-----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, RMDFMiPMog6N1plrFNpoIBq2Y3eiF8rs6P/LTPlLbFJcsjbjKHv9prKgy+ptMJeY PsvkKqDbjl1D4jHfzgeofw== 0001193125-06-232148.txt : 20061113 0001193125-06-232148.hdr.sgml : 20061110 20061113110625 ACCESSION NUMBER: 0001193125-06-232148 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20061001 FILED AS OF DATE: 20061113 DATE AS OF CHANGE: 20061113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERKINELMER INC CENTRAL INDEX KEY: 0000031791 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 042052042 STATE OF INCORPORATION: MA FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05075 FILM NUMBER: 061206401 BUSINESS ADDRESS: STREET 1: 45 WILLIAM ST CITY: WELLESLEY STATE: MA ZIP: 02481 BUSINESS PHONE: 7814314131 MAIL ADDRESS: STREET 1: 45 WILLIAM ST CITY: WELLESLEY STATE: MA ZIP: 02481 FORMER COMPANY: FORMER CONFORMED NAME: EG&G INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: EDGERTON GERMESHAUSEN & GRIER INC DATE OF NAME CHANGE: 19670626 10-Q 1 d10q.htm FORM 10-Q FORM 10-Q
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q

 


(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2006

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-5075

PerkinElmer, Inc.

(Exact name of Registrant as specified in its Charter)

 

Massachusetts   04-2052042
(State of incorporation)   (I.R.S. Employer Identification No.)

45 William Street

Wellesley, Massachusetts 02481

(Address of principal executive offices)

(781) 237-5100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.    Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer  þ            Accelerated filer  ¨            Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

As of November 6, 2006, there were outstanding 122,969,013 shares of common stock, $1 par value per share.

 



Table of Contents

TABLE OF CONTENTS

 

          Page
   PART I. FINANCIAL INFORMATION   

Item 1.

  

Financial Statements

   3
  

Condensed Consolidated Income Statements

   3
  

Condensed Consolidated Balance Sheets

   4
  

Condensed Consolidated Statements of Cash Flows

   5
  

Notes to Condensed Consolidated Financial Statements

   6

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   24
  

Overview

   24
  

Recent Developments

   24
  

Critical Accounting Policies and Estimates

   26
  

Consolidated Results of Continuing Operations

   26
  

Reporting Segment Results of Continuing Operations

   34
  

Liquidity and Capital Resources

   36
  

Off-Balance Sheet Arrangements

   38
  

Dividends

   38
  

Effects of Recently Adopted Accounting Pronouncements

   38
  

Effects of Recently Issued Accounting Pronouncements

   39

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

   40

Item 4.

  

Controls and Procedures

   40
   PART II. OTHER INFORMATION   

Item 1.

  

Legal Proceedings

   42

Item 1A.

  

Risk Factors

   42

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

   47

Item 6.

  

Exhibits

   48

Signatures

   49

Exhibit Index

   50

 

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PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

PERKINELMER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

(Unaudited)

 

    Three Months Ended     Nine Months Ended  
    October 1,
2006
    October 2,
2005
    October 1,
2006
    October 2,
2005
 
   

(In thousands, except

per share data)

   

(In thousands, except

per share data)

 

Sales

  $ 386,917     $ 359,982     $ 1,119,372     $ 1,086,173  

Cost of sales

    230,976       209,700       670,155       636,479  

Selling, general and administrative expenses

    94,664       87,900       277,172       277,437  

Research and development expenses

    24,762       21,676       72,640       66,349  

Restructuring and integration (reversals) charges, net

    —         —         (290 )     14,245  

Gains on dispositions, net

    —         (461 )     (1,505 )     (64 )

In-process research and development charge

    —         —         —         194  
                               

Operating income from continuing operations

    36,515       41,167       101,200       91,533  

Interest expense (income), net

    233       6,397       (965 )     20,684  

Extinguishment of debt

    —         —         —         6,210  

(Gains) losses on dispositions of investments and other, net

    (456 )     (349 )     2,383       (5,342 )
                               

Interest and other (income) expense, net

    (223 )     6,048       1,418       21,552  
                               

Income from continuing operations before income taxes

    36,738       35,119       99,782       69,981  

Provision for (benefit from) income taxes

    7,823       8,650       22,527       (2,652 )
                               

Income from continuing operations

    28,915       26,469       77,255       72,633  

Income (loss) from discontinued operations, net of income taxes

    —         5,176       (1,025 )     12,464  

Gain (loss) on disposition of discontinued operations, net of income taxes

    838       188       1,625       (4,537 )
                               

Net income

  $ 29,753     $ 31,833     $ 77,855     $ 80,560  
                               

Basic earnings (loss) per share:

       

Continuing operations

  $ 0.23     $ 0.20     $ 0.61     $ 0.56  

Income (loss) from discontinued operations, net of income taxes

    —         0.04       (0.01 )     0.10  

Gain (loss) on disposition of discontinued operations, net of income taxes

    0.01       —         0.01       (0.04 )
                               

Net income

  $ 0.24     $ 0.25     $ 0.62     $ 0.62  
                               

Diluted earnings (loss) per share:

       

Continuing operations

  $ 0.23     $ 0.20     $ 0.61     $ 0.55  

Income (loss) from discontinued operations, net of income taxes

    —         0.04       (0.01 )     0.10  

Gain (loss) on disposition of discontinued operations, net of income taxes

    0.01       —         0.01       (0.03 )
                               

Net income

  $ 0.24     $ 0.24     $ 0.61     $ 0.62  
                               

Weighted average shares of common stock outstanding:

       

Basic

    124,277       129,543       126,105       129,135  

Diluted

    125,171       131,291       127,429       131,021  

Cash dividends per common share

  $ 0.07     $ 0.07     $ 0.21     $ 0.21  

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.

 

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PERKINELMER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

    

October 1,

2006

    January 1,
2006
 
     (In thousands, except share
and per share data)
 

Current assets:

    

Cash and cash equivalents

   $ 207,074     $ 502,264  

Accounts receivable, net

     253,189       250,844  

Inventories

     182,124       163,150  

Other current assets

     72,745       71,189  

Current assets of discontinued operations

     1,090       11,442  
                

Total current assets

     716,222       998,889  
                

Property, plant and equipment:

    

At cost

     517,611       484,453  

Accumulated depreciation

     (336,026 )     (307,084 )
                

Property, plant and equipment, net

     181,585       177,369  

Marketable securities and investments

     7,531       9,222  

Intangible assets, net

     412,017       375,419  

Goodwill

     1,102,232       1,026,201  

Other assets

     80,028       90,156  

Long-term assets of discontinued operations

     1,654       16,205  
                

Total assets

   $ 2,501,269     $ 2,693,461  
                

Current liabilities:

    

Short-term debt

   $ 1,142     $ 1,131  

Accounts payable

     142,644       146,971  

Accrued restructuring costs and integration costs

     8,607       11,242  

Accrued expenses

     278,969       324,954  

Current liabilities of discontinued operations

     909       10,241  
                

Total current liabilities

     432,271       494,539  
                

Long-term debt

     201,133       243,282  

Long-term liabilities

     311,218       303,687  

Long-term liabilities of discontinued operations

     —         1,440  
                

Total liabilities

     944,622       1,042,948  
                

Commitments and contingencies

    

Stockholders’ equity:

    

Preferred stock—$1 par value per share, authorized 1,000,000 shares; none issued or outstanding

     —         —    

Common stock—$1 par value per share, authorized 300,000,000 shares; issued and outstanding 122,919,000 and 130,109,000 at October 1, 2006 and January 1, 2006, respectively

     122,919       130,109  

Capital in excess of par value

     400,006       556,728  

Unearned compensation

     —         (6,372 )

Retained earnings

     1,007,088       964,690  

Accumulated other comprehensive income

     26,634       5,358  
                

Total stockholders’ equity

     1,556,647       1,650,513  
                

Total liabilities and stockholders’ equity

   $ 2,501,269     $ 2,693,461  
                

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.

 

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PERKINELMER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Nine Months Ended  
     October 1,
2006
    October 2,
2005
 
     (In thousands)  

Operating activities:

    

Net income

   $ 77,855     $ 80,560  

Loss (income) from discontinued operations, net of income taxes

     1,025       (12,464 )

(Gain) loss on disposition of discontinued operations, net of income taxes

     (1,625 )     4,537  
                

Net income from continuing operations

     77,255       72,633  

Adjustments to reconcile net income from continuing operations to net cash provided by continuing operations:

    

Stock-based compensation

     10,629       5,627  

Restructuring and integration (reversals) charges, net

     (290 )     14,245  

Amortization of debt discount and issuance costs

     218       8,506  

Depreciation and amortization

     50,937       51,117  

Resolution of prior year tax contingencies

     55       (27,772 )

Gains on dispositions, net

     (3,418 )     (5,908 )

Changes in operating assets and liabilities which provided (used) cash, excluding effects from companies purchased and divested:

    

Accounts receivable

     12,972       (2,658 )

Inventories

     (13,264 )     (2,186 )

Accounts payable

     (9,976 )     2,810  

Taxes paid on divestitures

     (59,996 )     —    

Accrued expenses and other

     (21,907 )     (6,547 )
                

Net cash provided by operating activities from continuing operations

     43,215       109,867  

Net cash (used in) provided by discontinued operations

     (862 )     13,651  
                

Net cash provided by operating activities

     42,353       123,518  

Investing activities:

    

Capital expenditures

     (30,999 )     (16,199 )

Proceeds from dispositions of property, plant and equipment, net

     7,085       9,393  

Proceeds from surrender of insurance policies

     3,753       —    

Proceeds from disposition of investments, net

     23,243       6,956  

Cash used for acquisitions, net of cash acquired

     (97,576 )     (14,888 )
                

Net cash used in continuing operations

     (94,494 )     (14,738 )

Net cash provided by (used in) discontinued operations

     467       (9,547 )
                

Net cash used in investing activities

     (94,027 )     (24,285 )

Financing activities:

    

Payments on debt

     (56,565 )     (100,000 )

Premium on prepayment of debt

     —         (4,125 )

Payment of debt issuance and tender costs

     (741 )     —    

Decrease in other credit facilities

     (812 )     (875 )

Tax benefit from exercise of common stock options

     3,998       —    

Proceeds from issuance of common stock

     17,385       9,270  

Purchases of common stock

     (190,121 )     —    

Cash dividends

     (26,851 )     (27,210 )
                

Net cash used in continuing operations

     (253,707 )     (122,940 )

Net cash used in discontinued operations

     —         (155 )
                

Net cash used in financing activities

     (253,707 )     (123,095 )
                

Effect of exchange rate changes on cash and cash equivalents

     10,191       (7,594 )
                

Net decrease in cash and cash equivalents

     (295,190 )     (31,456 )

Cash and cash equivalents at beginning of period

     502,264       197,513  
                

Cash and cash equivalents at end of period

   $ 207,074     $ 166,057  
                

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.

 

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PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by PerkinElmer, Inc. (the “Company”), without audit, in accordance with the accounting principles generally accepted in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information in the footnote disclosures of these financial statements has been condensed or omitted where it substantially duplicates information provided in the Company’s latest audited financial statements in accordance with the rules and regulations of the SEC. These financial statements should be read in conjunction with the Company’s financial statements and notes included in its Annual Report on Form 10-K for the fiscal year ended January 1, 2006, filed with the SEC (the “2005 Form 10-K”). The balance sheet amounts at January 1, 2006 in this report were derived from the Company’s audited 2005 financial statements included in the 2005 Form 10-K. Certain prior period amounts related to discontinued operations have been reclassified to conform to the current-year financial statement presentation. The financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the Company’s results of operations, financial position and cash flows for the periods indicated. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for the nine months ended October 1, 2006 and October 2, 2005 are not necessarily indicative of the results for the entire fiscal year or any future period.

Recently Adopted Accounting Pronouncement

Effective January 2, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” (“SFAS No. 123(R)”), which requires compensation costs related to stock-based transactions, including employee stock options, to be recognized in the financial statements based on fair value. SFAS No. 123(R) revises SFAS No. 123, as amended, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” The Company adopted SFAS No. 123(R) using the modified prospective application transition method. Under this method, compensation cost, measured using fair value, is recognized for the unvested portion of stock-based payments granted prior to January 2, 2006 and all stock-based payments granted subsequent to January 1, 2006 over the related vesting period. Prior to January 2, 2006, the Company applied the intrinsic value based method prescribed in APB Opinion No. 25 in accounting for employee stock-based compensation. In accordance with the modified prospective method, prior period results have not been restated and are not directly comparable to periods after adoption. Due to the adoption of SFAS No. 123(R), the Company’s results for the three and nine months ended October 1, 2006 include incremental compensation related to stock options totaling $3.1 million and $6.9 million, respectively.

Recently Issued Accounting Pronouncements

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides guidance on how prior year misstatements should be taken into consideration when quantifying misstatements in current year financial statements for purposes of determining whether the current year’s financial statements are materially misstated. The Company will be required to adopt SAB 108 in the fourth quarter of fiscal year 2006. Management does not anticipate that the adoption of SAB 108 will have a material impact on the Company’s consolidated financial statements.

 

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In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. The Company will be required to adopt SFAS No. 157 in the first quarter of fiscal year 2008. Management is currently evaluating the requirements of SFAS No. 157 and has not yet determined the impact, if any, on the Company’s consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R)” (“SFAS No. 158”). SFAS No. 158 requires companies to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of defined benefit pension and other postretirement benefit plans. Additionally, SFAS No. 158 requires companies to measure plan assets and obligations at their year-end balance sheet date. SFAS No. 158 requires prospective application, and the recognition and disclosure requirements are effective for the Company’s fiscal year ending December 31, 2006.

Management is currently evaluating the requirements of SFAS No. 158 and has not yet determined the impact on the Company’s consolidated financial statements. The effect of adopting SFAS No. 158 may have an impact on the Company’s consolidated balance sheets, but no impact to the Company’s consolidated income statements or statements of cash flows. The actual impact of adopting SFAS No. 158 will be dependent upon the fair value of plan assets and the amount of projected benefit obligations measured as of December 31, 2006. Management does not anticipate an impact on the Company’s compliance with the financial covenants contained in the Company’s loan agreement, described in more detail in Note 5, from the adoption of SFAS No. 158.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN No. 48”). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in the financial statements of an entity in accordance with SFAS No. 109, “Accounting for Income Taxes.” The new interpretation is effective for fiscal years beginning after December 15, 2006. The Company will be required to adopt FIN No. 48 in the first quarter of fiscal year 2007. Management is currently evaluating the requirements of FIN No. 48 and has not yet determined the impact on the Company’s consolidated financial statements.

(2) Acquisitions

Acquisition of Agilix Corporation. In February 2006, the Company acquired specified assets of Agilix Corporation (“Agilix”) for approximately $8.7 million in cash plus potential additional contingent consideration, which management expects to be immaterial to the Company. Assets acquired primarily relate to Agilix’s core technology which centers around labeling technology using isobaric mass tags that allows for the simultaneous quantification of molecules, such as proteins, from multiple samples.

Acquisition of Spectral Genomics, Inc. In April 2006, the Company acquired specified assets and assumed specified liabilities of Spectral Genomics, Inc. (“Spectral”), a leader in molecular karyotyping technology used to evaluate chromosomal abnormalities. Consideration for the transaction was approximately $12.0 million in cash plus potential additional contingent consideration, which management expects to be immaterial to the Company. The Company will make cash payments of $2.1 million in the fourth quarter of 2006 and $0.9 million in the first quarter of 2007, as well as royalty payments based on future sales, to license additional intellectual property rights from a third party. The Company expects to receive a partial reimbursement of the license fees as a result of its agreement with Spectral.

Acquisition of Clinical & Analytical Service Solutions Ltd. In June 2006, the Company acquired the stock of Clinical & Analytical Service Solutions Ltd. (“C&A”), a scientific equipment asset and managed maintenance company serving the pharmaceutical, biotechnology and healthcare markets. Consideration for the transaction was approximately $12.3 million in cash, net of cash acquired, plus potential additional contingent consideration, which management expects to be immaterial to the Company.

 

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Acquisition of J.N. Macri Technologies LLC and NTD Laboratories, Inc. In July 2006, the Company acquired specified assets and assumed specified liabilities of J.N. Macri Technologies LLC (“Macri”) and acquired the stock of NTD Laboratories, Inc. (“NTD”). Macri holds and licenses global patents related to free beta Human Chorionic Gonadotropin (“free Beta hCG”). Free Beta hCG is a peptide hormone produced in the early stage of pregnancy that is widely recognized as an important biomarker for first-trimester prenatal risk assessment. NTD is a laboratory specializing in prenatal risk assessment and offers laboratory developed and validated testing under the brand name UltraScreen®, of which free Beta hCG is an important component. Aggregate consideration for these transactions was $55.2 million in cash, net of cash acquired, and subject to a net working capital adjustment.

Acquisition of Avalon Instruments Limited. In September 2006, the Company acquired the stock of Avalon Instruments Limited (“Avalon”). The acquisition of Avalon expands and complements the Company’s Molecular Spectroscopy product portfolio by adding a family of innovative bench-top dispersive Raman spectrometers. Raman spectroscopy identifies and characterizes the composition of both organic and inorganic materials in a wide range of applications. Consideration for this transaction was $5.2 million in cash, net of cash acquired, plus potential additional contingent consideration, which management expects to be immaterial to the Company.

The operations for each of these acquisitions are reported within the results of the Company’s Life and Analytical Sciences segment from the acquisition date. These acquisitions, individually and in the aggregate, did not have a material effect on the Company’s financial position, results of operations or cash flows.

The acquisitions were accounted for in accordance with SFAS No. 141, “Business Combinations” (“SFAS No. 141”), and the Company has accordingly allocated the purchase prices of the acquisitions based upon the preliminary fair values of the assets acquired and liabilities assumed. The purchase prices and related allocations are preliminary and may be revised as a result of adjustments made to the purchase prices, additional information regarding liabilities assumed, including contingent liabilities, and revisions of preliminary estimates of fair values made at the dates of purchase. In connection with the fair valuing of the assets acquired and liabilities assumed, management, assisted by valuation consultants, performed assessments of intangible assets using customary valuation procedures and techniques. During the third quarter of 2006, the Company has updated the purchase price allocations of Agilix and Spectral based on additional information regarding the liabilities assumed and future payments for deferred consideration.

The components of the preliminary purchase prices and allocations are as follows (in thousands):

 

      Agilix    Spectral     C&A     Macri/NTD     Avalon  

Consideration and acquisition costs:

           

Cash payments, net of cash acquired

   $ 8,696    $ 12,000     $ 12,333     $ 55,222     $ 5,240  

Deferred consideration

     —        2,000       —         —         —    

Transaction costs

     29      69       440       377       165  
                                       

Total consideration and acquisition costs

   $ 8,725    $ 14,069     $ 12,773     $ 55,599     $ 5,405  
                                       

Allocation of purchase price

           

Current assets

   $ —      $ 468     $ 2,468     $ 3,044     $ 512  

Property, plant and equipment

     645      388       533       384       8  

Identifiable intangible assets

     7,300      9,900       4,368       32,600       1,600  

Goodwill

     780      5,427       10,993       31,811       3,998  

Other assets

     —        —         —         40       —    

Deferred taxes

     —        —         (1,416 )     (8,388 )     (480 )

Liabilities assumed

     —        (2,114 )     (4,173 )     (3,892 )     (233 )
                                       

Total

   $ 8,725    $ 14,069     $ 12,773     $ 55,599     $ 5,405  
                                       

 

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(3) Restructuring Charges

The Company has undertaken a series of restructuring actions related to the impact of acquisitions, divestitures and the integration of its business units. Restructuring actions were recorded in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” In certain instances, specifically when governmental authorities are involved in setting severance levels, SFAS No. 112, “Employers’ Accounting for Postemployment Benefits,” is applied. The principal actions associated with these plans related to workforce and overhead reductions resulting from reorganization activities, including the closure of certain manufacturing and selling facilities. Details of these plans are discussed more fully in the Company’s 2005 Form 10-K.

A description of each of the restructuring plans and the activity recorded for the nine month period ended October 1, 2006 is as follows:

Q2 2006 Plan

During the second quarter of 2006, the Company recognized a $0.8 million restructuring charge in the Life and Analytical Sciences segment (the “Q2 2006 Plan”). The purpose of this restructuring action was to shift resources into product lines that were more consistent with the Company’s growth strategy. The actions in the Q2 2006 Plan were workforce reductions resulting from reorganization activities.

The following table summarizes the components of the Q2 2006 Plan activity for the nine months ended October 1, 2006:

 

     Headcount     Severance  
           (Dollars in thousands)  

Balance at January 1, 2006

   —       $ —    

Provision

   23       755  

Amounts paid

   (23 )     (391 )
              

Balance at October 1, 2006

   —       $ 364  
              

All actions related to the Q2 2006 Plan were completed by the end of the second quarter of 2006, and the Company anticipates that all payments will be completed by the end of 2006.

Q4 2005 Plan

During the fourth quarter of 2005, the Company recognized a $2.2 million restructuring charge in the Life and Analytical Sciences segment and a $6.0 million restructuring charge in the Optoelectronics segment (the “Q4 2005 Plan”). The purpose of these restructuring actions was to shift resources into geographic regions and product lines that were more consistent with the Company’s growth strategy. The principal actions in the Q4 2005 Plan were workforce reductions and the closure of several facilities resulting from reorganization activities.

During the second quarter of 2006, the Company recorded a pre-tax restructuring charge of $0.4 million relating to its Q4 2005 Plan due to higher than expected costs associated with the termination of employees in Europe within the Life and Analytical Sciences segment. The Company also recorded a pre-tax restructuring reversal of $1.4 million relating to its Q4 2005 Plan due to the completion in June 2006 of the sale of a building previously reserved for in the Q4 2005 Plan. The amount of the proceeds from this sale in excess of the current book value of the property was recorded as a restructuring reversal within the Optoelectronics segment.

 

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The following table summarizes the components of the Q4 2005 Plan activity for the nine months ended October 1, 2006:

 

     Headcount     Severance     Abandonment
of Excess Facilities
    Total  
     (Dollars in thousands)  

Balance at January 1, 2006

   24     $ 1,792     $ 354     $ 2,146  

Change in estimate

   —         354       —         354  

Amounts paid

   (16 )     (1,665 )     (221 )     (1,886 )
                              

Balance at October 1, 2006

   8     $ 481     $ 133     $ 614  
                              

All actions related to the Q4 2005 Plan have been completed and the Company anticipates that all payments will be completed by the end of 2006.

Q2 2005 Plan

During the second quarter of 2005, the Company recognized a $5.3 million restructuring charge in the Life and Analytical Sciences segment and a $2.9 million restructuring charge in the Optoelectronics segment (the “Q2 2005 Plan”). The purpose of these restructuring actions was to shift resources into geographic regions and product lines that were more consistent with the Company’s growth strategy. The principal actions in the Q2 2005 Plan were workforce reductions resulting from reorganization activities. All workforce reductions have been completed and the remaining payments relate to international severance contracts.

The following table summarizes the components of the Q2 2005 Plan activity for the nine months ended October 1, 2006:

 

     Severance  
     (In thousands)  

Balance at January 1, 2006

   $ 2,338  

Amounts paid

     (1,299 )
        

Balance at October 1, 2006

   $ 1,039  
        

All actions related to the Q2 2005 Plan have been completed and the Company anticipates that all payments will be completed by the end of 2006.

2001 to 2003 Restructuring and Integration Plans

The Company has approximately $6.6 million of remaining liabilities associated with 2001 to 2003 restructuring and integration plans, primarily relating to remaining lease obligations of closed facilities. The remaining terms of these leases vary in length but all will be completed by 2014.

