-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Tg+r9jjbeSGOH37fC7JIKd2L1a6jjvYa8+6r9v4Wdda8otIGi7HZBx0cqGoX77fz PZ87sVCnSARNhEYeJTKsrQ== 0000795986-95-000003.txt : 19950613 0000795986-95-000003.hdr.sgml : 19950613 ACCESSION NUMBER: 0000795986-95-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950308 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO INSTRUMENT SYSTEMS INC CENTRAL INDEX KEY: 0000795986 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 042925809 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09786 FILM NUMBER: 95519119 BUSINESS ADDRESS: STREET 1: 504 AIRPORT RD STREET 2: P O BOX 2108 CITY: SANTA FE STATE: NM ZIP: 87504 BUSINESS PHONE: 6176221000 MAIL ADDRESS: STREET 1: 81 WYMAN STREET CITY: WALTHAM STATE: MA ZIP: 02254 10-K 1 THI 1994 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ----------------------------------- FORM 10-K (mark one) [ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1994 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 1-9786 THERMO INSTRUMENT SYSTEMS INC. (Exact name of Registrant as specified in its charter) Delaware 04-2925809 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 504 Airport Road, Post Office Box 2108 Santa Fe, New Mexico 87504-2108 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 622-1000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ---------------------------- ----------------------- Common Stock, $.10 par value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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, and (2) has been subject to the filing requirements for at least the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of January 27, 1995, was approximately $218,981,000. As of January 27, 1995, the Registrant had 47,570,240 shares of Common Stock outstanding. Documents Incorporated by Reference Portions of the Registrant's Annual Report to Shareholders for the year ended December 31, 1994, are incorporated by reference into Parts I and II. Portions of the Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 22, 1995, are incorporated by reference into Part III. PAGE PART I Item 1. Business (a) General Development of Business. Thermo Instrument Systems Inc. (the Company or the Registrant) is a worldwide leader in the development, manufacture, and marketing of analytical instruments used to detect and measure air pollution, nuclear radioactivity, complex chemical compounds, toxic metals, and other elements in a wide variety of materials. The Company also markets process monitoring and control instruments primarily for the oil, gas, and petrochemical industries. Through its 86%-owned subsidiary, ThermoSpectra Corporation (ThermoSpectra), the Company develops, manufactures, and markets precision imaging, inspection, and measurement instrumentation that employ a variety of energy sources or signals as well as high-speed data acquisition and digital processing technologies. In 1994, the Company's ThermoSpectra subsidiary sold 1,505,000 shares of its common stock in private placements at $10.00 per share for net proceeds of $14.0 million, resulting in a gain of $6.5 million. Effective April 4, 1994, the Company formed an environmental services joint venture with Thermo Process Systems Inc. (Thermo Process), another public subsidiary of Thermo Electron Corporation (Thermo Electron). The joint venture operates under the name Thermo Terra Tech. The Company contributed the analytical laboratories and the nuclear health physics and environmental science and engineering services businesses that comprised its Services segment. Thermo Process contributed its environmental laboratory business, which specializes in fast-response testing of petroleum-contaminated soils and groundwater, and approximately $31 million in cash and short-term investments. The Company owns 49% of Thermo Terra Tech and accounts for its interest in the joint venture using the equity method. As a result, the Services segment operations are no longer consolidated in the Company's financial statements. Under the terms of the joint venture agreement, 66.67% of income earned by the joint venture after April 4, 1994, will be allocated to the Company until the first to occur of (a) the joint venture has accumulated $5.1 million in net profits, (b) April 1, 1995, or (c) the date on which at least 70% of Thermo Process' cash contribution to the joint venture is first invested in one or more additional businesses. Thereafter, the Company's share of the joint venture's income will be 49%. The Company historically has expanded both through the acquisition of companies and product lines and through internal development of new products and technologies. During the past several years the Company has completed several complementary acquisitions that have provided additional technologies, specialized manufacturing or product development expertise, and broader capabilities in marketing and distribution. In 1994*, the Company's acquisitions included the assets of IRT Corporation for a purchase price of $7.3 million, and several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated (Baker Hughes) for a purchase price of $89.7 million. On January 1, 1995, the Company acquired the assets of the Analytical Instruments Division of * References to 1994, 1993, and 1992 herein are for the fiscal years ended December 31, 1994, January 1, 1994, and January 2, 1993, respectively. 2PAGE Baird Corporation, a wholly owned subsidiary of Imo Industries Inc., for $12.3 million in cash, subject to a post-closing adjustment. On March 1, 1995, the Company entered into an Asset and Stock Purchase Agreement (the Agreement) with Fisons plc (Fisons) under which the Company agreed to acquire the Scientific Instruments Division (the Division) of Fisons for 202 million British pounds sterling. The Division is principally composed of operations that are involved in the research, development, manufacture, and sale of analytical instruments to industrial and research laboratories worldwide. Consummation of the acquisition is subject to several conditions, including approval by Fisons shareholders, regulatory approvals, consent of certain third parties, and customary conditions to closing. The Company intends to fund the purchase price from available cash and through borrowings from Thermo Electron. Thermo Electron has guaranteed the obligations of the Company under the Agreement. The purchase price is subject to a post-closing adjustment based on the net asset value of the Division as of the closing date. The Company was incorporated in Delaware in May 1986 as a wholly owned subsidiary of Thermo Electron to succeed the instruments businesses that were previously conducted by several Thermo Electron subsidiaries. As of December 31, 1994, Thermo Electron owned 39,634,271 shares, or 83%, of the Company's outstanding common stock. Thermo Electron is a major manufacturer of biomedical products including heart-assist systems and mammography systems, papermaking and recycling equipment, alternative-energy systems, industrial process equipment, and other specialized products. Thermo Electron also provides environmental and metallurgical services and conducts advanced technology research and development. Thermo Electron intends, for the foreseeable future, to maintain at least 80% ownership of the Company, so that it may continue to file consolidated U.S. federal and state income tax returns with the Company. This may require the purchase by Thermo Electron of additional shares of common stock and/or convertible debentures of the Company from time to time as the number of outstanding shares of the Company increases. These and any other purchases may be made either on the open market or directly from the Company or pursuant to conversions of the Company's 7% subordinated convertible note due 1996 or the 3 3/4% senior convertible note due 2000 held by Thermo Electron. See Notes 5 and 11 to Consolidated Financial Statements in the Registrant's 1994 Annual Report to Shareholders for a description of the Company's outstanding stock options and convertible obligations. During 1994, Thermo Electron purchased 1,931,327 shares of the Company's common stock on the open market at a total cost of $57.4 million. (b) Financial Information About Industry Segments. The Company operates in one business segment: the manufacturing and marketing of analytical, monitoring, and process control instruments used to detect and measure air pollution, radioactivity, complex chemical compounds, toxic metals and other elements in a broad range of liquids and solids, as well as to control and monitor various industrial processes (the Instruments Segment). Prior to April 4, 1994, the Company also provided environmental science and engineering services, laboratory-based testing, and nuclear physics services, which comprised the Company's Services segment. These services are now being provided by the Thermo Terra Tech joint venture. 3PAGE Financial information concerning the Company's industry segments is provided in Note 13 to Consolidated Financial Statements in the Registrant's 1994 Annual Report to Shareholders and is incorporated herein by reference. (c) Description of Business. (i) Principal Products and Services Instruments manufactured and marketed by the Company employ a variety of advanced technologies and spectral, electroanalytical, and separation techniques to determine the composition, structure, and physical properties of natural and synthetic substances. The Company's instruments can be broadly categorized by their use as analytical, monitoring, or process control instruments. Analytical Instruments The Company's principal analytical instrument products are atomic emission and absorption spectrometers, Fourier transform infrared (FT-IR) and FT-Raman spectrometers, mass spectrometers, high performance liquid chromatographs, gas chromatographs, and X-ray fluorescence instrumentation. Atomic Emission (AE) and Atomic Absorption (AA) Spectrometers identify and measure trace quantities of metals, and other elements in a wide variety of materials, including environmental samples (such as soil, water, and wastes), foods, drugs, cosmetics, and alloys. The Company sells its products to a wide range of customers in manufacturing industries such as producers of aircraft, automobiles and trucks, computers, chemicals, food, pharmaceuticals, and primary metals; service industries such as waste management companies and commercial testing laboratories; and government and university laboratories. The Company is a leading manufacturer of sequential AE spectrometers, in which elements are analyzed one at a time, and simultaneous AE spectrometers, in which many elements can be measured at the same time. The Company produces AA spectrometers in single-, double- and four-channel models. The Company is the only major producer of multichannel AA spectrometers, which provide several operational advantages over single-channel instruments, including speed of analysis, increased accuracy, reduced sample consumption, and analysis over an extended range of concentrations. The Company's FT-IR and FT-Raman spectrometers are designed to nondestructively determine the chemical composition and physical properties of materials. These instruments are used in many areas of chemical research, industrial quality control and process monitoring, and for solving a wide variety of materials analysis problems. The Company offers a variety of models ranging from newly introduced models designed for routine applications to highly advanced research-grade FT-IR spectrometers. The Company is a leading manufacturer of commercial mass spectrometers and has pioneered many of the significant developments and applications of mass spectrometry. The Company's mass spectrometry products identify and measure the components of a sample for organic chemical compounds or for inorganic compounds. These instruments are used by customers in environmental analysis and pollution control; in research and production of pharmaceuticals; in biochemistry; in analysis of foods, chemicals, and 4PAGE petrochemicals; and in health and forensic science. The Company provides both stand-alone mass spectrometers and combined systems that use its own chromatographs or those purchased from other companies. These products span a range of sensitivity, specificity, separation technologies, data-handling capabilities, sizes, and prices. The Company sells high performance liquid chromatography, capillary electrophoresis, and related instruments and equipment used principally in the research and development and production monitoring of pharmaceuticals, chemicals, and personal-care products, and for environmental monitoring. These instruments separate the chemical components of substances for purposes of identification and measurement. Capillary electrophoresis is a relatively new separation technique that is based on a combination of chromatographic and electroanalytical technologies and is particularly useful in biochemical, pharmaceutical, and environmental research. In 1994, with its acquisition of the Tremetrics and TN Technologies businesses from Baker Hughes, the Company added two analytical testing technologies: gas chromatography and X-ray fluorescence. Gas chromatographs are widely used in environmental and industrial laboratories as stand-alone instruments or in conjunction with mass spectrometers, where the gas chromatograph separates a sample into individual chemical components for the mass spectrometer to identify. Applications include the identification of organic compounds, from pesticide residues on vegetables to chlorinated organics in drinking water. The Company sells a wide variety of gas chromatography detectors that measure trace levels of pollutants in water, soil, and air. X-ray fluorescence instruments allow for the nondestructive analysis of inorganic elements. Applications include alloy identification, on-line process monitoring and quality control, characterization of toxic metals in soil, and thickness and/or composition of semiconductor thin films. In addition, the Company manufactures and markets digital oscilloscopes, multichannel transient recorders, high-resolution waveform analyzers, laser scanning confocal microscopes, and X-ray microanalysis equipment, as well as X-ray imaging systems used for quality assurance and failure analysis applications primarily in the electronics industry. Monitoring Instruments The Company manufactures monitoring instruments for two principal markets: the detection and measurement of nuclear radiation, and the monitoring of air pollutants including toxic and combustible gases. The Company's nuclear radiation monitoring instruments detect and measure alpha, beta, gamma, neutron, and X-ray radiation emitted by natural sources and by radioactive materials used in nuclear power plants and certain governmental, industrial, and medical facilities. The Company is a leading manufacturer of a broad range of stand-alone and portable instruments and computer-integrated instrument systems used to ensure the safety of personnel from exposure to nuclear radiation. Nuclear power plants and U.S. Department of Energy (DOE) facilities purchase approximately 70% of the radiation monitoring instruments sold by the Company. The businesses acquired from FAG Kugelfischer Georg Shafer AG in 1993 provide two classes of products. The radiation safety-measurement products division is a major supplier of instruments and systems that are manufactured to European standards for personnel protection and environmental monitoring. The radiometry division manufactures industrial gauging and process control instruments used principally by manufacturers 5PAGE of flat sheet materials, including metals, plastics, rubber, paper, and fibers. The Company's air-monitoring instruments measure pollutants in ambient air and from stationary sources such as industrial smokestacks. The principal pollutants measured are oxides of nitrogen, sulfur dioxide, carbon monoxide, ozone, and volatile organic compounds (VOCs). These instruments are used by utility and industrial customers to ensure compliance with environmental regulations, by government agencies to monitor air quality, and by research facilities. The Occupational Safety and Health Administration's safety requirements for protecting workers from toxic or explosive atmospheres in confined spaces are addressed with the Company's detectors, instruments, and systems for sensing, monitoring, and warning of such dangers. These worker-safety products are used in a wide range of applications, from large petrochemical plants, utilities, and industrial manufacturing facilities to commercial buildings. In addition, the Company manufactures equipment that provides on-line, real-time analysis of elements in bulk raw materials, such as coal and cement. These analyzers are used by utilities to determine the sulfur content of coal to ensure compliance with air quality standards and by the cement industry to test raw materials to assure product quality and uniformity. Process Control Instruments With the 1994 acquisition of the EnviroTech Controls business from Baker Hughes, the Company now addresses the process monitoring, analysis, gauging, and control instruments market, primarily for the oil, gas, and petrochemical industries. The Company manufactures and markets a number of process monitoring, analysis, and control systems including: analog and digital recorders for continuous process industries; process and laboratory analytical instruments and monitors to detect lethal gases for the oil, gas, and petrochemical industries; supervisory control and data acquisition software for process monitoring and operator interface in a variety of industrial processes; and turnkey, integrated systems to control networks of distant oil and gas wells. The Company also manufactures and markets process gauges and noncontacting and nonintrusive process control instrumentation to measure liquid levels, density, weight, and flows for a variety of industries. Application examples include measuring levels in a pharmaceutical reactor, determining the percentage by weight of solids contained in a mining slurry, or monitoring the flow of fluid into a wastewater treatment facility. In addition to analytical, monitoring, and process control instruments, the Company supplies related accessories, spare parts, and instrument maintenance and training programs at its own and its customers' facilities. Thermo Terra Tech Joint Venture Effective April 4, 1994, the Company formed an environmental services joint venture with Thermo Process Systems Inc., another public subsidiary of Thermo Electron. The Company contributed the analytical laboratories and 6PAGE the nuclear health physics and environmental science and engineering services businesses that comprised its Services segment. Thermo Process contributed its environmental laboratory business, which specializes in fast-response testing of petroleum-contaminated soils and groundwater, and approximately $31 million in cash and short-term investments. The Company owns 49% of Thermo Terra Tech and accounts for its interest in the joint venture using the equity method. Thermo Terra Tech provides comprehensive laboratory-based environmental testing, analysis, and related services for the detection, measurement, and monitoring of hazardous wastes and radioactive materials. Thermo Terra Tech's services also include design and construction inspection of water supply and wastewater treatment facilities, surveying and site planning, transportation engineering services, solid waste management services, and building services. Customers and Marketing The Company sells many of its products and services to customers whose activities are subject to numerous environmental quality, pollution control, and occupational safety and health regulations and laws enacted by federal, state, and local governments and by international accord. Customers include industrial manufacturers, environmental laboratories, utilities, waste management and treatment facilities, and government agencies. The Company's analytical instruments are also used in biomedical applications such as analysis of drugs and drug metabolites; in academic and industrial chemical research; in forensic science; in energy and mineral resource exploration and production; in metals processing; and in a range of product quality assurance and process monitoring applications. The Company's process control instrumentation is used primarily in the oil, gas, and petrochemical industries. The Company sells its products through its own marketing and sales force in North America, Europe, and Asia and receives additional market coverage through authorized representatives throughout the world. Some products are distributed through original equipment manufacturer (OEM) agreements. The Company's products are installed and serviced in most major markets by the Company's personnel. Installation and service in some countries are provided by authorized representatives. Customers may purchase service contracts from the Company to cover equipment no longer under warranty, and service work also is provided on a time, materials, and expense basis. Training courses on both the operation and maintenance of the Company's products are conducted for customers and authorized representatives who service the products. (ii) & (xi) New Products; Research and Development The Company maintains active programs for the development of new products using both new and existing technologies and for enhancing existing products by improving their price-performance ratio. The development of new applications for analytical instrument products is an especially important element of the growth strategy for these products. Although the Company's products are subject to obsolescence due to technological developments, sudden obsolescence is not characteristic of the Company's business. Research and development expenses for the Company were $42,924,000, $34,510,000, and $26,138,000 in 1994, 1993, and 1992, respectively. 7PAGE (iii) Raw Materials The Company manufactures many of the parts and subsystems used in its products, including optical components and proprietary circuitry. Other components, including packaging materials, integrated circuits, microprocessors, and computers, are manufactured by others. The raw materials, components, and supplies purchased by the Company are either available from a number of different suppliers or from alternative sources that could be developed without a material adverse effect upon the Company's business. (iv) Patents, Licenses, and Trademarks The Company's policy is to protect its intellectual property rights, including applying for and obtaining patents when appropriate. The Company also enters into licensing agreements with other companies in which it grants or receives rights to specific patents and technical know-how. Patent protection is believed to provide the Company with competitive advantages with respect to certain instruments such as its mass spectrometers with ion traps. The Company also considers technical know-how, trade secrets, and trademarks to be important to its business. (v) Seasonal Influences There are no significant seasonal influences on the Company's sales of its products. (vi) Working Capital Requirements There are no special inventory requirements or credit terms extended to customers that would have a material adverse effect on the Company's working capital requirements. (vii) Dependency on a Single Customer The Company's Instrument Segment is not dependent upon a single customer, or a few customers. The Company's former Services segment, the business of which is now conducted by the Thermo Terra Tech joint venture, derived approximately 30%, 31%, and 30% of its revenues in the three-month period ended April 2, 1994 and in 1993 and 1992, respectively, from contracts or subcontracts with the federal government. No single customer accounted for more than 10% of the Company's revenues in any of the past three years. (viii) Backlog The backlog of firm orders for the Instruments segment as of December 31, 1994 and January 1, 1994 was $139,596,000 and $115,620,000, respectively. The backlog of firm orders for the Company's former Services segment as of January 1, 1994, was $26,196,000. The Company anticipates that substantially all of the backlog at December 31, 1994, will be shipped or completed within the current fiscal year. (ix) Government Contracts Not applicable. 8PAGE (x) Competition The Company generally competes on the basis of technical advances that result in new products and improved price-performance ratios, reputation among customers as a quality leader for products and services, and active research and application-development programs. To a lesser extent, the Company competes on the basis of price. The Company believes it is among the principal manufacturers specializing in analytical instrumentation, although it faces significant competition from other companies, many of which are larger than the Company, and technologies in most of its product lines and its relative position in certain markets cannot be determined due to insufficient data. The Company believes it is a leading supplier of mass spectrometers, FT-IR spectrometers, FT-IR and FT-Raman microscopes, and optical plasma-emission spectrometers and a major supplier of atomic absorption spectrometers. In liquid chromatography, the Company believes its competitors include several larger companies and numerous specialty manufacturers. In its remaining analytical instrument product lines, the Company believes its competitors are mainly smaller, specialized firms. The Company is a leading manufacturer of ambient air monitoring instruments and a major manufacturer of source monitoring and worker-safety monitoring instruments. Some engineering companies compete for large ambient air monitoring installations, but they do not manufacture the individual instruments that form a major part of the system, therefore, they will often buy these from the Company on an OEM basis. The Company has a relatively small presence within the large and varied process control marketplace, which is extremely fragmented and comprises several large companies and numerous smaller companies. (xii) Environmental Protection Regulations The Company believes that compliance by the Company with federal, state, and local environmental regulations will not have a materially adverse effect on its capital expenditures, earnings, or competitive position. (xiii) Number of Employees As of December 31, 1994, the Company employed 3,966 people. (d) Financial Information About Exports by Domestic Operations and About Foreign Operations. Financial information about exports by domestic operations and about foreign operations is summarized in Note 13 to Consolidated Financial Statements in the Registrant's 1994 Annual Report to Shareholders and is incorporated herein by reference. 