10-Q

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                              TO                             

Commission File Number 000-30833

Bruker Daltonics Inc.
(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation or organization) 04-3110160
(I.R.S. Employer
Identification Number)

15 Fortune Drive
Billerica, MA 01821
(Address of principal executive offices)

(978) 663-3660
(Registrant's telephone number, including area code)

        Check whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes ý    No o

        As of May 8, 2002 there were 54,896,831 shares of the Registrant's common stock outstanding.

		PAGE NUMBER
PART I	FINANCIAL INFORMATION
ITEM 1:	Financial Statements (Unaudited)
	Consolidated Condensed Balance Sheets as of March 31, 2002 and December 31, 2001	3
	Consolidated Condensed Statements of Operations for the three months ended March 31, 2002 and March 31, 2001	4
	Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2002 and March 31, 2001	5
	Notes to Consolidated Condensed Financial Statements	6
ITEM 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	8
ITEM 3:	Quantitative and Qualitative Disclosures of Market Risk	10
PART II	OTHER INFORMATION
ITEM 1:	Legal Proceedings	11
ITEM 2:	Changes in Securities and Use of Proceeds	11
ITEM 3:	Defaults Upon Senior Securities	11
ITEM 4:	Submission of Matters to a Vote of Security Shareholders	11
ITEM 5:	Other Information	11
ITEM 6:	Exhibits and Reports on Form 8-K	11
	SIGNATURES	12

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PART I    FINANCIAL INFORMATION

ITEM 1:    Financial Statements (Unaudited)

Bruker Daltonics Inc.

Consolidated Condensed Balance Sheets

(in thousands, except share and per share amounts)

		March 31, 2002		December 31, 2001
		(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents	$	6,743	$	8,381
	Short-term investments		60,060		61,750
	Accounts receivable, net		16,100		16,203
	Inventories		51,867		47,531
	Other assets		6,746		5,057
Total current assets			141,516		138,922
Property, plant and equipment, net			39,100		37,252
Intangible and other assets			13,187		12,900
Total assets		$	193,803	$	189,074
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Short-term bank borrowings	$	6,908	$	3,885
	Accounts payable and accrued expenses		16,617		15,727
	Other liabilities		20,535		19,710
Total current liabilities			44,060		39,322
Long-term debt			11,121		11,323
Other long term liabilities			10,739		10,882
Common stock, $0.01 par value, authorized 100,000,000 shares, issued and outstanding 54,889,136 in 2002 and 54,881,436 in 2001			549		549
Other stockholders' equity			127,334		126,998
Total stockholders' equity			127,883		127,547
Total liabilities and stockholders' equity		$	193,803	$	189,074

See accompanying notes.

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Bruker Daltonics Inc.

Consolidated Condensed Statements of Operations

(in thousands, except per share data)

(Unaudited)

		Three Months Ended March 31,
		2002		2001
Product revenues		$	25,674	$	21,742
Other revenues			109		166
	Net revenues		25,783		21,908
Costs and operating expenses:
	Cost of product revenue		12,075		10,433
	Selling, general and administrative		7,857		6,169
	Research and development		4,503		4,639
Total costs and operating expenses			24,435		21,241
Operating income			1,348		667
Interest and other income, net			220		945
Income before provision for income taxes			1,568		1,612
Provision for income taxes			627		667
Net income		$	941	$	945
Net income per share—basic and diluted		$	0.02	$	0.02

See accompanying notes.

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Bruker Daltonics Inc.

Consolidated Condensed Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2002			2001
Net cash used in operating activities	$	(3,210	)	$	(7,789	)
Investing activities
Purchases of property and equipment		(3,509	)		(3,197	)
Redemption of short-term investments		2,000			—
Purchase of short-term investments		(309	)		(1,145	)
Net cash used in investing activities		(1,818	)		(4,342	)
Financing activities
Proceeds from issuance of common stock		32			63
Proceeds from short-term borrowings		3,111			2,114
Advances from affiliated companies		247			1,130
Net cash provided by financing activities		3,390			3,307
Effect of exchange rate changes		—			(769	)
Net change in cash and cash equivalents		(1,638	)		(9,593	)
Cash and cash equivalents at beginning of period		8,381			21,735
Cash and cash equivalents at end of period	$	6,743		$	12,142

See accompanying notes.

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Bruker Daltonics Inc.

Notes to Consolidated Condensed 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 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, proteomics companies, academic institutions and government agencies.

        The financial statements represent the consolidated accounts of Bruker Daltonics Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated condensed financial statements as of March 31, 2002 and for the three months ended March 31, 2002 and 2001 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, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002.

        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.

        The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

        For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

2.    Inventories

        The components of inventories were as follows (in thousands):

	March 31, 2002		December 31, 2001
	(Unaudited)
Raw materials	$	15,087	$	13,790
Work-in-process		19,028		16,942
Finished goods		17,752		16,799
	$	51,867	$	47,531

3.    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

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number of shares which are assumed to be purchased by the Company from the resulting proceeds at the average market price during the period.