(4) Inventories

Inventories consisted of the following:

 

     October 1,
2006
   January 1,
2006
     (In thousands)

Raw materials

   $ 67,224    $ 59,023

Work in progress

     12,069      9,606

Finished goods

     102,831      94,521
             

Total Inventories

   $ 182,124    $ 163,150
             

 

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(5) Debt

Senior Unsecured Credit Facility. In October 2005, the Company entered into a $350.0 million five-year senior unsecured revolving credit facility. This facility replaced its previous $100.0 million five-year revolving credit facility. Letters of credit in the aggregate amount of approximately $15.0 million, originally issued under its previous credit agreement, are treated as issued under this new agreement. The Company uses the senior unsecured revolving credit facility for general corporate purposes which may include working capital, refinancing existing indebtedness, capital expenditures, share repurchases, acquisitions and strategic alliances. The interest rates under the senior unsecured revolving credit facility are based on the Eurocurrency rate at the time of borrowing plus a margin or the base rate from time to time. The Eurocurrency margin as of October 1, 2006 was 60 basis points. The base rate is the higher of (1) the corporate base rate announced from time to time by Bank of America, N.A. and (2) the Federal Funds rate plus 50 basis points. The Company may allocate all or a portion of its indebtedness under the senior unsecured revolving credit facility to interest based upon the Eurocurrency rate plus a margin or the base rate. As of October 1, 2006, all borrowings under the senior unsecured revolving credit facility were allocated to interest based on the Eurocurrency rate plus a margin. The weighted-average Eurocurrency interest rate as of October 1, 2006 was 3.32%, resulting in a weighted-average effective Eurocurrency rate, including the margin, of 3.92%. There were approximately $200.9 million of borrowings under the facility as of October 1, 2006, which were undertaken by certain foreign subsidiaries of the Company. The funds were borrowed in the subsidiaries’ functional currencies of Euro (EUR), Canadian Dollars (CAD) and Japanese Yen (JPY). The agreement contains affirmative, negative and financial covenants and events of default customary for financings of this type. The financial covenants include interest coverage and debt-to-EBITDA ratios. The Company was in compliance with all covenants as of October 1, 2006.

(6) Earnings Per Share

Basic earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding during the period less restricted unvested shares. Diluted earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding plus all potentially dilutive common stock equivalents, primarily shares issuable upon the exercise of stock options using the treasury stock method:

 

     Three Months Ended    Nine Months Ended
     October 1,
2006
   October 2,
2005
   October 1,
2006
   October 2,
2005
     (In thousands)    (In thousands)

Number of common shares—basic

   124,277    129,543    126,105    129,135

Effect of dilutive securities:

           

Stock options and restricted stock

   894    1,748    1,324    1,886
                   

Number of common shares—diluted

   125,171    131,291    127,429    131,021
                   

Number of potentially dilutive securities excluded from calculation due to antidilutive impact

   9,966    6,786    8,577    7,831
                   

Antidilutive securities include outstanding stock options with exercise prices and average unrecognized compensation cost in excess of the average fair market value of common stock for the related period. Antidilutive options were excluded from the calculation of diluted net income per share and could become dilutive in the future.

 

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(7) Comprehensive Income

Comprehensive income consisted of the following:

 

     Three Months Ended     Nine Months Ended  
     October 1,
2006
    October 2,
2005
    October 1,
2006
    October 2,
2005
 
     (In thousands)     (In thousands)  

Net income

   $ 29,753     $ 31,833     $ 77,855     $ 80,560  

Other comprehensive income (loss):

        

Foreign currency translation adjustments, net of tax

     3,877       (296 )     21,382       (42,609 )

Unrealized (losses) gains on securities, net of tax

     (42 )     73       (106 )     (72 )
                                
     3,835       (223 )     21,276       (42,681 )
                                

Comprehensive income

   $ 33,588     $ 31,610     $ 99,131     $ 37,879  
                                

The components of accumulated other comprehensive income, net of tax, were as follows:

 

     October 1,
2006
   

January 1,

2006

 
     (In thousands)  

Foreign currency translation adjustments, net of tax

   $ 59,014     $ 37,632  

Minimum pension liability, net of tax

     (32,401 )     (32,401 )

Unrealized gains on securities, net of tax

     21       127  
                

Accumulated other comprehensive income, net of tax

   $ 26,634     $ 5,358  
                

(8) Industry Segment Information

The Company follows SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information.” SFAS No. 131 establishes standards for the way public business enterprises report information about operating segments in annual financial statements and in interim reports to shareholders. The method for determining what information to report is based on the way that management organizes the segments within the Company for making operating decisions and assessing financial performance. In evaluating financial performance, management uses operating profit as the measure of the segments’ profit or loss. Based on the guidance in SFAS No. 131, the Company has two operating segments for financial reporting purposes. The operating segments and their principal products and services are:

 

    Life and Analytical Sciences. The Company is a leading provider of drug discovery, genetic screening and environmental and chemical analysis tools, including instruments, reagents, consumables, and services.

 

    Optoelectronics. The Company provides a broad range of digital imaging, sensor and specialty lighting components used in the biomedical, consumer products and other specialty end markets.

 

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Sales and operating profit by segment are shown in the table below:

 

     Three Months Ended     Nine Months Ended  
     October 1,
2006
    October 2,
2005
    October 1,
2006
    October 2,
2005
 
     (In thousands)     (In thousands)  

Life & Analytical Sciences

        

Sales

   $ 283,527     $ 259,083     $ 823,918     $ 794,634  

Operating profit

     25,334       26,717       74,429       64,342  

Optoelectronics

        

Sales

     103,390       100,899       295,454       291,539  

Operating profit

     20,097       20,782       50,209       47,156  

Other

        

Operating loss

     (8,916 )     (6,332 )     (23,438 )     (19,965 )

Continuing Operations

        

Sales

   $ 386,917     $ 359,982     $ 1,119,372     $ 1,086,173  

Operating profit

     36,515       41,167       101,200       91,533  

(9) Discontinued Operations

As part of its continued efforts to focus on higher growth opportunities, the Company has discontinued certain businesses. The Company has accounted for these businesses as discontinued operations in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and, accordingly, has presented the results of operations and related cash flows as discontinued operations for all periods presented. The assets and liabilities of these businesses have been presented separately and are reflected within the assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of October 1, 2006 and January 1, 2006.

In September 2005, the Company’s Board of Directors approved a plan to divest its Fluid Sciences segment. The Fluid Sciences segment consisted of three businesses—Aerospace, Fluid Testing and Semiconductor. In November 2005, the Company sold the Fluid Testing division to Caleb Brett USA Inc. for approximately $34.5 million, resulting in a net pre-tax gain of $30.3 million. In December 2005, the Company sold the Aerospace division to Eaton Corporation for approximately $333.0 million, resulting in a net pre-tax gain of $250.6 million. These gains were recognized during fiscal 2005 as gains on the dispositions of discontinued operations. The Company received total cash proceeds in these transactions of approximately $361.1 million. During the first nine months of 2006, the Company finalized the net working capital adjustments associated with the sales of these businesses and settled a claim related to an employee benefit program, resulting in the recognition of losses in 2006 of $1.3 million and $0.2 million relative to the Aerospace business and the Fluid Testing business, respectively. In February 2006, the Company sold substantially all of the assets of its Semiconductor business to an entity affiliated with Tara Capital, Inc. for approximately $26.5 million, subject to a net working capital adjustment, plus potential additional contingent consideration. A pre-tax gain of $3.8 million, exclusive of additional contingent consideration, was recognized through the first nine months of 2006.

In December 2005, the Company’s Board of Directors approved a plan to sell its Lithography business. In June 2005, the Company’s Board of Directors approved a plan to shut down the Company’s Fiber Optics Test Equipment business. The results of these businesses were previously reported as part of the Optoelectronics segment. During the quarter ended October 1, 2006, the Company substantially completed the remediation of an environmental matter within the Lithography business, resulting in recognition of a pre-tax loss of $1.1 million. The completion of the shut-down of the Fiber Optics Test Equipment business resulted in a pre-tax loss of $5.2 million related to lease and severance costs and the reduction of fixed assets and inventory to net realizable value. The Company recognized the net loss during fiscal 2005.

During 2006 and 2005, the Company settled various claims under certain long-term contracts and transition services with its Technical Services business, which was sold in August 1999.

 

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During the third quarter of 2006 there was a $1.4 million tax benefit resulting from the inter-period allocation of income tax to the losses from the dispositions of discontinued operations.

The table below summarizes the gains and losses on dispositions of discontinued operations, as discussed above:

 

     Three Months Ended    Nine Months Ended  
     October 1,
2006
    October 2,
2005
   October 1,
2006
    October 2,
2005
 
     (In thousands)    (In thousands)  

Gain on Semiconductor business

   $ —       $ —      $ 3,750     $ —    

Loss on Aerospace business

     (11 )     —        (1,288 )     —    

Loss on Fluid Testing business

     —         —        (234 )     —    

Loss on Lithography business

     (1,079 )     —        (1,481 )     —    

Gain on contract settlements associated with the Technical Services business

     467       24      853       424  

Gain (loss) on Fiber Optics Test Equipment business

     30       126      28       (5,025 )

Net gain (loss) on dispositions of other discontinued operations

     70       64      (208 )     356  
                               

Net (loss) gain on dispositions of discontinued operations before income taxes

     (523 )     214      1,420       (4,245 )

(Benefit from) provision for income taxes

     (1,361 )     26      (205 )     292  
                               

Gain (loss) on dispositions of discontinued operations, net of income taxes

   $ 838     $ 188    $ 1,625     $ (4,537 )
                               

Summary operating results of the discontinued operations of the Fluid Sciences segment and the Fiber Optics Test Equipment and Lithography businesses for the periods prior to disposition were as follows:

 

     Three Months Ended    Nine Months Ended
     October 1,
2006
   October 2,
2005
   October 1,
2006
    October 2,
2005
     (In thousands)    (In thousands)

Sales

   $ —      $ 60,190    $ 8,705     $ 176,096

Costs and expenses

     —        51,523      9,707       154,948
                            

Operating income (loss) from discontinued operations

     —        8,667      (1,002 )     21,148

Other expenses, net

     —        574      396       1,228
                            

Operating income (loss) from discontinued operations before income taxes

     —        8,093      (1,398 )     19,920

Provision for (benefit from) income taxes

     —        2,917      (373 )     7,456
                            

Income (loss) from discontinued operations, net of taxes

   $ —      $ 5,176    $ (1,025 )   $ 12,464
                            

(10) Stock-Based Compensation

In December 2004, the FASB issued SFAS No. 123(R) which requires compensation costs related to stock-based transactions, including employee stock options, to be recognized in the financial statements based on fair value. SFAS No. 123(R) revises SFAS No. 123, as amended, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.”

Effective January 2, 2006, the Company adopted the provisions of SFAS No. 123(R) using the modified prospective transition method. Accordingly, periods prior to adoption have not been restated and are not directly comparable to periods after adoption. Under the modified prospective method, compensation cost recognized in periods after adoption includes (i) compensation cost for all stock-based payments granted prior to, but not yet

 

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vested as of, January 2, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, less estimated forfeitures, and (ii) compensation cost for all stock-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R), less estimated forfeitures.

Prior to January 2, 2006, the Company accounted for stock-based compensation plans in accordance with the provisions of APB Opinion No. 25, as permitted by SFAS No. 123. Under APB Opinion No. 25, the Company recorded stock-based compensation expense for restricted stock, restricted stock units and performance units, which amounted to $0.4 million and $1.5 million, net of related taxes, for the three and nine months ended October 2, 2005, respectively. Under APB Opinion No. 25, the Company was generally not required to recognize compensation expense for the cost of stock options, when such options had an exercise price equal to the market price at the date of grant, or shares issued under the Company’s Employee Stock Purchase Plan. If the fair value based method as prescribed by SFAS No. 123 had been applied by the Company, the effect on net income and earnings per share for the three and nine months ended October 2, 2005 would have been as follows:

 

    

Three Months Ended

October 2, 2005

   

Nine Months Ended

October 2, 2005

 
    

(In thousands, except

per share data)

   

(In thousands, except

per share data)

 

Net income, as reported

   $ 31,833     $ 80,560  

Add: Stock-based employee compensation expense included in net income, net of related tax effects

     390       1,525  

Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects

     (2,028 )     (8,909 )
                

Pro forma net income

   $ 30,195     $ 73,176  
                

Earnings per share:

    

Basic—as reported

   $ 0.25     $ 0.62  

Basic—pro forma

   $ 0.23     $ 0.57  

Diluted—as reported

   $ 0.24     $ 0.62  

Diluted—pro forma

   $ 0.23     $ 0.56  

As of October 1, 2006, the Company had three stock-based compensation plans. Under the 2005 Incentive Plan, 5.4 million shares of the Company’s common stock were made available for option grants, restricted stock awards and performance units. Under the 2001 Incentive Plan, 8.8 million shares of the Company’s common stock were made available for option grants, restricted stock awards and performance units. Under the Life Sciences Plan, 2.3 million shares of the Company’s common stock were made available for option grants.

For the three and nine months ended October 1, 2006, in accordance with the adoption of SFAS No. 123(R), the Company recorded incremental compensation related to the stock options of $3.1 million and $6.9 million, respectively. The total stock-based compensation expense for the cost of stock options, restricted stock, restricted stock units and performance units was $4.5 million and $10.7 million for the three and nine months ended October 1, 2006, respectively. The total income tax benefit recognized in the consolidated income statements for stock-based compensation was $1.4 million and $3.5 million for the three and nine months ended October 1, 2006, respectively. Stock-based compensation costs capitalized as part of inventory were approximately $0.4 million as of October 1, 2006.

Stock Options: The Company has granted options to purchase common shares at prices equal to the market price of the common shares on the date the option is granted. Conditions of vesting are determined at the time of grant. Options are generally exercisable in equal annual installments over a period of three years and will generally expire seven years after the date of grant. Options assumed as part of business combination transactions retain all the rights, terms and conditions of the respective plans under which they were originally issued.

 

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The fair value of each option grant is estimated using the Black-Scholes option pricing model. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility was calculated primarily based on the historical volatility of the Company’s stock. The average expected life was based on the contractual term of the option and historic exercise experience. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. Forfeitures are estimated based on voluntary termination behavior, as well as an analysis of actual option forfeitures. The Company’s weighted-average assumptions used in the Black-Scholes option pricing model are as follows:

 

     2006     2005  

Expected stock price volatility

     35 %     48 %

Risk free interest rate

     4.4 %     3.5 %

Expected life of options (years)

     4.0       4.0  

Expected annual dividend per share

   $ 0.28     $ 0.28  

A summary of option activity as of October 1, 2006 and changes during the first nine months of 2006 are presented below:

 

     Shares     Weighted-
Average
Exercise Price
   Weighted-Average
Remaining
Contractual Term
(in years)
   Aggregate
Intrinsic
Value
(in millions)

Outstanding at January 1, 2006

   13,540,872     $ 22.44      

Granted

   1,715,332       22.53      

Exercised

   (1,414,599 )     12.31      

Canceled

   (636,993 )     32.36      

Forfeited

   (345,922 )     19.32      
                  

Outstanding at October 1, 2006

   12,858,690     $ 23.18    3.9    $ 19.0
                  

Exercisable at October 1, 2006

   9,840,487     $ 23.73    3.3    $ 17.9
                  

The weighted-average grant-date fair values of options granted for the three and nine months ended October 1, 2006 were $6.33 and $6.85, respectively. The weighted-average grant-date fair values of options granted for the three and nine months ended October 2, 2005 were $7.47 and $8.20, respectively. The total intrinsic value of options exercised for the three and nine months ended October 1, 2006 were $0.2 million and $15.2 million, respectively. The total intrinsic value of options exercised for the three and nine months ended October 2, 2005 were $2.0 million and $5.3 million, respectively.

Cash received from option exercises for the first nine months of 2006 and 2005 was $17.4 million and $9.3 million, respectively. The related tax benefit classified as a financing cash inflow was $4.0 million for the first nine months of 2006.

 

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The total compensation recognized related to the stock options, which is a function of current and prior year awards, is net of estimated forfeitures and was approximately $3.1 million and $6.9 million for the three and nine months ended October 1, 2006, respectively. There was $12.7 million of total unrecognized compensation cost related to non-vested stock options granted as of October 1, 2006. This cost is expected to be recognized over a weighted-average period of 1.7 fiscal years and will be adjusted for any future changes in estimated forfeitures. The following table summarizes total compensation expense related to stock options included in the Company’s consolidated income statement:

 

      Three Months Ended
October 1, 2006
    Nine Months Ended
October 1, 2006
 
     (In thousands)  

Cost of sales

   $ 535     $ 837  

Selling, general and administrative expenses

     2,397       5,459  

Research and development expenses

     154       533  

Discontinued operations

     9       85  
                

Compensation expense related to stock options

     3,095       6,914  

Less: income tax benefit

     (946 )     (2,121 )
                

Net compensation expense related to stock options

   $ 2,149     $ 4,793  
                

The following table summarizes information about stock options outstanding as of October 1, 2006:

 

     Options Outstanding    Options Exercisable

Prices

  

Number

Outstanding at
October 1, 2006

   Weighted-
Average
Remaining
Contractual Life
   Weighted-
Average
Exercise
Price
   Number
Exercisable at
October 1, 2006
   Weighted-
Average
Exercise
Price

$  4.88 –   5.70

   63,666    2.9    $ 4.91    63,666    $ 4.91

7.03 –   9.88

   652,145    2.9      8.28    624,951      8.25

10.77 – 16.09

   1,585,526    2.5      13.47    1,583,194      13.47

16.38 – 24.15

   6,040,046    4.8      20.65    3,051,369      19.83

25.24 – 37.17

   3,983,037    3.7      30.67    3,983,037      30.67

39.18 – 49.98

   517,552    1.2      44.65    517,552      44.65

50.28 – 57.27

   16,718    3.4      56.44    16,718      56.44
                            

$  4.88 – 57.27

   12,858,690    3.9    $ 23.18    9,840,487    $ 23.73
                            

Restricted Stock Awards: The Company has awarded restricted stock and restricted stock units that contain time-based vesting provisions and restricted stock that contains performance-based vesting provisions to certain employees at no cost to them, which cannot be sold, assigned, transferred or pledged during the restriction period. These awards were granted under the Company’s 2005 Incentive Plan and 2001 Incentive Plan. All restrictions on the awards will lapse upon certain situations including death or disability of the employee and a change in control of the Company. Recipients of the restricted stock have the right to vote such shares and receive dividends, whereas the recipients of restricted stock units do not have these same benefits.

Restricted Stock Awards (Time-based Vesting)—Grants of restricted stock and restricted stock units that vest through the passage of time. The fair value of the award at the time of the grant is expensed on a straight line basis primarily in selling, general and administrative expenses over the vesting period, which is generally three years.

Restricted Stock Awards (Performance—based Vesting)—Grants of restricted stock that vest based on certain specified performance criteria. The fair value of the shares is expensed over the period of performance primarily in selling, general and administrative expenses, once achievement of criteria is deemed probable.

 

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A summary of the status of the Company’s restricted stock awards as of October 1, 2006 and changes during the first nine months of 2006 are presented below:

 

Nonvested Restricted Stock Awards

   Shares     Weighted-Average
Grant-Date Fair
Value

Nonvested at January 1, 2006

   330,669     $ 20.59

Granted

   256,828       22.78

Vested

   (3,334 )     20.06

Forfeited

   (38,000 )     20.70
            

Nonvested at October 1, 2006

   546,163     $ 21.62
            

There were no restricted stock awards granted during the three months ended October 1, 2006. The weighted-average grant-date fair value of restricted stock awards granted during the nine months ended October 1, 2006 was $22.78. The weighted-average grant-date fair values of restricted stock awards granted during the three and nine months ended October 2, 2005 were $19.94 and $20.76, respectively. The total compensation recognized related to the restricted stock awards, which is a function of current and prior year awards, was approximately $0.8 million and $2.2 million for the three and nine months ended October 1, 2006, respectively. As of October 1, 2006, there were 546,163 shares of restricted stock awards outstanding subject to forfeiture.

As of October 1, 2006, there was $8.6 million of total unrecognized compensation cost related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 1.7 fiscal years. The fair value of restricted stock awards vested during the first nine months of 2006 was $0.1 million. There were no restricted stock awards that vested during the first nine months of 2005.

Unearned compensation is recorded in a contra-equity account and established at the date restricted stock is granted representing the amount of unrecognized restricted stock expense that is reduced as expense is recognized. Under the provisions of SFAS No. 123(R), the recognition of unearned compensation at the date restricted stock is granted is no longer required. Therefore, in the first quarter of 2006, the $6.4 million of unrecognized restricted stock that had been in “Unearned compensation” in the consolidated balance sheet as of January 1, 2006 was reversed to “Capital in excess of par value.”

Performance Units: The Company’s performance unit program provides a cash award based on the achievement of specific performance criteria. A target number of units are granted at the beginning of a three-year performance period. The number of units earned at the end of the performance period is determined by multiplying the number of units granted by a performance factor for each individual ranging from 0% to 200%. Awards are determined by multiplying the number of units earned by the stock price at the end of the performance period and are paid in cash. The compensation expense associated with these units is recognized over the period that the performance targets are expected to be achieved. The Company granted 208,328 and 247,197 performance units in the first nine months of 2006 and 2005, respectively. The weighted-average grant-date fair values of performance units granted during the first nine months of 2006 and 2005 were $22.74 and $21.02, respectively. The total compensation related to these performance units, which is a function of current and prior year awards, was approximately $0.5 million and $1.6 million for the three and nine months ended October 1, 2006, respectively. As of October 1, 2006, there were 546,995 performance units outstanding subject to forfeiture.

Employee Stock Purchase Plan: In April 1999, the Company’s stockholders approved the 1998 Employee Stock Purchase Plan, whereby participating employees had the right to purchase common stock at a price equal to 85% of the lower of the closing price on the first day or the last day of the six-month offering period. In April 2005, the Compensation and Benefits Committee of the Company’s Board of Directors voted to amend the Employee Stock Purchase Plan, effective July 1, 2005, whereby participating employees have the right to

 

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purchase common stock at a price equal to 95% of the closing price on the last day of each six-month offering period. The number of shares which an employee may purchase, subject to certain aggregate limits, is determined by the employee’s voluntary contribution, which may not exceed 10% of the employee’s base compensation. During the nine months ended October 1, 2006, the Company issued 0.1 million shares under this plan at a weighted-average price of $19.85 per share. There remains available for sale to employees an aggregate of 1.8 million shares of the Company’s stock out of the 5.0 million shares authorized by shareholders.

Stock Repurchase Program: In the first nine months of 2006, the Company repurchased in the open market 8.9 million shares of its common stock at an aggregate cost of $190.1 million, including commissions. The repurchased shares have been reflected as additional authorized but unissued shares, with the payments reflected in common stock and capital in excess of par value. These repurchases were made pursuant to the Company’s stock repurchase program (the “Program”), which authorized repurchases of up to an aggregate of 10.0 million shares of the Company’s common stock. During the third quarter of 2006 the Company completed its repurchase of 10.0 million shares in the aggregate under the Program. On November 6, 2006, the Company announced that the Board of Directors authorized the Company to repurchase up to 10.0 million additional shares of common stock under a new stock repurchase program (the “New Program”). The New Program will expire on October 25, 2010 unless this authorization is terminated earlier by the Board. The New Program may also be suspended or discontinued at any time by the Company.

(11) Goodwill and Intangible Assets

In accordance with SFAS No. 142, “Goodwill and other Intangible Assets,” the Company is required to test goodwill for impairment at the reporting unit level upon initial adoption and at least annually thereafter. As part of the Company’s on-going compliance with SFAS No. 142, the Company, assisted by valuation consultants, completed its annual assessment of goodwill using a measurement date of January 2, 2006. The results of this annual assessment resulted in no impairment charge.