9PAGE (e) Executive Officers of the Registrant. Present Title (Year First Became Executive Name Age Officer) --------------------- ---- ------------------------------------------ Arvin H. Smith 65 President and Chief Executive Officer (1986) John N. Hatsopoulos * 60 Vice President and Chief Financial Officer (1988) Denis A. Helm 55 Senior Vice President (1986) Earl R. Lewis 51 Senior Vice President (1990) Richard W. K. Chapman 50 Vice President (1994) Barry S. Howe 39 Vice President (1994) Paul F. Kelleher 52 Chief Accounting Officer (1986) * John N. Hatsopoulos and George N. Hatsopoulos, a director of the Company, are brothers. Each executive officer serves until his successor is chosen or appointed by the Board of Directors and qualified or until earlier resignation, death, or removal. All executive officers, except Mr. Chapman, have held comparable positions for at least five years either with the Company or with its parent company, Thermo Electron. Mr. Chapman has held management positions at the Company's Finnigan Corporation (Finnigan) subsidiary since 1989, first as marketing manager and, beginning in 1992, as president. Messrs. Helm, Lewis, Chapman, and Howe are full-time employees of the Company. Messrs. Smith, Hatsopoulos, and Kelleher are full-time employees of Thermo Electron, but devote such time to the affairs of the Company as the Company's needs reasonably require. Item 2. Properties The Company owns approximately 1,203,000 square feet of office, engineering, laboratory, and production space, principally in California, Colorado, Florida, New Mexico, Texas, Wisconsin, Germany, and England, and leases approximately 957,000 square feet of office, engineering, laboratory, and production space under leases expiring from 1995 to 2017, principally in California, Massachusetts, Connecticut, Texas, Wisconsin, Japan, and Germany. As of December 31, 1994, the Company has a $10,855,000 mortgage loan that is secured by 200,000 square feet of property in California with a net book value of $16,564,000. The Company believes that its facilities are in good condition and are suitable and adequate for its present operations and that suitable space is readily available if any of such leases are not extended. Item 3. Legal Proceedings The Company has been notified that the Environmental Protection Agency has determined that a release or a substantial threat of a release of a hazardous substance, as defined in the Comprehensive Environmental Response Compensation and Liability Act of 1980 (CERCLA or the Superfund law), occurred at two sites to which chemical or other wastes generated by the manufacturing operations of subsidiaries of the Company were sent. The notifications allege that these subsidiaries may be potentially responsible parties with respect to the remedial actions needed to control or clean up any such releases. Under CERCLA, responsible parties can include current and previous owners of the site, generators of hazardous substances 10PAGE disposed of at the site, and transporters of hazardous substances to the site. Each responsible party can be jointly and severally liable, without regard to fault or negligence, for all costs associated with the remediation of the site. In each instance the Company believes that its subsidiary is only one of several companies which received such notification and who may likewise be held liable for any such remedial costs. The Company also is involved with one site under California law where the Company may be required to participate in remediation. The Company evaluates its potential liability as a responsible party for these environmental matters on an ongoing basis based upon factors such as the estimated remediation costs, the nature and duration of the Company's involvement with the site, the financial strength of other potentially responsible parties, and the availability of indemnification from previous owners of acquired businesses. Estimated liabilities are accrued in accordance with Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies." To date, the Company has not incurred any significant liability with respect to any of these sites and the Company anticipates that future liabilities related to sites with which the Company is currently involved will not have a materially adverse effect on the Company's business, results of operations or financial condition. On September 27, 1993, Analytica of Branford, Inc. (Analytica) filed a complaint against the Company's Finnigan subsidiary in U.S. District Court for the District of Connecticut. The complaint alleges that Finnigan has used apparatus, and has manufactured and sold products which aid and instruct end-purchasers to use the apparatus, in a manner so as to infringe a U.S. patent entitled "Method of Producing Multiply Charged Ions and For Determining Molecular Weights of Molecules By Use of the Multiply Charged Ions of Molecules", and asks for injunctive relief, profits, unspecified damages, and attorney's fees. The Company believes that the Finnigan products and applications which Analytica seeks to challenge may include mass spectrometers equipped with electrospray ionization sources which are used for multiple charged ion analysis of high molecular weight compounds. Finnigan has filed its answer denying infringement and also has counterclaimed for a declaration that the Analytica patent be held invalid and not infringed. Discussions between the parties, including settlement discussions, are continuing. No trial date has been set. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. 11PAGE PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Information concerning the market and market price for the Registrant's Common Stock, $.10 par value, and dividend policy is included under the sections labeled "Common Stock Market Information" and "Dividend Policy" in the Registrant's 1994 Annual Report to Shareholders and is incorporated herein by reference. Item 6. Selected Financial Data The information required under this item is included under the sections labeled "Selected Financial Information" and "Dividend Policy" in the Registrant's 1994 Annual Report to Shareholders and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required under this item is included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrant's 1994 Annual Report to Shareholders and is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The Registrant's Consolidated Financial Statements as of December 31, 1994, are included in the Registrant's 1994 Annual Report to Shareholders and are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. 12PAGE PART III Item 10. Directors and Executive Officers of the Registrant The information concerning directors required under this item is incorporated herein by reference from the material contained under the caption "Election of Directors" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. The information concerning delinquent filers pursuant to Item 405 of Regulation S-K is incorporated herein by reference from the material contained under the heading "Disclosure of Certain Late Filings" under the caption "Stock Ownership" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. Item 11. Executive Compensation The information required under this item is incorporated herein by reference from the material contained under the caption "Executive Compensation" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required under this item is incorporated herein by reference from the material contained under the caption "Stock Ownership" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. Item 13. Certain Relationships and Related Transactions The information required under this item is incorporated herein by reference from the material contained under the caption "Relationship with Affiliates" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. 13PAGE PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a), (d) Financial Statements and Schedules. (1) The consolidated financial statements set forth in the list below are filed as part of this Report. (2) The consolidated financial statement schedule set forth in the list below is filed as part of this Report. (3) Exhibits filed herewith or incorporated herein by reference are set forth in Item 14(c) below. List of Financial Statements and Schedules Referenced in this Item 14. Information incorporated by reference from Exhibit 13 filed herewith: Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Shareholders' Investment Notes to Consolidated Financial Statements Report of Independent Public Accountants Certain Financial Statement Schedules filed herewith: Schedule II: Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable or not required, or because the required information is shown either in the financial statements or the notes thereto. (b) Reports on Form 8-K. During the quarter ended December 31, 1994, the Registrant was not required to file, and did not file, any Current Report on Form 8-K. On March 6, 1995, the Company filed a Current Report on Form 8-K pertaining to its pending acquisition of Fisons plc. (c) Exhibits. See Exhibit Index on the page immediately preceding exhibits. 14PAGE SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: March 7, 1995 THERMO INSTRUMENT SYSTEMS INC. By: Arvin H. Smith ------------------------------ Arvin H. Smith President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, as of March 7, 1995. Signature Title By: Arvin H. Smith President, Chief Executive Officer Arvin H. Smith and Director By: John N. Hatsopoulos Vice President, Chief Financial Officer John N. Hatsopoulos and Director By: Paul F. Kelleher Chief Accounting Officer Paul F. Kelleher By: Marshall J. Armstrong Director Marshall J. Armstrong By: Frank Borman Director Frank Borman By: Elias P. Gyftopoulos Director Elias P. Gyftopoulos By: George N. Hatsopoulos Chairman of the Board and Director George N. Hatsopoulos By: Robert C. Howard Director Robert C. Howard By: Frank Jungers Director Frank Jungers By: Robert A. McCabe Director Robert A. McCabe By: Polyvios C. Vintiadis Director Polyvios C. Vintiadis 15PAGE Report of Independent Public Accountants To the Shareholders and Board of Directors of Thermo Instrument Systems Inc.: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Thermo Instrument Systems Inc.'s Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 10, 1995 (except with respect to the matters discussed in Note 14 as to which the date is March 1, 1995). Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14 on page 14 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. Arthur Andersen LLP Boston, Massachusetts February 10, 1995 16PAGE SCHEDULE II THERMO INSTRUMENT SYSTEMS INC. VALUATION AND QUALIFYING ACCOUNTS (In thousands) Bad Less: Charged Debts Ac- Balance at to Costs Re- counts Balance Beginning and Acquisi- Disposi- cover- Written at End Description of Year Expenses tions(a) tions(a) ed Off of Year -------------------------------------------------------------------------- Year Ended December 31, 1994 Allowance for Doubtful Accounts $8,456 $ 733 $4,763 $(2,696) $ 259 $(2,736) $8,779 Year Ended January 1, 1994 Allowance for Doubtful Accounts $7,276 $ 970 $1,322 $ (586) $1,241 $(1,767) $8,456 Year Ended January 2, 1993 Allowance for Doubtful Accounts $7,096 $ 666 $ 985 $ - $ (42) $(1,429) $7,276 (a) As described in Notes 3 and 4 to Consolidated Financial Statements in the Registrant's 1994 Annual Report to Shareholders. 17PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- --------------------------------------------------------- ---- 2.1 Asset and Stock Purchase Agreement between Thermo Electron Corporation and Baker Hughes Incorporated dated January 28, 1994 (filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K relating to events occurring on March 16, 1994 [File No. 1-9786] and incorporated herein by reference). 2.2 Assignment and Assumption Agreement dated March 16, 1994 among Thermo Electron Corporation, Thermedics Inc. and the Registrant (filed as Exhibit 2.2 to the Registrant's Current Report on Form 8-K relating to events occurring on March 16, 1994 [File No. 1-9786] and incorporated herein by reference). 2.3 Asset and Stock Purchase Agreement among the Registrant, Thermo Electron Corporation and Fisons plc dated March 1, 1995. Pursuant to Item 601(b)(2) of Regulation S-K, schedules to this Agreement have been omitted. The Company hereby undertakes to furnish supplementally a copy of such schedules to the Commission upon request. 3.1 Restated Certificate of Incorporation of the Registrant, as amended (filed as Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-9786] and incorporated herein by reference). 3.2 By-Laws of the Registrant (filed as Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-9786] and incorporated herein by reference). 4.1 Fiscal Agency Agreement dated as of August 2, 1991 among the Registrant, Thermo Electron Corporation, and Chemical Bank as fiscal agent, relating to $86,250,000 principal amount of 6 5/8% subordinated convertible debentures due 2001 (filed as Exhibit 4(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1991 [File No. 1-9786] and incorporated herein by reference). 4.2 Fiscal Agency Agreement dated as of September 15, 1993, among the Registrant, Thermo Electron Corporation and Chemical Bank as fiscal agent, relating to the $70,000,000 principal amount of 3 3/4% senior convertible debentures due 2000 (filed as Exhibit 4 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 2, 1993 [File No. 1-9786] and incorporated by reference). 18PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page -------- ------------------------------------------------------- ---- 4.3 Subordinated convertible note purchase agreement by and between the Registrant and Thermo Electron Corporation as of August 2, 1991 (filed as Exhibit 10(h) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 28, 1991 [File No. 1-9786] and incorporated herein by reference). 4.4 Senior convertible note purchase agreement by and between the Registrant and Thermo Electron Corporation as of September 15, 1993 (filed as Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 2, 1993 [File No. 1-9786] and incorporated by reference). 4.5 Master Guarantee Reimbursement Agreement dated January 1, 1994 by and among the Registrant and Thermo Electron Corporation. The Registrant hereby agrees, pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K, to furnish to the Commission upon request, a copy of each instrument with respect to other long-term debt of the Registrant or its subsidiaries. 10.1 Amended and Restated Corporate Services Agreement, dated as of January 3, 1993, between Thermo Electron Corporation and the Registrant (filed as Exhibit 10(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-9786] and incorporated herein by reference). 10.2 Tax Allocation Agreement dated as of May 29, 1986, between Thermo Electron and the Registrant (filed as Exhibit 10(b) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). 10.3 Thermo Electron Corporate Charter, as amended and restated effective January 3, 1993 (filed as Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-9786] and incorporated herein by reference). 10.4 Form of Indemnification Agreement with Directors and Officers (filed as Exhibit 10(g) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 29, 1990 [File No. 1-9786] and incorporated herein by reference). 10.5 Asset and Stock Purchase Agreement dated January 14, 1993 among the Registrant, Spectra-Physics Analytical, Inc. and Spectra-Physics, Inc. (filed as Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-9786] and incorporated herein by reference). 19PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page -------- --------------------------------------------------------- ---- 10.6 Plan for sale of shares by the Registrant to Thermo Electron Corporation (filed as Exhibit 10(dd) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 3, 1993 [File No. 1-9786] and incorporated herein by reference). 10.7 Master Repurchase Agreement dated January 1, 1994 between the Registrant and Thermo Electron Corporation (filed as Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-9786] and incorporated herein by reference). 10.8-10.15 Reserved. 10.16 Deferred Compensation Plan for Directors of the Registrant (filed as Exhibit 10(f) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). 10.17 Directors' Stock Option Plan of the Registrant. 10.18 Incentive Stock Option Plan of the Registrant (filed as Exhibit 10(c) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Registrant's Nonqualified Stock Option Plan is 1,500,000 shares, after adjustment to reflect share increase approved in 1990 and 3-for-2 stock splits effected in January 1988 and July 1993). 10.19 Nonqualified Stock Option Plan of the Registrant (filed as Exhibit 10(d) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Registrant's Incentive Stock Option Plan is 1,500,000 shares, after adjustment to reflect share increase approved in 1990 and 3-for-2 stock splits effected in January 1988 and July 1993). 10.20 Equity Incentive Plan of the Registrant (filed as Appendix A to the Proxy Statement dated April 27, 1993 of the Registrant [File No. 1-9786] and incorporated herein by reference). (Maximum number of shares issuable is 2,150,000 shares, after adjustment to reflect share increase approved in December 1993 and 3-for-2 stock split effected in July 1993). 10.21 Finnigan Corporation 1979 Long-term Incentive Stock Option Plan. 20PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page -------- --------------------------------------------------------- ---- 10.22 Former Thermo Environmental Corporation Incentive Stock Option Plan (filed as Exhibit 10(d) to Thermo Environmental's Registration Statement on Form S-1 [Reg. No. 33-329] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Former Thermo Environmental Corporation Nonqualified Stock Option Plan is 618,750 shares, after adjustment to reflect share increase approved in 1987 and 3-for-2 stock split effected in July 1993). 10.23 Former Thermo Environmental Corporation Nonqualified Stock Option Plan (filed as Exhibit 10(e) to Thermo Environmental's Registration Statement on Form S-1 [Reg. No. 33-329] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Former Thermo Environmental Corporation Incentive Stock Option Plan is 618,750 shares, after adjustment to reflect share increase approved in 1987 and 3-for-2 stock split effected in July 1993). In addition to the stock-based compensation plans of the Registrant, the executive officers of the Registrant may be granted awards under stock-based compensation plans of the Registrants' parent, Thermo Electron Corporation, and its subsidiaries, for services rendered to the Registrant or to such affiliated corporations. Such plans are listed under Exhibits 10.24-10.69. 10.24 Thermo Electron Corporation Incentive Stock Option Plan (filed as Exhibit 4(d) to Thermo Electron's Registration Statement on Form S-8 [Reg. No. 33-8993] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Electron Nonqualified Stock Option Plan is 6,023,437 shares, after adjustment to reflect share increases approved in 1984 and 1986, and share decrease approved in 1989, and 3-for-2 stock splits effected in October 1986 and October 1993). 10.25 Thermo Electron Corporation Nonqualified Stock Option Plan (filed as Exhibit 4(e) to Thermo Electron's Registration Statement on Form S-8 [Reg. No. 33-8993] and incorporated herein by reference). (Plan amended in 1984 to extend expiration date to December 14, 1994; maximum number of shares issuable in the aggregate under this plan and the Thermo Electron Incentive Stock Option Plan is 6,023,437 shares, after adjustment to reflect share increases approved in 1984 and 1986, and share decrease approved in 1989, and 3-for-2 stock splits effected in October 1986 and October 1993). 21PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page -------- --------------------------------------------------------- ---- 10.26 Thermo Electron Corporation Equity Incentive Plan (filed as Exhibit A to Thermo Electron's Proxy Statement dated April 12, 1989 [File No. 1-8002] and incorporated herein by reference). (Plan amended in 1989 to restrict exercise price for SEC reporting persons to not less than 50% of fair market value or par value; maximum number of shares issuable is 4,700,000 shares, after adjustment to reflect 3-for-2 stock split effected in October 1993 and share increase approved in 1994). 10.27 Thermo Electron Corporation - Thermedics Inc. Nonqualified Stock Option Plan (filed as Exhibit 4 to a Registration Statement on Form S-8 of Thermedics [Reg. No. 2-93747] and incorporated herein by reference). (Maximum number of shares issuable is 450,000 shares, after adjustment to reflect share increase approved in 1988, 5-for-4 stock split effected in January 1985, 4-for-3 stock split effected in September 1985, and 3-for-2 stock splits effected in October 1986 and November 1993). 10.28 Thermo Electron Corporation - Thermo Instrument Systems Inc. (formerly Thermo Environmental Corporation) Nonqualified Stock Option Plan (filed as Exhibit 4(c) to the Registrant's Registration Statement on Form S-8 [Reg. No. 33-8034] and incorporated herein by reference). (Maximum number of shares issuable is 225,000 shares, after adjustment to reflect 3-for-2 stock split effected in July 1993). 10.29 Thermo Electron Corporation - Thermo Instrument Systems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.12 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 3, 1987 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 320,152 shares, after adjustment to reflect share increase approved in 1988 and 3-for-2 stock splits effected in January 1988 and July 1993). 10.30 Thermo Electron Corporation - Thermo Process Systems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.13 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 3, 1987 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 108,000 shares, after adjustment to reflect 6-for-5 stock splits effected in July 1988 and March 1989, and 3-for-2 stock split effected in September 1989). 22PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- -------------------------------------------------------- ---- 10.31 Thermo Electron Corporation - Thermo Power Corporation (formerly Tecogen Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.14 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 3, 1987 [File No. 1-8002] and incorporated herein by reference). 10.32 Thermo Electron Corporation - Thermo Cardiosystems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.11 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 29, 1990 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 130,500 shares, after adjustment to reflect share increases approved in 1990 and 1992, 3-for-2 stock split effected in January 1990, 5-for-4 stock split effected in May 1990 and 2-for-1 stock split effected in November 1993). 10.33 Thermo Electron Corporation - Thermo Ecotek Corporation (formerly Thermo Energy Systems Corporation) Nonqualified Stock Option Plan (filed as Exhibit 10.12 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 29, 1990 [File No. 1-8002] and incorporated herein by reference). 10.34 Thermo Electron Corporation - ThermoTrex Corporation (formerly Thermo Electron Technologies Corporation) Nonqualified Stock Option Plan (filed as Exhibit 10.13 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 29, 1990 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 180,000 shares, after adjustment to reflect 3-for-2 stock split effected in October 1993). 10.35 Thermo Electron Corporation - Thermo Fibertek Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.14 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 28, 1991 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 400,000 shares, after adjustment to reflect 2-for-1 stock split effected in September 1992). 10.36 Thermo Electron Corporation - Thermo Voltek Corp. (formerly Universal Voltronics Corp.) Nonqualified Stock Option Plan (filed as Exhibit 10.17 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 7,500 shares, after adjustment to reflect 3-for-2 stock split effected in November 1993). 23PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- --------------------------------------------------------- ---- 10.37 Thermo Ecotek Corporation (formerly Thermo Energy Systems Corporation) Incentive Stock Option Plan (filed as Exhibit 10.18 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Ecotek Nonqualified Stock Option Plan is 900,000 shares, after adjustment to reflect share increase approved in December 1993). 10.38 Thermo Ecotek Corporation (formerly Thermo Energy Systems Corporation) Nonqualified Stock Option Plan (filed as Exhibit 10.19 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Ecotek Incentive Stock Option Plan is 900,000 shares, after adjustment to reflect share increase approved in December 1993). 10.39 Thermo Ecotek Corporation (formerly Thermo Energy Systems Corporation) Equity Incentive Plan. 10.40 Thermedics Inc. Incentive Stock Option Plan (filed as Exhibit 10(d) to Thermedics' Registration Statement on Form S-1 [Reg. No. 33-84380] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermedics Nonqualified Stock Option Plan is 1,931,923 shares, after adjustment to reflect share increases approved in 1986 and 1992, 5-for-4 stock split effected in January 1985, 4-for-3 stock split effected in September 1985, and 3-for-2 stock split effected in November 1993). 10.41 Thermedics Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(e) to Thermedics' Registration Statement on Form S-1 [Reg. No. 33-84380] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermedics Incentive Stock Option Plan is 1,931,923 shares, after adjustment to reflect share increases approved in 1986 and 1992, 5-for-4 stock split effected in January 1985, 4-for-3 stock split effected in September 1985, and 3-for-2 stock split effected in November 1993). 10.42 Thermedics Inc. Equity Incentive Plan (filed as Appendix A to the Proxy Statement dated May 10, 1993 of Thermedics [File No. 1-9567] and incorporated herein by reference). (Maximum number of shares issuable is 1,500,000 shares, after adjustment to reflect 3-for-2 stock split effected in November 1993). 24PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page -------- --------------------------------------------------------- ---- 10.43 Thermedics Inc. - Thermedics Detection Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.20 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). 10.44 Thermo Cardiosystems Inc. Incentive Stock Option Plan (filed as Exhibit 10(f) to Thermo Cardiosystems' Registration Statement on Form S-1 [Reg. No. 33-25144] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Cardiosystems Nonqualified Stock Option Plan is 1,143,750 shares, after adjustment to reflect share increase approved in 1992, 3-for-2 stock split effected in January 1990, 5-for-4 stock split effected in May 1990 and 2-for-1 stock split effected in November 1993). 10.45 Thermo Cardiosystems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(g) to Thermo Cardiosystems' Registration Statement on Form S-1 [Reg. No. 33-25144] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Cardiosystems Incentive Stock Option Plan is 1,143,750 shares, after adjustment to reflect share increase approved in 1992, 3-for-2 stock split effected in January 1990, 5-for-4 stock split effected in May 1990 and 2-for-1 stock split effected in November 1993). 10.46 Thermo Cardiosystems Inc. Equity Incentive Plan. 10.47 Thermo Voltek Corp. (formerly Universal Voltronics Corp.) 1985 Stock Option Plan (filed as Exhibit 10.14 to Thermo Voltek's Annual Report on Form 10-K for the fiscal year ended June 30, 1985 [File No. 0-8245] and incorporated herein by reference). (Maximum number of shares issuable is 200,000 shares, after adjustment to reflect 1-for-3 reverse stock split effected in November 1992 and 3-for-2 stock split effected in November 1993). 10.48 Thermo Voltek Corp. (formerly Universal Voltronics Corp.) 1990 Stock Option Plan (filed as Exhibit 10.2 to Thermo Voltek's Annual Report on Form 10-K for the fiscal year ended June 30, 1990 [File No. 1-10574] and incorporated herein by reference). (Maximum number of shares issuable is 400,000 shares, after adjustment to reflect share increases in 1993 and 1994, 1-for-3 reverse stock split effected in November 1992, and 3-for-2 stock split effected in November 1993). 10.49 Thermo Voltek Corp. Equity Incentive Plan. 10.50 Reserved. 25PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- --------------------------------------------------------- ---- 10.51 Thermo Instrument Systems Inc. - ThermoSpectra Corporation Nonqualified Stock Option Plan. 10.52 ThermoSpectra Corporation Equity Incentive Plan. 10.53 ThermoTrex Corporation (formerly Thermo Electron Technologies Corporation) Incentive Stock Option Plan (filed as Exhibit 10(h) to ThermoTrex's Registration Statement on Form S-1 [Reg. No. 33-40972] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the ThermoTrex Nonqualified Stock Option Plan is 1,945,000 shares, after adjustment to reflect share increases approved in 1992 and 1993, and 3-for-2 stock split effected in October 1993). 10.54 ThermoTrex Corporation (formerly Thermo Electron Technologies Corporation) Nonqualified Stock Option Plan (filed as Exhibit 10(i) to ThermoTrex's Registration Statement on Form S-1 [Reg. No. 33-40972] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the ThermoTrex Incentive Stock Option Plan is 1,945,000 shares, after adjustment to reflect share increases approved in 1992 and 1993, and 3-for-2 stock split effected in October 1993). 10.55 ThermoTrex Corporation - ThermoLase Corporation (formerly ThermoLase Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.53 to ThermoTrex's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-10791] and incorporated herein by reference). 10.56 ThermoLase Corporation (formerly ThermoLase Inc.) Incentive Stock Option Plan (filed as Exhibit 10.55 to ThermoTrex's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-10791] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the ThermoLase Nonqualified Stock Option Plan is 1,400,000 shares, after adjustment to reflect share increase approved in 1993 and 2-for-1 stock split effected in March 1994.) 10.57 ThermoLase Corporation (formerly ThermoLase Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.54 to ThermoTrex's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-10791] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the ThermoLase Incentive Stock Option Plan is 1,400,000 shares, after adjustment to reflect share increase approved in 1993 and 2-for-1 stock split effected in March 1994). 26PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- --------------------------------------------------------- ---- 10.58 Thermo Fibertek Inc. Incentive Stock Option Plan (filed as Exhibit 10(k) to Thermo Fibertek's Registration Statement on Form S-1 [Reg. No. 33-51172] and incorporated herein by reference). 