        The following table sets forth the computation of basic and diluted average shares outstanding for the periods indicated (in thousands):

	Three Months Ended March 31,
	2002	2001
Average shares outstanding—basic	54,883	54,783
Net effect of dilutive stock options—based on treasury stock method	272	533
Average shares outstanding—diluted	55,155	55,316

4.    Comprehensive Income (Loss)

        Total comprehensive income, consisting of net income and the change in the accumulated foreign currency translation adjustment, was $0.3 million for the three months ended March 31, 2002, and total comprehensive loss was $1.1 million for the three months ended March 31, 2001.

5.    Contingencies

        The Company's wholly-owned subsidiary, Bruker Daltonik GmbH, had a $2.2 million and $2.5 million accrued reserve at March 31, 2002 and December 31, 2001, respectively, related both to patent infringement litigation and possible cost overruns, attorneys' fees and liquidated damages related to an existing contract.

        During the third quarter of 2001, the Company accrued a $1.5 million reserve related to an existing contract within its substance detection and pathogen identification business. The reserve is for possible cost overruns, attorneys' fees and liquidated damages related to this contract. The Company intends to complete the contract and reach a reasonable settlement with the other party to the contract regarding the outstanding issues related to the contract. The Company believes it has an adequate reserve for these possible cost overruns, attorneys' fees and liquidated damages.

        Other lawsuits, claims and proceedings of a nature considered normal to its businesses may be pending from time to time against the Company. The Company believes the outcome of these proceedings, if any, will not have a material impact on the Company's financial position or results of operations.

        As of March 31, 2002, the Company had purchase commitments of approximately $12 million for the expansion of an existing facility in Germany and the construction of a new facility in the United States.

6.    New Accounting Pronouncements

        Effective January 1, 2002, the Company adopted the provisions of Financial Accounting Standards Board Statement Number ("FAS") 142 "Goodwill and Other Intangible Assets," FAS 144 "Accounting for the Impairment or Disposal of Long-lived Assets" and the remaining provisions of FAS 141 "Business Combinations." The adoption of these statements did not have a significant impact on the Company's financial statements.

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ITEM 2:    Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following discussion of our financial condition and results of operations should be read in conjunction with our interim condensed consolidated financial statements and the notes to those statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2001.

        Statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations which express that we "believe", "anticipate", "expect" or "plan to" as well as other statements which are not historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. Actual events or results may differ materially as a result of the risks and uncertainties described herein and elsewhere, including but not limited to, those factors discussed in "Factors Affecting Our Business, Operating Results and Financial Condition" set forth in our Annual Report on Form 10-K for the year ended December 31, 2001.

Results of Operations

Quarter Ended March 31, 2002 Compared to Quarter Ended March 31, 2001

        Product Revenue.    Total product revenue for the three months ended March 31, 2002 increased $3.9 million, or 18.1%, to $25.7 million compared to $21.7 million for the same period in 2001. Life science systems revenue, substance detection systems revenue and aftermarket revenue as a percentage of product revenue was 76%, 8% and 16%, respectively, in 2002 as compared to 70%, 8% and 22%, respectively, in 2001. The increase is related to continuing growth of all our life science product lines, with a stronger emphasis on our MALDI-TOF product line.

        Other Revenue.    Other revenue for the three months ended March 31, 2002 decreased $57,000, or 34.3%, to $109,000 compared to $166,000 for the same period in 2001. The change is due to the timing of receipts from various projects for early-stage research and development, which are currently funded by grants from the German government.

        Cost of Product Revenue.    Cost of product revenue for the three months ended March 31, 2002 increased $1.6 million, or 15.7%, to $12.1 million compared to $10.4 million for the same period in 2001. The cost of product revenue as a percentage of product revenue was 47.0% in 2002 as compared to 48.0% for the same period in 2001. The increase in overall cost of product revenue is due to an increase in product sales while the decrease in cost of product revenue as a percentage of product revenue relates to the product mix of sales directly to customers and through strategic alliances as well as an overall reduction in production costs of our newer products.

        Selling, General and Administrative.    Selling, general and administrative expenses for the three months ended March 31, 2002 increased $1.7 million, or 27.4%, to $7.9 million compared to $6.2 million for the same period in 2001. Selling, general and administrative expenses as a percentage of product revenues were 30.6% in 2002 and 28.3% for the same period in 2001. The increase relates to the addition of several new distribution subsidiaries established during 2001 that have not yet realized the full potential for sales in their geographic areas, but have incurred the normal selling, general and administrative costs associated with the first year of operations. The increase also is related to the costs incurred during 2002 associated with several business development projects currently under evaluation.