The changes in the carrying amount of goodwill for the period ended October 1, 2006 from January 1, 2006 are as follows:

 

     Life and
Analytical
Sciences
   Optoelectronics    Consolidated
     (In thousands)

Balance, January 1, 2006

   $ 982,260    $ 43,941    $ 1,026,201

Foreign currency translation

     20,100      1,591      21,691

Acquisitions and earn-out adjustments

     53,083      1,257      54,340
                    

Balance, October 1, 2006

   $ 1,055,443    $ 46,789    $ 1,102,232
                    

 

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Identifiable intangible asset balances at October 1, 2006 and January 1, 2006 were as follows:

 

     October 1,
2006
    January 1,
2006
 
     (In thousands)  

Patents

   $ 109,285     $ 90,955  

Less: Accumulated amortization

     (48,504 )     (41,908 )
                

Net patents

     60,781       49,047  
                

Licenses

     60,362       51,529  

Less: Accumulated amortization

     (25,081 )     (23,029 )
                

Net licenses

     35,281       28,500  
                

Core technology

     243,453       210,283  

Less: Accumulated amortization

     (86,663 )     (71,575 )
                

Net core technology

     156,790       138,708  
                

Net amortizable intangible assets

     252,852       216,255  

Non-amortizing intangible assets, primarily trademarks and trade names

     159,165       159,164  
                

Totals

   $ 412,017     $ 375,419  
                

(12) Warranty Reserves

The Company provides warranty protection for certain products for periods ranging from one to three years beyond the date of sale. The majority of costs associated with warranty obligations include the replacement of parts and the time of service personnel to respond to repair and replacement requests. A warranty reserve is recorded based upon historical results, supplemented by management’s expectations of future costs. Warranty reserves are included in “Accrued expenses” on the consolidated balance sheets. A summary of warranty reserve activity for the three and nine months ended October 1, 2006 and October 2, 2005 is as follows:

 

     Three Months Ended     Nine Months Ended  
     October 1,
2006
    October 2,
2005
    October 1,
2006
    October 2,
2005
 
     (In thousands)     (In thousands)  

Balance beginning of period

   $ 9,883     $ 9,387     $ 9,207     $ 9,601  

Provision

     3,397       3,344       10,813       10,001  

Charges

     (3,443 )     (3,423 )     (10,756 )     (9,626 )

Other

     84       (38 )     657       (706 )
                                

Balance end of period

   $ 9,921     $ 9,270     $ 9,921     $ 9,270  
                                

 

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(13) Employee Benefit Plans

The following table summarizes the components of net periodic benefit cost (credit) for the Company’s various defined benefit employee pension and post-retirement plans in accordance with SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” for the three and nine months ended October 1, 2006 and October 2, 2005:

 

     Defined Benefit
Pension Benefits
    Post-Retirement
Medical Benefits
 
     Three Months Ended  
     October 1,
2006
    October 2,
2005
    October 1,
2006
    October 2,
2005
 
     (In thousands)  

Service cost

   $ 1,254     $ 1,585     $ 24     $ 34  

Interest cost

     5,567       5,614       60       125  

Expected return on plan assets

     (5,576 )     (5,596 )     (214 )     (197 )

Net amortization and deferral

     1,528       1,131       (216 )     (123 )
                                

Net periodic benefit cost (credit)

   $ 2,773     $ 2,734     $ (346 )   $ (161 )
                                
    

Defined Benefit

Pension Benefits

    Post-Retirement
Medical Benefits
 
     Nine Months Ended  
     October 1,
2006
    October 2,
2005
    October 1,
2006
    October 2,
2005
 
     (In thousands)  

Service cost

   $ 3,864     $ 4,919     $ 72     $ 102  

Interest cost

     16,518       17,087       180       375  

Expected return on plan assets

     (16,560 )     (16,907 )     (642 )     (591 )

Net amortization and deferral

     4,549       3,361       (648 )     (369 )
                                

Net periodic benefit cost (credit)

   $ 8,371     $ 8,460     $ (1,038 )   $ (483 )
                                

(14) Contingencies

The Company is conducting a number of environmental investigations and remedial actions at current and former Company locations and, along with other companies, has been named a potentially responsible party (“PRP”) for certain waste disposal sites. The Company accrues for environmental issues in the accounting period that the Company’s responsibility is established and when the cost can be reasonably estimated. The Company has accrued $3.7 million as of October 1, 2006, representing management’s estimate of the total cost of ultimate disposition of known environmental matters. Such amount is not discounted and does not reflect the recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the time period over which remediation may occur and the possible effects of changing laws and regulations. For sites where the Company has been named a PRP, management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. The Company expects that the majority of such accrued amounts could be paid out over a period of up to ten years. As assessment and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had or are expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

In papers dated October 23, 2002, Enzo Biochem, Inc. and Enzo Life Sciences, Inc. (collectively, “Enzo”) filed a complaint in the United States District Court for the Southern District of New York, Civil Action No. 02-8448, against Amersham plc, Amersham BioSciences, PerkinElmer, Inc., PerkinElmer Life Sciences, Inc., Sigma-Aldrich Corporation, Sigma Chemical Company, Inc., Molecular Probes, Inc., and Orchid

 

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BioSciences, Inc. The complaint alleges that the Company has breached its distributorship and settlement agreements with Enzo, infringed Enzo’s patents, engaged in unfair competition and fraud, and committed torts against Enzo by, among other things, engaging in commercial development and exploitation of Enzo’s patented products and technology, separately and together with the other defendants. Enzo seeks injunctive and monetary relief. In 2003, the court severed the lawsuit and ordered Enzo to serve individual complaints against the five defendants. The Company subsequently filed an answer and a counterclaim alleging that Enzo’s patents are invalid. In July 2006, the court issued a decision regarding the construction of the claims in Enzo’s patents that effectively limited the coverage of certain of those claims and, the Company believes, excludes certain of the Company’s products from the coverage of Enzo’s patents. Discovery is ongoing. The court has set a schedule for filing of summary judgment motions commencing on January 3, 2007, but has not set a date for trial.

On October 17, 2003, Amersham Biosciences Corp. filed a complaint, which was subsequently amended, in the United States District Court for New Jersey, Civil Action No. 03-4901, against a subsidiary of the Company, alleging that the Company’s ViewLux and certain of its Image FlashPlate products infringe three of Amersham’s patents related to high-throughput screening (the “NJ case”). On August 18, 2004, Amersham plc filed a complaint against two of the Company’s United Kingdom-based subsidiaries in the Patent Court of the English High Court of Justice, Case No. 04C02688, alleging that the Company’s same products infringe one corresponding Amersham patent in the United Kingdom, which was granted in August 2004 (the “UK case”). Amersham seeks injunctive and monetary relief in both cases. The Company filed answers and counterclaims in both cases. On October 29, 2003, the Company filed a complaint, which was subsequently amended, against Amersham in the United States District Court for Massachusetts, Civil Action No. 03-12098, alleging that Amersham’s IN Cell Analyzer, and LEADseeker Multimodality Imaging system and certain Cyclic AMP and IP3 assays infringe two of the Company’s patents related to high-throughput screening (the “MA case”). The Company seeks injunctive and monetary relief. Amersham subsequently filed an answer and counterclaims. After a trial in the UK case in December 2005, the court ruled in February 2006 that Amersham’s patent in question was invalid in the United Kingdom and awarded costs to the Company. Amersham’s appeal of the ruling in the UK case is scheduled to be heard in early 2007. In May 2006, the court in the NJ case issued a decision regarding the construction of the claims in Amersham’s patents that adopted many of Amersham’s claim construction positions. The company has filed a motion asking the court to reconsider that decision. Discovery has not yet been completed in either the NJ or MA case, nor has a trial date been set in either case. A voluntary mediation occurred in September 2006, but did not result in a resolution of these matters. Fact discovery, which was stayed pending the mediation, has now resumed.

The Company believes it has meritorious defenses to these lawsuits and other proceedings, and it is contesting the actions vigorously in all of the above matters. The Company is currently unable, however, to reasonably estimate the amount of loss, if any, that may result from the resolution of these matters or to determine whether resolution of any of these matters will have a material adverse impact on its consolidated financial statements.

During 2005, the Internal Revenue Service concluded its audit of federal income taxes for the years 1999 through 2002. The Company has agreed to the conclusions of the Internal Revenue Service in all matters with the exception of one, and has filed a single issue protest with the Appeals Division of the Internal Revenue Service. The Company expects to resolve the matter in the first half of 2007. Regardless of the outcome of the protest, the Company does not expect the final resolution to significantly impact its financial position, results of operations or cash flows in 2007.

The Company is under regular examination by tax authorities in the United States and other countries (such as Germany and the United Kingdom) in which the Company has significant business operations. The tax years under examination vary by jurisdiction. The Company regularly assesses the likelihood of additional assessments in each of the taxing jurisdictions resulting from these and subsequent years’ examinations. The Company has established income tax reserves which it believes to be adequate in relation to the potential for additional assessments. Once established, reserves are adjusted as additional information becomes available and when an

 

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event occurs requiring a change to the reserves. The resolution of tax matters is not expected to have a material effect on the Company’s consolidated financial condition.

The Company is also subject to various other claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of its business activities. Each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company. The Company has established accruals for potential losses that it believes are probable and reasonably estimable. In the opinion of the Company’s management, based on its review of the information available at this time, the total cost of resolving these other contingencies at October 1, 2006, should not have a material adverse effect on the Company’s consolidated financial statements.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q, including the following management’s discussion and analysis, contains forward-looking information that you should read in conjunction with the condensed consolidated financial statements and notes to the condensed consolidated financial statements that we have included elsewhere in this quarterly report on Form 10-Q. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Words such as “believes,” “plans,” “anticipates,” “expects,” “will” and similar expressions are intended to identify forward-looking statements. Our actual results may differ materially from the plans, intentions or expectations we disclose in the forward-looking statements we make. We have included important factors under the heading “Risk Factors” in Item 1A below that we believe could cause actual results to differ materially from the forward-looking statements we make. We are not obligated to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a leading provider of scientific instruments, consumables and services to the pharmaceutical, biomedical, academic research, environmental testing and general industrial markets, commonly referred to as the health sciences and photonics markets. We design, manufacture, market and service products and systems within two businesses, each constituting a separate reporting segment:

 

    Life and Analytical Sciences. We are a leading provider of drug discovery, genetic screening and environmental and chemical analysis tools, including instruments, reagents, consumables, and services.

 

    Optoelectronics. We provide a broad range of digital imaging, sensor and specialty lighting components used in the biomedical, consumer products and other specialty end markets.

The health sciences markets include all of the businesses in our Life and Analytical Sciences segment and the medical imaging business, as well as elements of the medical sensors and lighting businesses in our Optoelectronics segment. The photonics markets include the remaining businesses in our Optoelectronics segment.

Recent Developments

Divestiture of Fluid Sciences Semiconductor Business. In February 2006, we sold substantially all of the assets of our Fluid Sciences Semiconductor business to an entity affiliated with Tara Capital, Inc. for approximately $26.5 million, subject to a net working capital adjustment, plus potential additional contingent consideration. We recognized a pre-tax gain of $3.8 million, exclusive of additional contingent consideration, through the first nine months of 2006.

Acquisition of Agilix Corporation. In February 2006, we acquired specified assets of Agilix Corporation (“Agilix”) for approximately $8.7 million in cash plus potential additional contingent consideration, which we expect to be immaterial to the Company. Assets acquired primarily relate to Agilix’s core technology which centers around labeling technology using isobaric mass tags that allows for the simultaneous quantification of molecules, such as proteins, from multiple samples. Agilix’s operations are reported within the results of our Life and Analytical Sciences segment from the acquisition date. This acquisition did not have a material effect on our financial position, results of operations or cash flows.

Acquisition of Spectral Genomics, Inc. In April 2006, we acquired specified assets and assumed specified liabilities of Spectral Genomics, Inc. (“Spectral”), a leader in molecular karyotyping technology used to evaluate chromosomal abnormalities. Consideration for the transaction was approximately $12.0 million in cash plus potential additional contingent consideration, which we expect to be immaterial to the Company. We will make cash payments of $2.1 million in the fourth quarter of 2006 and $0.9 million in the first quarter of 2007, as well as royalty payments based on future sales, to license additional intellectual property rights from a third party. We

 

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expect to receive a partial reimbursement of the license fees as a result of our agreement with Spectral. Spectral’s operations are reported within the results of our Life and Analytical Sciences segment from the acquisition date. This acquisition did not have a material effect on our financial position, results of operations or cash flows.

Acquisition of Clinical & Analytical Service Solutions Ltd. In June 2006, we acquired the stock of Clinical & Analytical Service Solutions Ltd. (“C&A”), a scientific equipment asset and managed maintenance company serving the pharmaceutical, biotechnology and healthcare markets. Consideration for the transaction was approximately $12.3 million in cash, net of cash acquired, plus potential additional contingent consideration, which we expect to be immaterial to the Company. C&A’s operations are reported within the results of our Life and Analytical Sciences segment from the acquisition date. This acquisition did not have a material effect on our financial position, results of operations or cash flows.

Restructuring. During the second quarter of 2006, our management approved a plan for workforce reductions in two locations in the U.S. as we shift resources into product lines that are more consistent with our growth strategy. The actions within the Q2 2006 Plan, described below, related to workforce reductions resulting from reorganization activities within the Life and Analytical Sciences segment. We completed notifying affected employees on June 30, 2006. As a result of this plan of termination, we recorded a pre-tax restructuring charge of $0.8 million during the second quarter of 2006 (the “Q2 2006 Plan”). As of October 1, 2006, substantially all of the $0.4 million remaining pre-tax restructuring charge will result in future cash expenditures which we expect will be paid by the end of 2006.

Acquisition of J.N. Macri Technologies LLC and NTD Laboratories, Inc. In July 2006, we acquired specified assets and assumed specified liabilities of J.N. Macri Technologies LLC (“Macri”) and acquired the stock of NTD Laboratories, Inc. (“NTD”). Macri holds and licenses global patents related to free beta Human Chorionic Gonadotropin (“free Beta hCG”). Free Beta hCG is a peptide hormone produced in the early stage of pregnancy that is widely recognized as an important biomarker for first-trimester prenatal risk assessment. NTD is a laboratory specializing in prenatal risk assessment and offers laboratory developed and validated testing under the brand name UltraScreen®, of which free Beta hCG is an important component. Aggregate consideration for these transactions was $55.2 million in cash, net of cash acquired, and subject to a net working capital adjustment. Both the Macri and NTD operations are reported within the results of our Life and Analytical Sciences segment from the acquisition date. These acquisitions did not have a material effect on our financial position, results of operations or cash flows.

Stock Repurchase Program. In the first nine months of 2006, we repurchased in the open market 8.9 million shares of our common stock at an aggregate cost of $190.1 million, including commissions. The repurchased shares have been reflected as additional authorized but unissued shares, with the payments reflected in common stock and capital in excess of par value. These repurchases were made pursuant to our stock repurchase program (the “Program”), which authorized repurchases of up to an aggregate of 10.0 million shares of our common stock. During the third quarter of 2006 we completed our repurchase of 10.0 million shares in the aggregate under the Program. On November 6, 2006, we announced that our Board of Directors authorized us to repurchase up to 10.0 million additional shares of our common stock under a new stock repurchase program (the “New Program”). The New Program will expire on October 25, 2010 unless this authorization is terminated earlier by our Board. The New Program may also be suspended or discontinued at any time.

Acquisition of Avalon Instruments Limited. In September 2006, we acquired the stock of Avalon Instruments Limited (“Avalon”). The acquisition of Avalon expands and complements our Molecular Spectroscopy product portfolio by adding a family of innovative bench-top dispersive Raman spectrometers. Raman spectroscopy identifies and characterizes the composition of both organic and inorganic materials in a wide range of applications. Consideration for this transaction was $5.2 million in cash, net of cash acquired, plus potential additional contingent consideration, which we expect to be immaterial to the Company. Avalon’s operations are reported within the results of our Life and Analytical Sciences segment from the acquisition date. This acquisition did not have a material effect on our financial position, results of operations or cash flows.

 

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Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, income taxes, restructuring, pensions and other post-retirement benefits, stock-based compensation, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are those policies that affect our more significant judgments and estimates used in preparation of our consolidated financial statements. We believe our critical accounting policies include our policies regarding revenue recognition, allowances for doubtful accounts, inventory valuation, value of long-lived assets, including intangibles, employee compensation and benefits, restructuring activities, gains or losses on dispositions and income taxes. For a more detailed discussion of our critical accounting policies, please refer to our Annual Report on Form 10-K for the fiscal year ended January 1, 2006, filed with the Securities and Exchange Commission (the “SEC”) (the “2005 Form 10-K”).

Consolidated Results of Continuing Operations

Sales

Sales for the third quarter of 2006 were $386.9 million, versus $360.0 million for the third quarter of 2005, an increase of $26.9 million, or 7%. The effect of acquisitions increased our third quarter of 2006 sales by $7.1 million. Changes in foreign exchange rates increased sales by $6.3 million in the third quarter of 2006, as compared to the third quarter of 2005. The total increase in sales reflects a $24.4 million, or 9%, increase in our Life and Analytical Sciences segment sales and an increase of $2.5 million, or 2%, in our Optoelectronics segment sales.

Sales for the nine-month period ended October 1, 2006 were $1,119.4 million, versus $1,086.2 million for the nine-month period ended October 2, 2005, an increase of $33.2 million, or 3%. The effect of acquisitions increased our sales for the nine-month period ended October 1, 2006 by $10.1 million. Changes in foreign exchange rates decreased sales by approximately $2.2 million in the nine-month period ended October 1, 2006, as compared to the nine-month period ended October 2, 2005. This total increase in sales reflects a $29.3 million, or 4%, increase in our Life and Analytical Sciences segment sales, which includes a $9.5 million increase from acquisitions, offset in part by an approximately $1.7 million decrease in sales attributable to unfavorable changes in foreign exchange rates compared to the nine-month period ended October 2, 2005. Our Optoelectronics segment sales grew $3.9 million, or 1%, including an approximately $0.5 million decrease in sales attributable to unfavorable changes in foreign exchange rates compared to the nine-month period ended October 2, 2005, offset by an increase of $0.6 million from acquisitions.

Cost of Sales

Cost of sales for the third quarter of 2006 was $231.0 million, versus $209.7 million for the third quarter of 2005, an increase of $21.3 million, or 10%. As a percentage of sales, cost of sales increased to 59.7% in the third quarter of 2006 from 58.3% in the third quarter of 2005, resulting in a decrease in gross margin of 140 basis points from 41.7% in the third quarter of 2005 to 40.3% in the third quarter of 2006. This decrease was primarily attributable to unusually high gross margins in the prior year due to favorable product mix in the third quarter of 2005 in addition to unfavorable commodity costs in the third quarter of 2006. Partially offsetting these items were efficiencies gained through increased production volume and successful execution of productivity initiatives. Amortization of intangible assets was $7.4 million for the third quarter of 2006 and $6.9 million for the third quarter of 2005. Cost of sales for the third quarter of 2006 also included $0.5 million of stock option expense.

 

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Cost of sales for the nine-month period ended October 1, 2006 was $670.2 million, versus $636.5 million for the nine-month period ended October 2, 2005, an increase of $33.7 million, or 5%. As a percentage of sales, cost of sales increased to 59.9% in the nine-month period ended October 1, 2006 from 58.6% in the nine-month period ended October 2, 2005, resulting in a decrease in gross margin of 130 basis points from 41.4% in the nine-month period ended October 2, 2005, to 40.1% in the nine-month period ended October 1, 2006. This decrease was primarily attributable to unusually high gross margins in the prior year due to favorable product mix in the third quarter of 2005 in addition to unfavorable commodity costs in the third quarter of 2006. Partially offsetting these items were efficiencies gained through increased production volume and successful execution of productivity initiatives. Amortization of intangible assets was $21.6 million and $20.8 million for the nine-month periods ended October 1, 2006 and October 2, 2005, respectively. Cost of sales for the nine-month period ended October 1, 2006 also included $0.8 million of stock option expense.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the third quarter of 2006 were $94.7 million versus $87.9 million for the third quarter of 2005, an increase of $6.8 million, or 8%. As a percentage of sales, selling, general and administrative expenses increased 10 basis points from 24.4% in the third quarter of 2005 to 24.5% in the third quarter of 2006. This increase was primarily the result of stock option expense, increased investment in business development activities, and an increase in the number of sales employees in both emerging markets and higher growth product lines, primarily offset by increased fixed cost leverage and cost controls. Amortization of intangible assets was $1.1 million for the third quarter of 2006 and $0.2 million for the third quarter of 2005. Selling, general and administrative expenses for the third quarter of 2006 included $2.4 million of stock option expense.

Selling, general and administrative expenses for the nine-month period ended October 1, 2006 were $277.2 million versus $277.4 million for the nine-month period ended October 2, 2005, a decrease of approximately $0.3 million. As a percentage of sales, selling, general and administrative expenses decreased 70 basis points from 25.5% in the nine-month period ended October 2, 2005 to 24.8% in the nine-month period ended October 1, 2006. This decrease was the result of increased fixed cost leverage and cost controls offset in part by increased investment in business development activities and an increase in the number of sales employees in both emerging markets and higher growth product lines and stock option expense. Amortization of intangible assets was $1.6 million and $0.6 million for the nine-month periods ended October 1, 2006 and October 2, 2005, respectively. Selling, general and administrative expenses for the nine-month period ended October 1, 2006 included $5.5 million of stock option expense.

Research and Development Expenses

Research and development expenses for the third quarter of 2006 were $24.8 million versus $21.7 million for the third quarter of 2005, an increase of $3.1 million, or 14%. As a percentage of sales, research and development expenses increased 40 basis points from 6.0% in the third quarter of 2005 to 6.4% in the third quarter of 2006. We expect our research and development efforts to increase and continue to emphasize the genetic screening, biopharmaceutical, and environmental and chemical end markets within our Life and Analytical Sciences segment, and medical digital imaging within our Optoelectronics segment in order to help accelerate our growth initiative. Research and development expenses for the third quarter of 2006 included $0.2 million of stock option expense and $0.5 million for the amortization of intangible assets.

Research and development expenses for the nine-month period ended October 1, 2006 were $72.6 million versus $66.3 million for the nine-month period ended October 2, 2005, an increase of $6.3 million, or 9%. As a percentage of sales, research and development expenses increased to 6.5% in the nine-month period ended October 1, 2006, from 6.1% in the nine-month period ended October 2, 2005. Research and development expenses for the nine-month period ended October 1, 2006 included $0.5 million of stock option expense and $1.0 million for the amortization of intangible assets.

 

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Restructuring, Net

We have undertaken a series of restructuring actions related to the impact of acquisitions, divestitures and the integration of its business units. Restructuring actions were recorded in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” In certain instances, specifically when governmental authorities are involved in setting severance levels, SFAS No. 112, “Employers’ Accounting for Postemployment Benefits,” is applied. The principal actions associated with these plans related to workforce and overhead reductions resulting from reorganization activities, including the closure of certain manufacturing and selling facilities. Details of these plans are discussed more fully in our 2005 Form 10-K.

A description of each of the restructuring plans and the activity recorded for the nine month period ended October 1, 2006 is as follows:

Q2 2006 Plan

During the second quarter of 2006, we recognized a $0.8 million restructuring charge in the Life and Analytical Sciences segment, which we refer to as the Q2 2006 Plan. The purpose of this restructuring action was to shift resources into product lines that were more consistent with our growth strategy. The actions in the Q2 2006 Plan were workforce reductions resulting from reorganization activities.

The following table summarizes the components of the Q2 2006 Plan activity for the nine months ended October 1, 2006:

 

     Headcount     Severance  
           (Dollars in thousands)  

Balance at January 1, 2006

   —       $ —    

Provision

   23       755  

Amounts paid

   (23 )     (391 )
              

Balance at October 1, 2006

   —       $ 364  
              

All actions related to the Q2 2006 Plan were completed by the end of the second quarter of 2006, and we anticipate that all payments will be completed by the end of 2006.

Q4 2005 Plan

During the fourth quarter of 2005, we recognized a $2.2 million restructuring charge in the Life and Analytical Sciences segment and a $6.0 million restructuring charge in the Optoelectronics segment, which we refer to as the Q4 2005 Plan. The purpose of these restructuring actions was to shift resources into geographic regions and product lines that were more consistent with our growth strategy. The principal actions in the Q4 2005 Plan were workforce reductions and the closure of several facilities resulting from reorganization activities.