10.59 Thermo Fibertek Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(l) to Thermo Fibertek's Registration Statement on Form S-1 [Reg. No. 33-51172] and incorporated herein by reference). 10.60 Thermo Fibertek Inc. Equity Incentive Plan. 10.61 Thermo Power Corporation (formerly Tecogen Inc.) Incentive Stock Option Plan (filed as Exhibit 10(h) to Thermo Power's Registration Statement on Form S-1 [Reg. No. 33-14017] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Power Nonqualified Stock Option Plan is 950,000 shares, after adjustment to reflect share increases approved in 1990, 1992 and 1993). 10.62 Thermo Power Corporation (formerly Tecogen Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10(i) to Thermo Power's Registration Statement on Form S-1 [Reg. No. 33-14017] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Power Incentive Stock Option Plan is 950,000 shares, after adjustment to reflect share increases approved in 1990, 1992 and 1993). 10.63 Thermo Power Corporation Equity Incentive Plan. 10.64 Thermo Process Systems Inc. Incentive Stock Option Plan (filed as Exhibit 10(h) to Thermo Process' Registration Statement on Form S-1 [Reg. No. 33-6763] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Process Nonqualified Stock Option Plan is 1,850,000 shares, after adjustment to reflect share increases approved in 1987, 1989 and 1992, 6-for-5 stock splits effected in July 1988 and March 1989, and 3-for-2 stock split effected in September 1989). 10.65 Thermo Process Systems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(i) to Thermo Process' Registration Statement on Form S-1 [Reg. No. 33-6763] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Process Incentive Stock Option Plan is 1,850,000 shares, after adjustment to reflect share increases approved in 1987, 1989 and 1992, 6-for-5 stock splits effected in July 1988 and March 1989, and 3-for-2 stock split effected in September 1989). 27PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- --------------------------------------------------------- ---- 10.66 Thermo Process Systems Inc. Equity Incentive Plan [filed as Exhibit 10.63 to Thermedics' Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-9567] and incorporated herein by reference.) (Maximum number of shares issuable is 1,750,000 shares, after adjustment to reflect share increase approved in 1994). 10.67 Thermo Process Systems Inc. - Thermo Remediation Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(l) to Thermo Process' Quarterly Report on Form 10-Q for the fiscal quarter ended January 1, 1994 [File No. 1-9549] and incorporated herein by reference). 10.68 Thermo Remediation Inc. Equity Incentive Plan (filed as Exhibit 10.7 to Thermo Remediation's Registration Statement on Form S-1 [Reg. No. 33-70544] and incorporated herein by reference). 10.69 Thermedics Detection Inc. Equity Incentive Plan. 11 Statement re: Computation of earnings per share. 13 Annual Report to Shareholders for the year ended December 31, 1994 (only those portions incorporated herein by reference). 21 Subsidiaries of the Registrant. 23 Consent of Arthur Andersen LLP. 27 Financial Data Schedule. 28 EX-2.3 2 Exhibit 2.3 TABLE OF CONTENTS Page 1. GENERAL ....................................... 1.1 Definitions ................................ 1.2 Schedules and Exhibits ..................... 1.3 Pounds Sterling ............................ 2. PURCHASE AND SALE ................................. 2.1 Agreement to Sell and to Purchase .......... 2.2 Transfer of Shares ......................... 2.3 Transfer of Assets ......................... 2.4 Payment of Purchase Price .................. 2.5 Assets Not Transferred ..................... 2.6 Documents of Transfer ...................... 2.7 Further Assurances ......................... 2.8 Restricted Assets .......................... 2.9 U.K. Real Property ......................... 2.10 Intercompany Accounts and Cash ............. 3. ASSUMPTION OF CERTAIN LIABILITIES ................. 3.1 Liabilities Assumed ........................ 3.2 Liabilities Not Assumed .................... 3.3 Documents of Assumption .................... 3.4 Risk of Loss ............................... 4. PURCHASE PRICE MATTERS ............................ 4.1 Post Closing Adjustment .................... 4.2 Allocation of Purchase Price ............... 4.3 Transaction Taxes .......................... 5. REPRESENTATIONS AND WARRANTIES BY THE SELLER ...... 5.1 Organization, Good Standing and Qualification 5.2 Capital Stock and Ownership ................ 5.3 Authority .................................. 5.4 No Conflict; No Consents or Approvals ...... 5.5 Undisclosed Liabilities .................... 5.6 No Termination of Relationships ............ 5.7 Financial Statements ....................... 5.8 Tax Matters ................................ 5.9 Title to Properties ........................ 5.10 Real Estate ................................ 5.11 Real Property Leases ....................... 5.12 Equipment Leases ........................... 5.13 Assets Used in the Business ................ 5.14 Accounts Receivable ........................ 5.15 Intellectual Property ...................... 5.16 Insurance Policies ......................... 5.17 Contracts .................................. 5.18 Inventory .................................. 5.19 Litigation ................................. PAGE 5.20 Compliance with Law ........................ 5.21 Absence of Subsequent Actions .............. 5.22 No Material Adverse Change ................. 5.23 Labor Matters .............................. 5.24 U.S. Employee Benefit Plans ................ 5.25 Foreign Employee Benefit Plans ............. 5.26 Indebtedness and Guaranties ................ 5.27 Product Warranty ........................... 5.28 Environmental Matters ...................... 5.29 Permits .................................... 5.30 Certain Business Relationships ............. 5.31 Books and Records .......................... 5.32 Customers and Suppliers .................... 5.33 Government Contracts ....................... 5.34 Recalls .................................... 5.35 Broker's and Finder's Fees ................. 5.36 Disclosure ................................. 6. REPRESENTATIONS AND WARRANTIES BY THE BUYER ....... 6.1 Organization and Good Standing ............. 6.2 Authority .................................. 6.3 No Conflict; No Consents or Approvals ...... 6.4 Broker's and Finder's Fees ................. 6.5 Solvency of Buyer .......................... 6.6 No Additional Warranties ................... 6.7 Investment Intent .......................... 7. OTHER AGREEMENTS .................................. 7.1 Conduct of Business ........................ 7.2 Full Access and Supplying of Information ... 7.3 Filings and Authorizations ................. 7.4 Exclusivity ................................ 7.5 Bulk Sales ................................. 7.6 Employment of Business Work Force .......... 7.7 Employee Benefits Matters .................. 7.8 Retention of Records and Sharing of Data ... 7.9 Tax Matters ................................ 7.10 Certain Trademark Matters .................. 7.11 Notices of Breaches; Updates ............... 7.12 Proprietary Information .................... 7.13 Solicitation ............................... 7.14 Non-Competition ............................ 7.15 Cooperation in Litigation .................. 7.16 Collection of Accounts Receivable .......... 7.17 Approval of Seller's Shareholders .......... 7.18 Bank Accounts .............................. 7.19 Transition Services ........................ 7.20 Guarantee .................................. 7.21 Employee Notices ........................... 7.22 Seller's Disclosure ........................ 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER TO CLOSE ................................ 8.1 Fulfillment of the Seller's Covenants ...... 8.2 Accuracy of the Seller's Representations ... 8.3 Authorizations and Consents ............... PAGE 8.4 No Litigation .............................. 8.5 Seller's Certificates ...................... 8.6 Resignations ............................... 8.7 HSR Act and Similar Matters ................ 8.8 U.K Merger Issues .......................... 8.9 Legal Opinions ............................. 8.10 Seller's Shareholder Approval .............. 9. CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATION TO CLOSE ....................................... 9.1 Fulfillment of the Buyer's Covenants ....... 9.2 Accuracy of the Buyer's Representations .... 9.3 No Litigation .............................. 9.4 Buyer's Certificates ....................... 9.5 HSR Act and Similar Matters ................ 9.6 Shareholder Approval ....................... 9.7 Legal Opinions ............................. 10. CLOSING ....................................... 11. INDEMNIFICATION ................................... 11.1 By the Seller .............................. 11.2 By the Buyer and the Parent ................ 11.3 Limitations on Indemnification ............. 11.4 Third-Party Claims ......................... 12. TERMINATION. ...................................... 12.1 Termination Events ......................... 12.2 Effect of Termination ...................... 12.3 Reimbursement of Expenses .................. 13. MISCELLANEOUS ..................................... 13.1 Amendments ................................. 13.2 Notices .................................... 13.3 Expenses ................................... 13.4 Waiver ..................................... 13.5 Headings ................................... 13.6 Severability ............................... 13.7 Entire Agreement ........................... 13.8 Assignment ................................. 13.9 Governing Law; Time of the Essence ......... 13.10 Counterparts ............................... 13.11 Conditions and Documents ................... 13.12 Publicity .................................. 13.13 Confidential Information ................... 13.14 Submission to Jurisdiction and Venue ....... 13.15 Construction ............................... PAGE EXHIBITS Exhibit A - Definitions Exhibit B - Terms Applicable to UK Property Exhibit C - Financial Statements Exhibit D - Terms Regarding Foreign Plans SCHEDULES Schedule 1.1 - Definitions Schedule 2.5 - Assets Not Transferred Schedule 4.2 - Allocation of Purchase Price Schedule 5.1 - Jurisdictions of incorporation or organization Schedule 5.2 - Capital stock and ownership Schedule 5.4 - Conflicts with material contracts; required governmental consents Schedule 5.8 - Tax matters Schedule 5.10 - Owned Real Estate Schedule 5.11 - Leased Real Estate Schedule 5.11A- Consents to Assignment of Leases Schedule 5.12 - Equipment leases Schedule 5.12A- Consents to Assignment of Equipment Leases Schedule 5.15 - Intellectual Property Matters Schedule 5.15A- Third Party Intellectual Property Schedule 5.16 - Insurance Policies Schedule 5.17 - Material contracts Schedule 5.17A Consents to Assignment of Material Contracts Schedule 5.19 - Litigation Schedule 5.20 - Compliance with laws Schedule 5.21 - Subsequent Actions Schedule 5.23 - Labor matters Schedule 5.23A- Employees planning to terminate PAGE Schedule 5.24 - U.S. employee benefit plans Schedule 5.25 - Foreign employee benefit plans Schedule 5.26 - Indebtedness and guaranties Schedule 5.28 - Environmental matters Schedule 5.29 - Permits Schedule 5.30 - Certain business relationships Schedule 5.32 - Customer and supplier matters Schedule 5.33 - Government contract matters Schedule 6.3 - Required governmental notices and filings Schedule 7.22- Law Firms Schedule 7.22A- Certain Disclosed Documents Schedule 8.3 - Consents to Assignment of Restricted Assets required as condition to closing Schedule 8.7- HSR Act and Similar Matters Schedule 9.5- HSR Act and Similar Matters PAGE ASSET AND STOCK PURCHASE AGREEMENT ASSET AND STOCK PURCHASE AGREEMENT (this "Agreement") dated as of March 1, 1995, between Fisons plc, a company organized under the laws of England (the "Seller"), Thermo Instrument Systems Inc., a corporation organized under the laws of Delaware, U.S.A. (the "Buyer") and Thermo Electron Corporation, a Delaware corporation ("Parent"). W I T N E S S E T H: WHEREAS, the Seller desires to sell, transfer and assign the business and operations of its Instruments Division; WHEREAS, the Seller desires to sell or cause to be sold, and the Buyer desires to acquire, the Business, as hereinafter defined; and WHEREAS, the Business will be transferred to the Buyer pursuant hereto by means of a sale and purchase of Assets and Shares, as hereinafter defined. NOW, THEREFORE, the parties hereto agree as follows: 1. GENERAL. 1.1 Definitions. The terms defined in Exhibit A, whenever used in this Agreement, shall have the meanings provided in such Exhibit for all purposes of this Agreement. 1.2 Schedules and Exhibits. A "Schedule" is a Schedule attached hereto and made a part hereof . An "Exhibit" is an agreement or other document attached hereto and made a part hereof. 1.3 Pounds Sterling. Unless otherwise indicated herein or on the Schedules, all references to amounts in pounds shall mean English pounds sterling. For purposes of determining the application of the terms of Section 5, 6 and 11 to items denominated in a currency other than English pounds sterling, the relevant currency shall be converted to English pounds sterling at the applicable exchange rate published in the currency crossrate table of The Wall Street Journal (New York edition) on the date of this Agreement (or, with respect to amounts referred to in Section 11, on the date on which notice of a claim is given or, if no notice is given because a Loss is not indemnifiable, on the first day of the month during which an estimate of the amount of the claim can reasonably be made). 2. PURCHASE AND SALE. 2.1 Agreement to Sell and to Purchase. In reliance upon the representations and warranties of the Buyer contained herein, and on the PAGE terms and subject to the conditions herein set forth, the Seller agrees to sell, convey, assign, transfer and deliver, or cause to be sold, conveyed, assigned, transferred and delivered, the Shares and the Assets to the Buyer. In reliance upon the representations and warranties of the Seller contained herein, and on the terms and subject to the conditions herein set forth, the Buyer agrees to purchase, or cause to be purchased, at the Closing the Shares and the Assets and to assume, or cause to be assumed, at the Closing, the Assumed Liabilities. In reliance upon the representations and warranties of the Seller contained herein, on the terms and subject to the conditions herein set forth, and in consideration of the sale of the Shares and the Assets, the Buyer agrees to pay, at the Closing, an aggregate purchase price of 202,000,000 English pounds sterling (or such lower or higher amount as is equal to (i) 202,000,000 English pounds sterling less (ii) the excess of (a) 138,000,000 English pounds sterling, over (b) the Net Book Value (as defined below) shown on the most recent internal financial statements of the Seller prior to the Closing Date (the "Interim Net Book Value") or plus the deficit of 138,000,000 English pounds sterling over Interim Net Book Value), subject to adjustment as provided in Section 4.1 (the "Purchase Price"), and to assume, at the Closing, the Assumed Liabilities. 2.2 Transfer of Shares. At the Closing, the Seller shall, or shall cause each Share Seller to, execute and deliver to the Buyer a certificate or certificates representing the Shares (in the case of certificated Shares) together with duly executed stock powers, share transfer forms, transfer deeds or other documents of transfer sufficient to convey the Shares to the Buyer, and such other instruments of conveyance as the Buyer may reasonably request in order to effect the sale, transfer, conveyance and assignment to the Buyer of good title to the Shares free and clear of all Encumbrances other than Permitted Encumbrances. 2.3 Transfer of Assets. At the Closing, subject to the proviso contained in Section 2.6(a), the Seller shall, or shall cause each Asset Seller to, execute and deliver to the Buyer a bill of sale and such other instruments of conveyance as the Buyer may reasonably request in order to effect the sale, transfer, conveyance and assignment to the Buyer of good title to the Assets, free and clear of all Encumbrances other than Permitted Encumbrances. 2.4 Payment of Purchase Price. At the Closing, the Buyer shall deliver the Purchase Price in immediately available funds by wire transfer to an account designated by the Seller, acting on behalf of the Share Sellers and the Asset Sellers. 2.5 Assets Not Transferred. Notwithstanding the foregoing, the Assets to be transferred shall not include the following (the "Excluded Assets"): (a) all of the rights, properties and assets used in the Business which shall have been transferred or disposed of prior to the Closing in transactions conducted in the Ordinary Course of Business 2PAGE or as described on Schedule 2.5; (b) all assets in the possession of the Business but owned by third parties, other than third party owned assets that, under GAAP, are appropriate to be reflected on the Closing Balance Sheet as Assets, subject to any third party rights in respect of the same being reflected thereon as liabilities of the Business; (c) all intercompany receivables, notes or loans with respect to the Business between (i) the Seller and its subsidiaries and affiliates which are not constituents of the Business and (ii) the Asset Sellers, in each case except for trade payables or receivables related to the provision of goods or services to or by the Business in the Ordinary Course of Business; (d) Restricted Assets that are not assignable to the Buyer as a matter of law; (e) the name "Fisons" and any derivation thereof and the stylized logo "Fisons" (collectively, the "Retained Names and Logos"); provided, however, that the Buyer shall be entitled to the use thereof pursuant to Section 7.10(a); (f) assets reflected on the balance sheet of the Laboratory Supplies and the Pharmaceuticals Divisions of the Seller, none of which assets are used primarily in the Business or will be reflected on the Closing Balance Sheet; (g) any shares of capital stock of any of the Dormant Shells designated in writing by the Buyer to the Seller not later than 10 days prior to the Closing; (h) any assets described on Schedule 2.5; and (i) any foreign currency agreement to which any Asset Seller is a party. 2.6 Documents of Transfer. At the Closing, in addition to the documents of transfer described in Sections 2.2 and 2.3, the Seller will, or will cause each respective Share Seller or Asset Seller to: (a) execute, acknowledge and deliver to the Buyer such deeds, bills of sale, endorsements, assignments, stock powers, share transfer forms and other good and sufficient instruments of conveyance, sale, transfer and assignment as shall be reasonably requested by the Buyer, and , subject to Section 4.3, with all required federal, state, local, foreign and other documentary and revenue stamps affixed where customarily paid or provided by a seller, as shall be required in order to effectively vest, subject only to any required recordation or similar filing, in the Buyer all of the Share Sellers' and Asset Sellers' right, title and interest in and to the Assets or the Shares, as the case may be, provided that (i) where the Buyer is satisfied 3PAGE that title to any of the Assets located in England can effectively pass by way of physical delivery without the use of any document of transfer, the Seller will deliver or cause to be delivered such Assets to the Buyer at Closing, such delivery to take place by means of the relevant Assets being retained at the places at which they are physically located at the Closing to the order of the Buyer and (ii) where title to such Assets can pass only by way of document of transfer, subject to Section 4.3, the Buyer shall be responsible for any stamp duty or other tax liable to be paid thereon; and (b) deliver or make available to the Buyer all of the files, documents, papers, contracts, agreements, legal descriptions, open books of account or ledgers and documentation in support thereof, and all other information appearing in writing and relating primarily to the Business and which is in any Share Seller's or Asset Seller's possession and the minute books and share registers of the Companies (it being understood that, subject to the provisions of Section 7.12, the Asset Sellers and the Share Sellers shall be entitled to retain copies of any of the foregoing, but only to the extent the retention of such copies is reasonably necessary for the Asset Sellers and the Share Sellers to comply with applicable tax, securities, accounting or other laws, rules or regulations and their obligations hereunder). 2.7 Further Assurances. At the Closing and at any time or from time to time thereafter, at the request of the Buyer and without further consideration, the Seller shall, and shall cause each Share Seller and Asset Seller to: (i) take such action as the Buyer may reasonably determine is necessary to put the Buyer in actual possession and operating control of the Business and (ii) execute, acknowledge and deliver such further instruments of conveyance, sale, transfer and assignment as the Buyer may reasonably request, and take such other action as the Buyer may reasonably request, in order to convey, sell, transfer and assign to the Buyer the Assets and the Shares, to evidence the Buyer's rights to, title in and ownership of the Assets and the Shares and to consummate the transactions contemplated hereby. At the Closing and at any time and from time to time after the Closing, at the request of the Seller and without further consideration, the Buyer shall, and shall cause each of its Subsidiaries to, take such action and execute, acknowledge and deliver such further instruments as the Seller may reasonably determine is necessary to consummate the transactions contemplated hereby. 2.8 Restricted Assets. (a) The Seller shall use all reasonable efforts, and the Buyer shall cooperate reasonably with the Seller, (i) to promptly obtain the consents and waivers necessary to convey or cause to be conveyed to the Buyer all of the Restricted Assets, and (ii) as of and subject to the occurrence of the Closing, to promptly convey or cause to be conveyed to the Buyer the Restricted Assets for which the Seller has received the necessary consents and waivers; provided, however, that the Seller shall not, and shall cause the Asset Sellers not to, amend or change any Restricted Asset without the prior written consent of 4PAGE the Buyer unless the Seller reasonably deems it necessary to preserve the value of the Restricted Asset. The Seller shall, and shall cause the Asset Sellers to, cooperate with the Buyer in making applications and filings or taking any other action necessary for the Buyer to obtain such franchises, licenses, permits or other instruments or agreements, if any, as are substantially equivalent to any Restricted Assets that are not assignable to Buyer as a matter of law. In no event shall the Buyer's cooperation hereunder require the Buyer to make any payments or incur any out-of-pocket expenses, except that the Buyer shall reimburse the Seller on an equitable basis for any consideration paid, with the prior approval of the Buyer, to any person from whom a consent or waiver is requested. (b) To the extent that the consents and waivers necessary to assign, transfer, sublease or sublicense any of the Restricted Assets are not obtained, the Seller shall, commencing on the Closing Date and continuing for the duration of each such Restricted Asset, use reasonable efforts to (i) provide to the Buyer the benefits of any such Restricted Asset not assigned, transferred or subleased due to the Seller's failure or inability to obtain such consent or waiver, (ii) cooperate with the Buyer to reach a reasonable and lawful arrangement designed to provide such benefits to the Buyer during such period and (iii) enforce at the request of the Buyer, or allow the Buyer to enforce (and, solely for such purpose, the Seller hereby constitutes and appoints the Buyer as its true and lawful attorney-in-fact until revoked in a writing delivered by the Seller to the Buyer), any rights of the Seller under any such Restricted Asset against the issuer thereof or the other party or parties thereto (including the right to elect to terminate such of the foregoing in accordance with the terms thereof upon the request of the Buyer); provided, however, that the reasonable costs and expenses of the Seller (including reasonable professional fees and expenses) incurred at the Buyer's request with respect to any of the actions contemplated under (iii) above shall be promptly paid or reimbursed by the Buyer to the Seller. At the end of each such period, the Seller shall have no further duties or obligations under this Section 2.8 with respect to such Restricted Asset and the failure or inability to obtain any necessary consent or waiver with respect thereto shall not be a breach of this Agreement so long as the Seller has carried out its obligations under this Section 2.8. (c) To the extent that the Buyer is provided the benefits of any Restricted Asset pursuant to clause (b) of this Section 2.8, the Buyer shall perform for the benefit of the issuer thereof, or the other party or parties thereto, the obligations of any Asset Seller thereunder or in connection therewith, but only to the extent that (i) such action by the Buyer would not result in any default thereunder or in connection therewith and (ii) such obligation would have been an Assumed Liability but for the non-assignability or non-transferability thereof; provided, however, that if the Buyer shall fail to perform to 5PAGE the extent required herein, the Seller shall thereafter cease to be obligated under this Section 2.8 to provide the Buyer with any benefits in respect of the Restricted Asset which is the subject of such failure to perform unless and until such situation is remedied or, at the sole option of the Seller, the Buyer shall promptly pay or reimburse the Seller to remedy such failure to perform during such period of failure of performance. 2.9 UK Property. In addition to the terms and conditions hereof, the terms and conditions set forth on Exhibit B shall apply to the sale of the UK Property. 2.10 Intercompany Accounts. Prior to or on the Closing Date, the Seller shall, and shall cause its Subsidiaries to, eliminate, to the extent legally possible, all intercompany accounts related to the Business between (a) the Seller and its subsidiaries and affiliates which are not constituents of the Business and (b) the Asset Sellers or the Companies, except for trade payables or receivables related to the provision of goods or services to or by the Business in the Ordinary Course of Business. 3. ASSUMPTION OF CERTAIN LIABILITIES. 3.1 Liabilities Assumed. On the Closing Date, subject to the terms and conditions herein set forth, the Seller shall assign or cause to be assigned to the Buyer, and the Buyer shall assume all liabilities of each Asset Seller of any nature, known or unknown, fixed, contingent or otherwise, arising out of or relating primarily to the Business, except for the Excluded Liabilities (collectively, the "Assumed Liabilities"). 