        Research and Development.    Research and development expenses for the three months ended March 31, 2002 decreased $136,000, or 2.9%, to $4.5 million compared to $4.6 million for the same period in 2001. As a percentage of product revenues, research and development expenses were 17.5%

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in 2002 compared to 21.3% for the same period in 2001. The decrease relates to the completion of certain new development projects that have now become a part of our existing product line.

        Interest and Other Income, Net.    Interest and other income, net for the three months ended March 31, 2002 was $220,000, compared to $945,000 for the same period in 2001. The difference relates to the lower interest earned on our short-term investments during the quarter.

Liquidity and Capital Resources

        Presently, we anticipate that our existing capital resources will meet our operating and investing needs through at least the end of 2002. Historically, we have financed our growth through a combination of cash provided from operations, debt financing and issuance of common stock. During the three months ended March 31, 2002, net cash used in operating activities was $3.2 million, which represents a decrease in net cash used in operating activities as compared to the same period in 2001 and is primarily a result of more efficient management of our current assets and liabilities.

        We used $3.5 million of cash during the three months ended March 31, 2002 for capital expenditures, which was principally related to expenditures for the expansion of our existing facility in Germany and the construction of a new production facility in the United States. The Company expects that capital expenditures related to the new facilities in 2002 will be approximately $12.0 million and total capital expenditures for the year will be approximately $17.0 million. Such capital expenditures are being made principally 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.

        In October 2001, we entered into a revolving line of credit with Citizens Bank in the United States in the amount of $2.5 million. This line, which is secured by portions of our inventory, receivables and equipment in the United States, may be used to support working capital and expires on July 31, 2002. We also maintain revolving lines of credit of approximately $6.7 million with German banks. As of March 31, 2002, there was approximately $6.0 million outstanding on these lines. Our German lines of credit are unsecured. During the first half of 2001, we entered into a revolving line of credit for approximately $1.2 million with a Japanese bank. As of March 31, 2002, there was approximately $1.0 million outstanding on the line. This line of credit is unsecured.

        We have three long-term notes payable with outstanding balances aggregating $11.1 million as of March 31, 2002. One note ($4.4 million), with an interest rate of 5.10%, is payable in full in 2003. The other two notes ($6.7 million in the aggregate) have an interest rate of 4.65% and are payable in full in 2008. Interest is due monthly, and all obligations are collateralized by the land and buildings of Bruker Daltonik GmbH.

        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, competition and technological developments in the market.

Inflation

        We do not believe inflation has had a material impact on our business or operating results during the periods presented.

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. Historically, our realized

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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.

ITEM 3:    Quantitative and Qualitative Disclosures About Market Risk

        Part of the information called for by this item is provided under the caption "Liquidity and Capital Resources" and "Impact of Foreign Currencies" under Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.

        The Company does not use derivative financial instruments for trading or speculative purposes. However, the Company regularly invests excess cash in overnight repurchase agreements and interest-bearing investment-grade securities that we hold for the duration of the term of the respective instrument and are subject to changes in short-term interest rates. The Company believes that the market risk arising from holding these financial instruments is minimal.

        The Company's exposure to market risks associated with changes in interest rates relates primarily to the increase or decrease in the amount of interest income earned on its investment portfolio since the Company's long-term debt has a fixed rate. The Company ensures the safety and preservation of invested funds by limiting default risks, market risk and reinvestment risk. The Company mitigates default risk by investing in investment grade securities. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of the Company's interest sensitive financial instruments at March 31, 2002. Declines in interest rates over time will, however, reduce the Company's interest income.

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PART II    OTHER INFORMATION

ITEM 1:    Legal Proceedings

General

        The Company may, from time to time, be involved in legal proceedings in the ordinary course of business. The Company is not currently involved in any pending legal proceedings that, either individually or taken as a whole, could materially harm our business, prospects, results of operations or financial condition. No such arbitrations or lawsuits have been threatened.

ITEM 2:    Changes in Securities and Use of Proceeds

        On August 3, 2000, the Securities and Exchange Commission declared effective our registration statement on Form S-1 (No. 333-34820) pursuant to which we offered and sold 9,200,000 shares of our common stock. We have used a portion of the net proceeds of the offering to fund our continuing research and development activities and for working capital and other general corporate purposes. Additionally, we have used approximately $7.0 million of the net proceeds to pay off a portion of our outstanding bank debt.

ITEM 3:    Defaults Upon Senior Securities

        None.

ITEM 4:    Submission of Matters to a Vote of Security Holders

        None.

ITEM 5:    Other Information

        None.

ITEM 6:    Exhibits and Reports on Form 8-K

(a)

Exhibits.

10.1 Amended and Restated 2000 Stock Option Plan

(b)

Current Reports on Form 8-K.

We did not file any reports on Form 8-K during the quarter ended March 31, 2002.