In addition, during the second quarter of 2006, we recorded a pre-tax restructuring charge of $0.4 million relating to our Q4 2005 Plan due to higher than expected costs associated with the termination of employees in Europe within our Life and Analytical Sciences segment. We also recorded a pre-tax restructuring reversal of $1.4 million relating to our Q4 2005 Plan due to the completion in June 2006 of the sale of a building previously reserved for in the Q4 2005 Plan. The amount of the proceeds from this sale in excess of the current book value of the property was recorded as a restructuring reversal within our Optoelectronics segment.

 

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The following table summarizes the components of the Q4 2005 Plan activity for the nine months ended October 1, 2006:

 

     Headcount     Severance     Abandonment
of Excess Facilities
    Total  
     (Dollars in thousands)  

Balance at January 1, 2006

   24     $ 1,792     $ 354     $ 2,146  

Change in estimate

   —         354       —         354  

Amounts paid

   (16 )     (1,665 )     (221 )     (1,886 )
                              

Balance at October 1, 2006

   8     $ 481     $ 133     $ 614  
                              

All actions related to the Q4 2005 Plan have been completed and we anticipate that all payments will be completed by the end of 2006.

Q2 2005 Plan

During the second quarter of 2005, we recognized a $5.3 million restructuring charge in the Life and Analytical Sciences segment and a $2.9 million restructuring charge in the Optoelectronics segment, which we refer to as the Q2 2005 Plan. The purpose of these restructuring actions was to shift resources into geographic regions and product lines that were more consistent with our growth strategy. The principal actions in the Q2 2005 Plan were workforce reductions resulting from reorganization activities. All workforce reductions have been completed and the remaining payments relate to international severance contracts.

The following table summarizes the components of the Q2 2005 Plan activity for the nine months ended October 1, 2006:

 

     Severance  
     (In thousands)  

Balance at January 1, 2006

   $ 2,338  

Amounts paid

     (1,299 )
        

Balance at October 1, 2006

   $ 1,039  
        

All actions related to the Q2 2005 Plan have been completed and we anticipate that all payments will be completed by the end of 2006.

2001 to 2003 Restructuring and Integration Plans

We have approximately $6.6 million of remaining liabilities associated with 2001 to 2003 restructuring and integration plans, primarily relating to remaining lease obligations of closed facilities. The remaining terms of these leases vary in length but all will be completed by 2014.

 

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Interest and Other (Income) Expense, Net

Interest and other (income) expense, net consisted of the following:

 

     Three Months Ended     Nine Months Ended  
    

October 1,

2006

   

October 2,

2005

   

October 1,

2006

   

October 2,

2005

 
     (In thousands)     (In thousands)  

Interest income

   $ (1,919 )   $ (489 )   $ (7,654 )   $ (1,778 )

Interest expense

     2,152       6,886       6,689       22,462  

Extinguishment of debt

     —         —         —         6,210  

Gains on dispositions of investments, net

     (980 )     (400 )     (1,913 )     (5,844 )

Other

     524       51       4,296       502  
                                
   $ (223 )   $ 6,048     $ 1,418     $ 21,552  
                                

Interest and other (income) expense, net for the three months ended October 1, 2006 was $0.2 million of income, versus $6.0 million of expense for the three months ended October 2, 2005, a decrease of $6.2 million or 103%. The decrease in interest and other expense, net in the third quarter of 2006 as compared to the third quarter of 2005 was primarily due to the overall reduction in outstanding debt, lower borrowing costs, and an increase in outstanding cash balances. Interest expense decreased $4.7 million primarily due to the $300.0 million of principal payments made on our senior subordinated 8 7/8% notes which we repurchased through a tender offer in the fourth quarter of 2005. These debt reductions in 2005 were partially offset by $200.9 million in debt outstanding as of October 1, 2006 under our new senior unsecured revolving credit facility, which we entered into on October 31, 2005. In addition, interest income increased $1.4 million due to higher cash balances, and also higher investment rates. We also recognized a net gain on dispositions of investments of $1.0 million associated with the dissolution of certain investments. Other expenses consisted primarily of expense related to foreign currency translation.

For the nine months ended October 1, 2006, interest and other expense, net was $1.4 million versus $21.6 million for the comparable period in 2005, a decrease of approximately $20.1 million, or 93%. The decrease primarily relates to the lower average outstanding balances on the senior subordinated 8 7/8% Notes which we repurchased through a tender offer in the fourth quarter of 2005, and replaced with lower cost debt through our senior unsecured revolving credit facility that we entered into on October 31, 2005. A discussion of our liquidity and our prospective borrowing costs is set forth below under the heading “Liquidity and Capital Resources.”

Provision/Benefit for Income Taxes

The third quarter 2006 provision for income taxes was $7.8 million, versus a provision of $8.7 million for the third quarter of 2005. The provision for income taxes was $22.5 million for the nine-month period ended October 1, 2006, compared to a benefit from income taxes of $2.7 million for the nine-month period ended October 2, 2005.

During the third quarter of 2006 our continuing operations tax provision was reduced, in the aggregate, by discrete items totaling approximately $1.2 million, resulting in a provision before the effect of discrete items of $9.0 million. The reported provision for income taxes for the third quarter of 2005 was $8.7 million. The net benefits of $1.2 million for the third quarter of 2006 consist of tax benefits from provision to return and amended return adjustments of $5.7 million partially offset by $4.5 million of audit settlements and accruals, and tax rate changes.

The reported provision for income taxes of $22.5 million for the nine months ended October 1, 2006 was reduced by a net benefit of $1.9 million, resulting in a provision before the effect of discrete items of $24.4 million. The reported benefit of $2.7 million from income taxes for the nine months ended October 2, 2005 reflects a benefit from the settlement of income tax audits of $26.5 million partially offset by a provision of $6.6

 

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million, resulting in a provision before the effect of discrete items of $17.2 million. The provision of $6.6 million represents the U.S. tax cost on $225.0 million of earnings which were subsequently repatriated in accordance with the Homeland Investment provisions of the American Jobs Creation Act of 2004.

Without the impact of discrete items, our continuing operations effective tax rate for the third quarter of 2006 and nine months ended October 1, 2006 was 24.5%. The comparable effective tax rates for the third quarter of 2005 and nine months ended October 2, 2005 were 24.6% and 24.5%, respectively.

We believe that the inclusion of these non-GAAP financial measures helps investors to gain a meaningful understanding of our tax provision and effective tax rate and their effect on our core operating results and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts. We use these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring our tax provision and effective tax rate and their effect on our core operating results and future prospects and comparing such performance to that of prior periods and to the performance of our competitors. These measures are also used by us in our financial and operating decision making.

Discontinued Operations

As part of our continued efforts to focus on higher growth opportunities, we have discontinued certain businesses and accounted for them as discontinued operations in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Accordingly, the results of operations and related cash flows have been presented as discontinued operations for all periods presented. The assets and liabilities of these businesses have been presented separately and are reflected within the assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of October 1, 2006 and January 1, 2006.

In September 2005, our Board of Directors approved a plan to divest our Fluid Sciences segment. The Fluid Sciences segment consisted of three businesses—Aerospace, Fluid Testing and Semiconductor. In November 2005, we sold the Fluid Testing division to Caleb Brett USA Inc. for approximately $34.5 million, resulting in a net pre-tax gain of $30.3 million. In December 2005, we sold the Aerospace division to Eaton Corporation for approximately $333.0 million, resulting in a net pre-tax gain of $250.6 million. These gains were recognized during fiscal 2005 as gains on the dispositions of discontinued operations. We received total cash proceeds in these transactions of approximately $361.1 million. During the first nine months of 2006, we finalized the net working capital adjustments associated with the sales of these businesses and settled a claim related to an employee benefit program, resulting in the recognition of losses in 2006 of $1.3 million and $0.2 million relative to the Aerospace business and the Fluid Testing business, respectively. In February 2006, we sold substantially all of the assets of our Semiconductor business to an entity affiliated with Tara Capital, Inc. for approximately $26.5 million, subject to a net working capital adjustment, plus potential additional contingent consideration. The pre-tax gain of $3.8 million, exclusive of additional contingent consideration, was recognized through the first nine months of 2006.

In December 2005, our Board of Directors approved a plan to sell our Lithography business. In June 2005, our Board of Directors approved a plan to shut down our Fiber Optics Test Equipment business. The results of these businesses were previously reported as part of the Optoelectronics segment. During the quarter ended October 1, 2006, we substantially completed the remediation of an environmental matter within the Lithography business, resulting in recognition of a pre-tax loss of $1.1 million. The completion of the shut-down of the Fiber Optics Test Equipment business resulted in a pre-tax loss of $5.2 million related to lease and severance costs and the reduction of fixed assets and inventory to net realizable value. We recognized the net loss during fiscal 2005.

During 2006 and 2005, we settled various claims under certain long-term contracts and transition services with our Technical Services business, which was sold in August 1999.

During the third quarter of 2006 there was a $1.4 million tax benefit resulting from the inter-period allocation of income tax to the losses from the dispositions of discontinued operations.

 

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The table below summarizes the gains and losses on dispositions of discontinued operations, as discussed above:

 

     Three Months Ended    Nine Months Ended  
     October 1,
2006
    October 2,
2005
   October 1,
2006
    October 2,
2005
 
     (In thousands)    (In thousands)  

Gain on Semiconductor business

   $ —       $ —      $ 3,750     $ —    

Loss on Aerospace business

     (11 )     —        (1,288 )     —    

Loss on Fluid Testing business

     —         —        (234 )     —    

Loss on Lithography business

     (1,079 )     —        (1,481 )     —    

Gain on contract settlements associated with the Technical Services business

     467       24      853       424  

Gain (loss) on Fiber Optics Test Equipment business

     30       126      28       (5,025 )

Net gain (loss) on dispositions of other discontinued operations

     70       64      (208 )     356  
                               

Net (loss) gain on dispositions of discontinued operations before income taxes

     (523 )     214      1,420       (4,245 )

(Benefit from) provision for income taxes

     (1,361 )     26      (205 )     292  
                               

Gain (loss) on dispositions of discontinued operations, net of income taxes

   $ 838     $ 188    $ 1,625     $ (4,537 )
                               

Summary operating results of the discontinued operations of the Fluid Sciences segment and the Fiber Optics Test Equipment and Lithography businesses for the periods prior to disposition were as follows:

 

     Three Months Ended    Nine Months Ended
     October 1,
2006
   October 2,
2005
   October 1,
2006
    October 2,
2005
     (In thousands)    (In thousands)

Sales

   $ —      $ 60,190    $ 8,705     $ 176,096

Costs and expenses

     —        51,523      9,707       154,948
                            

Operating income (loss) from discontinued operations

     —        8,667      (1,002 )     21,148

Other expenses, net

     —        574      396       1,228
                            

Operating income (loss) from discontinued operations before income taxes

     —        8,093      (1,398 )     19,920

Provision for (benefit from) income taxes

     —        2,917      (373 )     7,456
                            

Income (loss) from discontinued operations, net of taxes

   $ —      $ 5,176    $ (1,025 )   $ 12,464
                            

Contingencies

We are conducting a number of environmental investigations and remedial actions at our current and former locations and, along with other companies, have been named a potentially responsible party (“PRP”) for certain waste disposal sites. We accrue for environmental issues in the accounting period that our responsibility is established and when the cost can be reasonably estimated. We have accrued $3.7 million as of October 1, 2006, representing our management’s estimate of the total cost of ultimate disposition of known environmental matters. This amount is not discounted and does not reflect any recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the time period over which remediation may occur, and the possible effects of changing laws and regulations. For sites where we have been named a PRP, our management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. We expect that the majority of such accrued amounts could be paid out over a period of up to ten

 

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years. As assessment and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had or are expected to have a material adverse effect on our financial position, results of operations or cash flows.

In papers dated October 23, 2002, Enzo Biochem, Inc. and Enzo Life Sciences, Inc. (collectively, “Enzo”) filed a complaint in the United States District Court for the Southern District of New York, Civil Action No. 02-8448, against Amersham plc, Amersham BioSciences, PerkinElmer, Inc., PerkinElmer Life Sciences, Inc., Sigma-Aldrich Corporation, Sigma Chemical Company, Inc., Molecular Probes, Inc., and Orchid BioSciences, Inc. The complaint alleges that we have breached our distributorship and settlement agreements with Enzo, infringed Enzo’s patents, engaged in unfair competition and fraud, and committed torts against Enzo by, among other things, engaging in commercial development and exploitation of Enzo’s patented products and technology, separately and together with the other defendants. Enzo seeks injunctive and monetary relief. In 2003, the court severed the lawsuit and ordered Enzo to serve individual complaints against the five defendants. We subsequently filed an answer and a counterclaim alleging that Enzo’s patents are invalid. In July 2006, the court issued a decision regarding the construction of the claims in Enzo’s patents that effectively limited the coverage of certain of those claims and, we believe, excludes certain of our products from the coverage of Enzo’s patents. Discovery is ongoing. The court has set a schedule for filing of summary judgment motions commencing on January 3, 2007, but has not set a date for trial.

On October 17, 2003, Amersham Biosciences Corp. filed a complaint, which was subsequently amended, in the United States District Court for New Jersey, Civil Action No. 03-4901, against our subsidiary, alleging that our ViewLux and certain of its Image FlashPlate products infringe three of Amersham’s patents related to high-throughput screening (the “NJ case”). On August 18, 2004, Amersham plc filed a complaint against two of our United Kingdom-based subsidiaries in the Patent Court of the English High Court of Justice, Case No. 04C02688, alleging that our same products infringe one corresponding Amersham patent in the United Kingdom, which was granted in August 2004 (the “UK case”). Amersham seeks injunctive and monetary relief in both cases. We filed answers and counterclaims in both cases. On October 29, 2003, we filed a complaint, which was subsequently amended, against Amersham in the United States District Court for Massachusetts, Civil Action No. 03-12098, alleging that Amersham’s IN Cell Analyzer, and LEADseeker Multimodality Imaging system and certain Cyclic AMP and IP3 assays infringe two of our patents related to high-throughput screening (the “MA case”). We seek injunctive and monetary relief. Amersham subsequently filed an answer and counterclaims. After a trial in the UK case in December 2005, the court ruled in February 2006 that Amersham’s patent in question was invalid in the United Kingdom and awarded costs to us. Amersham’s appeal of the ruling in the UK case is scheduled to be heard in early 2007. In May 2006, the court in the NJ case issued a decision regarding the construction of the claims in Amersham’s patents that adopted many of Amersham’s claim construction positions. We have filed a motion asking the court to reconsider that decision. Discovery has not yet been completed in either the NJ or MA case, nor has a trial date been set in either case. A voluntary mediation occurred in September 2006, but did not result in a resolution of these matters. Fact discovery, which was stayed pending the mediation, has now resumed.

We believe we have meritorious defenses to these lawsuits and other proceedings, and we are contesting the actions vigorously in all of the above matters. We are currently unable, however, to reasonably estimate the amount of loss, if any, that may result from the resolution of these matters or to determine whether resolution of any of these matters will have a material adverse impact on our consolidated financial statements.

During 2005, the Internal Revenue Service concluded its audit of federal income taxes for the years 1999 through 2002. We have agreed to the conclusions of the Internal Revenue Service in all matters with the exception of one, and have filed a single issue protest with the Appeals Division of the Internal Revenue Service. We expect to resolve the matter in the first half of 2007. Regardless of the outcome of the protest, we do not expect the final resolution to significantly impact our financial position, results of operations or cash flows in 2007.

 

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We are under regular examination by tax authorities in the United States and other countries (such as Germany and the United Kingdom) in which we have significant business operations. The tax years under examination vary by jurisdiction. We regularly assess the likelihood of additional assessments in each of the taxing jurisdictions resulting from these and subsequent years’ examinations. We have established income tax reserves which we believe to be adequate in relation to the potential for additional assessments. Once established, reserves are adjusted as additional information becomes available and when an event occurs requiring a change to the reserves. The resolution of tax matters is not expected to have a material effect on our consolidated financial condition.

We are also subject to various other claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of our business activities. Each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to us. We have established accruals for potential losses that we believe are probable and reasonably estimable. In the opinion of our management, based on our review of the information available at this time, the total cost of resolving these other contingencies at October 1, 2006, should not have a material adverse effect on our consolidated financial statements.

Reporting Segment Results of Continuing Operations

Life and Analytical Sciences

Sales for the third quarter of 2006 were $283.5 million, versus $259.1 million for the third quarter of 2005, an increase of $24.4 million, or 9%. Acquisitions increased sales in the third quarter of 2006 by $7.1 million, as compared to the third quarter of 2005. Changes in foreign exchange rates accounted for an increase in sales of $5.2 million in the third quarter of 2006 as compared to the third quarter of 2005. The analysis in the remainder of this paragraph compares selected sales by market and product type for the third quarter of 2006, as compared to the third quarter of 2005, and includes the effect of foreign exchange rate fluctuations and acquisitions. Sales to genetic screening customers increased $10.5 million, our OneSource laboratory service sales increased by $9.3 million, and sales to environmental and chemical analysis customers increased $4.7 million. Biopharma sales were unchanged from the comparable period from the prior year. Sales by type of product included increases in instruments of $14.4 million, service of $9.3 million and consumables of $0.7 million.

Sales for the nine-month period ended October 1, 2006 were $823.9 million, versus $794.6 million for the nine-month period ended October 2, 2005, an increase of $29.3 million, or 4%. The effect of acquisitions increased our sales for the nine-month period ended October 1, 2006 by $9.5 million, as compared to the nine-month period ended October 2, 2005. Changes in foreign exchange rates decreased sales by approximately $1.7 million in the nine-month period ended October 1, 2006, as compared to the nine-month period ended October 2, 2005. The following analysis in the remainder of this paragraph compares selected sales by market and product type for the nine-month period ended October 1, 2006, as compared to the nine-month period ended October 2, 2005, and includes the effect of foreign exchange rate fluctuations and acquisitions. Our OneSource laboratory service sales increased by $17.4 million, sales to genetic screening customers increased by $16.9 million, and sales to environmental and chemical analysis customers increased by $8.6 million, while sales to biopharmaceutical customers decreased by $13.6 million. Sales by type of product included increases in sales of service of $17.4 million and instruments of $16.8 million offset by decreases in consumables and reagents of $5.0 million.

Operating profit for the third quarter of 2006 was $25.3 million, versus $26.7 million for the third quarter of 2005, a decrease of $1.4 million, or 5%. The decrease in operating profit in the third quarter of 2006 as compared to the third quarter of 2005 was primarily the result of an increase in amortization expense and the inclusion of stock option expense, as well as a decrease in gross margin percentage. The decrease in gross margin percentage is due to unusually high gross margins in the prior year resulting from favorable product mix in the third quarter of 2005 in addition to unfavorable commodity costs in the third quarter of 2006, partially offset by efficiencies gained through increased production volume and successful execution of productivity initiatives. The third

 

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quarter of 2006 includes stock option expense of $1.0 million. Amortization of intangible assets was $8.4 million for the third quarter of 2006 and $6.5 million for the third quarter of 2005.

Operating profit for the nine-month period ended October 1, 2006 was $74.4 million, versus $64.3 million for the nine-month period ended October 2, 2005, an increase of $10.1 million, or 16%. The increase in operating profit in the nine-month period ended October 1, 2006 as compared to the nine-month period ended October 2, 2005 was primarily the result of a decrease in restructuring charges from $11.0 million in 2005 to $1.1 million in 2006, offset by a decrease in gross margin percentage. The decrease in gross margin percentage is due to unusually high gross margins in the prior year resulting from favorable product mix in the third quarter of 2005 in addition to unfavorable commodity costs in the third quarter of 2006, partially offset by efficiencies gained through increased production volume and successful execution of productivity initiatives. The nine-month period ended October 1, 2006 includes stock option expense of $2.3 million. Amortization of intangible assets was $22.3 million for the nine-month period ended October 1, 2006 and $19.6 million for the nine-month period ended October 2, 2005.

Optoelectronics

Sales for the third quarter of 2006 were $103.4 million, versus $100.9 million for the third quarter of 2005, an increase of $2.5 million, or 2%. Changes in foreign exchange rates accounted for an increase in sales of $1.1 million in the third quarter of 2006, as compared to the third quarter of 2005. The analysis in the remainder of this paragraph compares selected sales by product type for the third quarter of 2006, as compared to the third quarter of 2005, and includes the effect of foreign exchange fluctuations and acquisitions. Sales of our digital imaging products increased by $4.0 million, while sales within our sensors and specialty lighting product lines decreased $1.5 million as compared to the prior year.

Sales for the nine-month period ended October 1, 2006 were $295.5 million, versus $291.5 million for the nine-month period ended October 2, 2005, an increase of $3.9 million, or 1%. The effect of acquisitions increased our sales for the nine-month period ended October 1, 2006 by $0.6 million, as compared to the nine-month period ended October 2, 2005. Changes in foreign exchange rates decreased sales by approximately $0.5 million in the nine-month period ended October 1, 2006, as compared to sales in the nine-month period ended October 2, 2005. The analysis in the remainder of this paragraph compares selected sales by product type for the nine-month period ended October 1, 2006, as compared to the nine-month period ended October 2, 2005, and includes the effect of foreign exchange fluctuations and acquisitions. Sales of our digital imaging products increased by $9.2 million, while sales within our sensors and specialty lighting product lines decreased $5.3 million.

Operating profit for the third quarter of 2006 was $20.1 million, versus $20.8 million for the third quarter of 2005, a decrease of $0.7 million, or 3%. This decrease in operating profit was primarily the result of a decrease in gross margin percentage. The decrease in gross margin percentage is due to unusually high gross margins in the prior year resulting from favorable customer mix in the third quarter of 2005, unfavorable commodity costs in the third quarter of 2006 and capacity issues within the amorphous silicon business, offset by successful execution of productivity initiatives. The operating profit for the third quarter of 2006 includes stock option expense of $0.4 million. Amortization of intangible assets was $0.6 million for the third quarter of 2006, which was unchanged from the third quarter of 2005.

Operating profit for the nine-month period ended October 1, 2006 was $50.2 million, versus $47.2 million for the nine-month period ended October 2, 2005, an increase of $3.1 million, or 6%. The increase in operating profit in the nine-month period ended October 1, 2006, as compared to the nine-month period ended October 2, 2005, was primarily the result of a $1.4 million restructuring credit in 2006 as compared to the $3.2 million restructuring charge in 2005, offset by a decrease in gross margin percentage. The decrease in gross margin percentage is due to unusually high gross margins in the prior year resulting from favorable customer mix in the third quarter of 2005, unfavorable commodity costs in the third quarter of 2006 and capacity issues within the

 

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amorphous silicon business, offset by successful execution of productivity initiatives. The nine-month period ended October 1, 2006 includes stock option expense of $1.1 million. Amortization of intangible assets was $1.9 million and $2.0 million for the nine-month periods ended October 1, 2006 and October 2, 2005, respectively. The nine-month period ended October 2, 2005 also included a $0.2 million charge for in-process research and development related to the acquisition of the capital stock of Elcos AG, a leading European designer and manufacturer of custom light emitting diode, or LED, solutions for biomedical and industrial applications.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures, service our debt and other long-term liabilities and pay dividends on our common stock. Our principal sources of funds are from our operations and the capital markets, particularly the debt markets. In the near term, we anticipate that our operations will generate sufficient cash to fund our operating expenses, capital expenditures, interest payments on our debt and dividends on our common stock. In the long-term, we expect to use internally generated funds and external sources to satisfy our debt and other long-term liabilities.

Principal factors that could affect the availability of our internally generated funds include:

 

    deterioration of sales due to weakness in markets in which we sell our products and services, and

 

    changes in our working capital requirements.

