to the completion of a significant non-recurring substance detection contract in 1997, a new life science product introduction delay and the expansion and reorganization of our manufacturing operations which had an adverse effect on shipments. We reorganized and expanded our manufacturing operations and facilities to meet increased demand for our life science products. OTHER REVENUE. Other revenue increased $171,000, or 9.1%, to $2.0 million in 1998 compared to $1.9 million in 1997. This increase was due to additional grant funding for early-stage research and development grants from the German government and from the Advanced Technology Program of the National Institute of Standards and Technologies in the United States. 28 COST OF PRODUCT REVENUE. Cost of product revenue decreased $4.9 million, or 19.8%, to $19.7 million in 1998 compared to $24.5 million in 1997. The cost of product revenue as a percentage of product revenue was 49.0% in 1998 over 49.8% in 1997. The decrease in cost of product revenue is due to a shift in our life science product mix and personnel and technological efficiencies that we introduced to improve the manufacturing process. SALES AND MARKETING. Sales and marketing expenses increased $257,000, or 3.6%, to $7.4 million in 1998 compared to $7.2 million in 1997. As a percent of net revenues, sales and marketing expenses increased from 14.0% in 1997 to 17.6% in 1998. This percentage increase was due to a decrease in 1998 net revenue. Overall sales and marketing expenditures remained at dollar levels consistent with the prior year. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased $93,000, or 4.4%, to $2.2 million in 1998 compared to $2.1 million in 1997. As a percent of net revenues, general and administrative expenses increased from 4.2% in 1997 to 5.3% in 1998 as a result of adding incremental staffing to support our expected growth. RESEARCH AND DEVELOPMENT. Research and development expenses increased $3.9 million, or 42.4%, to $13.0 million in 1998 compared to $9.2 million in 1997. As a percent of net revenues, research and development expenses increased from 17.9% in 1997 to 30.9% in 1998 as a result of our strategic decision to increase our engineering and development personnel in order to continue developing new products and applications. The increase in expense as a percentage of revenues resulted from the corresponding decrease in revenues. PATENT LITIGATION COSTS. In 1997, we increased by $5.5 million, our reserve for all litigation costs we expected to incur in connection with our defense against Finnigan's patent infringement litigation, including appeals. In 1998, we did not increase our estimate for these costs. INTEREST EXPENSES, NET. Interest expense increased $158,000, or 21.2%, to $901,000 in 1998 compared to $743,000 in 1997. The interest expense is the result of our long and short-term borrowings from banks in the United States and Germany. PROVISION FOR INCOME TAXES. Due to the net loss in 1998, we had no provision for income taxes. In 1997, the effective tax rate was 82.1%, which reflects an increase in statutory rates due to a non-recurring tax assessment in Germany. INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES. Income from discontinued operations net of income taxes increased $175,000, or 83.6%, to $383,000 in 1998 compared to $209,000 in 1997. Income from discontinued operations is related to the disposal of our infrared sales group in March 2000. Selected Quarterly Operating Results The following table sets forth our unaudited quarterly results for the five quarters ended March 31, 2000. This information has been prepared on the same basis as the financial statements and, in the opinion of our management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the 29 periods presented. The unaudited quarterly operating results are not necessarily indicative of future results of operation. This data should be read in conjunction with our Financial Statements and related Notes included in this prospectus.
Three Months Ended --------------------------------------------------------------- March 31, June 30, September 30, December 31, March 31, 1999 1999 1999 1999 2000 --------- -------- ------------- ------------ --------- (in thousands) Product revenue..................... $10,879 $14,062 $17,243 $18,436 $14,035 Other revenue....................... 1,019 1,625 764 662 564 ------- ------- ------- ------- ------- Net revenue....................... 11,898 15,687 18,007 19,098 14,599 Cost of product revenue............. 5,497 7,538 8,800 9,783 6,574 Operating expenses.................. 6,500 7,684 8,143 8,105 7,575 ------- ------- ------- ------- ------- Total cost and operating expenses.......................... 11,997 15,222 16,943 17,888 14,149 ------- ------- ------- ------- ------- Operating income (loss) from continuing operations............. (99) 465 1,064 1,210 450 Other expenses, net................. (127) (173) (225) (252) (128) ------- ------- ------- ------- ------- Income (loss) from continuing operations before provision for income taxes...................... (226) 292 839 958 322 Provision (benefit) for income taxes............................. (120) 155 445 507 185 ------- ------- ------- ------- ------- Income (loss) from continuing operations........................ (106) 137 394 451 137 Income from discontinued operations, net of income taxes............... 90 101 75 107 37 ------- ------- ------- ------- ------- Net income (loss)................... $ (16) $ 238 $ 469 $ 558 $ 174 ======= ======= ======= ======= =======
Liquidity and Capital Resources Presently, we anticipate that our existing capital resources and the expected proceeds from this offering will meet our operating and investing needs through the end of 2001. Historically, we have financed our growth through a combination of cash provided from operations, debt financing and issuance of common stock. Cash provided from operating activities is our primary source of liquidity. We used $29,000 in cash flow for operations during the first quarter of 2000, generated $5.4 million during 1999, used $6.5 million in 1998 and generated $12.7 million in 1997. We used $260,000 of cash in the first quarter of 2000, $4.4 million in 1999, $2.9 million in 1998 and $3.9 million in 1997 for capital expenditures. Such capital expenditures were made to improve productivity and expand manufacturing capacity. We expect to continue to make capital investments focused on enhancing the efficiency of our operations and supporting our growth. Other current assets increased at March 31, 2000 as compared to December 31, 1999. The increase in other current assets was principally due to an increase in a VAT tax receivable in Germany, deferred financing costs incurred with our Registration Statement on Form S-1, and the timing of other receivables. In August 1999, we entered into a revolving line of credit with Citizens Bank in the United States in the amount of $2.5 million, of which $1.0 million was outstanding as of March 31, 2000. This line, which is secured by portions of our inventory, receivables and 30 equipment in the United States, is used to support working capital and expires July 31, 2001. We also maintained revolving lines of credit in 1998 and 1999 of approximately $4.2 million and $6.2 million, respectively, with German banks, of which $1.6 million was outstanding as of March 31, 2000. Our German lines of credit are unsecured and are renewable in June 2000. We plan to renew these lines on substantially similar terms. In 1998 we raised $5.8 million from the issuance of our common stock which was used to acquire the stock of our affiliate, Bruker Daltonik GmbH. No material capital expenditure commitments were outstanding as of March 31, 2000. Our future capital uses and requirements depend on numerous factors, including our success in selling our existing products, our progress in research and development, our ability to introduce and sell new products, our sales and marketing expenses, our need to expand production capacity, costs associated with possible acquisitions, expenses associated with unforeseen litigation, regulatory changes, and competition and technological developments in the market. Impact of Foreign Currencies We sell our products in many countries and a substantial portion of our sales and a portion of our costs and expenses are denominated in foreign currencies, especially in Euro. In the first quarter 2000 and 1999, the U.S. dollar strengthened against the Euro, and in 1998, the U.S. dollar strengthened against the German mark. In each case, this reduced our consolidated revenue growth rate, as expressed in U.S. dollars. In addition, the currency fluctuations resulted in a foreign currency translation gain of $647,000 in 1998, a loss of $1.5 million in 1999 and a loss of $481,000 in the first quarter of 2000, which are included as a component of accumulated other comprehensive income (loss) on our balance sheets. Historically, our realized foreign exchange gains and losses have not been material. Accordingly, we have not hedged our foreign currency position in the past. However, as we expand our sales internationally, we plan to evaluate our currency risks and we may enter into foreign exchange contracts from time to time to mitigate foreign currency exposure. Stock Options In February 2000, our board of directors adopted and our stockholders approved our 2000 Stock Option Plan. The plan provides for the issuance of up to 2,120,000 shares of common stock in connection with stock options or other awards. In February 2000, we granted stock options for 783,135 shares of common stock, which vest over three-to-five year periods. The Company accounts for stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25, because the exercise price of our stock options equaled the fair market value of the underlying stock on the date of grant, no compensation expense was recognized. Our board of directors considered various factors in determining the fair market value of the Company's common stock on the date the stock options were granted. The board used data of comparable public companies to determine an initial valuation of the Company as if it were a public company. The board discounted this valuation by 20% to reflect the lack of marketability of our stock due to our status as a private company. Since the grant date of our stock options to the date of this Registration Statement, various factors have contributed to the increase in the per share value of our common stock. Our first quarter 2000 results exceeded our internal projections by 12%. Our first quarter 2000 life science revenues grew 29% as compared to the first quarter of 1999. Income from 31 continuing operations grew 229% in the first quarter 2000 as compared to the first quarter 1999. Our new order bookings of life science products for the first quarter 2000 increased by 33% as compared to the first quarter 1999. Moreover, subsequent to February 2000, we introduced 6 new products (esquire 3000, OmniFlex, MAP II/8, BioTOF II, Anchor Chips and APEX III) within our life science product line. In March 2000, we signed a strategic distribution/collaboration agreement with PerkinElmer Instruments for an initial order of our OmniFlex systems. Additionally, in June 2000 we signed a strategic collaboration agreement with Variagenics, Inc. under which we anticipate that we will sell additional products. During the past few months, the life science industry has benefited greatly from recent developments in sequencing the human genome, which has fueled the growth of, and interest in, the life science industry as a whole. Inflation We do not believe inflation has had a material impact on our business or operating results during the periods presented. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The provisions of the statement require the recognition of all derivatives as either assets or liabilities in the statement of financial position and the measurement of those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. The Company is required to implement the statement in the first quarter of fiscal 2001. We do not believe that this new accounting standard will have a material impact on our financial statements. 32 BUSINESS Overview Bruker Daltonics is a leading developer and provider of innovative life science tools based on mass spectrometry. Our substantial investment in research and development allows us to design, manufacture and market a broad array of products intended to meet the rapidly growing needs of our diverse customer base. Our customers include pharmaceutical companies, biotechnology companies, agricultural biotechnology companies, molecular diagnostics companies, academic institutions and government agencies. Mass spectrometers are sophisticated devices that provide highly accurate molecular information. Our mass spectrometry-based systems often combine automated sample preparation robots, advanced mass spectrometry instrumentation, reagent kits and other disposable products used in conducting assays, or consumables, and bioinformatics software. Our systems offer integrated solutions for applications in multiple existing and emerging markets including genomics and proteomics, metabolic and biomarker profiling, drug discovery and development, molecular assays and diagnostics, molecular and systems biology and basic medical research. We market our life science systems both through our direct sales force and through strategic distribution arrangements with Agilent Technologies, PerkinElmer, Sequenom, MWG-Biotech and others. We are also a worldwide leader in supplying mass spectrometry-based systems for substance detection and pathogen identification in security and defense applications. Industry Background We design our products to address the rapidly evolving needs of the life science industry. Public and private efforts to sequence the entire human genome have led to advances that are fueling further investment in the discovery and identification of single nucleotide polymorphisms, or SNPs, and other forms of genetic variation. These developments, combined with advances in combinatorial chemistry, which is the creation of libraries of chemical compounds, and in basic molecular biology and medical research, are spurring growth in the following rapidly developing and emerging areas: - PHARMACOGENOMICS, which compares the genetic information of an individual to the average human genome to predict the response of individual patients and patient populations to drugs; - PERSONALIZED MEDICINE, which seeks to apply inexpensive, rapid molecular diagnostic tests, or assays, to profile a patient's genetic composition and enable the prescription of individualized drug therapy; - PROTEOMICS, which involves the large-scale separation, identification and characterization of proteins in order to understand how proteins are created based on the information contained in genes; - NEW METHODS OF DRUG DISCOVERY, which are based on the rapid measurement, or high-throughput screening, of large numbers of small organic compounds synthesized through combinatorial chemistry against large numbers of disease pathways, or targets, identified by genomics and proteomics; - BIOMARKER DETECTION, OR BIO-BARCODING, which develops rapid and sensitive assays for a broad range of cell and tissue types for applications including infectious disease detection, human tissue assessment, the identification of specific agricultural characteristics and pathogen identification, even when the molecular mechanisms are not understood or the genomic sequence is not available; and 33 - METABOLIC PROFILING, OR METABOLOMICS, which analyzes the levels of substances produced by the metabolism, or metabolites, present in a cell or in biological fluids to draw correlations between disease states, genetic modifications and variations in metabolite levels. In addition, increased levels of funding for basic medical research have fueled demand by universities, medical schools and government agencies for sophisticated bioanalytical systems, such as mass spectrometers. Funding has also increased for substance detection and pathogen identification systems for security and defense applications. LIMITATIONS OF ALTERNATIVE LIFE SCIENCE TOOLS Many of the bioanalytical tools available today based on technologies other than mass spectrometry, including those described in the next paragraph, have significant limitations when used for applications including the detection of genetic variation, pharmacogenomics, proteomics, drug discovery and biomarker detection. These limitations include lack of throughput to accommodate the volume of analysis required, lack of automation, time-consuming sample preparation and insufficient accuracy of the resulting data. For example, the two leading methods traditionally used for DNA sequencing and expression profiling are electrophoresis and hybridization. The error rate of these techniques can increase the cost, complexity and time involved in completing more demanding analyses. Traditional protein science tools including Edman sequencing and two-dimensional gel separations are time consuming, relatively inaccurate and labor intensive. Additionally, many alternative life sciences tools can only be utilized by expert scientists. Other, newer bioanalytical tools, like biological chips that can be read by fluorescence readers, may be highly automated. However, these instruments are often less flexible or less accurate than mass spectrometers. For other emerging applications including metabolic profiling and rapid biomarker detection, we believe there presently are no automated, sensitive and accurate alternative tools available other than mass spectrometry-based systems. Increasingly, life science companies are looking to solutions that address the limitations inherent in these alternative tools. MASS SPECTROMETRY Mass spectrometers are devices for measuring the mass, or weight, of a molecule. Mass spectrometry systems employ an ionization source which creates charged molecules and a mass separation/detection component which separates these charged molecules on the basis of mass to detect their presence and quantity. Mass spectrometry has been used in physics and chemistry for over fifty years. Over the past fifteen years, mass spectrometry has emerged as a powerful research tool in the life sciences. For example, mass spectrometers can determine the identity, amount, structure, sequence and other biological properties of small molecules, like drug candidates and metabolites, as well as large biomolecules, like proteins or DNA. While highly accurate, mass spectrometers historically have been limited by the time and skill required to prepare samples, conduct each measurement and analyze the data. 34 Our Solutions Our product lines integrate sophisticated mass spectrometers with automated sample preparation and measurement, and, where appropriate, bioinformatics software to address many of the bioanalytical and bioinformatics needs of the life sciences industry across a broad range of applications. Our products have particular application to: - genetic variation analysis, including such evolving areas as pharmacogenomics and personalized medicine; - proteomics; - metabolomics; - drug discovery based on high-throughput screening and combinatorial chemistry; and - drug development. Automated high-throughput mass spectrometry systems offer significant advantages over other bioanalytical tools, including Edman sequencing and two-dimensional gel separations, in these emerging and rapidly changing markets. Our automated systems allow our customers to generate and evaluate large volumes of accurate, high-quality data on a cost-effective basis. We believe that this enhanced throughput and high-quality data improves our customers' ability to apply bioinformatics to validate lead disease pathways, or targets, understand disease pathways and analyze lead compounds. Our customers also use our products in molecular biology and other basic medical research. In addition, our automated, integrated mass spectrometry technology forms the basis of our substance detection and pathogen identification products used in security and defense markets. Our life science systems are based on four core mass spectrometry technologies. Building on these core technologies, we offer a wide range of systems that address key analytical needs in multiple applications across the life sciences industry. We believe that our products offer the following advantages to our customers: HIGH DEGREE OF AUTOMATION. Our automated sample preparation and measurement technology and sophisticated bioanalytic software allow our customers to process high sample volumes with reduced reliance on highly-trained scientific personnel. INTEGRATED SOLUTIONS. We provide our customers with complete bioanalytical solutions by integrating our mass spectrometry products with sample preparation technology that conditions samples before they are analyzed, or front-end sample preparation, purification and separation methods that clean and separate components of sample mixtures, chemicals and other disposable materials used in conducting assays and bioinformatics software that interprets and analyzes data after it has been generated. ACCURATE RESULTS. Our automated mass spectrometry systems generate large volumes of highly accurate data with the selectivity and sensitivity our customers demand. The high sensitivity of our products enables our customers to pursue miniaturization and analysis of smaller samples. The accuracy of the results reduces the need for repeat analysis to eliminate errors. INCREASED PRODUCTIVITY. Our high-throughput products are designed to allow our life science customers to increase productivity by generating more results in a shorter time period. COST EFFICIENCY. We have achieved performance advances with our products that are designed to result in increased information per analysis at a significantly lower cost per analysis for our customers. 35 Our Strategy Our strategy is to continue to be a leading provider of mass spectrometry and related systems for use in life sciences, as well as in substance detection and pathogen identification. Key elements of our strategy include: PROVIDE A BROAD ARRAY OF TOOLS FOR A WIDE RANGE OF APPLICATIONS. In life sciences, our strategy is to offer a broad range of products that provide integrated solutions including sample preparation, sample analysis and data interpretation for applications in existing and emerging life science markets. Our longer term strategy is to expand our enabling life science tools beyond our current mass spectrometry-based product lines, and to extend our position as a leading provider of biological mass spectrometers to related bioinformation business opportunities. We plan to selectively evaluate new life science markets to which we may apply our core technologies and to continue to develop and market our mass spectrometry systems for substance detection and pathogen identification. DEVELOP NEW PLATFORMS, ENHANCED PRODUCTS AND NEW APPLICATIONS. We plan to continue our substantial investment in internal research and development. As a result of this investment, in the past year we introduced an entirely new technology platform, four next generation mass spectrometers, two new consumable product lines and two bioinformatics software packages. We expect our collaborations with key industrial and academic customers to continue to play a strategic role in our research and development efforts and to assist us in identifying and anticipating opportunities for enhanced products and emerging applications. BUILD ALLIANCES AND PURSUE ACQUISITIONS. We plan to continue to co-develop selected products with strategic partners, especially when these alliances expand our product lines and extend our marketing reach. As an example, our collaboration with Agilent recently resulted in the introduction of two ion trap instruments designed to be installed on top of a laboratory bench. We also intend to pursue strategic acquisitions to extend our technology base. For example, in the past year, we acquired ProteiGene and Viking to expand our biomarker and substance detection technologies, respectively. GENERATE RECURRING REVENUE. Our consumables and product service and support provide an opportunity to generate recurring revenue. We seek to develop additional consumables which enhance the ease of use and productivity of our tools. For example, our reagents and assay kits make sample preparation easier for our customers. We seek to increase recurring revenue from post-warranty service to our growing industrial customer base as well as from training and applications support. DEVELOP AND EXPAND OUR BIOINFORMATION BUSINESS. We intend to expand our presence in the bioinformation field through our wholly-owned subsidiary, ProteiGene. We expect to create proprietary databases which our customers can access by paying subscription fees, to collaborate in drug discovery with customers in return for milestone and product royalty payments, and to offer paid-for technology access partnerships to life science companies. We intend to deploy our automated high-throughput mass spectrometry-based discovery tools in an industrial-biology information production operation. LEVERAGE OUR INTELLECTUAL PROPERTY. We expect to continue to pursue an intellectual property strategy of obtaining extensive patent protection. As of May 26, 2000, we owned or exclusively licensed 79 issued U.S. patents and 27 pending U.S. patent applications as well as 108 issued foreign patents and 75 pending foreign patent applications. We believe that maintaining extensive intellectual property rights allows us to maintain a competitive advantage through protecting access to key technologies. Where appropriate, we may pursue an active licensing program to generate recurring revenue. 36 Our Products MASS SPECTROMETRY We base our life science solutions on four core mass spectrometry technology platforms which include: - matrix-assisted laser desorption ionization, or MALDI, time-of-flight mass spectrometry; - electrospray ionization, or ESI, time-of-flight mass spectrometry; - Fourier transform mass spectrometry; and - ion trap mass spectrometry. Time-of-Flight Mass Spectrometers measure mass based on the time it takes for charged molecules to travel from the ionization source to the detection component. With the ability to analyze as many as 20,000 samples per day, these mass spectrometers currently have the highest sample throughput and can analyze the broadest range of masses of any mass spectrometer for use in the fields of genomics and proteomics. Our time-of-flight mass spectrometry solutions make full use of this potential for increased speed by automating various steps of the analysis. Our time-of-flight solutions combine high sensitivity, accuracy and throughput to generate large volumes of accurate raw data for SNP detection and proteomics. Our life science tools include both MALDI and ESI time-of-flight instruments. MALDI TIME-OF-FLIGHT MASS SPECTROMETERS utilize an ionization process to analyze solid samples using a laser that combines large volume sample throughput with high mass range and significant sensitivity. Our MALDI time-of-flight mass spectrometers are useful for (a) SNP analysis; (b) genotyping; (c) personalized medicine; (d) forensics; (e) proteomics and protein function analysis; (f) drug discovery and development; and (g) fast cell and tissue biomarker detection. We offer three MALDI time-of-flight instruments: REFLEX III-TM-. Our top-of-the-line MALDI time-of-flight instrument offers modular flexibility that allows various configurations in the research laboratory and automated sampling combined with high sensitivity, resolution and accuracy. BIFLEX III-TM-. The BIFLEX III provides high-end performance with high throughput for industrial biology and drug discovery applications. Sequenom uses this system in its industrial genomics MassArray system, and MWG-Biotech is integrating it into a medium-throughput SNP detection system. OMNIFLEX-TM-. Our first MALDI time-of-flight instrument which can be installed on a laboratory bench can be used in general-purpose mass spectrometry laboratories. We introduced this product in March 2000. The OmniFLEX combines sensitivity, resolution and accuracy, for a wide variety of routine and higher-end applications, with a lower price than our other two products described above. We co-market this product with PerkinElmer. These products utilize our proprietary AnchorChip microarrays which prepare samples for analysis. These microarrays employ patented microfluidics technology that improves sensitivity and reduces analysis time per sample by concentrating the sample in a defined location. ESI TIME-OF-FLIGHT MASS SPECTROMETERS utilize an ionization process to analyze liquid samples. This process, which does not destroy the sample, allows for rapid data acquisition and analysis of large biological molecules. ESI time-of-flight mass spectrometers are useful for (a) identification, protein analysis and functional complex analysis in proteomics and protein 37 function; (b) molecular identification in metabolomics and drug metabolite analysis; (c) combinatorial chemistry high-throughput screening, or HTS; and (d) fast liquid chromatography mass spectrometry, or LC/MS, in drug discovery and development. BIOTOF II-TM-. We introduced our BioTOF II in March 2000. Our system offers higher mass resolution and improved mass accuracy than we believe is currently achievable with other commercial ESI time-of-flight systems. FOURIER TRANSFORM MASS SPECTROMETERS utilize high-field superconducting magnets to offer the highest resolution, selectivity and accuracy currently achievable in mass spectrometry. Our systems based on this technology often eliminate the need for time-consuming separation techniques in complex mixture analyses. In addition, our systems can fragment molecular ions to perform exact mass analysis on all fragments to determine molecular structure. Fourier transform mass spectrometers are useful for (a) the study of the structure and function of biomolecules including proteins, DNA and natural products; (b) complex mixture analysis including combinatorial libraries; (c) high-throughput proteomics and metabolomics; and (d) high-throughput drug screening. APEX III-TM-. Our APEX III product line offers a choice of four magnetic field strengths. An increase in field strength improves resolution, selectivity and accuracy. These products allow a wide range of research capabilities while maintaining simplicity of operation. Our recent software and automation developments allow us to offer high-throughput, easy-to-use systems. ION TRAP MASS SPECTROMETERS measure all ions simultaneously which improves sensitivity relative to older quadrupole mass spectrometers. Ion trap mass spectrometers are useful for (a) sequencing and identification based on structural analysis; (b) quantitative liquid chromatography mass spectrometry; (c) identification of combinatorial libraries; and (d) generally enhancing the speed and efficiency of the drug discovery and development process. ESQUIRE3000-TM-. Our esquire3000 ion trap mass spectrometer combines our patented ion trap technology with ion source and liquid chromatography technology from Agilent. It offers performance benefits over other ion trap systems, including software integration with Agilent separation systems, faster scan rates, higher sensitivity, a wider mass range and a simple Windows NT user interface. We also manufacture a related product, the LC/MSD-trap, which is distributed by Agilent. 38 CONSUMABLES We sell consumables for processing, purifying and preparing samples prior to mass spectrometric analyses. Additionally, our systems for substance detection and pathogen identification use consumables for sample collection. Consumables will provide an increasing recurring revenue stream as our installed systems base grows. Our consumables include:
Product Description - ------------------------------------- ------------------------------------------------------------ AnchorChips Microarrays that prepare samples and increase the sensitivity of MALDI analysis, improve automation and minimize reagent consumption GenoPureDS kit Purifies DNA prior to mass spectrometric analysis GenoPureOligo kit Purifies oligonucleotides, or DNA fragments, prior to analysis Silicon wheels Sample collection device for substance detection Quartz tubes Sample processing device for pathogen identification Dryers and filters Air dryers and filters for our ion mobility spectrometers
AUTOMATION AND SEPARATION PRODUCTS, TRAINING AND SERVICES We sell a broad array of related products and services with our initial system sales and during a product's lifetime. For substance detection systems, we have developed training products, including complete system simulator installations. We offer post-warranty service on either a pre-paid or per-call basis and sell repair and replacement parts for our growing installed systems base. Our related products include:
Product Description - ------------------------------------- ------------------------------------------------------------ Reconnaissance Simulator Training system that instructs users how to identify areas contaminated with toxic substances MM-1 Trainer Training product for the operation of our mass spectrometer HP1100 and 3D-CE Products that condition samples for mass spectrometric analysis that are produced by Agilent Technologies, Inc. and sold by us MAP II and II/8 Robots based on technology owned by Gilson Inc. that prepare samples for analysis by our MALDI instruments AutoXecute Automation software that allows our time-of-flight systems to analyze samples automatically
BIOINFORMATICS AND SOFTWARE We have introduced automated control software to integrate separation devices and robotics into our solutions. In addition, we provide bioinformatics software to generate 39 useable information from large volumes of raw data. Finally, we offer intuitive data acquisition and analysis software on a Windows NT platform to make our systems accessible to non-experts. Our related products include:
Product Description - ------------------------------------- ------------------------------------------------------------ HyStar NT Liquid chromatography mass spectrometry software to control Agilent and Waters liquid chromatography systems, Gilson robots, and the operation of an integrated liquid chromatography/nuclear magnetic resonance/mass spectrometry system BioTools For biomolecule identification and sequencing Mascot Fast, automated web-enabled protein identification from protein databases--purchased from Matrix Science AGCTools Interpretation software for DNA mass spectra for SNPs or other genetic variation PolymerTools Interpretation software for mass spectra for synthetic polymer parameters QuantAnalysis Software for quantification of metabolites and substances
SUBSTANCE DETECTION AND PATHOGEN IDENTIFICATION We sell a wide range of portable analytical and bioanalytical detection systems and related products. Our customers use these devices for nuclear, biological pathogen and chemical defense applications, anti-terrorism, law enforcement and process and facilities monitoring. Our substance detection and pathogen identification products use many of the same technology platforms as our life sciences products. For example, we developed our esquire products using the same ion trap technology used in our chemical and biological mass spectrometers. We also provide integrated, comprehensive detection suites which include our multiple detection systems, consumables, training and simulators. Our related products include:
Product Description - ------------------------------------- ------------------------------------------------------------ MM-1 Mobile mass spectrometer for automatic detection of chemical substances CBMS Mobile ion trap mass spectrometers for automated classification of biological pathogens and identification of chemical agents RAID-16 and RAID-S Portable and stationary automated ion mobility detectors for chemical agents detection SPME-RAID Trace detector for explosives EM640 Series Transportable mass spectrometers for emergency response Viking 573 Portable gas chromatography mass spectrometer for law enforcement RAPID II Long-range infrared detector for chemical substance clouds SVG-2 Solid-state radiation detector NIGAS Non-intrusive neutron activation detector for chemical component analysis in closed containers
40 Research and Development PRODUCT AND APPLICATIONS DEVELOPMENT. We commit substantial capital and resources to internal and collaborative research and development in order to provide innovative life science solutions to our customers. The following are a few examples of our recent research and development accomplishments: - After a four-year development effort, we created a new technology platform for orthogonal time-of-flight mass spectrometry. In March 2000, we offered our second generation product derived from this ESI time-of-flight platform, the BioTOF II; - In March 2000, we introduced various next-generation systems based on our existing mass spectrometry technology platforms including the Apex III Series Fourier transform mass spectrometer, the esquire3000 ion trap mass spectrometer, the OmniFlex MALDI time-of-flight mass spectrometer and the MAP II/8 sample preparation robot. These new systems typically had two-year development and engineering cycles. These products have fewer parts, lower production costs and improved price/performance ratios; - We have recently commercialized our AnchorChip microarrays. These products incorporate our patented microfluidics technology which achieves greater sensitivity in MALDI analyses; and - We developed our ion source, known as ZeroAdjust Nanospray-TM-, to solve ease of use and throughput constraints associated with traditional ESI sources at ultra low flow rates. This development increases throughput for proteomic applications. GRANTS. Historically, we have been the recipient of various government grants. We recently completed a five-year Advanced Technology Program grant from the National Institute of Standards and Technology for the development of a Mass Tag DNA Diagnostic Mass Spectrometer. We also currently have six ongoing, multi-year research grants from the German Federal Government for the development of new spectrometers and new applications for analysis. We have generally retained at least non-exclusive rights to any items or improvements we develop under these grants. The U.S. government generally retains the right to use technology developed under grants. The German government requires that we use and market technology developed under grants in order to retain our rights to the technology. Customers We have a broad and diversified global life science customer base that included over 400 customers at December 31, 1999. Our life science customers accounted for approximately 57% of our net revenue in 1999. Our life science customer base includes pharmaceutical, biotechnology, agricultural biotechnology, molecular diagnostics and fine chemical companies, as well as commercial laboratories, university laboratories, medical schools and other not- for-profit research institutes and government laboratories. We sell our substance detection and pathogen identification products and services to defense departments and law enforcement and emergency response professionals. In fiscal 1999, our substance detection and pathogen identification customers represented approximately 43% of our net revenue. During 1998 and 1999, the U.S. Department of Defense Edgewood Chemical Biological Center accounted for 12% and 13%, respectively, of our net revenue and the South Korean government (through its prime contractor Daewoo Heavy Industries) accounted for 18% and 15%, respectively, of our net revenue. Our production contract with the U.S. Department of Defense Edgewood Chemical Biological Center ended on March 31, 2000, and we do not currently anticipate that our net revenue attributable to either of these customers will account for greater than 10% of our net revenue in 2000. 41 Strategic Collaborations We have several key technical collaborations and alliances for the development and distribution of new or existing products. These collaborations include: AGILENT TECHNOLOGIES. In 1996, we commenced a collaboration with Agilent Technologies (formerly Hewlett Packard) to develop and distribute ion trap liquid chromatography mass spectrometry instrumentation. We manufacture and distribute our esquire3000 product, and we jointly manufacture a related ion trap product for distribution by Agilent. Under our agreement with Agilent, neither party can conduct joint ion trap development with any other party and each party can distribute its products without restriction. PERKINELMER INSTRUMENTS. In March 2000, we began our alliance with PerkinElmer to leverage PerkinElmer's global distribution capability to co-market our OmniFlex time-of-flight products. We believe this alliance will advance expansion into new markets, including pharmaceutical drug development, protein, peptide and oligonucleotide product quality control, synthetic polymer manufacturing, and quality testing in the food and beverage industries. SEQUENOM. In 1997, we began an alliance with Sequenom to develop industrial genomics tools for high-throughput SNP analysis. Our BIFLEX III is the basis for a co-labeled system called SpectroScan-TM- which is an important component of the Sequenom MassARRAY system. Each party owns the rights to any developments it makes under this collaboration. MWG-BIOTECH. In 1999, we began our alliance with MWG-Biotech to co-develop an integrated system for SNP analysis, including reagent kits, high-volume sample preparation systems and our BIFLEX III, MALDI time-of-flight system. The National Institute of Standards has selected this system to help establish a standard SNP database laboratory. Each party owns any developments it makes under this collaboration. We have a number of other collaborations, including collaborations with Matrix Sciences and Variagenics for technology enhancements. We recently expanded our collaboration with Variagenics to combine our technologies into an integrated system used by Variagenics and its pharmaceutical partners to identify genetic variances. We own all developments we make under these collaborations. Sales and Marketing MARKETING ACTIVITIES. Our primary marketing theme is "Enabling Life Science Tools Based on Mass Spectrometry." We emphasize our solutions and technology platforms rather than simply the provision of instruments. We pursue an active marketing program through a large number of activities throughout the year. Our key marketing vehicles include trade shows, advertising, our website, newsletters and related activities. DIRECT SALES CHANNELS. During the last three years, we have committed significant resources to upgrade and expand our direct sales force and our distribution channels worldwide. We have direct sales coverage throughout most of the European Union, North America and much of the Pacific Rim. During the past three years, we have hired and trained more than forty professional technical sales staff for direct sales and marketing activities. We have well-equipped application and demonstration facilities and qualified application personnel who assist customers and provide product demonstrations in specific application areas. We maintain our primary demonstration facilities in the United States (Massachusetts and California), Germany (Bremen and Leipzig), the United Kingdom and Japan. Demonstration systems and applications scientists are also available in Australia, France, Italy and Switzerland. 42 INDIRECT SALES CHANNELS. We have various international distributors and independent sales representatives, including in the countries of South Korea, Portugal and Israel and in the regions of Latin America and Eastern Europe. We have adopted a distribution business model where we engage in strategic distribution alliances with other companies to address certain market segments. Our primary distribution alliances are: - We manufacture for Agilent an ion trap mass spectrometer, which they incorporate into their liquid chromatography mass spectrometry systems for distribution into various industrial markets. - We sell high-throughput MALDI time-of-flight mass spectrometers through Sequenom into emerging industrial genomics markets for high-throughput SNP analysis. - We sell BIFLEX MALDI time-of-flight mass spectrometry systems through MWG-Biotech for DNA/RNA applications, including SNP detection. - We recently began co-marketing our OmniFLEX MALDI time-of-flight mass spectrometers with PerkinElmer in a variety of industrial market segments. Sales Cycle and Backlog The typical sales cycle for our life science systems is three to six months for most product lines. However, the cycle can be in excess of a year when a customer must budget the product into an upcoming fiscal year. Substance detection and pathogen identification products can have multi-year sales cycles for large production contracts. We typically ship ordered products within twelve months after receipt of the order. At March 31, 1999 and 2000, we had approximately $31.7 million and $39.1 million, respectively, in orders which had not yet been shipped and accepted by the customer. Manufacturing We manufacture and test the majority of our products in our three principal ISO 9001 registered manufacturing facilities located in the United States and Germany. We have considerable manufacturing flexibility at our various facilities, and each facility can manufacture multiple products at the same time. We maintain in-house key manufacturing know-how, technologies and resources. Our facilities incorporate environmental chambers, CE mark compliance test centers, clean room manufacturing for vacuum components, licensed facilities for handling closed radioactive sources, computer-aided laser cutting and vacuum welding. We maintain multiple suppliers for key components that are not manufactured in-house. Intellectual Property Our intellectual property consists of patents, copyrights, trade secrets, know-how and trademarks. Protection of our intellectual property is a strategic priority for our business. As of June 21, 2000, we owned or exclusively licensed 79 issued U.S. patents and 27 pending U.S. patent applications as well as 108 issued foreign patents and 76 pending foreign patent applications. We have exclusively licensed three patents, which cover time-of-flight mass spectrometry with improved resolution and accuracy, from Indiana University. We believe our owned and licensed patent portfolio provides us with a competitive advantage. This portfolio permits us to maintain access to a number of key technologies. We license our owned patent rights where appropriate. We will enforce our patent rights against infringers if necessary. The patent positions of life science tool companies involve complex legal and factual questions. As a result, we cannot predict the enforceability of our patents with certainty. In 43 addition, we are aware of the existence from time to time of patents in certain countries which, if valid, could impair our ability to manufacture and sell our products in these countries. We also rely upon trade secrets, know-how, trademarks, copyright protection and licensing to develop and maintain our competitive position. We generally require the execution of confidentiality agreements by our employees, consultants and other scientific advisors. These agreements provide that all confidential information made known during the course of a relationship with us will be held in confidence and used only for our benefit. In addition, these agreements provide that we own all inventions generated during the course of the relationship. We are a party to various government contracts. Under some of these government contracts, the government may receive license or similar rights to intellectual property developed under the contract. However, under government contracts we enter we receive no less than non-exclusive rights to any items or technologies we develop. Scientific Advisory Board We have established an international Scientific Advisory Board to advise us on strategic research and development and strategic marketing issues. The members of the Board include: - Jean Futrell, Ph.D., Director of the Department of Energy's Environmental Molecular Sciences Laboratory in Richmond, Washington; former Chairman of Chemistry and Biochemistry at the University of Delaware. - Steven A. Hofstadtler, Ph.D., Director of Drug Discovery Technology, ISIS Pharmaceuticals, Inc., Carlsbad, California. - Joachim R. Wesener, Ph.D., Head of Mass Spectrometry at Bayer Central Research, Leverkusen; Board Member of German Society for Mass Spectrometry. - Professor Helmut Meyer, University of Bochum, Germany; President of Protagen AG, Bochum, Germany. - Professor Peter Derrick, University of Warwick, United Kingdom; Director of University of Warwick's Institute for Mass Spectrometry; Professor and Chairman of the Department of Chemistry. - Gunther Heinrich, Ph.D., CEO and President of EPIDAUROS AG, Bernried, Germany. We provide members of our Scientific Advisory Board a fee of $6,000 per year and options at fair market value for 1,500 shares of our common stock. These options vest in equal annual increments over the course of their three-year tenure. We also reimburse Scientific Advisory Board members for expenses reasonably incurred related to the services they provide us. Competition Our markets are highly competitive, and we expect the competition to increase. Currently, we compete with a variety of companies that offer mass spectrometry-based systems along each of our product lines. These competitors include PE Biosystems, Amersham Pharmacia Biotech, Waters Corporation, ThermoElectron Corporation and Hitachi. We also compete with other companies that provide analytical tools based on other technologies. We believe that the principal competitive factors in our markets are technological applications expertise, product functionality, marketing expertise, distribution capability, proprietary patent portfolios, cost and cost effectiveness. Our existing products and any products that we develop may compete in multiple, highly competitive markets. Many of our potential competitors in these markets have 44 substantially greater financial, technical and marketing resources than we do. They may offer or succeed in developing products that would render our products or those of our strategic partners obsolete or noncompetitive. In addition, many of these competitors have significantly greater experience in the life sciences market. Our ability to compete successfully will depend on our ability to develop proprietary products that reach the market in a timely manner and are technologically superior to and/or are less expensive, or more cost effective, than other currently marketed products. Current competitors or other companies may possess or develop technologies and products that are more effective than ours. Our technologies and products may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors. Employees As of July 12, 2000, we employed over 400 full-time employees, with approximately 80 employees in the United States and more than 320 employees located primarily in Europe. Over 100 of these employees hold doctorates in biology, chemistry or physics. Facilities Our three principal facilities incorporate manufacturing, research and development, application and demonstration, marketing and sales and administration functions. These are: - a leased 25,000 square foot facility in Billerica, Massachusetts; - an owned 50,000 square foot facility in Bremen, Germany; and - an owned 50,000 square foot facility in Leipzig, Germany. We lease additional centers for sales, applications and service support in Fremont, California; Coventry, United Kingdom (Bruker Daltonics Ltd.); Wissembourg, France (Bruker Daltonique S.A.); Stockholm, Sweden (Bruker Daltonics Scandinavia A.B.); Faellanden, Switzerland (Bruker Daltonics GmbH); Tsukuba, Japan (Nihon Bruker Daltonics K.K.); Beijing, People's Republic of China and Taipei, Taiwan. Government Regulation We possess low-level radiation licenses for our facilities in Billerica, Massachusetts and Leipzig, Germany. Some of our products, particularly in the detection area, are subject to enhanced levels of export controls from the United States and Germany. Apart from these two areas, we are not subject to direct governmental regulation other than the laws and regulations generally applicable to businesses in the jurisdictions in which we operate. Legal Proceedings FINNIGAN LITIGATION Since December 31, 1996, we have been involved in patent litigation with a competitor, Finnigan, a subsidiary of ThermoQuest and an indirect subsidiary of Thermo Electron. INTERNATIONAL TRADE COMMISSION INVESTIGATION AND APPEAL. In January 1997, Finnigan filed a complaint with the United States International Trade Commission alleging that our esquire mass spectrometer products which are based on our ion trap technology and a related product sold by our strategic partner, Agilent (formerly a division of Hewlett Packard), infringe Finnigan's U.S. Patent No. 4,540,884, or the `884 patent, and U.S. Patent No. 34,000, or the `000 patent. In February 1998, an administrative law judge initially found that some claims of the `884 patent were not infringed, some claims of the `884 patent were invalid, and that the `000 patent was invalid. In April 1998, the Commission issued a final determination confirming the initial determination. Finnigan appealed the determination for the `884 patent only to the Court of Appeals for the Federal Circuit. In June 1999, this appeals court reversed 45 the finding of invalidity of some claims of the `884 patent, but affirmed that our products did not infringe the `884 patent. The impact of this decision was to leave in effect the order of the Commission denying Finnigan the relief it sought. PATENT INFRINGEMENT ACTION BY FINNIGAN IN UNITED STATES DISTRICT COURT. In December 1996, Finnigan brought suit in the United States District Court for the District of Massachusetts alleging that our esquire series of mass spectrometer products and a related product marketed by Agilent infringe two claims of the `000 patent and one claim of the `884 patent. The '000 patent expires in April 2005, and the '884 patent expires in September 2002. We have filed two motions for summary judgment. One motion seeks a ruling that the claim of the `884 patent is not infringed. The other seeks a ruling that the `000 patent is invalid. Finnigan has opposed these motions for summary judgment and cross-moved for summary judgment that the claim of the `884 patent covers the method of operation of our esquire mass spectrometers and the related Agilent product. No hearing on these motions has been scheduled as of June 21, 2000. OUR ANTITRUST ACTION AGAINST FINNIGAN AND OTHERS IN UNITED STATES DISTRICT COURT. In May 1997, we filed a complaint in the United States District Court for the District of Massachusetts alleging antitrust violations against Finnigan, ThermoQuest and Thermo Instruments, another subsidiary of ThermoElectron, based on Finnigan's actions in connection with several of its patents. In January 2000, Finnigan filed a motion to dismiss. We have opposed this motion. A hearing was held in May 2000 on the motion to dismiss. The court has not yet rendered a ruling on this motion. PATENT INFRINGEMENT ACTION BY FINNIGAN IN THE DISTRICT COURT IN DUSSELDORF, GERMANY. In March 1999, Finnigan brought suit in a District Court in Dusseldorf, Germany alleging that our esquire series of mass spectrometer products and the related Agilent product infringe three Finnigan European patents. The court retained the claims alleging infringement in Germany but, on jurisdictional grounds, transferred the claims alleging infringement in the United Kingdom, France, Sweden and Switzerland to the District Court in Hamburg. In January and February 2000, the Dusseldorf court held hearings on the infringement actions. In March 2000, the court issued rulings that distribution and delivery of our esquire series of products and of the related Agilent product for use in Germany infringe two Finnigan patents, and we were enjoined from selling our ion trap devices in Germany. The court ordered us and Agilent to pay damages in an amount to be determined and stayed its consideration of the third patent pending the court's opportunity to hear witness testimony with respect to our claim regarding this patent. On May 8, 2000, we filed an appeal of this ruling. In June 2000, the German court issued a decision to temporarily suspend enforcement of the March 2000 ruling, pending a decision on our motion to suspend enforcement pending our appeal. In accordance with the court's direction, we have posted a DM6 million bond and can now sell and deliver our ion trap devices in Germany until August 15, 2000. If the court does not grant our motion to suspend enforcement until our appeal is heard, we will, after August 15, 2000, again be enjoined from selling our ion trap devices in Germany. This restriction will continue until the Finnigan patents expire, in 2003 for one of the patents and in 2007 for the other, unless the patents are nullified, the infringement rulings are reversed on appeal, or we design around the Finnigan patents. The damages for our past sales of ion trap products in Germany to be determined by the Dusseldorf court are roughly estimated at $240,000, and the attorneys' fees and costs that we may be required to pay are roughly estimated at $105,000. The damages and costs that the Dusseldorf Court actually assesses may be more or less than the amounts estimated here. PATENT INFRINGEMENT ACTION BY FINNIGAN IN THE DISTRICT COURT IN HAMBURG, GERMANY. As noted above, the Dusseldorf Court transferred to the District Court in Hamburg the claims 46 alleging infringement in the United Kingdom, France, Sweden and Switzerland. In these proceedings the substantive patent law of each country will apply to the determination of the claims and defenses relating to infringement in each country, respectively. A hearing date of September 13, 2000 has been set in the Hamburg Court regarding these claims. NULLITY ACTIONS AGAINST THE FINNIGAN PATENTS IN GERMANY. The same three Finnigan patents asserted in the Dusseldorf actions are also the subject of nullity actions we filed in the German Patent Court in Munich. In these actions the Munich Court is being asked to determine the validity of the three Finnigan patents as they apply in Germany. The Munich Court will not determine the validity of the patents as the patents apply in France or the United Kingdom. Hearings in the Munich nullity actions are anticipated to occur in July 2000, with decisions expected to follow some months later. If we prevail in the nullity actions, the rulings of the Dusseldorf Court will be withdrawn. OUR PATENT INFRINGEMENT ACTION AGAINST FINNIGAN IN THE DISTRICT COURT IN DUSSELDORF, GERMANY. In late 1999, we filed a complaint in the Federal Court in Dusseldorf alleging that Finnigan's ion trap products infringe two of our European patents. Hearings are scheduled for September 2000. One of our two patents in this suit is the subject of a nullity action filed by Finnigan in the German Patent Court in Munich. A hearing date has not yet been set for the nullity action. While we believe that our ion trap mass spectrometry products, including our esquire series and the product sold by Agilent, should ultimately be held not to infringe any claim of any valid Finnigan patent, we cannot predict the outcome of the Finnigan litigation. In 1996, 1997, 1998 and 1999, our sales of ion trap mass spectrometry products in Germany totaled $702,630, $727,276, $810,767 and $2.0 million, respectively. In 1996, 1997, 1998 and 1999, our sales of these products in other European countries totaled $448,561, $767,956, $1.8 million and $2.6 million, respectively. In 1996, 1997, 1998 and 1999, our sales of ion trap mass spectrometry products in the U.S. totaled $1.6 million, $1.5 million, $2.1 million and $3.6 million, respectively. In 1996, 1997, 1998 and 1999, total worldwide sales of our ion trap mass spectrometry products totaled $2.7 million, $3.2 million, $5.0 million and $8.2 million, respectively. Also, under our agreement with Agilent, we may be required to indemnify Agilent from any damages and expenses resulting from the Finnigan litigation. See "Risk Factors--Our success depends on our ability to operate without infringing or misappropriating the proprietary rights of others; and we are currently involved in several legal actions concerning technology for ion trap spectrometry with a competitor and various affiliates of the competitor, and a German court has decided that we have infringed two European patents of the competitor." GENERAL We may, from time to time, be involved in other legal proceedings in the ordinary course of business. On May 19, 2000, we received a letter from counsel for the University of Northern Iowa Research Foundation of Cedar Falls, Iowa alleging that certain coaxial mass spectrometer technology used in our BioTOF II mass spectrometers infringes claims of a patent held by the University. We believe that this allegation is without merit. We are not currently involved in any other pending legal proceedings that, either individually or taken as a whole, could materially harm our business, prospects, results of operations or financial condition. 47 MANAGEMENT Directors and Executive Officers Our directors and executive officers and their respective ages and positions as of July 12, 2000 are as follows:
Name Age Position - ---- -------- ------------------------------------------ Frank H. Laukien, Ph.D. (1)............... 40 Chairman, President and Chief Executive Officer John J. Hulburt, C.P.A.................... 33 Corporate Controller and Treasurer Dieter Koch, Ph.D......................... 60 Managing Director of Bruker Daltonik GmbH*; Managing Director of Bruker Saxonia Analytik GmbH* and Director of Bruker Daltonics Inc. Jochen Franzen, Ph.D. .................... 69 Managing Director, Bruker Daltonik GmbH* Hans-Jakob Baum........................... 48 Vice General Manager of Bruker Daltonik GmbH*; Managing Director of Bruker Saxonia Analytik GmbH* John Wronka, Ph.D. ....................... 45 Vice President Gary Kruppa, Ph.D. ....................... 39 Vice President M. Christopher Canavan, Jr. (2)........... 61 Director Collin J. D'Silva (2)..................... 43 Director William A. Linton (2)(3).................. 52 Director Richard M. Stein (1)(3)................... 49 Director and Secretary Bernhard Wangler (1)...................... 49 Director