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BRUKER DALTONICS INC.
Date: May 10, 2002	By:	/s/  FRANK H. LAUKIEN, PH.D. Frank H. Laukien, Ph.D. President, Chairman, Chief Executive Officer, and Director (Principal Executive Officer)
Date: May 10, 2002	By:	/s/  JOHN J. HULBURT, CPA John J. Hulburt, CPA Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

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QuickLinks

Bruker Daltonics Inc. Consolidated Condensed Balance Sheets (in thousands, except share and per share amounts)
Bruker Daltonics Inc. Consolidated Condensed Statements of Operations (in thousands, except per share data) (Unaudited)
Bruker Daltonics Inc. Consolidated Condensed Statements of Cash Flows (in thousands) (Unaudited)
Bruker Daltonics Inc. Notes to Consolidated Condensed Financial Statements
SIGNATURES

EX-10.1

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Exhibit 10.1

BRUKER DALTONICS INC.
AMENDED AND RESTATED
2000 STOCK OPTION PLAN

        1.    Purpose of the Plan.

        This stock option plan (the "2000 Stock Option Plan") is intended to encourage ownership of the stock of Bruker Daltonics Inc. (the "Company") by management, employees, directors, consultants and advisors ("Optionees") of the Company and its subsidiaries, to induce qualified personnel to enter and remain in the employ of the Company or its subsidiaries and otherwise to provide additional incentive for Optionees to promote the success of its business.

        2.    Stock Subject to the 2000 Stock Option Plan.

        (a)  The total number of shares of the authorized but unissued or Treasury shares of the common stock, $.01 par value, of the Company ("Common Stock") for which options may be granted under the 2000 Stock Option Plan shall not exceed two million two hundred twenty thousand (2,220,000) shares, corresponding to four percent (4%) of the issued and outstanding shares of Common Stock after the completion of the Company's initial public offering, subject to adjustment as provided in Section 12 hereof.

        (b)  If an option granted hereunder shall expire or terminate for any reason without having vested fully or having been exercised in full, the unvested and/or unpurchased shares subject thereto shall again be available for subsequent option grants under the 2000 Stock Option Plan.

        (c)  Stock issuable upon exercise of an option granted under the 2000 Stock Option Plan may be subject to such restrictions on transfer, repurchase rights (but not to exceed 20% of the stock issuable upon exercise of options granted under the 2000 Stock Option Plan) or other restrictions as shall be determined by the Board of Directors of the Company (the "Board").

        (d)  Notwithstanding any other provision of this Plan to the contrary, the Compensation Committee of the Board shall have the right, in its sole discretion, to allocate and grant up to twenty percent (20%) of the Common Stock authorized to be granted as options hereunder as restricted stock to employees of the Company on such terms and conditions and pursuant to such restricted stock agreements as the Compensation Committee, in its discretion, shall deem appropriate.

        3.    Administration of the 2000 Stock Option Plan.

        The 2000 Stock Option Plan shall be administered by the Board or a Stock Option Committee (the "Compensation Committee") consisting of two or more persons appointed to such Compensation Committee from time to time by the Board; provided, however, that (i) to the extent necessary in order to permit officers and directors of the Company to be exempt from the provisions of Section 16(b) of the 1934 Act with respect to transactions pursuant to the 2000 Stock Option Plan, each of such persons shall be a "Non-Employee Director" within the meaning of Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "1934 Act") and (ii) if such qualification is deemed necessary in order for the grant or exercise of awards made under the 2000 Stock Option Plan to qualify for any tax or other material benefit to participants of the Company under applicable regulations under Section 162(m) of the Code, each of such persons shall be an "outside director" (as defined in applicable regulations thereunder). The term "Compensation Committee" shall, for all purposes of the 2000 Stock Option Plan be deemed to refer to the Board if the Board is administering the 2000 Stock Option Plan. If the 2000 Stock Option Plan is administered by a Compensation Committee, the Compensation Committee shall from time to time

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select a Chairman from among its members and shall adopt such rules and regulations as it shall deem appropriate concerning the holding of meetings and the administration of the 2000 Stock Option Plan. A majority of the entire Compensation Committee shall constitute a quorum and the actions of a majority of the members of the Compensation Committee present at a meeting at which a quorum is present, or actions approved in writing by all of the members of the Compensation Committee, shall be the actions of the Compensation Committee; provided, however, that if the Compensation Committee consists of only two members, both shall be required to constitute a quorum and to act at a meeting or to approve actions in writing. Except as otherwise expressly provided in the 2000 Stock Option Plan, the Compensation Committee shall have all powers with respect to the administration of the 2000 Stock Option Plan, including, without limitation, full power and authority to interpret the provisions of the 2000 Stock Option Plan and any option agreement grated hereunder, and to resolve all questions arising under the 2000 Stock Option Plan. All decisions of the Compensation Committee shall be conclusive and binding on all participants in the 2000 Stock Option Plan.