3.2 Liabilities Not Assumed. The Buyer shall not assume any liabilities or obligations of any Asset Seller of any nature, known or unknown, fixed, contingent or otherwise, arising out of or relating to the following, all of which shall remain obligations of such Asset Seller (the "Excluded Liabilities"): (a) any Environmental Liability; (b) any legal suit, action or proceeding of any kind filed and commenced against any Asset Seller prior to the Closing Date, or the commencement of which was, to the Seller's Knowledge, threatened in writing prior to the Closing Date, including, without limitation, those described on Schedule 5.15 or Schedule 5.19 (regardless of whether or not threatened in writing); (c) any and all Taxes with respect to Pre-Closing Periods to the extent the Seller is liable for such Taxes under Section 7.9; (d) any overdraft facility, bank credit line or third party indebtedness for money borrowed to the extent not reflected on the Closing Balance Sheet or listed on Schedule 5.26; (e) Subject to Section 7.7(b), (i) any claims against, or 6PAGE liabilities or obligations of or in connection with, any Plans or Foreign Plans not specifically assumed by the Buyer pursuant to this Agreement, (ii) any claims for severance pay, termination pay, redundancy pay, pay in lieu of notice or any other claim for similar compensation or damages relating to the termination of any employee prior to the Closing Date or (iii) any claims for compensation by any employee for services rendered prior to the Closing Date; provided that the foregoing clauses (ii) and (iii) shall not include claims for severance, termination or redundancy pay or pay in lieu of notice relating to the termination of any Continuing Employee on or after the Closing Date; (f) any product liability claims asserted on or prior to the fifth anniversary of the Closing Date arising out of or related to the sale of any products of the Business prior to the Closing Date to the extent such claims exceed the accruals and reserves therefor on the Closing Balance Sheet; (g) liabilities and obligations under Restricted Assets to the extent the Seller does not obtain the consents and waivers necessary to assign, transfer, sublease or sublicense such Restricted Assets to the Buyer and the Seller does not provide to the Buyer the benefits of such Restricted Assets pursuant to Section 2.8(b); (h) any claim, suit or proceeding relating to the actual or alleged infringement by any of the Asset Sellers of the Proprietary Rights of any third party commencing prior to the Closing Date, including, without limitation, any claim, suit or proceeding relating to any of the matters described in Schedule 5.15; (i) any liabilities or obligations arising out of or relating to the violation of any Laws and Regulations that occurred prior to the Closing Date; (j) the cost of fulfilling any bona fide warranty obligations undertaken by the Asset Sellers with respect to products sold prior to the Closing Date, except to the extent of warranty reserves on the Closing Balance Sheet; (k) liabilities or obligations under foreign currency contracts to which any Asset Seller is a party; (l) any liability of any Asset Seller to the Seller or any of its Subsidiaries that is not a constituent of the Business, except for trade payables or receivables related to the provision of goods or services to or by the Business in the Ordinary Course of Business; and (m) agreements relating to the sale or other disposition of any business or real property prior to the Closing Date. 3.3 Documents of Assumption. At the Closing, the assumption of the Assumed Liabilities by the Buyer shall be evidenced by the execution and 7PAGE delivery to the Asset Sellers of instruments of assumption and such other instruments as the Seller may reasonably request in order to effect the assumption by the Buyer of the Assumed Liabilities. After the Closing, the Buyer shall, at the written request of Seller, use reasonable efforts to arrange over time for the substitution of the Buyer for the Seller and its Subsidiaries and Affiliates that are not constituents of the Business on the agreements, obligations and liabilities in respect of the Business which are obligations of the Seller and its Subsidiaries and Affiliates that are not constituents of the Business, including, without limitation, those agreements, obligations and liabilities listed on Schedule 5.26. 3.4 Risk of Loss. The risk of loss of any of the Assets or the Company Assets shall be the responsibility of the Buyer as of the Closing Date. All casualty or other losses of Assets or Company Assets or to the Business occurring after such time shall be the responsibility of the Buyer, whether or not the Buyer has purchased or obtained any insurance coverage. 4. PURCHASE PRICE MATTERS. 4.1 Post-Closing Adjustment. The Purchase Price set forth in Section 2.1 shall be subject to adjustment after the Closing Date as follows: (a) Within 60 days after the Closing Date, the Seller shall prepare and deliver to the Buyer a consolidated balance sheet of the Business reflecting the assets and liabilities of the Business as of the Closing Date without giving effect to the transactions contemplated by this Agreement, which shall consist only of the Assets, the Company Assets, the Assumed Liabilities and the Company Liabilities (the "Draft Closing Balance Sheet"). The Seller shall prepare the Draft Closing Balance Sheet in accordance with English generally accepted accounting principles ("GAAP") and the Accounting Principles and in such detail as the Buyer shall reasonably request. The Draft Closing Balance Sheet shall include appropriate accruals for (x) liabilities of the Business incurred prior to the Closing Date but for which invoices have not been received as of the Closing Date and (y) prepayments in respect of the Business. (b) The Buyer shall deliver to the Seller within 60 days after receiving the Draft Closing Balance Sheet a detailed statement describing its objections (if any) thereto. Failure of the Buyer so to object to the Draft Closing Balance Sheet shall constitute acceptance thereof, whereupon the Draft Closing Balance Sheet shall be deemed to be the "Closing Balance Sheet". The Buyer and the Seller shall use reasonable efforts to resolve any such objections, but if they do not reach a final resolution within 30 days after the Seller has received the statement of objections, the Buyer and the Seller shall select an accounting firm mutually acceptable to them (the "Neutral Auditors") to resolve any remaining objections. If the Buyer and the Seller are unable to agree on the choice of Neutral Auditors, they shall select as Neutral Auditors an internationally-recognized accounting firm by lot (after excluding their respective regular independent accounting firms). The Draft Closing Balance Sheet shall be adjusted by the Neutral Auditors only to conform to GAAP and the Accounting Principles 8PAGE and, as so adjusted, shall be the Closing Balance Sheet. Such determination by the Neutral Auditors shall be conclusive and binding upon the Buyer and the Seller, absent fraud or manifest error. (c) During the preparation of the Draft Closing Balance Sheet by the Seller and the period of any dispute referred to above, the Buyer shall promptly disclose to the Seller, the Seller's independent accountants and, if applicable, the Neutral Auditors all relevant facts and information, give them full access to books, records, facilities and employees of the Business and cooperate fully with the Seller, the Seller's accountants and, if applicable, the Neutral Auditors in order to prepare the Draft Closing Balance Sheet or the Closing Balance Sheet, as the case may be; provided, however, that any such access shall be allowed only in such manner as not to interfere unreasonably with the operation of the Business. (d) The Buyer and the Seller shall share equally the fees and expenses of the Neutral Auditors. (e) If the Net Book Value (as defined below) as shown on the Closing Balance Sheet is less than the Interim Net Book Value, the Seller shall pay to the Buyer, by wire transfer or other delivery of immediately available funds, within three business days after the date on which the Closing Balance Sheet is finally determined pursuant to this Section 4.1, an amount equal to such deficiency (plus interest thereon from the Closing Date at the interest rate equal to 1% above LIBOR as in effect from time to time). "Net Book Value" shall mean the excess of the combined tangible Assets and Company Assets (and for the avoidance of doubt shall include accounts receivable, cash, bank balances and similar assets) over the combined Assumed Liabilities and Company Liabilities. (f) If the Net Book Value as shown on the Closing Balance Sheet exceeds the Interim Net Book Value, the Buyer shall pay to the Seller, by wire transfer or other delivery of immediately available funds, within three business days after the date on which the Closing Balance Sheet is finally determined pursuant to this Section 4.1, an amount equal to such excess (plus interest thereon from the Closing Date at the interest rate equal to 1% above LIBOR as in effect from time to time). 4.2 Allocation of Purchase Price. The parties shall use reasonable efforts to agree prior to the Closing on an allocation of the Purchase Price (and all other capitalizable costs). 4.3 Transaction Taxes. Any and all federal, state, county, local or foreign sales, use, value added, excise, stamp, transfer and other taxes not in the nature of income taxes, fees and duties (including any interest, additions to tax and penalties with respect thereto) and any and all transfer, recording or similar fees and charges (collectively, "Transaction Taxes") imposed in connection with the consummation of the transactions contemplated hereunder shall be borne equally by the Buyer and the Seller, provided, however, that this Section 4.3 shall not apply to any VAT, which shall be borne by the Buyer, subject to Section 7.9(h). 9PAGE 5. REPRESENTATIONS AND WARRANTIES BY THE SELLER. The Seller, on behalf of itself, each Share Seller and each Asset Seller, represents and warrants to the Buyer as set forth in this Section 5. The Buyer may rely upon the representations and warranties contained herein, notwithstanding any investigation of the Business made by the Buyer prior to the Closing or the knowledge of the officers, directors, stockholders, employees or agents of the Buyer. OTHER THAN AS EXPRESSLY SET FORTH HEREIN, NO ASSET SELLER OR SHARE SELLER MAKES ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE WARRANTIES CONTAINED IN THIS SECTION 5 ARE THE ONLY WARRANTIES, EXPRESSED OR IMPLIED, GIVEN WITH RESPECT TO THE BUSINESS. 5.1 Organization, Good Standing and Qualification. The Seller, each Share Seller, each Asset Seller and each Company is a corporation or other form of limited liability company duly incorporated or otherwise duly organized, validly existing and in good standing (in such jurisdictions where such concept is applicable) under the laws of its respective jurisdiction of incorporation or organization as set forth on Schedule 5.1. Each Share Seller, each Asset Seller and each Company has all requisite corporate power and authority to own or lease its properties and carry on its business as presently conducted. Each Asset Seller and each Company is in good standing as a foreign corporation and licensed or qualified to transact business in each jurisdiction in which the nature of the properties owned or leased by it or the business transacted by it requires it to be so licensed or qualified, except those jurisdictions, if any, in which the failure so to qualify would not result in a Material Adverse Effect. 5.2 Capital Stock and Ownership. (a) The total number of shares of capital stock, and the classes and par values thereof, which each Company is authorized to issue, the number of such shares which are issued and outstanding and the number of such outstanding shares owned, directly or indirectly, legally or beneficially by the Seller (or any subsidiary or affiliate of the Seller, including without limitation, the Share Sellers), the number of shares owned by the other stockholders and the identities of the such stockholders, are as set forth in Schedule 5.2. (b) Except as set forth in Schedule 5.2, there are not outstanding any (i) securities of any Company convertible into or exchangeable for any shares of capital stock or other securities of any such Company; (ii) subscriptions, options, warrants or other rights, contingent or otherwise, obligating any Company to issue or purchase or entitling any third party to acquire from any Company any shares of capital stock or other securities of such Company, other than directors' qualifying shares or shares required to be held by foreign nationals, if any; or (iii) agreements or understandings with respect to the voting, sale, transfer or other restriction on shares of capital stock of any Company to which any Share Seller, any Asset Seller or any Company is a party, other than this Agreement and 10PAGE Permitted Encumbrances. (c) The shares of capital stock of each Company that are owned, directly or indirectly, by each Share Seller have been duly authorized and validly issued, are fully paid, non-assessable and free of preemptive rights. (d) Each Share Seller holds good title to the Shares being sold by it, free and clear of all Encumbrances other than Permitted Encumbrances. The transfer of the Shares to the Buyer pursuant to this Agreement will vest, subject only to recordation on the books of the respective Companies, in the Buyer good title to the Shares, free and clear of all Encumbrances (other than Permitted Encumbrances), except for any Encumbrances resulting from any action taken or omitted to be taken by Buyer or any of its Subsidiaries or Affiliates. (e) Except as set forth in Schedule 5.2, no Company holds any direct or indirect equity interest in any other corporation or other entity, except for another Company. 5.3 Authority. (a) Except for the Seller's Shareholder Resolution, the Seller has all requisite corporate right, power, capacity and authority to enter into, deliver and perform this Agreement, each Share Seller and each Asset Seller has all requisite corporate right, power, capacity and authority to consummate the transactions contemplated hereby; and this Agreement has been, and any agreement, instrument or document executed pursuant to Section 2.6(a) will be as of the Closing Date, duly and validly executed and delivered by the Seller (or each Share Seller or Asset Seller, as applicable) pursuant to all necessary corporate action on the part of the Seller (or each Share Seller or Asset Seller, as applicable). (b) This Agreement is, and any agreement, instrument or document executed pursuant to Section 2.6(a) will be as of the Closing Date, legal, valid and binding upon and enforceable against the Seller (or each Share Seller or Asset Seller, as applicable) in accordance with its terms. 5.4 No Conflict; No Consents or Approvals. (a) The execution and delivery by the Seller of this Agreement, the execution and delivery by any Asset Seller or Share Seller of any agreement, instrument or document contemplated hereby, the consummation of the transactions contemplated herein or therein by any Share Seller or any Asset Seller and the compliance by any Share Seller or any Asset Seller with any of the provisions hereof or thereof will not (i) conflict with, result in a violation or breach of or constitute a default under (or would result in a violation, breach or default with the giving of notice or the passage of time or both) (A) the certificate of incorporation or bylaws (or other 11PAGE similar charter or governing documents) of any Share Seller, any Asset Seller or any Company, (B) except as set forth in Schedule 5.4, any contract, understanding, commitment or agreement referred to in Schedule 5.17, except any such violation, breach or default of any such contract, understanding, commitment or agreement which (together with all other such violations, breaches or defaults) would not have a Material Adverse Effect, or (C) any law, statute, ordinance, writ, injunction, decree, rule, regulation or court or administrative order by which any Share Seller, any Asset Seller or any Company (or any of the Assets or the Company Assets) is subject or bound; (ii) result in the creation or imposition of, or give any party the right to create or impose, any Encumbrance (other than Permitted Encumbrances) upon any of the Shares, the Assets or the Company Assets, (iii) terminate, modify or cancel, or give any other party the right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract, understanding, commitment or agreement referred to in Schedule 5.17 or (iv) entitle any employee of the Business to any severance or other payment or benefit except as provided by applicable law. (b) Except as set forth on Schedule 5.4, no consent or approval of any Governmental Body or waiting period imposed by law is required in connection with the execution, delivery or performance of this Agreement and the consummation of the transactions contemplated hereby by any Share Seller, any Asset Seller or any Company. (c) No litigation, claim, administrative proceeding or other proceeding or governmental investigation or inquiry is pending or, to the Seller's Knowledge, has been threatened which would prevent or delay the execution, delivery or performance of this Agreement or the consummation by any Share Seller or any Asset Seller of the transactions contemplated hereby (except for any such litigation, claim, administrative proceeding or other proceeding or governmental investigation or inquiry that also relates to the Buyer's ability to execute, deliver or perform this Agreement or consummate the transactions contemplated hereby). (d) To Seller's Knowledge, there are no Restricted Assets as to which the failure to obtain all necessary consents and waivers for the assignment, transfer, sublease or sublicense thereof as of the Closing would have a Material Adverse Effect. 5.5 Undisclosed Liabilities. To the Seller's Knowledge, no Company or, with respect to the Business, Asset Seller or Share Seller has any liability or obligation of any nature, fixed, contingent, accrued or otherwise, liquidated or unliquidated, and whether due or to become due, except for: (a) liabilities and obligations reflected on the Balance Sheet, other than those discharged since the Balance Sheet Date; (b) liabilities and obligations incurred in the Ordinary Course 12PAGE of Business since the Balance Sheet Date and that have not been discharged; (c) liabilities and obligations under any contract, lease or other agreement to which a Company is a party (except for any liabilities or obligations resulting from any breach thereof by such Company); (d) liabilities and obligations under any contract, lease or other agreement which is part of the Assets (except for any liabilities or obligations resulting from any breach thereof by any Asset Seller); (e) the Excluded Liabilities; and (f) the Excluded Company Liabilities. 5.6 No Termination of Relationships. To the Seller's Knowledge, the relationship of any material distributor, agent, representative, customer or supplier of the Business will not be terminated or adversely affected as a result of the execution of this Agreement or the consummation of the transactions contemplated hereby. 5.7 Financial Statements. Attached hereto as Exhibit C are the Financial Statements. The Financial Statements present fairly the financial condition and results of operations of the Business as of the date and for the period indicated, have been prepared in accordance with GAAP and the Accounting Principles applied on a basis consistent with prior periods, and are consistent with the books and records of the Business. 5.8 Tax Matters. Except as set forth in Schedule 5.8: (a) Each Company and, with respect to the Business, each Asset Seller, has accurately prepared and duly and timely filed all material Tax Returns that it was required to file. All such material Tax Returns were correct and complete in all material respects. All material Taxes owed by a Company and, with respect to the Business, any Asset Seller, (whether or not shown on any Tax Return) have been paid when due, other than those for which adequate reserves have been established on the Balance Sheet. No Company is currently the beneficiary of any extension of time within which to file any material Tax Return. No written claim or inquiry with respect to any material amount of Taxes has ever been made by an authority in a jurisdiction where any Company or, with respect to the Business, any Asset Seller, did not file Tax Returns that such Company or, with respect to the Business, such Asset Seller, is or may be subject to any Tax by that jurisdiction. There are no liens or other security interests (other than Permitted Encumbrances) on any of the Assets or the Company Assets that arose in connection with any failure (or alleged failure) to pay any Tax. 13PAGE (b) All Taxes of any Company attributable to Tax periods or portions thereof ending on or prior to the Balance Sheet Date, including Taxes that may become payable by any such Company in future periods in respect of any transactions or sales occurring on or prior to the Balance Sheet Date, that have not yet been paid have, in the aggregate, been adequately reflected as a liability on the Balance Sheet in accordance with GAAP consistently applied. (c) Without limiting the generality of the foregoing, each Company has withheld or collected and duly paid all material Taxes required to have been withheld or collected and paid in connection with amounts paid or owing to or from any employee, independent contractor, creditor, stockholder, or other third party. (d) To the Seller's Knowledge, there is no dispute or claim concerning any material Tax liability of any of the Companies pending. Schedule 5.8 lists all income Tax Returns filed with respect to any of the Companies for taxable periods ended on or after December 31, 1990, indicates those Tax Returns that have been audited, and indicates those Tax Returns that are currently the subject of audit. To the Seller's Knowledge, the Seller (or its Affiliate) has delivered or made available to the Buyer (or the Buyer's representative) true and complete copies of the material income, franchise, excise, sales, use, property and employment Tax Returns (or relevant portions thereof) filed by any of the Companies or, with respect to the Business, any Asset Seller, together with all material examination reports (or relevant portions thereof) and statements of deficiencies assessed, proposed in writing to be assessed against, or agreed to with respect thereto by any such Company or, with respect to the Business, such Asset Seller, since January 1, 1988. (e) None of the Companies has made a currently effective waiver of any statute of limitations in respect of material Taxes or agreed to any currently effective extension of time with respect to a material Tax assessment or deficiency. (f) None of the Companies has filed a consent under Code Section 341(f) concerning collapsible corporations. None of the Companies has made any payments, is obligated to make any payments, or is a party to any agreement that could obligate it to make any payments that will be an "excess parachute payment" under Code Section 280G. None of the Companies has been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii). None of the Companies has any liability for any Taxes of any person (other than such Company) under Treas. Reg. S 1.1502-6 (or any similar provision of federal, state, local, or foreign law), as a transferee or successor, by contract, or otherwise. (g) To the Seller's Knowledge, Schedule 5.8 sets forth the following information with respect to each of the Companies as of December 31, 1994: (i) the tax basis of the Company in the Company 14PAGE Assets, and (ii) the amount of any net operating loss carryforward of the Company. (h) To the Seller's Knowledge, while an Affiliate of the Seller, none of the Companies is or has ever been: resident for purposes of United Kingdom legislation in the United Kingdom; engaged in any trade or other business within the United Kingdom; in receipt of any income that is or should have been subject to United Kingdom taxation; in the position of having a "tax presence" in the United Kingdom as that expression is understood for the purposes of United Kingdom Laws and Regulations relating to Taxes. 5.9 Title to Properties. (a) The Asset Sellers and Companies are the true and lawful owners of, and have good title to, the Assets and the Company Assets, respectively, in each case free and clear of all Encumbrances other than Permitted Encumbrances. Upon execution and delivery by the Seller to the Buyer of the instruments of conveyance referred to in Sections 10(b)(iii) and (iv), or, where applicable, physical delivery of Assets pursuant to Section 2.6(a), the Buyer will receive all of Seller's title to, and interest in, the Assets and the Company Assets, free and clear of all Encumbrances other than Permitted Encumbrances. (b) Other than the Leased Real Estate and equipment held under leases entered into in the Ordinary Course of Business, none of the assets in possession of the Business but owned by third parties is material to the Business. 5.10 Real Estate. Schedule 5.10 lists and describes the location of all owned real property included in the Assets or the Company Assets. Except as set forth on Schedule 5.10 or Exhibit B, with respect to each parcel of Owned Real Estate: (a) the identified owner has good title to such parcel, insurable by a recognized national title insurance company (in the U.S. and such other jurisdictions where the concept of title insurance is applicable) at standard rates, free and clear of all Encumbrances, except for Permitted Encumbrances which do not impair the use, occupancy or value of such parcel as heretofore used by the Seller and its Subsidiaries; (b) there are no (i) condemnation proceedings pending or, to the Seller's Knowledge, threatened in writing relating to such parcel, or (ii) litigation or administrative actions pending or, to the Seller's Knowledge, threatened in writing relating to such parcel; (c) to the Seller's Knowledge, the legal description for such parcel contained in the deed thereof describes such parcel fully and adequately; the buildings and improvements located thereon are located within the boundary lines of the described parcels of land, are not in violation of current setback requirements, zoning laws and ordinances 15PAGE and do not encroach on any easement which may materially burden the land; the land does not serve any adjoining property for any purpose inconsistent with the use of the land as heretofore used; and such parcel is not subject to any restriction for which any permits or licenses necessary to the use thereof as heretofore used have not been obtained; (d) there are no leases, subleases, licenses or agreements granting to any party or parties the right of use or occupancy of any portion of such parcel; (e) there are no outstanding options or rights of first refusal to purchase such parcel, or any portion thereof or interest therein; (f) all facilities located on such parcel are supplied with utilities and other services necessary for the operation of such facilities as heretofore operated, including gas, electricity, water, telephone, sanitary sewer and storm sewer, all of which services are adequate for their current uses and, to Seller's Knowledge, are in accordance with all applicable Laws and Regulations; (g) such parcel has direct access to a public road or access to a public road via an easement benefiting such parcel; (h) there is no pending or, to the Seller's Knowledge, any threatened proceeding to change or redefine the zoning classification of all or any portion of the parcel in a manner that would materially interfere with the use of such parcel as heretofore used; (i) All of the material buildings and improvements constructed on the parcel are in serviceable condition and repair, subject to ordinary wear and tear, and are free of material construction defects, and all mechanical and utility systems servicing such improvements are in serviceable condition and repair, subject to ordinary wear and tear, and are free of material defects; (j) to the Seller's Knowledge, each parcel is an independent unit which does not rely on any facilities (other than the facilities of public utility and water companies) located on any other property (i) to fulfill any zoning, building code or other municipal or governmental requirement; (ii) for structural support or the furnishing of any essential building systems or utilities, including but not limited to electric, plumbing, mechanical, heating, ventilating, and air conditioning systems; or (iii) to fulfill the requirements of any lease. To the Seller's Knowledge, no building or other improvement not included in the parcel relies on any part of the parcel to fulfill any zoning, building code or other municipal or governmental requirement or for structural support or the furnishing of any essential building systems or utilities. Such parcel is assessed by local property assessors as a tax parcel or parcels separate from all other tax parcels; and 16PAGE (k) there are no pending agreements relating to any material construction or alteration of any buildings on any parcel. 