- ------------ (1) Member of the executive committee. (2) Member of the audit committee. (3) Member of the compensation committee. * Bruker Daltonik GmbH is a subsidiary of Bruker Daltonics Inc. and Bruker Saxonia Analytik GmbH is a subsidiary of Bruker Daltonik GmbH. FRANK H. LAUKIEN, PH.D. Dr. Laukien has been the Chairman, President and Chief Executive Officer of Bruker Daltonics since the inception of our predecessor company in February 1991. He has been a Managing Director of Bruker Daltonik GmbH, a wholly-owned subsidiary of Bruker Daltonics, since August 1997. He has also served as Chairman of Bruker AXS Inc., an affiliate of Bruker Daltonics, since October 1997 and as President of Bruker Instruments, Inc., an affiliate of Bruker Daltonics, since June 1997. He is a Professor of Mass Spectrometry at the University of Amsterdam. Dr. Laukien holds a B.S. degree from the Massachusetts Institute of Technology, as well as a M.A. and a Ph.D. in chemical physics from Harvard University. JOHN J. HULBURT, C.P.A. Mr. Hulburt has been our Corporate Controller since April 2000 and our Treasurer since June 2000. From December 1996 until April 2000, he was a manager at Ernst & Young LLP. Prior to that time, Mr. Hulburt was a senior accountant at Arthur Andersen LLP. Mr. Hulburt is a Certified Public Accountant. He holds a B.S. in accounting from Merrimack College. 48 DIETER KOCH, PH.D. Dr. Koch has been a Director of Bruker Daltonics since August 1997. He is a Managing Director of Bruker Daltonik GmbH, now a wholly-owned subsidiary of Bruker Daltonics, since June 1980. Dr. Koch has also been the Managing Director of Bruker Saxonia Analytik GmbH, now a subsidiary of Bruker Daltonik, since founding it in 1990. He is responsible for our substance detection and pathogen identification product lines. He holds M.S. and Ph.D. degrees in chemistry from the University of Cologne. JOCHEN FRANZEN, PH.D. Dr. Franzen is a Managing Director of Bruker Daltonik GmbH and has held this position since June 1980. He is responsible for intellectual property and research activities at Bruker Daltonik GmbH. Prior to 1980 he served as Managing Director of Franzen Analysentechnik GmbH, a mass spectrometry manufacturing company. Dr. Franzen served as President of the German Society for Mass Spectrometry during 1997 and 1998. He holds an M.S. degree from the University of Mainz and a Ph.D. in physics from the Max-Planck Institute. HANS-JAKOB BAUM. Mr. Baum has been a Vice General Manager of Bruker Daltonik GmbH since August 1999. He is responsible for sales and product applications. Mr. Baum joined Bruker Daltonik GmbH in June 1988 as a Product Manager. From January 1991 until August 1997, he was Sales Director of Bruker Daltonik. Before joining us, Mr. Baum was a Chemical Defense Officer in the German Army. JOHN WRONKA, PH.D. Dr. Wronka has been our Vice President since June 1996. He is responsible for the general management of operations in the U.S. Dr. Wronka joined Bruker Instruments, an affiliate of Bruker Daltonics, in May 1989 as Mass Spectrometry Product Manager. He joined Bruker Daltonics as the Mass Spectrometry Division Manager in July 1995 and served as a Division Manager until June 1996. Prior to joining Bruker Instruments, Dr. Wronka was a Professor and Instrumentation Manager for Northeastern University. He holds a B.S. from St. Joseph's College and a Ph.D. in chemistry from the University of Delaware. GARY KRUPPA, PH.D. Dr. Kruppa has served as our Vice President of the Fourier Transform Mass Spectrometry Division since October 1998. He joined Bruker Instruments, an affiliate of Bruker Daltonics, in November 1990 as an applications scientist. He joined Bruker Daltonics in December 1994, and from December 1994 until September 1998 he was a Product Manager. Before joining Bruker Instruments, he was a research scientist at Ciba-Geigy, now Novartis, a pharmaceutical and drug discovery company. Dr. Kruppa holds a B.S. degree from the University of Delaware and a Ph.D. in chemical physics from the California Institute of Technology. M. CHRISTOPHER CANAVAN, JR. Mr Canavan joined our board of directors in June 2000. Mr. Canavan joined the Boston office of Coopers & Lybrand in June 1961 and became a partner in the firm in June 1972. Effective July 1, 1998, Coopers & Lybrand merged with Price Waterhouse and Company to form PricewaterhouseCoopers LLP. Mr. Canavan continued as a partner with PricewaterhouseCoopers LLP until his retirement in June 1999. Mr. Canavan holds a Bachelor of Science in Business Administration from Boston College. COLLIN J. D'SILVA. Mr. D'Silva joined our board of directors in February 2000. Mr. D'Silva is the President and Chief Executive Officer of Transgenomic, Inc., a life science company involved in SNP discovery, in San Jose, California. Mr. D'Silva has held these positions since 1997. From 1988 to 1997, Mr. D'Silva was President and Chief Executive Officer of CETAC Technologies, Inc, a company designing instrumentation for elemental analysis. Mr. D'Silva holds a B.S. degree and a Masters in Industrial Engineering from Iowa State University as well as a Masters in Business Administration from Creighton University. 49 WILLIAM A. LINTON. Mr. Linton joined our board of directors in February 2000. Mr. Linton is the Chairman and Chief Executive Officer of Promega Corporation, a DNA consumables company, and has held these positions since 1978. Mr. Linton received a B.S. degree from University of California, Berkeley in 1970. RICHARD M. STEIN. Mr. Stein joined our board of directors in February 2000 and is our Secretary. Mr. Stein has been an attorney with Hutchins, Wheeler & Dittmar, a Boston-based law firm, since November 1992 and became a stockholder of the firm on January 1, 1993. He served as the managing stockholder of Hutchins, Wheeler & Dittmar from January 1995 until December 1997. Mr. Stein holds a B.A. degree from Brandeis University and a J.D. from Boston College Law School. BERNHARD WANGLER. Mr. Wangler joined our board of directors in February 2000. Mr. Wangler has been a German tax consultant and principal partner with Kanzlei Wangler in Karlsruhe, Germany since July 1983. He has been a Certified Public Accountant in Germany since 1984. Mr. Wangler holds a Bachelor of Economics and Commerce degree and a Masters degree in Business Administration from the University of Mannheim, Germany. Board Committees The compensation committee of the board of directors of Bruker Daltonics is comprised of Messrs. Stein and Linton. The compensation committee reviews and evaluates the compensation and benefits of all of the officers of Bruker Daltonics, reviews general policy matters relating to compensation and employee benefits and makes recommendations concerning these matters to the board of directors. The compensation committee also administers Bruker Daltonics' stock option plan. See "--Benefit Plans." The audit committee of the board of directors of Bruker Daltonics is comprised of Messrs. Canavan, D'Silva and Linton. The audit committee reviews, with Bruker Daltonics independent auditors, the scope and timing of the auditors' services, the auditors' report on Bruker Daltonics' financial statements following completion of the audit, and Bruker Daltonics' internal accounting and financial control policies and procedures. In addition, the audit committee makes annual recommendations to the board of directors for the appointment of independent auditors for the ensuing year. The executive committee of the board of directors of Bruker Daltonics is comprised of Messrs. Laukien, Stein and Wangler. The executive committee facilitates the day-to-day management of Bruker Daltonics. The executive committee handles all matters deemed appropriate from time to time by the Chairman, other than matters including the approval of any asset sale, merger, sale of securities or financing in excess of $5 million. Election of Directors and Officers Our board of directors consists of seven members. Our certificate of incorporation provides for a classified board of directors divided into three classes. The Class I directors' term of office will expire at the annual meeting of stockholders to be held in 2001, the Class II directors' term of office will expire at the annual meeting of stockholders to be held in 2002 and Class III directors' term of office will expire at the annual meeting of stockholders to be held in 2003. Messrs. Laukien and Koch will initially serve as Class I directors; Messrs. Stein, Wangler and D'Silva will initially serve as Class II directors; and Messrs. Canavan and Linton will initially serve as Class III directors. At each annual meeting of stockholders, beginning with the 2001 annual meeting, the successors to directors whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting following election and until their successors have been duly elected and qualified, or until their earlier resignation or removal, if any. To the extent there is an increase or reduction in 50 the number of directors, increase or decrease in directorships resulting therefrom will be distributed among the classes so that, as nearly as possible, each class will consist of an equal number of directors. Two directors will be independent, as required by the rules of the Nasdaq National Market. Executive officers are elected by, and serve at the discretion of, the board. Former Officer In June 2000, we accepted the resignation of our former Treasurer and, since December 1999, our Chief Financial Officer, following the disclosure that he had made certain unauthorized transfers of Company funds (approximately $60,000 over the period 1996 through 1998), as well as greater amounts of additional funds of certain of our affiliated companies, to a company controlled by him. The former officer has subsequently repaid all such Company funds. Although no longer employed by us, he continues to serve as an officer and employee of Bruker Instruments, an affiliated company. Compensation of Directors Our current non-employee directors receive $10,000 per calendar year and an additional $5,000 per calendar year for each committee on which they serve. They are also reimbursed for the expenses they incur in attending meetings of the board or board committees. Although our directors are not entitled to any specified number of options as a result of their positions as directors, we have granted in the past, and intend to grant in the future, non-qualified stock options to our non-employee directors. Compensation Committee Interlocks and Insider Participation None of our directors serves as a member of the board of directors or compensation committee of any other company that has one or more executive officers serving as a member of our board of directors or compensation committee. Executive Compensation The following table sets forth the compensation earned by our Chief Executive Officer and each of our other most highly compensated executive officers (collectively, the "Named Executive Officers") during the year ending December 31, 1997, 1998 and 1999: Summary Compensation Table
Name and Principal Position Year Salary Bonus(1) - --------------------------- -------- --------- ---------- Frank H. Laukien (2)........................................ 1999 $ 50,000 $153,530 Chairman, President and 1998 0 197,364 Chief Executive Officer 1997 0 117,500 Dieter Koch (3)............................................. 1999 117,104 36,493 Managing Director, Bruker 1998 128,483 17,056 Daltonik GmbH; Managing 1997 139,653 -- Director, Bruker Saxonia Analytik GmbH Jochen Franzen (3).......................................... 1999 106,755 -- Managing Director, Bruker 1998 109,154 -- Daltonik GmbH 1997 107,914 --
51
Name and Principal Position Year Salary Bonus(1) - --------------------------- -------- --------- ---------- John Wronka................................................. 1999 70,885 123,005 Vice President 1998 68,488 75,886 1997 65,854 76,941 Hans-Jakob Baum (3)......................................... 1999 93,683 32,680 Vice General Manager of 1998 96,078 28,426 Bruker Daltonik GmbH 1997 93,487 20,198
- ------------ (1) Includes commissions paid. (2) Frank H. Laukien's normalized salary for fiscal 2000 is $120,000. (3) Amounts paid in Deutsch Mark and converted to United States Dollars based on the average conversion rate for the respective year. Benefit Plans 2000 STOCK OPTION PLAN The 2000 Stock Option Plan, or the 2000 Plan, provides for the granting of incentive stock options to our employees and non-qualified options, as defined in Section 422 of the Internal Revenue Code, to our employees, directors, advisors and consultants. The 2000 Plan was adopted and approved by our directors and stockholders in February 2000. The 2000 Plan may be administered by our board of directors or by our compensation committee. Either of the board or the compensation committee has the authority to take the following actions: (a) interpret and apply the 2000 Plan; and (b) determine the eligibility of an individual to participate in the 2000 Plan. Stock options are granted under stock option agreements which contain the vesting schedules of the stock options. Non-qualified stock options are granted with an exercise price of at least 50% of fair market value of the common stock on the date of grant, and incentive stock options are granted with an exercise price of at least 100% of the stock's fair market value on the date of grant. No incentive stock options may be granted to an employee who, at the time of the grant, owns more than 10% of the voting power or greater than 10% of a class of Bruker Daltonics' outstanding stock, unless the purchase price of the stock is not less than 110% of the stock's fair market value on the date of the grant and the option, by its terms, shall not be exercisable more than five years from the date it is granted. Vested options may be exercised in full at one time or in part from time to time in amounts of 50 shares or more. The payment of the exercise price may be made as determined by the board or committee, and set forth in the option agreement, by delivery of cash or a check. Bruker Daltonics may delay the issuance of shares covered by the exercise of an option until the shares for which the option has been exercised have been registered or qualified under the applicable federal or state securities laws, or counsel for Bruker Daltonics has opined that the shares are exempt from the registration requirements of applicable federal or state securities laws. The term of any option granted under the 2000 Plan is limited to either five or ten years, depending on the nature of the option holder. Upon the termination of an option holder's employment with Bruker Daltonics, his or her options will terminate no more than 90 days after that option holder leaves the employ of Bruker Daltonics. Options granted under the 2000 Plan are not transferrable other than by will or the laws of descent and distribution. The 2000 Plan may be amended by our board of directors; provided, however, that the board may not increase the number of shares reserved under the 2000 Plan without the consent of our stockholders. 52 The compensation committee may grant up to 20% of the shares reserved for option grants as restricted stock subject to repurchase rights rather than as stock options. The number of shares reserved for issuance upon the exercise of options under the 2000 Plan is 2,120,000. As of July 12, 2000, 762,750 options were outstanding under the 2000 Plan. Options granted vest over a term established by the board of directors at the date of grant. None of these options begin to vest prior to March 1, 2001. The outstanding options have an exercise price ranging from $5.27 to $6.33 per share. On February 29, 2000 we granted the following officers incentive stock options to purchase the number of shares set forth below: Frank H. Laukien............................................ 25,000 Dieter Koch................................................. 25,000 Jochen Franzen.............................................. 25,000 John Wronka................................................. 12,500 Hans-Jakob Baum............................................. 12,500
All of the above options have an exercise price of $5.27 per share except those granted to Frank Laukien which have an exercise price of $5.80 per share. None of these options are currently exercisable. 401(K) PLAN We participate with our affiliates in a tax qualified employee savings plan which covers all of our employees in the United States who are at least 21 years old and have completed six months of eligible service. Eligible employees may defer up to 15% of their earnings as a salary deferral contribution to the plan, subject to the Internal Revenue Service's annual contribution and compensation limits. We currently match employee contributions dollar for dollar up to 3% of eligible compensation, which includes 100% of salary and 50% of commissions, after the second full plan year of the participant's employment. Our 401(k) plan is intended to qualify under Section 401 of the Internal Revenue Code of 1986, as amended, so that contributions by employees and by us to our 401(k) plan, and income earned on plan contributions are not taxable to employees until withdrawn or distributed from the plan, and so that contributions, including employee salary deferral contributions, will be deductible by us when made. Our 401(k) also provides for discretionary profit sharing. We may contribute up to 3% of a participant's eligible compensation to profit sharing. In any given year that we conduct profit sharing, participants are eligible for 1% after three years of service, 2% after four years of service and 3% after five or more years of service. Limitation of Liability; Indemnification of Directors and Officers As permitted by Delaware General Corporation Law, we have included in our certificate of incorporation a provision to eliminate the personal liability of our directors for monetary damages for breach or alleged breach of their fiduciary duties as directors, other than breaches of their duty of loyalty, actions not in good faith or which involve intentional misconduct, or transactions from which they derive improper personal benefit. In addition, our by-laws provide that we are required to indemnify our officers and directors under certain circumstances, including those circumstances in which indemnification would otherwise be discretionary, and we are required to advance expenses to our officers and directors as incurred in connection with proceedings against them for which they may be indemnified. At present, we are not aware of any pending or threatened litigation or proceeding involving our directors, officers, employees or agents in which indemnification would be required or permitted, except that Jochen Franzen has been named as a defendant in the Finnigan litigation. We believe that our certificate of incorporation and by-law provisions are necessary to attract and retain qualified persons as directors and officers. 53 PRINCIPAL STOCKHOLDERS The following table sets forth information regarding the beneficial ownership of our common stock as of July 12, 2000, and as adjusted to reflect the sale of the common stock offered hereby by: - each person (or group of affiliated persons) who is known by us to own beneficially more than 5% of the outstanding shares of our common stock; - each of our directors who own our common stock; - our executive officers listed in the "Summary Compensation Table" who own our common stock; and - all directors and executive officers as a group. Except as subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Beneficial ownership and percentage of ownership are calculated in accordance with the rules of the Securities and Exchange Commission, or SEC.
Percentage of Shares Outstanding ---------------------- Number of Shares Before the After the Name and Address of Beneficial Owner Beneficially Owned Offering Offering - ------------------------------------ ------------------ ---------- --------- Named Executive Officers and Directors Frank H. Laukien....................................... 9,100,000 20.0% 17.2% c/o Bruker Daltonics 15 Fortune Drive Billerica, MA 01821 All Directors and Executive Officers as a Group(1)..... 9,100,000 20.0% 17.2% (12 persons, including the above) 5% Stockholders Dirk D. Laukien........................................ 9,100,000 20.0% 17.2% 2634 Crescent Ridge Drive The Woodlands, TX 77381 Isolde Laukien......................................... 9,100,000 20.0% 17.2% 8 Brigham Road Lexington, MA 02713 Joerg C. Laukien....................................... 9,100,000 20.0% 17.2% Uhlandstrasse IO D-76275 Ettlingen-Bruchhausen Germany Marc M. Laukien........................................ 9,100,000 20.0% 17.2% 8 Crest View Road Bedford, MA 01730
- ---------- (1) As of July 12, 2000, John J. Hulburt, Dieter Koch, Ph.D., Jochen Franzen, Ph.D., Hans-Jakob Baum, John Wronka, Ph.D., Gary Kruppa, Ph.D., M. Christopher Canavan, Jr., Collin J. D'Silva, William A. Linton, Richard M. Stein and Bernard Wangler were not beneficial owners of our common stock. 54 RELATED TRANSACTIONS Affiliation and Shareholders Bruker Daltonics is affiliated with Bruker Physik AG, Bruker Optics, Inc., Bruker AXS Inc., Rhena Invest AG, Techneon AG, SBI Holding AG and their respective subsidiaries, collectively referred to as the Bruker affiliated companies, through common control at the shareholder level, as our current stockholders also own these entities. Our five stockholders are Frank H. Laukien, Dirk D. Laukien, Isolde Laukien, Joerg C. Laukien and Marc M. Laukien. Isolde Laukien is the mother of Dirk and Marc Laukien. Joerg, Frank, Dirk and Marc are brothers or half-brothers. Frank H. Laukien, Ph.D., the Chairman, President and Chief Executive Officer of Bruker Daltonics is also Chairman of the board of directors of Bruker AXS and director and President of Bruker Instruments, a Bruker affiliated company. Dr. Laukien is also a director of Bruker Canada Ltd., Bruker Netherlands B.V. and Bruker Belgium S.A., all of which are Bruker affiliated companies. Additionally, Dr. Laukien beneficially owns directly or indirectly more than 10% of the stock of each of the Bruker affiliated companies. Until March 31, 2000, he was also the Chief Executive Officer of Bruker AXS. Dieter Koch, a director of Bruker Daltonics, is an officer in Bruker Daltonik GmbH, a subsidiary of Bruker Daltonics, and Bruker Saxonia Analytik GmbH, a subsidiary of Bruker Daltonik. Additionally, he owns 2% of Bruker Saxonia Analytik GmbH. Richard M. Stein, a director of Bruker Daltonics, is a stockholder of Hutchins, Wheeler & Dittmar, a law firm which has been retained by Bruker Daltonics for over five years. Bernard Wangler, a director of Bruker Daltonics, provided tax consulting services to our German affiliates for over five years. During fiscal 1997, 1998 and 1999, our affiliates paid his firm approximately $36,900, $142,800 and $170,000, respectively, in exchange for these services. Sharing Agreement Bruker Daltonics entered into a sharing agreement, dated as of February 28, 2000 with Bruker Physik AG, Techneon AG, SBI Holding AG, Rhena Invest AG, Bruker Spectrospin SA, Bruker AXS Inc., Bruker Analytik GmbH, Bruker Electronik GmbH, Bruker Instruments, Inc., Bruker AG, Bruker SA, Bruker Optics, Inc. and Bruker Medical AG, all Bruker affiliated companies. The Sharing Agreement provides for the sharing of specified intellectual property rights, services, facilities and other related items among the parties to the Agreement. The following description of the Sharing Agreement is a summary and is qualified in its entirety by the provisions of the Sharing Agreement, a copy of which has been filed as an exhibit to the registration statement of which this prospectus is a part. NAME Pursuant to the terms of the Sharing Agreement, Bruker Analytik and Bruker Physik have granted to the other parties to the Sharing Agreement a perpetual, irrevocable, non-exclusive, royalty-free, non-transferable right and license to use the name "Bruker" in connection with the conduct and operation of their respective businesses, provided that the parties do not materially interfere with any other party's use of the name, do not take any action which would materially detract from the goodwill associated with the name and do not take any action which would cause a lien to be placed on the name or the parties' license rights. This license automatically becomes null and void with respect to a party if that party 55 files, or has filed against it, a petition in bankruptcy, fails to comply with the relevant terms of the Sharing Agreement, suffers a major loss of its reputation in its industry or the marketplace or undergoes a change of control. However, once a party to the Sharing Agreement becomes a public company and issues stock in excess of $25.0 million to the public, it will not lose its license to the name Bruker in a subsequent change of control. INTELLECTUAL PROPERTY The parties to the Sharing Agreement also generally share technology and other intellectual property rights, as they existed on or prior to February 28, 2000, subject to the terms of the Sharing Agreement. In addition, under the Sharing Agreement each party, including us, has agreed to negotiate with any other party who wishes to obtain an agreement permitting such party to make a broader use of the first party's intellectual property that was in effect on or prior to February 28, 2000. However, no party has any obligation to enter into these agreements. Bruker Daltonics has a written agreement in place with Bruker Optik defining the use, royalties and terms and conditions of the use of various technology and related intellectual property. DISTRIBUTION In various countries, including Australia, Belgium, Canada, India, Italy, Netherlands, Mexico, Singapore, Spain and Thailand, Bruker Daltonics shares in the worldwide distribution network of Bruker affiliated companies. In 2000, we believe that less than 10% of our life sciences systems sales will be booked through affiliated international Bruker sales offices. The Sharing Agreement provides for the use of common distribution channels by the parties to the agreement. The terms and conditions of sale and the transfer pricing for any shared distribution will be on an arm's length basis as would be utilized in typical transaction with a person or entity not a party to the agreement. The Sharing Agreement also states that no common sales channel may have any exclusivity in any country or geographic area. SERVICES We also share various general and administrative expenses for items such as umbrella insurance policies, retirement plans, accounting services and leases, with various affiliates. These services are charged among Bruker Daltonics and, the Bruker affiliated entities at arm's length conditions and pricing, according to individual Sub-Sharing Agreements. In 1997, Bruker Instruments provided personnel, administrative and other services to us at a cost of $370,391, the estimated fair market value of these services. In 1998 various Bruker affiliated companies provided personnel, administrative and other services to us at a cost of approximately $227,000, the estimated fair market value of these services. In 1999, various Bruker affiliated companies and their subsidiaries provided personnel, administrative and other services, and subleased space to us at a cost of approximately $437,000, the estimated fair market value of these services. We sublease our facility in Billerica, Massachusetts from Bruker Instruments. We paid rent of $125,123, $131,962 and $221,221 for increasing square footage at $8.85 per square foot, on a triple net basis for our sublease of this facility in 1997, 1998 and 1999, respectively. Bruker Instruments leases this facility from Umbrina Realty Trust. Frank H. Laukien, Dirk Laukien and Marc Laukien each own one third of the beneficial interest of Umbrina Realty Trust. 56 PURCHASES AND SALES We purchase subunits or components, including some components used in our substance detection and pathogen identification products, miscellaneous electronics boards used in Fourier transform mass spectrometers, sheet metal cabinets and some of the superconducting magnets used for Fourier transform mass spectrometers, from various Bruker affiliated companies, including Bruker Electronik GmbH, Bruker Optik GmbH, Bruker AG, Bruker Analytik GmbH and Bruker SA, at arm's length commercial conditions and pricing. In 1997, 1998 and 1999, we purchased components from our affiliates for $3,019,177, $3,913,662 and $3,208,572, respectively. Under the Sharing Agreement, our affiliates who supply these subunits or components have agreed to continue to do so for at least seven years and to provide spare parts for at least 12 years, at commercially reasonable arm's length conditions and pricing. However, a significant portion of these purchases may not be recurring due to the discontinued operations of our analytical infrared sales group. In 1997, 1998 and 1999, purchases from Bruker affiliated companies for the discontinued operations were $986,314, $1,712,242 and $1,645,089, respectively. We expect purchases from Bruker affiliated companies to be less than 5% of revenues. We supply individual licenses to our HyStar software package to Bruker affiliated companies for resale as part of its liquid chromatography/nuclear magnetic resonance product offerings at commercially reasonable arm's length conditions and pricing. As part of the Sharing Agreement, we guarantee a continued supply of this software package (or its successor) for at least seven years. In 1997, 1998 and 1999 we sold to our affiliated distributors products for resale in the amounts of $14,256,695, $9,804,838 and $10,307,416, respectively. Since we incorporated our own direct sales subsidiaries in 1999, we believe that less than 10% of our future sales will be through our affiliated distributors. Other Transactions In December 1999, we acquired 50,000 shares, or 49% of the stock, of ProteiGene from Frank H. Laukien. We paid $50,000 for this stock, the estimated fair market value and also the amount originally paid by Dr. Laukien for this stock. We completed the sale of our analytical infrared sales group in March 2000 to Bruker Optik GmbH, our affiliate. The purchase price for this sale was $254,425, the net book value of the purchased assets and assumed liabilities. Indebtedness As of December 31, 1997, Bruker Daltonik GmbH had two demand loans outstanding aggregating $8,262,617 from Techneon AG, an affiliated company. The loans, which were secured by mortgages on our German real estate, accrued interest at 5.3% and 7.5%. As of December 31, 1997, Bruker Daltonics had a $50,000 demand loan outstanding from Frank H. Laukien. The loan, which was unsecured, accrues interest at prime (8.5% at December 31, 1997). As of December 31, 1999, we had no indebtedness to any of our affiliates. 57 DESCRIPTION OF CAPITAL STOCK Upon completion of the offering, our authorized capital stock will consist of 100,000,000 shares of common stock, $0.01 par value per share, of which 53,000,000 shares will be outstanding (54,125,000 shares if the Underwriters' over-allotment is exercised in full), and 5,000,000 shares of preferred stock, $0.01 par value per share, none of which will be outstanding at the time of this offering. The following description of our capital stock and certain provisions of our restated certificate of incorporation and by-laws is a summary of the material provisions of our capital stock, and you should also refer to the provisions of the certificate of incorporation and by-laws, copies of which have been filed as exhibits to the registration statement of which this prospectus is a part. Common Stock Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders, including the election of directors. Accordingly, holders of a majority of the shares of common stock entitled to vote in any election of directors may elect all of the directors standing for election if they choose to do so. The certificate of incorporation does not provide for cumulative voting for the election of directors. Holders of our common stock are entitled to receive ratably any dividends that may be declared by the board of directors out of funds legally available and are entitled to receive, pro rata, all assets of Bruker Daltonics available for distribution to such holders upon liquidation. Holders of our common stock have no preemptive, subscription or redemption rights. Preferred Stock We are authorized to issue "blank check" preferred stock, which may be issued from time to time in one or more series upon authorization by our board of directors. The board of directors, without further approval of the stockholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights and terms, liquidation preferences and any other rights, preferences, privileges and restrictions applicable to each series of the preferred stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of our common stock and, under certain circumstances, make it more difficult for a third party to gain control of Bruker Daltonics, discourage bids for our common stock at a premium or otherwise adversely affect the market price of our common stock. Various Certificate of Incorporation, By-law and Statutory Anti-Takeover Provisions Affecting Stockholders CLASSIFIED BOARD. Our board of directors is divided into three classes. Initially Class I will serve until the annual meeting of stockholders in 2001, Class II will serve until the annual meeting of stockholders in 2002 and Class III will serve until the annual meeting of stockholders in 2003. Following this initial transition period, each class will serve for three years, with one class being elected each year. Removal of a member of the board of directors with or without cause requires a majority vote of the board of directors or of the stockholders. A majority of the remaining directors then in office, though less than a quorum, and the stockholders, are empowered to fill any vacancy on the board of directors. A majority vote of the stockholders is required to alter, amend or repeal the foregoing provisions. 58 DIRECTORS LIABILITY. The certificate of incorporation provides that no director shall be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability, provided that, to the extent provided by applicable law, the certificate of incorporation shall not eliminate the liability of a director for (a) any breach of the director's duty of loyalty to us or our stockholders; (b) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (c) acts or omissions in respect of certain unlawful dividend payments or stock redemptions or repurchases; or (d) any transaction from which such director derives improper personal benefit. The effect of this provision is to eliminate the rights of Bruker Daltonics and our stockholders (through stockholders' derivative suits against Bruker Daltonics) to recover monetary damages against a director for breach of the fiduciary duty of care as a director (including breaches resulting from negligent or grossly negligent behavior) except in the situations described in clauses (a) through (d) above. The limitations summarized above, however, do not affect the ability of Bruker Daltonics or our stockholders to seek non-monetary-based remedies, such as an injunction or rescission, against a director for breach of his fiduciary duty nor would such limitations limit liability under the Federal securities laws. Our by-laws provide that we shall, to the extent permitted by Delaware law indemnify and advance expenses to the currently acting and former directors, officers, employees and agents of Bruker Daltonics or of another corporation, partnership, joint venture, trust or other enterprise if serving at our request arising in connection with their acting in such capacities. Various provisions described above may also have the effect of delaying stockholder actions with respect to certain business combinations and the election of new members to our board of directors. As such, the provisions could have the effect of discouraging open market purchases of our common stock because they may be considered disadvantageous by a stockholder who desires to undertake a business combination with us or elect a new director to our board. Statutory Business Combination Provision Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from consummating a "business combination," except under certain circumstances, with an "interested stockholder" for a period of three years after the date such person became an "interested stockholder" unless: - before such person became an interested stockholder, the board of directors of the corporation approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination; - upon the closing of the transaction that resulted in the interested stockholder's becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares held by directors who are also officers of the corporation and shares held by employee stock plans; or - following the transaction in which such person became an interested stockholder, the business combination is approved by the board of directors of the corporation and authorized at a meeting of stockholders by the affirmative vote of the holders of 66 2/3% of the outstanding voting stock of the corporation not owned by the interested stockholder. The term "interested stockholder" generally is defined as a person who, together with affiliates and associates, owns, or, within the prior three years, owned, 15% or more of a 59 corporation's outstanding voting stock. The term "business combination" includes mergers, asset sales and other similar transactions resulting in a financial benefit to an interested stockholder. Section 203 makes it more difficult for an "interested stockholder" to effect various business combinations with a corporation for a three-year period. A Delaware corporation may "opt out" of Section 203 with an express provision in its original certificate of incorporation or an express provision in its certificate of incorporation or by-laws resulting from an amendment approved by holders of at least a majority of the outstanding voting stock. We have elected to "opt" out of Section 203 in our certificate of incorporation. Therefore any transaction between us and an interested stockholder is not subject to the requirements of Section 203. Transfer Agent and Registrar The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company. 60 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, Bruker Daltonics will have outstanding 53,000,000 shares of our common stock. Of these shares, the 7,500,000 shares offered hereby (8,625,000 shares if the underwriters' over-allotment option is exercised in full) will be freely tradable without restriction or further registration under the Securities Act, unless purchased by "affiliates" of Bruker Daltonics as that term is defined in Rule 144 described below. The remaining 45,500,000 shares of common stock outstanding upon closing of the offering are "restricted securities" as that term is defined in Rule 144. In general, under Rule 144, as amended, a person who has beneficially owned shares for at least one year is entitled to sell in "brokers' transactions" or to market makers, within any three-month period commencing 90 days after the date of this prospectus, a number of shares that does not exceed the greater of (a) one percent of the number of shares of common stock then outstanding, approximately 53,000,000 shares immediately after the completion of this offering (54,125,000 shares if the underwriters' over-allotment option is exercised in full), or (b) generally, the average weekly trading volume in our common stock during the four calendar weeks preceding the required filing of a Form 144 with respect to such sale. Sales under Rule 144 are generally subject to the availability of current public information about Bruker Daltonics. Under Rule 701, persons who purchase shares upon exercise of options granted prior to the effective date of this offering are entitled to sell such shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period requirements of Rule 144. Each of our stockholders has agreed to certain restrictions on their ability to sell, offer, contract or grant any option to sell, pledge, transfer or otherwise dispose of shares of our common stock for a period of 180 days after the date of this prospectus, without the prior written consent of UBS Warburg LLC. All 45,500,000 of our outstanding shares, not including the 7,500,000 offered hereby, are subject to 180-day lockup agreements. These 45,500,000 shares are eligible for sale 180 days after the commencement of this offering, subject to the requirements of Rule 144. Prior to this offering, there has not been any public market for our common stock. Future sales of substantial amounts of our common stock in the public market could adversely affect the prevailing market prices and impair our ability to raise capital through the sale of equity securities. 61 UNDERWRITING Subject to the terms and conditions of the underwriting agreement, the underwriters named below, through their representatives, UBS Warburg LLC, CIBC World Markets and Thomas Weisel Partners LLC have severally agreed to purchase from Bruker Daltonics the following respective number of shares of common stock at a public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus:
Underwriter Number of Shares - ----------- ---------------- UBS Warburg LLC............................................ CIBC World Markets......................................... Thomas Weisel Partners LLC................................. Total................................................ 7,500,000
The underwriting agreement provides that the obligations of the several underwriters to purchase the shares of common stock offered hereby are subject to various conditions precedent and that the underwriters will purchase all shares of the common stock offered hereby, other than those covered by the over-allotment option described below, if any of these shares are purchased. In addition, the underwriting agreement provides that, in the event of a default by an underwriter, in certain circumstances the purchase commitments of non-defaulting underwriters may be increased or the underwriting agreement may be terminated. The underwriters propose to offer the shares of common stock to the public at the public offering price set forth on the cover of this prospectus and to dealers at a price that represents a concession not in excess of $ per share under the public offering price. The underwriters may allow, and these dealers may re-allow, a concession of not more than $ per share to other dealers. After the initial public offering, representatives of the underwriters may change the offering price and other selling terms. We have granted to the underwriters an option, exercisable not later than 30 days after the date of this prospectus, to purchase up to 1,125,000 additional shares of common stock at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus. The underwriters may exercise this option only to cover over-allotments made in connection with the sale of the common stock offered hereby. To the extent that the underwriters exercise this option, each of the underwriters will become obligated, subject to conditions, to purchase approximately the same percentage of additional shares of common stock as the number of shares of common stock to be purchased by it in the above table bears to the total number of shares of common stock offered hereby. We will be obligated, pursuant to the option, to sell these additional shares of common stock to the underwriters to the extent the option is exercised. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the other shares are being offered. The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting 62 fee is currently expected to be 7% of the initial public offering price. We have agreed to pay the underwriters the following fees, assuming either no exercise or full exercise by the underwriters of the underwriters' over-allotment option:
Total Fees --------------------------------------------- Without Exercise of With Full Exercise of Fee Per Share Over-Allotment Option Over-Allotment Option ------------- --------------------- --------------------- Fees paid by Bruker Daltonics.......... $0.77 $5,775,000 $6,641,250
In addition, we estimate that our share of the total expenses of this offering, excluding underwriting discounts and commissions, will be approximately $1.5 million. We have agreed to indemnify the underwriters against some specified types of liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect of any of these liabilities. Each of our officers and directors and all of our stockholders have agreed not to offer, sell, contract to sell, or otherwise dispose of, or enter into any transaction that is designed to, or could be expected to, result in the disposition of any shares of our common stock or other securities convertible into or exchangeable or exercisable for shares of our common stock or derivatives of our common stock owned by these persons prior to this offering or common stock issuable upon exercise of options or warrants held by these persons for a period of 180 days after the effective date of the registration statement of which this prospectus is a part without the prior written consent of UBS Warburg LLC. This consent may be given at any time without public notice. We have entered into a similar agreement with the representatives of the underwriters. There are no agreements between the representatives and any of our stockholders or affiliates releasing them from these lock-up agreements prior to the expiration of the 180-day period. The representatives of the underwriters have advised us that the underwriters do not intend to confirm sales to any account over which they exercise discretionary authority. In order to facilitate the offering of our common stock, the underwriters may engage in transactions that stabilize, maintain, or otherwise affect the market price of our common stock. The underwriters may over-allot shares of our common stock in connection with this offering, thus creating a short position for their own account. Short sales involve sales by the underwriters of a greater number of shares than they are committed to purchase in the offering. A short sales position may involve either "covered" short sales or "naked" short sales. Covered short sales are sales made in an amount not greater than the underwriters' overallotment option to purchase additional shares in the offering described above. The underwriters may close out any covered short position by either exercising their overallotment option or purchasing shares in the open market. In determining the source of shares to close the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the overallotment option. Naked short sales are sales in excess of the overallotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. Accordingly, to cover these short sales positions or to stabilize the market price of our common stock, the underwriters may bid for, and purchase, shares of our common stock in the open market. These transactions may be effected on the Nasdaq National Market or 63 otherwise. Additionally, the representatives, on behalf of the underwriters, may also reclaim selling concessions allowed to an underwriter or dealer. Similar to other purchase transactions, the underwriters' purchases to cover the syndicate short sales or to stabilize the market price of our common stock may have the effect of raising or maintaining the market price of our common stock or preventing or mitigating a decline in the market price of our common stock. As a result, the price of the shares of our common stock may be higher than the price that might otherwise exist in the open market. The underwriters are not required to engage in these activities and, if commenced, may end any of these activities at any time. At our request, the underwriters have reserved for sale, at the initial public offering price, up to 375,000 shares, or 5%, of our common stock being sold in this offering for our vendors, employees, family members of employees, customers and other third parties. These purchasers are expected to agree not to offer, sell, contract to sell, or otherwise dispose of, or enter into any transaction that is designed to, or could be expected to, result in the disposition of any shares of our common stock or other securities convertible into or exchangeable or exercisable for shares of our common stock or derivatives of our common stock acquired by these persons in this offering or common stock issuable upon exercise of options or warrants held by these persons for a period of 180 days after the effective date of the registration statement of which this prospectus is a part without the prior written consent of UBS Warburg LLC. The number of shares of our common stock available for sale to the general public will be reduced to the extent these reserved shares are purchased. Any reserved shares that are not purchased by these persons will be offered by the underwriters to the general public on the same basis as the other shares in this offering. After the SEC has declared the registration statement effective and the initial public offering price has been determined, the underwriters shall orally or electronically confirm the allocation and price of the reserved shares to each purchaser of such shares. Pricing of This Offering Prior to this offering, there has been no public market for the common stock. Consequently, the initial public offering price for our common stock has been determined by negotiation among us and the representatives of the underwriters. Among the principal factors considered in determining the initial public offering price were: - prevailing market conditions; - our results of operations in recent periods; - the market capitalization and stage of development of other companies that we and the representatives of the underwriters believe to be comparable to our business; and - estimates of our business potential. The estimated initial public offering price range set forth on the cover of this preliminary prospectus is subject to change as a result of market conditions and other factors. Thomas Weisel Partners LLC, one of the representatives of the underwriters, was organized and registered as a broker-dealer in December 1998. Since December 1998, Thomas Weisel Partners has been named as a lead or co-manager on 153 filed public offerings of equity securities, of which 109 have been completed, and has acted as a syndicate member in an additional 80 public offerings of equity securities. Thomas Weisel Partners does not have any material relationship with us or any of our officers, directors or other controlling persons, except with respect to its contractual relationship with us pursuant to the underwriting agreement entered into in connection with this offering. 64 CERTAIN UNITED STATES TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS There are federal income and estate tax consequences related to the ownership and disposition of our common stock by a non-U.S. holder. A non-U.S. holder is any person or entity that, for United States federal income tax purposes, is either a non-resident individual, a corporation or other entity taxed as a corporation organized or created under non-U.S. law, an estate that is not taxable in the United States on its worldwide income or a trust that is either not subject to primary supervision over its administration by a United States court or not subject to the control of a U.S. person with respect to substantial trust decisions. Partnerships organized outside of the United States and their partners should consult their own tax advisors about the consequences of holding our common stock, as the tax treatment with respect to foreign partnerships and their partners is complex. Individuals may, in certain cases, be deemed to be resident aliens, as opposed to non-resident aliens, by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year (counting for such purposes, all of the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year). Resident aliens are generally subject to United States federal income tax as if they were United States citizens. This summary does not discuss all United States federal income tax considerations that may be relevant to non-U.S. holders in light of their particular circumstances or to non-U.S. holders that may be subject to special treatment under United States federal income tax laws. This summary assumes that non-U.S. holders hold their stock as capital assets. Furthermore, this summary does not discuss aspects of United States federal income taxation that may be applicable to holders of options to purchase our common stock, nor does it address any aspects of non-U.S. taxation or United States state or local taxation. This summary is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing, temporary and proposed regulations promulgated thereunder, and administrative and judicial interpretations thereof, all of which are subject to change, possibly with retroactive effect. THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED TO BE, LEGAL, BUSINESS OR TAX ADVICE TO ANY PARTICULAR SHAREHOLDER. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF THE DESCRIBED TRANSACTIONS IN THEIR PARTICULAR CIRCUMSTANCES. Dividends In the event that dividends are paid on shares of our common stock, dividends paid to a non-U.S. holder of our common stock generally will be subject to United States withholding tax at a 30% rate, unless an applicable income tax treaty provides for a lower withholding rate. Currently, the applicable United States Treasury regulations presume, absent actual knowledge to the contrary, that dividends paid to an address in a foreign country are paid to a resident of such country for purposes of the 30% withholding tax. However, recently finalized United States Treasury regulations provide that in the case of dividends paid after December 31, 2000, United States backup withholding tax at a 31% rate will be imposed on dividends paid to non-U.S. holders if the certification or documentary evidence procedures 65 and requirements set forth in such regulations are not satisfied directly or through an intermediary. Further, in order to claim the benefit of an applicable income tax treaty rate for dividends paid after December 31, 2000, a non-U.S. holder must comply with certification requirements set forth in the recently finalized United States Treasury regulations. The 30% withholding tax does not apply to dividends paid to a non-U.S. holder that provides a Form 4224 or, after December 31, 2000, a Form W-8ECI, certifying that the dividends are effectively connected with the non-U.S. holder's conduct of a trade or business within the United States. Instead, the effectively connected dividends will generally be subject to regular United States income tax as if the non-U.S. holder were a United States resident. If the non-U.S. holder is eligible for the benefits of a tax treaty between the United States and the holder's country of residence, any effectively connected income will be subject to United States federal income tax only if it is attributable to a permanent establishment in the United States mainlined by the holder. A non-U.S. corporation receiving effectively connected dividends may also be subject to an additional "branch profits tax" imposed at a rate of 30% (or a lower treaty rate) on an earnings amount that is net of the regular tax. A non-U.S. holder may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund along with the required information with the Internal Revenue Service ("IRS"). Gain on Disposition of Common Stock A non-U.S. holder generally will not be subject to United States federal income or withholding tax requirements in respect of gain recognized on a disposition of common stock unless: (a) the gain is effectively connected with the conduct of a trade or business of the non-U.S. holder within the United States or of a partnership, trust or estate in which the non-U.S. holder is a partner or beneficiary within the United States and, if certain tax treaties apply, is attributable to a permanent establishment of the non-U.S. holder, within the United States; (b) the non-U.S. holder is an individual who holds our common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code, is present in the United States for 183 or more days in the taxable year of the disposition and meets certain other tax law requirements; (c) the non-U.S. holder is a United States expatriate required to pay tax pursuant to the provisions of United States tax law; or (d) we are or have been a "United States real property holding corporation" for federal income tax purposes at any time during the shorter of the five-year period preceding such disposition or the period that the non-U.S. holder holds our common stock. We believe that we are not, have not been and do not anticipate becoming, a United States real property holding corporation for United States federal income tax purposes. A non-U.S. holder who is an individual and is described in clause (a) or (c) above will be required to pay tax on the net gain derived from a sale of our common stock at regular graduated United States federal income tax rates. Further, a non-U.S. holder who is an individual and who is described in clause (b) above generally will be subject to a flat 30% tax on the gain derived from a sale. A non-U.S. holder that is a corporation and that is described 66 in clause (a) above generally will be required to pay tax on its net gain at regular graduated United States federal income tax rates. Such non-U.S. holder may also have to pay a branch profits tax. Federal Estate Tax For United States federal estate tax purposes, an individual's gross estate will include our common stock owned, or treated as owned, by an individual. Generally, this will be the case regardless whether or not such individual was a United States citizen or a United States resident. This general rule of inclusion may be limited by an applicable estate tax or other treaty. Information Reporting and Backup Withholding Tax Under United States Treasury regulations, we must report annually to the Internal Revenue Service and to each non-U.S. holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends. These information reporting requirements apply whether withholding is required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder is a resident under the provisions of an applicable income tax treaty or agreement. Dividends Currently, the 31% United States backup withholding tax generally will not apply: (a) to dividends which are paid to non-U.S. holders and are taxed at the regular 30% withholding tax rate as discussed above; or (b) before January 1, 2001, to dividends paid to a non-U.S. holder at an address outside of the United States unless the payor has actual knowledge that the payee is a U.S. holder. The recently finalized United States Treasury regulations provide that in the case of dividends paid after December 31, 2000, a non-U.S. holder generally will be subject to backup withholding tax at the rate of 31% unless: (a) specified certification procedures are followed; or (b) specified documentary evidence procedures are followed. Sale or Exchange of Common Stock U.S. information reporting and backup withholding generally will not apply to a payment of proceeds of a disposition of common stock where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. However, information reporting requirements, but not backup withholding, generally will apply to such a payment if the broker is: - a U.S. person; - a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the U.S.; - a controlled foreign corporation as defined in the Code; or 67 - a foreign partnership with certain U.S. connections (for payments made after December 31, 2000). Information reporting requirements will not apply in the above cases if the broker has documentary evidence in its records that the holder is a non-U.S. holder and certain conditions are met or the holder otherwise establishes an exemption. A non-U.S. holder will be required to certify its non-U.S. status, in order to avoid information reporting and backup withholding at a 31% rate on disposition proceeds, where the transaction is effected by or through a U.S. office of a broker. The tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. When withholding results in an overpayment of taxes, a refund may be obtained if the required information is furnished to the IRS. 68 LEGAL MATTERS The validity of the shares of common stock offered hereby will be passed upon for Bruker Daltonics by Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston, Massachusetts. Richard M. Stein, a stockholder of Hutchins, Wheeler & Dittmar, holds options to purchase 3,000 shares of the common stock of Bruker Daltonics and will purchase shares of common stock in this offering. Mr. Stein is also a Director and the Secretary of Bruker Daltonics. Certain legal matters in connection with the offering will be passed upon for the underwriters by Ropes & Gray, Boston, Massachusetts. EXPERTS BDO von Riegen, Lienau, Sucker & Partner GmbH, independent auditors, have audited our combined financial statements as of and for the year ended December 31, 1997, as set forth in their report. Ernst & Young LLP, independent auditors, have audited our consolidated and combined financial statements as of and for the years ended December 31, 1998 and 1999, as set forth in their report. We have included our financial statements in this prospectus and elsewhere in this registration statement in reliance on BDO von Riegen, Lienau, Sucker & Partner GmbH and Ernst & Young LLP's reports, given upon their authority as experts in accounting and auditing. CHANGE IN ACCOUNTANTS In December 1998, Bruker Daltonics Inc. dismissed BDO von Riegen, Lienau, Sucker & Partner GmbH as the independent accountant for our subsidiary Bruker Daltoniks GmbH and appointed Ernst & Young LLP as our independent accountants to audit our combined/ consolidated financial statements for the year ending December 31, 1998. The Board of Directors of Bruker Daltonics Inc. ratified this action. We changed auditors because we wanted to utilize one global audit firm. BDO von Riegen, Lienau, Sucker & Partner GmbH reissued their opinion as combined financial statements of Bruker Daltonics Inc. for the year ended December 31, 1997 on April 6, 2000. The reports of BDO von Riegen, Lienau, Sucker & Partner GmbH on the combined financial statements for the year ended December 31, 1997 contained no adverse opinions or disclaimers of opinion and have not been qualified or modified as to uncertainty, audit scope or accounting principles. In connection with its audit for the year ended December 31, 1997 and for the period until the change in accountants, there were no disagreements with BDO von Riegen, Lienau, Sucker & Partner GmbH on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure which disagreements if not resolved to the satisfaction of BDO von Riegen, Lienau, Sucker & Partner GmbH would have caused them to make reference thereto in their report on the financial statements for such year. Bruker Daltonics Inc. provided BDO von Riegen, Lienau, Sucker & Partner GmbH with a copy of this disclosure and requested that BDO von Riegen, Lienau, Sucker & Partner GmbH furnish us with a letter addressed to the SEC stating that BDO von Riegen, Lienau, Sucker & Partner GmbH agrees with the above statements. The BDO von Riegen, Lienau, Sucker & Partner GmbH letter addressed to the SEC was filed as Exhibit 16.1 to Amendment No. 2 to Form S-1. WHERE YOU CAN FIND MORE INFORMATION We have filed a registration statement on Form S-1 with the Securities and Exchange Commission, or SEC, for our common stock that we are offering by this prospectus. This 69 prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to us and our common stock, we make reference to the registration statement and to the exhibits and schedules filed therewith. Statements contained in this prospectus as to the contents of any contract or any other document referred to are qualified in all respects by reference to the copy of such contract or other document filed as an exhibit to the registration statement. A copy of the registration statement may be inspected by anyone without charge at the SEC's principal office in Washington, D.C., and copies of all or any part of the registration statement may be obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of certain fees prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The SEC maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the web site is http://www.sec.gov. Upon completion of the offering, we will be subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended and, in accordance therewith, will file reports, proxy statements and other information with the SEC. We intend to furnish our stockholders with annual reports containing financial statements audited by our independent public accountants and quarterly reports for the first three fiscal quarters of each fiscal year containing unaudited interim financial information. 70 BRUKER DALTONICS INC. INDEX TO FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors for the years ended December 31, 1998 and 1999................................ F-2 Consolidated Balance Sheets as of December 31, 1998, 1999 and March 31, 2000 (unaudited)............................ F-3 Combined / Consolidated Statements of Operations for the years ended December 31, 1998 and 1999 and for the three months ended March 31, 1999 and 2000 (unaudited)....................... F-4 Combined / Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998 and 1999 and for the three months ended March 31, 2000 (unaudited)................................ F-5 Combined / Consolidated Statements of Cash Flows for the years ended December 31, 1998 and 1999 and for the three months ended March 31, 1999 and 2000 (unaudited)....................... F-6 Notes to Financial Statements for the years ended December 31, 1998 and 1999.................................................. F-7 Report of BDO von Riegen, Lienau, Sucker & Partner GmbH, Independent Auditors for the year ended December 31, 1997...................................................... F-23 Report of Ernst & Young LLP, Independent Auditors for the year ended December 31, 1997.............................. F-24 Combined Balance Sheet as of December 31, 1997.............. F-25 Combined Statement of Operations for the year ended December 31, 1997.................................................. F-26 Combined Statement of Stockholders' Equity for the year ended December 31, 1997................................... F-27 Combined Statement of Cash Flows for the year ended December 31, 1997.................................................. F-28 Notes to Financial Statements for the year ended December 31, 1997.................................................. F-29
All financial data schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. F-1 Report of Ernst & Young LLP, Independent Auditors The Board of Directors Bruker Daltonics Inc. We have audited the accompanying consolidated balance sheets of Bruker Daltonics Inc. (the Company), as of December 31, 1998 and 1999, the related combined statements of operations, stockholders' equity, and cash flows for the year ended December 31, 1998, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bruker Daltonics Inc. at December 31, 1998 and 1999, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Boston, Massachusetts March 11, 2000 F-2 BRUKER DALTONICS INC. CONSOLIDATED BALANCE SHEETS
December 31, March 31, --------------------------- ------------ 1998 1999 2000 ------------ ------------ ------------ (unaudited) ------------ ASSETS Current assets: Cash and cash equivalents................................. $ 1,134,916 $ 2,443,142 $ 3,904,531 Accounts receivable, less allowances for doubtful accounts of $157,198 in 1998, $113,861 in 1999 and $113,861 in 2000..................................................... 9,743,922 12,203,888 8,993,853 Inventories............................................... 17,033,673 25,441,844 31,320,039 Deferred income taxes..................................... 369,150 899,000 892,095 Other assets.............................................. 1,055,375 532,446 1,970,151 ----------- ----------- ------------ Total current assets.................................. 29,337,036 41,520,320 47,080,669 ----------- ----------- ------------ Restricted cash............................................. 5,895,871 -- -- Property, plant and equipment, net.......................... 28,365,580 25,350,543 23,783,801 Intangible and other assets................................. 242,827 438,197 373,418 ----------- ----------- ------------ Total assets...................................... $63,841,314 $67,309,060 $ 71,237,888 =========== =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term bank borrowings................................ $ 2,941,239 $ 2,496,350 $ 2,630,687 Accounts payable.......................................... 3,254,786 6,661,399 5,934,876 Due to affiliated companies............................... 147,239 1,496,240 4,406,424 Accrued expenses.......................................... 1,720,043 3,805,486 3,046,854 Accrued payroll........................................... 1,656,727 1,741,669 1,754,985 Customer deposits......................................... 9,872,513 8,323,465 11,221,574 Warranty reserves......................................... 3,206,621 4,739,013 4,609,828 Income taxes payable...................................... 199,982 176,690 140,648 ----------- ----------- ------------ Total current liabilities............................. 22,999,150 29,440,312 33,745,876 ----------- ----------- ------------ Deferred revenue............................................ 99,841 393,371 808,183 Long-term debt.............................................. 14,982,498 12,843,582 12,289,240 Deferred income tax liabilities............................. 8,667,382 8,785,712 8,600,086 Contingent liabilities...................................... 6,752,312 5,788,434 6,043,440 Stockholders' equity: Common stock, $0.01 par value, authorized 100,000,000 shares, issued and outstanding 45,500,000 shares in 1998, 1999 and 2000............................................ 455,000 455,000 455,000 Additional paid-in capital................................ 6,045,000 6,045,000 6,045,000 Accumulated other comprehensive loss...................... (1,322,828) (2,854,829) (3,335,661) Retained earnings......................................... 5,162,959 6,412,478 6,586,724 ----------- ----------- ------------ Total stockholders' equity............................ 10,340,131 10,057,649 9,751,063 ----------- ----------- ------------ Total liabilities and stockholders' equity........ $63,841,314 $67,309,060 $ 71,237,888 =========== =========== ============