        4.    Type of Options.

        Options granted pursuant to the 2000 Stock Option Plan shall be authorized by action of the Compensation Committee and may be designated as either incentive stock options meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified options which are not intended to meet the requirements of such Section 422 of the Code, the designation to be in the sole discretion of the Compensation Committee. The 2000 Stock Option Plan shall be administered by the Compensation Committee in such manner as to permit options granted as incentive stock options to qualify as incentive stock options under the Code.

        5.    Eligibility.

        (a)  As required by U.S. law, incentive stock options shall only be granted to Optionees who are employees. As a result, options designated as incentive stock options shall, subject to the limitation on amounts of more than 10% of the combined voting power of the Company as designated in Section 5(e), be granted only to key employees (including officers and directors who are also employees) of the Company or any of its subsidiaries, including subsidiaries which become such after adoption of the 2000 Stock Option Plan.

        (b)  The law permits more flexibility for the grant of non-qualified stock options. Accordingly, options designated as non-qualified options may be granted to officers, employees, consultants, advisors and directors of the Company or of any of its subsidiaries, including subsidiaries which become such after adoption of the 2000 Stock Option Plan.

        (c)  As used herein, "subsidiary" or "subsidiaries" shall be as defined in Section 424 of the Code and the Treasury Regulations promulgated thereunder (the "Regulations").

        (d)  The Compensation Committee shall, from time to time, at its sole discretion, select from such eligible persons those to whom options shall be granted and shall determine the number of shares to be subject to each option. In determining the eligibility of a person to be granted an option, as well as in determining the number of shares to be granted to any person, the Compensation Committee in its sole discretion shall take into account the position and responsibilities of the person being considered, the nature and value to the Company or its subsidiaries of his or her service and accomplishments, his or her present and potential contribution to the success of the Company or its subsidiaries, and such other factors as the Compensation Committee may deem relevant.

        (e)  As required by law, no option designated as an incentive stock option shall be granted to any employee of the Company or any subsidiary if such employee owns, immediately prior to the grant of an option, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of a parent or a subsidiary, unless the purchase price for the stock under such option shall be at least 110% of its fair market value at the time such option is granted and the option, by its

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terms, shall not be exercisable more than five years from the date it is granted. In determining the stock ownership under this paragraph, the provisions of Section 424(d) of the Code shall be controlling.

        (f)    In determining the fair market value under this paragraph, the provisions of Section 7 hereof shall apply.

        (g)  Subject to the provisions of Section 12 relating to adjustments upon changes in the shares of Common Stock, no employee shall be eligible to be granted Options covering more than 100,000 shares of Common Stock during any calendar year.

        6.    Option Agreement.

        Each option shall be evidenced by an option agreement (the "Agreement") duly executed on behalf of the Company and by the Optionee to whom such option is granted, which Agreement shall comply with and be subject to the terms and conditions of the 2000 Stock Option Plan. The Agreement may contain such other terms, provisions and conditions which are not inconsistent with the 2000 Stock Option Plan as may be determined by the Compensation Committee; provided that (a) options designated as incentive stock options shall meet all of the conditions for incentive stock options as defined in Section 422 of the Code; (b) the vesting schedule contained in the form of incentive stock option agreement approved by the Board shall not be altered by the Compensation Committee for any grant of an incentive stock option; and (c) the vesting schedule contained in the form of non-qualified stock option agreement approved by the Board shall be the recommended vesting schedule for the grant of non-qualified stock options by the Compensation Committee but may be altered by the Compensation Committee. The date of grant of an option shall be as determined by the Compensation Committee. More than one option may be granted to an individual.

        7.    Option Price.

        The option price or prices of shares of the Company's Common Stock for options designated as non-qualified stock options shall be as determined by the Compensation Committee, but in no event shall the option price of a non-qualified stock option be less than 50% of the fair market value of such Common Stock at the time the option is granted, as determined by the Compensation Committee. The option price or prices of shares of the Company's Common Stock for incentive stock options shall be not less than the fair market value of such Common Stock at the time the option is granted as determined by the Compensation Committee in accordance with the Regulations promulgated under Section 422 of the Code. If such shares are then listed on any national securities exchange, the fair market value shall be the mean between the high and low sales prices, if any, on the largest such exchange on the date of the grant of the option or, if none, shall be determined by taking a weighted average of the means between the highest and lowest sales prices on the nearest date before and the nearest date after the date of grant in accordance with Treasury Regulations Section 25.2512-2. If the shares are not then listed on any such exchange, the fair market value of such shares shall be the mean between the high and low sales prices, if any, as reported in the National Association of Securities Dealers Automated Quotation National Market ("NASDAQ/NM") for the date of the grant of the option, or, if none, shall be determined by taking a weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the date of grant in accordance with Treasury Regulations Section 25.2512-2. If the shares are not then either listed on any such exchange or quoted in NASDAQ/NM, the fair market value shall be the mean between the average of the "Bid" and the average of the "Ask" prices, if any, as reported in the National Daily Quotation Service for the date of the grant of the option, or, if none, shall be determined by taking a weighted average of the means between the highest and lowest sales prices on the nearest date before and the nearest date after the date of grant in accordance with Treasury Regulations Section 25.2512-2. If the fair market value cannot be determined under the preceding three sentences, it shall be determined in good faith by the Compensation Committee.