5.11 Real Property Leases. Schedule 5.11 lists all real property leased or subleased as of the date hereof to a Company or, in the conduct of the Business, to an Asset Seller. The Seller has delivered to the Buyer correct and complete copies of the leases and subleases (as amended to date) listed in Schedule 5.11. With respect to each lease and sublease of Leased Real Estate: (a) the lease or sublease is legal, valid, binding, enforceable and in full force and effect with respect to each Asset Seller and each Company which is a party thereto; (b) except as set forth on Schedule 5.11A or Exhibit B, each lease or sublease to which an Asset Seller is a party is assignable by the Asset Seller to the Buyer without the consent or approval of or any payment to any party, no lease or sublease to which a Company is a party requires any permission or consent upon a change in control of such company, all such leases or subleases (whether the lessee is an Asset Seller or Company) will continue to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing, and the consummation of the transactions contemplated herein will not conflict with, result in a violation or breach of or constitute a default under (or would result in a violation, breach or default with the giving of notice or the passage of time or both) any such lease or sublease; (c) neither any Asset Seller nor any Company is in breach or default in any material respect under any such lease or sublease, and no event has occurred which, with notice and/or lapse of time, would constitute such a breach or default; (d) to the Seller's Knowledge, there are no disputes or forbearance programs in effect as to the lease or sublease; (e) neither any Asset Seller nor any Company has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold; (f) to the Seller's Knowledge, all facilities leased or subleased thereunder are supplied with utilities and other services necessary for the operation of said facilities; and (g) with respect to each parcel of Leased Real Estate located in a jurisdiction that recognizes leasehold interests in land as distinct ownership interests (including, without limitation, England and Australia), all of the statements set forth in Section 5.10 are true. 5.12 Equipment Leases. Schedule 5.12 contains a list of all equipment leases involving an annual expense per lease in excess of 100,000 English pounds sterling to which a Company is a lessee or an Asset 17PAGE Seller is a lessee with respect to a lease which is part of the Assets, and (other than with respect to motor vehicle leases) lists the term of such lease and the rent payable thereunder. With respect to each equipment lease listed in Schedule 5.12: (a) the lease is legal, valid, binding, enforceable and in full force and effect with respect to each Asset Seller and each Company which is a party thereto; (b) except as set forth in Schedule 5.12A, each lease to which an Asset Seller is a party is assignable by the Asset Seller to the Buyer without the consent or approval of or any payment to any party, no lease or sublease to which a Company is a party requires any permission or consent upon a change in control of such Company, all such leases (whether the lessee is an Asset Seller or Company) will continue to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing, and the consummation of the transactions contemplated herein will not conflict with, result in a violation or breach of or constitute a default under (or would result in a violation, breach or default with the giving of notice or the passage of time or both) any such lease; and (c) neither any Asset Seller nor any Company is in breach or default in any material respect under any such lease, and no event has occurred which, with notice and/or lapse of time, would constitute such a breach or default. 5.13 Assets Used in the Business. The Assets and the Company Assets are sufficient for the conduct of the Business as heretofore conducted by the Companies and the Asset Sellers. The Assets and the Company Assets are in good operating condition and repair (subject to normal wear and tear). 5.14 Accounts Receivable. All accounts receivable of the Business reflected on the Balance Sheet are valid receivables, arose in the Ordinary Course of Business, are collectible and, to the Seller's Knowledge, are subject to no setoffs or counterclaims, net, in the aggregate, of an applicable reserve for doubtful accounts shown on the Balance Sheet. All accounts receivable reflected in the financial or accounting records of the Business that have arisen since the Balance Sheet Date are valid receivables, arose in the Ordinary Course of Business, are collectible and, to the Seller's Knowledge, are subject to no setoffs or counterclaims net, in the aggregate, of a reserve for doubtful accounts proportionate to that shown on the Balance Sheet. 5.15 Intellectual Property. (a) Schedule 5.15 contains a list of all of the following that are owned by any Company or, in the conduct of the Business, by any Asset Seller: (i) patents and patent applications; (ii) registered 18PAGE trademarks, registered tradenames and registered service marks and applications therefor; and (iii) registered licenses relating to any of the foregoing. Schedule 5.15 identifies the owner of each item listed thereon and, in the case of registrations and applications, the application or registration number and date. (b) The Asset Sellers and the Companies own or have the right to use all Proprietary Rights used in the operation of the Business as heretofore conducted or necessary for the operation of the Business as heretofore conducted (collectively, "Intellectual Property"). Upon execution and delivery by the Seller to the Buyer of the instruments of conveyance referred to in Sections 10(b)(iii) and 10(b)(iv), each item of Intellectual Property owned or used by the Asset Sellers and the Companies in the operation of the Business as of the Closing will be owned or available for use by the Buyer or the Companies on substantively identical terms and conditions immediately following the Closing, except as otherwise indicated on Schedule 5.15. Each of the Asset Sellers and the Companies has taken reasonable measures to protect the proprietary nature of the Intellectual Property and to maintain in confidence the trade secrets and confidential information that it owns or uses in, and that are material to, the Business. No other person or entity has any rights to any of the Intellectual Property owned or used by the Asset Sellers or the Companies that are material to the Business, except that the Intellectual Property identified on Schedule 5.15 as licensed to the Companies or, in the conduct of the Business, to the Asset Sellers, is owned by the respective owners identified on Schedule 5.15. Except as set forth on Schedule 5.15, to the Seller's Knowledge, no person or entity is infringing, violating or misappropriating any of the Intellectual Property. Except as set forth on Schedule 5.15, no Asset Seller or Company has agreed, except in the Ordinary Course of Business in conjunction with product sales, to indemnify any person or entity for or against any infringement, misappropriation or other conflict with any Intellectual Property. (c) Except as set forth on Schedule 5.15, to the Seller's Knowledge, none of the activities or business presently conducted by the Business infringes or violates, or constitutes a misappropriation of, any Proprietary Rights of any other person or entity (including, without limitation, the Seller or any Subsidiary or Affiliate of the Seller). Except as set forth on Schedule 5.15, no Company, or, in the conduct of the Business, Asset Seller, has received since January 1, 1992, any complaint, claim or notice in writing alleging any such infringement, violation or misappropriation, which complaint, claim or notice has not been resolved to the mutual satisfaction of the parties involved in a manner which involves no future obligations of the Seller. (d) Except as set forth on Schedule 5.15A, with respect to each item of Intellectual Property owned by a third party and used by a Company or, in the conduct of the Business, an Asset Seller: 19PAGE (i) the license, sublicense or other agreement covering such item is legal, valid, binding, enforceable and in full force and effect with respect to the Asset Seller or Company which is a party thereto; (ii) such license, sublicense or other agreement to which an Asset Seller is a party is assignable by the Asset Seller to the Buyer without the consent or approval of or any payment to any party and the consummation of the transactions contemplated herein will not conflict with, result in a violation or breach of or constitute a default under (or would result in a violation, breach or default with the giving of notice or the passage of time or both) any such license, sublicense or other agreement which violation, breach or default (together with all other such violations, breaches or defaults) would have a Material Adverse Effect; (iii) neither any Asset Seller or Company nor, to the Seller's Knowledge, any other party is in breach or default under any such license, sublicense or other agreement, and no event has occurred which, with notice and/or lapse of time, would constitute such a breach or default or permit a termination, modification or acceleration thereunder; (iv) to the Seller's Knowledge, the underlying item of Intellectual Property is not subject to any outstanding judgment, order, decree, stipulation or injunction; and (v) no Asset Seller or Company has agreed, except in the Ordinary Course of Business in conjunction with product sales, to indemnify any person or entity for or against any interference, infringement, misappropriation or other conflict with respect to such item. 5.16 Insurance Policies. (a) Schedule 5.16 sets forth a list (including the name of the insurer, the amount of total annual premiums, and the type and amount of coverages) of all material policies of fire, theft, casualty, liability, burglary, fidelity, workers compensation, business interruption, environmental, product liability, automobile and other forms of insurance under which any Company or, with respect to the Business, an Asset Seller, is a named insured or otherwise the beneficiary of coverage. Neither any Share Seller, any Asset Seller nor any Company has, with respect to the Business, received any notice from the insurer under any such policy disclaiming coverage, reserving rights with respect to a particular claim or such policy in general, or canceling or materially amending any such policy. (b) All premiums due and payable for such insurance policies have been duly paid, and such policies or extensions or renewals thereof in the amounts described will be outstanding and duly in full 20PAGE force without interruption until the Closing Date. 5.17 Contracts. Schedule 5.17 contains a list of the following written contracts, understandings, commitments and agreements relating to the Business: (a) all contracts, leases, understandings or commitments, whether in the Ordinary Course of Business or not: (i) involving a present or future obligation to purchase, lease or deliver goods or services of an amount or value in excess of 200,000 English pounds sterling each; or (ii) which limit or restrict the ability of the Business to compete anywhere in the world; or (iii) which establish a partnership or joint venture; (b) all bonus, incentive or deferred compensation arrangements relating to the Business, all profit sharing, pension, multi-employer pension, vacation, group insurance or employee welfare plans or other similar plans or fringe benefits which could result in a cost to the Business of more than 100,000 English pounds sterling per annum; (c) all collective bargaining agreements or other contracts or commitments to or with any labor union, employee representative or group of employees, and the Seller has made available to the Buyer all employment manuals, booklets and the like setting forth the terms of employment and labor policies and practices (whether or not legally binding) that are of general application to employees or employees of a certain type of the Business or of any section or part of the Business; (d) any changes since February 1, 1995 to each employment contract, and each other contract, agreement or commitment to or with an individual employee, agent, representative or consultant for a remuneration which exceeds or will exceed in accordance with its terms 50,000 English pounds sterling per annum or which cannot be terminated at any time without liability to the employer, upon no more than six months notice; (e) any arrangement under which any Company or, in the conduct of the Business, any Asset Seller, has created, incurred, assumed or guaranteed indebtedness for borrowed money involving more than 200,000 English pounds sterling; (f) each sales representative, distributorship or other agreement providing for the distribution or marketing of products (i) under which revenue to the Business during its year ended December 31, 1994 exceeded 200,000 English pounds sterling or (ii) which is not terminable by the constituent of the Business which is a party thereto without penalty or breach upon no more than six months prior notice to the other party thereto; (g) any agreement concluded within the past five years relating to the acquisition or disposition of significant assets, businesses or companies other than in the Ordinary Course of Business (whether by 21PAGE sale of assets, sale of stock, merger or otherwise); and (h) any other arrangement under which the consequences of a default or termination would have a Material Adverse Effect, or which gives or could give any other party thereto the right to cause the transactions contemplated by this Agreement to be rescinded following consummation, or which involves more than 300,000 English pounds sterling in the aggregate. The Seller has delivered or made available to the Buyer a correct and complete copy of (i) each written arrangement (as amended to date) listed in Schedule 5.17 and (ii) a list as of February 1, 1995 of each employment contract, and each other contract, agreement or commitment to or with an individual employee, agent, representative or consultant for a remuneration which exceeds or will exceed in accordance with its terms 50,000 English pounds sterling per annum or which cannot be terminated at any time without liability to the employer, upon no more than six months notice. With respect to each written arrangement so listed: (i) the written arrangement is legal, valid, binding and enforceable and in full force and effect with respect to each Asset Seller and Company which is a party thereto and, to the Seller's Knowledge, with respect to every other party thereto; (ii) each written arrangement to which an Asset Seller is a party is assignable by the Asset Seller to the Buyer without the consent or approval of or any payment to any party (except as set forth in Schedule 5.17A), and the consummation of the transactions contemplated herein will not conflict with, result in a violation or breach of or constitute a default under (or would result in a violation, breach or default with the giving of notice or the passage of time or both) any such written arrangement which violation, breach or default (together with all other such violations, breaches or defaults) would have a Material Adverse Effect; and (iii) neither any Asset Seller or Company nor, to the Seller's Knowledge, any other party thereto is in breach or default, and no event has occurred which, with notice and/or lapse of time, would constitute such a breach or default or permit a termination, modification or acceleration, under the written arrangement, which breach or default would have a Material Adverse Effect. No Asset Seller or Company is a party to any oral contract, agreement or other arrangement which, if reduced to written form, would be required to be listed in Schedule 5.17 under the terms of this Section 5.17. None of the contracts, understandings, commitments and agreements listed on Schedule 5.17 is (or would be if entered into today and if the Seller's only business were the Business and the Seller's only assets were the Shares and the Assets): such as to require an announcement as a Super Class 1 transaction under Chapter 10 of the London Stock Exchange Listing Rules (the "Yellow Book"); or a material contract not entered into in the ordinary course of business under paragraph 6.C.20 of the Yellow Book. 5.18 Inventory. The value of the inventory as stated on the Balance Sheet reflects the lower of cost or market for such inventory as applied in accordance with GAAP and the Accounting Principles. All inventory reflected on the Balance Sheet consists of a quality and quantity usable and salable in the Ordinary Course of Business, except for scrap, excess 22PAGE or obsolete items and items that are of below-standard quality or broken before completion of final manufacture, all of which have been written-off or written-down to net realizable value on the Balance Sheet. All inventory of the Business purchased since the Balance Sheet Date consists of a quality and quantity usable and salable in the Ordinary Course of Business, except for scrap, excess or obsolete items and items that are of below-standard quality or are broken before completion of final manufacture, all of which have been written-off or written-down to net realizable value on the books of the Business. 5.19 Litigation. Schedule 5.19 describes all suits, actions, proceedings, investigations, inquiries, claims, complaints and accusations pending or, to the Seller's Knowledge, threatened in writing against the Business, the Assets, the Company Assets or the Shares and to which any Asset Seller or Company is or would be a party, in any court or before any industrial tribunal or arbitration panel of any kind or before or by any federal, provincial, state, local, foreign, regulatory or other government, governmental agency, department, commission, board, bureau, instrumentality, authority or body ("Governmental Body"). There is no outstanding (i) injunction, decree, judgment, award, fine or penalty by any court, arbitration panel, industrial tribunal or Governmental Body against or affecting the Business, the Assets, the Company Assets or the Shares or (ii) writ or order of any such entity against or affecting the Business, the Assets, the Company Assets or the Shares which would have a Material Adverse Effect. 5.20 Compliance with Law. Except as set forth in Schedule 5.20, (a) each Company and, with respect to the Business, each Asset Seller and Share Seller has complied, in all material respects, and is in compliance, in all material respects, with all U.S. and foreign laws (including without limitation the U.S. Foreign Corrupt Practices Act and the U.S. Occupational Safety and Health Act and regulations thereunder), rules, decrees, regulations, ordinances and orders ("Laws and Regulations") that affect or relate to this Agreement, the transactions contemplated hereby or the conduct of the Business, the Assets, the Company Assets or the Shares; (b) each Share Seller, each Asset Seller and each Company has filed with the proper authorities all material statements and reports required by all applicable Laws and Regulations relating to the Business, the Assets, the Company Assets or the Shares; (c) none of the Share Sellers, Asset Sellers or Companies has received notice or inquiry relating to any actual or alleged violation of any material Laws and Regulations relating to the Business, the Assets, the Company Assets or the Shares and (d) no Company or, with respect to the Business, Asset Seller is party to any agreement or arrangement (whether or not intended to be legally binding) or is in the pursuit of any course of conduct which is registrable under the United Kingdom Restrictive Trade Practices Acts 1976 and 1977 or prohibited by or capable of giving rise to an investigation by the United Kingdom Director-General of Fair Trading or a reference to the United Kingdom Monopolies and Mergers Commission or is in material contravention or breach of any of the following European Union or United Kingdom Laws and Regulations: The Treaty of Rome 1957; the Fair Trading Act 1973; the Consumer Credit Act 1974; the Health and Safety at Work etc Act 1974; the 23PAGE Trade Descriptions Acts 1968 and 1972; the Restrictive Trade Practices Act 1976 and 1977; the Competition Act 1980; the Data Protection Act 1984 or any regulations, orders, notices or directions made under any of the foregoing. 5.21 Absence of Subsequent Actions. Except as set forth in Schedule 5.21, since the Balance Sheet Date, no Company or, with respect to the Business, Asset Seller, has: (a) incurred any liability, including without limitation any liability for or in respect of borrowed money, in excess of 200,000 English pounds sterling in the aggregate, except current liabilities incurred, and liabilities under contracts entered into, in the Ordinary Course of Business; (b) purchased any shares of capital stock or other equity securities of any party unaffiliated with the Seller; (c) mortgaged, pledged or subjected to any material claim any portion of its assets, tangible or intangible, other than Permitted Encumbrances; (d) acquired or sold, assigned, transferred or otherwise disposed of a material amount of tangible assets, except in each case in the Ordinary Course of Business or as contemplated by Section 2.5; (e) sold, assigned, licensed, sublicensed or transferred any material Intellectual Property, except for licenses of Intellectual Property in the Ordinary Course of Business in conjunction with product sales; (f) made any single capital expenditure or commitment therefor in excess of 200,000 English pounds sterling; (g) suffered any non-operating loss in excess of 100,000 English pounds sterling; (h) made any change in compensation of any director or executive officer (or employee of similar station) except for increases which are in the Ordinary Course of Business; (i) changed its credit policy as to sale of inventories or collection of receivables; (j) decreased in any material respect expenditures with respect to promotion and advertising or maintenance and repairs; (k) entered into any joint venture, partnership or similar arrangement; (l) amended, modified or terminated any contract, understanding, commitment or agreement referred to in Schedule 5.17 other than in the 24PAGE Ordinary Course of Business, except for any such item that terminated in accordance with its terms; (m) authorized or issued any recall notice for any of its products or initiated any safety inquiry or investigation other than in the Ordinary Course of Business; (n) received notice of any warranty claim (other than in the Ordinary Course of Business) or any products liability claim; (o) experienced any material reduction in the rate of, or gross margins associated with, firm bookings or orders for the products and services of the Business, or any material deterioration in the backlog level of the Business; (p) changed its accounting methods, principles or practices other than as required by GAAP; (q) taken any of the other actions set forth in Section 7.1(a); or (r) agreed to do any of the things listed in clauses (a) through (q) of this Section 5.21. 5.22 No Material Adverse Change. Since the Balance Sheet Date, there has not been any material adverse change in the business, results of operations or prospects of the Business as heretofore conducted. 5.23 Labor Matters. (a) The Seller has provided to the Buyer a list of all employees of the Business as of December 31, 1994. To the Seller's Knowledge, except as listed on Schedule 5.23A, no employee of any Company and no employee of any Asset Seller employed in the Business has any plans to terminate employment (other than for the purpose of accepting employment with the Buyer following the Closing). Except as set forth in Schedule 5.23, no Company or, in the conduct of the Business, Asset Seller, has, since December 31, 1992, experienced any strikes, material grievances, material claims of unfair labor practices or other collective bargaining disputes. To the Seller's Knowledge, there is no organizational effort presently being made or threatened by or on behalf of any labor union with respect to any employees of the Business. (b) With respect to the Companies and, in the conduct of the Business, the Asset Sellers, there are not in existence and, to the Seller's Knowledge, there are not threatened any material (i) work stoppages or strikes, (ii) grievance, arbitration proceedings or proceedings before any industrial tribunal arising out of collective bargaining agreements, national labor union agreements or otherwise covering employees of the Business, or (iii) unfair labor practice complaints. 25PAGE (c) No Asset Seller or Company recognizes (expressly or impliedly) any trade union. No claims are being made by any trade union for recognition and no claim for recognition of which Seller has received written notice has been referred to the United Kingdom Advisory Conciliation & Arbitration Service or to the United Kingdom Central Arbitration Committee. (d) The Seller has not made any representations or statements to any of its employees or any employee engaged in the Business in any way connected with or concerning employment with the Buyer or any of the Buyer's Affiliates which representation or statement conflicts with, or is additional to, the terms of this Agreement. (e) Except as set forth on Schedule 5.23, there are no requirements or arrangements (whether or not intended to be legally binding) on the part of any Asset Seller or Company to pay any employee of the Business any sums on redundancy other than under any applicable Laws and Regulations. 5.24 U.S. Employee Benefit Plans. (a) Schedule 5.24 lists all employee benefit plans (as defined in Section 3(3) of ERISA), and all compensation plans, agreements or arrangements, including without limitation insurance coverage, disability benefits, bonus, deferred compensation, incentive compensation, severance or termination pay, post-retirement compensation, change in control compensation, death benefit, stock purchase, phantom stock, stock appreciation and stock option plans or arrangements and vacation, which obligate, or may reasonably be expected to obligate, the Business to provide a value of more than 100,000 English pounds sterling annually, maintained or contributed to by or on behalf of the Asset Sellers, the Share Sellers or the Companies applicable to employees of the Business employed in the U.S. (the "Plans"). The Fisons Scientific Equipment Savings Incentive Plan including the related trust (the "Savings Plan") has received a favorable determination letter from the IRS and, to the Seller's Knowledge, no event has occurred and no condition exists which could reasonably be expected to result in the revocation of any such determination. Each of the Plans has been administered in compliance with its terms and the requirements of all applicable Laws and Regulations, including without limitation ERISA and the Code, and all required contributions to each Plan have been made, in each case, except where the failure to do so would not have a Material Adverse Effect. The Seller has heretofore delivered or made available to the Buyer true and complete copies of all of the Plans and, where applicable, related trusts and contracts, including all amendments. (b) Except as described in Schedule 5.24, there are no inquiries or investigations by the IRS, the U.S. Department of Labor, no termination proceedings and no actions, suits or claims (other than claims for benefits in the Ordinary Course of Business) pending or, to the Seller's Knowledge, threatened against the Savings Plan (or any 26PAGE Company, Share Seller or Asset Seller with respect thereto) or the assets thereof which would have a Material Adverse Effect. (c) No Company has ever maintained an employee benefit plan subject to Section 412 of the Code or Title IV of ERISA. (d) Neither any Asset Seller, any Share Seller, any Company nor any ERISA Affiliate contributes to, has within the past five years had an obligation to contribute to, or is subject to a liability to, a "multi-employer plan" as defined in Section 4001(a)(3) of ERISA. (e) Except as set forth in Schedule 5.24, there are no unfunded obligations under any Plan providing benefits after termination of employment to any employee or former employee of the Business (or to any beneficiary of any such employee or former employee), including but not limited to retiree health coverage and deferred compensation, but excluding continuation of health coverage required to be continued under Section 4980B of the Code and insurance conversion privileges under state law. (f) Except as set forth in Schedule 5.24, no act or omission has occurred and no condition exists with respect to any employee benefit plan maintained by any Asset Seller, any Share Seller, any Company or any ERISA Affiliate that would subject any Company or the Assets to any fine, penalty, tax or liability of any kind imposed under ERISA or the Code, in each case, that would have a Material Adverse Effect. (g) Schedules 5.24 and 5.25 disclose each: (i) agreement, plan or arrangement under which any person may receive payments from a Company or from any Share Seller or Asset Seller with respect to any employee of the Business, that may be subject to the tax imposed by Section 4999 of the Code or included in the determination of such person's "parachute payment" under Section 280G of the Code; and (ii) agreement or plan binding any Company or, with respect to any employee of the Business, any Share Seller or Asset Seller, including without limitation any stock option plan, stock appreciation right plan, restricted stock plan, stock purchase plan, severance benefit plan or employee benefit plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. 