The accompanying notes are an integral part of these statements. F-3 BRUKER DALTONICS INC. COMBINED / CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, Three Months Ended March 31, ---------------------------- -------------------------------- 1998 1999 1999 2000 ------------ ------------- ------------- ------------- COMBINED CONSOLIDATED CONSOLIDATED CONSOLIDATED (UNAUDITED) Product revenue...................................... $40,157,261 $60,620,349 $ 10,878,678 $ 14,034,856 Other revenue........................................ 2,049,740 4,070,101 1,019,235 563,644 ----------- ----------- ------------ ------------ Net revenue................................ 42,207,001 64,690,450 11,897,913 14,598,500 ----------- ----------- ------------ ------------ Costs and operating expenses: Cost of product revenue............................ 19,672,357 31,617,724 5,496,505 6,574,128 Sales and marketing................................ 7,434,968 11,345,265 2,256,101 2,563,424 General and administrative......................... 2,212,594 3,411,138 617,531 1,108,120 Research and development........................... 13,048,670 15,138,114 3,088,341 3,600,273 Patent litigation costs............................ -- 537,817 537,817 302,937 ----------- ----------- ------------ ------------ Total costs and operating expenses......... 42,368,589 62,050,058 11,996,295 14,148,882 ----------- ----------- ------------ ------------ Operating income (loss) from continuing operations... (161,588) 2,640,392 (98,382) 449,618 Other income (expense)............................... 173,737 130,219 139,890 (24,784) Interest expense, net................................ (900,829) (907,682) (267,125) (102,562) ----------- ----------- ------------ ------------ Income (loss) from continuing operations before provision for income taxes......................... (888,680) 1,862,929 (225,617) 322,272 Provision (benefit) for income taxes................. -- 986,887 (119,577) 184,995 ----------- ----------- ------------ ------------ Income (loss) from continuing operations............. (888,680) 876,042 (106,040) 137,277 Income from discontinued operations, net of income taxes.............................................. 383,414 373,477 90,435 36,969 ----------- ----------- ------------ ------------ Net income (loss).................................... $ (505,266) $ 1,249,519 $ (15,605) $ 174,246 =========== =========== ============ ============ Net income (loss) per share-basic and diluted Income (loss) from continuing operations........... $ (0.02) $ 0.02 $ 0.00 $ 0.00 Income from discontinued operations, net of income taxes............................................ 0.01 0.01 0.00 0.00 ----------- ----------- ------------ ------------ Net income (loss) per share.......................... $ (0.01) $ 0.03 $ 0.00 $ 0.00 =========== =========== ============ ============ Shares used in computing net income (loss) per share-basic and diluted............................ 45,500,000 45,500,000 45,500,000 45,500,000 =========== =========== ============ ============
The accompanying notes are an integral part of these statements. F-4 BRUKER DALTONICS INC. COMBINED / CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock ------------------------ Accumulated Bruker Bruker Additional Other Total Daltonics Daltonik Paid-in Retained Comprehensive Stockholders' Inc. GmbH Capital Earnings Income (Loss) Equity ---------- ----------- ----------- ----------- --------------- -------------- Balance as of December 31, 1997....... $ 52,500 $3,489,184 $ 697,500 $7,600,096 $(1,969,494) $ 9,869,786 Issuance of common stock............ 402,500 -- 5,347,500 -- -- 5,750,000 Payments to stockholders in connection with reorganization of business........................... -- (3,489,184) -- (1,931,871) -- (5,421,055) Foreign currency translation adjustment......................... -- -- -- -- 646,666 646,666 Net loss............................ -- -- -- (505,266) -- (505,266) ----------- Net comprehensive income............ -- -- -- -- -- 141,400 -------- ---------- ---------- ---------- ----------- ----------- Balance as of December 31, 1998....... 455,000 -- 6,045,000 5,162,959 (1,322,828) 10,340,131 Foreign currency translation adjustment......................... -- -- -- -- (1,532,001) (1,532,001) Net income.......................... -- -- -- 1,249,519 -- 1,249,519 ----------- Net comprehensive loss.............. -- -- -- -- -- (282,482) -------- ---------- ---------- ---------- ----------- ----------- Balance as of December 31, 1999....... 455,000 -- 6,045,000 6,412,478 (2,854,829) 10,057,649 Foreign currency translation adjustment (unaudited).............. (480,832) (480,832) Net income (unaudited)................ 174,246 174,246 ----------- Net comprehensive loss (unaudited).... (306,586) Balance as of March 31, 2000 (unaudited)......................... $455,000 $ -- $6,045,000 $6,586,724 $(3,335,661) $ 9,751,063 ======== ========== ========== ========== =========== ===========
The accompanying notes are an integral part of these statements. F-5 BRUKER DALTONICS INC. COMBINED / CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, Three Months Ended March 31, --------------------------- --------------------------------- 1998 1999 1999 2000 ----------- ------------- ------------- ------------- COMBINED CONSOLIDATED CONSOLIDATED CONSOLIDATED (UNAUDITED) Operating activities: Income (loss) from continuing operations........... $ (888,680) $ 876,042 $ (106,040) $ 137,277 Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) continuing operations: Depreciation and amortization.................. 2,604,582 3,486,625 798,484 832,570 Deferred income taxes.......................... 526,061 875,095 82,014 191,185 Charge for purchase of in-process research and development.............................. -- 100,000 -- -- Changes in operating assets and liabilities: Accounts receivable.......................... (6,272,587) (3,605,416) 2,952,420 3,217,331 Inventories.................................. (1,802,029) (10,264,776) (307,879) (7,205,327) Other assets................................. (862,924) 91,990 (640,540) (1,339,639) Accounts payable and accrued expenses........ (479,955) 6,374,182 877,284 161,104 Warranty reserve............................. 1,758,596 2,033,985 (45,506) 45,052 Contingent liabilities....................... (367,257) -- 201,682 518,525 Income taxes payable......................... (525,681) (469) 4,122 (35,789) Deferred revenue............................. (281,799) 294,710 41,177 425,179 Customer deposits............................ 66,098 4,680,139 (282,418) 3,101,162 ----------- ------------ ----------- ----------- Net cash provided by (used in) continuing operations....................................... (6,525,575) 4,942,107 3,574,800 48,630 Net cash provided by (used in) discontinued operations....................................... (9,068) 495,126 210,153 (78,067) ----------- ------------ ----------- ----------- Net cash provided by (used in) operating activities................................... (6,534,643) 5,437,233 3,784,953 (29,437) Investing activities: Purchases of property and equipment................ (2,887,675) (4,235,677) (385,825) (309,694) Acquisition of business, net of cash acquired...... -- (200,000) -- 50,000 ----------- ------------ ----------- ----------- Net cash used in investing activities.......... (2,887,675) (4,435,677) (385,825) (259,694) Financing activities: Proceeds from long-term debt....................... 14,212,750 -- -- -- Proceeds from short-term borrowings................ 2,603,898 1,000,000 2,518,897 204,313 Payments on short-term borrowings.................. (50,000) (1,086,700) -- Advances from (payments to) affiliated companies... (8,616,816) 444,370 (6,305,386) 1,582,408 Issuance of common stock........................... 5,750,000 -- -- -- Payments to stockholders........................... (5,435,012) -- -- -- ----------- ------------ ----------- ----------- Net cash provided by (used in) financing activities................................... 8,464,820 357,670 (3,786,489) 1,786,721 Effect of exchange rate changes.................... 70,979 (51,000) (76,408) (36,201) ----------- ------------ ----------- ----------- Net change in cash and cash equivalents............ (886,519) 1,308,226 (463,769) 1,461,389 Cash and cash equivalents at beginning of period... 2,021,435 1,134,916 1,134,916 2,443,142 ----------- ------------ ----------- ----------- Cash and cash equivalents at end of period......... $ 1,134,916 $ 2,443,142 $ 671,147 $ 3,904,531 =========== ============ =========== =========== Supplemental cash flow information: Cash paid for interest........................... $ 1,018,765 $ 1,231,867 Cash paid for taxes.............................. 152,821 463,987
The accompanying notes are an integral part of these statements. F-6 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS 1. Description of Business Bruker Daltonics Inc. and its wholly-owned subsidiaries (the "Company") design, manufacture and market proprietary life science systems based on its mass spectrometry core technology platforms. The Company also sells a broad range of field analytical systems for substance detection and pathogen identification. The Company maintains major technical centers in Europe, North America and Japan. Bruker Daltonics allocates substantial capital and resources to research and development and is party to various collaborations and strategic alliances. The Company's diverse customer base includes pharmaceutical companies, biotechnology companies, academic institutions and government agencies. These financial statements represent the consolidated accounts of Bruker Daltonics Inc., and its wholly-owned subsidiaries as of December 31, 1998 and 1999 and for the year ended December 31, 1999, and the combined accounts of Bruker Daltonics Inc., and its affiliated companies for the year ended December 31, 1998 (see Note 3). All significant intercompany accounts and transactions have been eliminated in consolidation and combination, respectively. 2. Summary of Significant Accounting Policies USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INTERIM CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements as of March 31, 2000 and for the three months ended March 31, 1999 and 2000 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with original maturities of 90 days or less at date of purchase to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair market value at year end. F-7 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. Summary of Significant Accounting Policies (continued) RESTRICTED CASH At December 31, 1998, $5,895,871 of cash was restricted as part of an advance deposit for a product distribution agreement between Bruker Daltonik GmbH and Hewlett-Packard Company (HP). The original advance was $6,680,002, from which the Company withdrew amounts for payment as products were delivered and accepted by HP. This deposit was reduced to $1,200,000 in the second quarter of 1999 and is no longer restricted. The Company has included the entire balance of $5,895,871 in customer deposits as of December 31, 1998. CONCENTRATION OF CREDIT RISK Financial instruments which subject the Company to credit risk consist of cash and cash equivalents and accounts receivables. The risk with respect to cash and cash equivalents is minimized by the Company's policy of investing in short-term financial instruments issued by highly-rated financial institutions. The risk with respect to accounts receivable is minimized by the credit worthiness of the Company's customers. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Credit losses have been within management's expectations. For the years ended December 31, 1998 and 1999, two customers accounted for an aggregate of 32% and 30%, respectively, of the Company's product revenue. Accounts receivables for these two customers accounted for an aggregate of 40% and 3% of total receivables as of December 31, 1998 and 1999, respectively. INVENTORIES Inventories are stated at the lower of cost or market with cost determined by the first-in, first-out, ("FIFO") method. Inventories include demonstration equipment which the Company offers to current and potential customers. The Company amortizes its demonstration equipment over a three year period. Amortization expense for demonstration equipment was $258,844 and $306,792 for the years ended December 31, 1998 and 1999, respectively. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost and are being depreciated on a straight-line basis over the estimated useful lives of the assets as follows: Buildings............................ 25 years Machinery and equipment.............. 5-10 years Furniture and fixtures............... 3-5 years Leasehold improvements............... Shorter of 15 years or the life of the lease
F-8 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. Summary of Significant Accounting Policies (continued) SOFTWARE COSTS Purchased software is capitalized at cost and is amortized over the estimated useful life, generally three years. Software developed for use in the Company's products is expensed as incurred and is classified as research and development expense. OTHER ASSETS Other assets consist principally of patents and licenses. Patents, patent applications and rights are stated at acquisition cost. Amortization of patents is recorded using the straight-line method over the legal lives of the patents, generally for periods ranging up to ten years. Accumulated amortization of these assets amounted to $983,702 and $1,120,840, as of December 31, 1998 and 1999, respectively. LONG-LIVED ASSETS The Company reviews long-lived assets for impairment, in accordance with Statement of Financial Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets to Be Disposed Of," whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are written-down to fair value when the carrying costs exceed this amount. Any impairment losses are determined based upon estimated future cash flows and fair values. To date, no such indicators of impairment have been identified. WARRANTY COSTS The Company provides a one year parts and labor warranty with the purchase of equipment. The anticipated cost for this one year warranty is accrued upon recognition of the sale and is included as a current liability on the accompanying balance sheets. CUSTOMER DEPOSITS Under the terms and conditions of contracts with certain customers, the Company requires an advance deposit. These deposit amounts are recorded as a liability until revenue is recognized against the specific contract at time of acceptance of the system. PATENT LITIGATION COSTS The Company records charges for the costs it anticipates incurring in connection with litigation and claims against the Company when management can reasonably estimate these costs. EARNINGS PER SHARE Basic earnings per share is calculated by dividing net earnings by the weighted-average number of common shares outstanding during the period. The diluted earnings per share computation includes the effect of shares which would be issuable upon the exercise of outstanding stock options, reduced by the number of shares which are assumed to be F-9 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. Summary of Significant Accounting Policies (continued) purchased by the Company from the resulting proceeds at the average market price during the period. At December 31, 1998 and 1999 there were no stock options outstanding, therefore basic and diluted earnings per share are equivalent. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The carrying amounts of the Company's cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short-term nature. The fair value of long-term debt is estimated based on current interest rates offered to the Company for financing arrangements with similar maturities. The recorded value of these financial instruments approximate their fair value at December 31, 1998 and 1999. FOREIGN CURRENCY TRANSLATION In accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, "Accounting for Foreign Exchange," all balance sheet accounts of foreign subsidiaries are translated into United States dollars at the current exchange rate, and income statement items are translated at the average exchange rate for the period; resulting translation adjustments are made directly to accumulated other comprehensive income (loss) in stockholders' equity. Realized exchange gains and losses are included in current operations and were not material. REVENUE RECOGNITION Revenue is recognized from system sales, including hardware with embedded software, when a product is accepted by the customer, except when sold through an independent distributor, a strategic distribution partner or an unconsolidated Bruker affiliated distributor which assumes responsibility for installation, in which case the system sale is recognized when the products are shipped to the distributor and title has transferred to the distributor. Our distributors do not have price protection rights or rights to return, however our products are warranted to be free from defect for a period of, typically, one year. Revenue from accessories and parts is recognized upon shipment, and revenue from services when performed. The Company's revenue recognition policies for software are in compliance with the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2, Software Revenue Recognition. The Company also offers to its customers warranty and service agreements extending beyond the initial year of warranty for a fee. These fees are recorded as deferred revenue and amortized into income over the life of the agreements. Other revenues, which are principally comprised of research and development grants, are recognized as grant work is performed. The Company believes that its revenue recognition policies comply with SEC Staff Accounting Bulletin No. 101--"Revenue Recognition in Financial Statements." F-10 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. Summary of Significant Accounting Policies (continued) ADVERTISING COSTS Advertising costs are expensed as incurred. Advertising expenses included in sales and marketing were $452,466 and $363,567 for the years ended December 31, 1998 and 1999, respectively. INCOME TAXES The Company provides for income taxes under the liability method prescribed by SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the difference is expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. ACCOUNTING DEVELOPMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The provisions of the statement require the recognition of all derivatives as either assets or liabilities in the statement of financial position and the measurement of those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. The Company is required to implement the statement in the first quarter of fiscal 2001. The Company does not believe that this new accounting standard will have a material impact on the financial statements. In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The statement established annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products and services, geographic areas and major customers. The adoption of the statement did not affect the results of operations or financial position of the Company. 3. Acquisitions BRUKER DALTONIK GMBH Effective December 21, 1998, Bruker Daltonics Inc. acquired all the equity interests of Bruker Daltonik GmbH formerly known as Bruker Franzen Analytik GmbH (a manufacturer of mass spectrometers) for $5,435,012 funded through the issuance of 5,750,000 shares of common stock for $1.00 per share to existing shareholders. The operations of Bruker Daltonik GmbH and its subsidiary, Bruker Saxonia Analytik GmbH, based in Germany, are included in the 1998 combined statements of operations for comparative purposes. The transaction represented an exchange between entities under common control and, accordingly, the assets acquired and liabilities assumed have been accounted for at historical cost in a manner similar to a pooling-of-interests. F-11 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 3. Acquisitions (continued) PROTEIGENE, INC. On December 6, 1999, the Company acquired a 49% interest in ProteiGene, Inc. from an officer of the Company for $50,000, the estimated fair market value. ProteiGene is a bioanalytical research and development company specializing in applications of mass spectrometry and bioinformatics in medical and microbiologic diagnostics. ProteiGene is developing products to be used in the care of patients suffering from routine and exotic infections, organ transplant rejection, and genetic and environmental diseases including cancers and auto-immune conditions where standard microbiologic and histopathologic diagnostics have proven ineffective. VIKING INSTRUMENTS CORPORATION On June 22, 1999, the Company purchased, the assets of Viking Instruments Corporation, a developer and manufacturer of transportable gas chromatrograph mass spectrometers (GC/MS). These transportable GC/MS instruments are used for laboratory and field analysis of soil, air and water for the identification and quantification of a wide variety of organic compounds and pollutants. The acquisition cost was $150,000, and the results of operations are included in the accompanying consolidated financial statements from the date of acquisition. In connection with the acquisition, $100,000 was expensed as purchased in-process research and development, $25,000 was allocated to core technology, and classified as an intangible, $20,000 was allocated to inventory and $5,000 was allocated to fixed assets. The amortization period is five years for the intangibles and three to five years for the fixed assets. The $100,000 in-process research and development was attributed to the Viking 573, a transportable gas chromatrograph mass spectrometer, and supported by a discounted probable cash flow analysis on a project-by-project basis modified to reflect the stage of completion of the in-process research and development expenditures. As of June 22, 1999, the feasibility of the acquired technology had not been established and the acquired technology had no future alternative uses. 4. Inventories The components of inventories were as follows:
December 31, March 31, --------------------------- ------------ 1998 1999 2000 ------------ ------------ ------------ (unaudited) Raw materials...................... $ 3,924,861 $ 5,849,464 $ 6,612,000 Work-in-process.................... 8,833,788 10,776,494 12,044,681 Finished goods..................... 4,275,024 8,815,886 12,663,358 ----------- ----------- ----------- $17,033,673 $25,441,844 $31,320,039 =========== =========== ===========
F-12 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 5. Property, Plant and Equipment Property, plant and equipment consisted of the following:
December 31, --------------------------- 1998 1999 ------------ ------------ Land........................................... $ 1,726,893 $ 1,480,358 Buildings...................................... 26,975,800 24,165,161 Office furniture, machinery and equipment...... 18,443,195 18,327,638 Leasehold improvements......................... 11,085 11,085 ------------ ------------ 47,156,973 43,984,242 Less accumulated depreciation and amortization................................. (18,791,393) (18,633,699) ------------ ------------ $ 28,365,580 $ 25,350,543 ============ ============
Depreciation expense for the years ended December 31, 1998 and 1999 was $2,464,693 and $3,317,282, respectively. Amortization of leasehold improvements is included with depreciation in the accompanying financial statements. 6. Income Taxes The components of income (loss) from continuing operations before provision for income taxes consisted of the following for the years ended December 31, 1998 and 1999:
Year Ended December 31, ------------------------- 1998 1999 ----------- ----------- United States..................................... $ 229,908 $(1,527,000) Foreign........................................... (1,118,588) 3,389,929 ----------- ----------- $ (888,680) $ 1,862,929 =========== ===========
F-13 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 6. Income Taxes (continued) Significant components of the provision for income taxes for the years ended December 31, 1998 and 1999 were as follows:
Year Ended December 31, -------------------------- 1998 1999 ---------- --------- Current: Federal.......................................... $ 96,536 $ -- State............................................ 11,464 -- Foreign.......................................... -- 72,000 --------- -------- 108,000 72,000 --------- -------- Deferred: Federal.......................................... (26,000) -- State............................................ (82,000) -- Foreign.......................................... -- 914,887 --------- -------- (108,000) 914,887 --------- -------- Total income taxes on continuing operations.. $ -- $986,887 ========= ========
The reconciliation of income tax computed at the United States federal statutory tax rate to income tax expense for the years ended December 31, 1998 and 1999 was as follows:
Year Ended December 31, -------------------------- 1998 1999 ---------- --------- Income tax (benefit) at statutory rate............. 34.0% 34.0% Add (deduct): Change in valuation allowance.................... (30.5) 35.6 Permanent differences............................ (1.6) 1.2 Foreign income tax at differing rates............ -- (8.9) Other............................................ (1.9) (9.0) --------- -------- -- 52.9% ========= ========
F-14 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 6. Income Taxes (continued) The components of the Company's deferred income taxes were as follows:
December 31, ------------------------- 1998 1999 ----------- ----------- Deferred tax assets: Inventory....................................... $ 301,000 $ 880,000 Warranty accrual................................ 55,000 257,000 Allowance for doubtful accounts................. 10,000 11,000 R & D tax credit carryforward................... 175,000 225,000 Net operating loss carryforward................. 29,000 171,000 Other........................................... 49,000 456,000 ----------- ----------- 619,000 2,000,000 Valuation allowance............................... (99,000) (763,000) ----------- ----------- Net deferred tax.................................. 520,000 1,237,000 Deferred tax liabilities: Patent litigation costs......................... (2,793,000) (4,023,000) Excess tax over book depreciation............... (5,998,000) (4,939,000) Other........................................... (27,000) (162,000) ----------- ----------- Total deferred tax liabilities.................... (8,818,000) (9,124,000) ----------- ----------- Net deferred tax liability........................ $(8,298,000) $(7,887,000) =========== ===========
For financial reporting purposes, a valuation allowance of $99,000 and $763,000 for December 31, 1998 and 1999, respectively, has been recognized to offset deferred tax assets since uncertainty exists with respect to future realization of deferred tax assets. As of December 31, 1999, the Company had approximately $225,000 and $428,000 of research and development tax credits and net operating loss carryforwards, respectively, available to reduce future federal tax liabilities. These credits expire at various dates through the year 2019. Undistributed earnings of foreign subsidiaries aggregated approximately $8.1 million at December 31, 1999, which, under existing law, will not be subject to United States tax until distributed as dividends. Because the earnings have been or are intended to be indefinitely reinvested in foreign operations, no provision has been made for United States income taxes that may be applicable thereto. 7. Financing Arrangements In August 1999, the Company entered into a revolving line of credit with Citizens Bank in the amount of $2,500,000. This line, which is secured by certain inventory, receivables and equipment in the United States, is used to provide working capital and expires July 31, 2001. Interest on this line of credit is at the lower of LIBOR plus 175 basis points (7.91% at F-15 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 7. Financing Arrangements (continued) December 31, 1999) or the Prime Rate (8.5% at December 31, 1999). There is no commitment fee on the unused portion of the line. As of December 31, 1999, the Company had $1,000,000 outstanding on this line of credit. The Company also maintained revolving lines of credit in 1998 and 1999, respectively, of approximately $4,200,000 and $6,200,000, among German banks at interest rates ranging between 7.5% and 6.1%. At December 31, 1998 and 1999, $2,941,239 and $1,496,350, respectively, was outstanding against these revolving lines of credit. The lines are secured by certain inventory and accounts receivable in Germany and are renewable in June 2000. The weighted average interest rate for all outstanding borrowings under the Company's lines of credit was 7.01% and 7.06% at December 31, 1998 and 1999, respectively. The Company has three notes payable with outstanding balances aggregating $14,982,498 and $12,843,582 as of December 31, 1998 and 1999, respectively. One note ($5,137,434 at December 31, 1999), with an interest rate of 5.10%, is payable in full in 2003. The other two notes ($7,706,148 in the aggregate at December 31, 1999), have an interest rate of 4.65% and are due in 2008. The notes are payable to Commerzbank in Germany. Interest is due monthly and all obligations are collateralized by the land and buildings of Bruker Daltonik GmbH. 8. Stockholder's Equity STOCK SPLIT On February 14, 2000, the Board of Directors of Bruker Daltonics Inc. authorized a seven-for-one stock split in the form of a stock dividend. Shareholders of record received six additional shares of common stock for every share they owned. All common shares and per share data in the accompanying financial statements have been restated to reflect the stock split. STOCK OPTIONS In February 2000, the Board of Directors adopted and the Stockholders approved the 2000 Stock Option Plan ("the Plan"). The Plan provides for the issuance of up to 2,120,000 shares of Common Stock in connection with stock options or other awards under the Plan. The Plan allows a committee of the Board of Directors (the "Committee") to grant incentive stock options, non-qualified stock options, stock appreciation rights and stock awards (including the use of restricted stock and phantom shares). The Committee has the authority to determine which employees will receive the rewards, the amount of the awards, and other terms and conditions of the award. In February 2000, the Committee granted stock options for 783,135 shares of common stock, which vest over three-to-five year periods. F-16 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 8. Stockholder's Equity (continued) Stock option activity for the three month period ended March 31, 2000 is as follows:
Weighted Average Options Exercise Price -------- -------------- Outstanding at December 31, 1999..................... -- -- Granted.............................................. 783,135 $5.29 Exercised............................................ -- -- Forfeited............................................ -- -- ------- ----- Outstanding at March 31, 2000........................ 783,135 $5.29 ======= Exercisable at March 31, 2000........................ -- ======= Weighted average fair value of options granted during the year........................................... $1.50
Exercise prices for options outstanding as of March 31, 2000 ranged from $5.27 to $5.80. The weighted-average remaining contractual life of those options is 9.92 years. The fair value for these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for 2000: risk free interest rate of 6.53%, dividend yield of 0% and a weighted-average expected life of the option of 5 years. The Company has never declared dividends on any of its capital stock and does not expect to do so in the foreseeable future. The Company accounts for stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and has adopted the disclosure-only alternative of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Under APB 25, because the exercise price of the Company's stock options equaled the fair market value of the underlying stock on the date of grant, no compensation expense was recognized. The Company's Board of Directors considered various factors in determining the fair market value of the Company's common stock on the date the stock options were granted. The Board used data of comparable public companies to determine an initial valuation of the Company as if the Company were a public company. The Board then discounted this valuation by 20% to reflect the lack of marketability of our stock due to our status as a private company. Stock options granted to non-employees, including Scientific Advisory Board Members, are accounted for in accordance with Emerging Issues Task Force Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services," which requires the value of such options to be remeasured as they vest over a performance period. The fair value of such options is determined using the Black-Scholes model and the resulting charge is recognized as the related services are performed. The Company has not incurred significant compensation expense relating to non-employee grants. For purposes of pro forma disclosures, the estimated fair value of stock options is amortized to expense over the options' respective vesting periods and the estimated fair value F-17 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 8. Stockholder's Equity (continued) of shares issued under the Company's stock option plan has been determined based on the fair value at date of grant as defined by SFAS 123, the Company's pro forma results for the three month period ended March 31, 2000 would have been as follows:
Pro forma net income........................................ $153,716 Pro forma basic and diluted income per share................ $ 0.00
9. Segment and Geographic Information The Company operates in one business segment and engages in the design, manufacturing and marketing of proprietary life science systems, process analysis systems, and analytical instruments based primarily on mass spectrometry technology. GEOGRAPHIC AREAS Information concerning principal geographic areas is as follows:
Three Months Ended Year Ended December 31, March 31, --------------------------- --------------------------- 1998 1999 1999 2000 ------------ ------------ ------------ ------------ (unaudited) NET PRODUCT REVENUES FROM EXTERNAL CUSTOMERS Germany............................. $26,621,316 $31,694,883 $ 7,621,834 $ 4,210,614 United States....................... 13,535,945 22,166,224 3,256,844 5,927,924 Other............................... -- 6,759,242 -- 3,896,318 ----------- ----------- ----------- ----------- $40,157,261 $60,620,349 $10,878,678 $14,034,856 =========== =========== =========== ===========
F-18 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 9. Segment and Geographic Information (continued) Net product revenues are attributable to geographic areas based on the region of sale.
December 31, March 31, --------------------------- ------------ 1998 1999 2000 ------------ ------------ ------------ (unaudited) LONG-LIVED ASSETS (EXCLUDING INTANGIBLE ASSETS) Germany.......................................... $28,037,374 $24,283,757 $22,692,833 United States.................................... 328,206 484,006 342,084 Other............................................ -- 672,935 796,840 ----------- ----------- ----------- $28,365,580 $25,440,698 $23,831,757 =========== =========== =========== NET ASSETS Germany.......................................... $ 9,307,408 $11,320,044 $11,217,117 United States.................................... 6,821,503 5,294,422 5,223,709 Other............................................ -- 357,091 189,211 ----------- ----------- ----------- 16,128,911 16,971,557 16,630,037 Elimination entries.............................. (5,788,780) (6,913,908) (6,878,974) ----------- ----------- ----------- $10,340,131 $10,057,649 $ 9,751,063 =========== =========== ===========
10. Discontinued Operations In 1999, the Company decided to discontinue its Fourier Transform-Infrared (FT-IR) business. The FT-IR business unit sells and services FT-IR instruments to a variety of markets outside the Company's core technology platform of mass spectrometry. The Company plans to complete the sale of its FT-IR business to Bruker Optik GmbH, an affiliated entity, in the first half of 2000 for a price, which approximates the net book value of the assets and liabilities of the business. Summary results for the discontinued operations for the years ended December 31, 1998 and 1999 are as follows:
Year Ended December 31, ----------------------------- 1998 1999 ----------- ----------- Net product revenues............................ $2,853,737 $2,741,815 Total costs and expenses........................ (2,214,492) (2,119,423) Provision for income taxes...................... (255,831) (248,915) ---------- ---------- Income from discontinued operations............. $ 383,414 $ 373,477 ========== ==========
The assets and liabilities of the discontinued operations as of December 31, 1998 and 1999 consisted of inventories ($30,930 and $31,650, respectively) and accounts payable ($24,317 and $146,686, respectively). F-19 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 11. Related-Party Transactions The Company is affiliated, through common shareholders, with several other entities which use the Bruker name. The Company and its affiliates have entered into a sharing agreement which provides for the sharing of specified intellectual property rights, services, facilities and other related items. The Company recognized sales to affiliated entities of $9,804,838 in 1998 and $10,307,416 in 1999 and purchases from affiliated entities of $3,913,662 in 1998 and $3,208,752 in 1999. In 1998 and 1999, various Bruker affiliates provided administrative and other services (including office space-see note 12) to the Company at a cost of approximately $227,000 and $437,000, respectively, based on its assessment of the estimated fair market value of such services. 12. Employee Benefit Plans The Company maintains or sponsors various defined contribution retirement plans that cover domestic and international employees. The Company may make contributions to these plans at its discretion. Retirement benefits earned are generally based on years of service and compensation during active employment. Eligibility is generally determined in accordance with local statutory requirements. However, the level of benefits and terms of vesting may vary among plans. The Company contributed $66,110 and $122,548 in 1998 and 1999, respectively. 13. Commitments and Contingencies LEASES The Company leases office space from related parties, under agreements expiring on various dates through 2004. The Company's principal office lease expires in 2000. These lease obligations for the next five years are as follows: 2000........................................................ $188,321 2001........................................................ 3,971 2002........................................................ 3,971 2003........................................................ 3,971 2004........................................................ 3,971 -------- $204,205 ========
Rent expense for the years ended December 31, 1998 and 1999 was $131,962 and $283,860, respectively. LICENSE AGREEMENTS The Company has entered into license agreements allowing the Company to utilize certain patents. If these patents are used in connection with a commercial product sale, the F-20 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 13. Commitments and Contingencies (continued) Company pays royalties ranging from 0.15% to 5.00% on the related product revenues. Licensing fees for the years ended December 31, 1998 and 1999 were $146,166 and $178,327, respectively. GRANTS The Company has a grant from the National Institute of Standards and Technology (NIST) Advanced Technology Program, which commenced on March 1, 1995 and ran through February 28, 2000. This grant is for the development of a DNA sequencing time-of-flight mass spectrometer with a total project cost of $7 million, of which $3.5 million will be reimbursed from NIST. The Company's expenditures were $1.3 million and $2.1 million in 1998 and 1999, respectively. Amounts reimbursed from NIST were $594,000 and $1 million in 1998 and 1999, respectively, and are classified in other revenues. The Company's wholly-owned subsidiary, Bruker Daltonik GmbH and its subsidiary Bruker Saxonia Analytik GmbH, are the recipients of six grants from German government authorities. The grants were made in connection with the Company's development of specific spectrometers and components of spectrometers. Total grants awarded amount to $4.8 million and expire through December 31, 2001. Amounts received under these grants during 1998 and 1999 totaled $1.5 million and $3 million, respectively, and are classified in other revenues. Total expenditures related to these grants were $3 million and $3.2 million in 1998 and 1999, respectively. LEGAL The Company's wholly-owned subsidiary, Bruker Daltonik GmbH, has a $6.8 million and $5.8 million accrued liability at December 31, 1998 and 1999, respectively, related to certain patent infringement litigation filed by a competitor. In 1997, the competitor initiated an action in the United States District Court of Massachusetts alleging patent infringement against the Company and Hewlett-Packard. The competitor has also filed a request for an investigation of its patent infringement claims with the United States International Trade Commission (ITC) and has filed suit against the Company in Germany, France and the United Kingdom. The Massachusetts patent action has been pending the final determination of the ITC action while the actions in Germany, France and the United Kingdom are on going. In 1998, the ITC found in favor of the Company and in 1999 the Court of Appeals for the Federal Circuit confirmed, in part, the ITC decision in favor of the Company. The Company has filed counterclaims in relation to these patent claims and in 1999 filed an anti-trust suit against the competitor in Massachusetts Federal Court. The Company believes that it has a meritorious defense to the competitor's claims and intends to vigorously defend itself. Based on a review of the current facts and circumstances, management of the Company and its subsidiary believe that the amount of the accrued liability is a reasonable estimate of the exposure to loss associated with these matters, representing, principally, anticipated legal fees. While acknowledging the uncertainties of litigation, the Company believes that these matters will be resolved without a material effect on the Company's financial position or F-21 BRUKER DALTONICS INC. NOTES TO FINANCIAL STATEMENTS (Continued) 13. Commitments and Contingencies (continued) results of operations. However, an unfavorable outcome of these matters could result in a material adverse impact on the Company's financial statements, although an estimate of such impact cannot be made. Other lawsuits, claims and proceedings of a nature considered normal to its businesses are pending against the Company and its subsidiary. The Company believes the outcome of these proceedings will not have a material impact on the Company's financial position or results of operations. F-22 Report of BDO von Riegen, Lienau, Sucker & Partner GmbH, Independent Auditors The Board of Directors Bruker Daltonics Inc. We have audited the accompanying combined balance sheet as of December 31, 1997 of the entities listed in Note 1, and the related combined statements of operations, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the financial statements of Bruker Daltonics Inc., which statements reflect total assets of approximately $5.5 million as of December 31, 1997 and total revenues of approximately $14.7 million for the year then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to data included for Bruker Daltonics Inc., is based solely on the report of other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the combined financial position at December 31, 1997 of the entities listed in Note 1, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. Bremen/Federal Republic of Germany, this 6th day of April, 2000 /s/ BDO von Riegen, Lienau, Sucker & Partner GmbH Wirtschaftsprufungsgesellschaft (Sucker) (Dr. Lienau) Wirtschaftsprufer Wirtschaftsprufer
F-23 Report of Ernst & Young LLP, Independent Auditors The Board of Directors Bruker Daltonics Inc. We have audited the balance sheet of Bruker Daltonics Inc. (formerly Bruker Analytical Systems, Inc.) (the Company) as of December 31, 1997, and the related statements of income, stockholders' equity, and cash flows for the year then ended (not presented separately herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bruker Daltonics Inc. at December 31, 1997, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Boston, Massachusetts February 3, 2000 F-24 BRUKER DALTONICS INC. COMBINED BALANCE SHEET
December 31, ------------ 1997 ------------ ASSETS Current assets: Cash and cash equivalents................................. $ 2,021,435 Accounts receivable, less allowance for doubtful accounts of $1,028................................................ 2,449,755 Inventories............................................... 14,436,816 Deferred tax asset........................................ 133,176 Other assets.............................................. 135,743 ----------- Total current assets.................................. 19,176,925 ----------- Restricted cash............................................. 6,680,002 Property, plant and equipment, net.......................... 26,173,305 Intangible and other assets................................. 218,396 ----------- Total assets...................................... $52,248,628 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings..................................... $ 182,881 Accounts payable.......................................... 4,290,956 Due to affiliated companies, net.......................... 8,218,007 Accrued expenses.......................................... 1,494,795 Accrued payroll........................................... 1,340,363 Customer deposits......................................... 10,470,046 Warranty reserve.......................................... 1,269,862 Note payable to stockholder............................... 50,000 Income taxes payable...................................... 705,513 ----------- Total current liabilities............................. 28,022,423 ----------- Deferred revenue............................................ 381,640 Deferred tax liability...................................... 7,323,929 Contingent liabilities...................................... 6,650,850 Stockholders' equity: Bruker Daltonics Inc. Common stock $.01 par value, authorized 7,000,000 shares, issued and outstanding 5,250,000 shares.................. 52,500 Additional paid-in capital................................ 697,500 Bruker Daltonik GmbH Common stock no par value, authorized 1 share, issued and outstanding 1 share...................................... 3,489,184 Accumulated other comprehensive loss...................... (1,969,494) Retained earnings......................................... 7,600,096 ----------- Total stockholders' equity............................ 9,869,786 ----------- Total liabilities and stockholders' equity........ $52,248,628 ===========
The accompanying notes are an integral part of these statements. F-25 BRUKER DALTONICS INC. COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, ------------ 1997 ------------ Product revenue............................................. $49,246,709 Other revenue............................................... 1,878,298 ----------- Net revenue................................................. 51,125,007 Costs and operating expenses: Cost of product revenue................................... 24,537,719 Sales and marketing....................................... 7,178,180 General and administrative................................ 2,119,792 Research and development.................................. 9,166,087 Patent litigation costs................................... 5,525,306 ----------- Total costs and operating expenses.................. 48,527,084 Operating income from continuing operations................. 2,597,923 Other income................................................ 127,255 Interest expense, net....................................... (743,199) ----------- Income before provision for income taxes.................... 1,981,979 Provision for income taxes.................................. 1,626,785 ----------- Income from continuing operations........................... 355,194 Income from discontinued operations, net of income taxes.... 208,851 ----------- Net income.................................................. $ 564,045 ===========
The accompanying notes are an integral part of these statements. F-26 BRUKER DALTONICS INC. COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock ------------------------ Accumulated Bruker Bruker Additional Other Total Daltonics Daltonik Paid-in Retained Comprehensive Stockholders' Inc. GmbH Capital Earnings Loss Equity ---------- ----------- ---------- ----------- --------------- -------------- Balance as of December 31, 1996 (unaudited)........... $ 7,000 $3,489,184 $ 93,000 $7,036,051 $ (628,822) $9,996,413 Issuance of common stock... 45,500 -- 604,500 -- -- 650,000 Foreign currency translation adjustment... -- -- -- -- (1,340,672) (1,340,672) Net income................. -- -- -- 564,045 -- 564,045 ---------- Net comprehensive loss..... -- -- -- -- -- (776,627) ------- ---------- -------- ---------- ----------- ---------- Balance as of December 31, 1997....................... $52,500 $3,489,184 $697,500 $7,600,096 $(1,969,494) $9,869,786 ======= ========== ======== ========== =========== ==========
The accompanying notes are an integral part of these statements. F-27 BRUKER DALTONICS INC. COMBINED STATEMENT OF CASH FLOWS
Year Ended December 31, ------------ 1997 ------------ Operating activities: Income from continuing operations........................... $ 355,194 Adjustments to reconcile income from continuing operations to net cash provided by continuing operations: Depreciation and amortization............................. 2,572,850 Deferred income taxes..................................... 1,024,312 Changes in operating assets and liabilities: Accounts receivable..................................... 4,393,788 Inventories............................................. (325,147) Other assets............................................ 780,460 Accounts payable and accrued expenses................... 1,556,147 Warranty reserve........................................ (1,080,366) Contingent liabilities.................................. 3,585,381 Income taxes payable.................................... 663,583 Deferred revenue........................................ 248,820 Customer deposits....................................... (1,409,458) ------------ Net cash provided by continuing operations.................. 12,365,564 Net cash provided by discontinued operations................ 320,904 ------------ Net cash provided by operating activities............... 12,686,468 Investing activities: Purchases of property and equipment......................... (3,911,879) ------------ Net cash used in investing activities................... (3,911,879) Financing activities: Payments on line of credit.................................. (5,399,472) Changes in due to affiliated companies...................... (5,366,415) Issuance of common stock.................................... 650,000 ------------ Net cash used in financing activities................... (10,115,887) Effect of exchange rate changes............................. (403,760) ------------ Net decrease in cash and cash equivalents................... (1,745,058) Cash and cash equivalents at beginning of year.............. 3,766,493 ------------ Cash and cash equivalents at end of year.................... $ 2,021,435 ============ Supplemental cash flow information: Cash paid for interest.................................... $ 1,252,112 Cash paid for income taxes................................ 517,461
The accompanying notes are an integral part of these statements. F-28 BRUKER DALTONICS INC. NOTES TO COMBINED FINANCIAL STATEMENTS 1. Description of Business These financial statements represent the combined accounts of Bruker Daltonics Inc. (formally Bruker Analytical Systems, Inc.) and Bruker Daltonik GmbH (formally Bruker-Franzen Analytik GmbH) including its subsidiary Bruker Saxonia Analytik GmbH (collectively "Bruker Daltonics" or the "Company"), for the year ended December 31, 1997. All significant intercompany accounts and transactions have been eliminated in combination. The Company designs, manufactures and markets proprietary life science systems based on its mass spectrometry core technology platforms. The Company also sells a broad range of field analytical systems for pathogen identification and substance detection. The Company maintains major technical centers in Europe and North America. Bruker Daltonics allocates substantial amounts to research and development and are parties to various collaborations and strategic alliances. The Company's diverse customer base includes pharmaceutical and biotechnology companies, academic institutions and government agencies. 2. Summary of Significant Accounting Policies USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with original maturities of 90 days or less at date of purchase to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair market value at year end. The Company has repurchase agreements with a bank. The repurchase agreements are collateralized by investments principally consisting of U.S. Government Agency securities in the amount of at least 100% of such obligation. RESTRICTED CASH At December 31, 1997, $6,680,002 of cash was restricted as part of an advance deposit for a product distribution agreement between Bruker Daltonik GmbH and Hewlett-Packard Company (HP). The Company withdrew amounts for payment as products were delivered and accepted by HP. CONCENTRATION OF CREDIT RISK Financial instruments which subject the Company to credit risk consist of cash and cash equivalents and accounts receivables. The risk with respect to cash and cash equivalents is minimized by the Company's policy of investing in short-term financial instruments issued by highly-rated financial institutions. The risk with respect to accounts receivable is minimized by F-29 BRUKER DALTONICS INC. NOTES TO COMBINED FINANCIAL STATEMENTS (Continued) 2. Summary of Significant Accounting Policies (continued) the credit worthiness of the Company's customers. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Credit losses have been within management's expectations. For the year ended December 31, 1997, two customers accounted for an aggregate of 31% of the Company's product revenue. Accounts receivables, as of December 31, 1997, for these two customers accounted for an aggregate of 28% of total receivables. INVENTORIES Inventories are stated at the lower of cost or market with cost determined by the first-in, first-out ("FIFO") method. Inventories include demonstration equipment which the Company offers to current and potential customers. The Company amortizes its demonstration equipment over a three year period. Amortization expense for demonstration equipment was $105,981 for the year ended December 31, 1997. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost and are being depreciated on a straight-line basis over the estimated useful lives of the assets as follows: Buildings................................................... 25 years Machinery and equipment..................................... 5-10 years Furniture and fixtures...................................... 3-5 years
SOFTWARE COSTS Purchased software is capitalized at cost and amortized over the estimated useful life, generally three years. Software developed for use in the Company's products is expensed as incurred and is classified as research and development expense. OTHER ASSETS Other assets consist principally of patents and licenses. Patents, patent applications and rights are stated at acquisition cost. Amortization of patents is recorded using the straight-line method over the legal lives of the patents, generally for periods ranging up to ten years. Accumulated amortization of these assets amounted to $694,104 as of December 31, 1997. LONG-LIVED ASSETS The Company reviews long-lived assets for impairment, in accordance with Statement of Financial Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets to Be Disposed Of," whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are written-down to fair value when the carrying costs exceed this amount. Any impairment losses are determined based upon estimated future cash flows and fair values. To date, no such indicators of impairment have been identified. F-30 BRUKER DALTONICS INC. NOTES TO COMBINED FINANCIAL STATEMENTS (Continued) 2. Summary of Significant Accounting Policies (continued) WARRANTY COSTS The Company provides a one year parts and labor warranty with the purchase of equipment. The anticipated cost for this one year warranty is accrued upon recognition of the sale and is included as a current liability on the accompanying balance sheets. CUSTOMER DEPOSITS Under the terms and conditions of contracts with certain customers, the Company requires an advance deposit. These deposit amounts are recorded as a liability until revenue is recognized against the specific contract at time of acceptance of the system. PATENT LITIGATION COSTS The Company records charges for the costs it anticipates incurring in connection with litigation and claims against the Company when management can reasonably estimate these costs. FOREIGN CURRENCY TRANSLATION In accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, "Accounting for Foreign Exchange," all balance sheet accounts of foreign subsidiaries are translated into United States dollars at the current exchange rate, and income statement items are translated at the average exchange rate for the period; resulting translation adjustments are made directly to accumulated other comprehensive income in stockholders' equity. Realized exchange gains and losses are included in current operations and were not material. REVENUE RECOGNITION Revenue is recognized from system sales, including hardware with embedded software, when a product is accepted by the customer, except when sold through an independent distributor, a strategic distribution partner or an unconsolidated Bruker affiliated distributor which assume responsibility for installation, in which case the system sale is recognized when the products are shipped to the distributor and the title has transferred to the distributor. Our distributors do not have price protection rights or rights to return, however our products are warranted to be free from defect for a period of, typically one year. Revenue from accessories and parts is recognized upon shipment, and revenue from services when performed. The Company's revenue recognition policies for software are in compliance with the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2, Software Revenue Recognition. The Company also offers to its customers extended warranty and service agreements extending beyond the initial year of warranty for a fee. These fees are recorded as deferred revenue and amortized into income over the life of the contract. Other revenues, which are principally comprised of research and development grants, are recognized as grant work is performed. F-31 BRUKER DALTONICS INC. NOTES TO COMBINED FINANCIAL STATEMENTS (Continued) 2. Summary of Significant Accounting Policies (continued) The Company believes that its revenue recognition policies comply with SEC Staff Accounting Bulletin No. 101--"Revenue Recognition in Financial Statements." ADVERTISING COSTS Advertising costs are expensed as incurred. Advertising expenses included in sales and marketing were $256,360 for the year ended December 31, 1997. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. INCOME TAXES The Company provides for income taxes under the liability method prescribed by SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the difference is expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. ACCOUNTING DEVELOPMENTS In 1997, the Company adopted SFAS No. 130, "Reporting Comprehensive Income," which establishes rules for reporting of comprehensive income and its components. The components of comprehensive income that relate to the Company are net earnings and foreign currency translation adjustments. In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The provisions of the statement require the recognition of all derivatives as either assets or liabilities in the statement of financial position and the measurement of those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. The Company is required to implement the statement in the first quarter of fiscal 2001. The Company does not believe that this new accounting standard will have a material impact on the financial statements. 3. Inventories The components of inventories at December 31, 1997 were as follows:
December 31, ------------ 1997 ------------ Raw materials............................................... $ 3,808,502 Work-in-process............................................. 4,269,997 Finished goods.............................................. 6,358,317 ----------- $14,436,816 ===========
F-32 BRUKER DALTONICS INC. NOTES TO COMBINED FINANCIAL STATEMENTS (Continued) 4. Property, Plant and Equipment Property, plant and equipment at December 31, 1997 consisted of the following:
December 31, ------------ 1997 ------------ Land........................................................ $ 1,118,789 Buildings................................................... 24,899,552 Office furniture, machinery and equipment................... 16,639,063 ------------ 42,657,404 Less accumulated depreciation............................... (16,484,099) ------------ $ 26,173,305 ============
Depreciation expense for the year ended December 31, 1997 was $2,340,780. 5. Income Taxes The components of income before provision for income taxes consisted of the following for the year ended December 31, 1997:
Year Ended December 31, ------------- 1997 ------------- United States............................................... $ 129,039 Foreign..................................................... 1,852,940 ---------- $1,981,979 ==========
Significant components of the provision (benefit) for income taxes for the year ended December 31, 1997 are as follows:
Year Ended December 31, ------------- 1997 ------------- Current: Federal................................................... $ 14,752 State..................................................... 3,950 Foreign................................................... 27,311 ---------- 46,013 ---------- Deferred: Federal................................................... (49,806) Foreign................................................... 1,630,578 ---------- 1,580,772 ---------- Total income taxes on continuing operations................. $1,626,785 ==========
F-33 BRUKER DALTONICS INC. NOTES TO COMBINED FINANCIAL STATEMENTS (Continued) 5. Income Taxes (continued) The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense for the year ended December 31, 1997 was as follows:
Year Ended December 31, ------------- 1997 ------------- Income tax (benefit) at statutory rate...................... $ 674,000 Add (deduct) Tax differentials on foreign earnings..................... 985,000 State income taxes........................................ 4,000 Other..................................................... (36,215) ---------- $1,626,785 ==========
The components of the Company's deferred income taxes at December 31, 1997 were as follows:
December 31, ------------- 1997 ------------- Deferred tax assets: Inventory................................................. $ 131,610 Warranty accrual.......................................... 49,000 Net operating loss credit carryforward.................... 1,523,000 Other..................................................... 498,637 ----------- 2,202,247 Deferred tax liabilities: Patent litigation costs................................... (3,385,000) Excess tax over book depreciation......................... (6,004,000) Other..................................................... (4,000) ----------- Total deferred tax liabilities.............................. (9,393,000) ----------- Net deferred tax liability.................................. $(7,190,753) ===========
As of December 31, 1997, the Company had approximately $3 million of net operating loss tax credit carryforwards available to reduce future tax liabilities. These credits expire through the year 2013. 6. Financing Arrangements The Company maintains revolving lines of credit, of approximately $5,300,000 among German banks at interest rates ranging between 7.25% and 7.50%. At December 31, 1997, $182,881 were outstanding against these revolving lines of credit. The lines are renewable annually in October 1998. F-34 BRUKER DALTONICS INC. NOTES TO COMBINED FINANCIAL STATEMENTS (Continued) 7. Segment and Geographic Information The Company operates in one business segment and engages in the design, manufacturing and marketing of proprietary life science systems, process analysis systems, and analytical instruments based primarily on mass spectrometry technology. GEOGRAPHIC AREAS Information concerning principal geographic areas for 1997 are as follows:
Year Ended December 31, ------------- 1997 ------------- Net product revenues from external customers Germany................................................... $36,019,815 United States............................................. 13,226,894 ----------- Combined.................................................. $49,246,709 ===========
Net product revenues are attributable to geographic areas based on the region of sale.