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        8.    Manner of Payment; Manner of Exercise.

        (a)  Options granted under the 2000 Stock Option Plan may provide for the payment of the exercise price, as determined by the Compensation Committee and as set forth in the Option Agreement, by delivery of (i) cash or a check payable to the order of the Company in an amount equal to the exercise price of such options, (ii) shares of Common Stock of the Company owned by the optionee having a fair market value equal in amount to the exercise price of the options being exercised, (iii) any combination of (i) and (ii), provided, however, that payment of the exercise price by delivery of shares of Common Stock of the Company owned by such optionee may be made only if such payment does not result in a charge to earnings for financial accounting purposes as determined by the Compensation Committee or (iv) payment may also be made by delivery of a properly executed exercise notice to the Company, together with a copy of irrevocable instruments to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate clause (iv) above, the Company may enter into agreements for coordinated procedures with one or more brokerage firms.

        (b)  To the extent that the right to purchase shares under an option has accrued and is in effect, options may be exercised in full at one time or in part from time to time, by giving written notice, signed by the Optionee exercising the option, to the Company, stating the number of shares with respect to which the option is being exercised, accompanied by payment in full for such shares as provided in subparagraph (a) above. Upon such exercise, delivery of a certificate for paid-up non-assessable shares shall be made at the principal office of the Company to the Optionee exercising the option at such time, during ordinary business hours, not more than thirty (30) days from the date of receipt of the notice by the Company, as shall be designated in such notice, or at such time, place and manner as may be agreed upon by the Company and the person or persons exercising the option. Upon exercise of the option and payment as provided above, the Optionee shall become a shareholder of the Company as to the Shares acquired upon such exercise.

        9.    Exercise of Options.

        Each option granted under the 2000 Stock Option Plan shall, subject to Section 6, Section 10(b) and Section 12 hereof, be exercisable at such time or times and during such period as determined by the Compensation Committee which shall be set forth in the Agreement; provided, however, that no option granted under the 2000 Stock Option Plan shall have a term in excess of ten (10) years from the date of grant.

        To the extent that an option to purchase shares is not exercised by an Optionee when it becomes initially exercisable, it shall not expire but shall be carried forward and shall be exercisable, on a cumulative basis, until the expiration of the exercise period. No partial exercise may be made for less than fifty (50) full shares of Common Stock.

        Notwithstanding the foregoing, the Compensation Committee may in its discretion accelerate the exerciseability of any option subject to such terms and conditions as the Compensation Committee deems necessary and appropriate.

        10.    Term of Options; Exerciseability.

        (a)  Term.

        (1)  Each option shall expire not more than ten (10) years from the date of the granting thereof, but shall be subject to earlier termination as herein provided.

        (2)  Except as otherwise provided in this Section 10, an option granted to any employee who ceases to be an employee of the Company, or an option granted to any other Optionee who ceases to have the same relationship with the Company or one of its subsidiaries which was in effect on the date the option was granted, shall terminate immediately on the date such

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Optionee ceases to be an employee, or ceases to have such relationship with the Company or one of its subsidiaries, or on the date on which the option expires by its terms, whichever occurs first.

        (3)  If such termination of employment or relationship is because the Optionee has become permanently disabled (within the meaning of Section 22(e)(3) of the Code), such option shall terminate thirty (30) days after the date such Optionee ceases to be an employee or to have such relationship, or on the date on which the option expires by its terms, whichever occurs first.

        (4)  In the event of the death of any Optionee, any option granted to such Optionee shall terminate ninety (90) days after the date of death, or on the date on which the option expires by its terms, whichever occurs first.

        (5)  Notwithstanding subparagraphs (2), (3) and (4) above, the Compensation Committee shall have the authority to extend the expiration date of any outstanding option in circumstances in which it deems such action to be appropriate, provided that no such extension shall extend the term of an option beyond the date on which the option would have expired if no termination of the Optionee's employment or relationship with the Company or its subsidiary had occurred.

        (b)  Exerciseability.    An option granted to an Optionee who ceases to be an employee, or ceases to have the same relationship with the Company or one of its subsidiaries which was in existence on the date the option was granted shall be exercisable only to the extent that the right to purchase shares under such option has accrued and is in effect on the date such Optionee ceases to be an employee, or ceases to have such relationship with the Company or one of its subsidiaries.