Principal factors that could affect our ability to obtain cash from external sources include:

 

    financial covenants contained in the financial instruments controlling our borrowings that limit our total borrowing capacity,

 

    increases in interest rates applicable to our outstanding variable rate debt,

 

    a ratings downgrade that would limit our ability to borrow under our accounts receivable facility and our overall access to the corporate debt market,

 

    volatility in the markets for corporate debt,

 

    a decrease in the market price for our common stock, and

 

    volatility in the public equity markets.

In October 2005 our Board of Directors reaffirmed our authority to repurchase up to 10.0 million shares of our common stock from time to time on the open market or in privately negotiated transactions. During the third quarter of 2006 we completed our repurchase of 10.0 million shares in the aggregate under the Program. On November 6, 2006, we announced that our Board of Directors authorized us to repurchase up to 10.0 million additional shares of our common stock under a new stock repurchase program (the “New Program”). The New Program will expire on October 25, 2010 unless this authorization is terminated earlier by our Board. The timing and amount of any shares repurchased will be determined based on our evaluation of market conditions and other factors. The New Program may also be suspended or discontinued at any time. Any repurchased shares will be available for use in connection with our stock plans and for other corporate programs. If we continue to repurchase shares, the repurchase program will be funded using our existing financial resources, including cash and cash equivalents and our existing senior unsecured revolving credit facility. At October 1, 2006, we had cash and cash equivalents of approximately $207.1 million.

Cash Flows

Operating Activities. Net cash generated by continuing operations operating activities was $43.2 million for the nine months ended October 1, 2006, compared to net cash generated by continuing operations operating

 

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activities of $109.9 million for the nine months ended October 2, 2005. Principal contributors to the generation of cash from operating activities during the nine months ended October 1, 2006 were net income from continuing operations of $77.3 million and depreciation and amortization of $50.9 million. These amounts were offset in part by taxes paid on divestitures of $60.0 million and an increase in net working capital of $10.3 million. Contributing to the net increase in working capital in the nine months ended October 1, 2006 was an increase in inventory of $13.3 million and a decrease in accounts payable of $10.0 million, offset in part by a decrease in accounts receivable of $13.0 million. Strong performance in accounts receivable collections in the Life and Analytical Sciences segment was partially offset by increased accounts payable disbursements in both the Life and Analytical Sciences and Optoelectronics segments. The increase in inventory is primarily the result of expanding the amount of inventory held at service locations to improve customer satisfaction within the Life and Analytical Sciences segment. There was no incremental use of our accounts receivable securitization facility during the first nine months of 2006, which totaled $45.0 million at both October 1, 2006 and January 1, 2006. Net cash used for changes in accrued expenses, other assets and liabilities and other items totaled $14.7 million during the first nine months of 2006, and primarily relates to timing of tax, salary and benefit related payments.

Investing Activities. Net cash used in continuing operations investing activities was $94.5 million in the nine months ended October 1, 2006, compared to $14.7 million of cash used in the nine months ended October 2, 2005. Included in the first nine months of 2006 was $25.0 million of net proceeds received from the sale of our semiconductor business and $6.3 million of net proceeds from the dispositions of certain investments. This was offset by approximately $93.5 million of net cash used for acquisitions. In addition, we incurred $12.1 million of business development transaction costs, earn-out payments and other costs in connection with these and previous transactions. Capital expenditures in the nine months ended October 1, 2006 were $31.0 million, mainly in the areas of tooling and other capital equipment purchases, in addition to facility improvements. These cash outflows were partially offset by $7.1 million received from the sale of property, plant and equipment and $3.8 million from the settlement of life insurance policies.

Financing Activities. Net cash used in continuing operations financing activities was $253.7 million in the nine months ended October 1, 2006, compared to $122.9 million in the nine months ended October 2, 2005, an increase of $130.8 million, or 106%. In the nine months ended October 1, 2006, we repurchased in the open market 8.9 million shares of our common stock at a total cost of $190.1 million. Debt reductions during the first nine months of 2006 totaled $56.6 million, compared to reductions in the first nine months of 2005 of $104.1 million. These uses of cash were offset by proceeds from common stock option exercises of $17.4 million and the related tax benefit of $4.0 million. In addition, we paid $26.9 million in dividends in the first nine months of 2006.

Borrowing Arrangements

Senior Unsecured Credit Facility. On October 31, 2005, we entered into a $350.0 million five-year senior unsecured revolving credit facility. Letters of credit in the aggregate amount of approximately $15.0 million, originally issued under our previous credit agreement, are treated as issued under this agreement. We use the senior unsecured revolving credit facility for general corporate purposes which may include working capital, refinancing existing indebtedness, capital expenditures, share repurchases, acquisitions and strategic alliances. The interest rates under the senior unsecured revolving credit facility are based on the Eurocurrency rate at the time of borrowing plus a margin or the base rate from time to time. The Eurocurrency margin as of October 1, 2006 was 60 basis points. The base rate is the higher of (1) the corporate base rate announced from time to time by Bank of America, N.A. and (2) the Federal Funds rate plus 50 basis points. We may allocate all or a portion of our indebtedness under the senior unsecured revolving credit facility to interest based upon the Eurocurrency rate plus a margin or the base rate. As of October 1, 2006, there were approximately $200.9 million of borrowings under the facility.

 

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Our senior unsecured revolving credit facility contains covenants that require us to maintain specific financial ratios, including:

 

    A minimum interest coverage ratio, and

 

    A maximum total leverage ratio.

We were in compliance with all covenants as of October 1, 2006.

Off-Balance Sheet Arrangements

Receivables Securitization Facility

We have established a wholly-owned consolidated subsidiary to purchase, on a revolving basis, certain of our accounts receivable balances and simultaneously sell an undivided interest in this pool of receivables to a financial institution. This facility, which is currently scheduled to expire in January 2007, provides for total funding capacity of $65.0 million to expand our sources of liquidity. The amount available for funding is based on the amount of receivables purchased by the consolidated subsidiary in any given month. Amounts funded under this facility were $45.0 million at both October 1, 2006 and January 1, 2006. As of October 1, 2006, we had approximately $20.0 million of capacity available under the facility. The facility had an effective interest rate of LIBOR plus approximately 50 basis points as of October 1, 2006. The facility includes conditions that require us to maintain a senior unsecured credit rating of BB or above, as defined by Standard & Poor’s Rating Services, and Ba2 or above, as defined by Moody’s Investors Service. In January 2006, we entered into an agreement to extend the term of our accounts receivable securitization facility to January 26, 2007.

Dividends

Our Board of Directors declared regular quarterly cash dividends of seven cents per share in the first three quarters of 2006 and in each quarter of 2005.

Effects of Recently Adopted Accounting Pronouncement

Effective January 2, 2006, we adopted SFAS No. 123(R), “Share-Based Payment” (“SFAS No. 123(R)”), which requires compensation costs related to stock-based transactions, including employee stock options, to be recognized in the financial statements based on fair value. SFAS No. 123(R) revises SFAS No. 123, as amended, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” Prior to January 2, 2006, we applied the intrinsic value based method prescribed in APB Opinion No. 25, as permitted by SFAS No. 123, in accounting for employee stock-based compensation. We generally did not recognize compensation expense in connection with the grant of stock options because the options granted had an exercise price equal to the fair market value of the underlying common stock on the date of grant.

In transitioning from APB Opinion No. 25 to SFAS No. 123(R), we have applied the modified prospective method. Accordingly, periods prior to adoption have not been restated and are not directly comparable to periods after adoption. Under the modified prospective method, compensation cost recognized in periods after adoption includes (i) compensation cost for all stock-based payments granted prior to, but not yet vested as of January 2, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, less estimated forfeitures, and (ii) compensation cost for all stock-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R), less estimated forfeitures.

The total stock-based compensation expense for the cost of stock options, restricted stock, restricted stock units and performance units was $4.5 million and $10.7 million for the three and nine months ended October 1, 2006, respectively. The total income tax benefit recognized in the consolidated income statements for stock-

 

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based compensation was $1.4 million and $3.5 million for the three and nine months ended October 1, 2006, respectively. At October 1, 2006, total unrecognized stock-based compensation expense, expected to be recognized over a weighted average period of 1.7 fiscal years, amounted to $12.7 million. Total unrecognized stock-based compensation expense will be adjusted for future changes in estimated forfeitures, if any.

Prior to the adoption of SFAS No. 123(R), we presented all excess tax benefits related to stock compensation as cash flows from operating activities in our statement of consolidated statements of cash flows. SFAS No. 123(R) requires the cash flows resulting from these tax benefits to be classified as cash flows from financing activities. In the first nine months of fiscal 2006, the tax benefit from the exercise of stock options was $4.0 million, which was classified as cash flows from financing activities.

Effects of Recently Issued Accounting Pronouncements

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides guidance on how prior year misstatements should be taken into consideration when quantifying misstatements in current year financial statements for purposes of determining whether the current year’s financial statements are materially misstated. We will be required to adopt SAB 108 in the fourth quarter of fiscal year 2006. We do not anticipate that the adoption of SAB 108 will have a material impact on our consolidated financial statements.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. We will be required to adopt SFAS No. 157 in the first quarter of fiscal year 2008. We are currently evaluating the requirements of SFAS No. 157 and have not yet determined the impact, if any, on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R)” (“SFAS No. 158”). SFAS No. 158 requires companies to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of defined benefit pension and other postretirement benefit plans. Additionally, SFAS No. 158 requires companies to measure plan assets and obligations at their year-end balance sheet date. SFAS No. 158 requires prospective application, and the recognition and disclosure requirements are effective for our fiscal year ending December 31, 2006.

We are currently evaluating the requirements of SFAS No. 158 and have not yet determined the impact on our consolidated financial statements. The effect of adopting SFAS No. 158 may have an impact on our consolidated balance sheets, but no impact to our consolidated income statements or statements of cash flows. The actual impact of adopting SFAS No. 158 will be dependent upon the fair value of plan assets and the amount of projected benefit obligations measured as of December 31, 2006. We do not anticipate an impact on our compliance with the financial covenants contained in our loan agreement, described in more detail in Note 5 to our consolidated financial statements, from the adoption of SFAS No. 158.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN No. 48”). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in the financial statements of an entity in accordance with SFAS No. 109, “Accounting for Income Taxes.” The new interpretation is effective for fiscal years beginning after December 15, 2006. We will be required to adopt FIN No. 48 in the first quarter of fiscal year 2007. We are currently evaluating the requirements of FIN No. 48 and have not yet determined the impact on our consolidated financial statements.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

Market Risk. We are exposed to market risks, relating to both currency exchange rates and interest rates. On occasion, in order to manage the volatility relating to these exposures, we may enter into various derivative transactions pursuant to our policies to hedge against known or forecasted market exposures. We briefly describe several of the market risks we face below. The following disclosure supplements the disclosure provided under the heading, “Item 7A. Quantitative and Qualitative Disclosure About Market Risk,” in our 2005 Form 10-K.

Foreign Exchange Risk. The potential change in foreign currency exchange rates offers a substantial risk to us, as approximately 60% of our business is conducted outside of the U.S., generally in foreign currencies. Our risk management strategy currently uses forward contracts to mitigate certain balance sheet foreign currency transaction exposures. The intent is to offset gains and losses that occur on the underlying exposures, with gains and losses resulting from the forward contracts that hedge these exposures. Principal hedged currencies include the British Pound (GBP), Canadian Dollar (CAD), Euro (EUR), Japanese Yen (JPY), and Singapore Dollar (SGD). The periods of these forward contracts typically span less than three months. We held forward foreign exchange contracts with U.S. equivalent notional amounts totaling $198.1 million at October 1, 2006 and $172.6 million on October 2, 2005. For the nine months ended October 1, 2006, we did not engage in any cash flow hedges. However, we are able to partially mitigate the impact that fluctuations in currencies have on our net income as a result of our manufacturing facilities located in countries outside the U.S., material sourcing and other spending which occur in countries outside the U.S resulting in a natural hedge. We do not enter into derivatives for trading or other speculative purposes, nor do we use leveraged financial instruments.

Although we attempt to manage our foreign currency exchange risk through the above activities, when the U.S. dollar weakens against other currencies in which we transact business, generally sales and net income will be positively but not proportionately impacted.

Foreign Currency Risk—Value-at-Risk Disclosure. We continue to measure foreign currency risk using the Value-at-Risk model described in our 2005 Form 10-K. These measures continue to approximate our risks.

Interest Rate Risk. Our debt portfolio, after consideration of the tender offer and repayment of the 6.8% Notes, includes primarily variable rate instruments. Fluctuations in interest rates can therefore have a direct impact on both our short-term cash flows (as they relate to interest) and our earnings.

Interest Rate Risk—Sensitivity. Our annual report on Form 10-K for the fiscal year ended January 1, 2006 presents sensitivity measures for our interest rate risk. We refer to our 2005 Form 10-K for our sensitivity disclosure.

 

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of our quarter ended October 1, 2006. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and

 

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management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on their evaluation of our disclosure controls and procedures as of the end of our quarter ended October 1, 2006, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended October 1, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

In papers dated October 23, 2002, Enzo Biochem, Inc. and Enzo Life Sciences, Inc. (collectively “Enzo”) filed a complaint in federal court in New York against us, one of our subsidiaries and several other companies, which is described in more detail in Note 14 to our condensed consolidated financial statements in this quarterly report. In July 2006, the court issued a decision regarding the construction of the claims in Enzo’s patents that effectively limited the coverage of certain of those claims and, we believe, excludes certain of our products from the coverage of Enzo’s patents. Discovery is ongoing. The court has set a schedule for filing of summary judgment motions commencing on January 3, 2007, but has not set a date for trial.

On October 17, 2003, Amersham Biosciences Corp. filed a complaint in federal court in New Jersey against one of our subsidiaries, alleging that certain of our subsidiary’s products infringe three of Amersham’s patents related to high-throughput screening (the “NJ case”). On October 29, 2003, we filed a complaint against Amersham in federal court in Massachusetts, alleging that certain of Amersham’s products infringe two of our patents related to high-throughput screening (the “MA case”). On August 18, 2004, Amersham plc filed a complaint in the Patent Court of the English High Court of Justice against two of our United Kingdom-based subsidiaries, alleging that certain of our products infringe one corresponding Amersham United Kingdom patent granted in August 2004 (the “UK case”). These cases are described in more detail in Note 14 to our condensed consolidated financial statements in this quarterly report. After a trial in the UK case in December 2005, the court ruled in February 2006 that Amersham’s patent in question was invalid in the United Kingdom and awarded costs to us. Amersham’s appeal of the ruling in the UK case is scheduled to be heard in early 2007. In May 2006, the court in the NJ case issued a decision regarding the construction of the claims in Amersham’s patents that adopted many of Amersham’s claim construction positions. We have filed a motion asking the court to reconsider that decision. Discovery has not yet been completed in either the NJ or MA case, nor has a trial date been set in either case. A voluntary mediation occurred in September 2006, but did not result in a resolution of these matters. Fact discovery, which was stayed pending the mediation, has now resumed.

We believe we have meritorious defenses to these lawsuits and the other proceedings described in Note 14, and are contesting the actions vigorously. We are currently unable, however, to reasonably estimate the amount of the loss, if any, that may result from the resolution of these matters or to determine whether resolution of any of these matters will have a material adverse impact on our consolidated financial statements.

We are also subject to various other claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of our business activities. Each of these matters is subject to uncertainties, and it is possible that some of these matters may be resolved unfavorably to us. We have established accruals for potential losses that we believe are probable and reasonably estimable. In the opinion of our management, based on its review of the information available at this time, the total cost of resolving these other contingencies at October 1, 2006 should not have a material adverse effect on our consolidated financial statements.

 

Item 1A. Risk Factors

The following important factors affect our business and operations generally or affect multiple segments of our business and operations:

If we do not introduce new products in a timely manner, we may lose market share and be unable to achieve revenue growth targets.

We sell many of our products in industries characterized by rapid technological change, frequent new product and service introductions, and evolving customer needs and industry standards. Many of the businesses competing with us in these industries have significant financial and other resources to invest in new technologies,

 

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substantial intellectual property portfolios, substantial experience in new product development, regulatory expertise, manufacturing capabilities and the distribution channels to deliver products to customers. Our products could become technologically obsolete over time, or we may invest in technology that does not lead to revenue growth or continue to sell products for which the demand from our customers is declining, in which case we may lose market share or not achieve our revenue growth targets. The success of our new product offerings will depend upon several factors, including our ability to:

 

    accurately anticipate customer needs,

 

    innovate and develop new technologies and applications,

 

    successfully commercialize new technologies in a timely manner,

 

    price our products competitively and manufacture and deliver our products in sufficient volumes and on time, and

 

    differentiate our offerings from our competitors’ offerings.

Many of our products are used by our customers to develop, test and manufacture their products. Therefore, we must anticipate industry trends and develop products in advance of the commercialization of our customers’ products. In developing new products, we may be required to make significant investments before we can determine the commercial viability of the new product. If we fail to accurately foresee our customers’ needs and future activities, we may invest heavily in research and development of products that do not lead to significant sales.

In addition, some of our licensed technology is subject to contractual restrictions, which may limit our ability to develop or commercialize products for some applications. For example, some of our license agreements are limited to the field of life sciences research, and exclude clinical diagnostics applications.

We may not be able to successfully execute acquisitions or license technologies, integrate acquired businesses or licensed technologies into our existing business, or make acquired businesses or licensed technologies profitable.

We have in the past, and may in the future, supplement our internal growth by acquiring businesses and licensing technologies that complement or augment our existing product lines, such as our acquisitions of J.N. Macri Technologies LLC and NTD Laboratories, Inc. in July 2006 and Avalon Instruments Limited in September 2006. However, we may be unable to identify or complete promising acquisitions or license transactions for many reasons, including:

 

    competition among buyers and licensees,

 

    the high valuations of businesses and technologies,

 

    the need for regulatory and other approval, and

 

    our inability to raise capital to fund these acquisitions.

Some of the businesses we may seek to acquire may be unprofitable or marginally profitable. Accordingly, the earnings or losses of acquired businesses may dilute our earnings. For these acquired businesses to achieve acceptable levels of profitability, we must improve their management, operations, products and market penetration. We may not be successful in this regard and may encounter other difficulties in integrating acquired businesses into our existing operations, such as incompatible management, information or other systems or cultural differences.

To finance our acquisitions, we may have to raise additional funds, either through public or private financings. We may be unable to obtain such funds or may be able to do so only on terms unacceptable to us.

 

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We may not be successful in adequately protecting our intellectual property.

Patent and trade secret protection is important to us because developing new products, processes and technologies gives us a competitive advantage, although it is time-consuming and expensive. We own many United States and foreign patents and intend to apply for additional patents. Patent applications we file, however, may not result in issued patents or, if they do, the claims allowed in the patents that issue may be narrower than what is needed to protect fully our products, processes and technologies. Similarly, applications to register our trademarks may not be granted in all countries in which they are filed. For our intellectual property that is protected by keeping it secret, such as trade secrets and know-how, we may not use adequate measures to protect this intellectual property.

Third parties may also challenge the validity of our issued patents, may circumvent or “design around” our patents and patent applications, or may claim that our products, processes or technologies infringe their patents. In addition, third parties may assert that our product names infringe their trademarks. We may incur significant expense in legal proceedings to protect our intellectual property against infringement by third parties or to defend against claims of infringement by third parties. Claims by third parties in pending or future lawsuits could result in awards of substantial damages against us or court orders that could effectively prevent us from manufacturing, using, importing or selling our products in the United States or other countries.

If we are unable to renew our licenses or otherwise lose our licensed rights, we may have to stop selling products or we may lose competitive advantage.

We may not be able to renew our existing licenses, or licenses we may obtain in the future, on terms acceptable to us, or at all. If we lose the rights to a patented or other proprietary technology, we may need to stop selling products incorporating that technology and possibly other products, redesign our products or lose a competitive advantage. Potential competitors could in-license technologies that we fail to license and potentially erode our market share.

Our licenses typically subject us to various economic and commercialization obligations. If we fail to comply with these obligations we could lose important rights under a license, such as the right to exclusivity in a market. In some cases, we could lose all rights under the license. In addition, rights granted under the license could be lost for reasons out of our control. For example, the licensor could lose patent protection for a number of reasons, including invalidity of the licensed patent, or a third party could obtain a patent that curtails our freedom to operate under one or more licenses.

If we do not compete effectively, our business will be harmed.

We encounter aggressive competition from numerous competitors in many areas of our business. We may not be able to compete effectively with all of these competitors. To remain competitive, we must develop new products and periodically enhance our existing products. We anticipate that we may also have to adjust the prices of many of our products to stay competitive. In addition, new competitors, technologies or market trends may emerge to threaten or reduce the value of entire product lines.

Our quarterly operating results could be subject to significant fluctuation, and we may not be able to adjust our operations to effectively address changes we do not anticipate.

Given the nature of the markets in which we participate, we cannot reliably predict future sales and profitability. Changes in competitive, market and economic conditions may require us to adjust our operations, and we may not be able to make those adjustments or to make them quickly enough to adapt to changing conditions. A high proportion of our costs are fixed, due in part to our research and development and

 

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manufacturing costs. Thus, small declines in sales could disproportionately affect our operating results in a quarter. Factors that may affect our quarterly operating results include:

 

    demand for and market acceptance of our products,

 

    competitive pressures resulting in lower selling prices,

 

    adverse changes in the level of economic activity in regions in which we do business,

 

    adverse changes in industries, such as pharmaceutical and biomedical, on which we are particularly dependent,

 

    changes in the portions of our sales represented by our various products and customers,

 

    delays or problems in the introduction of new products,

 

    our competitors’ announcement or introduction of new products, services or technological innovations,

 

    increased costs of raw materials or supplies, and

 

    changes in the volume or timing of product orders.

If we are unable to produce an adequate quantity of products, such as our digital x-ray detectors, to meet our customers’ demands, our revenue growth may be adversely affected.

We have an established global manufacturing base with facilities in multiple locations around the world. Each of these facilities faces risks to its production capacity that may relate to natural disasters, labor relations or regulatory compliance. In addition, in any of these facilities, such as our Optoelectronics amorphous silicon facility in Santa Clara, California, we may not manage the manufacturing or production processes at expected levels, we may fail to anticipate or act on the need to increase the production capacity, or we may be unable to quickly resolve technical manufacturing issues that arise from time to time. Any of these risks could cause our revenue growth to be adversely affected.

If we fail to maintain satisfactory compliance with the regulations of the United States Food and Drug Administration and other governmental agencies, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil or criminal penalties.

Some of the products produced by our Life and Analytical Sciences segment are subject to regulation by the United States Food and Drug Administration (“FDA”) and similar international agencies. These regulations govern a wide variety of product activities, from design and development to labeling, manufacturing, promotion, sales, resales and distribution. If we fail to comply with those regulations or those of similar international agencies, we may have to recall products, cease their manufacture and distribution, and may be subject to fines or criminal prosecution.

Changes in governmental regulations may reduce demand for our products or increase our expenses.

We compete in markets in which we or our customers must comply with federal, state, local and foreign regulations, such as environmental, health and safety, and food and drug regulations. We develop, configure and market our products to meet customer needs created by these regulations. Any significant change in these regulations could reduce demand for our products or increase our costs of producing these products.

Economic, political and other risks associated with foreign operations could adversely affect our international sales.

Because we sell our products worldwide, our businesses are subject to risks associated with doing business internationally. Our sales originating outside the United States represented the majority of our total sales in the

 

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quarter ended October 1, 2006. We anticipate that sales from international operations will continue to represent a substantial portion of our total sales. In addition, many of our manufacturing facilities, employees and suppliers are located outside the United States. Accordingly, our future results of operations could be harmed by a variety of factors, including:

 

    changes in foreign currency exchange rates,

 

    changes in a country’s or region’s political or economic conditions, particularly in developing or emerging markets,

 

    longer payment cycles of foreign customers and difficulty of collecting receivables in foreign jurisdictions,

 

    trade protection measures and import or export licensing requirements,

 

    differing tax laws and changes in those laws,

 

    difficulty in staffing and managing widespread operations,

 

    differing labor laws and changes in those laws,

 

    differing protection of intellectual property and changes in that protection, and

 

    differing regulatory requirements and changes in those requirements.