December 31, ------------ 1997 ------------ Long-lived assets (excluding intangible assets) Germany................................................... $26,026,746 United States............................................. 146,559 ----------- Combined.................................................. $26,173,305 =========== Net assets Germany................................................... $ 9,146,007 United States............................................. 841,695 ----------- 9,987,702 Elimination entries....................................... (117,916) ----------- Combined.................................................. $ 9,869,786 ===========
8. Discontinued Operations The Company plans to complete the sale of its FT-IR business to Bruker Optik GmbH in the first half of 2000. The FT-IR business sells and services FT-IR instruments to a variety of markets, outside the Company's core technology platform of mass spectrometry. F-35 BRUKER DALTONICS INC. NOTES TO COMBINED FINANCIAL STATEMENTS (Continued) 8. Discontinued Operations (continued) Summary results for the discontinued operations for the year ended December 31, 1997 are as follows:
Year Ended December 31, ------------ 1997 ------------ Net product revenues........................................ $1,643,857 Total costs and expenses.................................... 1,295,352 Provision for income taxes.................................. 139,654 ---------- Income from discontinued operations......................... $ 208,851 ==========
The assets and liabilities of the discontinued operations as of December 31, 1997 consisted of accounts payable of $385,869. 9. Related-Party Transactions As of December 31, 1997, Bruker Daltonik GmbH has two demand loans outstanding aggregating $8,262,617 to Techneon AG, an affiliated company. The loans, which are unsecured, bear interest at 5.25% and 7.50%. At December 31, 1997, the Group had a $50,000 demand note to the President of the Group. The note, which is unsecured, bears interest at prime (8.50% at December 31, 1997). The Company recognized sales to affiliated entities of $14,256,695 and purchases from affiliated entities of $3,019,177 in 1997. In 1997, Bruker Instruments, Inc., a related party, provided administrative and other services to the Company at a cost of $370,391 based on its assessment of the estimated fair market value of such services. 10. Employee Benefit Plans The Company maintains or sponsors various defined contribution retirement plans that cover domestic and international employees. The Company may make contributions to these plans at its discretion. Retirement benefits earned are generally based on years of service and compensation during active employment. Eligibility is generally determined in accordance with local statutory requirements. However, the level of benefits and terms of vesting may vary among plans. The Company contributed $49,037 in 1997. 11. Commitments and Contingencies LEASES The Company leases office and production space from Bruker Instruments, Inc. under a renewable lease. The term of this lease, which was entered into on June 27, 1996, is for three years and four months with one year extensions thereafter. Total rent expense was $125,123 in 1997. F-36 BRUKER DALTONICS INC. NOTES TO COMBINED FINANCIAL STATEMENTS (Continued) 11. Commitments and Contingencies (continued) Future minimum rental payments under the Company's operating lease, excluding real estate taxes, insurance and operating costs paid by the Company, are $131,962, $213,782 and $184,350 for 1998, 1999 and 2000, respectively. GRANTS The Company has a grant from the National Institute of Standards and Technology (NIST) Advanced Technology Program, which commenced on March 1, 1995 and runs through February 28, 2000. This grant is for the development of a DNA sequencing time-of-flight mass spectrometer with a total project cost of $7.0 million, of which $3.5 million will be reimbursed from NIST. The Company's expenditures were $953,852 in 1997. Amounts reimbursed from NIST were $487,780, and are classified in other revenues. Bruker Daltonik GmbH and its subsidiary Bruker Saxonia Analytik GmbH, are the recipients of five grants from German government authorities. The grants were made in connection with the Company's development of specific spectrometers and components of spectrometers. Grants range from $1,203,382 to $6,183,027 and aggregate $16,483,699. The grants expire from December 31, 1997 through January 31, 2001. Aggregate expenditures during the year ended December 31, 1997 totaled $3,744,857. Amounts reimbursed in the aggregate during 1997 totaled $1,390,518 and are classified in other revenues. At December 31, 1997, the Company had no grants receivable. LEGAL Various lawsuits, claims and proceedings of a nature considered normal to its businesses are pending against the Company and its subsidiary. The most significant of these are described below. The Company has a $6.7 million accrued liability at December 31, 1997 related to certain patent infringement litigation filed by a competitor. In 1997, the competitor initiated an action in the United States District Court of Massachusetts alleging patent infringement against the Company and Hewlett-Packard. The competitor has also filed a request for an investigation of its patent infringement claims with the United States International Trade Commission (ITC) and has filed suit against the Company in Germany, France and the United Kingdom. The Massachusetts patent action has been pending the final determination of the ITC action while the actions in Germany, France and the United Kingdom are on going. Based on a review of the current facts and circumstances, management of the Company believe that the amount of the accrued liability is a reasonable estimate of the exposure to the loss associated with these matters, representing, principally, anticipated legal fees. While acknowledging the uncertainties of litigation, the Company believes that these matters will be resolved without a material effect on the Company's financial position or results of operations. However, an unfavorable outcome of these matters could result in a material adverse impact on the Company's financial statements. F-37 You should rely only on the information contained in this prospectus. We have not authorized anyone to provide information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. TABLE OF CONTENTS
Page -------- Prospectus Summary............... 1 Risk Factors..................... 6 Special Note Regarding Forward-Looking Statements..... 17 Use of Proceeds.................. 18 Dividend Policy.................. 18 Capitalization................... 19 Dilution......................... 20 Selected Financial Data.......... 21 Management's Discussion and Analysis of Financial Condition and Results of Operations...... 23 Business......................... 33 Management....................... 48 Principal Stockholders........... 54 Related Transactions............. 55 Description of Capital Stock..... 58 Shares Eligible for Future Sale........................... 61 Underwriting..................... 62 Certain United States Tax Considerations for Non-United States Holders................. 65 Legal Matters.................... 69 Experts.......................... 69 Change in Accountants............ 69 Where You Can Find More Information.................... 69 Index to Financial Statements.... F-1
Until , 2000 (25 days after the date of this prospectus), all dealers that buy, sell or trade in these securities, whether or not participating in this offering, may be required to deliver a prospectus. Dealers are also obligated to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. [LOGO] 7,500,000 Shares Common Stock UBS Warburg LLC CIBC World Markets Thomas Weisel Partners LLC Prospectus , 2000 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The estimated expenses (other than the underwriting discount) payable in connection with the sale of the common stock offered hereby are as follows, all of which will be paid by the Company:
AMOUNT ------------ SEC registration fee........................................ $ 33,000 NASD filing fee............................................. 13,000 Nasdaq National Market fee.................................. 95,000 Printing expenses........................................... 300,000 Legal fees and expenses..................................... 500,000 Accounting fees and expenses................................ 300,000 Transfer agent and registrar fees and expenses.............. 25,000 Miscellaneous............................................... 234,000 ----------- Total....................................................... $ 1,500,000 ===========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the General Corporation Law of the State of Delaware provides as follows: A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact the he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent or another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suite or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorney's fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and a manner he reasonably believed to in or not opposed to the best interest of the corporation and except that no indemnification shall be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the II-1 adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. In addition, pursuant to our certificate of incorporation and bylaws, we shall indemnify our directors and officers against expenses (including judgments or amounts paid in settlement) incurred in any action, civil or criminal, to which any such person is a party by reason of any alleged act or failure to act in his capacity as such, except as to a matter as to which such director or officer shall have been finally adjudged not to have acted in good faith in the reasonable belief that his action was in the best interest of the corporation. The underwriting agreement between Bruker Daltonics and the underwriters of this offering provides that the underwriters are obligated, under certain circumstances, to indemnify our directors, officers and controlling persons against certain liabilities, including liabilities under the Securities Act. Reference is made to the form of Underwriting Agreement filed at Exhibit 1.1 hereto. We maintain directors and officers liability insurance for the benefit of our directors and certain of our officers. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES During the three year period ending December 31, 1999, Bruker Daltonics has issued the following securities, none of which has been registered under the Securities Act: 1. On February 1, 1997, we sold 350,000 shares of common stock to Frank H. Laukien for a purchase price of $3,500 and a capital contribution of $46,500. 2. On June 30, 1997, we sold 1,750,000 shares of common stock to Isolde Laukien for a purchase price of $17,500 and a capital contribution of $232,500; 1,050,000 shares of common stock to Joerg C. Laukien for a purchase price of $10,500 and a capital contribution of $139,500; 1,050,000 shares of common stock to Marc M. Laukien for a purchase price of $10,500 and a capital contribution of $139,500; and 350,000 shares of common stock to Dirk D. Laukien for a purchase price of $3,500 and a capital contribution of $46,500. 3. On December 21, 1998, we sold 8,050,000 shares of common stock for $80,500 and a capital contribution of $1,069,500 to each of Frank H. Laukien, Isolde Laukien, Joerg C. Laukien, Marc M. Laukien and Dirk D. Laukien. 4. As of July 12, 2000, options to purchase 762,750 shares of common stock were outstanding under Bruker Daltonics' 2000 Stock Option Plan. None of the options are exercisable within 60 days. All of these options were granted in February, April and July 2000 to officers, directors, employees and advisors of Bruker Daltonics. The sales of securities set forth in paragraphs one to three above were exempt from the registration requirements of the Securities Act in reliance on Section 4(2) thereof, or Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering. The sale of securities set forth in paragraph four above was exempt from the registration requirements of the Securities Act in reliance on Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer pursuant to compensatory benefit plans and contracts relating to compensation as provided under such Rule 701. The granting of stock options described in paragraph four above did not require registration under the Securities Act, or an exemption therefrom, insofar as such grants did not involve a "sale" of securities as such term is used in Section 2(3) of the Securities Act. II-2 ITEM 16. EXHIBITS
NO. DESCRIPTION OF DOCUMENTS --- ------------------------------------------------------------ 1.1 Form of Underwriting Agreement **2.1 Asset Purchase Agreement dated July 1, 1996 between the Registrant and Spectrospin AG **2.2 Share Purchase Agreement dated December 9, 1998 among the Registrant, Bruker Physik AG and the estate of Dr. Guenther R. Laukien **2.3 Asset Purchase Agreement dated May 28, 1999 between the Registrant and Viking Instruments Corp **2.4 ProteiGene Share Purchase Agreement dated December 6, 1999 between the Registrant and Frank H. Laukien **2.5 ProteiGene Share Purchase Agreement dated March 1, 2000 between the Registrant and Sidney R. Kaufman **3.1 Amended and Restated Certificate of Incorporation of the Registrant **3.2 Amended and Restated Bylaws of the Registrant *4.1 Specimen stock certificate representing shares of common stock of the Registrant *5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation **10.1 2000 Stock Option Plan **10.2 Sharing Agreement dated as of February 28, 2000 among the Registrant and 13 affiliates of the Registrant **+10.3 Collaboration and OEM Agreement dated March 6, 2000 between PerkinElmer Instruments LLC and its Affiliates and the Registrant and its Affiliates **+10.4 Cooperation Agreement dated November 15, 1999 between Bruker Daltonik GmbH and MWG-Biotech AG **+10.5 License Agreement dated August 10, 1998 between the Registrant and Indiana University's Advanced Research & Technology Institute **10.6 Lease dated June 27, 1996 between the Registrant and Bruker Instruments, Inc., as amended +10.7 ITMS Collaboration Agreement by and between Hewlett-Packard, the Registrant and Bruker Daltonik GmbH, dated April 28, 1999 **+10.8 Collaboration Agreement dated December 4, 1997 between Bruker-Franzen Analytik GmbH and Sequenom Instruments GmbH **+10.9 Agreement by and between the Bruker Daltonik GmbH, Bruker Saxonia Analytik GmbH and Bruker Optik GmbH dated March 30, 2000 **16.1 Letter re: change in certifying accountants **21.1 Subsidiaries of the Registrant 23.1 Consent of Ernst & Young LLP 23.2 Consent of BDO von Riegen, Lienau, Sucker & Partner GmbH *23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in Exhibit 5.1) 24.1 Power of Attorney for M. Christopher Canavan, Jr. **27.1 Financial Data Schedule as of December 31, 1999 **27.2 Financial Data Schedule as of March 31, 2000
- --------- II-3 * To be filed by amendment ** Previously filed + Confidential treatment requested as to certain portions, which portions have been omitted and filed separately with the Commission. All other schedules for which provisions are made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. ITEM 17. UNDERTAKINGS The undersigned registrant hereby undertakes to provide to the underwriters at the closing of this offering specified in the underwriting agreement certificates in such denomination and registered in such names as required by the underwriters to permit proper delivery to each purchaser. The undersigned registrant hereby undertakes that: (1) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and (2) for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to provisions described in Item 14 above, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amended registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Billerica, Massachusetts, on July 14, 2000. BRUKER DALTONICS INC. By: /s/ FRANK H. LAUKIEN, PH.D. ----------------------------------------- Frank H. Laukien, Ph.D. PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- President and Chief Executive /s/ FRANK H. LAUKIEN, PH.D. Officer and Chairman of the ------------------------------------------- Board (Principal Executive July 14, 2000 Frank H. Laukien, Ph.D. Officer) Corporate Controller and /s/ JOHN J. HULBURT Treasurer ------------------------------------------- (Principal Financial and July 14, 2000 John J. Hulburt Accounting Officer) * ------------------------------------------- Director July 14, 2000 Dieter Koch, Ph.D. * ------------------------------------------- Director July 14, 2000 Bernhard Wangler * ------------------------------------------- Director July 14, 2000 William A. Linton * ------------------------------------------- Director July 14, 2000 Collin D'Silva * ------------------------------------------- Director July 14, 2000 Richard M. Stein /s/ M. CHRISTOPHER CANAVAN, JR. ------------------------------------------- Director July 14, 2000 M. Christopher Canavan, Jr. * /s/ FRANK H. LAUKIEN, PH.D. - ------------------------------------------- Frank H. Laukien, Ph.D., as Attorney-in-fact
EXHIBIT INDEX
NO. DESCRIPTION OF DOCUMENTS - --- ------------------------------------------------------------ 1.1 Form of Underwriting Agreement **2.1 Asset Purchase Agreement dated July 1, 1996 between the Registrant and Spectrospin AG **2.2 Share Purchase Agreement dated December 9, 1998 among the Registrant, Bruker Physik AG and the estate of Dr. Guenther R. Laukien **2.3 Asset Purchase Agreement dated May 28, 1999 between the Registrant and Viking Instruments Corp. **2.4 ProteiGene Share Purchase Agreement dated December 6, 1999 between the Registrant and Frank H. Laukien **2.5 ProteiGene Share Purchase Agreement dated March 1, 2000 between the Registrant and Sidney R. Kaufman **3.1 Amended and Restated Certificate of Incorporation of the Registrant **3.2 Amended and Restated Bylaws of the Registrant *4.1 Specimen stock certificate representing shares of common stock of the Registrant *5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation **10.1 2000 Stock Option Plan **10.2 Sharing Agreement dated as of February 28, 2000 among the Registrant and 13 affiliates of the Registrant **+10.3 Collaboration and OEM Agreement dated March 6, 2000 between PerkinElmer Instruments LLC and its Affiliates and the Registrant and its Affiliates **+10.4 Cooperation Agreement dated November 15, 1999 between Bruker Daltonik GmbH and MWG-Biotech AG **+10.5 License Agreement dated August 10, 1998 between the Registrant and Indiana University's Advanced Research & Technology Institute **10.6 Lease dated June 27, 1996 between the Registrant and Bruker Instruments, Inc., as amended +10.7 ITMS Collaboration Agreement by and between Hewlett-Packard, the Registrant and Bruker Daltonik GmbH, dated April 28, 1999 **+10.8 Collaboration Agreement dated December 4, 1997 between Bruker-Franzen Analytik GmbH and Sequenom Instruments GmbH **+10.9 Agreement by and between the Bruker Daltonik GmbH, Bruker Saxonia Analytik GmbH and Bruker Optik GmbH dated March 30, 2000 **16.1 Letter re: change in certifying accountants **21.1 Subsidiaries of the Registrant 23.1 Consent of Ernst & Young LLP 23.2 Consent of BDO von Riegen, Lienau, Sucker & Partner GmbH *23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in Exhibit 5.1) 24.1 Power of Attorney for M. Christopher Canavan, Jr. **27.1 Financial Data Schedule as of December 31, 1999 **27.2 Financial Data Schedule as of March 31, 2000
- ------------ * To be filed by amendment + Confidential treatment requested as to certain portions, which portions have been omitted and filed separately with the Commission. ** Previously filed EX-1.1 2 ex-1_1.txt EXHIBIT 1.1 Exhibit 1.1 __________ Shares BRUKER DALTONICS INC. Common Stock ($.01 Par Value) FORM OF EQUITY UNDERWRITING AGREEMENT ________ __, 2000 UBS Warburg LLC Thomas Weisel Partners LLC CIBC World Markets Corp. As Representatives of the Several Underwriters c/o UBS Warburg LLC 299 Park Avenue, 41st Floor New York, New York 10171 Ladies and Gentlemen: Bruker Daltonics Inc., a Delaware corporation (the "Company") proposes to sell to the several underwriters (the "Underwriters") named in Schedule I hereto for whom you are acting as representatives (the "Representatives") an aggregate of ___________ shares of the Company's Common Stock, $.01 par value (the "Firm Shares"). The respective amounts of the Firm Shares to be so purchased by the several Underwriters are set forth opposite their names in Schedule I hereto. The Company also proposes to sell at the Underwriters' option an aggregate of up to ___________ additional shares of the Company's Common Stock (the "Option Shares") as set forth below. As the Representatives, you have advised the Company (a) that you are authorized to enter into this Agreement on behalf of the several Underwriters, and (b) that the several Underwriters are willing, acting severally and not jointly, to purchase the numbers of Firm Shares set forth opposite their respective names in Schedule I, plus their pro rata portion of the Option Shares if you elect to exercise the over-allotment option in whole or in part for the accounts of the several Underwriters. The Firm Shares and the Option Shares (to the extent the aforementioned option is exercised) are herein collectively called the "Shares." The Company and the Underwriters agree that up to _________shares of the Common Stock to be purchased by the Underwriters (the "Reserved Shares") shall be reserved for sale by the Underwriters to certain persons designated by the Company, as part of the distribution of the Shares by the Underwriters, subject to the terms of this Agreement, the applicable rules, regulations and interpretations of the National Association of Securities Dealers, Inc. (the "NASD") and all other applicable laws, rules and regulations. To the extent that such Reserved Shares are not orally confirmed for purchase by such persons designated by the Company by the end of the first business day after the date of this Agreement, such Reserved Shares may be offered to the public as part of the public offering contemplated hereby. In consideration of the mutual agreements contained herein and of the interests of the parties in the transactions contemplated hereby, the parties hereto agree as follows: 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to each of the Underwriters as follows: (a) A registration statement on Form S-1 (File No. 33-______) with respect to the Shares has been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the "Act"), and the Rules and Regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder and has been filed with the Commission and the registration statement filed by electronic transmission pursuant to the Commission's Electronic Data Gathering, Analysis and Retrieval System ("EDGAR") (except as may be permitted by Regulation S-T under the Act) was identical to the copy thereof delivered to the Underwriters for use in connection with the offer and sale of the Shares. The Company has complied with the conditions for the use of Form S-1. Copies of such registration statement, including any amendments thereto, the preliminary prospectuses (meeting the requirements of the Rules and Regulations) contained therein and the exhibits, financial statements and schedules, as finally amended and revised, have heretofore been delivered by the Company to you. Such registration statement, together with any registration statement filed by the Company pursuant to Rule 462 (b) of the Act, herein referred to as the "Registration Statement," which shall be deemed to include all information omitted therefrom in reliance upon Rule 430A and contained in the Prospectus referred to below, has become effective under the Act and no post-effective amendment to the Registration Statement has been filed as of the date of this Agreement. "Prospectus" means the form of prospectus first filed with the Commission pursuant to Rule 424(b). Each preliminary prospectus included in the Registration Statement prior to the time it becomes effective is herein referred to as a "Preliminary Prospectus." Any reference herein to the Registration Statement, any -2- Preliminary Prospectus or to the Prospectus shall be deemed to refer to and include any supplements or amendments thereto, filed with the Commission after the date of filing of the Prospectus under Rules 424(b) or 430A, and prior to the termination of the offering of the Shares by the Underwriters. (b) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement. Each of the subsidiaries of the Company as listed in Exhibit A hereto (collectively, the "Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement. The Subsidiaries are the only subsidiaries, direct or indirect, of the Company. The Company and each of the Subsidiaries are duly qualified to transact business in all jurisdictions in which the conduct of their business requires such qualification. The outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and to the extent shown in Exhibit A hereto are owned by the Company or another Subsidiary free and clear of all liens, encumbrances and equities and claims; and no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into shares of capital stock or ownership interests in the Subsidiaries are outstanding. (c) The outstanding shares of Common Stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; the Shares to be issued and sold by the Company have been duly authorized and when issued and paid for as contemplated herein will be validly issued, fully paid and non-assessable; and no preemptive rights of stockholders exist with respect to any of the Shares or the issue and sale thereof. None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other rights to subscribe for or purchase securities of the Company. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company other than those described in the Prospectus. Neither the filing of the Registration Statement nor the offering or sale of the Shares as contemplated by this Agreement gives rise to any rights, other than those which have been waived or satisfied, for or relating to the registration of any shares of Common Stock, which rights, if any, are described in the Prospectus under the heading "Shares Eligible for Future Sale" and "Description of Capital Stock." The description of the Company's stock option and other stock plans or arrangements, and the options or other rights granted thereunder, set forth in the Prospectus accurately and fairly presents in all material respects the information required to be shown with respect to such plans, arrangements, options and rights. (d) The information set forth under the caption "Capitalization" in the Prospectus is true and correct. All of the Shares conform to the description thereof contained in the Registration -3- Statement. The form of certificates for the Shares conforms to the corporate law of the jurisdiction of the Company's incorporation. (e) The Commission has not issued an order preventing or suspending the use of any Prospectus relating to the proposed offering of the Shares nor instituted proceedings for that purpose. The Registration Statement contains, and the Prospectus and any amendments or supplements thereto will contain, all statements which are required to be stated therein by, and will conform to, the requirements of the Act and the Rules and Regulations. The Registration Statement and any amendment thereto do not contain, and will not contain, any untrue statement of a material fact and do not omit, and will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus and any amendments and supplements thereto do not contain, and will not contain, any untrue statement of material fact; and do not omit, and will not omit, to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to information contained in or omitted from the Registration Statement or the Prospectus, or any such amendment or supplement, in reliance upon, and in conformity with, written information furnished to the Company by or on behalf of any Underwriter through the Representatives, specifically for use in the preparation thereof. (f) The consolidated financial statements of the Company and the Subsidiaries, together with related notes and schedules as set forth in the Registration Statement, present fairly the financial position and the results of operations and cash flows of the Company and the consolidated Subsidiaries, at the indicated dates and for the indicated periods. Such financial statements and related schedules have been prepared in accordance with generally accepted principles of accounting, consistently applied throughout the periods involved, except as disclosed therein, and all adjustments necessary for a fair presentation of results for such periods have been made. No other financial statements or supporting schedules are required to be included in the Registration Statement. The summary financial and statistical data included in the Registration Statement presents fairly the information shown therein and such data has been compiled on a basis consistent with the financial statements presented therein and the books and records of the Company. The pro forma financial statements and other pro forma financial information included in the Registration Statement and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements, have been properly compiled on the pro forma bases described therein, and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (g) Ernst & Young, who have certified certain of the financial statements filed with the Commission as part of the Registration Statement, are independent public accountants as required by the Act and the Rules and Regulations. -4- (h) There is no action, suit, claim or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of the Subsidiaries before any court or administrative agency or otherwise which if determined adversely to the Company or any of its Subsidiaries might result in any material adverse change in the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and of the Subsidiaries taken as a whole or to prevent the consummation of the transactions contemplated hereby, except as set forth in the Registration Statement. (i) The Company and the Subsidiaries have good and marketable title to all of the properties and assets reflected in the financial statements (or as described in the Registration Statement) hereinabove described, subject to no lien, mortgage, pledge, charge or encumbrance of any kind except those reflected in such financial statements (or as described in the Registration Statement) or which are not material in amount. The Company and the Subsidiaries occupy their leased properties under valid and binding leases conforming in all material respects to the description thereof set forth in the Registration Statement. (j) The Company and the Subsidiaries have filed all Federal, State, local and foreign tax returns which have been required to be filed and have paid all taxes indicated by said returns and all assessments received by them or any of them to the extent that such taxes have become due. All tax liabilities have been adequately provided for in the financial statements of the Company, and the Company does not know of any actual or proposed additional material tax assessments. (k) Since the respective dates as of which information is given in the Registration Statement, as it may be amended or supplemented, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise), or prospects of the Company and its Subsidiaries taken as a whole, whether or not occurring in the ordinary course of business, and there has not been any material transaction entered into or any material transaction that is probable of being entered into by the Company or the Subsidiaries, other than transactions in the ordinary course of business and changes and transactions described in the Registration Statement, as it may be amended or supplemented. The Company and the Subsidiaries have no material contingent obligations which are not disclosed in the Company's financial statements which are included in the Registration Statement. (l) Neither the Company nor any of the Subsidiaries is or with the giving of notice or lapse of time or both, will be, in violation of or in default under its Charter or By-Laws or under any agreement, lease, contract, indenture or other instrument or obligation to which it is a party or by which it, or any of its properties, is bound and which default is of material significance in respect of the condition, financial or otherwise of the Company and its Subsidiaries taken as a whole or the business, management, properties, assets, rights, operations, condition (financial or otherwise) or -5- prospects of the Company and the Subsidiaries taken as a whole. The execution and delivery of this Agreement and the consummation of the transactions herein contemplated and the fulfillment of the terms hereof will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any Subsidiary is a party, or of the Charter or By-Laws of the Company or any order, rule or regulation applicable to the Company or any Subsidiary of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction. (m) Each approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body necessary in connection with the execution and delivery by the Company of this Agreement and the consummation of the transactions herein contemplated (except such additional steps as may be required by the Commission, the National Association of Securities Dealers, Inc. (the "NASD") or such additional steps as may be necessary to qualify the Shares for public offering by the Underwriters under state securities or Blue Sky laws) has been obtained or made and is in full force and effect. (n) The Company is conducting its business in compliance with all applicable local, state, federal and foreign laws, rules and regulations, including without limitation, all such laws, rules and regulations of the jurisdictions in which the Company and each Subsidiary is conducting business. (o) The Company and each Subsidiary owns or possesses those trademarks, trade names, service marks, patents, patent rights, copyrights, licenses, approvals, inventions, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) and other similar rights and intellectual property necessary to conduct its business as now conducted and has taken all steps reasonably necessary to secure assignments of such intellectual property from its employees and contractors; to the knowledge of the Company, none of the technology employed by the Company and the Subsidiaries has been obtained or is being used by the Company or the Subsidiaries in violation of any contractual or fiduciary obligation binding on the Company or the Subsidiaries, its directors or executive officers or, to the Company's knowledge, any of its employees or consultants; and the Company has taken and will maintain reasonable measures to prevent the unauthorized dissemination or publication of its confidential information. The Company knows of no material infringement by others of patents, patent rights, trade names, trademarks or copyrights owned by or licensed to the Company, except as disclosed in the Registration Statement. The Company and the Subsidiaries have good and marketable title to the patent and patent applications referred to in the Prospectus. Neither the Company nor any Subsidiary has infringed, interfered with or misappropriated any patents, patent rights, trade names, trademarks, copyrights or other intellectual property rights of -6- others, which infringement, if the subject of any unfavorable decision, ruling or finding would, individually or in the aggregate, be reasonably likely to result in a material adverse change in the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company. To the Company's knowledge, except as disclosed in the Registration Statement, there are no legal or governmental proceedings pending relating to trademarks, trade names, patent rights, mask works, copyrights, licenses, trade secrets or other intellectual property rights of the Company or the Subsidiaries other than the prosecution by the Company of its patent applications before the United States Patent Office and appropriate foreign government agencies, and no proceedings are threatened or contemplated by governmental authorities or others relating to trademarks, trade names, patent rights, mask works, copyrights, licenses or other intellectual property rights of the Company. (p) Neither the Company, nor to the Company's knowledge, any of its affiliates, has taken or may take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. The Company acknowledges that the Underwriters may engage in passive market making transactions in the Shares on the NASDAQ Stock Market in accordance with Rule 103 of Regulation M under the Exchange Act. (q) Neither the Company nor any Subsidiary is, and after the issuance and sale of, and the receipt of payment for, the Shares and the application of the net proceeds therefrom as described in the Prospectus will not be, an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, (as amended, the "1940 Act") and the rules and regulations of the Commission thereunder. (r) The Company and each of its Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (s) The Company and each of its Subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses -7- and the value of their respective properties and as is customary for companies engaged in similar industries. (t) The Company and each of its Subsidiaries which is subject to ERISA (as defined below) is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company or any Subsidiary would have any liability; neither the Company nor any Subsidiary has incurred or expects to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company or any Subsidiary would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (u) To the Company's knowledge, there are no affiliations or associations between any member of the NASD and any of the Company's officers, directors or 5% or greater securityholders, except as set forth in the Registration Statement. (v) Subsequent to the respective dates of which information is given in the Registration Statement, (i) the Company has not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction not in the ordinary course of business; (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company, except in each case as described in such Registration Statement. (w) No material labor dispute with the employees of the Company and the Subsidiaries exists, or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors that could result in any material adverse effect on the Company. (x) The Company has not distributed and will not distribute, prior to the later of the Option Closing Date (as defined below) and the completion of the Underwriters' distribution of the Shares, any offering material in connection with the offering and sale of the Shares other than the Preliminary Prospectus, the Prospectus or the Registration Statement. -8- (y) There are no business relationships or related-party transactions involving the Company or any other person required to be described in the Prospectus which have not been described as required by the Act or the Rules and Regulations. (z) Neither the Company, nor any Subsidiary nor, to the best of the Company's knowledge, any employee or agent of the Company or any Subsidiary, has made any contribution or other payment to any official of, or candidate for, any federal, state or foreign office in violation of any law or of a character required to be disclosed in the Prospectus. (aa) The Registration Statement, the Prospectus and any Preliminary Prospectus comply, and any amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which the Prospectus or any Preliminary Prospectus, as amended or supplemented, if applicable, are distributed in connection with the offering, issuance and sale of Reserved Shares. (bb) No consent, approval, authorization or order of, or qualification with, any governmental body or agency, other than those obtained, is required in connection with the offering of the Reserved Shares in any jurisdiction where the Reserved Shares are being offered. (cc) The Company has not offered, or caused any Representative or its affiliates to offer, nor will it offer or cause any Representative or its affiliates to offer, any Reserved Shares to any person with the specific intent to unlawfully influence (i) a customer or supplier of the Company to alter the customer's or supplier's level or type of business with the Company, or (ii) a trade journalist or publication to write or publish favorable information about the Company or its services. (dd) Neither the Company nor any Subsidiary is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the emission, discharge, release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), nor has the Company or any Subsidiary received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company is in violation of any Environmental Law. Each of the Company and the Subsidiaries has all permits, authorizations and approvals required under any applicable Environmental Laws and is in compliance with their requirements. There is no claim, action or cause of action filed with a court or governmental -9- authority or any administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings with respect to which the Company or any Subsidiary has received written notice, and no written notice to the Company or any Subsidiary by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys' fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Hazardous Materials at any location owned, leased or operated by the Company or any Subsidiary now or in the past (collectively, "Environmental Claims"), pending or, to the best of the Company's knowledge, threatened against the Company or any Subsidiary or any person or entity whose liability for any Environmental Claim the Company or any Subsidiary has retained or assumed either contractually or by operation of law nor are there any events or circumstances that might reasonably be expected to form the basis for an Environmental Claim. To the best of the Company's knowledge, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Hazardous Materials, that reasonably could result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against the Company or any Subsidiary or against any person or entity whose liability for any Environmental Claim the Company or any Subsidiary has retained or assumed either contractually or by operation of law. (ee) The Company has reviewed its operations and any third parties with which the Company has a material relationship to evaluate the extent to which the business or operations of the Company will be affected by the Year 2000 Problem. As a result of such review, the Company has no reason to believe, and does not believe, that the Year 2000 Problem will result in a material adverse change in the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company or result in any material loss or interference with the Company's business or operations. The "Year 2000 Problem" as used herein means any significant risk that computer hardware or software used in the receipt, transmission, processing, manipulation, storage, retrieval, retransmission or other utilization of data or in the operation of mechanical or electrical systems of any kind will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000. (ff) The Company and each of the Subsidiaries holds all material licenses, certificates and permits from governmental authorities which are necessary to the conduct of their businesses. (gg) Any certificate signed by an officer of the Company or any Subsidiary delivered to the Representatives or to counsel for the Underwriters pursuant to this Agreement or in connection with the Closing contemplated hereby shall be deemed to be a representation and warranty by the Company to each Underwriter as to the matters covered thereby. -10- 2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES. (a) On the basis of the representations, warranties and covenants herein contained, and subject to the conditions herein set forth, the Company agrees to sell to the Underwriters and each Underwriter agrees, severally and not jointly, to purchase, at a price of $_____ per share, the number of Firm Shares set forth opposite the name of each Underwriter in Schedule I hereof, subject to adjustments in accordance with Section 9 hereof. (b) Payment for the Firm Shares to be sold hereunder is to be made by Federal (same day) funds against delivery of certificates therefor to the Representatives for the several accounts of the Underwriters. Such payment and delivery are to be made through the facilities of the Depository Trust Company, New York, New York at 10:00 a.m., New York time, on the third business day after the date of this Agreement or at such other time and date not later than five business days thereafter as you and the Company shall agree upon, such time and date being herein referred to as the "Closing Date." (As used herein, "business day" means a day on which the New York Stock Exchange is open for trading and on which banks in New York are open for business and are not permitted by law or executive order to be closed.) [The certificates for the Firm Shares will be delivered in such denominations and in such registrations as the Representatives request in writing not later than the second full business day prior to the Closing Date, and will be made available for inspection by the Representatives at least one business day prior to the Closing Date.] (c) In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the several Underwriters to purchase the Option Shares at the price per share as set forth in the first paragraph of this Section 2. The option granted hereby may be exercised in whole or in part by giving written notice (i) at any time before the Closing Date and (ii) only once thereafter within 30 days after the date of this Agreement, by you, as Representatives of the several Underwriters, to the Company setting forth the number of Option Shares as to which the several Underwriters are exercising the option, the names and denominations in which the Option Shares are to be registered and the time and date at which such certificates are to be delivered. The time and date at which certificates for Option Shares are to be delivered shall be determined by the Representatives but shall not be earlier than three nor later than 10 full business days after the exercise of such option, nor in any event prior to the Closing Date (such time and date being herein referred to as the "Option Closing Date"). If the date of exercise of the option is three or more days before the Closing Date, the notice of exercise shall set the Closing Date as the Option Closing Date. The number of Option Shares to be purchased by each Underwriter shall be in the same proportion to the total number of Option Shares being purchased as the number of Firm Shares being purchased by such Underwriter bears to the total number of Firm Shares being sold hereunder, adjusted by you in such manner as to avoid fractional shares. The option with respect -11- to the Option Shares granted hereunder may be exercised only to cover over-allotments in the sale of the Firm Shares by the Underwriters. You, as Representatives of the several Underwriters, may cancel such option at any time prior to its expiration by giving written notice of such cancellation to the Company. To the extent, if any, that the option is exercised, payment for the Option Shares shall be made on the Option Closing Date in Federal (same day) funds through the facilities of the Depository Trust Company in New York, New York drawn to the order of the Company. 3. OFFERING BY THE UNDERWRITERS. It is understood that the several Underwriters are to make a public offering of the Firm Shares as soon as the Representatives deems it advisable to do so. The Firm Shares are to be initially offered to the public at the initial public offering price set forth in the Prospectus. The Representatives may from time to time thereafter change the public offering price and other selling terms. To the extent, if at all, that any Option Shares are purchased pursuant to Section 2 hereof, the Underwriters will offer them to the public on the foregoing terms. It is further understood that you will act as the Representatives for the Underwriters in the offering and sale of the Shares in accordance with a Master Agreement Among Underwriters entered into by you and the several other Underwriters. 4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the several Underwriters that: (a) The Company will (A) use its best efforts to cause the Registration Statement to become effective or, if the procedure in Rule 430A of the Rules and Regulations is followed, to prepare and timely file with the Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form approved by the Representatives containing information previously omitted at the time of effectiveness of the Registration Statement in reliance on Rule 430A of the Rules and Regulations, (B) not file any amendment to the Registration Statement or supplement to the Prospectus of which the Representatives shall not previously have been advised and furnished with a copy or to which the Representatives shall have reasonably objected in writing or which is not in compliance with the Rules and Regulations and (C) file on a timely basis all reports and any definitive proxy or information statements required to be filed by the Company with the Commission subsequent to the date of the Prospectus and prior to the termination of the offering of the Shares by the Underwriters. (b) The Company will advise the Representatives promptly (A) when the Registration Statement or any post-effective amendment thereto shall have become effective, (B) of receipt of any comments from the Commission, (C) of any request of the Commission for -12- amendment of the Registration Statement or for supplement to the Prospectus or for any additional information, and (D) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the use of the Prospectus or of the institution of any proceedings for that purpose. The Company will use its best efforts to prevent the issuance of any such stop order preventing or suspending the use of the Prospectus and to obtain as soon as possible the lifting thereof, if issued. (c) The Company will cooperate with the Representatives in endeavoring to qualify the Shares for sale under the securities laws of such jurisdictions as the Representatives may reasonably have designated in writing and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose, provided the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not now so qualified or required to file such a consent. The Company will, from time to time, prepare and file such statements, reports, and other documents, as are or may be required to continue such qualifications in effect for so long a period as the Representatives may reasonably request for distribution of the Shares. (d) The Company will deliver to, or upon the order of, the Representatives, from time to time, as many copies of any Preliminary Prospectus as the Representatives may reasonably request. The Company will deliver to, or upon the order of, the Representatives during the period when delivery of a Prospectus is required under the Act, as many copies of the Prospectus in final form, or as thereafter amended or supplemented, as the Representatives may reasonably request. The Company will deliver to the Representatives at or before the Closing Date, four signed copies of the Registration Statement and all amendments thereto including all exhibits filed therewith, and will deliver to the Representatives such number of copies of the Registration Statement (including such number of copies of the exhibits filed therewith that may reasonably be requested), and of all amendments thereto, as the Representatives may reasonably request. (e) The Company will comply with the Act and the Rules and Regulations, and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder, so as to permit the completion of the distribution of the Shares as contemplated in this Agreement and the Prospectus. If during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, any event shall occur as a result of which, in the judgment of the Company or in the reasonable opinion of the Underwriters, it becomes necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances existing at the time the Prospectus is delivered to a purchaser, not misleading, or, if it is necessary at any time to amend or supplement the Prospectus to comply with any law, the Company will promptly prepare and file with the Commission an appropriate amendment to the Registration Statement or supplement to the Prospectus so that the Prospectus as so amended or supplemented will not, in the light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with the law. -13- (f) The Company will make generally available to its security holders, as soon as it is practicable to do so, but in any event not later than 15 months after the effective date of the Registration Statement, an earning statement (which need not be audited) in reasonable detail, covering a period of at least 12 consecutive months beginning after the effective date of the Registration Statement, which earning statement shall satisfy the requirements of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you in writing when such statement has been so made available. (g) Prior to the Closing Date, the Company will furnish to the Underwriters, as soon as they have been prepared by or are available to the Company, a copy of any unaudited interim financial statements of the Company for any period subsequent to the period covered by the most recent financial statements appearing in the Registration Statement and the Prospectus. (h) No offering, sale, short sale or other disposition of any shares of Common Stock of the Company or other securities convertible into or exchangeable or exercisable for shares of Common Stock or derivative of Common Stock (or agreement for such) will be made for a period of 180 days after the date of this Agreement, directly or indirectly, by the Company otherwise than hereunder or with the prior written consent of Deutsche Bank Securities Inc. (i) The Company will use its best efforts to list, subject to notice of issuance, the Shares on the NASDAQ Stock Market. (j) The Company has caused each officer and director and shareholder of the Company to furnish to you, on or prior to the date of this agreement, a letter or letters, in form and substance satisfactory to the Underwriters, pursuant to which each such person agrees not to offer, sell, sell short or otherwise dispose of any shares of Common Stock of the Company or other capital stock of the Company, or any other securities convertible, exchangeable or exercisable for Common Shares or derivative of Common Shares owned by such person (or which such person has the right to direct the disposition of) or request the registration for the offer or sale of any of the foregoing for a period of 180 days after the date of this Agreement, directly or indirectly, except with the prior written consent of Deutsche Bank Securities Inc. ("Lockup Agreements"). (k) The Company shall apply the net proceeds of its sale of the Shares as set forth in the Prospectus and shall file such reports with the Commission with respect to the sale of the Shares and the application of the proceeds therefrom as may be required in accordance with Rule 463 under the Act. -14- (l) The Company shall not invest, or otherwise use the proceeds received by the Company from its sale of the Shares in such a manner as would require the Company or any of the Subsidiaries to register as an investment company under the 1940 Act. (m) The Company will maintain a transfer agent and, if necessary under the jurisdiction of incorporation of the Company, a registrar for the Common Stock. (n) The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company. 