        11.    Options Not Transferable.

        The right of any Optionee to exercise any option granted to him or her shall not be assignable or transferable by such Optionee otherwise than by will or the laws of descent and distribution, and any such option shall be exercisable during the lifetime of such Optionee only by him or her. Any option granted under the 2000 Stock Option Plan shall be null and void and without effect upon the bankruptcy of the Optionee to whom the option is granted, or upon any attempted assignment or transfer, except as herein provided, including without limitation any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition, attachment, divorce, trustee process or similar process, whether legal or equitable, upon such option.

        12.    Recapitalizations, Reorganizations and the Like.

        (a)  In the event that the outstanding shares of the Common Stock of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination of shares, or dividends payable in capital stock, appropriate adjustment shall be made in the number and kind of shares as to which options may be granted under the 2000 Stock Option Plan and as to which outstanding options or portions thereof then unexercised shall be exercisable, to the end that the proportionate interest of the Optionee shall be maintained as before the occurrence of such event; such adjustment in outstanding options shall be made without change in the total price applicable to the unexercised portion of such options and with a corresponding adjustment in the option price per share.

        (b)  In addition, unless otherwise determined by the Board in its sole discretion, in the case of any (i) sale or conveyance to another entity of all or substantially all of the property and assets of the Company, including, without limitation, by way of merger or consolidation, or (ii) Change in

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Control (as hereinafter defined) of the Company, the purchaser(s) of the Company's assets or stock may, in his, her or its discretion, deliver to the Optionee the same kind of consideration that is delivered to the shareholders of the Company as a result of such sale, conveyance or Change in Control, or the Board may cancel all outstanding options in exchange for consideration in cash or in kind which consideration in both cases shall be equal in value to the value of those shares of stock or other securities the Optionee would have received had the option been exercised (to the extent then exercisable) and no disposition of the shares acquired upon such exercise been made prior to such sale, conveyance or Change in Control, less the option price therefor. Upon receipt of such consideration by the Optionee, his or her option shall immediately terminate and be of no further force and effect. The value of the stock or other securities the Optionee would have received if the option had been exercised shall be determined in good faith by the Board, and in the case of shares of the Common Stock of the Company, in accordance with the provisions of Section 7 hereof. The Board shall also have the power and right to accelerate the exerciseability of any options, notwithstanding any limitations in this 2000 Stock Option Plan or in the Agreement upon such a sale, conveyance or Change in Control. Upon such acceleration, any options or portion thereof originally designated as incentive stock options that no longer qualify as incentive stock options under Section 422 of the Code as a result of such acceleration shall be redesignated as non-qualified stock options. A "Change in Control" shall be deemed to have occurred if any person, or any two or more persons acting as a group, and all affiliates of such person or persons, who prior to such time owned less than twenty percent (20%) of the then outstanding Common Stock of the Company, shall acquire, whether by purchase, exchange, tender offer, merger, consolidation or otherwise, such additional shares of the Company's Common Stock in one or more transactions, or series of transactions, such that following such transaction or transactions, such person or group and affiliates beneficially own at least fifty percent (50%) of the Company's Common Stock outstanding.

        (c)  Upon dissolution or liquidation of the Company, all options granted under this 2000 Stock Option Plan shall terminate, but each Optionee (if at such time in the employ of or otherwise associated with the Company or any of its subsidiaries) shall have the right, immediately prior to such dissolution or liquidation, to exercise his or her option to the extent then exercisable.

        (d)  No fraction of a share shall be purchasable or deliverable upon the exercise of any option, but in the event any adjustment hereunder of the number of shares covered by the option shall cause such number to include a fraction of a share, such fraction shall be adjusted to the nearest smaller whole number of shares.

        13.    No Special Employment or Other Rights.

        Nothing contained in the 2000 Stock Option Plan or in any option granted under the Plan shall confer upon any Optionee right with respect to the continuation of his or her employment or other relationship by the Company (or any subsidiary) or interfere in any way with the right of the Company (or any subsidiary), subject to the terms of any separate employment or other agreement, at any time to terminate such employment or other relationship or to increase or decrease the compensation of the option holder from the rate in existence at the time of the grant of an option. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment or another relationship shall be determined by the Compensation Committee at the time.

        14.    Withholding.

        The Company's obligation to deliver shares upon the exercise of any option granted under the 2000 Stock Option Plan and any payments or transfers under Section 12 hereof shall be subject to the Optionee's satisfaction of all applicable Federal, state and local income, excise, employment and any other tax withholding requirements. All non-U.S. Optionees must pay all applicable employee and

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employers wage and other withholding taxes in advance of receiving shares upon exercise of any vested option.