If we do not retain our key personnel, our ability to execute our business strategy will be limited.

Our success depends to a significant extent upon the continued service of our executive officers and key management and technical personnel, particularly our experienced engineers, and on our ability to continue to attract, retain, and motivate qualified personnel. The competition for these employees is intense. The loss of the services of one or more of our key personnel could have a material adverse effect on our operating results. In addition, there could be a material adverse effect on us should the turnover rates for engineers and other key personnel increase significantly or if we are unable to continue to attract qualified personnel. We do not maintain any key person life insurance policy on any of our officers or employees.

Restrictions in our senior unsecured credit facility may limit our activities.

Our senior unsecured revolving credit facility contains, and future debt instruments to which we may become subject may contain, restrictive covenants that limit our ability to engage in activities that could otherwise benefit our company. Our new senior unsecured revolving credit facility includes restrictions on our ability and the ability of our subsidiaries to:

 

    pay dividends on, redeem or repurchase our capital stock,

 

    sell assets,

 

    incur obligations that restrict their ability to make dividend or other payments to us,

 

    guarantee or secure indebtedness,

 

    enter into transactions with affiliates, and

 

    consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries on a consolidated basis.

We are also required to meet specified financial ratios under the terms of our senior unsecured revolving credit facility. Our ability to comply with these financial restrictions and covenants is dependent on our future performance, which is subject to prevailing economic conditions and other factors, including factors that are beyond our control such as foreign exchange rates, interest rates, changes in technology and changes in the level of competition.

 

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Our failure to comply with any of these restrictions in our senior unsecured revolving credit facility may result in an event of default under that facility, which could permit acceleration of the debt under that facility, and require us to prepay that debt before its scheduled due date.

Our results of operations will be adversely affected if we fail to realize the full value of our intangible assets.

As of October 1, 2006, our total assets included $1.5 billion of net intangible assets. Net intangible assets consist principally of goodwill associated with acquisitions and costs associated with securing patent rights, trademark rights and technology licenses, net of accumulated amortization. We test certain of these items—specifically all of those that are considered “non-amortizing”—on an annual basis for potential impairment by comparing the carrying value to the fair market value of the reporting unit to which they are assigned. All of our amortizing intangible assets are evaluated for impairment should discrete events occur that call into question the recoverability of the intangible.

Adverse changes in our business or the failure to grow our Life and Analytical Sciences segment may result in impairment of our intangible assets which could adversely affect our results of operations.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Stock Repurchase Program

The following table provides information with respect to the shares of common stock repurchased by us for the periods indicated.

 

    Issuer Repurchases of Equity Securities

Period

  Total Number of
Shares
Purchased(1)
  Average Price
Paid Per
Share
  Total Number of Shares
Purchased as Part of Publicly
Announced Plans or Programs
  Maximum Number of Shares
that May Yet Be Purchased
Under the Plans or Programs

July 3, 2006 – July 30, 2006

  0   $ 0.00   0   3,904,000

July 31, 2006 – August 27, 2006

  194,170     17.94   194,170   3,709,830

August 28, 2006 – October 1, 2006

  3,709,830     18.90   3,709,830   0
           

Activity for quarter ended October 1, 2006

  3,904,000   $ 18.86   3,904,000   0
           

(1) On October 21, 2005 our Board of Directors reaffirmed our authority to repurchase up to 10,000,000 shares of our common stock, which we publicly disclosed on November 14, 2005 (the “Program”). During the fourth quarter of 2005, we repurchased 1,096,000 shares of our common stock in the open market under the Program at an aggregate cost of $24.4 million, including commissions. During the first quarter of 2006, we repurchased 5,000,000 shares of our common stock in the open market under the Program at an aggregate cost of $116.4 million, including commissions. We did not repurchase any shares of our common stock in the second quarter of 2006. During the third quarter of 2006, we repurchased 3,904,000 shares of our common stock in the open market under the Program at an aggregate cost of $73.7 million, including commissions.

 

   During the third quarter of 2006 we completed our repurchase of 10.0 million shares in the aggregate under the Program. On November 6, 2006, we announced that our Board of Directors authorized us to repurchase up to 10.0 million additional shares of our common stock under a new stock repurchase program (the “New Program”). The New Program will expire on October 25, 2010 unless this authorization is terminated earlier by our Board. The New Program may also be suspended or discontinued at any time.

 

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Table of Contents
Item 6. Exhibits

 

10.1    PerkinElmer’s Amended and Restated 2001 Incentive Plan.
10.2    PerkinElmer’s Amended and Restated Life Sciences Incentive Plan.
10.3    Form of Stock Option Agreement given by PerkinElmer to its executive officers for use under the 2005 Incentive Plan.
10.4    Form of Stock Option Agreement given by PerkinElmer to its chairman and chief executive officer for use under the 2005 Incentive Plan.
10.5    Form of Restricted Stock Agreement given by PerkinElmer to its executive officers for awards with performance-based vesting under the 2005 Incentive Plan.
10.6    Form of Restricted Stock Agreement given by PerkinElmer to its executive officers for awards with time-based vesting under the 2005 Incentive Plan.
10.7    Form of Restricted Stock Unit Agreement given by PerkinElmer to its executive officers under the 2005 Incentive Plan.
10.8    Stock Purchase Agreement, dated as of July 27, 2006, by and between PerkinElmer Holdings, Inc. and James N. Macri was filed with the Securities and Exchange Commission on August 2, 2006 as Exhibit 99.1 to our current report on Form 8-K and is incorporated herein by reference.
10.9    Asset Purchase Agreement, dated as of July 27, 2006, by and among PerkinElmer Singapore Pte Ltd, J.N. Macri Technologies LLC and James N. Macri was filed with the Securities and Exchange Commission on August 2, 2006 as Exhibit 99.2 to our current report on Form 8-K and is incorporated herein by reference.
31.1    Certification of Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2    Certification of Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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Table of Contents

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.

 

PERKINELMER, INC.

By:   /s/    JEFFREY D. CAPELLO        
 

Jeffrey D. Capello

Senior Vice President and

Chief Financial Officer

(Principal Financial Officer)

November 13, 2006

 

PERKINELMER, INC.

By:   /s/    MICHAEL L. BATTLES        
 

Michael L. Battles

Vice President, Corporate Controller and

Chief Accounting Officer

(Principal Accounting Officer)

November 13, 2006

 

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Table of Contents

EXHIBIT INDEX

 

Exhibit
Number
  

Exhibit Name

10.1    PerkinElmer’s Amended and Restated 2001 Incentive Plan.
10.2    PerkinElmer’s Amended and Restated Life Sciences Incentive Plan.
10.3    Form of Stock Option Agreement given by PerkinElmer to its executive officers for use under the 2005 Incentive Plan.
10.4    Form of Stock Option Agreement given by PerkinElmer to its chairman and chief executive officer for use under the 2005 Incentive Plan.
10.5    Form of Restricted Stock Agreement given by PerkinElmer to its executive officers for awards with performance-based vesting under the 2005 Incentive Plan.
10.6    Form of Restricted Stock Agreement given by PerkinElmer to its executive officers for awards with time-based vesting under the 2005 Incentive Plan.
10.7    Form of Restricted Stock Unit Agreement given by PerkinElmer to its executive officers under the 2005 Incentive Plan.
10.8    Stock Purchase Agreement, dated as of July 27, 2006, by and between PerkinElmer Holdings, Inc. and James N. Macri was filed with the Securities and Exchange Commission on August 2, 2006 as Exhibit 99.1 to our current report on Form 8-K and is incorporated herein by reference.
10.9    Asset Purchase Agreement, dated as of July 27, 2006, by and among PerkinElmer Singapore Pte Ltd, J.N. Macri Technologies LLC and James N. Macri was filed with the Securities and Exchange Commission on August 2, 2006 as Exhibit 99.2 to our current report on Form 8-K and is incorporated herein by reference.
31.1    Certification of Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2    Certification of Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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EX-10.1 2 dex101.htm AMENDED AND RESTATED 2001 INCENTIVE PLAN Amended and Restated 2001 Incentive Plan

Exhibit 10.1

PerkinElmer, Inc.

AMENDED AND RESTATED 2001 INCENTIVE PLAN

1. Purpose

The purpose of this 2001 Incentive Plan (the “Plan”) of PerkinElmer, Inc., a Massachusetts corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing such persons with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such persons with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future subsidiary corporations as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including, without limitation, a joint venture or limited liability company) in which the Company has a significant interest, as determined by the Board of Directors of the Company (the “Board”).

2. Eligibility

All of the Company’s employees, officers, directors, consultants and advisors (and any individuals who have accepted an offer for employment) are eligible to be granted options, restricted stock awards, performance units, other stock-based awards or cash performance awards (each, an “Award”) under the Plan. Each person who has been granted an Award under the Plan shall be deemed a “Participant”.

3. Administration, Delegation

(a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.


(b) Delegation to Executive Officers. To the extent permitted by applicable law, the Board may delegate to one or more executive officers of the Company the power to make Awards and exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix (i) the maximum number of shares subject to Awards and (ii) the maximum number of shares for any one Participant to be made by such executive officers.

(c) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). The Board shall appoint one such Committee of not less than two members, each member of which shall be an “outside director” within the meaning of Section 162(m) of the Code and a “non-employee director” as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”). All references in the Plan to the “Board” shall mean the Board or a Committee of the Board or the executive officer referred to in Section 3(b) to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or executive officer.

4. Stock Available for Awards

(a) Number of Shares. Subject to adjustment under Section 9, Awards may be made under the Plan for up to the Total Authorized Shares (as defined below). For purposes of the Plan, “Total Authorized Shares” shall mean a number of shares of the common stock, $1.00 par value per share, of the Company (“Common Stock”) as is equal to the sum of:

(i) 4,400,000;

(ii) the number of shares of Common Stock covered by, but not ultimately issued pursuant to, any Award under this Plan that (A) expires or is terminated, surrendered or canceled without having been fully exercised or (B) is forfeited in whole or in part (including as a result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right), subject, however, in the case of Awards of Incentive Stock Options (as hereinafter defined), to any limitation required under the Code;

(iii) the number of shares of Common Stock that were available for issuance under the Company’s 1999 Incentive Plan (the “Prior Plan”) to the extent not issued or subject to an Award under the Prior Plan on the date of approval of the Plan by the stockholders of the Company (the “Approval Date”); and

 

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(iv) the number of shares of Common Stock that become available under the Prior Plan after the Approval Date because an Award made under the Prior Plan (A) expires or is terminated, surrendered or canceled after the Approval Date without having been fully exercised or (B) is forfeited in whole or in part (including as a result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) after the Approval Date, subject, however, in the case of Awards of Incentive Stock Options (as hereinafter defined), to any limitation required under the Code.

Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.

(b) Per-Participant Limit. Subject to adjustment under Section 9, the maximum number of shares of Common Stock with respect to which an Award may be granted to any Participant under the Plan shall be 1,000,000 per calendar year. The per-Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of the Code.

(c) Other Limits. Subject to adjustment under Section 9, the maximum number of shares of Common Stock that may be issued under the Plan pursuant to all Awards that are not Options, including without limitation Restricted Stock Awards, shall be 400,000. The principles of the second sentence of Section 4(a) shall apply to this Section 4(c).

5. Stock Options

(a) General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option which is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a “Nonstatutory Stock Option”.

(b) Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of the Company and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) which is intended to be an Incentive Stock Option is not an Incentive Stock Option.

 

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(c) Exercise Price. The Board shall establish the exercise price at the time each Option is granted and specify it in the applicable option agreement; provided, however, that the exercise price shall not be less than 100% of the fair market value of the Common Stock, as determined by the Board, at the time the Option is granted, or par value, if greater.

(d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement; provided, however, that no Option will be granted for a term in excess of 10 years.

(e) Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised.

(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:

(1) in cash or by check, payable to the order of the Company;

(2) except as the Board may, in its sole discretion, otherwise provide in an option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;

(3) when the Common Stock is registered under the Securities Exchange Act of 1934, by delivery of vested shares of Common Stock owned by the Participant valued at their fair market value as determined by (or in a manner approved by) the Board in good faith (“Fair Market Value”), provided (i) such method of payment is then permitted under applicable law and (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant at least six months prior to such delivery;

(4) to the extent permitted by the Board, in its sole discretion by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or

(5) by any combination of the above permitted forms of payment.

 

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(g) Substitute Options. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Options in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Options may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Options contained in the other sections of this Section 5 or in Section 2.

6. Restricted Stock

(a) Grants. The Board may grant Awards entitling recipients to acquire shares of Common Stock, subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award (each, a “Restricted Stock Award”).

(b) Terms and Conditions. The Board shall determine the terms and conditions of any such Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue price, if any. Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant’s estate.

7. Other Stock-Based Awards

The Board shall have the right to grant other Awards based upon the Common Stock having such terms and conditions as the Board may determine, including the grant of shares based upon certain conditions, the grant of securities or other awards convertible into Common Stock and the grant of stock appreciation rights.

8. Performance Awards.

(a) Administration. This Section 8 shall be administered by a Committee appointed by the Board. Unless otherwise determined by the Board, the Committee shall be the Compensation Committee.

 

5


(b) Grants. The Committee may grant Performance Awards entitling recipients to receive shares of Common Stock, cash, or any combination thereof, based on Company performance over a specified period. The Committee may grant any number of Performance Awards to any particular participant and a Performance Award may have a performance period that overlaps the performance period of another Performance Award.

(c) Terms and Conditions. Each Performance Award shall establish the performance period, not shorter than one year, over which the performance goals of the Company must be achieved; the performance goals which must be achieved; and the amount of the award which will be earned or forfeited based on the extent to which the performance goals are achieved for the performance period. The Committee may establish objective formulas for determining the size of the Performance Award based on the level of achievement of the performance goals over the performance period.

(d) Performance Goals. The performance goals which the Committee may establish with respect to any Performance Award may include any one or more of (a) earnings per share, (b) return on average equity or average assets with respect to a pre-determined peer group, (c) earnings, (d) earnings growth, (e) revenues, (f) expenses, (g) stock price, (h) market share, (i) return on sales, assets, equity or investment, (j) regulatory compliance, (k) improvement of financial ratings, (l) achievement of balance sheet or income statement objectives, (m) economic value added®, (n) total shareholder return, (o) net operating profit after tax, (p) pre-tax or after-tax income, (q) cash flow, or (r) such other objective goals established by the Board, and may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated. Such performance goals may be adjusted to exclude any one or more of (i) extraordinary items, (ii) gains or losses on the dispositions of discontinued operations, (iii) the cumulative effects of changes in accounting principles, (iv) the writedown of any asset, and (v) charges for restructuring and rationalization programs. Such performance goals may be particular to a Participant or the department, branch, line of business, subsidiary or other unit in which the Participant works and may cover such period (not shorter than one year) as may be specified by the Board.

(e) Limits. The maximum payment which may be made pursuant to Performance Awards granted to any Participant in any year shall not exceed $3,000,000, valuing Common Stock distributed in the satisfaction of a Performance Award at its fair market value on the date of payment.

(f) Payment. At the end of the performance period with respect to which a Performance Award is granted, the Committee shall determine the amount, if any to be paid to the Participant based on the level of the performance goals established by the Committee for purposes of the Performance Award and shall authorize the Company to

 

6


pay the Participant the amount so determined. The Committee may at any time, in its sole discretion, cancel a Performance Award or reduce or eliminate the amount payable with respect to a Performance Award without the consent of the Participant.

9. Adjustments for Changes in Common Stock and Certain Other Events

(a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend, (i) the number and class of securities available under this Plan, (ii) the per-Participant limit set forth in Section 4(b) and the limits set forth in Section 4(c), (iii) the number and class of securities and exercise price per share subject to each outstanding Option, (iv) the repurchase price per share subject to each outstanding Restricted Stock Award, and (v) the terms of each other outstanding Award shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is necessary and appropriate. In particular, the number of shares of Common Stock available under the Plan pursuant to Section 4(a), the per-Participant limit set forth in Section 4(b) and the limit set forth in Section 4(c) shall all be doubled if the two-for-one stock split to be effected as a stock dividend recommended to the Company’s stockholders is approved at the 2001 Annual Meeting of Stockholders. If this Section 9(a) applies and Section 9(c) also applies to any event, Section 9(c) shall be applicable to such event, and this Section 9(a) shall not be applicable.

(b) Liquidation or Dissolution. In the event of a proposed liquidation or dissolution of the Company, the Board shall upon written notice to the Participants provide that all then unexercised Options will (i) become exercisable in full as of a specified time at least 10 business days prior to the effective date of such liquidation or dissolution and (ii) terminate effective upon such liquidation or dissolution, except to the extent exercised before such effective date. The Board may specify the effect of a liquidation or dissolution on any Restricted Stock Award or other Award granted under the Plan at the time of the grant of such Award.

(c) Acquisition Events

(1) Definition. An “Acquisition Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which the Common Stock is converted into or exchanged for the right to receive cash, securities or other property or (b) any exchange of shares of the Company for cash, securities or other property pursuant to a statutory share exchange transaction.

 

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(2) Consequences of an Acquisition Event on Options. Upon the occurrence of an Acquisition Event, or the execution by the Company of any agreement with respect to an Acquisition Event, the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof). For purposes hereof, an Option shall be considered to be assumed if, following consummation of the Acquisition Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Acquisition Event, the consideration (whether cash, securities or other property) received as a result of the Acquisition Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Acquisition Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Acquisition Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Acquisition Event.

Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, such Options, then the Board shall, upon written notice to the Participants, provide that all then unexercised Options will become exercisable in full as of a specified time prior to the Acquisition Event and will terminate immediately prior to the consummation of such Acquisition Event, except to the extent exercised by the Participants before the consummation of such Acquisition Event; provided, however, that in the event of an Acquisition Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Acquisition Event (the “Acquisition Price”), then the Board may instead provide that all outstanding Options shall terminate upon consummation of such Acquisition Event and that each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options.

(3) Consequences of an Acquisition Event on Restricted Stock Awards. Upon the occurrence of an Acquisition Event, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company’s successor and shall apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Acquisition Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award.

 

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(4) Consequences of an Acquisition Event on Other Awards. The Board shall specify the effect of an Acquisition Event on any other Award granted under the Plan at the time of the grant of such Award.

(d) Change in Control Events

(1) Definitions.

(A) “Change in Control” or “Change in Control Event” shall mean:

(i) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (x) the then-outstanding shares of voting common stock of the Company (the “Outstanding Company Common Stock”) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control Event: (A) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (C) any acquisition by any corporation pursuant to a Business Combination (as defined below) which satisfies the condition set forth in clauses (x) and (y) of subsection (iii) of this definition; or

(ii) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board (1) who was a member of the Board during April, 2002 or (2) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (2) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or

 

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(iii) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange or purchase involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which, as a result of such transaction, owns the Company or substantially all of the Company’s assets, either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, immediately prior to such Business Combination and (y) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination).

(iv) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(B) “Good Reason” shall mean:

(i) any reduction in the annual base salary payable to the Participant from and after such Change in Control Event not required by adverse business conditions, or (ii) the relocation of the place of business at which the Participant is principally located to a location that is greater than 25 miles from its location immediately prior to such Change in Control Event. Notwithstanding the foregoing, the resignation shall not be considered to be for Good Reason if any such circumstances are fully corrected prior to the date of resignation.

(C) “Cause” shall mean:

any (i) failure by the Participant to perform his or her material responsibilities and fiduciary duties to the Company, (ii) misappropriating the funds or property of the

 

10


Company by the Participant, (iii) commission of a felony or causing any injury or harm to any officer, director, employee, consultant, or agent of the Company, (iv) any breach by the Participant of the agreement evidencing an Award, or (v) any breach of the Participant’s Non-Disclosure or Invention Assignment Agreement, as the case may be, with the Company or of any other agreement between the Participant and the Company (including, without limitation, any agreement imposing obligations on the Participant to maintain the confidentiality of the Company’s proprietary information or to assign inventions to the Company). The Participant shall be considered to have been discharged for “Cause” if the Company determines, within 30 days after the Participant’s resignation, that discharge for Cause was warranted.

(2) Consequences of a Change in Control Event on Options.

Upon the occurrence of a Change in Control Event (regardless of whether such event also constitutes an Acquisition Event), except to the extent specifically provided otherwise in the instrument evidencing any Option or in any other agreement between a Participant and the Company, the vesting schedule of such Option shall be fully accelerated if the Participant is terminated without Cause or resigns for Good Reason within twelve months after the Change in Control Event, and all of the Participant’s unvested Options shall immediately vest and become exercisable.

(3) Effect on Other Awards.

Upon the occurrence of a Change in Control Event (regardless of whether such event also constitutes an Acquisition Event) the Board shall specify the effect of the Change of Control Event on any other Award granted under the Plan.

10. General Provisions Applicable to Awards

(a) Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.

(b) Documentation. Each Award shall be evidenced by a written instrument in such form as the Board shall determine; such written instrument may be in the form of an agreement signed by the Company and the Participant or a written or electronic confirming memorandum from the Company to the Participant. Each Award may contain terms and conditions in addition to those set forth in the Plan.

 

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(c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.

(d) Termination of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award.

(e) Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. Except as the Board may otherwise provide in an Award, Participants may, to the extent then permitted under applicable law, satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including vested shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.

(f) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

(g) Acceleration. The Board may at any time provide that any Options shall become immediately exercisable in full or in part, that any Restricted Stock Awards shall be free of restrictions in full or in part or that any other Awards may become exercisable in full or in part or free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.

(h) Deferral. An optionee who is entitled, by authority of the Board of Directors, to defer his or her compensation pursuant to any deferred compensation plan maintained

 

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by the Company may elect, in accordance with rules established by the Board, to defer receipt of any shares of Common Stock issuable upon the exercise of an option, provided that such election is irrevocable and made at least that number of days prior to the exercise of the option which shall be determined by the Board. The optionee’s account under such deferred compensation plan shall be credited with a number of stock units equal to the number of shares so deferred.

11. Miscellaneous

(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.

(b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

(c) Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board, but no Award granted to a Participant designated by the Board as subject to Section 162(m) of the Code by the Board shall become exercisable, vested or realizable, as applicable to such Award, unless and until the Plan has been approved by the Company’s stockholders to the extent stockholder approval is required by Section 162(m) in the manner required under Section 162(m) (including the vote required under Section 162(m)). No Awards shall be granted under the Plan after the completion of ten years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date.

(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that to the extent required by Section 162(m) of the Code, no Award granted to a Participant designated as subject to Section 162(m)

 

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by the Board after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award (to the extent that such amendment to the Plan was required to grant such Award to a particular Participant), unless and until such amendment shall have been approved by the Company’s stockholders as required by Section 162(m) (including the vote required under Section 162(m)).

(e) Provisions for Foreign Employees. The Board may, without amending the Plan, modify options granted to employees who are foreign nationals or who are employed outside the United States to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefits or other matters.

(f) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without regard to any applicable conflicts of law.

 

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EX-10.2 3 dex102.htm AMENDED AND RESTATED LIFE SCIENCES INCENTIVE PLAN Amended and Restated Life Sciences Incentive Plan

Exhibit 10.2

PerkinElmer, Inc.

AMENDED AND RESTATED LIFE SCIENCES INCENTIVE PLAN

1. Purpose

This is an amendment and restatement of the Packard BioScience Company 2000 Stock Incentive Plan for the purposes of reflecting the acquisition of Packard BioScience Company by PerkinElmer, Inc., a Massachusetts corporation (the “Company”). The purpose of this Life Sciences Incentive Plan (the “Plan”) of the Company is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing such persons with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such persons with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future subsidiary corporations as defined in Section-424(f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including, without limitation, a joint venture or limited liability company) in which the Company has a significant interest, as determined by the Board of Directors of the Company (the “Board”).