5.25 Foreign Employee Benefit Plans. Schedule 5.25 lists (i) each retirement plan that is not statutorily required (disregarding for this purpose the United Kingdom Statutory requirement for any contracted-out schemes to provide guaranteed minimum pensions under the United Kingdom Pension Schemes Act 1993) that is maintained or contributed to by or on behalf of any Asset Seller, Share Seller or Company applicable to employees of the Business located outside of the U.S. (a "Foreign Retirement Plan") and (ii) each welfare benefit plan that is not required 27PAGE by statute or applicable national industry-wide agreement maintained or contributed to by or on behalf of any Asset Seller, Share Seller or Company applicable to employees of the Business located outside of the U.S. and which, in the case of clause (ii), obligates or may reasonably be expected to obligate the Business to provide a value of more than 100,000 English pounds sterling annually (a "Foreign Welfare Plan"). Except as set forth in Schedule 5.25, each such Foreign Retirement Plan and Foreign Welfare Plan (collectively, the "Foreign Plans") is fully funded, has been administered, in all material respects, in compliance with its terms and the requirements of all applicable Laws and Regulations (including, without limitation, Article 119 of the Treaty of Rome), and all required contributions to each Foreign Plan have been made. The books and records of the Companies and, with respect to the Business, the Asset Sellers, accurately reflect the obligations and liabilities of the Companies and the Asset Sellers under the Foreign Plans. The Seller has heretofore delivered to the Buyer true and complete copies of all of the written Foreign Plans and written summaries of the oral Foreign Plans and, where applicable, related trusts and contracts, including all amendments. There are no inquiries or investigations by any foreign Governmental Body, no termination proceedings and no actions, suits or claims (other than claims for benefits) pending or, to the Seller's Knowledge, threatened against any Foreign Plan (or any Company, Share Seller or Asset Seller with respect thereto) or the assets thereof. Except as set forth in Schedule 5.25, there are no unfunded obligations under any Foreign Plan providing benefits after termination of employment to any employee or former employee of the Business (or to any beneficiary of any such employee or former employee), including but not limited to retiree health coverage and deferred compensation, but excluding insurance conversion privileges under applicable foreign law. No Foreign Plan, plan documentation or agreement, summary plan description or other written communication distributed generally to employees of the Business by its terms prohibits the amendment or termination of any such Foreign Plan. All reports, forms and other documents required to be filed or advisable to be filed with any governmental entity with respect to each Foreign Plan have been timely filed and are complete and accurate in all material respects. 5.26 Indebtedness and Guaranties. Schedule 5.26 sets forth a true and complete list (indicating the obligor, the beneficiary, the amount and the date of maturity or expiration), including the names of the parties thereto, of all debt instruments, loan agreements, indentures, guaranties or other written obligations which relate to (i) indebtedness for borrowed money or (ii) money loaned to others, provided that the Seller shall not be required to list any such obligations which (a) include less than 100,000 English pounds sterling or (b) are general corporate obligations of the Seller, which are not secured by any of the Assets, the Company Assets or the Shares and which do not constitute an Assumed Liability or Company Liability. All of the aforesaid items were entered into in the Ordinary Course of Business, are valid and binding, in full force and effect and are enforceable in accordance with their respective terms; there exists no breach or default, or any event which with notice or lapse of time or both, would constitute a breach or default by any party thereto; and there are no prepayment penalties associated therewith. 28PAGE 5.27 Product Warranty. The standard terms and conditions of sale or lease of each Division, Business Seller and Company have been provided by the Seller to the Buyer. 5.28 Environmental Matters. (a) Except as set forth in Schedule 5.28, each Share Seller, each Asset Seller and each Company is in compliance in all material respects with all Environmental Laws applicable to the Business. Except as set forth in Schedule 5.28, there is no pending or, to the Seller's Knowledge, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding or investigation, inquiry or information request by any Governmental Body under any Environmental Law involving or relating to the Business. For purposes of this Agreement, "Environmental Law" means any federal, state, foreign or local law or statute, or any rule or regulation implementing such law or statute, in each case existing and in effect on the date hereof relating to pollution or protection of the environment, including without limitation any statute or regulation pertaining to (i) treatment, storage, disposal, generation or transportation of Materials of Environmental Concern; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the release or threatened release into the environment of hazardous substances, or solid or hazardous waste, including without limitation emissions, discharges, injections, spills, escapes or dumping of Materials of Environmental Concern; (v) the protection of wildlife, marine sanctuaries and wetlands, including without limitation all endangered and threatened species; (vi) above ground or underground storage tanks, vessels and containers; (vii) abandoned, disposed or discarded barrels, tanks, vessels, containers and other closed receptacles; and (viii) manufacture, processing, use, distribution, treatment, storage, disposal, transportation or handling of Materials of Environmental Concern. As used herein, the terms "release" and "environment" shall have the meaning set forth in the federal Comprehensive Environmental Compensation, Liability and Response Act of 1980, as amended ("CERCLA"). (b) Except as set forth in Schedule 5.28, to the Seller's Knowledge, there has been no release of any Materials of Environmental Concern in amounts above reportable quantities under applicable Environmental Laws into the environment at any parcel of real property or any facility (i) currently owned or operated by any Share Seller or any Asset Seller relating to the Business, (ii) currently owned or operated by any Company, (iii) formerly owned, operated or controlled by any Share Seller or any Asset Seller in the conduct of the Business during the period of its ownership, operation or control or (iv) formerly owned, operated or controlled by any Company during the period of its ownership, operation or control, that, in each case, would have a Material Adverse Effect. For purposes of this Agreement, "Materials of Environmental Concern" means any pollutants or contaminants, hazardous substances (as such term is defined under CERCLA), solid wastes and hazardous wastes (as such terms are defined under the 29PAGE federal Resources Conservation and Recovery Act of 1976, as amended), radioactive materials, toxic materials, oil or petroleum and petroleum products. (c) To the Seller's Knowledge, set forth in Schedule 5.28 is a list of all environmental reports, investigations and audits relating to premises (i) currently owned or operated by any Share Seller or any Asset Seller in the conduct of the Business or (ii) currently owned or operated by any Company, in each of the foregoing cases whether conducted by or on behalf of any Share Seller, Asset Seller, any Company or a third party, and whether done at the initiative of the Seller, any Share Seller, any Asset Seller or any Company or directed by a Governmental Body or other third party. Copies of each such report, or the results of each such report, investigation or audit in the possession of any Asset Seller, Share Seller or Company, have been provided or made available to the Buyer (except that only summaries of the results of statistical information resulting from physical monitoring or testing have been provided to the Buyer). (d) The Seller has provided or made available to the Buyer a list of, to the Seller's Knowledge, all of the solid and hazardous waste transporters and treatment, storage and disposal facilities that have been utilized by any Share Seller or any Asset Seller in the conduct of the Business since January 1, 1980 or by any Company at any time. Neither any Share Seller, any Asset Seller nor any Company has received written notice of any liability under any Environmental Law of any such transporter or facility which would have a Material Adverse Effect. (e) Without limiting the generality of the foregoing paragraphs of this Section 5.28, none of the Companies or, with respect to the Business, the Asset Sellers or Share Sellers is, except as set forth in Schedule 5.28, in violation in any material respect of any of the following United Kingdom Laws and Regulations: the Clean Air Acts 1956 and 1968; the Control of Pollution Act 1974; the Health and Safety at Work etc Act 1974; the Water Act 1989; and the Environmental Protection Act 1990; and all statutory instruments, regulations and orders made under each of the foregoing. (f) To the Seller's Knowledge, none of the Companies or, with respect to the Business, Asset Sellers or Share Sellers produces or uses any substances, or uses any processes in the manufacture or processing of its products, which are currently proscribed by the United Kingdom Secretary of State for the Environment, the United Kingdom Inspectorate of Pollution, the United Kingdom National Rivers Authority or any United Kingdom local authority under any applicable Environmental Law. 5.29 Permits. The Companies, Asset Sellers and Share Sellers currently hold all permits that are required for the operation of the Companies as heretofore operated or for the conduct of the Business as heretofore conducted, except for any such permits the failure to hold which 30PAGE would not have a Material Adverse Effect (all of such permits being referred to herein as "Material Permits"). Each Material Permit is in full force and effect and no suspension or cancellation of such Permit has been, to the Seller's Knowledge, threatened in writing. Except as set forth in Schedule 5.29, each such Material Permit held by an Asset Seller is assignable by the Asset Seller to the Buyer without the consent or approval of or any payment to any party, all such Material Permits (whether held by an Asset Seller or Company) will continue to be in full force and effect immediately following the Closing in accordance in all substantive respects with the terms thereof as in effect immediately prior to the Closing, and the consummation of the transactions contemplated herein will not conflict with, result in a violation or breach of or constitute a default under (or would result in a violation, breach or default with the giving of notice or the passage of time or both) any such Material Permit. To the Seller's Knowledge, there is no proposed or contemplated change in the terms of any Material Permit. 5.30 Certain Business Relationships. Except as set forth on Schedule 5.30, no Affiliate of the Seller (other than any Asset Seller, Share Seller or Company) (a) owns any property or right, tangible or intangible, which is necessary to operate the Business or is reflected on the Balance Sheet, (b) has any claim or cause of action against the Assets, any Company or any Company Assets other than with respect to receivables related to the provision of goods or services to the Business in the Ordinary Course of Business, or (c) other than with respect to trade payables related to the provision of goods or services by the Business in the Ordinary Course of Business, owes any money to any Company or, in connection with the Business, to any Asset Seller. 5.31 Books and Records. The books, records, accounts, ledgers and files of each Asset Seller with respect to the Business and each Company are accurate and complete in all material respects and have been maintained in accordance with good business and bookkeeping practices in all material respects. The minute books and other similar records of each Company of actions taken at any meetings of such Company's stockholders, Board of Directors, Managing Board, Supervisory Board or any committee thereof and of all written consents executed in lieu of the holding of any such meeting are true and complete in all material respects. The stock certificate books, stock ledgers and/or share registers of each Company are complete and correct in all material respects. 5.32 Customers and Suppliers. No unfilled customer orders or commitments obligating any Division, Business Seller or Company to process, manufacture or deliver products or perform services, which orders or commitments are material, individually or in the aggregate, to the Business will result in a material loss to the Business upon completion of performance. To the Sellers' Knowledge, no purchase orders or commitments of any Division, Business Seller or Company, which orders or commitments are material, individually or in the aggregate, to the Business are materially in excess of normal requirements of the Business, nor are prices provided therein materially in excess of current market prices for 31PAGE the products or services to be provided thereunder. No material supplier of the Business has indicated within the past year that it will stop, or materially decrease the rate of, supplying materials, products, or services to the Business and no material customer of the Business has indicated within the past year that it will stop, or materially decrease the rate of, buying materials, products or services from the Business. Schedule 5.32 sets forth a list of (a) each customer that accounted for more than 1% of the combined revenues of the Business during the 1994 fiscal year and (b) each supplier that is the sole supplier of any significant product or component to the Business. Except as set forth on Schedule 5.32, there are no suppliers to the Business of significant goods or services with respect to which practical alternative sources of supply, or comparable products, are not available on comparable terms and conditions. 5.33 Government Contracts. No Division, Business Seller or Company is, or since December 31, 1992 has been, suspended or debarred from bidding on contracts or subcontracts with any Governmental Body; no such suspension or debarment has been initiated or, to the Seller's Knowledge, threatened in writing; and the consummation of the transactions contemplated by this Agreement will not result in any such suspension or debarment (assuming that no such suspension or debarment will result solely from the identity of the Buyer). Except as set forth on Schedule 5.33, no Division, Business Seller or Company has, since December 31, 1992, been audited or investigated or is now being audited or, to the Seller's Knowledge, has been threatened in writing with an investigation by the U.S. Government Accounting Office, the U.S. Department of Defense or any of its agencies, the Defense Contract Audit Agency, the U.S. Department of Justice, the Inspector General of any U.S. Governmental Body, any similar agencies or instrumentalities of any foreign Governmental Body, or any prime contractor with a Governmental Body nor, to the Seller's Knowledge, has any such audit or investigation been threatened in writing. To the Seller's Knowledge, there is no valid basis for (a) the suspension or debarment of any Division, Business Seller or Company from bidding on contracts or subcontracts with any Governmental Body or (b) any claim pursuant to any audit by any Governmental Body in connection with any contracts or subcontracts relating to the provision of products or services to or for the benefit of a Governmental Body. Except as set forth on Schedule 5.33, no Division, Business Seller or Company has any agreements, contracts or commitments which require it to obtain or maintain a security clearance with any Governmental Body. 5.34 Recalls. To the Seller's Knowledge, there is no basis for the recall, withdrawal or suspension of any approval by any Governmental Body with respect to any product or service sold by the Business. None of the products or services of the Business is subject to any recall proceedings and, to the Seller's Knowledge, no such proceedings have been threatened in writing. Since January 1, 1990 no product or service of the Business has been recalled. 5.35 Broker's or Finder's Fees. The Seller has no knowledge of, and has taken no action which would give rise to, any claim (or the reasonable 32PAGE basis therefor) for a broker's or finder's fee to be paid by the Buyer or the Parent in connection with the consummation of the transactions contemplated hereby. 5.36 Disclosure. No statement contained in the Schedules contains any untrue statement of a material fact or omits to state any material fact necessary, in light of the circumstances under which it was made, in order to make such statements not misleading. 6. REPRESENTATIONS AND WARRANTIES BY THE BUYER. Each of the Parent and the Buyer, jointly and severally, represents and warrants to the Seller as set forth in this Section 6. The Seller may rely upon the representations and warranties contained herein, notwithstanding any investigation of the Buyer or the Parent made by the Seller prior to the Closing or the knowledge of the officers, directors, stockholders, employees or agents of the Seller. 6.1 Organization and Good Standing. Each of the Parent and the Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware. As of the Closing Date, each Designated Transferee of the Buyer will be a corporation duly incorporated and validly existing and, where such concept exists will, be in good standing under the laws of its jurisdiction of incorporation. 6.2 Authority. (a) Each of the Parent and the Buyer has all requisite corporate right, power, capacity and authority to enter into, deliver and perform this Agreement and each of the Parent and the Buyer has, and each Designated Transferee as of the Closing Date will have, all requisite right, power, capacity and authority to consummate the transactions contemplated hereby. This Agreement has been, and any agreement, instrument or document executed pursuant to Section 3.3 will be as of the Closing Date, duly and validly executed and delivered by each of the Buyer and the Parent, pursuant to all necessary corporate action on the part of each of the Buyer and the Parent. (b) This Agreement is legal, valid and binding upon and enforceable against each of the Parent and the Buyer in accordance with its terms. 6.3 No Conflict; No Consents or Approvals. (a) The execution and delivery by each of the Parent and the Buyer of this Agreement, the execution and delivery by the Parent and the Buyer of any agreement, instrument or document contemplated hereby, the consummation of the transactions contemplated herein or therein by each of the Parent and the Buyer and the compliance by each of the Parent and the Buyer with any of the provisions hereof will not conflict with, result in a violation or breach of or constitute a 33PAGE default under (or would result in a violation, breach or default with the giving of notice or the passage of time or both) (i) the certificate of incorporation or bylaws (or other similar charter or governing documents) of the Parent or the Buyer or any Designated Transferee, (ii) any material contract, agreement, indenture, note, license or other instrument or obligation of the Parent or the Buyer or any Designated Transferee or (iii) any law, statute, ordinance, writ, injunction, decree, rule, regulation or court or administrative order by which the Parent or the Buyer or any Designated Transferee (or any of the properties or assets of the Parent, the Buyer or any Designated Transferee) is subject or bound. (b) Except as set forth on Schedule 5.4, no consent or approval of any Governmental Body or waiting period imposed by law is required in connection with the execution, delivery or performance of this Agreement by the Parent or the Buyer and the consummation of the transactions contemplated hereby by the Parent , the Buyer or any Designated Transferee. (c) No litigation, claim, administrative proceeding or other proceeding or governmental investigation or inquiry is pending or, to the actual knowledge of any executive officer of the Buyer or the Parent after reasonable inquiry, has been threatened which would prevent or delay the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby by the Parent, the Buyer or any Designated Transferee (except for any such litigation, claim, administrative proceeding or other proceeding or governmental investigation or inquiry that also relates to the Seller's ability to execute, deliver or perform this Agreement or consummate the transactions contemplated hereby). 6.4 Broker's or Finder's Fees. The Buyer has no knowledge of, and has taken no action which would give rise to, any claim (or the reasonable basis therefor) for a broker's or finder's fee to be paid by any Asset Seller, any Share Seller or any Company in connection with the consummation of the transactions contemplated hereby. 6.5 Solvency of Buyer. On the Closing Date upon consummation of the transactions contemplated hereby, the Buyer will be solvent and will have adequate working capital to pay, discharge or perform the Assumed Liabilities as such become due and payable. 6.6 No Additional Warranties. Except for the express representations, warranties and undertakings of the Asset Sellers and Share Sellers in this Agreement, the Buyer is relying for purposes of acquiring the Business upon its own independent investigation and examination, and not upon any other representation, warranty, covenant or agreement of any Asset Seller or any Share Seller, whether express or implied. 6.7 Investment Intent. The Buyer is acquiring the Shares not with a view to, for resale in connection with, or with an intent to participate, directly or indirectly, in, any distribution of such securities within the 34PAGE meaning of foreign, federal or state securities laws, if applicable. 7. OTHER AGREEMENTS. 7.1 Conduct of Business. (a) Except to the extent waived or consented to in writing by the Buyer, during the period from the date of this Agreement to the Closing, the Seller shall, and shall cause each Share Seller, each Asset Seller and each Company to, conduct the Business only in the Ordinary Course of Business and in compliance with all applicable Laws and Regulations and, to the extent consistent therewith, use all reasonable efforts to preserve intact the current business organization of the Business, keep the physical assets of the Business in serviceable condition, keep available the services of the current officers and employees of the Business and preserve the relationships of the Business with customers, suppliers and others having business dealings with the Business. Without limiting the generality of the foregoing, prior to the Closing, without the written consent of the Buyer, the Seller shall not, and shall cause each Share Seller, each Asset Seller and each Company not to, with respect to the Business: (i) acquire, sell, lease, encumber or dispose of any assets or any shares or other equity interests in or securities of any corporation, partnership, association or other business organization or division thereof, other than purchases and sales of assets in the Ordinary Course of Business; (ii) except in the Ordinary Course of Business: (A) create, incur or assume any debt not currently outstanding (including obligations in respect of capital leases); (B) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person; or (C) make any loans, advances or capital contributions to, or investments in, any other person; (iii) enter into, adopt or amend any Plan or Foreign Plan or any employment or severance agreement or arrangement of the type described in Section 5.24(i) (other than such amendments as are required to comply with applicable law) or increase in any manner the compensation or fringe benefits of, or modify the employment terms of, its directors, officers or employees, generally or individually, or pay any benefit not required by the terms in effect on the date hereof of any existing Plan or Foreign Plan or, except in the Ordinary Course of Business, hire any new employees or consultants; (iv) change its accounting methods, principles or practices, except insofar as may be required by a change in GAAP; 35PAGE (v) mortgage or pledge any of its property or assets relating to the Business or subject any such assets to any Encumbrance other than Permitted Encumbrances; (vi) sell, assign, transfer or license any Intellectual Property, except for licenses of Intellectual Property in the Ordinary Course of Business in conjunction with product sales; (vii) enter into, amend, terminate, take or omit to take any action that would constitute a violation of or default under, or waive any rights under, any contract or agreement listed on Schedule 5.17 or any Material Permit; (viii) make or commit to make any capital expenditure in excess of 500,000 English pounds sterling; or (ix) take any action or fail to take any reasonable action permitted by this Agreement if such action or failure to take action would result in (a) any of the representations and warranties of the Seller set forth in this Agreement becoming untrue in any material respect or (b) any of the conditions to the Closing set forth in Section 8 not being satisfied. (b) The Seller shall promptly notify the Buyer of any lawsuits, claims, proceedings, investigations or inquiries against the Business, any Share Seller, any Asset Seller or any Company or their respective stockholders, officers or directors between the date of this Agreement and the Closing Date which (i) to the Seller's Knowledge, are commenced or threatened and may affect the transactions contemplated by this Agreement or (ii) to the Seller's Knowledge, are commenced or threatened in writing and may have a Material Adverse Effect. (c) During the period from the date of this Agreement to the Closing, the Seller shall, and shall cause each Share Seller, Asset Seller and Company to, (i) unless instructed otherwise by the Buyer, accept customer orders in the Ordinary Course of Business, and (ii) cooperate with the Buyer in communicating with suppliers and customers to accomplish the transfer of the Assets to and the purchase of the Business by the Buyer on the Closing Date. 7.2 Full Access and Supplying of Information. Prior to the Closing, the Seller shall (and shall cause each Share Seller, each Asset Seller and each Company to) permit representatives of the Buyer to have full access to all premises, properties, financial, tax and accounting records, contracts, other records and documents and personnel of or pertaining to the Business; provided, however, that such access shall be allowed only during normal business hours, with reasonable advance notice and in such manner as not to interfere unreasonably with the normal business operations of the Business. Prior to the Closing, the Seller shall also furnish to the Buyer or its representatives such information as the Buyer may reasonably request in connection with any review, investigation or 36PAGE examination of the books and records, accounts, contracts, properties, assets, operations and facilities of or relating to the Business. In connection therewith, the Seller shall direct and authorize its independent public accountants to make available to the Buyer and to the independent public accountants representing the Buyer all working papers pertaining to the examination and audit by such accountants of the Business. Costs reasonably incurred by the Seller to third parties at the Buyer's request arising from or due to the Buyer's review of the Business shall be paid by the Buyer. 