        15.    Restrictions on Issue of Shares.

        (a)  Notwithstanding the provisions of Section 8, the Company may delay the issuance of shares covered by the exercise of an option and the delivery of a certificate for such shares until one of the following conditions shall be satisfied:

        (i)    The shares with respect to which such option has been exercised are at the time of the issue of such shares effectively registered or qualified under applicable Federal and state securities acts now in force or as hereafter amended; or

        (ii)  Counsel for the Company shall have given an opinion, which opinion shall not be unreasonably conditioned or withheld, that such shares are exempt from registration and qualification under applicable Federal and state securities acts now in force or as hereafter amended.

        (b)  It is intended that all exercises of options shall be effective, and the Company shall use its best efforts to bring about compliance with the above conditions within a reasonable time, except that the Company shall be under no obligation to qualify shares or to cause a registration statement or a post-effective amendment to any registration statement to be prepared for the purpose of covering the issue of shares in respect of which any option may be exercised, except as otherwise agreed to by the Company in writing.

        16.    Purchase for Investment; Rights of Holder on Subsequent Registration.

        Unless the shares to be issued upon exercise of an option granted under the 2000 Stock Option Plan have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended, the Company shall be under no obligation to issue any shares covered by any option unless the Optionee, in whole or in part, shall give a written representation and undertaking to the Company which is satisfactory in form and scope to counsel for the Company and upon which, in the opinion of such counsel, the Company may reasonably rely, that he or she is acquiring the shares issued pursuant to such exercise of the option for his or her own account as an investment and not with a view to, or for sale in connection with, the distribution of any such shares, and that he or she will make no transfer of the same except in compliance with any rules and regulations in force at the time of such transfer under the Securities Act of 1933, or any other applicable law, and that if shares are issued without such registration, a legend to this effect may be endorsed upon the securities so issued. In the event that the Company shall, nevertheless, deem it necessary or desirable to register under the Securities Act of 1933 or other applicable statutes any shares with respect to which an option shall have been exercised, or to qualify any such shares for exemption from the Securities Act of 1933 or other applicable statutes, then the Company may take such action and may require from each Optionee such information in writing for use in any registration statement, supplementary registration statement, prospectus, preliminary prospectus or offering circular as is reasonably necessary for such purpose and may require reasonable indemnity to the Company and its officers and directors and controlling persons from such holder against all losses, claims, damages and liabilities arising from such use of the information so furnished and caused by any untrue statement of any material fact therein or caused by the omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made.

        17.    Modification of Outstanding Options.

        The Board may authorize the amendment of any outstanding option with the consent of the Optionee when and subject to such conditions as are deemed to be in the best interests of the Company and in accordance with the purposes of this 2000 Stock Option Plan.

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        18.    Approval of Stockholders.

        The 2000 Stock Option Plan shall be subject to approval by the vote of stockholders holding at least a majority of the voting stock of the Company present, or represented, and entitled to vote at a duly held stockholders' meeting, or by written consent of the stockholders as provided for under applicable state law, within twelve (12) months after the adoption of the 2000 Stock Option Plan by the Board of Directors and shall take effect as of the date of adoption by the Board of Directors upon such approval. The Compensation Committee may grant options under the 2000 Stock Option Plan prior to such approval, but any such option shall become effective as of the date of grant only upon such approval and, accordingly, no such option may be exercisable prior to such approval.

        19.    Termination and Amendment.

        Unless sooner terminated as herein provided, the 2000 Stock Option Plan shall terminate ten (10) years from the date upon which the 2000 Stock Option Plan was duly adopted by the Board. The Board may at any time terminate the 2000 Stock Option Plan or make such modification or amendment thereof as it deems advisable; provided, however, that except as provided in this Section 20, the Board may not, without the approval of the stockholders of the Company obtained in the manner stated in Section 19, increase the maximum number of shares for which options may be granted or change the designation of the class of persons eligible to receive options under the 2000 Stock Option Plan, or make any other change in the 2000 Stock Option Plan which requires stockholder approval under applicable law or regulations.

        20.    Reservation of Stock.

        The Company shall at all times during the term of the 2000 Stock Option Plan reserve and keep available such number of shares of stock as will be sufficient to satisfy the requirements of the 2000 Stock Option Plan and shall pay all fees and expenses necessarily incurred by the Company in connection therewith.

        21.    Limitation of Rights in the Option Shares.

        An Optionee shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the options except to the extent that the option shall have been exercised with respect thereto and, in addition, a certificate shall have been issued theretofore and delivered to the Optionee.

        22.    Notices.

        Any communication or notice required or permitted to be given under the 2000 Stock Option Plan shall be in writing, and mailed by registered or certified mail or delivered by hand, if to the Company, to its principal place of business, attention: Treasurer, and, if to an Optionee, to the address as appearing on the records of the Company.

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BRUKER DALTONICS INC. AMENDED AND RESTATED 2000 STOCK OPTION PLAN