5. COSTS AND EXPENSES. The Company will pay all costs, expenses and fees incident to the performance of the obligations of the Company under this Agreement, including, without limiting the generality of the foregoing, the following: accounting fees of the Company; the fees and disbursements of counsel for the Company; the cost of printing and delivering to, or as requested by, the Underwriters copies of the Registration Statement, Preliminary Prospectuses, the Prospectus, this Agreement, the Underwriters' Selling Memorandum, if any, the Underwriters' Invitation Letter, the Listing Application, the Blue Sky Survey and any supplements or amendments thereto; the filing fees of the Commission; the filing fees and expenses (including legal fees and disbursements) incident to securing any required review by the National Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Shares; the Listing Fee of the NASDAQ Stock Market; and the expenses, including the fees and disbursements of counsel for the Underwriters, incurred in connection with the qualification of the Shares under State securities or Blue Sky laws. The Company agrees to pay all costs and expenses of the Underwriters, including the fees and disbursements of counsel for the Underwriters, incident to the offer and sale of directed shares of the Common Stock by the Underwriters to employees and persons having business relationships with the Company and its Subsidiaries. The Company shall not, however, be required to pay for any of the Underwriters' expenses (other than those related to qualification under NASD regulation and State securities or Blue Sky laws) except that, if this Agreement shall not be consummated because the conditions in Section 6 hereof are not satisfied, or because this Agreement is terminated by the Representatives pursuant to Section 11 (other than pursuant to (a)(ii), (iii) or (v)) hereof or by reason of any failure, refusal or inability on the part of the Company to perform any undertaking or satisfy any condition of this Agreement or to comply with any of the terms hereof on their part to be performed, unless such failure to satisfy said condition or to comply with said terms be due to the default or omission of any Underwriter, then the Company shall reimburse the several Underwriters for reasonable out-of-pocket expenses, including fees and disbursements of counsel, reasonably incurred in connection with investigating, marketing and proposing to market the Shares or in contemplation of performing their obligations -15- hereunder; but the Company shall not in any event be liable to any of the several Underwriters for damages on account of loss of anticipated profits from the sale by them of the Shares. 6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several obligations of the Underwriters to purchase the Firm Shares on the Closing Date and the Option Shares, if any, on the Option Closing Date are subject to the accuracy, as of the Closing Date or the Option Closing Date, as the case may be, of the representations and warranties of the Company contained herein, and to the performance by the Company of its covenants and obligations hereunder and to the following additional conditions: (a) The Registration Statement and all post-effective amendments thereto shall have become effective and any and all filings required by Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and any request of the Commission for additional information (to be included in the Registration Statement or otherwise) shall have been disclosed to the Representatives and complied with to their reasonable satisfaction. No stop order suspending the effectiveness of the Registration Statement, as amended from time to time, shall have been issued and no proceedings for that purpose shall have been taken or, to the knowledge of the Company, shall be contemplated by the Commission and no injunction, restraining order, or order of any nature by a Federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance of the Shares. (b) The Representatives shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation, counsel for the Company, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Underwriters (and stating that it may be relied upon by counsel to the Underwriters) to the effect that: (i) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement; each of the Subsidiaries identified as Significant Subsidiaries on Exhibit A hereto (the "Significant Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement; the Company and each of the Significant Subsidiaries are duly qualified to transact business in all jurisdictions in which the failure to qualify would have a materially adverse effect upon the business of the Company and the Significant Subsidiaries taken as a whole; and the outstanding shares of capital stock of each of the Significant Subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable and are owned by the Company or a Significant Subsidiary; and, to the best of such counsel's knowledge, the outstanding shares of capital stock of each of the Significant Subsidiaries is owned of record free and clear of all liens, encumbrances -16- and equities and claims, and no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into any shares of capital stock or of ownership interests in the Significant Subsidiaries are outstanding. (ii) The Company has authorized and outstanding capital stock as set forth under the caption "Capitalization" in the Prospectus; the authorized shares of the Company's Common Stock have been duly authorized; the outstanding shares of the Company's Common Stock have been duly authorized and validly issued and are fully paid and non-assessable; all of the Shares conform to the description thereof contained in the Prospectus; the certificates for the Shares, assuming they are in the form filed with the Commission, are in due and proper form; the shares of Common Stock, including the Option Shares, if any, to be sold by the Company pursuant to this Agreement have been duly authorized and will be validly issued, fully paid and non-assessable when issued and paid for as contemplated by this Agreement; and no preemptive rights of stockholders exist with respect to any of the Shares or the issue or sale thereof. (iii) Except as described in or contemplated by the Prospectus, to the knowledge of such counsel, there are no outstanding securities of the Company convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of capital stock of the Company and there are no outstanding or authorized options, warrants or rights of any character obligating the Company to issue any shares of its capital stock or any securities convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of such stock; and except as described in the Prospectus, to the knowledge of such counsel, no holder of any securities of the Company or any other person has the right, contractual or otherwise, which has not been satisfied or effectively waived, to cause the Company to sell or otherwise issue to them, or to permit them to underwrite the sale of, any of the Shares or the right to have any Common Shares or other securities of the Company included in the Registration Statement or the right, as a result of the filing of the Registration Statement, to require registration under the Act of any shares of Common Stock or other securities of the Company. (iv) The Registration Statement has become effective under the Act and, to the best of the knowledge of such counsel, no stop order proceedings with respect thereto have been instituted or are pending or threatened under the Act. (v) The Registration Statement, the Prospectus and each amendment or supplement thereto comply as to form in all material respects with the requirements of the Act and the applicable rules and regulations thereunder (except that such counsel need express no opinion as to the financial statements or other statistical data and related schedules therein). (vi) The statements under the captions "Management," "Related Party Transactions," "Description of Capital Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as such statements constitute a summary of documents referred to therein or -17- matters of law, fairly summarize in all material respects the information called for with respect to such documents and matters. (vii) Such counsel does not know of any contracts or documents required to be filed as exhibits to the Registration Statement or described in the Registration Statement or the Prospectus which are no so filed or described as required, and such contracts and documents as are summarized in the Registration Statement or the Prospectus are fairly summarized in all material respects. (viii) Such counsel knows of no material legal or governmental proceedings pending or threatened against the Company or any of the Significant Subsidiaries except as set forth in the Prospectus. (ix) The execution and delivery of this Agreement and the consummation of the transactions herein contemplated do not and will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, the Charter or By-Laws of the Company, or any agreement or instrument known to such counsel to which the Company or any of the Significant Subsidiaries is a party or by which the Company or any of the Significant Subsidiaries may be bound. (x) This Agreement has been duly authorized, executed and delivered by the Company. (xi) No approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body is necessary in connection with the execution and delivery of this Agreement and the consummation of the transactions herein contemplated (other than as may be required by the NASD or as required by State securities and Blue Sky laws as to which such counsel need express no opinion) except such as have been obtained or made, specifying the same. (xii) Neither the Company nor any Significant Subsidiary is or will become, as a result of the consummation of the transactions contemplated by this Agreement, and application of the net proceeds therefrom as described in the Prospectus, required to register as an investment company under the 1940 Act. In rendering such opinion Hutchins, Wheeler & Dittmar may rely as to matters governed by the laws of states other than the Commonwealth of Massachusetts, the General Corporation Law of the State of Delaware or Federal laws on local counsel in such jurisdictions, provided that in each case Hutchins, Wheeler & Dittmar shall state that they believe that they and the Underwriters are justified in relying on such other counsel. In addition to the matters set forth above, such opinion shall also include a statement to the effect that nothing has come to the -18- attention of such counsel which leads them to believe that (i) the Registration Statement, at the time it became effective under the Act (but after giving effect to any modifications incorporated therein pursuant to Rule 430A under the Act) and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Prospectus, or any supplement thereto, on the date it was filed pursuant to the Rules and Regulations and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements, in the light of the circumstances under which they are made, not misleading (except that such counsel need express no view as to financial statements, schedules and statistical information therein). With respect to such statement, Hutchins, Wheeler & Dittmar may state that their belief is based upon the procedures set forth therein, but is without independent check and verification. (c) The Representatives shall have received from Ropes & Gray, counsel for the Underwriters, an opinion dated the Closing Date or the Option Closing Date, as the case may be, with respect to the incorporation of the Company, the validity of the Shares delivered on the Closing Date or the Option Closing Date, as the case may be, the Registration Statements, the Prospectus and other related matters as the Representatives may require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. In rendering such opinion, Ropes & Gray may rely as to all matters governed other than by the laws of the Commonwealth of Massachusetts, the General Corporation Law of the State of Delaware, or federal laws on the opinion of counsel referred to in Paragraph (b) of this Section 6. In addition to the matters set forth above, such opinion shall also include a statement to the effect that nothing has come to the attention of such counsel which leads them to believe that (i) the Registration Statement, or any amendment thereto, as of the time it became effective under the Act (but after giving effect to any modifications incorporated therein pursuant to Rule 430A under the Act) as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Prospectus, or any supplement thereto, on the date it was filed pursuant to the Rules and Regulations and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements, in the light of the circumstances under which they are made, not misleading (except that such counsel need express no view as to financial statements, schedules and statistical information therein). With respect to such statement, Ropes & Gray may state that their belief is based upon the procedures set forth therein, but is without independent check and verification. (d) The Representatives shall have received at or prior to the Closing Date from Ropes & Gray a memorandum or summary, in form and substance satisfactory to the Representatives, with respect to the qualification for offering and sale by the Underwriters of the -19- Shares under the State securities or Blue Sky laws of such jurisdictions as the Representatives may reasonably have designated to the Company. (e) You shall have received, on each of the dates hereof, the Closing Date and the Option Closing Date, as the case may be, a letter dated the date hereof, the Closing Date or the Option Closing Date, as the case may be, in form and substance satisfactory to you, of Ernst & Young confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating that in their opinion the financial statements and schedules examined by them and included in the Registration Statement comply in form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations; and containing such other statements and information as is ordinarily included in accountants' "comfort letters" to Underwriters with respect to the financial statements and certain financial and statistical information contained in the Registration Statement and Prospectus. (f) The Representatives shall have received on the Closing Date or the Option Closing Date, as the case may be, a certificate or certificates of the Chief Executive Officer and the Chief Financial Officer of the Company to the effect that, as of the Closing Date or the Option Closing Date, as the case may be, each of them severally represents as follows: (i) The Registration Statement has become effective under the Act and no stop order suspending the effectiveness of the Registrations Statement has been issued, and no proceedings for such purpose have been taken or are, to his knowledge, contemplated by the Commission; (ii) The representations and warranties of the Company contained in Section 1 hereof are true and correct as of the Closing Date or the Option Closing Date, as the case may be; (iii) All filings required to have been made pursuant to Rules 424 or 430A under the Act have been made; (iv) The Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such closing date; (v) He or she has carefully examined the Registration Statement and the Prospectus and, in his or her opinion, as of the effective date of the Registration Statement, the statements contained in the Registration Statement were true and correct, and such Registration Statement and Prospectus did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and since the effective date of the Registration Statement, no event has occurred which should have been set forth in a -20- supplement to or an amendment of the Prospectus which has not been so set forth in such supplement or amendment; and (vi) Since the respective dates as of which information is given in the Registration Statement and Prospectus, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the condition, financial or otherwise, of the Company and its Significant Subsidiaries taken as a whole or the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and the Significant Subsidiaries taken as a whole, whether or not arising in the ordinary course of business. (g) The Company shall have furnished to the Representatives such further certificates and documents confirming the representations and warranties, covenants and conditions contained herein and related matters as the Representatives may reasonably have requested. (h) The Firm Shares and Option Shares, if any, have been approved for designation upon notice of issuance on the NASDAQ Stock Market. (i) The Lockup Agreements described in Section 4 (j) are in full force and effect. (j) On each of the Closing Date and the Option Closing Date, if any, the Representatives shall have received a certificate or certificates of the Secretary or Assistant Secretary of the Company in form and substance reasonably satisfactory to the Representatives. (k) The Representatives shall have received from Pennie & Edmonds LLP, patent litigation counsel to the Company, an opinion dated the Closing Date or the Option Closing Date, as the case may be, to the effect set forth in Exhibit B hereto. (l) The Representatives shall have received from Boehmert & Boehmert, European patent litigation counsel to the Company, an opinion dated the Closing Date or the Option Closing Date, as the case may be, to the effect set forth in Exhibit B hereto. (m) The Representatives shall have received from Ward & Olivo, patent counsel to the Company, an opinion dated the Closing Date or the Option Closing Date, as the case may be, to the effect set forth in Exhibit C hereto. (n) The Representatives shall have received from foreign counsel to the Company, an opinion regarding certain Subsidiaries dated the Closing Date or the Option Closing Date, as the case may be, to the effect set forth in Exhibit D hereto. -21- The opinions and certificates mentioned in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in all material respects satisfactory to the Representatives and to Ropes & Gray, counsel for the Underwriters. If any of the conditions hereinabove provided for in this Section 6 shall not have been fulfilled when and as required by this Agreement to be fulfilled, the obligations of the Underwriters hereunder may be terminated by the Representatives by notifying the Company of such termination in writing or by telegram at or prior to the Closing Date or the Option Closing Date, as the case may be. In such event, the Company and the Underwriters shall not be under any obligation to each other (except to the extent provided in Sections 5 and 8 hereof). 7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligation of the Company to sell and deliver the portion of the Shares required to be delivered as and when specified in this Agreement are subject to the conditions that at the Closing Date or the Option Closing Date, as the case may be, no stop order suspending the effectiveness of the Registration Statement shall have been issued and in effect or proceedings therefor initiated or threatened. 8. INDEMNIFICATION. (a) The Company agrees: (1) to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act, against any losses, claims, damages or liabilities to which such Underwriter or any such controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) the violation of any applicable laws or regulations of foreign jurisdictions where Reserved Shares have been offered to persons designated by the Company, or (iv) any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Shares or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (PROVIDED, that the Company shall not be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of -22- competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its gross negligence or willful misconduct); provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or through the Representatives specifically for use in the preparation thereof; PROVIDED FURTHER, that the foregoing indemnity agreement with respect to any Preliminary Prospectus or Prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages or liabilities purchased Shares, or any person controlling such Underwriter, if a copy of the Preliminary Prospectus or the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Shares to such person, and if the Preliminary Prospectus or the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Company with Section 8(a) hereof. (2) to reimburse each Underwriter and each such controlling person upon demand for any legal or other out-of-pocket expenses reasonably incurred by such Underwriter or such controlling person in connection with investigating or defending any such loss, claim, damage or liability, action or proceeding or in responding to a subpoena or governmental inquiry related to the offering of the Shares, whether or not such Underwriter or controlling person is a party to any action or proceeding. In the event that it is finally judicially determined that the Underwriters were not entitled to receive payments for legal and other expenses pursuant to this subparagraph, the Underwriters will promptly return all sums that had been advanced pursuant hereto. (b) Each Underwriter severally and not jointly will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Registration Statement, and each person, if any, who controls the Company within the meaning of the Act, against any losses, claims, damages or liabilities to which the Company or any such director, officer, or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in the light -23- of the circumstances under which they were made; and will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that each Underwriter will be liable in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission has been made in the Registration Statement, any Preliminary Prospectus, the Prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or through the Representatives specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which such Underwriter may otherwise have. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to this Section 8, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing. No indemnification provided for in Section 8(a) or (b) shall be available to any party who shall fail to give notice as provided in this Section 8(c) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was materially prejudiced by the failure to give such notice, but the failure to give such notice shall not relieve the indemnifying party or parties from any liability which it or they may have to the indemnified party for contribution or otherwise than on account of the provisions of Section 8(a) or (b). In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel at its own expense. Notwithstanding the foregoing, the indemnifying party shall pay as incurred (or within 30 days of presentation) the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them or (iii) the indemnifying party shall have failed to assume the defense and employ counsel acceptable to the indemnified party within a reasonable period of time after notice of commencement of the action. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such indemnified parties. Such firm shall be designated in writing by you in the case of parties indemnified pursuant to Section 8(a) and by the Company in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if -24- settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. In addition, the indemnifying party will not, without the prior written consent of the indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding of which indemnification may be sought hereunder (whether or not any indemnified party is an actual or potential party to such claim, action or proceeding) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action or proceeding. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 8(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section 8(d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the -25- provisions of this subsection (d), (i) no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions applicable to the Shares purchased by such Underwriter, and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this Section 8(d) to contribute are several in proportion to their respective underwriting obligations and not joint. (e) In any proceeding relating to the Registration Statement, any Preliminary Prospectus, the Prospectus or any supplement or amendment thereto, each party against whom contribution may be sought under this Section 8 hereby consents to the jurisdiction of any court having jurisdiction over any other contributing party, agrees that process issuing from such court may be served upon him or it by any other contributing party and consents to the service of such process and agrees that any other contributing party may join him or it as an additional defendant in any such proceeding in which such other contributing party is a party. (f) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 8 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 8 and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company, its directors or officers or any persons controlling the Company, (ii) acceptance of any Shares and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Underwriter, or to the Company, its directors or officers, or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 8. (g) In connection with the offer and sale of the Reserved Shares, the Company agrees, promptly upon a request in writing, to indemnify and hold harmless the Underwriters from and against any and all losses, liabilities, claims, damages and expenses incurred by them as a result of the failure of persons designated by the Company to pay for and accept delivery of Reserved Shares which, by the end of the first business day following the date of this Agreement, were subject to a properly confirmed agreement to purchase. 9. DEFAULT BY UNDERWRITERS. If on the Closing Date or the Option Closing Date, as the case may be, any Underwriter shall fail to purchase and pay for the portion of the Shares which such Underwriter has agreed to purchase and pay for on such date (otherwise than by reason of any default on the part of the Company), you, as Representatives of the Underwriters, shall use your reasonable efforts to procure within 36 hours thereafter one or more of the other Underwriters, or any others, -26- to purchase from the Company such amounts as may be agreed upon and upon the terms set forth herein, the Firm Shares or Option Shares, as the case may be, which the defaulting Underwriter or Underwriters failed to purchase. If during such 36 hours you, as such Representatives, shall not have procured such other Underwriters, or any others, to purchase the Firm Shares or Option Shares, as the case may be, agreed to be purchased by the defaulting Underwriter or Underwriters, then (a) if the aggregate number of shares with respect to which such default shall occur does not exceed 10% of the Firm Shares or Option Shares, as the case may be, covered hereby, the other Underwriters shall be obligated, severally, in proportion to the respective numbers of Firm Shares or Option Shares, as the case may be, which they are obligated to purchase hereunder, to purchase the Firm Shares or Option Shares, as the case may be, which such defaulting Underwriter or Underwriters failed to purchase, or (b) if the aggregate number of shares of Firm Shares or Option Shares, as the case may be, with respect to which such default shall occur exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered hereby, the Company or you as the Representatives of the Underwriters will have the right, by written notice given within the next 36-hour period to the parties to this Agreement, to terminate this Agreement without liability on the part of the non-defaulting Underwriters or of the Company except to the extent provided in Section 8 hereof. In the event of a default by any Underwriter or Underwriters, as set forth in this Section 9, the Closing Date or Option Closing Date, as the case may be, may be postponed for such period, not exceeding seven days, as you, as Representatives, may determine in order that the required changes in the Registration Statement or in the Prospectus or in any other documents or arrangements may be effected. The term "Underwriter" includes any person substituted for a defaulting Underwriter. Any action taken under this Section 9 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 10. NOTICES. All communications hereunder shall be in writing and, except as otherwise provided herein, will be mailed, delivered, telecopied or telegraphed and confirmed as follows: if to the Underwriters, to UBS Warburg LLC, 299 Park Avenue, 41st Floor, New York, New York 10171, Attention: Keith Lockwood, to Bruker Daltonics Inc., Manning Park, Billerica, Massachusetts, 01821, Attention: President; with a copy to Hutchins, Wheeler & Dittmar, 101 Federal Street, Boston, Massachusetts, 02110, Attention: Richard M. Stein. 11. TERMINATION. (a) This Agreement may be terminated by you by notice to the Company at any time prior to the Closing Date if any of the following has occurred: (i) since the respective dates as of which information is given in the Registration Statement and the Prospectus, any material -27- adverse change or any development involving a prospective material adverse change in or affecting the condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole or the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, (ii) any outbreak or escalation of hostilities or declaration of war or national emergency or other national or international calamity or crisis or change in economic or political conditions if the effect of such outbreak, escalation, declaration, emergency, calamity, crisis or change on the financial markets of the United States would, in your reasonable judgment, make it impracticable or inadvisable to market the Shares or to enforce contracts for the sale of the Shares, or (iii) suspension of trading in securities generally on the New York Stock Exchange or the American Stock Exchange or limitation on prices (other than limitations on hours or numbers of days of trading) for securities on either such Exchange, (iv) the enactment, publication, decree or other promulgation of any statute, regulation, rule or order of any court or other governmental authority which in your opinion materially and adversely affects or may materially and adversely affect the business or operations of the Company, (v) declaration of a banking moratorium by United States or New York State authorities, (vi) any downgrading, or placement on any watch list for possible downgrading, in the rating of the Company's debt securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Exchange Act); (vii) the suspension of trading of the Company's common stock by the NASDAQ Stock Market, the Commission, or any other governmental authority or, (viii) the taking of any action by any governmental body or agency in respect of its monetary or fiscal affairs which in your reasonable opinion has a material adverse effect on the securities markets in the United States; or (b) as provided in Sections 6 and 9 of this Agreement. 12. SUCCESSORS. This Agreement has been and is made solely for the benefit of the Underwriters and the Company and their respective successors, executors, administrators, heirs and assigns, and the officers, directors and controlling persons referred to herein, and no other person will have any right or obligation hereunder. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign merely because of such purchase. 13. INFORMATION PROVIDED BY UNDERWRITERS. The Company and the Underwriters acknowledge and agree that the only information furnished or to be furnished by any Underwriter to the Company for inclusion in any Prospectus or the Registration Statement consists of the information set forth in the last paragraph on the front cover page (insofar as such information relates to the Underwriters), legends required -28- by Item 502(d) of Regulation S-K under the Act and the information under the caption "Underwriting" in the Prospectus. 14. MISCELLANEOUS. The reimbursement, indemnification and contribution agreements contained in this Agreement and the representations, warranties and covenants in this Agreement shall remain in full force and effect regardless of (a) any termination of this Agreement, (b) any investigation made by or on behalf of any Underwriter or controlling person thereof, or by or on behalf of the Company or its directors or officers and (c) delivery of and payment for the Shares under this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. -29- If the foregoing letter is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement among the Company and the several Underwriters in accordance with its terms. Very truly yours, BRUKER DALTONICS INC. By ------------------------------------- President The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. UBS WARBURG LLC THOMAS WEISEL PARTNERS LLC CIBC WORLD MARKETS CORP. As Representatives of the several Underwriters listed on Schedule I By: UBS Warburg LLC By: ------------------------------- Authorized Officer -30- SCHEDULE I SCHEDULE OF UNDERWRITERS
Number of Firm Shares Underwriter to be Purchased ----------- ---------------------- UBS Warburg LLC Thomas Weisel Partners LLC [CIBC World Markets] ---------- Total ----------
-31- SCHEDULE II SCHEDULE OF OPTION SHARES
Maximum Number Percentage of of Option Shares Total Number of Name of Seller to be Sold Option Shares -------------- ---------------- ---------------- ------ --- Total 100 ------ ---
-32- EX-10.7 3 ex-10_7.txt EXHIBIT 10.7 EXHIBIT 10.7 ITMS COLLABORATION AGREEMENT BY AND BETWEEN HEWLETT-PACKARD COMPANY AND BRUKER DALTONIK GMBH CONFIDENTIAL HEWLETT-PACKARD-BRUKER TABLE OF CONTENTS RECITALS 1 ARTICLE 1 - DEFINITIONS 2 ARTICLE 2 - MANAGEMENT OF THE RELATIONSHIP AND COMMUNICATIONS BETWEEN THE PARTIES 4 ARTICLE 3 - OVERVIEW OF THE GEMINI PROGRAM 6 ARTICLE 4 - SPECIFICATIONS FOR THE GEMINI / GEMINI R&D MS 7 ARTICLE 5 - DESIGN AND DEVELOPMENT OF THE GEMINI / GEMINI R&D MS 8 ARTICLE 6 - MARKETING OF THE GEMINI / GEMINI R&D MS 10 ARTICLE 7 - MANUFACTURING AND PROCURING COMPONENTS FOR THE GEMINI / GEMINI R&D MS 11 ARTICLE 8 - SALES OF COMPONENTS AND OF THE GEMINI MS AND GEMINI R&D MS 15 ARTICLE 9 - HP'S MINIMUM PURCHASE COMMITMENT, INITIAL PURCHASE ORDER AND DISPOSITION OF HP'S SECURITY DEPOSIT/DOWN PAYMENT 19 ARTICLE 10 - WARRANTIES AND SUPPORT 20 ARTICLE 11 - NEW DEVELOPMENT PROJECTS 21 ARTICLE 12 - EMPLOYEE RELATIONS 22 ARTICLE 13 - CONFIDENTIAL INFORMATION 23 ARTICLE 14 - DEVELOPMENT INVENTIONS AND OTHER INTELLECTUAL PROPERTY CREATED DURING DEVELOPMENT PROGRAMS 24 ARTICLE 15 - REPRESENTATIONS, WARRANTIES AND DISCLAIMERS 29 ARTICLE 16 - CONFLICTS WITH THIRD PARTY INTELLECTUAL PROPERTY RIGHTS 29 ARTICLE 17 - RESPONSIBILITIES FOR SALES OF ESQUIRE-LC SYSTEMS 30 ARTICLE 18 - DISPOSITION OF RESEARCH FUNDS 32 ARTICLE 19 - PUBLICITY 33 ARTICLE 20 - TERM, TERMINATION AND EXCLUSIVITY 33 ARTICLE 21 - DISPUTES BETWEEN THE PARTIES 38 ARTICLE 22 - MISCELLANEOUS 39 EXECUTION 41
71BRUKER-HP Collaboration Agreement ii ITMS COLLABORATION AGREEMENT This Agreement is made with an Effective Date of April 28, 1999 by Hewlett-Packard Company, a Delaware corporation with offices at 1601 California Avenue, Palo Alto, CA 94304-1126 ("HP"); and Bruker Daltonik GmbH, a corporation organized and existing under the laws of Germany with offices at Fahrenheitstrasse 4, D-28359 Bremen, Germany ("Bruker"), formerly called Bruker-Franzen Analytik GmbH ("BFA"). RECITALS A. HP is in the business of designing, manufacturing, and marketing analytical chemistry instruments such as liquid chromatographs, gas chromatographs, and mass spectrometers; analytical chemistry systems that combine a liquid or gas chromatograph with a mass spectrometer; and software tools for collecting and processing data in such systems. HP is a leader in developing low-cost mass spectrometers and technology for the ionization/interface stage of LC/MS systems. HP has considerable expertise in the design and manufacture of API ion sources. B. Bruker is in the business of designing, manufacturing and marketing analytical chemistry instruments such as mass spectrometers and associated software. Bruker is a recognized leader in developing ion trap mass spectrometers. Bruker has considerable expertise in the design and manufacture of ion trap mass spectrometers and conventional nanoelectrospray ion sources. C. HP and Bruker have complementary expertise. HP and BRUKER wish to develop a long-term collaboration in API-ITMS technology. HP and Bruker desire to serve their respective customers more effectively by collaborating on developing LC/MS() mass spectrometers, especially certain critical core components thereof, thereby enabling both parties to take advantage of the particular strengths, experience and superior competencies of each. HP and Bruker also recognize that by allocating responsibility for manufacturing components of mass spectrometers, the parties can take advantage of higher volume production, reducing the cost of the components to each party and enabling the parties to participate in a highly competitive market. D. Bruker and HP entered into a certain BRUKER-HP ITMS Agreement dated January 19, 1996, which established a plan for developing (1) a product series (Esquire-LC ITMS) for market introduction in Fall 1996 and (2) a lower cost, higher volume product series (Gemini) for market introduction in January 1998. The BRUKER-HP ITMS Agreement has been amended twice: on March 14, 1997, (Amendments I and 2) and on September 1, 1997 (Amendment 3). Phase I of the program provided for in the ITMS Agreement, as amended, has been completed. The hardware development work under Phase 2 of the program is substantially complete. The software development work is progressing. The Esquire ITMS product series has been developed and the second generation product, called Esquire-LC, is currently being marketed by both parties. The Gemini mass spectrometer, which was to be developed in Phase 3, is still under development. E. The Parties desire to continue the development of software for, and the manufacture and marketing of, the Esquire-LC ITMS system. F. The parties now wish to recommit themselves and undertake to develop a re-defined Gemini / Gemini R&D MS and to allocate the necessary resources to complete this development. G. The parties wish to complete the set of specifications for the Gemini / Gemini R&D MS, and to adopt a plan for finalizing these specifications. The Parties also wish to allocate responsibility for designing, integrating, and manufacturing the various components of the Gemini/Gemini R&D MS. The Parties will sell these components and other parts to each other, allocate responsibility for integrating the various components and testing the integrated Gemini / Gemini R&D MS, establish the terms and conditions of sale of the Gemini / Gemini R&D MS and certain components thereof, and provide for long term support of the Gemini / Gemini R&D MS. H. Because circumstances have changed substantially from what was contemplated when the ITMS Agreement was signed, the Parties wish to replace the ITMS Agreement, as amended, with this agreement. TERMS AND CONDITIONS NOW, THEREFORE, in consideration of the mutual covenants expressed in this Agreement, HP and Bruker agree as follows: ARTICLE I - DEFINITIONS 1.1 AFFILIATE means a business entity which controls, is controlled by, or is under common control with a Party. "Control" means ownership or control of more than 50% of the stock entitled to vote for the election of directors, or in the case of a non-corporate entity an equivalent majority control. Such entity will be considered an Affiliate only so long as such control exists. 1.2 AGREEMENT means this ITMS Collaboration Agreement, comprising this document and the appendices identified in Section 22. 1.3 APCI means atmospheric pressure chemical ionization. 1.4 API means atmospheric pressure ionization, the process of producing ions at atmospheric pressure and then sampling the ions through atmospheric interfaces. 1.5 BRUKER CORE AREAS means the following areas: RF ITMS technology design or parts of an RF ITMS, RF ion trap, and methods of operating an RF ion trap; electronics, firmware and software for RF ion trap control and detection and acquisition of MS, MS/MS and MS(n) data. 1.6 ENGINEERING COLLABORATION PERIOD means the period of time during which the Parties collaborate on the joint development of ITMSs, including Esquire, Esquire-LC, Gemini/Gemini R&D, [*](1), and any other future ITMS jointly developed hereunder. The Engineering Collaboration Period is specified and determined in Article 20. 1. 1.7 ESQUIRE-LC means the API-ITMS co-developed by the Parties under the Old Agreement. 1.8 ESI means electrospray ionization. 1.9 GEMINI is the code name given to (1) the project to develop high-performance, rugged, easy-to-use, relatively low cost, bench-top, ITMSs for high performance liquid chromatography with MS('~ capability; (2) the ITMSs that are expected to result from such project; and (3) the overall program that includes manufacturing and marketing, as well as the development, of such ITMSs. 1.10 GEMINI NIS is the internal code name for the API-ITMS that the Parties will develop and manufacture for HP in accordance with this Agreement. 1.11 GEMINI R&D NIS is the internal code name for an alternative configuration of the Gemini MS that the Parties will develop and manufacture for Bruker in accordance with this Agreement. 1.12 HP CORE AREAS means the following areas: conventional on-line electrospray and APCI generation of ions but excluding nano-electrospray; as reduced to practice in an ITMS product. 1.13 INTELLECTUAL PROPERTY RIGHTS means the rights under patents, patent applications, and copyrights, and the rights in any industrial designs or trade secrets recognized by law. 1.14 ITMS means radio frequency ion trap mass spectrometer. 1.15 LCIMS means a mass spectrometer designed to work with a liquid chromatograph. 1.16 MS(n) means multiple stages of mass spectrometry (where n = the number of stages) in which there is a collision or reaction between each stage of mass analysis. 1.17 OLD AGREEMENT means the "BRUKER-HP ITMS AGREEMENT between Bruker-Franzen Analytik GmbH and Hewlett-Packard Company" dated January 19, 1996, together with Amendments I and 2 thereto, dated March 14, 1997, and Amendment 3, dated September 1, 1997. - -------- (1) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. 1.18 PARTY AND PARTIES refer to HP and Bruker as the context requires. 1.19 QUALIFIED NEW LEAD means the identification of a prospective new customer who is presented as interested in buying a product and who either has the authority to buy the product or can authorize the purchase of the product. A lead will be considered new if the selling Party who receives the lead has not had any contact with the individual (or his / her predecessor) during the 12 months prior to receiving the lead. ARTICLE 2 - MANAGEMENT OF THE RELATIONSHIP AND COMMUNICATIONS BETWEEN THE PARTIES 2.1 DESIGNATION OF KEY PERSONNEL. Bruker will designate appropriate persons to serve as its Program Manager, Product Manager, Project Manager, and Business Manager. HP will designate appropriate persons to serve as its Program Manager, Product Manager, Project Manager, and Business Manager. Each Party also may designate one or more Project Leaders. 2.2 PROGRAM MANAGERS. The Program Managers will represent their respective Parties on all business and management issues. They will confer as needed to ensure that schedule delays and administrative issues are resolved; that inventions are being identified and reported; that intellectual property and confidentiality issues are properly addressed ; and that other activities are proceeding in accordance with this the Agreement. The Program Managers will ensure that all issues relating to the manufacture and delivery of parts, components and finished instruments are addressed properly. 2.3 PRODUCT MANAGERS. The Product Managers will be responsible for product strategy, product definition, marketing programs, product introduction plans, promotions, business plans, and pricing proposals. 2.4 PROJECT MANAGERS. The Project Managers will be responsible for answering technical questions, clarifying technical issues, and resolving schedule delays. They will confer regularly to ensure that all technical issues are resolved quickly; that all inventions are being identified and reported promptly; and that all intellectual property issues are addressed thoroughly. The Project Managers will confer whenever important issues arise in the development of the specifications or the prototypes of the Gemini MS / Gemini R&D MS. 2.5 PROJECT LEADERS. The Project Leaders will be responsible for receiving and answering technical questions and resolving technical issues in the areas for which they have been designated. 2.6 BUSINESS MANAGERS. The Business Managers have the authority to resolve any issues that arise under this Agreement. The Business Managers will not be involved on a day-to- day basis, but they will confer as needed to ensure harmonious relationships between the Parties and their respective Program Managers, Product Managers, and Project Managers. 2.7 CHANGING DESIGNATIONS. Each Party may change its Project Leader, Program Manager, Product Manager, Project Manager, or Business Manager. Each Party will notify the other Party of such change in a timely manner. 2.8 LIFECYCLE PLANNING. In developing the Gemini / Gemini R&D MS and any other product under this Agreement the Parties will use "Lifecycle Planning," HP's product development methodology. As part of Lifecycle Planning, the Parties will prepare a set of Lifecycle Documents substantially like those that HP prepares for the development of a new product. To minimize redundant effort, the Parties will collaborate in developing those portions of their respective Lifecycle Documents that are common to the product development. The Parties will exclude from their jointly prepared Lifecycle Documents, and will not collaborate on or exchange, information about pricing, customer profiles, and markets. Lifecycle Planning prescribes well-defined phases in developing a new product, with checkpoints and formal reviews at the end of each phase. The Parties will conduct joint formal reviews at each check point to discuss all common issues on the development of the product. The Parties will conduct separately their independent formal reviews of the marketing and financial aspects of the development project. The Parties will develop consensual quality plans for hardware, software, and analytical performance. The Parties must sign off upon the completion of each phase before proceeding to the next phase. The Parties will revise their Project Plan and other Lifecycle Documents, as required to track the progress of the Project. 2.9 MEETINGS AND REVIEWS. The Parties will conduct regular telephone conferences to discuss any corrective actions that may be required to keep the project on track. The Parties will conduct formal project reviews at checkpoint dates. These meetings will be face-to-face, by video conference, or by teleconference. 2.10 NOTICES. Any required notices will be given in writing. Notices may be delivered by any reasonable means and will be deemed to have been given on the date of actual receipt. Notices will be given to the Parties at the following addresses, or at such other addresses as the Parties may designate: Hewlett-Packard Company Bruker Daltonik GmbH Attn.: Dick Begley Attn.: Dieter Koch 1601 California Avenue Fahrenheitstrasse 4, D-28359 Palo Alto, CA 94304 USA Bremen, Germany Fax: 650 857-7029 Fax: 49-421-2205-100 with a copy to: with a copy to Hewlett-Packard Company Bruker Daltonics, Inc. Attn.: Managing Counsel(IP) Attn.: Frank H. Laukien, Ph.D. 1501 Page Mill Road 19 Fortune Drive, Manning Park Palo Alto, CA 94304 Billerica, MA 01821 Fax: 650 852-8063 Fax: 987 667-0985 ARTICLE 3 - OVERVIEW OF THE GEMINI PROGRAM 3.1 GOALS OF THE GEMINI PROJECT. As the first project under this Agreement, HP and Bruker undertake to develop the Gemini MS for HP and the Gemini R&D MS for Bruker. The Gemini MS will be a high-performance, rugged, easy-to-use, relatively low cost, bench-top ITMS for high performance liquid chromatography with MS(n) capability. The Gemini R&D MS will be a high-performance, flexible, research-oriented ITMS for high performance liquid chromatography with MS(') capability. The Gemini MS / Gemini R&D MS is described in more detail and the required functionality, features, and performance characteristics are set out in the Gemini Product Data sheet, which is incorporated herein as Appendix 1. The Gemini MS and the Gemini R&D MS will be based upon essentially the same components, but will have different configurations, as well as differences in names and appearances as provided in Section 5.7. HP and Bruker will complete the development so that HP and Bruker can begin shipping the Gemini MS and the Gemini R&D MS respectively to their demo centers and to their first customers between January 1, 2000 and March 1, 2000. The Gemini Project if successful may lead to the [*](2) as further described in Article 11. Improvements to or further developments of the Gemini MS / Gemini R&D MS after the product is introduced and first marketed, particularly any software developed during any continuing development program, may be made available as an upgrade to the Gemini MS / Gemini R&D MS or as part of the next generation platform, [*]. 3.2 GENERAL PLAN. The Parties will collaborate to complete a set of specifications for the Gemini MS and the Gemini R&D MS. The Parties will divide the responsibilities for designing, developing, manufacturing, assembling, integrating and testing the Gemini / Gemini R&D MS. The Parties will apply jointly for certifications of the product(s) in the names of both Parties. The specific responsibilities of each Party are described in the Gemini Project Plan, incorporated herein as Appendix 2. The Parties will carry out the development work, including the manufacture of prototype units and pilot run units, during the different phases of the development in accordance with the Gemini Project Plan. ARTICLE 4 - SPECIFICATIONS FOR THE GEMINI / GEMINI R&D MS 4.1 DOCUMENTS COMPRISING SET OF SPECIFICATIONS. The Gemini MS will be defined, described and specified in accordance with the following set of specifications: 4.1.1 Gemini Product Data Sheet 4.1.2 Gemini Hardware External Reference Specification 4.1.3 Gemini Software External Reference Specification 4.1.4 Gemini Compatibility Matrix 4.1.5 Gemini Analytical Performance Quality Plan 4.1.6 Gemini Hardware Quality and Regulatory Plan - -------- (2) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. 4.1.7 Gemini Software Quality Plan 4.2 REQUIREMENTS AND DESIRED TARGETS. In some instances the specifications will set out not only the requirements that the Gemini MS / Gemini R&D MS must meet, but also the desired targets that the Parties recognize as technically challenging. The Parties will meet all requirements and will use reasonable efforts to meet all desired targets. A Party will not be in default for failing to design and/or manufacture a component so that the Gemini MS meets a desired target. 4.3 STATUS AND FURTHER EFFORTS TO COMPLETE SET OF SPECIFICATIONS. The set of specifications, while substantially complete, still have areas requiring further work. Items designated "TBD" (to be determined) will be the subject of further discussions. The Parties will endeavor to complete and formally adopt the specifications in April 1999. To that end, the Project Managers and the other affected technical personnel will confer at least bi-weekly by teleconference to discuss any open issues until the entire set of specifications is complete and the Parties have adopted them. 4.4 FORMAL ADOPTION OF SPECIFICATIONS. When the Parties agree that a specification is complete, Bruker's and HP's Product Managers and the Project Managers will sign the specification to signify that the specification has been formally adopted. 4.5 CHANGES TO SPECIFICATIONS AFTER ADOPTIONS. After a specification has been formally adopted, the Parties may change the specification only by mutual written agreement, signed by Bruker's and HP's Product Manners and Project Managers. ARTICLE 5 - DESIGN AND DEVELOPMENT OF THE GEMINI / GEMINI R&D MS 5.1 PROJECT PLAN. The Gemini Project Plan (Appendix 2) sets out the plan for designing and developing the Gemini MS and the principal portions of the Gemini R&D MS, which are in common with the Gemini MS. The Gemini Project Plan allocates the various tasks between the Parties. Each Party will perform its tasks on the development of the Gemini MS / Gemini R&D MS in each of the phases of the Project in accordance with the Gemini Project Plan. 5.2 INDIVIDUAL AND COLLABORATIVE APPROACH. Each Party has -well-defined tasks called out in the Gemini Project Plan. The Parties will work closely together on system design, integration and testing, particularly of software. The Parties also will work together as necessary to solve a problem or correct for a missed milestone or a delay in an element on the critical path. Because the various components of the Gemini MS will need to work together, a Party may offer suggestions respecting a component even if that Party is not responsible for developing that component. The Party responsible for developing the component will consider each suggestion and will adopt the suggestion unless in its judgment the suggestion is not feasible or reasonable. 5.3 HP'S CORE RESPONSIBILITIES. HP will design and develop the APCI and ESI ionization sources of the Gemini MS / Gemini R&D MS, the high voltage supplies that drive the ion source, the ion optics that guide the ions to the mass analyzer section, the vacuum system, the mechanical packaging and exoskeleton, and the ChemStation software. HP also will design (or procure) the APCI hardware accessory and application software options for protein database searching, peptide tools analysis and deconvolution analysis. HP also will provide assistance to Bruker in the integration and testing of the hardware components that HP develops and the software that HP develops with the hardware components and software that Bruker develops, as and when it becomes necessary. The Gemini Project Plan contains a more detailed and complete itemization of the components for which HP is responsible. 5.4 BRUKER'S CORE RESPONSIBILITIES. Bruker will design and develop the ion trap mass analyzer portion of the Gemini MS, including the electronics, the algorithms, and the software for controlling the ion trap mass analyzer. Bruker will do the mechanical design of the internal tub supports. Bruker will develop the acquisition and control software and software for performing data analysis. Bruker also is responsible for overall integration of the Gemini MS, with HP assisting when and as necessary. Bruker also will design (or procure) the nanoelectrospray accessory and application software options for MS library searching, standalone data analysis, and identification- of-unknown-peaks ("LUMS Dissect") analysis. The Gemini Project Plan contains a more detailed and complete itemization of the components for which Bruker is responsible. 5.5 JOINT RESPONSIBILITIES. Bruker and HP are jointly responsible for ensuring that their respective components and contributions to Gemini MS/Gemini R&D MS are fully compatible so that when the kit components are integrated, the products will meet their set of specifications. Bruker and HP are jointly responsible for conducting and passing tests for the prototype and pilot run instruments and software. 5.6 ALTERNATE VERSIONS AND MODELS OF THE GEMINI MS. The Gemini MS will be designed, developed, and manufactured to include all essential features and functions so that HP may sell it as a stand-alone product and as part of a high-throughput, routine analysis system. The Gemini MS will bear the product identification and appearance or trade dress of an HP instrument. The Gemini MS is also intended to serve as a core platform from which each Party may develop specialized Gemini instruments and systems. A Party may include additional software as a standard or optional feature. All Gemini instruments and systems and Gemini R&D systems will be based on the core Gemini MS so that economies of scale may be realized in manufacturing common parts and components and in assembling and testing the finished product. The Parties expect to differentiate their respective products. 