7.3 Filings and Authorizations. (a) Each of the Seller and the Buyer, as promptly as practicable after the date hereof, (i) shall make, or cause to be made, all such filings and submissions required under Laws and Regulations applicable to it, or to its Subsidiaries and Affiliates, as may be required for it to consummate the purchase and sale of the Assets and the Shares in accordance with the terms of this Agreement, including, without limitation, the filings and submissions listed on Schedules 5.4 and 6.3 hereof; (ii) shall use its best efforts to obtain, or cause to be obtained, all authorizations, approvals, consents and waivers from all persons and Governmental Bodies necessary to be obtained by it, or its Subsidiaries or Affiliates, in order for it so to consummate such transfer; and (iii) shall use its best efforts to take or cause to be taken all other actions necessary, proper or advisable in order for it to fulfill its obligations hereunder. Notwithstanding the foregoing, the Buyer shall not be required to (i) sell or dispose of or hold separately (through a trust or otherwise) any assets or businesses of the Buyer, its Affiliates or the Business, or make any other change in any portion of its business or incur any other limitation on the Buyer's conduct of its business to obtain such authorizations, approvals, consents and waivers, (ii) incur out-of-pocket expenses of third parties of more than 500,000 English pounds sterling in performing its obligations under this Section 7.3(a) or (iii) respond to formal requests for additional information or documentary material pursuant to 16 C.F.R. 803.20 under the HSR Act or other similar Laws or Regulations, provided, however, that the Buyer shall, after any such request, use its best efforts to seek to limit the scope and amount of information that the relevant Governmental Body is seeking to a level acceptable to the Buyer and shall provide such limited level of information informally to such Governmental Body in lieu of complying with the formal request. The Seller and the Buyer will coordinate and cooperate with one another in exchanging information relating to the foregoing and supplying such reasonable assistance as may be reasonably requested by each in connection with the foregoing. If (w) the Buyer elects not to comply with any such formal request under the HSR Act, (x) the conditions to Closing specified in Section 8.7 and 9.5 with respect to the HSR Act have not been satisfied as of the Termination Date and (y) all other conditions to Closing specified in Section 8 and 9 have been satisfied, except for any such conditions that would have been satisfied but for a breach by the Buyer of this Agreement, then the 37PAGE Buyer shall reimburse the Seller for its out-of-pocket expenses to third parties incurred in connection with the transactions contemplated hereby up to a maximum of 500,000 English pounds sterling. (b) With respect to the filings and actions, if any, necessary to comply with all applicable provisions and requirements of the Industrial Site Recovery Act, N.J.S.A. C.13:1K-6 ("ISRA"), pertaining to any Assets located in the State of New Jersey that are subject to ISRA requirements, such actions and filings shall include, but are not limited to, submission of (i) a notice to the New Jersey Department of Environmental Protection and Energy ("NJDEPE") regarding the transfer of ownership and operations of Assets or Company Assets located in the State of New Jersey, and (ii) a remediation agreement, including a demonstration that a remediation funding source has been established. Such submissions shall be made unless the Seller reasonably demonstrates that an alternative method of compliance with ISRA's requirements will ensure an earlier Closing Date. Regardless of the method of ISRA compliance chosen, the Seller shall obtain from the NJDEPE, prior to the Closing, all consents, approvals, authorizations and waivers required by ISRA covering the transactions contemplated by this Agreement. Notwithstanding any other provision of this Agreement, the Seller shall retain, at its sole cost and expense, all responsibility for compliance with any and all ISRA obligations required by the NJDEPE for the transfer of the Assets or Company Assets located in the State of New Jersey from and after the Closing, except to the extent that any cost, expense or obligation is attributable to acts or omissions of the Buyer subsequent to the Closing. (c) Subject to Section 7.3(a), the Buyer and the Seller shall cooperate in taking such actions as shall be necessary or desirable to satisfy the Buyer that the United Kingdom Secretary of State for Trade and Industry will not refer the proposed acquisition of the Shares and the Assets by the Buyer hereunder to the United Kingdom Monopolies and Mergers Commission. 7.4 Exclusivity. Prior to the termination of this Agreement pursuant to Section 12 hereof, except as may be required by fiduciary duties of the Board of Directors of the Seller under applicable law, the Seller shall not and shall cause the Asset Sellers, the Share Sellers, the Companies and the Seller's other Affiliates not to, and shall cause each of its and their respective officers, directors, employees, representatives and agents not to, directly or indirectly, (a) encourage, solicit, initiate, engage or participate in discussions or negotiations with any person or entity (other than the Buyer) concerning any merger, consolidation, sale of assets, tender offer, recapitalization, accumulation of shares of stock, proxy solicitation or other business combination involving the Business, any Division, any Business Seller or any Company or any material portion thereof or (b) except as may otherwise be required by applicable law or Governmental Body, provide any non-public information concerning the Business to any person or entity (other than the Buyer, the Seller and the 38PAGE Seller's Subsidiaries). Except as may otherwise by required by applicable law or Governmental Body, the Seller shall immediately notify the Buyer of, and shall disclose to the Buyer all details of, any inquiries, discussions or negotiations of the nature described in this Section 7.4. 7.5 Bulk Sales. It may not be practicable to comply or attempt to comply with the procedures of the bulk sales or bulk transfers acts or laws of any or all of the states or other jurisdictions in which the Assets are situated (or of any state or jurisdiction) which may be asserted to be applicable to the transactions contemplated hereby. The Buyer and the Seller therefore waive any requirements for compliance with any or all of such laws. 7.6 Employment of Business Work Force. (a) Prior to the Closing, but effective as of and conditioned on the occurrence of the Closing, the Buyer shall make an offer of employment to each employee of the Asset Sellers employed in the Business (except the UK Employees employed in that part of the Business that is situated in the United Kingdom (the "UK Business")) who on the Closing Date is actively at work or absent due to short-term disability (as defined in the plan covering the employee), parental leave, jury duty, vacation, military service, or similar short-term leave and, upon acceptance by such employee, enter into an at will employer-employee relationship with such employee. The terms of said offer of the Buyer to each such employee shall include the payment of cash compensation which is substantially equivalent to that provided to such employee immediately prior to the Closing Date, and benefits, in the aggregate, on a basis substantially consistent with the Buyer's normal practices for its existing comparable employees; provided, however, that the Buyer shall have complete discretion to change any of the terms or conditions of employment, compensation or benefits at any time after the Closing Date. (b) (i) The Seller and the Buyer anticipate that the United Kingdom Transfer of Undertakings (Protection of Employment) Regulation 1981 (the "Transfer Regulations") will apply to the sale and purchase under this Agreement of the UK Business; the Seller and the Buyer acknowledge and agree that under the Transfer Regulations, the contracts of employment between the Seller and the UK Employees will have effect after the Closing Date as if originally made between the Buyer and the UK Employees. (c) The Buyer agrees that the service of Continuing Employees with the Seller or its Affiliates or predecessors prior to the Closing Date shall be taken into account for all relevant purposes under the Buyer's employee benefit plans, including credit for eligibility, vesting and benefit accrual. The Seller shall provide the Buyer with copies of records reasonably required to establish each such employee's service prior to the Closing Date. The Buyer shall (i) allocate to such employees a number of days of vacation equal to the number of accrued and deferred vacation days that would be due such 39PAGE employees as of the Closing Date if such employees were voluntarily terminating their employment with the Seller as of the Closing Date and (ii) pay such employees who terminate their employment with the Buyer for their accrued and deferred vacation allocations existing at the time of their termination. The Seller shall provide the Buyer with records showing the amount of accrued and deferred vacation due and owing to each such employee as of the Closing Date and an accrual therefor will be recorded on the Closing Balance Sheet. (d) The parties hereto do not intend to create any third-party beneficiary rights respecting any employee as a result of the provisions herein and specifically hereby negate any such intention. (e) The Seller and each Asset Seller hereby consent to the hiring by the Buyer of employees of the Asset Sellers as contemplated by this Section 7.6 and waive, with respect to the employment of such employees, any claims or rights that the Seller or any Asset Seller may have against the Buyer or any such employee under any non-competition, confidentiality or employment agreement. (f) Except as specifically required by applicable law (including, without limitation, the Transfer Regulations) or as provided in this Section 7.6, the Buyer shall not have any obligation to employ or offer employment to any employees of the Asset Sellers employed in the Business. 7.7 Employee Benefit Matters. Contingent upon the occurrence of the Closing: (a) Transition Period for Foreign Retirement Plans. The Seller shall make such arrangements as may be necessary and possible for the Continuing Employees located outside of the U.S. to remain in the Foreign Retirement Plans for such period as the Buyer shall elect, of up to one year after the Closing Date (the "Foreign Transition Period"), and the Buyer shall bear the cost of such coverage for the Continuing Employees during the Foreign Transition Period at the contribution rate for each such Foreign Retirement Plan being paid by the Seller on the date of this Agreement, unless such rate is changed (upward or downward) by the Buyer after the date hereof, in which event the Buyer shall bear the cost of such coverage for the Continuing Employees during the Foreign Transition Period at the changed contribution rate. Notwithstanding the foregoing sentence, continued coverage of those Continuing Employees who are UK Employees in the Fisons UK Pension Fund shall be as set forth in Exhibit D. In the event of any conflict between the terms and conditions hereof and the terms and conditions set forth in Exhibit D, the terms and conditions set forth in Exhibit D shall prevail. The Seller and the Buyer shall observe and perform the provisions of Exhibit D to be performed by the Seller and the Buyer, respectively, in relation to the Fisons UK Pension Fund. The foregoing provision of this Section 7.7(a) shall not apply to those Foreign Retirement Plans maintained by a Company solely for its employees. 40PAGE (b) Welfare Plans. (i) Benefits Continuation. Except as provided in Sections 7.7 (b)(ii), (iii), (iv), (v), (vi), (vii) and (viii) below, effective as of the Closing, (A) the Seller shall cause each Continuing Employee to cease to participate in each welfare benefit plan sponsored by the Asset Sellers, the Share Sellers and/or their affiliates (the "Seller's Welfare Plans") and (B) the Buyer shall cause each such Continuing Employee to be covered by Buyer's welfare benefit plans. (ii) Disability and Certain Other Benefits. The Seller shall be liable for claims for benefits (other than for short-term disability, workers' compensation and medical (including vision care and prescription drugs) and dental benefits) by employees of the Business (active or inactive) and by terminated employees previously employed in the Business under the Seller's Welfare Plans arising out of occurrences prior to the Closing Date. In this regard, but not by way of limiting the foregoing, the Seller shall be liable for the long-term disability benefits for those employees of the Business receiving or qualified to receive long- term disability benefits under the Seller's disability programs as of the Closing Date, including without limitation those employees of the Business in the long-term disability elimination period (which employees shall receive long-term disability benefits from the Seller upon the conclusion of the applicable elimination period); provided, however, that the Seller's obligation to provide long-term disability benefits shall cease with respect to any such employee of the Business who subsequently becomes employed by the Buyer. (iii) Workers' Compensation Benefits. The Seller shall be liable for claims for workers' compensation benefits under the Seller's Welfare Plans by employees of the Business (active or inactive) and by terminated employees previously employed in the Business with respect to injuries or illnesses prior to the Closing Date. The Buyer shall be liable for claims for workers' compensation benefits by Continuing Employees with respect to claims for injuries or illnesses that occur on or after the Closing Date. (iv) Short-Term Disability Benefits. The Seller shall be liable for claims for short-term disability benefits under the Seller's Welfare Plans by employees of the Business (active or inactive) with respect to payments due prior to the Closing Date and by terminated employees previously employed in the Business. The Buyer shall be liable for claims for short-term disability benefits under the Buyer's welfare plans by Continuing Employees with respect to payments due on or after the Closing Date. (v) Medical and Dental Benefits. The Seller shall be liable for claims for medical (including vision care and 41PAGE prescription drugs) and dental benefits incurred by employees of the Business (active or inactive) and their respective covered dependents with respect to services and treatment rendered prior to the Closing Date under the Seller's Welfare Plans; provided, however, that the preceding provisions shall not alter any deadlines for submission of claims set forth in the Seller's Welfare Plans or increase any benefits, rights or remedies of the Continuing Employees under the Seller's Welfare Plans. The Buyer shall be liable for claims for medical (including vision care and prescription drugs) and dental benefits incurred by Continuing Employees and their respective covered dependents under the Buyer's welfare plans with respect to services and treatment rendered on or after the Closing Date. The Buyer shall cause each of the Continuing Employees to be granted credit under the Buyer's medical and dental plans, for the year during which the Closing Date occurs, with any deductibles or copayments already incurred by such Continuing Employees for such year under the plans of the Asset Sellers, the Share Sellers and/or their affiliates, but only if and to the extent that the amount of such incurred deductibles or copayments has been provided to the Buyer within 180 days after the Closing Date, and the Buyer shall cause to be waived any pre-existing condition restrictions under the Buyer's medical and dental plans to the extent necessary to provide immediate coverage under the Buyer's medical and dental plans. The Buyer shall make available to the Continuing Employees (and their covered dependents) a group health plan (or plans) having a level of benefits such that the actual coverage of a Continuing Employee (or any of his or her covered dependents) under such group health plan (or plans) would, if the Continuing Employee had made an election under Section 4980B(f) of the Code or Part 6 of Title I of ERISA with respect to any group health plan maintained by any Asset Seller or any Share Seller, constitute an event described in Section 4980B(f)(2)(B)(iv) of the Code and Section 602(2)(D) of ERISA. The Buyer shall have no obligation to provide health benefits to any Continuing Employee who declines to be covered under such group health plan (or plans) and, if the Buyer complies with the requirements of the preceding sentence, the Buyer shall have no further obligation or responsibility to any Asset Seller or any Share Seller under Section 4980B of the Code or Part 6 of Title I of ERISA with respect to the transactions contemplated by this Agreement. (vi) Transition Period. Notwithstanding the foregoing, the Seller shall make such arrangements as may be necessary for the UK Employees to remain as participants of the Seller's private health insurance scheme after the Closing for a period of up to 90 days after the Closing Date (as the Buyer shall elect) and the Buyer shall pay the premium cost for the participating UK Employees (and their covered dependents) incurred and paid after the Closing Date under the Seller's private health insurance scheme plus an administrative fee of 5% 42PAGE of such cost. (vii) Retiree Medical, Dental and Life Benefits. The Seller shall be liable for medical, dental and life insurance coverage under the Seller's Welfare Plans after termination of employment to employees of the Business whose employment terminated prior to the Closing Date and to those employees of the Business who are eligible therefor as of the Closing Date. Prior to the Closing Date, the Seller agrees to notify all employees of the Business that such coverage (including coverage under the Fisons Post-Retirement Medical Savings Plan) for all employees of the Business will be terminated upon the Closing Date and it will notify Continuing Employees who are eligible as of the Closing Date for retiree medical coverage under the ARL retiree medical plan which provides for medicare supplemental coverage that coverage for such Continuing Employees under such plan as in effect from time to time will be provided by the Seller upon retirement from the Buyer and/or its affiliates. The Buyer agrees to provide notice to the Seller of such retirements for purposes of the preceding sentence. (viii) COBRA. The Seller shall be responsible for providing benefits pursuant to Section 4980B of the Code to employees of the Business who cease to be employed by any Company or Asset Seller prior to the Closing Date. (ix) Limitation on Buyer's Liability. Except as provided in this Section 7.7(b), the Buyer shall have no liability with respect to any claims for benefits under the Seller's Welfare Benefit Plans. The Seller shall have no liability with respect to claims for benefits under the Buyer's welfare benefit plans. (c) Multi-employer Plans. The Buyer, the Companies and/or their affiliates shall not assume any obligation or liability imposed under Section 4201 of ERISA. The Buyer, the Companies and/or their affiliates shall not be obligated under any agreement described in Section 4204 of ERISA. (d) Savings Plans. The Buyer shall allow U.S. Continuing Employees to make direct cash rollovers under Section 402(c) of the Code of their account balances from the Savings Plan to a savings plan intended to be qualified under Section 401(a) of the Code maintained by the Buyer. The parties agree to take such action as is reasonably necessary to establish an arrangement under which any U.S. Continuing Employee may provide for payroll withholding for the purpose of repaying any loan made prior to the Closing Date to such Continuing Employee by the Savings Plan, in lieu of payment of the loan in full as a result of the transactions contemplated by this Agreement. 43PAGE (e) Information. The Buyer agrees that, commencing no later than sixty (60) days after the Closing Date, it will forward to the Seller (ATTN: Manager, Retirement Programs) within ten (10) days after the end of each month a written list, prepared by the Buyer's payroll department of all Continuing Employees who have terminated employment during the month. The list shall contain the Continuing Employee's name, last known address, Social Security Number and date of termination. 7.8 Retention of Records and Sharing of Data. (a) The Buyer shall retain for a period of seven years after the Closing Date (or longer if required by any applicable statute of limitations) the books and records relating to the Business transferred pursuant to this Agreement (unless the Seller requests a longer period, in which case such books and records shall be stored by the Buyer at the Seller's expense), and, during normal business hours, with reasonable advance notice and in such manner as not to interfere unreasonably with the normal business operations of the Buyer, shall (i) give the Seller and its authorized representatives reasonable access to the books, records, offices and other facilities and properties relating to the operation of the Business prior to the Closing Date, (ii) permit the Seller to make such inspections (and copies of any documents at the Seller's expense) thereof as the Seller may reasonably request, and (iii) furnish the Seller with such financial and operating data and other information relating to the Business as the Seller may from time to time reasonably request, in order to comply with applicable securities, tax, environmental, employment or other Laws and Regulations. (b) The Seller shall and shall cause each Share Seller and Asset Seller to retain for a period of seven years after the Closing Date (or longer if required by any applicable statute of limitations) the books and records relating to the Business that are retained by the Seller, any Share Seller or any Asset Seller pursuant to the terms of this Agreement (unless the Buyer requests a longer period, in which case such books and records shall be stored by the Seller at the Buyer's expense), and, during normal business hours, with reasonable advance notice and in such manner as not to interfere unreasonably with the normal operations of the business of the Seller, Share Sellers and Asset Sellers, shall (i) give the Buyer and its authorized representatives reasonable access to (A) such books, records, offices and other facilities and properties and (B) the work papers of its accountants relating to the operation of the Business prior to the Closing Date, (ii) permit the Buyer to make such inspections (and copies of any documents at the Buyer's expense) thereof as the Buyer may reasonably request, and (iii) furnish the Buyer with such financial and operating data and other information as the Buyer may from time to time reasonably request in order to comply with its obligations under applicable securities, tax, environmental, employment or other Laws and Regulations. Without limiting the generality of the foregoing, the Seller shall make available to the 44PAGE Buyer such financial information and reasonable assistance with respect to the Business as is reasonably necessary for the Buyer to prepare on a timely basis the financial statements required by Item 2 of Form 8-K to be filed by Buyer under the U.S. Securities Exchange Act of 1934 with respect to the transactions contemplated by this Agreement, which shall include audited financial statements prepared in accordance with U.S. generally accepted accounting principles for the fiscal years of the Business ended December 31, 1993 and 1994. (c) Promptly upon request by the Buyer made at any time during the three-year period following the Closing Date, the Seller shall authorize the release to the Buyer of all files pertaining to the Business held by any Governmental Body. 7.9 Tax Matters. (a) Any and all agreements among any Company and any Seller, Asset Seller, Share Seller or Company regarding allocation or payment of Taxes or amounts in lieu of Taxes with respect to the Business shall be terminated at and as of, or prior to, the Closing. (b) Except as provided in Sections 4.3 and 7.9(c) hereof: (i) The Seller shall be liable for any and all claims, losses, liabilities, obligations, damages, impositions, assessments, demands, judgments, settlements, costs and expenses (including reasonable attorneys', accountants' and experts' fees and expenses and any applicable assessments of interest and penalties) with respect to Taxes attributable to the Business or for which any Company may be liable with respect to any and all periods, or portions thereof, ending before the Closing Date ("Pre-Closing Periods"); provided, however, that Seller shall only be liable for any such Taxes to the extent that the aggregate amount of such Taxes exceeds the aggregate amount of the reserves and accruals for Taxes set forth on the Closing Balance Sheet. (ii) The Buyer shall be liable for any and all claims, losses, liabilities, obligations, damages, impositions, assessments, demands, judgments, settlements, costs and expenses (including reasonable attorneys', accountants' and experts' fees and expenses and any applicable assessments of interest and penalties) with respect to (A) Taxes attributable to the Business or for which any Company may be liable with respect to any and all periods, or portions thereof, beginning on or after the Closing Date ("Post-Closing Periods"), and (B) Taxes attributable to the Business or for which any Company may be liable with respect to any and all Pre-Closing Periods to the extent that the aggregate amount of such Taxes is equal to or less than the aggregate amount of the reserves and accruals for Taxes set forth on the Closing Balance Sheet. 45PAGE (iii) For purposes of this Section 7.9, any and all transactions or events contemplated by this Agreement that occur at or prior to the Closing shall be deemed to have occurred in the Pre-Closing Period. (c) In the case of any Tax that is attributable to a taxable period which begins before the Closing Date and ends on or after the Closing Date, the amount of Taxes attributable to the Pre-Closing Period shall be determined as follows: (i) In the case of ad valorem Taxes imposed on the Assets or any Asset Seller or any Company and franchise or similar Taxes imposed on any Company based on capital (including net worth or long-term debt) or number of shares of stock authorized, issued or outstanding, the portion attributable to the Pre-Closing Period shall be the amount of such Taxes for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the Pre-Closing Period and the denominator of which is the number of days in the entire taxable period. (ii) In the case of all other Taxes, the portion attributable to the Pre-Closing Period shall be determined on the basis of an interim closing of the books of the Company or Asset Seller as of the Closing, and the determination of the hypothetical Tax for such Pre-Closing Period, determined on the basis of such interim closing of the books, without annualization. The hypothetical Tax for any period shall in no case be less than zero. (d) The Buyer and the Seller shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder; provided that the party requesting assistance shall pay the reasonable out-of-pocket expenses incurred by the party providing such assistance; and provided further that no party shall be required to provide assistance at times or in amounts that would interfere unreasonably with the business and operations of such party. The Buyer agrees to retain all books and records with respect to Tax matters pertinent to the Companies or the Business relating to any Tax periods ending on or prior to the Closing Date and any Tax periods beginning before the Closing Date and ending after the Closing Date until the expiration of any applicable statute of limitations or extensions thereof. The Seller and Buyer acknowledge the difficulty of providing such cooperation; accordingly, the Seller and Buyer agree to use reasonable efforts to request any assistance pursuant to this Section 7.9(d) within the first six months following the Closing Date. Without limiting the generality of the foregoing provisions of this Section 7.9(d), the Seller (and each 46PAGE Share Seller and Asset Seller) and the Buyer shall cooperate and consult in good faith with each other during the course of the preparation of foreign, federal, state and local income Tax Returns which include Pre-Closing Periods and to the extent appropriate shall use their best efforts to agree on the inclusion of items of income, deduction, gain, loss and credit for each Pre-Closing Period so as to properly reflect such items attributable to such Pre-Closing Period in a manner consistent with past practices. (e) The Buyer and Seller agree that to the maximum extent permitted by applicable law, neither the Buyer nor any of the Buyer's affiliates or subsidiary corporations (including, with respect to Post-Closing Periods, the Companies) will carry back to any taxable period of the Seller or any of its Subsidiaries or Affiliates (including, with respect to Pre-Closing Periods, the Companies) any loss, credit or deduction incurred or generated in, or attributable to, any Post-Closing Period that would affect any Tax Return of the Seller or any of its Subsidiaries or Affiliates, and the Buyer agrees to make or exercise, or cause to be made or exercised, any and all necessary or permitted elections or options available under applicable law to avoid any such carryback. (f) Notice and indemnification in connection with Taxes shall be governed by Section 11 of this Agreement. (g) All indemnification payments under Section 11 shall be deemed adjustments to the Purchase Price. (h) United Kingdom Value Added Tax (i) The Seller and the Buyer intend that article 5 of the United Kingdom Value Added Tax (Special Provisions) Order 1992 (the "VAT Order") shall apply to the sale of the Assets located in the United Kingdom (the "UK Assets") under this Agreement, so that the sale is treated as neither a supply of goods nor a supply of services. (ii) If nevertheless any United Kingdom VAT ("UK VAT") is chargeable on any supply by the Seller under this Agreement, the Buyer shall pay to the Seller the amount of that UK VAT (and indemnify it for any related interest and penalties) and the Seller shall issue to the Buyer a proper tax invoice in respect of that UK VAT. (iii) Without limiting clause (ii) above, UK VAT shall be treated as chargeable if HM Customs & Excise rule that it is chargeable. If they have done so before Closing, the UK VAT shall be payable by the Buyer on Closing subject to delivery at Closing by the Seller to the Buyer of the appropriate tax invoice. If they do so on or after Closing, the UK VAT shall be payable by the Buyer within five days after the Seller gives the Buyer notice of the ruling together with the appropriate tax 47PAGE invoice. (iv) If the Buyer fails to pay the amount of the UK VAT on the due date under clause (iii) above, it shall pay interest on that amount from the due date until actual payment (excluding any period for which interest indemnified under clause (ii) runs) at an interest rate equal to one percent above LIBOR, as in effect from time to time. (v) With a view to ensuring that article 5 of the VAT Order applies, the Buyer: (a) shall ensure that the Buyer is registered in the United Kingdom for UK VAT not later than the Closing Date; (b) warrants that the UK Assets are to be used by the Buyer in carrying on the same kind of business as that carried on by the Seller in relation to the UK Assets; and (c) warrants that the Buyer has, or will by the relevant date have, properly made an election to waive exemption in respect of Unit TX, Churchfields Industrial Estate, Sydney Little Road, East Sussex, England, United Kingdom, with effect from a day not later than the relevant date (having obtained the written permission of HM Customs and Excise if necessary) which it will not revoke within three months of the Closing Date and has, or will by that date have, duly given to HM Customs and Excise the written notification of the election required to make the election effective. In this paragraph "relevant date" has the same meaning as article 5(2) of the VAT Order. (vi) In respect of each property mentioned in clause (v)(c), without prejudice to that subclause, the Buyer shall on or before the Closing give to the Seller evidence reasonably satisfactory to the Seller that the election has been made and written notification duly given in accordance with that subclause. (vii) References in clauses (v)(a) and (c) to the Buyer shall be construed as references to the transferee within the meaning of the corresponding provision of article 5 of the VAT Order. (viii) The Seller and the Buyer intend that Section 49 of the Value Added Tax Act 1994 shall apply to the sale of the Assets under this Agreement. The Buyer will allow the Seller access to and copies of any UK VAT records of the Business which are preserved by the Buyer pursuant to Section 49(1)(b) of the United Kingdom Value Added Tax Act 1994 in accordance with Section 7.8 of this Agreement. 