2. Eligibility

All of the Company’s employees, consultants and advisors (and any individuals who have accepted an offer for employment) are eligible to be granted options, performance units, or other stock-based awards (each, an “Award”) under the Plan; officers and directors of the Company are not eligible to be granted Awards hereunder. Each person who has been granted an Award under the Plan shall be deemed a “Participant”.

3. Administration, Delegation

(a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.

(b) Delegation to Executive Officers. To the extent permitted by applicable law, the Board may delegate to one or more executive officers of the Company the power to make Awards and exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix (i) the maximum number of shares subject to Awards and (ii) the maximum number of shares for any one Participant to be made by such executive officers.


(c) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean the Board or a Committee of the Board or the executive officer referred to in Section-3(b) to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or executive officer.

4. Stock Available for Awards

(a) Number of Shares. Subject to adjustment under Section-9, Awards may be made under the Plan for up to the Total Authorized Shares (as defined below). For purposes of the Plan, “Total Authorized Shares” shall mean a number of shares of the common stock, $1.00 par value per share, of the Company (“Common Stock”) as is equal to the sum of:

(i) 2,322,606;

(ii) the number of shares of Common Stock covered by, but not ultimately issued pursuant to, any Award under this Plan that (A) expires or is terminated, surrendered or canceled without having been fully exercised or (B) is forfeited in whole or in part (including as a result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right), subject, however, in the case of Awards of Incentive Stock Options (as hereinafter defined), to any limitation required under the Code;

(iii) the number of shares of Common Stock that were available for issuance under the Packard BioScience Company Management Stock Incentive Plan and the Packard BioScience Company 2000 Stock Incentive Plan (the “Prior Plan(s)”) to the extent not issued or subject to an Award under the Prior Plan(s) on the date the Company acquired Packard BioScience Company (the “Closing Date”); and

(iv) the number of shares of Common Stock that become available under the Prior Plan(s) after the Closing Date because an Award made under the Prior Plan(s) (A) expires or is terminated, surrendered or canceled after the Approval Date without having been fully exercised or (B) is forfeited in whole or in part (including as a result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) after the Closing Date, subject, however, in the case of Awards of Incentive Stock Options (as hereinafter defined), to any limitation required under the Code. All determinations of numbers of shares shall take into account any adjustments made to reflect the acquisition of Packard BioScience Company by the Company.

 

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Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.

(b) Other Limits. Subject to adjustment under Section-9, the maximum number of shares of Common Stock that may be issued under the Plan pursuant to all Awards that are not Options shall be 400,000.

5. Stock Options

(a) General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. Only Options which are not intended to be incentive stock options (as defined in Section-422 of the Code) may be granted under the Plan.

(b) Exercise Price. The Board shall establish the exercise price at the time each Option is granted and specify it in the applicable option agreement; provided, however, that the exercise price shall not be less than 100% of the fair market value of the Common Stock, as determined by the Board, at the time the Option is granted, or par value, if greater.

(c) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement; provided, however, that no Option will be granted for a term in excess of 10 years.

(d) Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section-5(e) for the number of shares for which the Option is exercised.

(e) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:

(1) in cash or by check, payable to the order of the Company;

(2) except as the Board may, in its sole discretion, otherwise provide in an option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;

 

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(3) when the Common Stock is registered under the Securities Exchange Act of 1934, by delivery of vested shares of Common Stock owned by the Participant valued at their fair market value as determined by (or in a manner approved by) the Board in good faith (“Fair Market Value”), provided (i) such method of payment is then permitted under applicable law and (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant at least six months prior to such delivery;

(4) to the extent permitted by the Board, in its sole discretion by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or

(5) by any combination of the above permitted forms of payment.

(f) Substitute Options. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Options in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Options may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Options contained in the other sections of this Section-5 or in Section-2.

6. Other Stock-Based Awards

The Board shall have the right to grant other Awards based upon the Common Stock having such terms and conditions as the Board may determine, including the grant of shares based upon certain conditions, the grant of securities or other awards convertible into Common Stock and the grant of stock appreciation rights.

7. Adjustments for Changes in Common Stock and Certain Other Events

(a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend, (i) the number and class of securities available under this Plan, (ii) the limits set forth in Section-4(c), (iii) the number and class of securities and exercise price per share subject to each outstanding Option, (iv) the repurchase price per share subject to each outstanding Restricted Stock Award, and (v) the terms of each other outstanding Award shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is necessary and appropriate. If this Section-7(a) applies and Section-7(c) also applies to any event, Section-7(c) shall be applicable to such event, and this Section-7(a) shall not be applicable.

(b) Liquidation or Dissolution. In the event of a proposed liquidation or dissolution of the Company, the Board shall upon written notice to the Participants provide that all then

 

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unexercised Options will (i) become exercisable in full as of a specified time at least 10 business days prior to the effective date of such liquidation or dissolution and (ii) terminate effective upon such liquidation or dissolution, except to the extent exercised before such effective date. The Board may specify the effect of a liquidation or dissolution on any Restricted Stock Award or other Award granted under the Plan at the time of the grant of such Award.

(c) Acquisition Events

(1) Definition. An “Acquisition Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which the Common Stock is converted into or exchanged for the right to receive cash, securities or other property or (b) any exchange of shares of the Company for cash, securities or other property pursuant to a statutory share exchange transaction.

(2) Consequences of an Acquisition Event on Options. Upon the occurrence of an Acquisition Event, or the execution by the Company of any agreement with respect to an Acquisition Event, the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof). For purposes hereof, an Option shall be considered to be assumed if, following consummation of the Acquisition Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Acquisition Event, the consideration (whether cash, securities or other property) received as a result of the Acquisition Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Acquisition Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Acquisition Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Acquisition Event.

Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, such Options, then the Board shall, upon written notice to the Participants, provide that all then unexercised Options will become exercisable in full as of a specified time prior to the Acquisition Event and will terminate immediately prior to the consummation of such Acquisition Event, except to the extent exercised by the Participants before the consummation of such Acquisition Event; provided, however, that in the event of an Acquisition Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Acquisition Event (the “Acquisition Price”), then the Board may instead provide that all outstanding Options shall terminate upon consummation of such Acquisition Event and that each Participant shall receive, in exchange therefor, a cash payment

 

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equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options.

(3) Consequences of an Acquisition Event on Restricted Stock Awards. Upon the occurrence of an Acquisition Event, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company’s successor and shall apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Acquisition Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award.

(4) Consequences of an Acquisition Event on Other Awards. The Board shall specify the effect of an Acquisition Event on any other Award granted under the Plan at the time of the grant of such Award.

(d) Change in Control Events

(1) Definitions.

(A) “Change in Control” or “Change in Control Event” shall mean:

(i) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) (a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (x) the then-outstanding shares of voting common stock of the Company (the “Outstanding Company Common Stock”) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control Event: (A) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (C) any acquisition by any corporation pursuant to a Business Combination (as defined below) which satisfies the condition set forth in clauses (x) and (y) of subsection (iii) of this definition; or

(ii) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board (1) who was a member of the Board during April, 2002 or (2) who was

 

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nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (2) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or

(iii) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange or purchase involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which, as a result of such transaction, owns the Company or substantially all of the Company’s assets, either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, immediately prior to such Business Combination and (y) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination).

(iv) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(B) “Good Reason” shall mean:

(i) any reduction in the annual base salary payable to the Participant from and after such Change in Control Event not required by adverse business conditions, or (ii) the relocation of the place of business at which the Participant is principally located to a location that is greater than 25 miles from its location immediately prior to such Change in Control Event. Notwithstanding the foregoing, the resignation shall not be considered to be for Good Reason if any such circumstances are fully corrected prior to the date of resignation.

 

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(C) “Cause” shall mean:

any (i) failure by the Participant to perform his or her material responsibilities and fiduciary duties to the Company, (ii) misappropriating the funds or property of the Company by the Participant, (iii) commission of a felony or causing any injury or harm to any officer, director, employee, consultant, or agent of the Company, (iv) any breach by the Participant of the agreement evidencing an Award, or (v) any breach of the Participant’s Non-Disclosure or Invention Assignment Agreement, as the case may be, with the Company or of any other agreement between the Participant and the Company (including, without limitation, any agreement imposing obligations on the Participant to maintain the confidentiality of the Company’s proprietary information or to assign inventions to the Company). The Participant shall be considered to have been discharged for “Cause” if the Company determines, within 30 days after the Participant’s resignation, that discharge for Cause was warranted.

(2) Consequences of a Change in Control Event on Options.

Upon the occurrence of a Change in Control Event (regardless of whether such event also constitutes an Acquisition Event), except to the extent specifically provided otherwise in the instrument evidencing any Option or in any other agreement between a Participant and the Company, the vesting schedule of such Option shall be fully accelerated if the Participant is terminated without Cause or resigns for Good Reason within twelve months after the Change in Control Event, and all of the Participant’s unvested Options shall immediately vest and become exercisable.

(3) Effect on Other Awards.

Upon the occurrence of a Change in Control Event (regardless of whether such event also constitutes an Acquisition Event) the Board shall specify the effect of the Change of Control Event on any other Award granted under the Plan.

8. General Provisions Applicable to Awards

(a) Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.

(b) Documentation. Each Award shall be evidenced by a written instrument in such form as the Board shall determine; such written instrument may be in the form of an agreement signed by the Company and the Participant or a written or electronic confirming memorandum from the Company to the Participant. Each Award may contain terms and conditions in addition to those set forth in the Plan.

 

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(c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.

(d) Termination of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award.

(e) Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. Except as the Board may otherwise provide in an Award, Participants may, to the extent then permitted under applicable law, satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including vested shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.

(f) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

(g) Acceleration. The Board may at any time provide that any Options shall become immediately exercisable in full or in part, that any Restricted Stock Awards shall be free of restrictions in full or in part or that any other Awards may become exercisable in full or in part or free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.

(h) Deferral. An optionee who is entitled, by authority of the Board of Directors, to defer his or her compensation pursuant to any deferred compensation plan maintained by the Company may elect, in accordance with rules established by the Board, to defer receipt of any shares of Common Stock issuable upon the exercise of an option, provided that such election is irrevocable and made at least that number of days prior to the exercise of the option which shall be determined by the Board. The optionee’s account under such deferred compensation plan shall be credited with a number of stock units equal to the number of shares so deferred.

 

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9. Miscellaneous

(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.

(b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

(c) Effective Date and Term of Plan. This amendment and restatement of the Plan shall become effective on the Closing Date and shall apply to Options granted under the Plan on or after the Closing Date. Options granted prior to the Closing Date shall be governed by the terms of the Plan as in effect immediately before the Closing Date. No Awards shall be granted under the Plan after the tenth anniversary of the Closing Date, but Awards previously granted may extend beyond that date.

(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time.

(e) Provisions for Foreign Employees. The Board may, without amending the Plan, modify options granted to employees who are foreign nationals or who are employed outside the United States to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefits or other matters.

(f) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without regard to any applicable conflicts of law.

 

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EX-10.3 4 dex103.htm FORM OF STOCK OPTION AGREEMENT GIVEN TO THE EXECUTIVE OFFICERS Form of Stock Option Agreement given to the executive officers

Exhibit 10.3

 

Officer   

2005 Incentive Plan Nonstatutory Stock Option Agreement

We are pleased to inform you that you have been granted an option to purchase common stock of PerkinElmer, Inc. (“PerkinElmer”).

This agreement evidences the grant by PerkinElmer on [GRANT DATE] (the “Date of Grant”) to [NAME OF EMPLOYEE] (“You” or the “Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2005 Incentive Plan (the “Plan”), a total of [NUMBER] shares of common stock of the Company at $[EXERCISE PRICE] per share. Unless earlier terminated, this option shall expire at 5:00 pm Eastern time on [EXPIRATION DATE] (the “Last Date to Exercise”).

Your grant has been made under the Plan which, together with the terms contained herein, establish the terms and conditions of your grant (the “Agreement”). The terms of the Plan are incorporated herein by reference. A copy of the Plan has been furnished to you electronically, and is accessible along with this Agreement. Please review the Plan carefully.

Vesting:

Options will vest equally over a three (3) year period (1/3 on each of the first, second and third anniversaries of the Date of Grant) and will have a seven (7) year term. Your option may also vest in connection with a Change in Control Event, as described below.

Exercise:

You may exercise this option, in whole or in part, to purchase a whole number of vested shares at any time, by following the exercise procedures set up by the Company. All exercises must take place by the Last Date to Exercise, or such earlier date as is set forth below following your death, disability or your ceasing to be an employee, or a Change in Control Event. The number of shares you may purchase as of any date cannot exceed the total number of shares vested by that date, less any shares you have previously acquired by exercising this option.

Employment Requirements:

In the event of your termination of employment, retirement, death or total disability, then, subject to the terms described below under “Consequences of a Change in Control”, the following terms apply:

 

  If your employment is terminated for reasons other than retirement (as defined below), death, or total disability, you will be able to exercise your stock options that are vested as of your last day of employment through the earlier of the option’s Last Date to Exercise or three (3) months after your last day of employment. All unvested stock options as of your last day of employment will be cancelled as of the close of business on your last day of employment.

 

  If you terminate your employment at or after age 55 and you have 10 years of service at the time of your termination (any termination subject to this bulleted paragraph, “retirement”, and which, for the avoidance of doubt, shall not include any termination of your employment referenced in the bulleted paragraph immediately below), you will be able to exercise your stock options that are vested as of your last day of employment through the earlier of the option’s Last Date to Exercise or three (3) years after your last day of employment. All unvested stock options as of your last day of employment will be cancelled as of the close of business on your last day of employment.

 

  If your employment is terminated due to your death or total disability as determined under the Company’s long term disability program, your unvested options become 100% vested as of your last day of employment. You, in the event of your total disability, or your estate, in the event of your death, have until the earlier of the option’s Last Date to Exercise or one (1) year after your last day of employment to exercise your options.

The option may be transferred to your child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing your household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or you) control the management of assets, any other entity in which these persons (or you) own more than fifty percent of the voting interests. The transferee shall be subject to all the terms and conditions applicable to this option prior to the transfer. The transfer shall not be effective until you have notified the Company in writing that the transfer has occurred. Except as provided herein, this option shall not be assignable or transferable by the person to whom it is granted, either voluntarily or by operation of law, except by will or by the laws of descent and distribution, and, during the life of the optionee, shall be exercisable only by the optionee.

Any reference in this Agreement to your “employment” refers to your employment by the Company (as defined in the Plan).


Officer   

Taxes and Withholding:

This option is intended to be a nonstatutory stock option. In the event that the Company determines that any federal, state, local or foreign tax or withholding payment is required relating to the exercise or sale of shares arising from this grant, the Company shall have the right to require such payments from you, or withhold such amounts from other payments due to you from the Company.

Agreements with the Company:

This stock option grant is subject to the terms and conditions of your signed and executed Prohibited Activity Agreement and your Employee Patent and Proprietary Information Utilization Agreement. If you terminate your employment with the Company and engage in any Prohibited Activity (as defined the Prohibited Activity Agreement) within two years after you terminate employment, you will repay to the Company the economic value of any stock option granted to you which is exercised by you at any time after the date which is twelve months prior to the date of your termination of employment.

Consequences of a Change in Control:

If there is a Change in Control Event (regardless of whether such event also constitutes a Reorganization Event (as defined in the Plan) and you were employed by the Company on the effective date of such Change in Control Event, your unvested stock options become 100% vested on the effective date of such Change in Control Event, and shall remain exercisable through the period ending on the earlier of:

1. The later of (i) the third anniversary of the effective date of such Change in Control Event or (ii) the first anniversary of the date the Employee’s employment with the Company terminates, or

2. The option’s Last Date to Exercise.

For purposes of this Agreement: a “Change in Control Event” means an event or occurrence set forth in any one or more of clauses (i) through (iv) below (including an event or occurrence that constitutes a Change in Control Event under one of such clauses but is specifically exempted from another such clause):

 

  (i) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”) of beneficial ownership of any capital stock of PerkinElmer if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (A) the then-outstanding shares of common stock of PerkinElmer (the “Outstanding PerkinElmer Common Stock”) or (B) the combined voting power of the then-outstanding securities of PerkinElmer entitled to vote generally in the election of directors (the “Outstanding PerkinElmer Voting Securities”); provided, however, that for purposes of this paragraph (i), none of the following acquisitions of Outstanding PerkinElmer Common Stock or Outstanding PerkinElmer Voting Securities shall constitute a Change in Control Event: (I) any acquisition directly from PerkinElmer (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of PerkinElmer, unless the Person exercising, converting or exchanging such security acquired such security directly from PerkinElmer or an underwriter or agent of PerkinElmer), (II) any acquisition by PerkinElmer, (III) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by PerkinElmer or any corporation controlled by PerkinElmer, or (IV) any acquisition by any corporation pursuant to a transaction which complies with subclauses (A) and (B) of clause (iii) of this definition; or

 

  (ii) such time as directors who are Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to PerkinElmer), where the term “Continuing Director” means at any date a member of the Board (A) who was a member of the Board on the grant date of your option or (B) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (B) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or

 

  (iii) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving PerkinElmer or a sale or other disposition of all or substantially all of the assets of PerkinElmer (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (A) all or substantially all of the individuals and entities who were the beneficial


Officer   

owners of the Outstanding PerkinElmer Common Stock and Outstanding PerkinElmer Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then outstanding securities entitled to vote generally in the election of directors, respectively, of the surviving, resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns PerkinElmer or substantially all of PerkinElmer’s assets either directly or through one or more other entities) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding PerkinElmer Stock and Outstanding PerkinElmer Voting Securities, respectively; and (B) no Person beneficially owns, directly or indirectly, 20% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or

 

  (iv) approval by the stockholders of PerkinElmer of a complete liquidation or dissolution of PerkinElmer.
EX-10.4 5 dex104.htm FORM OF STOCK OPTION AGREEMENT GIVEN TO THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER Form of Stock Option Agreement given to the chairman and chief executive officer

Exhibit 10.4

Chairman   

2005 Incentive Plan Nonstatutory Stock Option Agreement

We are pleased to inform you that you have been granted an option to purchase common stock of PerkinElmer, Inc. (“PerkinElmer”).

This agreement evidences the grant by PerkinElmer on [GRANT DATE] (the “Date of Grant”) to [NAME OF EMPLOYEE] (“You” or the “Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2005 Incentive Plan (the “Plan”), a total of [NUMBER] shares of common stock of the Company at $[EXERCISE PRICE] per share. Unless earlier terminated, this option shall expire at 5:00 pm Eastern time on [EXPIRATION DATE] (the “Last Date to Exercise”).

Your grant has been made under the Plan which, together with the terms contained herein, establish the terms and conditions of your grant (the “Agreement”). The terms of the Plan are incorporated herein by reference. A copy of the Plan has been furnished to you electronically, and is accessible along with this Agreement. Please review the Plan carefully.

Vesting:

Options will vest equally over a three (3) year period (1/3 on each of the first, second and third anniversaries of the Date of Grant) and will have a seven (7) year term. Your option may also vest in connection with a Change in Control Event, as described below.

Exercise:

You may exercise this option, in whole or in part, to purchase a whole number of vested shares at any time, by following the exercise procedures set up by the Company. All exercises must take place by the Last Date to Exercise, or such earlier date as is set forth below following your death, disability or your ceasing to be an employee, or a Change in Control Event. The number of shares you may purchase as of any date cannot exceed the total number of shares vested by that date, less any shares you have previously acquired by exercising this option.

Employment Requirements:

In the event of your termination of employment, retirement, death or total disability, then, subject to the terms described below under “Consequences of a Change in Control”, the following terms apply:

 

  If your employment is terminated by the Company without cause pursuant to Section 5(f) of your employment agreement with the Company, you will be able to exercise your stock options that are vested as of your last day of employment through the earlier of the option’s Last Date to Exercise or the first anniversary of the date your employment with the Company terminates

 

  If you terminate your employment at or after age 55 and you have 10 years of service at the time of your termination (any termination subject to this bulleted paragraph, “retirement”, and which, for the avoidance of doubt, shall not include any termination of your employment referenced in the bulleted paragraph immediately below), you will be able to exercise your stock options that are vested as of your last day of employment through the earlier of the option’s Last Date to Exercise or three (3) years after your last day of employment. All unvested stock options as of your last day of employment will be cancelled as of the close of business on your last day of employment.

 

  If your employment is terminated due to your death or total disability as determined under the Company’s long term disability program, your unvested options become 100% vested as of your last day of employment. You, in the event of your total disability, or your estate, in the event of your death, have until the earlier of the option’s Last Date to Exercise or one (1) year after your last day of employment to exercise your options.

 

  If your employment is terminated and such termination is other than (i) by the Company without cause or (ii) by reason of retirement (as defined below), death, or total disability, you will be able to exercise your stock options that are vested as of your last day of employment through the earlier of the option’s Last Date to Exercise or three (3) months after your last day of employment. All unvested stock options as of your last day of employment will be cancelled as of the close of business on your last day of employment.

The option may be transferred to your child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing your household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or you) control the management of assets, any other entity in which these persons (or you) own more than fifty percent of the voting interests. The transferee shall be subject to all the terms and conditions applicable to this option prior to the transfer. The transfer shall not be effective until you have notified the Company in writing that the transfer has occurred. Except as provided herein, this option shall not be assignable or transferable by the person to whom it is granted, either voluntarily or by operation of law, except by will or by the laws of descent and distribution, and, during the life of the optionee, shall be exercisable only by the optionee.

Any reference in this Agreement to your “employment” refers to your employment by the Company (as defined in the Plan).


Chairman   

Taxes and Withholding:

This option is intended to be a nonstatutory stock option. In the event that the Company determines that any federal, state, local or foreign tax or withholding payment is required relating to the exercise or sale of shares arising from this grant, the Company shall have the right to require such payments from you, or withhold such amounts from other payments due to you from the Company.

Agreements with the Company:

This stock option grant is subject to the terms and conditions of your signed and executed Prohibited Activity Agreement and your Employee Patent and Proprietary Information Utilization Agreement. If you terminate your employment with the Company and engage in any Prohibited Activity (as defined the Prohibited Activity Agreement) within two years after you terminate employment, you will repay to the Company the economic value of any stock option granted to you which is exercised by you at any time after the date which is twelve months prior to the date of your termination of employment.

Consequences of a Change in Control:

If there is a Change in Control Event (regardless of whether such event also constitutes a Reorganization Event (as defined in the Plan)) and you were employed by the Company on the effective date of such Change in Control Event, your unvested stock options become 100% vested on the effective date of such Change in Control Event, and shall remain exercisable through the period ending on the earlier of:

1. The later of (i) the third anniversary of the effective date of such Change in Control Event or (ii) the first anniversary of the date the Employee’s employment with the Company terminates, or

2. The option’s Last Date to Exercise.

For purposes of this Agreement: a “Change in Control Event” means an event or occurrence set forth in any one or more of clauses (i) through (iv) below (including an event or occurrence that constitutes a Change in Control Event under one of such clauses but is specifically exempted from another such clause):

 

  (i) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”) of beneficial ownership of any capital stock of PerkinElmer if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (A) the then-outstanding shares of common stock of PerkinElmer (the “Outstanding PerkinElmer Common Stock”) or (B) the combined voting power of the then-outstanding securities of PerkinElmer entitled to vote generally in the election of directors (the “Outstanding PerkinElmer Voting Securities”); provided, however, that for purposes of this paragraph (i), none of the following acquisitions of Outstanding PerkinElmer Common Stock or Outstanding PerkinElmer Voting Securities shall constitute a Change in Control Event: (I) any acquisition directly from PerkinElmer (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of PerkinElmer, unless the Person exercising, converting or exchanging such security acquired such security directly from PerkinElmer or an underwriter or agent of PerkinElmer), (II) any acquisition by PerkinElmer, (III) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by PerkinElmer or any corporation controlled by PerkinElmer, or (IV) any acquisition by any corporation pursuant to a transaction which complies with subclauses (A) and (B) of clause (iii) of this definition; or

 

  (ii) such time as directors who are Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to PerkinElmer), where the term “Continuing Director” means at any date a member of the Board (A) who was a member of the Board on the grant date of your option or (B) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (B) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or

 

  (iii) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving PerkinElmer or a sale or other disposition of all or substantially all of the assets of PerkinElmer (a “Business Combination”), unless, immediately following such Business Combination, each of the following


Chairman   

two conditions is satisfied: (A) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding PerkinElmer Common Stock and Outstanding PerkinElmer Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then outstanding securities entitled to vote generally in the election of directors, respectively, of the surviving, resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns PerkinElmer or substantially all of PerkinElmer’s assets either directly or through one or more other entities) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding PerkinElmer Stock and Outstanding PerkinElmer Voting Securities, respectively; and (B) no Person beneficially owns, directly or indirectly, 20% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or

 

  (iv) approval by the stockholders of PerkinElmer of a complete liquidation or dissolution of PerkinElmer.
EX-10.5 6 dex105.htm FORM OF RESTRICTED STOCK OPTION AGREEMENT FOR PERFORMANCE-BASED VESTING Form of Restricted Stock Option Agreement for performance-based vesting

Exhibit 10.5

PerkinElmer, Inc.