5.7 GEMINI R&D MS. Bruker will modify the Gemini MS to make the Gemini R&D MS. The Gemini R&D MS will differ in appearance from the Gemini MS and will be consistent with the appearance of the Bruker product line. Bruker will design and manufacture different external covers for the Gemini R&D MS. The Gemini R&D MS will bear the product identification and appearance or trade dress, of a Bruker instrument. Bruker will distribute the Gemini R&D MS to its customers. Bruker intends to market the Gemini R&D MS as a flexible research-oriented instrument and as part of a high-end LC/MS(') system. Bruker may include other ion sources and/or other software as standard features. HP will provide a fast switching power supply as a standard component of the Gemini R&D MS. 5.8 CONTINUING RESPONSIBILITIES. If a purchased part that a Party has designed into a component becomes obsolete, that Party will develop an alternative design using parts that will be available in the future. That Party also will develop an appropriate migration plan (acceptable to HP and Bruker) that includes the purchase of sufficient parts to (a) continue manufacture and timely delivery of the Gemini MS and Gemini R&D MS during the period of transition to the new design and (b) make field replacements of obsoleted parts or components as may be required. 5.9 FORMAL TESTING AND CERTIFICATIONS. Bruker and HP are jointly responsible for obtaining the required certifications as set out in the Gemini Hardware Quality and Regulatory Plan and for meeting all requirements for CSA and CE certification. Whenever testing occurs at the other party's site, the visiting party will provide engineering support personnel for the tests at their own expense, including travel costs. 5.10 PRODUCT DOCUMENTATION. HP and Bruker Will collaborate on the development of - the (a) product engineering documentation for use in manufacturing and testing, (b) training materials for training product support engineers, and (c) user information for generation of user manuals. Bruker will take the lead in preparing the first draft and the final draft of the product engineering documentation. Each Party will prepare and exchange its drafts of training materials and user information pertaining to the parts and functions of the Gemini/Gemini R&D for which it is responsible for designing and developing. Both Bruker and HP will own the copyright in the product documentation. Each Party may adapt and prepare derivative works of the product documentation in developing manuals or other documentation for its employees and its customers. 5.11 SUSTAINING ENGINEERING. Each Party will provide sustaining engineering for the Gemini / Gemini R&D MS product line comparable to the level that it provides for other similar products. The Parties will continue to collaborate on refinements, engineering changes, cost reduction, and software updates, upgrades, and new releases. ARTICLE 6 - MARKETING OF THE GEMINI / GEMINI R&D MS 6.1 MARKET INTRODUCTION. Neither Party may announce the Gemini/Gemini R&D MS or show such instruments to prospective customers until both Parties have accepted the production prototypes at the end of the Production Prototype Phase, unless both Parties agree to the early announcement or showing. Neither Party may issue quotations on, accept purchase orders for, or ship its Gemini/Gemini R&D MS instrument unless the other Party consents or both Parties have accepted the pilot run units at the end of the Pilot Run Phase. At any time the Parties may by mutual agreement disclose information about the Gemini/Gemini R&D MS and invite industry experts to observe demonstrations of prototype units, under terms of appropriate confidentiality agreements, to obtain critical feedback. 6.2 NO RESTRICTIONS ON SALES BY THE PARTIES. Bruker may sell the Gemini R&D MS without restriction on customers, geographic territory or sales channels. HP may sell the Gemini.MS without restriction on customers, geographic territory or sales channels. 6.3 HP COLLABORATION ON SALES OF THE GEMINI R&D MS. Whenever appropriate, HP will provide to Bruker or its Affiliates. Qualified New Leads to prospective customers who express an interest in the Gemini R&D MS. Bruker or its Affiliates will pay HP a commission or finder's fee on the sale of a Gemini R&D MS that results from a Qualified New Lead, as provided in the Finder's Fee Agreement. 6.4 BRUKER COLLABORATION ON SALES OF THE GEMINI MS. Whenever appropriate, Bruker or its Affiliates will provide to HP Qualified New Leads to prospective customers who express an interest in the Gemini MS. HP will pay Bruker or its Affiliates a commission or finder's fee on the sale of a Gemini MS that results from a Qualified New Lead, as provided in the Finder's Fee Agreement. ARTICLE 7 - MANUFACTURING AND PROCURING COMPONENTS FOR THE GEMINI / GEMINI R&D MS 7.1 HP'S CORE RESPONSIBILITIES. 7.1.1 HP GEMINI KITS AND HP GEMINI R&D KITS. HP will manufacture (or procure) and test all components comprising the HP Gemini Kit and the HP Gemini R&D Kit. These components are identified in "Appendix 2 - Gemini Component Breakdown" in the Gemini Project Plan. HP will assemble and test each HP Gemini Kit and each HP Gemini R&D Kit. HP will manufacture HP Gemini Kits based on (a) HP's forecast of demand and actual purchase orders from HP customers for the Gemini MS and (b) Bruker's forecast of demand and actual purchase orders received from Bruker for kits with standard positive/negative power switching. HP will manufacture HP Gemini R&D Kits based on (a) actual purchase orders and sales forecasts from Bruker and (b) HP's forecast of demand and actual purchase orders received from HP customers who specify fast positive/negative power switching. HP will design the shipping container and packaging for the HP Gemini Kits and HP Gemini R&D Kits so that Bruker can reuse the shipping container and packaging for the Gemini MS and the packaging for the Gemini R&D MS. HP will provide the container and packaging as part of the Gemini MS Kit and Gemini R&D Kit. HP will pack the High Voltage Power Supply within the shipping container, but separate from and outside the mechanical packaging or body of the HP Gemini Kit and the HP Gemini R&D Kit, so that Bruker may easily remove the power supply and store it separately. HP will ship HP Gemini Kits and HP Gemini R&D Kits to Bruker FOB San Francisco using reasonable efforts to ship in accordance with schedules in Bruker purchase orders. 7.1.2 HP SOFTWARE. HP will manufacture CD ROMs containing the standard ChemStation software. Separate copies of the ChemStation software will be provided for each customer shipment. HP will provide a master copy of all integration software components that HP develops for the Gemini MS/Gemini R&D MS. (Bruker will incorporate these components on its CD-ROM for distribution to customers.) HP also will manufacture CD ROMs or discs containing the software for the following optional products, which Bruker may purchase from HP: HP Peptide Tools, HP Deconvolution, and Peptide Search. 7.1.3 HP SHIP KITS. HP will manufacture or procure all accessories and consumables comprising the HP Ship Kit. The specific items included in the HP Ship Kit are listed under the heading "HP Ship Kit" in "Appendix 2 - Gemini Component Breakdown" in the Gemini Project Plan. 7.1.4 CONSUMABLES. HP will manufacture or procure the consumables that are regularly used by customers in using the Gemini MS or Gemini R&D MS. HP customers and Bruker customers may order these consumables from HP through HP's consumables distribution channel. 7.2 BRUKER'S CORE RESPONSIBILITIES. 7.2.1 BRUKER HARDWARE. Bruker will manufacture (or procure) and test all hardware components for which Bruker has production responsibility. These components are identified in the section under the heading "Bruker-Daltonik Components" in "Appendix 2 - Gemini Im Component Breakdown" in the Gemini Project Plan. 7.2.2 BRUKER SOFTWARE. Bruker will manufacture CD ROMs containing all software required to provide control of the Gemini MS and Gemini R&D MS and CD ROMs containing the data analysis software. Bruker also will manufacture CD ROMs or discs containing the software for the following optional products, which HP may purchase from Bruker: LC/MS Dissect, Library Search, and stand-alone data analysis. 7.2.3 INTEGRATION AND FINAL TESTING. Bruker will provide final assembly and integration of the HP Gemini Kit / HP Gemini R&D Kit with the corresponding Bruker hardware components referred to in Section 7.2.1 and the Bruker Software referred to in Section 7.2.2 to produce the final Gemini MS units and Gemini R&D MS units and will conduct the final testing of each of the final units. All work will be performed in an ISO 9000 certified environment. Bruker will conduct the final test of each Gemini MS and Gemini R&D MS in accordance with the final test procedures that Bruker, with 11P's assistance, will develop before the end of the pilot run phase. 7.3 SEPARATELY PROCURED ITEMS. The following components, although required for the operation of the Gemini MS and Gemini R&D MS, are not provided by HP to Bruker as part of the HP Gemini Kit or HP Gemini R&D Kit, and are not provided by Bruker to HP as part of the Gemini MS that it sells to HP: (1) an Edwards EIM18 rough pump; (2) a PC with two LAN boards, monitor, and printer; and (3) a syringe pump. Each Party will procure these components separately and furnish them as part of the Gemini MS or Gemini R&D MS that such Party sells to its customers. 7.4 ISO COMPLIANCE. Each Party will prepare its manufacturing facilities and environment in which Gemini / Gemini R&D components, kits, and products will be manufactured and the processes and systems that it will use to manufacture Gemini / Gemini R&D components, kits, and products to meet the relevant ISO 9000 standards by October 1, 1999. Each Party will maintain ISO 9000 certification for the duration of its activities in manufacturing Gemini / Gemini R&D components, kits, and products. If a Party decides to use a separate entity for manufacturing any component for which it is responsible, the Party will use its best efforts to select an entity that will meet the relevant ISO 9000 standards before engaging such entity to perform any work required under this Agreement. If a Party uses a separate entity for manufacturing any component for which it is responsible, and such entity does not meet the relevant ISO 9000 standards, the Party will carefully inspect all incoming parts and provide the other Party assurance that such parts meet such Party's quality standards. 7.5 YEAR 2000 COMPLIANCE WARRANTIES. The phrase "Year 2000 Compliant" means able to perform without error, loss of data or loss of functionality arising from any failure to process, calculate, compare or sequence date data accurately. Each Party warrants to the other Party that the processes and systems that it uses to manufacture Gemini and Gemini R&D components, kits, and products hereunder will be Year 2000 Compliant by June 1, 1999, and that such processes and systems will not have an adverse impact on the provision of components, kits and products to either Party or their respective customers. Each Party also warrants to the other Party that all software and firmware that it develops for the other Party or furnishes to the other Party or to the other Party's customers will be Year 2000 Compliant and will not cause any product with which the software or firmware is intended to be used and is used to become non-Year 2000 Compliant. Each Party will demonstrate Year 2000 Compliance by furnishing the other Party successful results of a formal software inspection and review and by successfully executing the year 2000 compliance tests. 7.6 QUALITY PROGRAM. Each Party will maintain an objective quality program for all products it delivers to the other Party. Each Party's quality program will be in accordance with the current revision of HP's Supplier Quality System Requirements. Each Party will provide to the other Party a copy of its quality program and supporting test documentation. 7.7 DELEGATING MANUFACTURING RESPONSIBILITIES. Whenever in this Agreement a Party is assigned the responsibility for manufacturing an item, such Party may procure the item from a third party or may have a third party manufacture the item. However, such Party must use its best efforts to select a third party supplier or third party manufacturer who will meet all relevant requirements of ISO 9000. Such Party also will use its best efforts to require the third party supplier or third party manufacturer to provide Year 2000 Compliance warranties, substantially like the warranties in Section. 7.5, covering everything, particularly software and firmware, procured from such third party, and to permit inspection by both Parties. 7.8 CONTINGENCY MANUFACTURING PLAN. The Parties will develop a mutually- acceptable contingency manufacturing plan for use in case either Party cannot produce sufficient products to meet the other Party's requirements. 7.8.1 If during any quarter either party is unable or unwilling to ship at least 90% of the quantity of HP Gemini MS and HP Gemini R&D MS kits and instruments, the Parties' Program Managers will discuss corrective actions. If during any quarter either party is unable or unwilling to ship at least 80% of the quantity of HP Gemini MS and HP Gemini R&D MS kits and instruments, the Par-ties' Program Managers and Business Managers will decide what corrective actions to take. Such actions may include, but are not limited to the following: (a) hire appropriately skilled personnel to add capacity or shift personnel from other programs to meet the shipment goals, or (b) provide additional technical assistance to the other party in which situation the party receiving assistance will compensate the other party at a rate of 1.5 times salaries plus transportation and living expenses. 7.9 ENGINEERING DESIGN OR PROCESS CHANGES. 7.9.1 PROPOSED CHANGES. Neither Party will, without the prior written consent of the other Party, make or incorporate in the Gemini kit, Gemini R&D kit or Gemini MS any change in any process or any change in any design that affects the electrical performance; the mechanical form fit, or function; the environmental compatibility; the chemical characteristics; the software compatibility; or the life, reliability, or quality of such Gemini Product (collectively, "Engineering Changes"). Each Party will give to the other Party notice of any proposed Engineering Change, and will provide evaluation samples and other appropriate information at least 90 days prior to the first proposed shipment of the Gemini kit, Gemini R&D kit or Gemini MS involving an Engineering Change. Each Party also will give to the other Party notice of any proposed geographical relocation of any manufacturing process together with assurances that such relocation will not affect product availability, the electrical performance, the mechanical form, fit, or function, the environmental compatibility, the chemical characteristics, the software compatibility, or the life, reliability, or quality of such Gemini Product, at least 60 days before such relocation. 7.9.2 SAFETY STANDARD CHANGES. Each Party will immediately give notice to the other Party if any upgrade, substitution or other change to an instrument is required to make that instrument meet applicable safety standards or other governmental statutes, rules, orders or regulations, even those that are not defined as Engineering Changes in Section 7.9. 1. The Parties will determine which Party is responsible for meeting the requirement, and such Party shall take all appropriate steps to effect the upgrade, substitution, or other change that may be required. If the instrument met all applicable safety standards and other governmental requirements at the time of manufacture, the Parties will allocate the costs of any subsequent upgrade, substitution or other change required, in an equitable manner, based on good faith discussions between the Parties. 7.9.3 EXCESSIVE FAILURE RATE. If the failure rate for the Gemini MS and/or Gemini R&D MS exceeds an average of two service calls per instrument per year, averaged over the total number of instruments under warranty, the Parties jointly will analyze the failure reports, determine the root causes, and develop corrective action plans. If the Parties determine that the failures are primarily attributable to one Party, such Party will provide additional engineering and technical support needed to bring the failure rate within an acceptable limit. If the Parties determine that the failures are not primarily attributable to one Party, both Parties will provide additional engineering and technical support needed to bring the failure rate within an acceptable limit. ARTICLE 8 - SALES OF COMPONENTS AND OF THE GEMINI MS AND GEMINI R&D MS 8.1 HP GEMINI PRODUCTS. Bruker may purchase from HP and HP will sell to Bruker the following products ("HP Gemini Products") so long as either HP is actively selling the Gemini MS or Bruker is actively selling the Gemini R&D MS: HP Gemini Kits, as specified in Sub-Section 7.1.1 HP Gemini R&D Kits, as specified in Sub-Section 7.1.1 HP Ship Kits, comprising accessories and consumables, as specified in Sub-Section 7.1.3 HP APCI accessory HP CDs or disks containing optional software identified on the document entitled "Pricing of HP and Bruker Kits, Instruments, Accessories, and Software" which is incorporated herein as an Appendix 3 in Section 22.9. HP Gemini R&D kit without source parts, etc. as specified in Gemini Project Plan. 8.2 BRUKER GEMINI PRODUCTS. HP may purchase from Bruker and Bruker will sell to HP the following products ("Bruker Gemini Products") so long as either Bruker is actively selling the Gemini R&D MS or HP is actively selling the Gemini MS: Gemini MS as assembled and tested in accordance with Section 7.2.3 Bruker Nanoelectro spray accessory Bruker CDs or disks containing optional software identified on the document entitled "Pricing of HP and Bruker Kits, Instruments, Accessories, and Software" 8.3 PRICES. Sales between HP and Bruker will be conducted in US dollars. The prices are set out in the document entitled "Pricing of HP and Bruker Kits, Instruments, Accessories, and Software," which is incorporated herein as Appendix 3. The Parties have a goal of reducing their respective manufacturing costs so that they can reduce their prices to each other after the year [*](3) from the prices specified for the year [*]. The parties will confer regarding their prices for HP Gemini Kits, HP Gemini R&D Kits and the Gemini MS sold after the year [*]. HP will reduce the prices that HP charges Bruker for the HP Gemini Kit and the HP Gemini R&D Kit by the same percentage that Bruker reduces the price that it charges HP for the Bruker value add portion of the Gemini MS. Bruker and HP have mutual interest in product differentiation, including different ionization methods (e.g. MALDI, FAB, SIMS, MCI, MAB). Bruker has an initial interest in developing an in-source MALDI-ITMS system based upon ionization in vacuum. Bruker has the option of purchasing a Gemini R&D kit without ESI/API source parts, power supplies, etc. to be used with different ionization sources mentioned above. This option is described in the Gemini project plan and the price set forth in Appendix 3. This provision is applicable for a volume of more than 5 kits per year. If less than 5 kits per year are required, Bruker can purchase Gemini R&D kits, and the excess parts not used for this instrument configuration can be used by Bruker for spare parts. 8.4. EXCHANGE RATE VARIANCES. The prices in Appendix 3 are based upon an exchange rate of 1.65DM per US dollar. HP and Bruker agree to share the exchange rate risk associated with the Bruker value add portion of the Gemini MS. If the actual exchange rate varies more than 5%DM/US$ Bruker and HP will equally share the impact of the variance. The actual exchange rate will be the noon Fed Funds fixing rate on the date that Bruker accepts a purchase order placed by HP. Within thirty days after the end of each HP fiscal quarter HP and Bruker will settle the impact of the differences and the appropriate party will make a payment to the other party. If the exchange rate between US dollars and the DM(or Euro) differs from the assumed exchange rate by more than 15% at the beginning of any HP fiscal quarter, HP and Bruker will reset the assumed exchange rate and adjust the prices in Appendix 3. To complete the reset of the assumed exchange rate, the Parties will (1) replace Appendix 3, "Pricing of HP and Bruker Kits, Instruments, Accessories, and Software" with a document containing revised prices in US dollars, (2) agree that any reference to prices refers to the updated Appendix, and (3) agree that any reference to the assumed exchange rate, in the body of the contract or any Appendices, refers to the new assumed exchange rate. 8.5 AOB-HP LICENSE AGREEMENT Analytical of Branford, Inc. ("AOB") is the exclusive licensee of U.S. patents No. 5,130,5338, No. 5,581,080, and No. 5,686,726. AOB has granted to HP sublicenses under AOB's exclusive licenses to the AOB licensed patents. AOB and HP have agreed that the Esquire-LC, Gemini MS & Gemini R&D MS and successor ITMS systems will be considered as licensed products sold by HP and Bruker to their customers so long as HP pays AOB the royalty due upon such sales. The AOB license fee is included in the price of the HP Esquire-LC kit and HP Gemini MS and Gemini R&D MS kits and bioanalysis and deconvolution software. However, Bruker cannot use the HP API source parts or deconvolution software for products other than ITMS products since Bruker has no license to AOB patents. - -------- (3) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. 8.6 TAXES, DUTIES, SHIPPING CHARGES, INSURANCE. Title to the HP Gemini MS Kits, HP Gemini R&D MS Kits, HP Ship Kits, APCI accessories, and the media on which HP has stored its optional software will pass to Bruker, FOB San Francisco. Bruker will pay all taxes, duties, freight and insurance for shipments from San Francisco. Title to the finished HP Gemini MS, nanoelectrospray accessory and the media on which Bruker has stored its optional software will pass to HP, FOB Bremen, Germany. HP will pay all taxes, duties, freight and insurance for shipments from Bremen, Germany. 8.7 ORDER FORECASTS. 8.7.1 DURING THE DEVELOPMENT PROJECT. At the beginning of the Production Prototype Phase, Bruker will give HP an initial forecast of Bruker's requirements for HP Gemini Products (as defined or listed in Section 8.1 ) for the first year after shipment release. Likewise, at the beginning of the Production Prototype Phase, HP will give Bruker an initial forecast of HP's requirements for Bruker Gemini Products (as defined or listed in Section 8.2) for the first year after shipment release . At the beginning of the Pilot Run Phase, each Party will provide to the other Party an updated forecast. 8.7.2 ON-GOING FORECASTS. After the successful conclusion of the Pilot Run Phase, HP will provide to Bruker before the end of each month a forecast of the quantity of the Gemini MS, the Bruker Nanoelectrospray Accessory, and Bruker Software that HP has ordered or scheduled for delivery or expects to order or schedule for deliveries, during the following 12 months. Similarly, before the end of each month Bruker will provide to HP a forecast of the quantity of the HP Gemini Kit, the HP Gemini R&D Kit, the HP Ship Kit, the HP APCI Accessory, and HP Software that Bruker has ordered or scheduled for deliveries, or expects to order or schedule for deliveries, during the following 12 months. Each Party will update its forecast each month to provide the other Party its best estimates of the number of units that it will want delivered in each of the 12 succeeding months. 8.7.3 IMPLICATIONS OF FORECASTS ON ORDERS FOR PRODUCTS. Both parties may accept, but will not be obligated to accept, a purchase order for quantities of Gemini Products that differ from the quantities indicated in its forecasts by more than the percentages indicated in the table below. A conforming purchase order must conform with each parameter set out below; the variances permitted are to be considered separately and not cumulatively.
- ---------------------------------------- -------------------------------------- -------------------------------------- Time Between Relevant Forecast and Minimum Quantity of Product on Maximum Quantity of Product on Required Shipments on Purchase Order Purchase Order Purchase Order - ---------------------------------------- -------------------------------------- -------------------------------------- Forecast Provided 1 Month Before 100% 100% Shipments Scheduled on Purchase Order - ---------------------------------------- -------------------------------------- -------------------------------------- Forecast Provided 2 Months Before 100% 110% Shipments Scheduled on Purchase Order - ---------------------------------------- -------------------------------------- -------------------------------------- Forecast Provided 3 Months 80% 120% - ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- -------------------------------------- Before Shipments Scheduled on Purchase Order - ---------------------------------------- -------------------------------------- -------------------------------------- Forecast Provided 6 Months Before 50% 150% Shipments Scheduled on Purchase Order - ---------------------------------------- -------------------------------------- --------------------------------------
8.8 PURCHASE ORDERS 8.8.1 FUNCTION OF PURCHASE ORDERS. Each Party will formally order kits, instruments, components, accessories, software, and replacement parts, ("Products") from the other Party and schedule shipments ("Delivery Dates") by issuing its regular purchase order ("Order") to the other Party. Each Order will include: (i) unit quantity; (ii) unit price; (iii) shipping destination; (iv) Delivery Date; and (v) other instructions or requirements pertinent to the Order. Both parties may schedule regular intervals for deliveries by an appropriate Order setting forth the intervals. This Agreement will control and take precedence over the terms of an Order if there is any inconsistency between this Agreement and an Order. 8.8.2 ORDER ACKNOWLEDGMENT. An Order will be deemed to have been placed as of the date of receipt of the Order. The receiving Party will promptly confirm the receipt of an Order electronically or through facsimile to the ordering Party within two working days. Orders that are within the allowed variances from the forecasts, as set out in Section 8.7, will be deemed accepted upon receipt. All Orders will be deemed accepted if the receiving Party does not reject the Order or non-conforming item on the Order, in whole or in part, within ten business days of receipt of the Order. If an Order exceeds the Forecast or shortens the Lead Time, the receiving Party will use reasonable efforts to fill such excess or accommodate such shorter Lead Time. 8.8.3 SUBMISSION OF REGULAR MONTHLY PURCHASE ORDERS. Each Party will submit to the other Party its Purchase Order for Products to be purchased and delivered during any month at least 60 days before the beginning of such month. 8.9 STANDARD PAYMENT TERMS. Each Party will pay for Products, in US dollars, net 37 days, after the latest of. (a) receipt by the receiving Party of an appropriate invoice from the shipping Party; or (b) receipt by the Party of the corresponding Products or Parts. Except as other-wise provided in this Agreement, associated freight expenses and duties will be paid directly by the receiving Party. Neither Party will be liable for any costs related to or payments for unordered or Nonconforming Products. 8.10 PROTOTYPES AND PRODUCTS DELIVERED DURING DEVELOPMENT PROJECT. During the Lab Prototype Phase, the Parties will provide the parts, hardware components, software, and labor to make and allocate lab prototypes, in accordance with the Gemini Project Plan. This will be done without charge to or receiving reimbursement from the other Party, irrespective of where the lab prototypes will be sent, who will get the lab prototypes, or how the lab prototypes will be used. During the Production Prototype Phase, the Parties may provide the parts, hardware components, software and labor to upgrade some of the lab prototypes to become production prototypes. The Parties will also provide the parts, hardware components, software, and labor to make new production prototypes. The Parties will allocate the production prototypes between the Parties, in accordance with the Gemini Project Plan, without charge to or receiving reimbursement from the other Party, irrespective of where the production prototypes will be sent, who will get the production prototypes, or how the production prototypes will be used. During the Pilot Run Phase, the Parties may upgrade some of the production prototypes to become pilot run instruments, and the Parties will make additional pilot run instruments. The Parties will distribute the pilot run instruments in accordance with the Gemini Project Plan, The pilot run instruments will be treated as customer units for purposes of determining and allocating costs and payments between the Parties. Bruker will pay HP for all HP Gemini Kits, HP Gemini R&D Kits, and HP Ship Kits (or their equivalents in components and parts) incorporated into the pilot run instruments, as though Bruker had ordered the components for its regular manufacturing. HP will pay Bruker for all the pilot run units that are delivered to HP, as though the units were ordered for customer shipments. If one Party has purchased and famished the separately procured items for a unit that is distributed to the other Party, the other Party will reimburse the procuring Party for such separately procured items. ARTICLE 9 - HP'S MINIMUM PURCHASE COMMITMENT, INITIAL PURCHASE ORDER AND DISPOSITION OF HP'S SECURITY DEPOSIT/DONVN PAYMENT 9.1 MINIMUM PURCHASE COMMITMENT BY HP. HP will purchase a minimum of [*](4) units of the Gemini NIS during the two years following shipment release. 9.2 HP'S INITIAL PURCHASE ORDER. As assurance for HP's minimum purchase commitment recited above, HP will issue a new purchase order for this minimum quantity after completion of the Production Prototype phase. This new purchase order will replace and automatically cancel existing HP Purchase Order #23732322. Notwithstanding anything to the contrary in Sub-Section 8.7.3, Section 8.8, and Section 8.9, (a) HP will not submit regular purchase orders until the [*] units ordered on its initial purchase order have been allocated for deliveries; instead HP will issue call offs or use another mutually acceptable procedure to advise Bruker of shipping destinations, Delivery Dates, and other instructions for each of the [*] units; (b) HP will pay for the first [*] units, including the pilot run units, as provided in Section 9.5 below. 9.3 SECURITY DEPOSIT/DOWN PAYMENT PREVIOUSLY PAID BY HP TO BRUKER. Under the terms of the Old Agreement, HP submitted Purchase Order 923732322 to Bruker for [*] - -------- (4) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. Gemini units. HP paid Bruker [*] as a security deposit and down payment, with an expectation that Bruker would begin shipping Gemini systems to HP in [*](5). 9.4 PARTIAL REFUND OF SECURITY DEPOSIT/DOWN PAYMENT. Within five days of execution of this Agreement, Bruker will refund to HP, by wire transfer, the balance of the security deposit / down payment, including accrued interest, except Bruker will retain [*] as the security deposit/down payment for the first [*] units of the Gemini MS . Thereafter, Bruker will pay HP interest within 30 days after the end of each HP Fiscal Quarter on any amounts that Bruker retains as a security deposit/down payment during such quarter. The interest rate for computing interest for such quarter will be the average of the LIBOR one-year index for such quarter divided by four. 9.5 DISPOSITION OF SECURITY DEPOSIT/DOWN PAYMENT. Each time Bruker sells and delivers a Gemini MS to HP, Bruker will deduct [*] of transfer price from the security deposit/down payment and invoice HP for the remainder. When the balance of the security deposit/down payment is less than [*], Bruker will apply the balance to HP's purchase of the next Gemini MS and invoice HP for the difference. If Bruker fails to develop the Gemini/Gemini R&D MS in a timely manner in accordance with the Gemini Project Plan, or if Bruker terminates this Agreement before the security deposit/down payment has been used up in the normal course of selling products to HP, Bruker shall immediately refund to HP the remaining balance of the security deposit/down payment. If HP does not order sufficient products to deplete the security deposit/down payment through no fault of Bruker, HP will forfeit any remaining security deposit/down payment. 9.6 DELAY IN INITIAL SHIPMENT. If the initial shipment of the Gemini MS is delayed beyond the scheduled shipment date of [*], Bruker will refund to HP [*] of the Security Deposit for each Gemini MS that HP forecasts, on its forecast immediately preceding the delay, for delivery during the period of the delay, until the initial shipment occurs. ARTICLE 10 - WARRANTIES AND SUPPORT 10.1 HP WARRANTY. HP warrants that all HP Gemini Products, including the media on which HP software is fixed, will be free from defects in materials and workmanship for a period of 15 months from the date of shipment by HP to Bruker. If any HP part in any Gemini MS or Gemini R&D MS fails during manufacture or test at Bruker's factory as a result of such defect, Bruker may draw from its stock of HP parts to replace any such failed HP part and return such failed part to HP for replacement at no charge: or for credit. If any HP part in any Gemini R&D MS fails as a result of such defect after Bruker has shipped the Gemini R&D MS, but within 15 months of HP's shipment to Bruker, HP will provide a replacement part in exchange for such failed part at no charge. However, HP will not be responsible for paying for any labor or other expenses incurred in connection with replacing such part in the Gemini R&D MS. - -------- (5) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. 10.2 BRUKER WARRANTY. Bruker warrants that all Bruker Gemini Products, including the media on which Bruker software is fixed, will be free from defects in materials and workmanship for a period of 15 months from the date of shipment by Bruker to HP. If any Bruker part in any Gemini MS fails as a result of such defect within 15 months of Bruker's shipment to HP, Bruker will provide a replacement part in exchange for such failed part at no charge. However, Bruker will not be responsible for paying for any labor or other expenses incurred in connection with replacing such part in the Gemini MS. 10.3 REPLACEMENT PARTS. Each Party will prepare a list of parts (by part number and description) that it will make available as replacement parts under its warranty and that it will sell for customer support. In preparing these lists, each Party will determine whether to furnish individual parts or assemblies of parts as replacement parts. Each Party also will determine and specify the lead-time for ordering and the lot quantity for each listed replacement part. Each Party also will determine the distribution channel(s) that it will use in selling the replacement parts or making them available to the other Party. The prices that each Party will charge the other Party for replacement parts or the formula that will be used to determine such prices is set out in the "Pricing of HP Kits, Accessories, and Software and Bruker Instruments, Accessories, and Software". 10.4 RETURN OF FAILED PARTS AND FAILURE REPORTS. HP will send to Bruker all failed electronic boards that HP replaces for its customers, at Bruker's expense. If Bruker requests HP to send other failed parts to Bruker, HP will use reasonable efforts to send such other failed parts to Bruker, at Bruker's expense. If HP requests Bruker to send any failed parts to HP, Bruker will use reasonable efforts to send such failed parts to HP, at HP's expense. Whether or not any failed part is returned, the par-ties will provide each other with failure information to facilitate corrective action by the Party that made the part. ARTICLE 11 - NEW DEVELOPMENT PROJECTS 11.1 UPGRADES TO GEMINI/GEMINI R&D MS AND NEW ITMS. The Parties will begin considering upgrades to the Gemini/Gemini R&D MS and/or the design of the next generation platform (under the code name [*](6)), at the end of the Gemini Production Prototype Phase. If the Parties decide to jointly develop a major upgrade to the Gemini/Gemini R&D MS or to jointly develop the [*] or any other ITMS, the Parties will use Lifecycle Planning, including the preparation of Lifecycle Documents for the project. Neither Party will be obligated to commence or to finish any joint development of an upgrade or new product unless both Parties formally adopt the Lifecycle Documents for the upgrade or new product, and both Parties agree to a set of prices at which the Parties will sell components and products to one another. 11.2 RP DEVELOPMENTS OF TECHNOLOGIES IN HP CORE AREAS. HP anticipates that it will continue making improvements in the HP Core Areas. HP will inform Bruker product, - -------- (6) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. project and program management of any improvements that HP develops and incorporates into any of its ITMS instruments during the Engineering Collaboration Period. Both Parties will share technology improvements in their core areas to assure that both Parties' products are competitive in basic areas of MS and MS/MS performance such as sensitivity, mass range, resolution, etc. Upon meeting the required competitive levels, the parties will discuss and mutually agree how to differentiate their products. 11.3 BRUKER DEVELOPMENTS OF TECHNOLOGIES IN BRUKER CORE AREA. Bruker anticipates that it will continue making improvements in the Bruker Core Areas. Bruker will inform HP products, project and program management of any improvements that Bruker develops and incorporates into any of its ITMS instruments during the Engineering Collaboration Period. Both Parties will share technology improvements in their core areas to assure that both Parties' products are competitive in basic areas of MS and MS/MS performance such as sensitivity, mass range, resolution, etc. Upon meeting the required competitive levels, the parties will discuss and mutually agree how to differentiate their products. ARTICLE 12 - EMPLOYEE RELATIONS 12.1 VISITING EMPLOYEES. Each Party will perform most of its tasks on its own premises. However, employees of each Party will visit the other Party's premises on a regular basis during the Engineering Collaboration Period. Regardless of the duration of any such visit, the visiting employee will not be deemed an employee of the Host Party. The visiting employee's regular employer will continue to be responsible for the employee's wages, benefits and payroll taxes, and (unless otherwise agreed by the Parties) reimbursable expenses. Each visiting employee will abide by the safety and security rules of the Host Party. 12.2 SENSITIVE INFORMATION. A visiting employee may inadvertently observe or overhear information that a reasonably prudent person would recognize as confidential or proprietary. If this happens, the employee will treat such information as belonging to the Host Party and will not disclose it to anyone or use it for any purpose without first inquiring of the Host Party. 12.3 RECRUITING. No Party may recruit any employee assigned by another Party to work on the Project while such employee works on the Project or within one year thereafter. However, such employee may take the initiative to apply for employment with the other Party and such other Party may offer employment to such employee. ARTICLE 13 - CONFIDENTIAL INFORMATION 13.1 CONFIDENTIAL INFORMATION. "Confidential Information" means (a) written information that is marked as confidential at the time of disclosure and (b) unwritten information that is treated as confidential at the time of disclosure and designated as confidential in a written memorandum sent to the recipient within thirty days of disclosure, summarizing the information sufficiently for identification. 13.2 DUTY OF CARE. Each Party receiving Confidential Information under this Agreement will protect it by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized use, dissemination, or publication of the Confidential Information as the recipient uses to protect its own confidential information of a like nature. 13.3 PERSONS WHO MAY RECEIVE INFORMATION. A recipient may disclose Confidential Information only to its employees and consultants who have a need to know such information to carry out their duties. All such employees and consultants must be obligated by written agreement to give substantially the same protection to the Confidential Information as is provided herein. 13.4 USE OF CONFIDENTIAL INFORMATION. HP may use Bruker's Confidential Information only for the purpose of understanding technologies associated with such disclosures, for developing ITMS products under this agreement, and for such purposes as may be permitted under Article 14. Bruker may use HP's Confidential Information only for the purpose of understanding technologies associated with such disclosures, for developing ITMS products under this agreement, and for such purposes as may be permitted under Article 14. 13.5 DISCLOSURES UNDER PRIOR AGREEMENTS. As of the Effective Date, this Agreement will govern any disclosure of Confidential Information pertinent to the Project under any prior agreement. 13.6 EXCLUSIONS. The provisions of this Article shall not apply to any information: (a) that was already in recipient's possession before disclosure by the disclosing Party, (b) that is, or after it becomes, a matter of public knowledge through no fault of recipient, (c) that is rightfully received by recipient from a third party without a duty of confidentiality, (d) that is disclosed by the disclosing Party to a third party without imposing a duty of confidentiality on the third party, or (e) that is developed independently by employees of the recipient with no access to the Confidential Information. A recipient may disclose Confidential Information when required by law, but only to the extent so required, provided that the recipient gives the disclosing Part), reasonable advance notice so that the disclosing Party can protect its interests. 13.7 TERM. The recipient's obligations of confidentiality expires three years after the expiration or termination of the Engineering Collaboration Period. ARTICLE 14 - DEVELOPMENT INVENTIONS AND OTHER INTELLECTUAL PROPERTY CREATED DURING DEVELOPMENT PROGRAMS 14.1 INVENTION. "Invention" means anything that comprises patentable subject matter under the U.S. Patent Law (Title 35, U.S. Code Section 101) 14.2 DEVELOPMENT INVENTION. "Development Invention" means an invention comprising, or embodied in, an ITMS or a component thereof, or a process practiced or implemented in or by an ITMS made or developed, by one or more employees of either Bruker or HP, during the Engineering Collaboration Period. 14.3 OWNERSHIP OF DEVELOPMENT INVENTIONS. A Development Invention made or developed solely by Bruker employees ("a Bruker Development Invention") is deemed to be solely owned by Bruker. A Development Invention made or developed solely by HP employees ("an HP Development Invention") is deemed to be solely owned by HP. A Development Invention made or developed jointly by employees of both Parties ("a Joint Development Invention") is deemed to be owned by both Parties. For purposes of Section 14.5 and Section 14.6 below, a Bruker Development Invention will be considered solely owned by Bruker, and an HP Development Invention will be considered solely owned by HP, notwithstanding any assignment or partial assignment of any ownership by a Party to any other party. 14.4 DISCLOSURE OF DEVELOPMENT INVENTIONS. Each Party will disclose to the other Party all Development Inventions, including Joint Development Inventions, made or developed by its employees. 14.5 OBTAINING AND MAINTAINING PATENTS COVERING DEVELOPMENT INVENTIONS. Each Party will determine, in its sole discretion, whether and where to file patent applications covering Development Inventions of which it is the sole owner. Each Party will be solely responsible for the prosecution of patent applications and the maintenance of patents covering Development Inventions of which it is the sole owner. With respect to Joint Development Inventions, the Parties will be governed by the provisions of Section 143 in determining whether and where to file patent applications and in allocating responsibility for the prosecution of patent applications and the maintenance of patents. 14.6 LICENSES REGARDING SOLELY OWNED DEVELOPMENT INVENTIONS. The provisions of this Section 14.6 and the Sub-sections hereunder relate and extend only to solely owned Development Inventions and grant no rights to exploit any other inventions or under any patents covering any other inventions. 14.6.1 LICENSES TO EACH OTHER REGARDING DEVELOPMENT INVENTION WITHIN OWNER'S CORE AREA. With respect to each solely owned Development Invention in the owner's Core Areas, the owning Party hereby grants and will grant to the other Party, for the duration of the Engineering Collaboration Period and for 2 years there after a world-wide, non-exclusive, royalty-free, paid -up license to use, offer to sell, sell and import ITMSs that constitute, embody, or incorporate such Development Invention and to practice any process(es) constituting or embodying such Development Invention in using ITMSs with the right to grant sublicenses to the other Party's Affiliates, but without the right to grant sublicenses to non-Affiliates. Such license extends and will extend to all patents covering the Development Invention and to trade secrets embodied in the Development Invention, but not to copyrights in computer programs. Such license specifically excludes the right to make, or have made, i.e. the license is not a manufacturing license. 14.6.2 LICENSES TO EACH OTHER REGARDING DEVELOPMENT INVENTION IN OTHER PARTY'S CORE AREA. With respect to each solely owned Development Invention in the other Party's Core Areas, the owning Party hereby grants and will grant to the other Party a world-wide, non-exclusive, royalty-free, paid-up, perpetual. license to make, have made, use, offer to sell, sell, and import products that constitute, embody, or incorporate such Development Invention and to practice any process(es) constituting or embodying such Development Invention in manufacturing or using products, in all fields, with the right to grant sublicenses to the other Party's Affiliates, but without the right to grant sublicenses to non-Affiliates. Such license extends and will extend to all patents covering the Development Invention and to trade secrets embodied in the Development Invention, but not to copyrights in computer programs. 14.6.3. LICENSES TO EACH OTHER REGARDING DEVELOPMENT INVENTION IN NEITHER PARTY'S CORE AREA. With respect to each solely owned Development Invention that is in neither Party's Core Areas, the owning Party hereby grants and will grant to the other Party, for the duration of the Engineering Collaboration Period and for two years thereafter, a world-wide, non-exclusive, royalty-free, paid-up license to use, offer to sell, and import ITMSs that have been developed jointly by the Parties hereunder that constitute, embody, or incorporate such Development Invention and to practice any process(es) constituting or embodying such Development Invention in using ITMSs that have been developed jointly by the Parties hereunder, with the right to grant sublicenses to the other Party's Affiliates, but without the right to grant sublicenses to non-Affiliates. Such license extends and will extend to all patents covering the Development Invention and to trade secrets embodied in the Development Invention, but not to copyrights in computer programs. Such license specifically excludes the right to make or have made, i.e., the license in not a manufacturing license. 14.6.4 LICENSES TO THIRD PARTIES. Each Party will determine, in its sole discretion, whether, and to whom else, it will grant additional licenses and the terms of such licenses with respect to its solely owned Development Inventions. 14.7 JOINT DEVELOPMENT INVENTIONS 14.7.1 JOINT DEVELOPMENT INVENTIONS IN BRUKER CORE AREAS. If the subject matter of a Joint Development Invention is exclusively in Bruker Core Areas: (1) Bruker shall have the first right to determine whether to seek patents on such invention; (2) if Bruker decides to file one or more patent applications on such invention, upon request by Bruker, HP will assign its rights to any patent application and any patent issuing from such patent application covering such invention, and Bruker may file and prosecute such patent applications solely in its name; and (3) HP shall retain, and Bruker shall grant to HP under the patents issuing from such patent applications, a royalty-free, nonexclusive, perpetual license to make, have made, import, offer to sell, sell, and use products that incorporate the invention, with the right to grant sublicenses to its Affiliates, but without the right to grant sublicenses to non-Affiliates. If Bruker decides not to file a patent application on a Joint Development Invention in Bruker Core Areas, or if Bruker does not timely request HP to assign HP's rights to file a patent application on such Joint Development Invention, the Joint Development Invention will be treated as a Joint Development Invention in neither Core Areas under the provisions of Section 14.7.3. 14.7.2 JOINT DEVELOPMENT INVENTIONS IN HP CORE AREAS. If the subject matter of a Joint Development Invention is exclusively in HP Core Areas: (1) HP shall have the first right to determine whether to seek patents on such invention; (2) if HP decides to file one or more patent applications on such invention, upon request by HP, Bruker will assign its rights to any patent application and any patent issuing from such patent application covering such invention, and HP may file and prosecute such patent applications solely in its name; and (3) Bruker shall retain, and HP shall grant to Bruker under the patents issuing from such patent applications, a royalty-free, nonexclusive, perpetual license to make, have made, import, offer to sell, sell, and use products that incorporate the invention, with the right to grant sublicenses to its Affiliates, but without the right to grant sublicenses to non-Affiliates. If HP decides not to file a patent application on a Joint Development Invention in HP Core Areas, or if HP does not timely request Bruker to assign Bruker's rights to file a patent application on such Joint Development Invention, the Joint Development Invention will be treated as a Joint Development Invention in neither core areas under the provisions of Section 14.7.3. 14.7.3 JOINT DEVELOPMENT INVENTIONS IN NEITHER CORE AREAS OR IN BOTH CORE AREAS. Joint inventions that are in neither Party's Core Areas, or simultaneously in both Party's Core Areas, will be owned jointly, and both parties will try to resolve by mutual agreement who takes the lead in filing patents on such inventions. 14.8 INVENTIONS PRIOR TO EFFECTIVE DATE. The Provisions of this Article 14 will apply to all Development Inventions-made during the Engineering Collaboration Period, whether made during the validity of the Old Agreement or after the Effective Date of this Agreement, except that with respect to any invention covered by the Old Agreement for which a patent has issued or for which a patent application has been filed in any country in the names of both Parties, all patents issued in all countries covering such invention will be assigned to both Bruker and HP in accordance with the Old Agreement. 14.9 LICENSES TO EACH OTHER ON PRE-EXISTING INTELLECTUAL PROPERTY. With respect to any HP or Bruker inventions, patents, know-how or trade secrets that existed before the Old Agreement was signed ("Pre-existing Intellectual Property"), the owning Party hereby grants and will grant to the other Party, for the duration of the Engineering Collaboration Period and for two years thereafter, a world-wide, non-exclusive, royalty-free, paid-up license to use, offer to sell, sell and import ITMSs that have been developed jointly by the Parties hereunder that constitute, embody, or incorporate such Pre-existing Intellectual Property and to practice any process(es) constituting or embodying such Pre-existing Intellectual Property in using ITMSs that have been developed jointly by the Parties hereunder, with the right to grant sublicenses to the other Party's Affiliates, but without the right to grant sublicenses to non-Affiliates. Such license does not extend to copyrights in computer programs. Such license specifically excludes the right to make or have made, i.e., the license in not a manufacturing license. The license also extends to the Esquire-LC. 14.10 IMPLIED LICENSES. The Parties acknowledge that with respect to any invention of a Party that such Party embodies in or incorporates into the Gemini MS / Gemini R&D MS or a component thereof, any purchaser of the Gemini MS / Gemini R&D MS will have an implied license under any patent that may cover such invention permitting such purchaser to use, to offer for sale, and to sell such patented invention when using or selling such Gemini MS / Gemini R&D MS. 14.11 OWNERSHIP OF COPYRIGHTS IN WORKS OF AUTHORSHIP. The copyright in a document and in any software or firmware code, written solely by employees of one Party, shall be owned solely by that Party. The copyright in a document and in any software or firmware code, written by employees of both Parties shall be owned by both Parties. 14.12 TRADE SECRETS IN AND LEGENDS TO BE APPLIED TO DOCUMENTS. If a document or software or firmware code includes or incorporates a trade secret of either Party, the Party that creates such document or software or firmware must include a legend on the document or embedded in the code designating such document or code as "Confidential" or "Proprietary" with the name of the Party whose trade secret is incorporated (or names of both Parties if trade secrets of both Par-ties are incorporated). Notwithstanding the ownership of the copyright in a work by one or both Parties, if the work incorporates or is based upon Confidential Information disclosed by one or both Parties or developed as Confidential Information in the Gemini Program or in connection with any other matters covered by this Agreement, the work may be used and distributed only in accordance with the provisions governing the use and distribution of Confidential Information herein. 14.13 LICENSE TO USE HP SOFTWARE. HP will make available for purchase by Bruker, as set out in Section 8.1, CDs containing certain optional computer application programs covered by HP copyrights. HP hereby grants to Bruker a license, under HP's copyright in each computer application program for which Bruker has paid the license fee, to install and to execute the program on one computer. Bruker will transfer to Bruker's customer the license when Bruker transfers the CDs containing such computer application program or when Bruker transfers the computer on which such computer application program is installed. Bruker will pay HP the license fee (or purchase the CE, containing the optional computer application program) for each computer on which an HP optional computer application program is installed or executed. 