Restricted Stock Agreement under 2005 Incentive Plan

This AGREEMENT made as of the      day of month, 200X, between PerkinElmer, Inc., a Massachusetts corporation (the “Company”), and                      (the “Participant”).

For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows:

1. Grant of Shares.

(a) Grant. The Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2005 Incentive Plan (the “Plan”),                  shares (the “Shares”) of common stock, $1.00 par value per share, of the Company (“Common Stock”). The Company shall issue to the Participant one or more certificates in the name of the Participant for that number of Shares issued to the Participant. The Participant agrees that the Shares shall be subject to vesting as set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Section 3 of this Agreement.

(b) Forfeiture. If the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, before the Shares vest, the Shares shall be immediately forfeited to the Company in exchange for $.001 per Share. Notwithstanding anything herein to the contrary, if the Shares do not vest on or before the occurrence of one or more of the events set forth in Section 2, the Shares shall automatically be forfeited to the Company in exchange for $.001 per Share.

(c) Deferral. The Participant may within 30 days of the date hereof make an irrevocable election to exchange any Shares for an account balance under the Company’s Deferred Compensation Plan, denominated in units equal in value to the value of the Shares and distributable only in shares of Common Stock at the time designated by the Participant at the time of such election; provided, however, that such units shall be subject to the vesting provisions of Section 2 of this Agreement. Such account balance shall be reduced to $.001 per share with respect to any unvested share units if the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, before such share units vest pursuant to Section 2 of this Agreement.

2. Vesting. Provided that the Participant remains employed by the Company on the occurrence of the following events or date(s), the Shares will become exercisable (“vest”) as to:

(a) 33% of the original number of Shares upon achievement of earnings per share (EPS) of the Company equal to or greater than $             on or before the last day of the Company’s 200X fiscal year;

(b) as to an additional 33% of the original number of Shares upon achievement of earnings per share (EPS) of the Company equal to or greater than $             on or before the last day of the Company’s 200X fiscal year;


(c) as to the remaining 34% of the original number of Shares upon achievement of earnings per share (EPS) of the Company equal to or greater than $             on or before the last day of the Company’s 200X fiscal year;

(d) EPS is defined in Exhibit A. Notwithstanding the above, the Compensation and Benefits Committee, may, in its sole discretion determine that the vesting criteria have been met;

(e) 100% of any remaining unvested Shares upon the death or permanent disability of the Participant on or before the last day of the Company’s 200X fiscal year. The Participant shall be deemed to be permanently disabled if he has been unable to perform his duties for the Company for a six consecutive month period and if he is entitled to long-term disability benefits under the Company’s long term disability plan, as determined by the long term disability carrier; or

(f) 100% of any remaining unvested Shares upon the occurrence of a Change in Control on or before the last day of the Company’s 200X fiscal year. For purposes of this Agreement, a “Change in Control” means an event or occurrence set forth in one or more of paragraphs (i) to (iv) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but that is specifically exempted under another such subsection):

(i) The acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (A) the then-outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (i), none of the following acquisitions of Outstanding Company Common Stock or Outstanding Company Voting Securities shall constitute a Change in Control: (I) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion, or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (II) any acquisition by the Company, (III) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (IV) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) and (B) of paragraph (ii) of this Section 2(f);

(ii) Such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board (A) who is a member of the Board on the date of the execution of this Agreement, or (B) who was nominated or elected subsequent to such date by at least a majority of the

 

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directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (B) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board;

(iii) The consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (A) all or substantially all of the individuals or entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the surviving, resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or indirectly through one or more other entities) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively; and (B) no Person beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or

(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

For purposes of this Agreement, employment with the Company shall include employment with a parent or subsidiary of the Company. Absent a determination otherwise by the Committee, the Participant must be employed through the vesting date to be entitled to the Shares.

3. Restrictions on Transfer.

(a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any Shares, or any interest therein, that are unvested, except that the Participant may transfer such Shares (i) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 3) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement, (ii) as part of the sale of all or

 

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substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), or (iii) to the Company in exchange for an account balance under the Company’s Deferred Compensation Plan subject to the terms set forth in Section 1 of this Agreement.

(b) The Company shall not be required (i) to transfer on its books any of the Shares which have been transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such Shares or to pay dividends to any transferee to whom such Shares have been transferred in violation of any of the provisions of this Agreement.

4. Restrictive Legends.

All certificates representing Shares shall have affixed thereto legends in substantially the following form, in addition to any other legends that may be required under federal or state securities laws:

“The shares of stock represented by this certificate are subject to restrictions on transfer set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of these shares (or his predecessor in interest), and such Agreement is available for inspection without charge at the office of the Clerk of the corporation.”

5. Provisions of the Plan This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement.

6. Adjustments for Stock Splits, Stock Dividends, Etc.

(a) If from time to time during the term of this Agreement, there is any stock split-up, reverse stock split, stock dividend, stock distribution, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization event or other reclassification of the Common Stock of the Company, or any distribution to holders of Common Stock other than a normal cash dividend, then any and all new, substituted or additional securities to which the Participant is entitled by reason of his ownership of the Shares shall be immediately considered unvested to the extent that the Shares in respect of which such new, substituted or additional securities are received were unvested at the time of receipt of such new, substituted or additional securities, and shall be subject to the restrictions on transfer and other provisions of this Agreement to the same extent as such unvested Shares.

(b) If the Shares are converted into or exchanged for, or stockholders of the Company receive by reason of any distribution in total or partial liquidation, securities of another corporation, or other property (including cash), pursuant to any merger of the Company or acquisition of its assets, other than one that constitutes a Change in Control for the purposes of Section 2 of this Agreement, then the rights of the Company under this Agreement shall inure to the benefit of the Company’s successor and this Agreement shall apply to the securities or other property received upon such conversion, exchange or distribution in the same manner and to the same extent as to the Shares.

 

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7. Withholding Taxes; Section 83(b) Election.

(a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to the vesting of the Shares.

(b) The Participant acknowledges and agrees that he may not make an election under Section 83(b) of the Internal Revenue Code with respect to the Shares. The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

8. Miscellaneous.

(a) No Rights to Employment. The Participant acknowledges and agrees that the vesting of the Shares pursuant to Section 2 hereof is earned only by continuing service as an employee at the will of the Company (not through the act of being hired or purchasing shares hereunder) and satisfying the other terms and conditions set forth in Section 2. The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee or consultant for the vesting period, for any period, or at all.

(b) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

(c) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.

(d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 3 of this Agreement.

(e) Notice. All notices required or permitted hereunder shall be in writing and deemed effectively given upon personal delivery or five days after deposit in the United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party hereto at the address shown beneath his or its respective signature to this Agreement, or at such other address or addresses as either party shall designate to the other in accordance with this Section 8(e).

 

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(f) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.

(g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.

(h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.

(i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the Commonwealth of Massachusetts without regard to any applicable conflicts of laws.

(j) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read and understands this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP, is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.

(k) Delivery of Certificates. The Participant authorizes the Company, on his behalf, to hold the Shares on book entry until the date on which the Shares vest.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

PERKINELMER, INC.
By:     
Name:     
Title:     
Address:     
    
PARTICIPANT

 

 

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EXHIBIT A

Definition of Earnings Per Share

(a) Earnings Per Share (EPS) shall mean post-tax earnings per common share on a GAAP basis for the applicable fiscal year determined on a fully diluted basis as reported in the Company’s annual consolidated financial statements, except that EPS shall be computed disregarding option expense and LTIP expense, adjusted as hereinafter described.

(b) If any of the following events occurs after the end of the Company’s 200X fiscal year, then in each fiscal year in which any such event directly affects post-tax earnings per share, including the 200X fiscal year, a corresponding adjustment shall be made to arrive at EPS for such year:

 

  (1) Any common stock split or common stock dividend, common stock subdivision or reclassification.

 

  (2) Any change in accounting principles or Company accounting practices.

 

  (3) Any change in laws, regulations or interpretations thereof.

 

  (4) Any items of a non-recurring nature, as evidenced by their exclusion from adjusted earnings in the Company’s reported quarterly financial statements.

 

  (5) Any extraordinary item, determined under generally accepted accounting principles.

(c) In the event of acquisitions, divestitures, or other growth or improvement initiatives, the Board of Directors may adjust the vesting targets (as defined in Section 2) as it deems appropriate to take account of the impact on EPS.

 

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EX-10.6 7 dex106.htm FORM OF RESTRICTED STOCK OPTION AGREEMENT FOR TIME-BASED VESTING Form of Restricted Stock Option Agreement for time-based vesting

Exhibit 10.6

PerkinElmer, Inc.

Restricted Stock Agreement under 2005 Incentive Plan

This AGREEMENT made as of the                      day of month, 200X, between PerkinElmer, Inc., a Massachusetts corporation (the “Company”), and                      (the “Participant”).

For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows:

1. Grant of Shares.

(a) Grant. The Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2005 Incentive Plan (the “Plan”),                      shares (the “Shares”) of common stock, $1.00 par value per share, of the Company (“Common Stock”). The Company shall issue to the Participant one or more certificates in the name of the Participant for that number of Shares issued to the Participant. The Participant agrees that the Shares shall be subject to vesting as set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Section 3 of this Agreement.

(b) Forfeiture. If the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, before the Shares vest, the Shares shall be immediately forfeited to the Company in exchange for $.001 per Share. Notwithstanding anything herein to the contrary, if the Shares do not vest on or before the occurrence of one or more of the events set forth in Section 2, the Shares shall automatically be forfeited to the Company in exchange for $.001 per Share.

[(c) Deferral. The Participant may within 30 days of the date hereof make an irrevocable election to exchange any Shares for an account balance under the Company’s Deferred Compensation Plan, denominated in units equal in value to the value of the Shares and distributable only in shares of Common Stock at the time designated by the Participant at the time of such election; provided, however, that such units shall be subject to the vesting provisions of Section 2 of this Agreement. Such account balance shall be reduced to $.001 per share with respect to any unvested share units if the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, before such share units vest pursuant to Section 2 of this Agreement.]

2. Vesting.

(a) Provided that the Participant remains employed by the Company on the occurrence of the following events or date(s), the Shares will vest as follows: (insert vesting schedule here):

(b) 100% of any remaining unvested Shares upon the death or permanent disability of the Participant on or before                     , 200X. The Participant shall be deemed to be permanently disabled if he has been unable to perform his duties for the Company for a six consecutive month period and if he is entitled to long-term disability benefits under the Company’s long term disability plan, as determined by the long term disability carrier; or


(c) 100% of any remaining unvested Shares upon the occurrence of a Change in Control on or before                     , 200X. For purposes of this Agreement, a “Change in Control” means an event or occurrence set forth in one or more of paragraphs (i) to (iv) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but that is specifically exempted under another such subsection):

(i) The acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (A) the then-outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (i), none of the following acquisitions of Outstanding Company Common Stock or Outstanding Company Voting Securities shall constitute a Change in Control: (I) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion, or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (II) any acquisition by the Company, (III) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (IV) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) and (B) of paragraph (ii) of this Section 2(c);

(ii) Such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board (A) who is a member of the Board on the date of the execution of this Agreement, or (B) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (B) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board;

(iii) The consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (A) all or substantially all of the individuals or entities who were the beneficial owners of the

 

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Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the surviving, resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or indirectly through one or more other entities) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively; and (B) no Person beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or

(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

For purposes of this Agreement, employment with the Company shall include employment with a parent or subsidiary of the Company. Absent a determination otherwise by the Committee, the Participant must be employed through the vesting date to be entitled to the Shares.

3. Restrictions on Transfer.

(a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any Shares, or any interest therein, that are unvested, except that the Participant may transfer such Shares (i) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 3) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement, (ii) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), [or (iii) to the Company in exchange for an account balance under the Company’s Deferred Compensation Plan subject to the terms set forth in Section 1 of this Agreement].

(b) The Company shall not be required (i) to transfer on its books any of the Shares which have been transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such Shares or to pay dividends to any transferee to whom such Shares have been transferred in violation of any of the provisions of this Agreement.

 

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4. Restrictive Legends.

All certificates representing Shares shall have affixed thereto legends in substantially the following form, in addition to any other legends that may be required under federal or state securities laws:

“The shares of stock represented by this certificate are subject to restrictions on transfer set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of these shares (or his predecessor in interest), and such Agreement is available for inspection without charge at the office of the Clerk of the corporation.”

5. Provisions of the Plan This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement.

6. Adjustments for Stock Splits, Stock Dividends, Etc.

(a) If from time to time during the term of this Agreement, there is any stock split-up, reverse stock split, stock dividend, stock distribution, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization event or other reclassification of the Common Stock of the Company, or any distribution to holders of Common Stock other than a normal cash dividend, then any and all new, substituted or additional securities to which the Participant is entitled by reason of his ownership of the Shares shall be immediately considered unvested to the extent that the Shares in respect of which such new, substituted or additional securities are received were unvested at the time of receipt of such new, substituted or additional securities, and shall be subject to the restrictions on transfer and other provisions of this Agreement to the same extent as such unvested Shares.

(b) If the Shares are converted into or exchanged for, or stockholders of the Company receive by reason of any distribution in total or partial liquidation, securities of another corporation, or other property (including cash), pursuant to any merger of the Company or acquisition of its assets, other than one that constitutes a Change in Control for the purposes of Section 2 of this Agreement, then the rights of the Company under this Agreement shall inure to the benefit of the Company’s successor and this Agreement shall apply to the securities or other property received upon such conversion, exchange or distribution in the same manner and to the same extent as to the Shares.

7. Withholding Taxes; Section 83(b) Election.

(a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to the vesting of the Shares.

(b) The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s

 

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own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. The Participant understands that it may be beneficial in many circumstances to elect to be taxed at the time the Shares are granted rather than when and as the Shares vest by filing an election under Section 83(b) of the Internal Revenue Code of 1986 with the I.R.S. within 30 days from the date of grant.

THE PARTICIPANT ACKNOWLEDGES THAT IT IS SOLELY THE PARTICIPANT’S RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE PARTICIPANT’S BEHALF.

8. Miscellaneous.

(a) No Rights to Employment. The Participant acknowledges and agrees that the vesting of the Shares pursuant to Section 2 hereof is earned only by continuing service as an employee at the will of the Company (not through the act of being hired or purchasing shares hereunder) and satisfying the other terms and conditions set forth in Section 2. The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee or consultant for the vesting period, for any period, or at all.

(b) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

(c) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.

(d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 3 of this Agreement.

(e) Notice. All notices required or permitted hereunder shall be in writing and deemed effectively given upon personal delivery or five days after deposit in the United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party hereto at the address shown beneath his or its respective signature to this Agreement, or at such other address or addresses as either party shall designate to the other in accordance with this Section 8(e).

(f) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.

 

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(g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.

(h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.

(i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the Commonwealth of Massachusetts without regard to any applicable conflicts of laws.

(j) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read and understands this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP, is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.

(k) Delivery of Certificates. The Participant authorizes the Company, on his behalf, to hold the Shares on book entry until the date on which the Shares vest.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

PERKINELMER, INC.
By:     
Name:     
Title:     
Address:     
    
PARTICIPANT

 

 

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EX-10.7 8 dex107.htm FORM OF RESTRICTED STOCK UNIT AGREEMENT Form of Restricted Stock Unit Agreement

Exhibit 10.7

PerkinElmer, Inc.

Restricted Stock Unit Agreement under 2005 Incentive Plan

This AGREEMENT made as of the                      day of month, 200X, between PerkinElmer, Inc., a Massachusetts corporation (the “Company”), and                      (the “Participant”).

For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows:

1. Grant of Units.

(a) Grant. The Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2005 Incentive Plan (the “Plan”),                      restricted stock units of the Company (the “Units”). Each Unit represents the right to receive one share of common stock, $1.00 par value per share, of the Company (“Common Stock”) as provided in this Agreement. The shares of Common Stock that are issuable upon vesting of the Units are referred to in this Agreement as “Shares”. Participant agrees that the Units shall be subject to vesting as set forth in Section 2 of this Agreement.

(b) Forfeiture. If the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, before the Units vest, the Units shall be immediately forfeited to the Company.

2. Vesting. Provided that the Participant remains employed by the Company on the occurrence of the following events or date(s), the Units will vest as follows:

(a) (insert vesting schedule here).

(b) upon the death or permanent disability of the Participant on or before the third anniversary of the date of this Agreement. The Participant shall be deemed to be permanently disabled if he has been unable to perform his duties for the Company for a six consecutive month period and if he is entitled to long-term disability benefits under the Company’s long term disability plan, as determined by the long term disability carrier; or

(c) upon the occurrence of a Change in Control on or before the third anniversary of the date of this Agreement. For purposes of this Agreement, a “Change in Control” means an event or occurrence set forth in one or more of paragraphs (i) to (iv) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but that is specifically exempted under another such subsection):

(i) The acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or more of either (A) the then-outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or (B) the


combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (i), none of the following acquisitions of Outstanding Company Common Stock or Outstanding Company Voting Securities shall constitute a Change in Control: (I) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion, or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (II) any acquisition by the Company, (III) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (IV) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) and (B) of paragraph (ii) of this Section 2(c);

(ii) Such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board (A) who is a member of the Board on the date of the execution of this Agreement, or (B) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (B) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board;

(iii) The consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (A) all or substantially all of the individuals or entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the surviving, resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or indirectly through one or more other entities) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively; and (B) no Person beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or

 

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(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

For purposes of this Agreement, employment with the Company shall include employment with a parent or subsidiary of the Company. Absent a determination otherwise by the Committee, the Participant must be employed through the vesting date to be entitled to vest in the Units.

3. Payment.

(a) As soon as administratively practicable following the vesting date(s) of the Units pursuant to Section 2 above, but in no event later than the 15th day of the third month of the year following the calendar year in which the Units vest, the Company shall distribute to the Participant (or to the Participant’s estate in the event of death) the Shares of Common Stock represented by Units that vested on such vesting date.

(b) The Company shall not be obligated to issue to the Participant the Shares upon the vesting of any RSU (or otherwise) unless the issuance and delivery of such Shares shall comply with all relevant provisions of law and other legal requirements including, without limitation, any applicable federal or state securities laws and the requirements of any stock exchange upon which shares of Common Stock may be issued.

4. Restrictions on Transfer. The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any Units except by the will or the laws of descent and distribution, and no amounts deferred under this Agreement, or any rights therein, shall be subject in any manner to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, levy, lien, attachment, garnishment, debt or other charge or disposition of any kind.

5. Dividend and Other Shareholder Rights. Except as set forth in the Plan, neither the Participant nor any person claiming under or through the Participant shall be, or have any rights or privileges of, a stockholder of the Company in respect to the Shares issuable pursuant to the Units granted hereunder until the Shares have been delivered to the Participant.

6. Provisions of the Plan This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement.

7. Adjustments for Stock Splits, Stock Dividends, Etc.

(a) If from time to time during the term of this Agreement, there is any stock split-up, reverse stock split, stock dividend, stock distribution, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization event or other reclassification of the Common Stock of the Company, or any distribution to holders of Common Stock other than a normal cash dividend, then a Unit shall become the right to receive, subject to the vesting and payment provisions described herein, any and all such new, substituted or additional securities or cash as if the Unit represented a share of Common Stock.

 

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(b) If the Shares are converted into or exchanged for, or stockholders of the Company receive by reason of any distribution in total or partial liquidation, securities of another corporation, or other property (including cash), pursuant to any merger of the Company or acquisition of its assets, other than one that constitutes a Change in Control for the purposes of Section 2 of this Agreement, then the rights of the Company under this Agreement shall inure to the benefit of the Company’s successor and a Unit shall become the right to receive, subject to the vesting and payment provisions described herein, any and all such new, substituted or additional securities or cash as if the Unit represented a share of Common Stock.

8. Withholding Taxes; No Section 83(b) Election.

(a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to the vesting of the Shares.

(b) The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. The Participant acknowledges that no election under Section 83(b) of the Internal Revenue Code of 1986 may be filed with respect to this award.

9. Miscellaneous.

(a) No Rights to Employment. The Participant acknowledges and agrees that the vesting of the Units pursuant to Section 2 hereof is earned only by continuing service as an employee at the will of the Company (not through the act of being hired or purchasing shares hereunder) and satisfying the other terms and conditions set forth in Section 2. The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee or consultant for the vesting period, for any period, or at all.

(b) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

(c) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.

(d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 4 of this Agreement.

 

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(e) Notice. All notices required or permitted hereunder shall be in writing and deemed effectively given upon personal delivery or five days after deposit in the United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party hereto at the address shown beneath his or its respective signature to this Agreement, or at such other address or addresses as either party shall designate to the other in accordance with this Section 9(e).

(f) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.

(g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.

(h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.

(i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the Commonwealth of Massachusetts without regard to any applicable conflicts of laws.

(j) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read and understands this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP, is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.

(k) Unfunded Rights. The right of the Participant to receive Common Stock pursuant to this Agreement is an unfunded and unsecured obligation of the Company. The Participant shall have no rights under this Agreement other than those of an unsecured general creditor of the Company.

 

- 5 -


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

PERKINELMER, INC.
By:     
Name:     
Title:     
Address:     
    
PARTICIPANT

 

 

- 6 -

EX-31.1 9 dex311.htm CERTIFICATION OF CEO PURSUANT TO SECTION 302 CERTIFICATION OF CEO PURSUANT TO SECTION 302

EXHIBIT 31.1

CERTIFICATION

I, Gregory L. Summe, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of PerkinElmer, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 13, 2006

    /s/    GREGORY L. SUMME        
    Gregory L. Summe
        Chairman of the Board, Chief Executive Officer and President
EX-31.2 10 dex312.htm CERTIFICATION OF CFO PURSUANT TO SECTION 302 CERTIFICATION OF CFO PURSUANT TO SECTION 302

EXHIBIT 31.2

CERTIFICATION

I, Jeffrey D. Capello, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of PerkinElmer, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 13, 2006

    /s/    JEFFREY D. CAPELLO        
    Jeffrey D. Capello
        Senior Vice President and Chief Financial Officer
EX-32.1 11 dex321.htm CERTIFICATION OF CEO AND CFO PURSUANT TO SECTION 906 CERTIFICATION OF CEO AND CFO PURSUANT TO SECTION 906

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of PerkinElmer, Inc. (the “Company”) for the period ended October 1, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Gregory L. Summe, Chairman of the Board, Chief Executive Officer and President of the Company, and Jeffrey D. Capello, Senior Vice President, Chief Financial Officer and Chief Accounting Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) Based on my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) Based on my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: November 13, 2006

    /s/    GREGORY L. SUMME        
    Gregory L. Summe
    Chairman of the Board, Chief Executive Officer and President

Dated: November 13, 2006

    /s/    JEFFREY D. CAPELLO        
    Jeffrey D. Capello
    Senior Vice President and Chief Financial Officer
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