14.14 LICENSE TO USE BRUKER SOFTWARE. Bruker will make available for purchase by HP, as set out in Section 8.2, CDs containing certain optional computer application programs covered by Bruker copyrights. Bruker hereby grants to HP a license, under Bruker's copyright in each computer application program -for which HP has paid the license fee, to install and to execute the program on one computer. HP will transfer to HP's customer the license when HP transfers the CDs containing such computer application program or when HP transfers the computer on which such computer application program is installed. HP will pay Bruker the license fee (or purchase the CD containing the optional computer application program) for each computer on which a Bruker optional computer application program is installed or executed. 14.15 LICENSE TO COPY AND DISTRIBUTE DOCUMENTS. Each Party grants to the other Party a non-exclusive, royalty-free, worldwide license under its copyrights in any technical paper or brochure describing or applicable to the Gemini MS / Gemini R&D MS to make and distribute copies thereof and to make derivative works thereof and to make and distribute copies of such derivative works ARTICLE 15 - REPRESENTATIONS, WARRANTIES AND DISCLAIMERS 15.1 THIRD PARTY CONFIDENTIAL INFORMATION. Each Party represents and warrants to the other Party that it will not furnish to the other Party, incorporate in any works furnished to the other Party or use in any deliverable in the Gemini Project any confidential information of any third party without permission of such third party. 15.2 THIRD PARTY WORKS OF AUTHORSHIP. Each Party represents and warrants to the other Party that it will not furnish to the other Party, incorporate in any works furnished to the other Party, or use in any deliverable in the Gemini Project any copyrighted works of any third party without permission of such third party. 15.3 THIRD PARTY PATENTS. Each Party represents and warrants to the other Party that it will not furnish to the other Party, incorporate in any works furnished to the other Party, or use in any deliverable in the Gemini Project any product, data, information, know-how, or process that such Party reasonably believes may infringe or conflict with any patent rights of a third party, unless such Party also furnishes to such other Party a warning of such possible infringement or conflict and information known by such Party about such possible infringement or conflict. Neither Party has a duty under this Agreement to conduct a patent search or infringement study. Except as expressly set forth elsewhere in this Agreement, neither Party warrants against infringement of third-party patent rights. 15.4 DISCLAIMERS OF EXPRESS AND IMPLIED WARRANTIES. Except as expressly set forth elsewhere in this Agreement, each Party expressly disclaims any express or implied warranties, including without limitation the warranties of merchantability and fitness for a particular purpose. ARTICLE 16 - CONFLICTS WITH THIRD PARTY INTELLECTUAL PROPERTY RIGHTS 16.1 CLAIMS DIRECTED TO BRUKER CORE AREAS. 16.1.1 BRUKER'S DUTY TO DEFEND. Bruker will, at its expense, defend or settle any third party claim asserted against HP based on an allegation of infringement of a third party's intellectual property rights in the Bruker Core Areas. Bruker will pay all costs, damages and expenses awarded by a court or agreed to in settlement, arising from such third party claim against HP. 16.1.2 HP'S DUTY TO NOTIFY AND COOPERATE. HP will give Bruker prompt notice of any third party claim, tender the defense, permit Bruker to control the defense, and provide information and reasonable assistance to Bruker at HP's expense. 16.2 CLAIMS DIRECTED TO HP CORE AREAS. 16.2.1 DUTY TO DEFEND. HP will, at its expense, defend or settle any third party claim asserted against Bruker based on an allegation of infringement of a third party's intellectual property rights in the HP Core Areas. HP will pay all costs, damages and expenses awarded by a court or agreed to in settlement, arising from such third party claim against Bruker. 16.2.2 BRUKER'S DUTY TO NOTIFY AND COOPERATE. Bruker will give HP prompt notice of any third party claim, tender the defense, permit HP to control the defense, and provide information and reasonable assistance to HP at Bruker's expense. 16.3 EITHER PARTY'S RIGHT TO DEFEND. The party providing any indemnification under this Section 16 shall have complete control of the defense and settlement of the matter subject to indemnification. If an indemnified party under Section 16 decides to retain its own counsel in connection with the matter where it is receiving indemnification, such indemnified party shall do so at its sole cost and expense, and such counsel shall have no role other than a monitoring role. 16.4 OTHER THIRD PARTY CLAIMS. Each party will be responsible for its own defense against third party claims not covered by the provisions above. The parties will co-operate with one another in defending against such third party claims. 16.5 PENDING LITIGATION. Bruker will assume the complete defense of the existing ITMS law suit and any new law suits brought by Finnigan Corporation against the Parties in Bruker's Core Areas as of the Effective Date and will be solely responsible for the selection of counsel and prosecution or settlement of the suit. HP will provide reasonable assistance to Bruker upon request, at HP's expense. Bruker will pay all costs of the defense incurred after the Effective Date. Bruker will pay any settlement and any final adverse judgment. Bruker is not liable for any of HP's defense costs incurred prior to the Effective Date. ARTICLE 17 - RESPONSIBILITIES FOR SALES OF ESQUIRE-LC SYSTEMS 17.1 CO-BRANDING. Bruker will continue to affix the trademarks and logotypes of both Bruker and HP to the Esquire-LC systems that Bruker makes. 17.2 SALES OF ESQUIRE KITS. HP will continue to sell to Bruker the HP Esquire-LC Kit, the HP APCI accessory and certain HP software related to Esquire-LC to Bruker as is described in Appendix 4. Bruker may purchase the HP software and HP hardware related to Esquire-LC through Bruker's OEM and DTD agreement with HP at the prices set out in such agreements. The prices for the Esquire-LC kits and APCI accessory are set out in an exhibit entitled "Pricing of HP Esquire-LC kits and APCI accessory" which is attached as Appendix 4. Bruker is responsible for determining the final amount of Esquire-LC kits to be ordered from HP. 17.3 MARKETING ESQUIRE-LC SYSTEMS IN THE UNITED STATES AND CANADA 17.3.1 DIVISION OF RESPONSIBILITIES. In the United States and Canada, HP's primary area of responsibility for promotion and sale of Esquire-LC Systems will be the commercial (for-profit) market plus HP's established customer base in the non-profit market. In the United States and Canada, Bruker's primary area of responsibility for promotion and sale of Esquire-LC Systems will be the non-profit market plus Bruker's established customer base in the commercial market. "Non-profit" means institutions such as governments, universities, hospitals, and research institutions that do not market products with an expectation of ultimately earning a profit. Representatives of HP and Bruker may, from time to time, meet to discuss whether each Party is effectively serving its primary area of responsibility, but nothing stated in this Section 17.3.1 or in any such meeting or discussion will prevent either Party from accepting, orders for Esquire-LC Systems outside its primary area of responsibility. 17.3.2 PURCHASES OF ESQUIRE-LC SYSTEMS AND ACCESSORIES. HP may purchase Esquire-LC Systems and related accessories, such as the Bruker nanoelectrospray ionization source, from Bruker for resale to commercial customers in the United States and Canada. Such purchases will be at transfer prices equal to Bruker's list prices in effect when HP submits its order, less a [*](7) discount. HP also may purchase the Bruker nanoelectrospray ionization source, for resale with the HP 1100 Series LC/MSD at a transfer price equal to Bruker's list price for the nanoelectrospray accessory in effect when HP submits its order, less an [*] discount. 17.3.3 SERVICE AND SUPPORT OF ESQUIRE-LC SYSTEMS. 17.3.3.1 HP will, at HP's expense, provide demos, first-line phone service and field support for simple problems, administration of warranties and service, hardware warranty of HP products and parts, and support for applications software arising from HP sales of Esquire-LC Systems. - -------- (7) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. 17.3.3.2 Bruker will, at Bruker's expense, provide installation services for Esquire-LC systems (but not the HP 1100),, phone support and field service for serious problems, hardware warranty for products and parts not supplied by HP, software phone support, and support for applications (at the factory only). If Bruker's sales and service affiliate does not provide such services in a timely manner, HP may contact Bruker and Bruker either will dispatch an engineer from the factory to provide the service or authorize HP to provide the service, in which case HP may invoice Bruker and Bruker will reimburse HP for HP's actual cost of providing such service for HP customers. 17.4 MARKETING ESQUIRE-LC SYSTEMS IN OTHER COUNTRIES. 17.4.1 RESPONSIBILITIES. In Europe and other countries outside the United States and Canada, Bruker shall have primary responsibility for promotion and sales of Esquire-LC systems. In Europe and other countries outside the United States and Canada, HP shall promote and co-market the Esquire-LC with Bruker. From time to time HP can sell to HP's established customer base in Europe and other countries outside the United States and Canada. Nothing contained in this section 17.4.1 will prevent either party from accepting orders outside of its primary area of responsibility. 17.4.2 COMMISSION FOR SALES OF ESQUIRE-LC SYSTEMS IN OTHER COUNTRIES AFTER EFFECTIVE DATE. Bruker will pay HP for promoting, marketing, and assisting., Bruker in selling Esquire-LC Systems in countries other than the United States and Canada by paying HP a commission upon each sale of an Esquire-LC System where substantive sales support is provided for a particular sale. The company receiving the sales lead and substantive sales support has the sole responsibility to determine whether or not the consummated sale was a direct result of the sales lead and sales support passed on by the other company. The commission on all such sales after the effective date will be [*](8) of -the net value of the order exclusive of all commissions, freight charges, duties or taxes. 17.4.3 REPORTS OF SALES AND PAYMENTS OF COMMISSIONS. Bruker will report its sales and shipments of Esquire-LC Systems in all countries on a monthly basis within three business days after the end of each month. Bruker will pay all commissions due HP within 15 days after the end of each HP Fiscal Quarter. 17.4.4 COMMISSION FOR SALES OF ESQUIRE-LC SYSTEMS IN OTHER COUNTRIES PRIOR TO EFFECTIVE DATE. Bruker has paid HP a sales commission of [*] rate of the German list price on sales of six Esquire-LC systems. This payment was in addition to the commission already paid by Bruker on three Esquire-LC systems sold under Amendment 3 of the Old Contract. HP agrees that Bruker does not owe HP any additional commissions for sales of ESQUIRE-LC systems prior to the Effective Date. 17.5 MARKETING OF OTHER PRODUCTS NOT USING SHARED TECHNOLOGY - -------- (8) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. Nothing contained in this Article 17 will be construed in any way to restrict or limit either Party with regard to promotion, distribution or sale of either Party's non-ITMS products that do not incorporate shared technology. ARTICLE 18 - DISPOSITION OF RESEARCH FUNDS HP heretofore paid Bruker [*] to help fund development of the Esquire/Gemini product line under the Old Agreement. If the Gemini MS and Gemini R&D MS are developed and introduced in accordance with the Gemini Project Plan, or mutually agreed upon changes to the Gemini Project Plan, Bruker will permanently retain the [*]. Otherwise, Bruker will forwith refund all of the [*] to HP. ARTICLE 19 - PUBLICITY 19.1 ENDORSEMENTS. Bruker and HP will consider each other's reasonable requests for endorsements of technical capabilities or the technology in each Party's respective core area. However, neither Party is obligated to endorse or give public testimonials respecting the other. 19.2 PUBLICITY. The Parties will collaborate respecting publicity. Neither Party will issue any notice to third parties or generate any publicity concerning this Agreement or the relationship of the Parties without the prior written consent of the other, except as may be required by law. ARTICLE 20 - TERM, TERMINATION AND EXCLUSIVITY 20.1 ENGINEERING COLLABORATION ON THE GEMINI/GEMINI R&D AND OTHER ITMS. The initial term of engineering collaboration on ITMS products, including the Gemini/Gemini R&D MS, commenced on January 19, 1996, under the Old Agreement, and will continue under this Agreement through December 31, 2005. The Parties will continue their engineering collaboration after December 31, 2005, for successive terms of one year through December 31, 2010, unless one Party gives notice to the other Party, on or before September 1, 2005, or September 1 of any subsequent year, that such Party does not want to extend the collaboration beyond the end of that year. The period of time from January 19, 1996, through the termination of engineering collaboration on December 31, 2005, or on such date in such later year, up to 2010, if the Parties extend the engineering collaboration, will be called the Engineering Collaboration Period. Certain provisions of this Agreement related to the engineering collaboration, specifically Section 2.9 - Meetings and Reviews, Article 3 - Over-view of the Gemini Program, Article 4 - Specifications for the Gemini/Gemini R&D MS, Article 5 - Design and Development of the Gemini/Gemini R&D MS, Article 11 - New Development Projects, Article 19 - Publicity, and Section 20.2.1 Exclusivity will be in effect from the Effective Date until December 31, 2005, and will be the extended automatically each year for an additional period of one year through December 31, 2010, unless one Party gives notice to the other Party, on or before September 1, 2005, or September 1 of any subsequent year, that such Party does not want to extend the collaboration beyond the end of that year, in which case these provisions will expire or terminate upon the expiration or termination of the engineering collaboration (i.e. the end of the Engineering Collaboration Period). After the Engineering Collaboration Period neither Party will have any obligations; under such provisions. The obligations of the Parties to disclose inventions, as provided in Section 14.4, extends beyond the Engineering Collaboration Period, but applies only to inventions made during the Engineering Collaboration Period. The obligations to grant licenses under patents covering Development Inventions, as provided in Article 14, extends beyond the Engineering Collaboration Period, but applies only to Development Inventions made during the Engineering Collaboration Period. 20.2 EXCLUSIVITY. 20.2.1 EXCLUSIVITY DURING THE COLLABORATION PERIOD. During the Engineering Collaboration Period, HP will not design, develop or manufacture an RIF ITMS, except as provided herein, or enter into any agreement with a third party for the design, development, manufacture or distribution of an RIF ITMS, other than an RF ITMS jointly developed by the Parties hereunder. However, HP's unrestricted right to distribute the Gemini and its successor products developed under this Agreement shall not be limited by this Section 20.2. 1. During the Engineering Collaboration Period, Bruker will not design, develop or manufacture a commercial LC/MS/MS API-ITMS, except the Gemini R&D and its successor products, as provided in this Agreement, or enter into any agreement with a third party analytical instruments company for the design, development, manufacture or distribution of a commercial LC/MS/MS API-ITMS, other than an RF UMS jointly developed by the Parties hereunder. However, Bruker's unrestricted right to distribute the Gemini R&D and its successor products developed under this Agreement shall not be limited by this Section 20.2. 1. A specific exception to this exclusivity section 20.2.1, is that Bruker always has the unencumbered right to design and develop any ITMS technology and systems for final customers in the Department of Defense, other government agencies, or their prime contractors or subcontractors for use in the course of their work on a government contract. Moreover, during the Engineering Collaboration Period and thereafter, Bruker has the unencumbered right to give non-exclusive licenses for its ITMS technology to any other party at any time at Bruker's sole discretion. Similarly, HP has the right to give non-exclusive licenses for its technology to any party at any time. 20.2.2 EXCLUSIVITY IF HP GIVES NOTICE. If HP gives notice to Bruker, pursuant to section 20.1, that it does not want to extend the Engineering Collaboration Period, then (1) HP shall not directly market or distribute any ITMS-based products, other than ITMS systems procured from Bruker, and Bruker shall continue to make such systems available to HP at competitive pricing and performance, for a period of four years from the date that HP gives such written notice, and (2) HP shall continue to make the components which it is selling to Bruker at the time of the notice available to Bruker at competitive pricing and performance, for a minimum of two years from the date that HP gives such written notice. Both Parties will develop a mutually agreed upon plan to maintain a competitive advantage for instrument pricing and performance compared with other state of art ITMS systems during the post-Collaboration period. Both parties will continue to supply parts to each other beyond the minimum two year period pursuant to Section 20.3. 20.2.3 EXCLUSIVITY IF BRUKER GIVES NOTICE. If Bruker gives notice to HP, pursuant to Section 20.1, that it does not want to extend the Engineering Collaboration Period, then neither Party is under any continuing obligation under this Section 20.2. If Bruker gives written notice that it does not want to extend the Engineering Collaboration Period, then for a period of two years from the date that Bruker gives written notice (1) Bruker shall continue to make ITMS systems jointly developed under this agreement available to HP at competitive pricing and performance, as provided in Section 20.3, and (2) HP shall continue to make the components which it is selling to Bruker at the time of the notice available to Bruker at competitive pricing and performance. Both Parties will develop a mutually agreed upon plan to maintain a competitive advantage for instrument pricing and performance compared with other state of art ITMS systems during the post-collaboration period. Both Parties will continue to supply parts to each other beyond the minimum two year period pursuant to Section 20.3. 20.3 MANUFACTURING AND SELLING GEMINI PRODUCTS AND OTHER ITMS PRODUCTS. Notwithstanding the expiration or termination of the Engineering Collaboration Period, the Parties will continue to manufacture and sell to each other Gemini Products, and any comparable or successor products for any other ITMS jointly developed by the Parties under this Agreement, in accordance with Article 7 and Article 8 for at least two years after the expiration of the Engineering Collaboration Period. If Bruker obsoletes the Gemini R&D MS and removes the product from its price list, or if the number of HP Gemini R&D Kits that Bruker orders from HP declines below 5 per calendar quarter for two successive quarters, HP may notify Bruker that HP will discontinue manufacturing HP Gemini Products, in which event, HP will allow Bruker to make one last-time buy of HP Gemini Products, within three months of such notice, after which HP will no longer be obligated to accept purchase orders for or sell HP Gemini Products to Bruker. If HP obsoletes the Gemini MS and removes the product from its price list, or if the number of Gemini MS that HP orders from Bruker declines below 5 per calendar quarter for two successive quarters, Bruker may notify HP that Bruker will discontinue manufacturing Bruker Gemini Products, in which event, Bruker will allow HP to make one last-time buy of Bruker Gemini Products, within three months of such notice, after which Bruker will no longer be obligated to accept purchase orders for or sell Bruker Gemini Products to HP. Notwithstanding the preceding two sentences, each Party will sell replacement parts to the other, in accordance with Section 10.3, for at least five years after the later of the last sale of a Gemini MS by Bruker to HP or the last sale of an HP Gemini R&D Kit by HP to Bruker. This section 20.3 shall also apply to any HP and Bruker successor products developed under this Agreement. 20.4 SERVICE AND SUPPORT. Bruker will continue to provide service and support, both in-warranty and out-of-warranty, in accordance with Article 10, for at least five years after its last sale of a Gemini NIS to HP. HP will continue to provide service and support, both in-warranty and out-of-warranty, in accordance with Article 10, for at least five years after its last sale of an HP Gemini R&D Kit to Bruker. Bruker will not be required to provide a Failure Report under Section 10.4 after HP's last sale of an HP Gemini R&D Kit to Bruker. HP will not be required to provide a Failure Report under Section 10.4 after Bruker's last sale of a Gemini MS to HP. This section 20.4 shall also apply to any HP and Bruker successor products developed under this Agreement. 20.5 TERMINATION OF ENGINEERING COLLABORATION PERIOD FOR DEFAULT. 20.5.1 RIGHT TO TERMINATE. If, during the Engineering Collaboration Period, either Party (a) commits a material breach of its obligations hereunder or (b) files for bankruptcy or receivership or does not dismiss a petition for involuntary bankruptcy filed against it within 60 days of such filing, either of which will be deemed a default hereunder, the other Party may terminate the Engineering Collaboration Period on a date earlier than that prescribed in Section 20.1. 20.5.2 MATERIAL BREACH. A material breach would include, by way of example and not a limitation: (1) failing to meet and. collaborate on critical tasks for which collaboration is required for the successful development of Gemini/Gemini /R&D MS or subsequent product, WITHOUT GOOD CAUSE; (2) stopping work on the project to develop Gemini/Gemini /R&D MS or subsequent product, WITHOUT GOOD CAUSE; (3) refusing to furnish parts, components, or instruments for which a Party is responsible to the other Party in accordance with the Gemini Project Plan (or the corresponding Project Plan for a new product), WITHOUT GOOD CAUSE, (4) disclosing or misusing Confidential Information of a Party, in violation of Article 13, to the material detriment of such Party; or (5) failing to make available improvements in a Party's Core Areas as required by Section 11.2 and Section 11.3; (6) willfully failing to disclose Development Inventions (7) violating the exclusivity in Section 20.2, (8) failing to ship or being materially late in shipping Gemini Products or other products jointly developed hereunder; and (9) attempting to assign this Agreement in violation of Section 22.5. 20.5.3 NOT MATERIAL BREACH. The following, by way of example and not of limitation, would not be considered a material breach giving rise to the right to terminate engineering collaboration: (1) delays in the development of a product caused by Force Majeure or substantial unanticipated technical problems; (2) failing to attain a desired target in the specifications; (3) inadvertent or minor delays in the development project that are promptly corrected; and (4) minor delays in manufacturing and delivering Gemini Products or other products jointly developed hereunder where such delays do not cause a significant disruption of the other Party's ability to sell and deliver products to its customers. 20.5.4 NOTICE AND OPPORTUNITY TO CURE DEFAULT AND RESOLVE DISPUTE. Before terminating the Engineering Collaboration Period under this Section 20.5, a Party who has the right to terminate under Sub-Section 20.5.1, must send the other Party a written notice of default setting out the grounds for such early termination. The Party receiving such a notice of default must cure the default within 90 days of receipt of such notice. If it is not technically feasible to cure the default within such 90 days, then within such 90 days the Party receiving the notice of default must submit to the Party who has the right to terminate a mutually acceptable plan to cure the default and proceed to cure the default under such plan. If the Party in Default has not cured the default or presented a mutually acceptable plan to cure the default within such 90 days, the Party with the right to terminate may thereafter terminate the Engineering Collaboration Period by sending the Party in default a written notice formally terminating the Engineering Collaboration Period on the date specified in such notice. If the Party receiving a notice of default disputes in good faith the right of the other Party to terminate the Engineering Collaboration Period, it may, in addition to, or in lieu of, curing the default or presenting a mutually acceptable plan to cure the default, initiate actions to resolve the dispute in accordance with Article 21. If the Party receiving a notice of default initiates the dispute resolution process under Article 21 and proceeds in good faith to resolve the dispute, the Party sending the notice of default will postpone sending any notice formally terminating the Engineering Collaboration Period for an additional 90 days while the Parties are engaged in resolving the dispute. The Parties may continue trying to resolve any dispute under Article 21 even after a Party terminates the Engineering Collaboration Period under this Section 20.5. If the Parties resolve a dispute after the Engineering Collaboration Period has been terminated under this Section 20.5, the Parties may, by mutual agreement, rescind the early termination, in which event the Engineering Collaboration Period will be determined in accordance with Section 20. 1. 20.5.5 CONSEQUENCES OF EARLY TERMINATION OF ENGINEERING COLLABORATION PERIOD. 20.5.5.1 TERMINATION BY EITHER PARTY. If either Party terminates the Engineering Collaboration Period under this Section 20.5, neither Party will be obligated to collaborate on development projects thereafter. The obligations of the Parties under Section 2.9- Meetings and Reviews, Article 3 - Overview of the Gemini Program, Article 4 - Specifications for the Gemini/Gemini R&D MS, Article 5 - Design and Development of the Gemini/Gemini R&D MS, Article 11 - New Development Projects, Article 19 - Publicity, and Section 20.2.1 - Exclusivity will terminate. Notwithstanding the Early Termination of engineering collaboration, if the Parties have commenced manufacturing and selling Gemini/Gemini R&D Products, the Parties will continue their relationship in accordance with Section 20.3. 20.5.5.2 TERMINATION BY BRUKER. If Bruker terminates the Engineering Collaboration Period under this Section 20.5 for default by HP, Bruker may retain the Research Funds, but if Bruker has not shipped the minimum quantity of Gemini MS specified in Section 9.1, then Bruker will forthwith refund any remaining Security Deposit. If Bruker terminates the Engineering Collaboration Period under this Section 20.5 for default by HP, then HP shall not market or distribute directly or indirectly any ITMS-based products, other than ITMS systems procured from Bruker, and Bruker shall continue to make such systems available to HP at competitive pricing and performance, for a period of four years after such early termination by Bruker; however, if Bruker is in default or subsequently commits a material breach of this Agreement or becomes in default, then this restriction upon HP will not apply. 20.5.5.3 TERMINATION BY HP. If HP terminates the Engineering Collaboration Period under this Section 20.5 for default by Bruker, prior to the market introduction of the Gemini MS, then Bruker will forthwith refund to HP the Research Funds according to Article 18. If HP terminates the Engineering Collaboration Period under this Section 20.5 for default by Bruker and if Bruker has not shipped the minimum quantity of Gemini MS specified in Section 9.1, then Bruker will forthwith refund to HP any remaining Security Deposit. ARTICLE 21 - DISPUTES BETWEEN THE PARTIES 21.1 INITIAL DISPUTE RESOLUTION. The Program Managers will meet and confer as needed to resolve any disputes between the Parties. If the Program Managers are unable to resolve a dispute, they will refer it to the Business Managers. 21.2 ESCALATION OF DISPUTE. Any dispute that the Business Managers are unable to resolve will be referred to senior executives of the Parties. The senior executives will meet and confer in good faith to resolve the dispute. 21.3 MEDIATION. If the Parties have not resolved the dispute within thirty days of the first meeting of the senior executives, any Party may initiate formal mediation. Mediation will take place in Boston, Massachusetts unless the Parties agree otherwise. The Parties will select a mediator. If the Parties are unable to agree on a mediator, any Party may ask the American Arbitration Association to appoint a mediator with experience in the analytical chemistry industry. The mediator will agree in writing to hold in confidence any information that a Party designates as confidential. All communications made by the Parties in connection with mediation will be treated as settlement negotiations and will not be admissible in any other proceeding. 21.4 LITIGATION; INJUNCTIONS. If the Parties have not resolved the dispute through mediation within ninety days of the initiation of mediation, any Party may initiate litigation to resolve the dispute. No Party may initiate litigation until the above procedure has been followed. However, any Party may at any time seek injunctive relief to prevent imminent, irreparable harm. 21.5 CHOICE OF LAW. The substantive laws of the State of New York, which are well developed and provide a preferable structure for commercial transactions, will govern this Agreement, without regard to the principles of conflict of laws. 21.6 FORUM. Any lawsuit may be brought in the U.S. District Court for the District of Massachusetts if the requirements for federal jurisdiction are met, or in the Middlesex Superior Court in Massachusetts if the requirements for federal jurisdiction are not met. All Parties consent to the exercise of personal. jurisdiction by these courts. ARTICLE 22 - MISCELLANEOUS 22.1 LEGAL STATUS OF THE PARTIES. Each Party is an independent contractor. This Agreement does not create a joint venture, partnership, or other legal entity. 22.2 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the sole benefit of the Parties hereto, and unless expressly provided herein, no rights or powers shall arise hereunder in favor of any third party. 22.3 FORCE MAJEURE. The failure of any Party to perform hereunder as a result of governmental action, laws, orders, or regulations, or as a result of disasters, such as war, acts of public enemies, fires, floods, earthquakes, acts of God or any causes of like kind beyond the reasonable control of such Party is excused for so long as such cause exists. 22.4 EXPORTS. Each Party will comply with applicable laws and regulations of the United States, the European Community, and Germany relating to export of goods and technical data. The Parties will not export or re-export any technical data, the direct product of such technical data, or any products received from any other Party to any proscribed country unless properly authorized. 22.5 NO ASSIGNMENT. No Party may assign any of its rights or obligations hereunder (except the right to receive money) without the prior written consent of the other Party. However, consent is not required for an assignment in connection with a change of the state of incorporation of a Party, a merger of a Party into its parent corporation, or a transfer of the business with which this Agreement is associated to an Affiliate of a Party. No assignment will relieve any Party of responsibility for its obligations hereunder, but consent to a request for a transfer of such responsibility to a successor in interest or to a transferee of the business will not be unreasonably withheld. Any purported assignment by a Party in violation of this Section will be voidable by the other Party. 22.6 RULES OF CONSTRUCTION AND INTERPRETATION. This Agreement was prepared by the Parties in negotiation. No Party will be considered the drafter and this Agreement will be construed without strict construction in favor of or against any Party. 22.7 NO WAIVER. Waiver of any provision of this Agreement will not be deemed a continuing waiver of that provision or a waiver of any other provision. 22.8 SEVERABILITY. If any provision of this Agreement is held to be ineffective, unenforceable or illegal for any reason, such decision will not affect the validity or enforcement of any or all of the remaining portions thereof. 22.9 INTEGRATION; SUPERSESSION; AND AMENDMENTS. This Agreement, including the Recitals, together with the Appendices identified below, contains the entire understanding of the Parties as to its subject matter. This Agreement supersedes and replaces the Old Agreement and any other prior agreements or understandings between the Parties as to this subject matter. If there are any conflicts between any provision in this Agreement and a provision in an Appendix the provision in this Agreement will prevail. Any waiver, modification or exception to this Agreement must be in writing and signed by a duly authorized company representative. Any such waiver, modification or exception in a given instance will not be deemed a waiver, modification or exception as to other or future actions or circumstances. The following Appendices are part of this Agreement: 22.9.1 Appendix I - Gemini Product Data Sheet 22.9.2 Appendix 2 - Gemini Project Plan 22.9.3 Appendix 3 - Pricing of IIP and Bruker Kits, Instruments Accessories, and Software 22.9.4 Appendix 4 - Pricing of HP Esquire-LC Kit and Instrument and APCI Prices 22.10 Bruker has been and intends to continue purchasing HP Analytical Chemistry Products from HP under a DTD Agreement and/or an Original Equipment Manufacturer's Agreement and reselling such products to Bruker's customers. Bruker and HP have been collaborating on sales activities, providing leads to one another under the terms of a Finder's Fee Agreement. The transaction under such agreements and the relationships governed by such agreements will continue to be governed by the terms of such respective agreements and are not abrogated or modified by this Agreement. 22.11 COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument. EXECUTION IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives on the date written below. BRUKER DALTONIK GmbH HEWLETT-PACKARD COMPANY By /s/ Frank H. Laukien By /s/ Richard F. Begley ---------------------- -------------------------------- Printed Name Frank H. Laukien Printed Name Richard F. Begley ------------------- ---------------------- Title Managing Director Title General Manager - CAD --------------------- ----------------------------- By /s/ Dieter Koch By /s/ Richard D. Kniss --------------------- -------------------------------- Printed Name Dieter Koch Printed Name Richard D. Kniss ----------------- ---------------------- Title Managing Director Title V.P. & General Manager CAG --------------------- ----------------------------- Date May 3, 1999 Date April 28, 1999 ------------- -----------------------------
GEMINI PRODUCT DATA SHEET APPENDIX 1 TO BRUKER-HP COLLABORATION AGREEMENT DOCUMENT INFORMATION: - ------------------------------------------- ------------------------------------------------ Filename Gemini.pds.doc - ------------------------------------------- ------------------------------------------------ Current Owner Michael Schubert, John Fieldsted, Ken Imatani, Sebastian Meyer-Plath - ------------------------------------------- ------------------------------------------------ Product Identifier G2440A LC/MS Detector - ------------------------------------------- ------------------------------------------------ Project Identifier Gemini - ------------------------------------------- ------------------------------------------------ Current Lifecycle Phase Entwurf/Investigation - ------------------------------------------- ------------------------------------------------
REVISION LOG:
Revision Date Reason for Update - --------------- ------------------ -------------------------------------------------------------------------- A.00 971114 Initial revision - --------------- ------------------ -------------------------------------------------------------------------- A.01 971117 Revisions to FURPS, DECISION PRIORITY LIST, and CRITICAL SUCCESS FACTORS following review session by John Fjeldsted, Steve Madden, Jim Bertsch, and Frank Cesarz - --------------- ------------------ -------------------------------------------------------------------------- A.02 971121 Revisions to RELATED PROJECTS, BOUNDARY CONDITIONS, PROJECT MANAGEMENT TEAM, and WHAT PROJECT IS NOT following review session with Gemini project team - --------------- ------------------ -------------------------------------------------------------------------- A.03 971219 Revisions to FURPS following review by HP and BFA Gemini project management team and LCQ benchmarking phase 1 - --------------- ------------------ -------------------------------------------------------------------------- A.04 980626 Update for Appendix to new HP-BFA Gemini contract, by Ken Imatani, John Fjeldsted, Frank Kuhlmann, Paul Goodley, Bryan Miller and Jim Bertsch; Change of ownership from Bryan Miller to Ken Imatani - --------------- ------------------ -------------------------------------------------------------------------- A.05 14.7.98 Update by MS after discussions with SMP - --------------- ------------------ -------------------------------------------------------------------------- A.06 23.7.98 Update by MS after Review with BS and GH. Clarifications regarding ESI HV supply for use with nanospray, mass axis stability, trigger outputs - --------------- ------------------ -------------------------------------------------------------------------- A.07 12.8.98 Update after discussions with John Fjeldsted - --------------- ------------------ -------------------------------------------------------------------------- A.08 24.8.98 Update after more discussions with John Fjeldsted - --------------- ------------------ -------------------------------------------------------------------------- A.09 29.9.98 Update after discussion on mass range issues - --------------- ------------------ -------------------------------------------------------------------------- A.10 9.10.98 Update - --------------- ------------------ -------------------------------------------------------------------------- A.11 18.1.99 Update - --------------- ------------------ -------------------------------------------------------------------------- A.12 31.3.99 Update - --------------- ------------------ -------------------------------------------------------------------------- A.13 Apr. 8, 99 Reformated Header, deleted "Draft, for discussion only" (JF) - --------------- ------------------ -------------------------------------------------------------------------- A.14 Apr. 15, 99 Added "Appendix 1 to Bruker-HP Collabor..." (JF) - --------------- ------------------ -------------------------------------------------------------------------- A.15 Apr. 21, 99 Changed language: stretch goals-> desired targets (MS) - --------------- ------------------ -------------------------------------------------------------------------- Instructions: Manually enter the document revisions here and update the corresponding footer revision each time revision log changed. Revision text should include location, time, participants, (R&D, marketing, product support) and a summary of the changes. Also state the revision control system used to recover revisions. - --------------- ------------------ --------------------------------------------------------------------------
- ------------------------------------- -------------------------------------------- -------------------------------- Project Identifier: Gemini Product ID/PL Mgr Appvl/Date: Rev/Date: A.15 draft Apr. 21, 99 - ------------------------------------- -------------------------------------------- --------------------------------
PRODUCT DESCRIPTION AND FURPS OBJECTIVES: Gemini will be a high-performance, rugged, easy to use, yet affordable ion trap MS detector for HPLC with MS/MS and MS(n) capability 1. HARDWARE/FIRMWARE FUNCTIONALITY 1.1 HPLC flow rates 1.1.1 API-ES: Flow rate range (including 100% aqueous), HPLC system: [*](9) (incl. divert valve); [*] when directly coupled to sprayer 1.1.2 APCI: Flow rate range (including 100% aqueous), [*] (identical to LC/MSD), OPTIONAL accessory 1.2 Nanoelectrospray, OPTIONAL accessory (continuous mode uses standard supplies, see 1.11.1 [*], see 1.11.2) 1.3 Hardware compatible with CE/MS interface [*] 1.4 Mass range/resolution/scan speed modes: MassRange Resolution Scan Speed [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] 1.5 [*] 1.6 MS/MS Modes: isolation/fragmentation/ product scan for up [*] in a time-slice in standard/normal mode [*] 1.7 MS(n) Modes: MS(n) [*]; (isolation/framentation)(n) [*] 1.8 Full mass range profile data in all modes 1.9 Support for rolling average in all manual and automated acquisition modes 1.10 [*] (enhanced functionality and ease-of-use) 1.11 Ionization: positive and negative ion modes 1.11.1 Positive/negative ionization mode switching for chromatographically separated peaks [*] using Segment Editor, see 2.1.4). Voltage range [*] upwards 1.11.2 Fast positive/negative ionization mode switching for "in-peak dual-mode detection" (e.g. [*] (HW/SW support designed in, requires [*]. Must be [*] 1.12 Dedicated ethernet interface to data sysem 1.13 Gemini will contain all electronics to support [*] as per LC/MSD power distribution board rev.D 1.14 All hardware setpoints under DS control and remotely accessible [*] 1.15 Mass axis stability: [*] at m/z 1522 [*] 1.16 APG remote support 1.17 Trigger output: Two relay contacts, SPDT, one dedicated for [*] 1.18 LC/MSD packaging + colors 1.19 Diverter Valve with leak sensor [*] (HW/SW support designed in) 2. SOFTWARE FUNCTIONALITY 2.1 MS Instrument Control/Data Acquisition 2.1.1 Automated and manual instrument "tuning" procedures [*] 2.1.2 Full DS control of [*], voltages for API sources 2.1.3 Scan editor with [*] (GUI) for all modes and [*] experiments e.g. [*] experiments incl. [*], pos/neg mode) 2.1.4 Segment Editor ("Time Table") with [*] set-up (GUI) 2.1.5 Peak detection and [*] 2.1.6 Sequencing capability for unattended automated analysis 2.1.7 [*] acquisition (MS(2), [*]), common modes in addition to 2.1.3 also directly implemented into GUI 2.1.8 [*] data in all modes; single datafile format for all modes 2.2 HPLC Control 2.2.1 Full direct control of, automated system operation with, and UV trace chromatographic data processing for 1100 Series family of HPLC modules; includes error-handling (HPIB interface will not be supported in A.06.05 ChemStation, 1100 LAN upgrade [*]) 2.2.2 Support for [*] mode operation through injector programming, segment editor and DA variable trace feature 2.2.3 Full direct control of, automated system operation with, and UV trace chromatographic data process for [*] system; includes error-handling (HPIB interface will not be supported in A.06/05 ChemStation, 1100 LAN upgrade ~ [*] 2.2.4 Remote start/stop control/automation capability and ability to collect and process [*] data for any HPLC [*] (uses standard ChemStation data format) 2.2.5 Control for [*] via third-party SW (e.g., [*] 2.3 [*] SW product development. Plans for [*], data and method [*] to be developed.
- -------- (9) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. 2.4 Data Analysis/Application Software 2.4.1 [*](10); Bruker requires software copy protection 2.4.2 UV and MS signal comparison and alignment 2.4.3 Deconvolution, Peptide Tools compatibility and LCMS Auto capability through automated *.RES file generation for LC/MS analyses, available [*] 2.4.4 Internet, Intranet and CD-ROM based access for protein databases (Input/Output Interface to search engines) supporting peptide fragment MW (MS) and AA-sequence (MS/MS info, through automated * .RES file generation for LC/MS analyses, [*] (HP supplied option) 2.4.5 [*] and data review/reporting software. Support also Chemstation-independent data (re)processing of data file batches (complete, partial sequences or individual data files) functionality like [*], but linked to ChemStation sequence table 2.4.6 Data file and report export as well as sample worklist import in standard format(s) [*] 2.4.7 Support for [*], available as (Bruker supplied) [*]. Includes [*] capabilities 2.5 Windows NT O/S 2.6 Standalone DA as an OPTION 2.7 Y2K compliance according to Bruker's and HP's standards 3 USABILITY/KNOWLEDGE TOOLS 3.1 Hardware usability design focus 3.1.1 Automatic system [*] with Gemini-specific calibrant solutions delivered by syringe pump or autosampler 3.1.2 Full DS control of API system parameters [*] 3.1.3 Non-backstreaming vacuum system with automated pumpdown/vent as per LC/MSD and Esquire-LC; 3.1.4 [*] for ease of maintenance; 3.1.5 [*] for minimizing noise and adjustments 3.2 Software usability design focus 3.2.1 Straightforward software system integration/task flow 3.2.2 [*] help (Win NT Standard) 3.2.3 CD-ROM based learning tools (INTERACTIVE SELF-PACED TUTORIALS, EXPERT HELP KEY TASKS, MAINTENANCE AND "OPTIMIZATION TIPS" FOR MAJOR APPLICATIONS), DETAILS AND OWNER TBD 3.3 [*] manual (possibly "on-line" only) 4 RELIABILITY 4.1 System [*] for the HW components 4.2 [*] of vacuum components [*] 4.3 SW reliability - TBD 5 PERFORMANCE [*] 6 SUPPORTABILITY 6.1 [*] diagnostic tools built in (including parameter readback, tune reports, and subsequent diagnostics) 6.2 Remote diagnostics or control capability (LAN/modem) possible through NT or third party package for isolated customers 6.3 Time for installation & minimal familiarization [*] 6.4 Plan for additional familiarization [*] OPTIONAL 7 LOCALIZATION 7.1 User information materials in English and localizable in the following languages: [*] 7.2 Software localization: [*] first version
- -------- (10) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. Planned Development Process: CAG Lifecycle X Yes No --- ---
- ------------------------------------------------------------------------------------------------------------------------- Completion Schedule: T=Target Date (set at I/L, I/D) A= Actual Date - ------------------------------------------------------------------------------------------------------------------------- Active Proposal Investigation LP/Design PP/Implem Pilot/Test Ship - ------------------- ----------------- ----------------- ----------------- ---------------- ----------------- ------------ T: A: T: A: T: A: T: A: T: A: T: A: T: A: 97/1/8 97/1/9 98/1/8 y/m/d y/m/d y/m/d y/m/d y/m/d - ---------- -------- -------- -------- -------- -------- -------- -------- ------- -------- -------- -------- -------- ---
GEMINI PROJECT PLAN APPENDIX 2 TO BRUKER-HP COLLABORATION AGREEMENT CONTENTS PROJECT DEFINITION AND DOCUMENTS..........................................................................3 MANAGEMENT STRUCTURE......................................................................................4 RESOURCES.................................................................................................4 RESPONSIBILITIES..........................................................................................5 Component Development and Production Responsibilities.....................................................5 Product Testing and Certification.........................................................................5 PC Configuration..........................................................................................6 Documentation and Learning Products.......................................................................6 Collaborative Development Considerations..................................................................6 CHANGE MANAGEMENT.........................................................................................6 Document Changes..........................................................................................6 DEFECT TRACKING...........................................................................................7 REQUIREMENTS TRACEABILITY.................................................................................7 User Requirement..........................................................................................7 LIFECYCLE CHECK POINTS/LIFECYCLE CUSTOMIZATION............................................................9 Lifecycle Checkpoint Schedule Overview....................................................................9 Investigation Phase/Entwurfsphase.........................................................................10 Hardware Lab Prototype Phase - LP Phase...................................................................11 Hardware Production Prototype Phase - PP-Phase............................................................13 SW-Development............................................................................................15 Software NT [*](11) Release...............................................................................15 Software NT [*] Release...................................................................................16 Software NT [*] Release...................................................................................17 Software NT [*] Release...................................................................................18 Pilot Run Phase - PR-Phase................................................................................19 APPENDIX 1 - GEMINI COMPONENT DEVELOPMENT AND PRODUCTION RESPONSIBILITY.............................................................................21 Definition of HP Gemini and HP Gemini R/D Kits............................................................21 HP Supplied Components, HP Gemini Kit Specific............................................................21 HP Supplied Components, HP Gemini R/K Kit Specific........................................................21 HP Supplied Components, common components for HP Gemini and HP Gemini R/K kits...................................................................................21 Bruker-Daltonik Supplied Components, for Gemini and Gemini R/D............................................22 Certain hardware and calibration/checkout components will be made available to Bruker for purchase from HP, but are not part of the HP Gemini Kits or HP Gemini R/D Kits...................................................................................23 Certain additional software components will be made available to Bruker to Purchase from HP, but are not part of the Gemini or Gemini R/D Kits..................................23
- -------- (11) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. Certain additional software components will be made available to HP to Purchase from Bruker, but are not part of the basic Gemini product...................................23 Description of HP Gemini/Gemini R/D Kits for [*](12)......................................................24
- -------- 12 [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. - -------------------------------------- ----------------------------------------- Current Owner Michael Schubert, John Fjeldsted - -------------------------------------- ----------------------------------------- Product Identifier Gemini/Gemini R&D - -------------------------------------- ----------------------------------------- Project Identifier Gemini/Gemini R&D - -------------------------------------- ----------------------------------------- Current Lifecycle Phase Entwurfsphase at Bruker, I phase at HP - -------------------------------------- -----------------------------------------
REVISION LOG:
REVISION DATE REASON FOR UPDATE - ----------------- ---------------- ----------------------------------------------------------------------------------- A.00 23.6.98 Initial revision. (MS) - ----------------- ---------------- ----------------------------------------------------------------------------------- A.01 21.8.98 Update after discussions with John Fjeldsted - ----------------- ---------------- ----------------------------------------------------------------------------------- A.02 10.11.98 Merge with John's project plan - ----------------- ---------------- ----------------------------------------------------------------------------------- A.03 10 Nov 98 Continued merge with John's project plan - ----------------- ---------------- ----------------------------------------------------------------------------------- A.04 Nov.12, 98 Continued merge - ----------------- ---------------- ----------------------------------------------------------------------------------- A.05 Nov. 16, 98 Continued merge - ----------------- ---------------- ----------------------------------------------------------------------------------- A.06 Nov. 20, 98 Continued merge, added HP Investigation Phase - ----------------- ---------------- ----------------------------------------------------------------------------------- A.07 Jan. 15, 99 Update with John - ----------------- ---------------- ----------------------------------------------------------------------------------- A.08 Feb. 4, 99 Update with John - ----------------- ---------------- ----------------------------------------------------------------------------------- A.09 Feb. 18, 99 Rewording, clarifications, and traceability Matrix, added (JCF) - ----------------- ---------------- ----------------------------------------------------------------------------------- A.10 Mar 9, 99 Verification of changes, deletions - ----------------- ---------------- ----------------------------------------------------------------------------------- A.11 Mar 24, 99 Update (MS) - ----------------- ---------------- ----------------------------------------------------------------------------------- A.12 Mar 30, 99 Update (MS) - ----------------- ---------------- ----------------------------------------------------------------------------------- A.13 Apr. 5, 99 Update (JF), added self as joint owner, removed several agreed-on strike-outs - ----------------- ---------------- ----------------------------------------------------------------------------------- A.14 Apr. 6, 99 Update (JF), several dates, also HP Gemini and HP Gemini R/D Kit definitions - ----------------- ---------------- ----------------------------------------------------------------------------------- A.15 Apr. 9, 99 Update (MS), added [*](13) plan - ----------------- ---------------- ----------------------------------------------------------------------------------- A.16 Apr. 15, 99 Update (JF), Header formating, some text to black, highlight Bruker requests - ----------------- ---------------- ----------------------------------------------------------------------------------- A.17 Apr. 23, 99 Update (JF, MS): added [*] - ----------------- ---------------- -----------------------------------------------------------------------------------
- -------- (13) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. PROJECT DEFINITION AND DOCUMENTS Gemini is the internal code name for the LC/MS(n) mass spectrometer based on HP LC/MSD 1100 Series packaging, source, vacuum system and the Bruker ion trap mass analyzer, electronics plus HP ChemStation and Bruker instrument control and data analysis software. The term Gemini also refers to the project to develop the Gemini product. The project Gemini is based on the ITMS Collaboration Agreement between Bruker-Daltonik GmbH, Bremen (called Bruker) and Hewlett-Packard Company (called HP) acting through its California Analytical Division (CAD). Several joint Lifecycle documents describing Gemini will be generated and updated by the project team during the project. Gemini will be developed in compliance with the following lifecycle documents.
- ---------------------------------------- -------------------------------- -------------------------------------------- DOCUMENT DESCRIPTION OWNERS--REVIEWERS - ---------------------------------------- -------------------------------- -------------------------------------------- Project Plan Contains Gemini project Owner - Project Managers information including project Reviewers - Project Leaders, Product, check points (this document) Program Managers - ---------------------------------------- -------------------------------- -------------------------------------------- Product Data Sheet A customer oriented product Owner - Product Managers description overview, Reviewers - Project Leaders, specifying major product Project, Program Managers features - ---------------------------------------- -------------------------------- -------------------------------------------- Component Development and Product Definition of Bruker vs. HP Owner - Project Managers Responsibilities (Appendix 1 to parts in Gemini, also Reviewers - Project Leaders Project Plan) definition of production and design/development responsibilities - ---------------------------------------- -------------------------------- -------------------------------------------- HW Schedule A detailed hardware Owner - HW Project Manager development schedule for lab, Reviewers - Project Leaders, Product, production prototype and pilot Program Managers run phases - ---------------------------------------- -------------------------------- -------------------------------------------- SW Schedule A detailed software Owner - SW Project Manager development Reviewers - Project Leaders, Product, Program Managers - ---------------------------------------- -------------------------------- -------------------------------------------- Compatibility Matrix A list of supported Gemini Owner - Product Managers configurations Reviewers - Project Leaders, Project - ---------------------------------------- -------------------------------- -------------------------------------------- HW ERS The hardware reference Owner - SW Project Manager, specification Reviewers - Project Manager, HW Project Leader, Product Manager - ---------------------------------------- -------------------------------- -------------------------------------------- Hardware Quality and A description of the required Owner - HW Quality Engineers Regulatory Plan product safety, environmental Reviewers - Project Manager, HW Project and electromagnetic Leader compatibility requirements - ----------------------------------------- -------------------------------- -------------------------------------------- Analytical Performance Quality Plan A internal description of Owner - Project Managers required basic analytical Reviewers - Product Manager, Application performance levels Chemists - ---------------------------------------- -------------------------------- -------------------------------------------- Software Quality Plan A description of required Owner - SW Project Manager software quality performance Reviewer Project Manager, Product Manager attributes - ---------------------------------------- -------------------------------- --------------------------------------------
MANAGEMENT STRUCTURE The Gemini Project is directed jointly by HP and Bruker. Management contact individuals are provided from by both companies as follows: CONTACT POINTS AT HP
- --------------------------- -------------------- ------------------- ------------------- ------------------------------- ROLE NAME TELEPHONE FAX EMAIL +1 650 +1 650 - --------------------------- -------------------- ------------------- ------------------- ------------------------------- Program Manager [*](14) 857 [*] 852-8011 [*] - --------------------------- -------------------- ------------------- ------------------- ------------------------------- Product Manager [*] 857 [*] 852-8011 [*] - --------------------------- -------------------- ------------------- ------------------- ------------------------------- Project Manager [*] 857 [*] 852-8011 [*] - --------------------------- -------------------- ------------------- ------------------- ------------------------------- Business Manager [*] 857 [*] 852-3792 [*] - --------------------------- -------------------- ------------------- ------------------- -------------------------------
CONTACTS POINTS AT BRUKER
- --------------------------- -------------------- ------------------- ------------------- ------------------------------- ROLE NAME TELEPHONE FAX EMAIL +49 421 +49 421 - --------------------------- -------------------- ------------------- ------------------- ------------------------------- Program Manager [*] 2205 [*] 2205-100 [*] - --------------------------- -------------------- ------------------- ------------------- ------------------------------- Project Manager [*] 2205 [*] 2205-100 [*] - --------------------------- -------------------- ------------------- ------------------- ------------------------------- Project Manager [*] 2205 [*] 2205-101 [*] - --------------------------- -------------------- ------------------- ------------------- ------------------------------- HW Project Leader [*] 2205 [*] 2205-101 [*] - --------------------------- -------------------- ------------------- ------------------- ------------------------------- SW Project Leader [*] 2205 [*] 2205-101 [*] - --------------------------- -------------------- ------------------- ------------------- ------------------------------- Business Manager Dieter Koch 2205 [*] 2205-100 DK@BDAL.DE - --------------------------- -------------------- ------------------- ------------------- -------------------------------
Additional personnel responsible for engineering, quality, application and document development are present at Bruker and HP and are available for direct contact between the organizations. Their names and contact information are available through the respective project and program managers. RESOURCES Gemini is a collaborative project between Bruker and HP. Each party will develop and supply the required components for which it is responsible and collaborate particularly in the areas of HW and SW development and testing and certification of Gemini in accordance with the lifecycle documents to ensure a successful development project. All pre-pilot run instruments will be built from components that are transferred at no charge between HP and Bruker. No billing of engineering time will transfered between HP and Bruker unless otherwise specified in the ITMS Collaboration Agreement. RESPONSIBILITIES COMPONENT DEVELOPMENT AND PRODUCTION RESPONSIBILITIES Appendix 1 contains several detailed lists indicating the various major components required for the Gemini and Gemini R/D products. these lists indicate of the respective HP and Bruker development and production responsibilities for these components. Specific lists included are: Definition of HP Gemini and HP Gemini R/D Kits - -------- (14) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. HP Supplied Components, HP Gemini Kit Specific HP Supplied Components, HP Gemini R/D Kit Specific HP Supplied Components, common components for HP Gemini and HP Gemini R/D Kits Bruker Supplied Components for Gemini and Gemini R/D Certain Hardware and calibration/checkout components will be made available to Bruker to purchase from HP, but are not part of the Gemini Kits or Gemini R/D Kits. Certain additional software components will be made available to Bruker to purchase from HP, but are not part of the Gemini or Gemini R/D Kits. Certain additional software components will be made available to HP to purchase from Bruker, but are not part of the basic Gemini product. Description of HP Gemini/Gemini R/D Kits for [*](15) PRODUCT TESTING AND CERTIFICATION Hardware regulatory and safety compliance testing and certification (see Gemini Hardware Quality and Regulatory Plan for specific requirements) are the responsibility of both HP and Bruker and are critical elements of the development project. HP and Bruker will conduct these tests and based on their respective components in Gemini ensure that Gemini meets the necessary specifications. The Gemini Hardware Quality Plan calls out specific test and indicates where (at HP/HP designated site or at Bruker/Bruker designated site) the various tests will be performed. Analytical instrument performance testing is the responsibility of both HP and Bruker. Both HP and Bruker will test the Lab-Prototype, Production-Prototype instruments as specified in this Project Plan and in accordance with the Analytical Performance Quality Plan. Software testing is the responsibility of both HP and Bruker. Both HP and Bruker will test the various releases of SW as specified in the Project Plan and in accordance with the Software Test Plan(s) to ensure a quality product and compliance with the Software Quality Plan. PC CONFIGURATION HP and Bruker will collaborate in PC and printer configuration decisions and testing, but HP is responsible for the decision regarding the final configuration specifics for its Gemini product, while Bruker is responsible for the decision regarding the final configuration specifics for its Gemini R&D product. DOCUMENTATION AND LEARNING PRODUCTS HP and Bruker will collaborate on the development of user information materials including manuals, site preparation and installation documents, performance verification documents, Help, CD-Roms, etc. (Ken and Sebastian will complete the learning products task and ownership list) COLLABORATIVE DEVELOPMENT CONSIDERATIONS As this project uses components from both companies, it is necessary that extra attention be given to communicating any proposed change to each other. The interaction between the various subsystems (mechanical, electrical, software, certification-related) can be very complex and designs need to be held constant over time on both sides (Bruker and HP). During the development phases it is essential that the design be complete prior to the Production Prototype phase to allow for - -------- (15) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. the necessary qualification and certification activities. After the Gemini hardware and software designs are complete it is necessary that a well regulated Engineering Change Order procedure be followed by both HP and Bruker. This procedure needs to be clearly defined and agreed upon prior to the completion of the Lab Phase. CHANGE MANAGEMENT DOCUMENT CHANGES Changes to the lifecycle documents describing Gemini (i.e., project plan, product data sheet, compatibility matrix, HW ERS, SW ERS, hardware quality and regulatory plan, analytical performance quality plan, software quality plan) require the previous approval of the project and product managers of both companies. Such changes are often addressed at lifecycle check points but can also be requested at unspecified times as well. Document revisions will be controlled by labeling each copy and every page with a revision string of the form A.00, A.01, A.02, etc. The revision string will be incremented by one each time the document changes, and a record will be entered into the document's revision log with the revision string, the date, and the reason for the update. Documents will also include the document's file name and "Page 1 of x" (where x is the total number of pages) on every page. At HP-CAD project lifecycle documents will be checked into the electronic project notebook (HMS) document control system. At HP PDM will be used for the storage of engineering documents such as drawings and schematics. Documents will be stored at Bruker-Daltronik as MS Word documents. At Bruker-Daltonik, documents will also be stored in a company secure electronic form. As documents are secure, changes will not inadvertently enter into these lifecycle documents. DEFECT TRACKING During the development of Gemini both HP and Bruker will report and or record all hardware and software defects found in the product. HP and Bruker, will evaluate the defects and based on product specification will suggest corrective measures, make corrections, make corrections, retest corrected changes, and jointly resolve defects. Bruker will maintain a database for the software defects. The TOP/3 system or equivalent will be used. The database will reside at Bruker, but copies will be made available to HP as needed. HP and Bruker will jointly review the submitted defects set severity levels and schedule fixes. For hardware a defect system will be put in place in which will call attention to any departure for specifications found in the PDS, Project Plan, Hardware Quality and Regulatory Plan or ERS documents. The information in this defect system will be communicated based on change or upon request from either HP or Bruker. Bruker will develop and maintain the defect tracking system for the hardware. REQUIREMENTS TRACEABILITY In accordance with product validation requirements basic user requirements listed in this Traceability Matrix are tracked through the Lifecycle Documents according to the following hardware and software tables.
- ------------------------------ ------------------------ -------------------------- -------------------------- PRODUCT DATA SHEET EXTERNAL REFERENCE USER REQUIREMENT (PDS) SECTION SPECIFICATION (ERS) QUALITY PLAN REFERENCE - ------------------------------ ------------------------ -------------------------- -------------------------- HARDWARE REQUIREMENTS - ------------------------------ ------------------------ -------------------------- -------------------------- ESI, APCI, NanoElectrospray HW/Firmware HW/Firmware compatibility Functionality Functionality - ------------------------------ ------------------------ -------------------------- -------------------------- Mass Range / Resolution / HW/Firmware HW/Firmware Analytical Performance Scan Speed Functionality Functionality Quality Plan - ------------------------------ ------------------------ -------------------------- -------------------------- MS/MS Performance HW/Firmware HW/Firmware Analytical Performance - ------------------------------ ------------------------ -------------------------- --------------------------
- ------------------------------ ------------------------ -------------------------- -------------------------- PRODUCT DATA SHEET EXTERNAL REFERENCE USER REQUIREMENT (PDS) SECTION SPECIFICATION (ERS) QUALITY PLAN REFERENCE - ------------------------------ ------------------------ -------------------------- -------------------------- Functionality Functionality Quality Plan - ------------------------------ ------------------------ -------------------------- -------------------------- ICC Performance HW/Firmware Functionality - ------------------------------ ------------------------ -------------------------- -------------------------- Pos/Neg Switching HW/Firmware Functionality - ------------------------------ ------------------------ -------------------------- -------------------------- Mass Stability Performance HW/Firmware Analytical Performance Functionality Quality Plan - ------------------------------ ------------------------ -------------------------- -------------------------- LC/MS and LC/MS/MS Performance Performance Analytical Performance Sensitivity Quality Plan - ------------------------------ ------------------------ -------------------------- -------------------------- Electrical Interface HW/Firmware HW/Firmware Requirements Functionality Functionality - ------------------------------ ------------------------ -------------------------- -------------------------- Packaging HW/Firmware Functionality - ------------------------------ ------------------------ -------------------------- -------------------------- Regulatory, Safety, Environmental, Safety, Hardware Quality Plan Environmental Reliability - ------------------------------ ------------------------ -------------------------- -------------------------- Diagnostics Supportability System Diagnostics tools built in - ------------------------------ ------------------------ -------------------------- -------------------------- System Configuration Compatibility Matrix SW Test Plan - ------------------------------ ------------------------ -------------------------- -------------------------- Reliability - ------------------------------ ------------------------ -------------------------- -------------------------- - ------------------------------ ------------------------ -------------------------- -------------------------- SOFTWARE REQUIREMENTS - ------------------------------ ------------------------ -------------------------- -------------------------- Automated Tuning Software Functionality SW ERS SW Test Plan - ------------------------------ ------------------------ -------------------------- -------------------------- Full System Control Software Functionality SW ERS SW Test Plan - ------------------------------ ------------------------ -------------------------- -------------------------- Scan and Segment Editing Software Functionality SW ERS SW Test Plan - ------------------------------ ------------------------ -------------------------- -------------------------- Data dependent acquisition modes Software Functionality SW ERS SW Test Plan - ------------------------------ ------------------------ -------------------------- -------------------------- Full profile data Software Functionality SW ERS SW Test Plan - ------------------------------ ------------------------ -------------------------- -------------------------- Software copy protection Software Functionality SW ERS SW Test Plan - ------------------------------ ------------------------ -------------------------- -------------------------- Peptide, Protein Tools Software Functionality SW ERS SW Test Plan - ------------------------------ ------------------------ -------------------------- -------------------------- [*](16) Software Functionality SW ERS SW Test Plan - ------------------------------ ------------------------ -------------------------- -------------------------- [*] Software Functionality SW ERS SW Test Plan - ------------------------------ ------------------------ -------------------------- --------------------------
- -------- (16) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof.
- ------------------------------ ------------------------ -------------------------- -------------------------- PRODUCT DATA SHEET EXTERNAL REFERENCE USER REQUIREMENT (PDS) SECTION SPECIFICATION (ERS) QUALITY PLAN REFERENCE - ------------------------------ ------------------------ -------------------------- -------------------------- NT Operating System Software Functionality SW ERS SW Test Plan - ------------------------------ ------------------------ -------------------------- -------------------------- Y2K compliance Software Functionality SW ERS SW Test Plan - ------------------------------ ------------------------ -------------------------- -------------------------- Help system Usability/Knowledge SW ERS Tools - ------------------------------ ------------------------ -------------------------- --------------------------
LIFECYCLE CHECK POINTS/LIFECYCLE CUSTOMIZATION At the conclusion of each phase in the project, (Lab Phase, Production Prototype Phase, Pilot Run as well as software Investigation/Design, Implementation, and Test Phases) a joint HP/Bruker check point meeting will be held to review the project status and determine if the project should transition to the subsequent phase. The major activities for each phase are found in the following Lifecycle Checklists. The joint meetings will be face-to-face, by video-conference, or by teleconference. For this project the standard HP hardware lifecycle checkpoints will be used. For the Gemini software development one common Proposal Phase has been used for the 3.0, 3.1, 3.2 and 4.0 releases of Esquire-LC/Gemini Software. Each of these releases will have a merged Investigation and Design Phases referred to as the "ID Phase". The Implementation Phase is referred to as the "I Phase". LIFECYCLE CHECKPOINT SCHEDULE OVERVIEW - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- Checkpoint 2/99 3/99 4/99 5/99 6/99 7/99 8/99 9/99 10/99 11/99 12/99 1/00 2/00 3/00 - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- HW Phases - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- Invest. Phase X X I-L - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- Lab Phase X X X X X X L-PP - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- PP Phase X X X PP-PR - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- Pilot Run X X MR - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- SW Phases - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- (17)[*] Test X X MR Phase - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- [*] ID Phase X X ID-I - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- [*] I Phase X X TR - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- [*] Test Phase X X MR - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- [*] ID Phase X X ID-I - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- [*] I Phase X X X X TR - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- [*] Test Phase X X X MR - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- [*] ID Phase X X ID-I - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- [*] I Phase X X X TR - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- [*] Test Phase MR 6/00 - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ ----- - ---------------- ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ------ ----- ------ -----
- -------- (17) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. INVESTIGATION PHASE/ENTWURFSPHASE A copy of this Activities List should be filled out by the Project Management Team prior to the completion of a phase, and reviewed appropriately. - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- PRODUCT ID: PROJECT ID: DATE: - ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
TARGET DATES: Projected Time: - 15 Apr 1999 OBJECTIVES:
- ------- ------------------------------------------------------ ---------------------- ----------------------- STATUS LOCATION - ------- ------------------------------------------------------ ---------------------- ----------------------- PROJECT MANAGEMENT TEAM - ------- ------------------------------------------------------ ---------------------- ----------------------- Update Project Documents - ------- ------------------------------------------------------ ---------------------- ----------------------- Sign-off on all Lifecycle documents - ------- ------------------------------------------------------ ---------------------- ----------------------- Manufacturing Release requirements (MR) reviewed - ------- ------------------------------------------------------ ---------------------- ----------------------- Establish communication lines for lifecycle check points - ------- ------------------------------------------------------ ---------------------- ----------------------- Joint HP/Bruker Project Lifecycle check-point review - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- RESEARCH AND DEVELOPMENT/QUALITY - ------- ------------------------------------------------------ ---------------------- ----------------------- Complete major components risk assessment - ------- ------------------------------------------------------ ---------------------- ----------------------- Finalize development schedule - ------- ------------------------------------------------------ ---------------------- ----------------------- Agree upon environmental, safety, and EMV tests - ------- ------------------------------------------------------ ---------------------- ----------------------- [*](18) - ------- ------------------------------------------------------ ---------------------- ----------------------- [*]: - Quality Improvement Plan, on target and jointly reviewed - Bruker requests (issue not resolved): Contingency Plan implemented and on target - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MARKETING/LEARNING PRODUCTS/PRODUCT SUPPORT - ------- ------------------------------------------------------ ---------------------- ----------------------- Complete compatibility matrix - ------- ------------------------------------------------------ ---------------------- ----------------------- Define required learning products with schedule - ------- ------------------------------------------------------ ---------------------- ----------------------- Define service training materials with schedule - ------- ------------------------------------------------------ ---------------------- ----------------------- Software release schedule outlined - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MANUFACTURING - ------- ------------------------------------------------------ ---------------------- ----------------------- Set up kit production at HP - ------- ------------------------------------------------------ ---------------------- ----------------------- Manufacturing Plan developed (draft). Critical production issues defined and plans developed (draft) - ------- ------------------------------------------------------ ---------------------- ----------------------- Preliminary production documentation reviewed (draft) - ------- ------------------------------------------------------ ---------------------- ----------------------- Product Stewardship plan developed (CSA, ISO) (draft) - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- -----------------------
- -------- (18) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. HARDWARE LAB PROTOTYPE PHASE - LP PHASE A copy of this Activities List should be filled out by the Project Management Team prior to the completion of a phase, and reviewed appropriately. - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- PRODUCT ID: PROJECT ID: DATE: - ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
TARGET DATES: Projected Time: [*](19) OBJECTIVES:
- ------- ------------------------------------------------------ ---------------------- ----------------------- STATUS LOCATION - ------- ------------------------------------------------------ ---------------------- ----------------------- PROJECT MANAGEMENT TEAM - ------- ------------------------------------------------------ ---------------------- ----------------------- Update Project Documents - ------- ------------------------------------------------------ ---------------------- ----------------------- Manufacturing Release requirements (MR) reviewed - ------- ------------------------------------------------------ ---------------------- ----------------------- Pilot Run allocations and schedule defined - ------- ------------------------------------------------------ ---------------------- ----------------------- Establish communication lines for lifecycle check points - ------- ------------------------------------------------------ ---------------------- ----------------------- Joint HP/Bruker Project Lifecycle check-point review - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- RESEARCH AND DEVELOPMENT/QUALITY - ------- ------------------------------------------------------ ---------------------- ----------------------- Build the LP units - ------- ------------------------------------------------------ ---------------------- ----------------------- Design review on major assemblies/margins identified - ------- ------------------------------------------------------ ---------------------- ----------------------- Meets Analytical performance tests - ------- ------------------------------------------------------ ---------------------- ----------------------- Meets preliminarily environmental, safety, and EMV tests - ------- ------------------------------------------------------ ---------------------- ----------------------- [*] - ------- ------------------------------------------------------ ---------------------- ----------------------- SW support of prototypes - ------- ------------------------------------------------------ ---------------------- ----------------------- Production documentation ready - ------- ------------------------------------------------------ ---------------------- ----------------------- Production tooling plan reviewed - ------- ------------------------------------------------------ ---------------------- ----------------------- [*] (as shown by statistical data from the field) - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MARKETING/LEARNING PRODUCTS/PRODUCT SUPPORT - ------- ------------------------------------------------------ ---------------------- ----------------------- Verify the compatibility matrix - ------- ------------------------------------------------------ ---------------------- ----------------------- Review required learning products with schedule - ------- ------------------------------------------------------ ---------------------- ----------------------- Draft service training materials with schedule - ------- ------------------------------------------------------ ---------------------- ----------------------- Industrial/Ergonomics review complete - ------- ------------------------------------------------------ ---------------------- ----------------------- Marketing Plan activities reviewed - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MANUFACTURING - ------- ------------------------------------------------------ ---------------------- ----------------------- Set up/preview kit production at HP - ------- ------------------------------------------------------ ---------------------- ----------------------- Manufacturing Plan developed (Final?). Critical production issues defined and plans developed (Final?) - ------- ------------------------------------------------------ ---------------------- ----------------------- Production documentation reviewed - ------- ------------------------------------------------------ ---------------------- ----------------------- Review Product Stewardship plan (draft) - ------- ------------------------------------------------------ ---------------------- ----------------------- Final Test procedure in development - ------- ------------------------------------------------------ ---------------------- -----------------------
- -------- (19) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. Instruments built (7)
- --------- --------- ----------------------- -------- ------------------------------------- ------------------ NO. NAME LOCATION DATE PURPOSE LATER PURPOSE - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 1 LP1 BFA EpT - Hardware Electrical and Mechanical PP6 Investigations, EMC and Software for Selftest - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 2 LP2 BFA EpT - Software Software/Electrical/Analytical PP7 Investigations - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 3 LP3 BFA EpT - Analytic Analytical Performance PP8 Investigations - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 4 LP4 BFA ESw - Software Analytical operation not necessary PP9 - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 5 LP5 BFA ESw - Software Analytical operation not necessary PP10 - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 6 LP6 HP-CAD Performance Test PP11 - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 7 LP7 BFA EpT - Software Autotune PP12 - --------- --------- ----------------------- -------- ------------------------------------- ------------------
Note: [*](20) and [*] are discussing allocation of LP/PP units. - -------- (20) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. HARDWARE LAB PROTOTYPE PHASE - PP-PHASE A copy of this Activities List should be filled out by the Project Management Team prior to the completion of a phase, and reviewed appropriately. - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- PRODUCT ID: PROJECT ID: DATE: - ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
TARGET DATES: Projected Time: [*](21) OBJECTIVES:
- ------- ------------------------------------------------------ ---------------------- ----------------------- STATUS LOCATION - ------- ------------------------------------------------------ ---------------------- ----------------------- PROJECT MANAGEMENT TEAM - -------------------------------------------------------------- ---------------------- ----------------------- Update Project Documents - ------- ------------------------------------------------------ ---------------------- ----------------------- Manufacturing Release requirements (MR) updated - ------- ------------------------------------------------------ ---------------------- ----------------------- Pilot Run allocations and schedule confirmed - ------- ------------------------------------------------------ ---------------------- ----------------------- Use communication lines for production forecasting, plan distribution of first shipments - ------- ------------------------------------------------------ ---------------------- ----------------------- Joint HP/Bruker Project Lifecycle check-point review - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- RESEARCH AND DEVELOPMENT/QUALITY - ------- ------------------------------------------------------ ---------------------- ----------------------- Design review on major assemblies/margins identified - ------- ------------------------------------------------------ ---------------------- ----------------------- Meets Analytical performance tests and PDS specifications - ------- ------------------------------------------------------ ---------------------- ----------------------- Meets environmental, safety, and EMV tests - ------- ------------------------------------------------------ ---------------------- ----------------------- Demonstrate preliminary SW performance - ------- ------------------------------------------------------ ---------------------- ----------------------- Technical information for product support documentation available - ------- ------------------------------------------------------ ---------------------- ----------------------- Manufacturing transition team identified - ------- ------------------------------------------------------ ---------------------- ----------------------- Production tooling plan ready - ------- ------------------------------------------------------ ---------------------- ----------------------- SW support for Pilot run - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MARKETING/LEARNING PRODUCTS/PRODUCT SUPPORT - ------- ------------------------------------------------------ ---------------------- ----------------------- Verify the compatibility matrix - ------- ------------------------------------------------------ ---------------------- ----------------------- Review required learning products with schedule - ------- ------------------------------------------------------ ---------------------- ----------------------- Review service training materials with schedule - ------- ------------------------------------------------------ ---------------------- ----------------------- Marketing Plan activities updated - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MANUFACTURING - ------- ------------------------------------------------------ ---------------------- ----------------------- Build the PP units, Upgrade LP units - ------- ------------------------------------------------------ ---------------------- ----------------------- Manufacturing goals meet, corrective plans in place - ------- ------------------------------------------------------ ---------------------- ----------------------- Production documentation reviewed - ------- ------------------------------------------------------ ---------------------- ----------------------- Product Stewardship plan updated - ------- ------------------------------------------------------ ---------------------- ----------------------- Master schedule developed and activated - ------- ------------------------------------------------------ ---------------------- ----------------------- Critical parts reviewed - ------- ------------------------------------------------------ ---------------------- ----------------------- Final Test procedure verified and in place - ------- ------------------------------------------------------ ---------------------- -----------------------
- -------- (21) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. Instruments built (5 plus LP instruments upgraded)
- --------- --------- ----------------------- -------- ------------------------------------- ------------------ NO. NAME LOCATION DATE PURPOSE LATER PURPOSE - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 8 PP2 HP-CAD Safety CSA (HP) - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 9 PP5 BFA QS EMC and Environmental - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 10 PP3 BFA App Application - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 11 PP1 HP-CAD HP-Application - --------- --------- ----------------------- -------- ------------------------------------- ------------------ 12 PP4 BFA App Application (Reserve) - --------- --------- ----------------------- -------- ------------------------------------- ------------------ LP1 PP6 BFA EpT - Hardware Electronical and Mechanical Investigations, EMC and Software for Selftest - --------- --------- ----------------------- -------- ------------------------------------- ------------------ LP2 PP7 BFA EpT - Software Sotfware/Electronical/Analytical Investigations - --------- --------- ----------------------- -------- ------------------------------------- ------------------ LP3 PP8 BFA EpT - Analytic Analytical Performance Investigations - --------- --------- ----------------------- -------- ------------------------------------- ------------------ LP4 PP9 BFA ESw - Software Analytical operation not necessary - --------- --------- ----------------------- -------- ------------------------------------- ------------------ LP5 PP10 BFA ESw - Software Analytical operation not necessary - --------- --------- ----------------------- -------- ------------------------------------- ------------------ LP6 PP11 HP-CAD Performance Test - --------- --------- ----------------------- -------- ------------------------------------- ------------------ LP7 PP12 BFA EpT - Software Autotune - --------- --------- ----------------------- -------- ------------------------------------- ------------------
Note: [*](22) and [*] are discussing allocation of LP/PP units. - -------- (22) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. SW-DEVELOPMENT As the SW group is currently extremely busy with the [*](23) release for Esquire-LC, the SW releases [*] are not yet fully defined. Both the number of intermediate releases as well as their functionality may change. Some functionality may also get [*]. Software [*] Release A copy of this Activities List should be filled out by the Project Management Team prior to the completion of a phase, and reviewed appropriately. TARGET-DATES: Phase [*] begin: [*] First pre-integration build: [*] First integration build: [*] First test release candidate: [*] MR completion: [*] - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- PRODUCT ID: PROJECT ID: DATE: - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- STATUS LOCATION - ------- ------------------------------------------------------ ---------------------- ----------------------- PROJECT MANAGEMENT TEAM - ------- ------------------------------------------------------ ---------------------- ----------------------- Update Project Documents - ------- ------------------------------------------------------ ---------------------- ----------------------- Verify the compatibility matrix (as applicable) - ------- ------------------------------------------------------ ---------------------- ----------------------- Use the inplace defect tracking system - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- RESEARCH AND DEVELOPMENT - -------------------------------------------------------------- ---------------------- ----------------------- Move from OS/2 platform to Windows NT - ------- ------------------------------------------------------ ---------------------- ----------------------- Satisfy Y2000 compliance - ------- ------------------------------------------------------ ---------------------- ----------------------- Support Gemini prototype development - ------- ------------------------------------------------------ ---------------------- ----------------------- Improved useability of instrument control - ------- ------------------------------------------------------ ---------------------- ----------------------- Implement improved data analysis functions (summary report) - ------- ------------------------------------------------------ ---------------------- ----------------------- [*] - ------- ------------------------------------------------------ ---------------------- ----------------------- MS/MS with up to [*] - ------- ------------------------------------------------------ ---------------------- ----------------------- Monitoring of up to [*] channels per time slice - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MARKETING - ------- ------------------------------------------------------ ---------------------- ----------------------- have learning products - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MANUFACTURING - ------- ------------------------------------------------------ ---------------------- ----------------------- Suitable installation process - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- -----------------------
- -------- (23) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. Software [*](24) Release A copy of this Activities List should be filled out by the Project Management Team prior to the completion of a phase, and reviewed appropriately. TARGET-DATES: Investigation complete (ID/I) [*] Implementation complete (TR) [*] Testing complete (MR/SR) [*]
- ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- PRODUCT ID: PROJECT ID: DATE: - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- STATUS LOCATION - ------- ------------------------------------------------------ ---------------------- ----------------------- PROJECT MANAGEMENT TEAM - ------- ------------------------------------------------------ ---------------------- ----------------------- Update Project Documents - ------- ------------------------------------------------------ ---------------------- ----------------------- Verify the compatibility matrix as applicable - ------- ------------------------------------------------------ ---------------------- ----------------------- Use the inplace defect tracking system - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- RESEARCH AND DEVELOPMENT - ------- ------------------------------------------------------ ---------------------- ----------------------- Implement non-completed functions for [*] - ------- ------------------------------------------------------ ---------------------- ----------------------- Support Gemini prototype development - ------- ------------------------------------------------------ ---------------------- ----------------------- Implement improved instrument control (segment editor) - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MARKETING - ------- ------------------------------------------------------ ---------------------- ----------------------- Have learning products - ------- ------------------------------------------------------ ---------------------- ----------------------- New applications - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MANUFACTURING - ------- ------------------------------------------------------ ---------------------- ----------------------- Suitable installation process - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- -----------------------
- -------- (24) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. Software [*](25) Release A copy of this Activities List should be filled out by the Project Management Team prior to the completion of a phase, and reviewed appropriately. TARGET-DATES: Investigation complete (ID/I) [*] Implementation complete (TR) [*] Testing complete (MR/SR) [*]
- ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- PRODUCT ID: PROJECT ID: DATE: - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- STATUS LOCATION - ------- ------------------------------------------------------ ---------------------- ----------------------- PROJECT MANAGEMENT TEAM - ------- ------------------------------------------------------ ---------------------- ----------------------- Update Project Documents - ------- ------------------------------------------------------ ---------------------- ----------------------- Verify the compatibility matrix as applicable - ------- ------------------------------------------------------ ---------------------- ----------------------- Use the inplace defect tracking system - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- RESEARCH AND DEVELOPMENT - ------- ------------------------------------------------------ ---------------------- ----------------------- New Peptide Search Functionality - ------- ------------------------------------------------------ ---------------------- ----------------------- Support Gemini prototype development - ------- ------------------------------------------------------ ---------------------- ----------------------- Implement non-completed functions planned for [*] release - ------- ------------------------------------------------------ ---------------------- ----------------------- Increase stability of the software - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MARKETING - ------- ------------------------------------------------------ ---------------------- ----------------------- Have learning products - ------- ------------------------------------------------------ ---------------------- ----------------------- New applications - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MANUFACTURING - ------- ------------------------------------------------------ ---------------------- ----------------------- Suitable installation process - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- -----------------------
- -------- (25) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. Software [*](26) Release A copy of this Activities List should be filled out by the Project Management Team prior to the completion of a phase, and reviewed appropriately. TARGET-DATES: Investigation complete (ID/I) [*] Implementation complete (TR) [*] Testing complete (MR/SR) [*]
- ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- PRODUCT ID: PROJECT ID: DATE: - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- STATUS LOCATION - ------- ------------------------------------------------------ ---------------------- ----------------------- PROJECT MANAGEMENT TEAM - ------- ------------------------------------------------------ ---------------------- ----------------------- Update Project Documents - ------- ------------------------------------------------------ ---------------------- ----------------------- Verify the compatibility matrix - ------- ------------------------------------------------------ ---------------------- ----------------------- Use the inplace defect tracking system - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- RESEARCH AND DEVELOPMENT - ------- ------------------------------------------------------ ---------------------- ----------------------- Implement non-completed functions planned for [*] release - ------- ------------------------------------------------------ ---------------------- ----------------------- Increase stability of the software - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MARKETING - ------- ------------------------------------------------------ ---------------------- ----------------------- Have learning products - ------- ------------------------------------------------------ ---------------------- ----------------------- New applications - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MANUFACTURING - ------- ------------------------------------------------------ ---------------------- ----------------------- Suitable installation process - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- -----------------------
- -------- (26) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. PILOT RUN PHASE - PR-PHASE A copy of this Activities List should be filled out by the Project Management Team prior to the completion of a phase, and reviewed appropriately. - ------------------- ----------------- ----------------- ----------------- ----------------- ----------------- PRODUCT ID: PROJECT ID: DATE: - ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
TARGET DATES: Projected Time: [*](27) OBJECTIVES:
- ------- ------------------------------------------------------ ---------------------- ----------------------- STATUS LOCATION - ------- ------------------------------------------------------ ---------------------- ----------------------- PROJECT MANAGEMENT TEAM - ------- ------------------------------------------------------ ---------------------- ----------------------- Update Project Documents - ------- ------------------------------------------------------ ---------------------- ----------------------- Manufacturing Release requirements (MR) met - ------- ------------------------------------------------------ ---------------------- ----------------------- First shipment date set - ------- ------------------------------------------------------ ---------------------- ----------------------- Test records retained - ------- ------------------------------------------------------ ---------------------- ----------------------- Post project review date set - ------- ------------------------------------------------------ ---------------------- ----------------------- Joint HP/Bruker Project Lifecycle check-point review - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- RESEARCH AND DEVELOPMENT/QUALITY - ------- ------------------------------------------------------ ---------------------- ----------------------- Design review of all product defects - ------- ------------------------------------------------------ ---------------------- ----------------------- Meets Analytical performance tests and PDS specifications - ------- ------------------------------------------------------ ---------------------- ----------------------- Meets environmental, safety, and EMV tests - ------- ------------------------------------------------------ ---------------------- ----------------------- Demonstrate preliminary SW performance - ------- ------------------------------------------------------ ---------------------- ----------------------- Final product tests reviewed - ------- ------------------------------------------------------ ---------------------- ----------------------- Quality/Safety review of all learning products - ------- ------------------------------------------------------ ---------------------- ----------------------- Product safety, regulatory and environmental qualification tests complete, safety certifications complete - ------- ------------------------------------------------------ ---------------------- ----------------------- Product submittals complete (CPL, etc.) - ------- ------------------------------------------------------ ---------------------- ----------------------- Waivers complete - ------- ------------------------------------------------------ ---------------------- ----------------------- Declaration of Conformity complete (CE, etc.) - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MARKETING/LEARNING PRODUCTS/PRODUCT SUPPORT - ------- ------------------------------------------------------ ---------------------- ----------------------- Learning products available to first customer, under document control - ------- ------------------------------------------------------ ---------------------- ----------------------- Service training materials available - ------- ------------------------------------------------------ ---------------------- ----------------------- Marketing Plan activities reviewed - ------- ------------------------------------------------------ ---------------------- ----------------------- New product introduction activities - ------- ------------------------------------------------------ ---------------------- ----------------------- Delivery of Units to Demo Centers - ------- ------------------------------------------------------ ---------------------- ----------------------- - ------- ------------------------------------------------------ ---------------------- ----------------------- MANUFACTURING - ------- ------------------------------------------------------ ---------------------- ----------------------- Build the PR units - ------- ------------------------------------------------------ ---------------------- ----------------------- Performance of production in planned volumes verified - ------- ------------------------------------------------------ ---------------------- ----------------------- Release PCO complete (HP) - ------- ------------------------------------------------------ ---------------------- ----------------------- All tooling complete - ------- ------------------------------------------------------ ---------------------- ----------------------- Production processes in place and reviewed - ------- ------------------------------------------------------ ---------------------- ----------------------- Production documentation complete - ------- ------------------------------------------------------ ---------------------- ----------------------- Production and Materials data collection implemented - ------- ------------------------------------------------------ ---------------------- ----------------------- Regulatory safety processes implemented - ------- ------------------------------------------------------ ---------------------- ----------------------- Manufacturing safety process reviewed - ------- ------------------------------------------------------ ---------------------- -----------------------
- -------- (27) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. - ------- ------------------------------------------------------ ---------------------- ----------------------- Order management system tested - ------- ------------------------------------------------------ ---------------------- -----------------------
Each company buys the PR instruments as if they were customer instruments; Note: Bruker to build PR1 and PR2 in early to [*](28) to prepare for shipment to HP by [*] Proposed number of instruments built (quantity and allocation TBD)
- --------- --------- ------------------- ------------------ ------------------------------- ------------------ NO. NAME LOCATION DATE PURPOSE LATER PURPOSE - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 13 PR1 HP Goal: Jan 10, 2000 HP Applications Training - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 14 PR2 HP Goal: Jan 10, 2000 HP Product Support Training - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 15 PR3 Bruker Bruker Applications Training - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 16 PR4 Bruker Bruker Service Training - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 17 PR5 Bruker - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 18 PR6 HP - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 19 PR7 Bruker - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 20 PR8 HP - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 21 PR9 Bruker - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 22 PR10 HP - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 23 PR11 Bruker - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 24 PR12 HP - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 25 PR13 Bruker - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 26 PR14 HP - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 27 PR15 Bruker - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 28 PR16 HP - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 29 PR17 Bruker - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 30 PR18 HP - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 31 PR19 Bruker - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 32 PR20 HP - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 33 PR21 Bruker - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 34 PR22 HP - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 35 PR23 Bruker - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 36 PR24 HP - --------- --------- ------------------- ------------------ ------------------------------- ------------------ 37 PR25 Bruker - --------- --------- ------------------- ------------------ ------------------------------- ------------------
- -------- (28) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. APPENDIX 1 - GEMINI COMPONENT DEVELOPMENT AND PRODUCTION RESPONSIBILITY Listed here is an overview of the components for which HP and Bruker-Daltonik are responsible. Each party will be responsible for assembly and testing of their components. Included in the lists is an indication of what components will require additional development (NC = no change, ME = mechanical engineering change required, EE = electrical engineering change required, SW = software engineering change required, TBD = required change to be determined). Unless otherwise noted responsibilities include design, development and production responsibilities. DEFINITION OF HP GEMINI AND HP GEMINI R/D KITS HP will make available to Bruker two basic kits, the HP Gemini and HP Gemini R/D Kits. These two kits share a common set of components, but differ in regards to whether they include the [*](29). Because the default configuration for the HP Gemini product uses the standard supplies the "HP Gemini Kit" specifies the kit which comes with standard supplies. Likewise, [*], because it has historically been associated with the [*] will include [*]. It is therefore possible that the final HP Gemini product sold to a customer may be built out of a HP Gemini R/D Kit as an option, and that by special order a [*] may be built based on an HP Gemini Kit. In summary, the HP Gemini Kit is comprised of the "HP supplied components, HP Gemini kit specific" and the "HP supplied components, common components for HP Gemini and HP Gemini R/D kits". The HP Gemini R/D kit is comprised of the "HP supplied components, HP Gemini R/D kit specific" and the "HP supplied components, common components for HP Gemini and HP Gemini R/D kits". HP SUPPLIED COMPONENTS, HP GEMINI KIT SPECIFIC
Engineering Component Requirement Electronic Hardware [*] NC HP SUPPLIED COMPONENTS, HP GEMINI R/D KIT SPECIFIC Electronic Hardware [*] EE HP SUPPLIED COMPONENTS, COMMON COMPONENTS FOR HP GEMINI AND HP GEMINI R/D KITS Mechanical Packaging [*] [*] [*] [*] [*] [*] [*] Mechanical Components [*] [*] [*] [*] [*] [*]
- -------- (29) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. [*](30) [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] Electronic Hardware [*] [*] [*] [*] [*] [*] [*] [*] [*] Other Crate NC Software components ChemStation incl spectral module incl. Integration with MS SW (macros, dill's, etc.) SW according to interface spec. [*]
BRUKER-DALTONIK SUPPLIED COMPONENTS, FOR GEMINI AND GEMINI R/D
Engineering Component Requirement Mechanical Packaging [*] [*] [*] Mechanical Components [*] [*] [*] [*] [*] [*] [*] [*] [*] Electronic Hardware [*]
- -------- (30) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. [*](31) [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] Other Supplies for syringe pump, etc. as per Esquire-LC NC Software components Gemini instrument control (single instrument license) SW Data Analysis (single instrument license) SW Note: [*] CERTAIN HARDWARE AND CALIBRATION/CHECKOUT COMPONENTS WILL BE MADE AVAILABLE TO BRUKER FOR PURCHASE FROM HP, BUT ARE NOT PART OF THE HP GEMINI KITS OR HP GEMINI R/D KITS. Standard and extended mode calibration samples (to m/z 2722) Chemist Performance evaluation sample (reserpine, __________ ) Remote Control microcontroller ship kit - G2440-60031 contains items needed to install the instrument like rough pump oil, oil return kit, oil pan, rough pump hose to instrument, tools, nitrogen gas purifier, drain bottle, etc. CERTAIN ADDITIONAL SOFTWARE COMPONENTS WILL BE MADE AVAILABLE TO BRUKER TO PURCHASE FROM HP, BUT ARE NOT PART OF THE GEMINI OR GEMINI R/D KITS. HP-CAD options (not in kit) [*] [*] [*] [*] CERTAIN ADDITIONAL SOFTWARE COMPONENTS WILL BE MADE AVAILABLE TO HP TO PURCHASE FROM BRUKER, BUT ARE NOT PART OF THE BASIC GEMINI PRODUCT. Bruker options (not in kit) [*] [*] [*] [*] DESCRIPTION OF HP GEMINI/GEMINI R/D KITS FOR [*]
- -------- (31) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. HP Gemini or Gemini R/D kit with the following components removed: [*](32) [*] [*] [*] [*] [*] [*] - -------- (32) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. APPENDIX 3 PRICING OF HP & BRUKER KITS, ACCESSORIES, SOFTWARE & INSTRUMENTS
Ship Release Jan 1, 2001 Jan 1, 2002 HP Esquire-LC Kit sold to Bruker US$, G1961A (230V version) through through and HP Esquire-LC Kit sold to Bruker US$, G1963A (208V version) through through and HP Gemini R&D Kit sold to Bruker US$ (fast pos/neg switching) [*](33) [*] [*] HP Gemini Kit sold to Bruker US$ (standard positive/negative switching) [*] [*] [*] Bruker Value Add Price to HP US$ [*] [*] [*] Bruker Value Add Price to HP US$ (fast pos/neg switching) [*] [*] [*] HP Price Paid to Bruker for Gemini Instrument US$ [*] [*] [*] HP Price Paid to Bruker for Gemini Instrument US$ [*] [*] [*] (with positive/negative switching) HP Gemini Ship Kit sold to Bruker US$ [*] [*] [*] HP Gemini Kit without source parts as given in Project Plan, sold to Bruker US$ for up to 10 Kits of such ind per year [*] [*] [*] HP APCI sold to Bruker US$ [*] [*] [*] HP Peptide Tools sold to Bruker sales outside US only, US$* [*] [*] [*] HP Deconvolution plus Peptide Tools sold to Bruker, sales inside US only, US$ [*] [*] [*] Bruker Nanoelectrospray sold to HP, DM [*] [*] [*] Sales of Bruker Software to HP and Sales of HP Software to Bruker, discount off list [*] [*] [*]
* This price may increase if/when HP increases the list price. The same formula that was used initially would apply (HPList - [*]) Bruker can sell the jointly developed deconvolution software outside of the United States, where no AOB license fee is due. In Europe and Asia-Pacific countries, Bruker may purchase from HP Peptide Tools bioanalysis software at the price specified in this appendix. In the United States by purchasing deconvolution and Peptide Tools from HP at the price specified in this appendix, Bruker obtains a licensed product for re-sale to its customers which includes the fee due to AOB. Spare Parts Pricing: The formula for pricing spare parts will be cost of material multiplied by [*]. - -------- (33) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. APPENDIX 4 PRICING OF ESQUIRE LC KIT, INSTRUMENT & APCI PRICES EFFECTIVE UNTIL INTRODUCTION OF GEMINI HP Esquire LC Kit sold to Bruker US$*, G1961A (230V version) [*](34) HP Esquire LC Kit sold to Bruker US$*, G1963A (208V version) [*] HP APCI sold to BFA US$**, G1962A [*] Price for purchases of the Esquire LC instrument by HP from Bruker will be the US list price less a discount of [*]. *The Price of the HP Esquire Kit sold to Bruker will decrease whenever Bruker decreases the US List price of the Esquire Instrument. The reduction of the Esquire Kit price will be the same percentage as the Esquire US List price is reduced. The current US List for the Esquire instrument is $179,000. **APCI pricing will be replaced with the APCI pricing for Gemini once Gemini starts shipping. Components of the Esquire-LC Kit: 1. API Source Inlet and electrospray source as developed for HP 1100 Series LC/MSD (spray chamber, nebulizer, integrated drying gas heater, sampling capillary, dual skimmer differential pumping stages, split octopole ion guide, and lens focusing optics, modified LC/MSD cast manifold - per current Bruker drawing, baffle, vacuum hoses and interconnection between pumps, and source covers). The ESI source is compatible for flow rates from 1 to 1000 uL/min. The system can also accept an APCI source (from HP, optional) or nanoelectrospray (from Bruker, optional). This product does not have an autocalibration system. 2. Pumping system as developed for LC/MSD (Edwards E1M18 rough pump, 250l/s split-flow drag-stage turbo pump, 70l/s drag-stage turbo pump; two turbo controllers. 3. Gas Flow Control Assembly as developed for LC/MSD (valves and manifold for the control of the nebulizer and drying gas flows, no electronics included. 4. Customized Octopole RF drive printed circuit assembly for split octopole ion guide. 5. License for production of multiply charged ions by electrospray on the ESQUIRE-LC (this does not include deconvolution software). 6. HP LC ChemStation software (G2170AA, (version A.06); HP spectral Evaluation module (G2180AA, version A.06). 7. Jet Direct Card 4100A. - ------- (34) [*] Indicates information has been omitted and separately filed with the Securities and Exchange Commission pursuant to an application for an order declaring confidential treatment thereof. EX-23.1 4 ex-23_1.txt EXHIBIT 23.1 Exhibit 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Selected Financial Data" and "Experts" and to the use of our reports dated March 11, 2000 and February 3, 2000, in Amendment No. 4 to the Registration Statement (Form S-1, No. 333-34820) and related Prospectus of Bruker Daltonics Inc. for the registration of 7,500,000 shares of its common stock. /s/ ERNST & YOUNG LLP Boston, Massachusetts July 12, 2000 EX-23.2 5 ex-23_2.txt EXHIBIT 23.2 Exhibit 23.2 CONSENT OF BDO INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Selected Financial Data" and "Experts" and to the use of our report dated April 6, 2000, in the Registration Statement (Form S-1) and related Prospectus of Bruker Daltonics Inc. for the registration of shares of its common stock. Bremen/Federal Republic of Germany July 13, 2000 BDO von Riegen, Lienau, Sucker & Partner GmbH Wirtschaftsprufungsgesellschaft /s/ Sucker /s/ Lienau Sucker Lienau Wirtschaftsprufer Wirtschaftsprufer
EX-24.1 6 ex-24_1.txt EXHIBIT 24.1 Exhibit 24.1 POWER OF ATTORNEY The undersigned does hereby constitute and appoint Frank H. Laukien and John Hulburt and each of them singly, his true and lawful attorney-in-fact and agent of the undersigned, to sign for the undersigned and in his name as a Director of Bruker Daltonics Inc., the Bruker Daltonics Inc. Registration Statement on Form S-1 and any and all pre-effective and post-effective amendments to said Registration Statement, and in connection with any registration of additional securities pursuant to Rule 462(b) under the Securities Act of 1933, to sign any abbreviated registration statement and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, in each case with the Securities and Exchange Commission, and generally to do all such things in his name and on his behalf in his capacities with the provisions of the Securities Act of 1933, as amended, and all requirements of the Securities and Exchange Commission. The power of attorney granted herein shall be deemed to be coupled with an interest and may be exercised by such attorney-in-fact to execute on behalf of the undersigned the applications, instruments, documents and certificates referred to above, which applications, instruments, documents and certificates shall be deemed to be authorized, valid and binding, and enforceable without further inquiry. Dated: July 6, 2000 /s/ M. Christopher Canavan, Jr. ---------------------------------- M. Christopher Canavan, Jr. -----END PRIVACY-ENHANCED MESSAGE-----