48PAGE 7.10 Certain Trademark Matters. (a) The Buyer shall not, and shall cause its Subsidiaries not to, put into use after the Closing Date any products, signs, purchase orders, invoices, sales orders, labels, letterheads, shipping documents and other materials not in existence on the Closing Date that bear any of the Retained Names and Logos or any name, mark or logo similar thereto. The Buyer shall be entitled to use any products, signs, purchase orders, invoices, sales orders, labels, letterheads, shipping documents or other materials in existence as of the Closing Date that bear any of the Retained Names and Logos or any name, mark or logo similar thereto for such period after the Closing Date, not exceeding 180 days, as the Buyer reasonably requires in order to (i) sell, in the Ordinary Course of Business, the inventory purchased by the Buyer hereunder and (ii) effect an orderly transition of the Business; provided, however, that (x) any such use shall be subject to such control policies and mechanisms as the Seller may reasonably impose and (y) the Seller shall be entitled to conduct such investigations of such use as it may reasonably deem necessary to protect its interests in the Retained Names and Logos and to satisfy itself of the Buyer's compliance with the provisions of this Section 7.10(a). The Buyer agrees that the Seller shall have no responsibility for claims by third parties arising out of, or relating to, the use by the Buyer or any successor thereof of any of the Retained Names and Logos after the Closing Date. (b) The Seller agrees, for itself and on behalf of its Subsidiaries and Affiliates, not to use, after the Closing Date, any trademark (other than the Retained Names and Logos) conveyed by the Seller to the Buyer hereunder or any trademark or name confusingly similar to any of the foregoing. The Seller shall promptly amend the certificate of incorporation and other corporate records of its Subsidiaries as necessary to comply with this provision or, in the United Kingdom, change the name of such Subsidiaries. 7.11 Notice of Breaches; Updates. (a) The Seller shall promptly deliver to the Buyer written notice of any event or development that would (i) render any statement, representation or warranty of the Seller in this Agreement (including exceptions set forth in the Schedules) inaccurate or incomplete in any material respect, or (ii) constitute or result in a breach by the Seller of, or a failure by the Seller to comply in any material respect with, any agreement or covenant in this Agreement applicable to the Seller. No such disclosure shall be deemed to avoid or cure any such misrepresentation or breach. (b) The Buyer shall promptly deliver to the Seller written notice of any event or development that would (i) render any statement, representation or warranty of the Buyer in this Agreement inaccurate or incomplete in any material respect, or (ii) constitute or result in a breach by the Buyer of, or a failure by the Buyer to 49PAGE comply with, any agreement or covenant in this Agreement applicable to the Buyer. No such disclosure shall be deemed to avoid or cure any such misrepresentation or breach. (c) The Seller shall deliver to the Buyer, as promptly as practicable following the end of each calendar month ending after the date of this Agreement and prior to the Closing Date, an unaudited combined statement of operations of the Business, and such other internal financial information as is ordinarily prepared by the Seller with respect to the Business, for such month, in each case prepared in accordance with past practices. 7.12 Proprietary Information. From and after the Closing, the Seller shall, and shall cause the Asset Sellers, the Share Sellers and its other Subsidiaries and Affiliates to, hold in confidence all knowledge, information and documents of a confidential nature or not generally known to the public with respect to the Business or the Buyer or the Buyer's business (including without limitation the financial information, technical information or data relating to the products of the Business and the names of customers of the Business) and shall not disclose or make use of the same without the written consent of the Buyer, except (i) as may be required by applicable law, (ii) that the Seller may disclose any such information to its professional advisors who need to know such information to assist Seller in complying with applicable tax, accounting, securities or other laws, rules or regulations and who agree to be bound by the provisions of this Section 7.12, (iii) as may be required by reporting requirements of any stock exchange or any lawful proceeding of a Governmental Body, provided that the Seller shall provide the Buyer with notice of any such disclosure as far in advance of such disclosure as is reasonable under the circumstances and that the Seller will cooperate reasonably with the Buyer to minimize the scope of such disclosure, and (iv) to the extent that such knowledge, information or documents shall have become public knowledge other than through a breach of this Agreement by the Seller, its Subsidiaries or Affiliates. 7.13 Solicitation. For a period of two years after the Closing Date, the Seller shall not, and shall cause its Subsidiaries and Affiliates not to, either directly or indirectly as a stockholder, investor, partner, director, officer, employee or otherwise, solicit or attempt to induce any Restricted Employee to terminate his or her employment with the Buyer or any Affiliate of the Buyer; provided, however, that it shall not be a breach of this Section 7.13 for the Seller to solicit Restricted Employees by means of general public advertisements or recruitment through an employment agency. For purposes of this Agreement, a "Restricted Employee" shall mean any person, other than employees terminated involuntarily by the Buyer, who (i) either (A) hold or have access to trade secrets or other confidential information relating to the Business or (B) had annual base salary in 1994 of at least 75,000 English pounds sterling, and (ii) either (X) was an employee of the Buyer or any Affiliate of the Buyer on either the date of this Agreement or the Closing Date or (Y) was an employee of any Asset Seller (employed primarily in the Business) or Company on either the date of this Agreement or the Closing Date and who 50PAGE is employed by the Buyer immediately after the Closing. 7.14 Non-Competition. (a) For a period of five years after the Closing Date, the Seller shall not, and shall cause its Subsidiaries not to, either directly or indirectly as a stockholder, investor, partner, director, officer, employee, consultant or otherwise, engage in a Competitive Business in any territory. For purposes of this Agreement, a "Competitive Business" means (i) the development, manufacture, marketing or sale of any product which is competitive with any product manufactured, sold or developed (or under development) by the Business on or prior to the Closing Date or (ii) the rendering of or marketing of any service which is competitive with any service rendered or marketed (or proposed to be rendered or marketed) by the Business on or prior to the Closing Date; provided, however, that the Seller shall not be prohibited from (1) the acquisition by asset purchase, stock purchase, merger, consolidation or otherwise of any Person partially engaged in a Competitive Business if the Seller uses its best efforts to dispose of the portion of such Person engaged in the Competitive Business within 12 months after such acquisition and, if such portion has not been disposed of within such 12-month period, the Seller continues to use all reasonable efforts to dispose of such portion, (2) the ownership of not more than 10% of any class of debt or equity securities of any Person engaged in a Competitive Business or (3) continuing to conduct and develop its Pharmaceuticals and Laboratory Supplies Divisions, the latter of which distributes or may distribute products for third parties that are or may be competitive with products manufactured or sold by the Business, provided, however, that such Divisions shall not in any event manufacture instruments of the type manufactured by the Business as of the Closing. (b) The Seller agrees that the duration and geographic scope of the non-competition provision set forth in this Section 7.14 are reasonable. In the event that any court determines that the duration or the geographic scope, or both, are unreasonable and that such provision is to that extent unenforceable, the parties agree that the provision shall remain in full force and effect for the greatest time period and in the greatest area that would not render it unenforceable. The parties intend that this non-competition provision shall be deemed to be a series of separate covenants, one for each and every county of each and every state of the U.S. and each and every political subdivision of each and every country outside the U.S. where this provision is intended to be effective. 7.15 Cooperation in Litigation. From and after the Closing Date, each party shall fully cooperate with the other in the defense or prosecution of any litigation or proceeding already instituted or which may be instituted hereafter against or by such other party relating to or arising out of the conduct of the Business by the Seller or the Buyer or their respective Affiliates prior to or after the Closing Date (other than 51PAGE litigation among the Seller and the Buyer and/or their respective Subsidiaries, Affiliates or parent companies arising out the transactions contemplated by this Agreement). The party requesting such cooperation shall pay the reasonable out-of-pocket expenses incurred in providing such cooperation (including legal fees and disbursements) by the party providing such cooperation and by its officers, directors, employees and agents, but shall not be responsible for reimbursing such party or its officers, directors, employees and agents for their time spent in such cooperation. 7.16 Collection of Accounts Receivable. (a) The Seller agrees that it shall, and shall cause the Share Sellers and the Asset Sellers to, forward promptly to the Buyer any moneys, checks or instruments received by any of them after the Closing Date with respect to the accounts receivable purchased by the Buyer pursuant to this Agreement. The Seller shall, and shall cause the Share Sellers and the Asset Sellers to, provide to the Buyer such reasonable assistance as the Buyer may request with respect to the collection of any such accounts receivable, provided the Buyer pays the reasonable out-of-pocket expenses of the Seller and its officers, directors and employees incurred in providing such assistance. (b) For a period of 12 months after the Closing Date (the "Collection Period"), the Buyer shall use its reasonable efforts to collect the accounts receivable shown on the Closing Balance Sheet (the "Accounts Receivable"). The Buyer may, but shall not be obligated to, use a collection agency or commence legal actions in connection with such collection efforts. Promptly after the expiration of the Collection Period, the Buyer shall give notice to the Seller designating those Accounts Receivable which have not been collected as of the end of the Collection Period and which the Buyer wishes the Seller to purchase. Within ten days after the receipt of such notice from the Buyer, the Seller shall purchase (without recourse to the Buyer) such designated Accounts Receivable then remaining unpaid for a purchase price equal to the value of such Accounts Receivable recorded on the Closing Balance Sheet less the reserve for doubtful accounts shown on the Closing Balance Sheet. References to Seller shall include, for purposes of Sections 7.16(b)-(f), an Affiliate of Seller nominated by Seller. (c) Upon the Seller's repurchase of any unpaid Account Receivable pursuant to this Section 7.16, the Buyer shall promptly deliver to the Seller any tangible evidence of such Account Receivable then in the possession of the Buyer or under its control but in any event the Buyer shall preserve and make available to the Seller all documentation in relation to such Account Receivables received by the Buyer from the Seller at Closing. (d) In the event that any payment received by the Buyer during the Collection Period is remitted by a customer which is indebted 52PAGE under both Accounts Receivable and an account receivable arising out of the sale of inventory in the Ordinary Course of Business after the Closing Date (a "New Receivable"), such payments shall first be applied to the Accounts Receivable due from such customer and the balance remaining after payment in full of all Accounts Receivable due from such customer shall be applied to the New Receivable; provided, however, that (i) with respect to any Account Receivable being contested or disputed by the payor thereof, no portion of the amount in dispute shall be deemed to have been collected by the Buyer in respect of such Account Receivable (unless otherwise directed by the customer) until all amounts owed by such customer to the Buyer for New Receivables have been paid or such dispute has been resolved, whichever occurs first (it being understood that undisputed amounts of Accounts Receivable shall be applied in accordance with the priorities set forth above) and (ii) the foregoing priorities shall not apply to sums received by the Buyer which are specifically identified by the customer as being tendered in payment of a New Receivable. The Buyer agrees not to induce any customer to identify any payment as being in respect of a New Receivable, except in the event the Buyer reasonably determines to sell to said customer on a C.O.D. basis only. (e) The Buyer will reasonably cooperate, at the Seller's expense, with the Seller in collecting any Accounts Receivable which are repurchased by the Seller pursuant to this Section 7.16; provided, however, that the foregoing shall not require the Buyer to be a party to any action brought by the Seller to collect such Accounts Receivable unless the conveyance of the Account Receivable to Seller is ineffective and Buyer is deemed to hold title thereto. (f) Any sums received by the Buyer in respect of Accounts Receivable after their repurchase by the Seller pursuant to this Section 7.16 shall be promptly transmitted by the Buyer to the Seller. In addition, if receipt by the Buyer of unidentified sums of money from an account debtor who owes any Account Receivable repurchased by the Seller pursuant to this Section 7.16 results in such account debtor having an aggregate credit balance with the Buyer, the Buyer shall promptly transmit to the Seller an amount of money equal to the lesser of (a) such aggregate credit balance or (b) the remaining unpaid balance of all Accounts Receivable which have been repurchased by the Seller and are payable by such account debtor to the Seller. 7.17 Approval of Seller's Shareholders. The Seller shall convene a general meeting of its shareholders for the purpose of considering and, if thought fit, passing a resolution (the "Seller's Shareholder Resolution") approving the sales of the Assets and the Shares pursuant to the terms of this Agreement. Such meeting shall be held not later than 35 days after the date of this Agreement. Notice of such meeting shall be accompanied by a recommendation of the Board of Directors of the Seller in favor of the Seller's Shareholder Resolution. The Seller shall ensure that such recommendation is not changed or withdrawn prior to the vote upon the Seller's Shareholder Resolution unless the failure to change or withdraw 53PAGE such recommendation would be a breach by the directors of the Seller of their fiduciary duty as directors under applicable law. Seller shall provide Buyer with a reasonable opportunity to review and comment upon the content of any circular or other shareholder communication insofar as it relates to the Buyer or the transactions contemplated hereby. 7.18 Bank Accounts. Prior to Closing, Seller shall provide Buyer with a complete list and description of all bank accounts, brokerage accounts, marketable securities, lines of credit, guaranties, foreign exchange option or forward contracts, and letters of credit held by any of the Companies or, in the conduct of the Business, the Asset Sellers or to which the Companies, or in the conduct of the Business, the Asset Seller are parties. Buyer and Seller will cooperate so that, as of the Closing, Buyer shall have the benefit of any such assets and, except as otherwise provided herein, shall (if permitted) be substituted for the Asset Sellers on any such contracts or agreements. 7.19 Transition Services. At and conditioned upon the Closing, the Buyer and the Seller (or one of its Affiliates) shall enter into an agreement (the "Transition Services Agreement") that shall identify specifically the transition services to be provided (for a maximum period of six months unless mutually agreed otherwise) by the Seller or its Affiliates in each jurisdiction in which the Business is conducted. The Buyer shall pay the Seller a fee for such services equal to the fully allocated cost of such services to the Seller, plus an administrative fee of 5% of such costs, within 30 days of billing thereof. 7.20 Guarantee. The Parent hereby guarantees the prompt and complete performance by the Buyer of all of the Buyer's covenants and conditions hereunder, which guarantee shall continue until all of the terms of this Agreement to be performed by the Buyer have been performed or otherwise discharged. 7.21 Employee Notices. The Seller shall make or shall cause the Companies and Asset Sellers to make, such notices to employees as shall be required by applicable law or agreement (including any notices required to be given to any union, works council or similar representative body). 7.22 Seller's Disclosure. The Seller has provided the Buyer with reasonable access to (i) copies of all agreements or documents described in the Schedules and (ii) reasonably detailed descriptions of all claims, proceedings or other matters described in the Schedules (any such agreement, document or description being referred to herein as a "Disclosed Item"). For purposes of the preceding sentence, the Seller shall be deemed to have provided Buyer with reasonable access to a Disclosed Item if such Disclosed Item was (a) physically provided to the Buyer, its Subsidiaries, Affiliates or representatives not later than February 24, 1995, or (b) held and available for review as of February 24, 1995 at the law firm listed on the attached Schedule 7.22 located in the same country as the Asset Seller or Company to which such Disclosure Item relates. Notwithstanding the foregoing, the Seller shall not in any event be deemed to have provided Buyer with reasonable access to any Disclosed Item located at any law firm 54PAGE outside of the U.S., England, Germany, Switzerland and Italy if such Disclosed Item is not listed on the attached Schedule 7.22A or has not physically been provided to Buyer, its Subsidiaries, Affiliates or representatives not later than February 24, 1995. The effect of any failure by Seller to provide Buyer access to a Disclosed Item as provided in this Section 7.22 shall be that such Disclosed Item shall be deemed not to be disclosed on the Schedules, notwithstanding its appearance on the Schedules. 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER TO CLOSE. The obligation of the Buyer to close the transactions contemplated by this Agreement shall be subject to the satisfaction of each of the following conditions precedent (it being understood that any such condition may be waived by the Buyer in whole or in part at any time and from time to time at its sole discretion): 8.1 Fulfillment of the Seller's Covenants. The Seller shall have fulfilled or complied in all material respects with each covenant, obligation and agreement required to be fulfilled or complied with by it prior to the Closing Date under this Agreement. 8.2 Accuracy of the Seller's Representations. No event shall have occurred at any time and no condition shall exist which makes any of the representations or warranties of the Seller contained in this Agreement untrue or incorrect on the date when made or on the Closing Date (or if a representation or warranty is made as of a specific date, untrue or incorrect as of such date) except any such event or condition that would not (together with all other such events or conditions) be a Material Event; provided, however, that if any event or condition shall exist which makes any of the representations or warranties of the Seller contained in this Agreement untrue or incorrect on the date when made or on the Closing Date (or, if a representation or warranty is made as of a specific date, untrue or incorrect as of such date), and such event or condition would not (together with all other such events or conditions) be a Material Event, then the Seller shall indemnify the Buyer for any Loss resulting from such event or condition pursuant to Section 11. 8.3 Authorizations and Consents. The Seller, each Company, each Asset Seller and each Share Seller shall have obtained all necessary consents and waivers for the assignment, transfer, sublease or sublicense of the Restricted Assets listed on Schedule 8.3. 8.4 No Litigation. No injunction shall be outstanding which would prevent consummation of the transactions contemplated by this Agreement. No legal action, suit, proceeding, investigation or inquiry shall be pending wherein an unfavorable judgment, order, decree, stipulation, ruling, decision or injunction would (i) prevent consummation of the sale of any material portion of the Assets or Shares as contemplated by this Agreement, (ii) cause the sale of any material portion of the Assets or Shares as contemplated by this Agreement to be rescinded following consummation, or (iii) be a Material Event. 55PAGE 8.5 Seller's Certificate. The Seller shall have delivered to the Buyer a certificate dated the Closing Date and executed by an executive officer of the Seller to the effect that each of the conditions specified in Sections 8.1, 8.2, 8.3, and 8.4 is satisfied in all respects to the knowledge of such executive officer. 8.6 Resignations. The Buyer shall have received the resignations of each of the directors and officers of each Company whose resignation has been requested by the Buyer at least ten business days prior to the Closing Date. 8.7 HSR Act and Similar Matters. All applicable waiting periods (and any extensions thereof) under the HSR Act shall have expired or otherwise been terminated, and all authorizations, approvals, consents, permits or waivers listed on Schedule 8.7 shall have been obtained. 8.8 U.K. Merger Issues. The Buyer or the Seller shall have received notice (a copy of which shall have been provided to the other party) that the United Kingdom Secretary of State for Trade and Industry does not intend to refer the proposed acquisition of the Shares and/or the Assets by the Buyer hereunder to the United Kingdom Monopolies and Mergers Commission; or the period (including any extension or extensions thereof) for considering any merger notice (as defined in Section 75E of the United Kingdom Fair Trading Act 1973 ("FTA")) given to the United Kingdom Director General of Fair Trading with respect to the proposed acquisition of the Shares and Assets shall have expired without any reference being made to the United Kingdom Monopolies and Mergers Commission with respect to the notified arrangements; or the United Kingdom Director General of Fair Trading has given notice pursuant to Section 75 B(5) of the FTA with respect to such proposed acquisition of Shares and Assets, the United Kingdom Secretary of State for Trade and Industry having accepted one or more undertakings under Section 75G of such Act. 8.9 Legal Opinions. The Buyer shall have received such opinions from counsel to the Seller in the U.S., U.K., Germany, Switzerland and Italy as the Buyer shall reasonably request. 8.10 Seller's Shareholder Approval. The Seller's Shareholder Resolution shall have been passed by the Seller's shareholders in a general meeting. 9. CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATION TO CLOSE. The obligation of the Seller to close the transactions contemplated by this Agreement shall be subject to the satisfaction of each of the following conditions precedent (it being understood that any such condition may be waived by the Seller in whole or in part at any time and from time to time at is sole discretion): 9.1 Fulfillment of the Buyer's Covenants. The Buyer shall have fulfilled or complied in all material respects with each covenant, 56PAGE obligation and agreement required to be fulfilled or complied with by it prior to the Closing Date under this Agreement. 9.2 Accuracy of the Buyer's Representations. No event shall have occurred at any time and no condition shall exist which makes any of the representations or warranties of the Buyer or the Parent contained in this Agreement untrue or incorrect on the date when made or on the Closing Date (or if a representation or warranty is made as of a specific date, untrue or incorrect as of such date), except any such event or condition that would not reasonably be expected to have a material adverse effect on the ability of either the Buyer or the Parent to consummate the transactions contemplated hereby. 9.3 No Litigation. No injunction shall be outstanding which would prevent consummation of the transactions contemplated by this Agreement. No legal action, suit or proceeding, investigation or inquiry shall be pending wherein an unfavorable judgment, order, decree, stipulation, ruling, decision or injunction would (i) prevent the consummation of the sale of any material portion of the Assets or Shares as contemplated hereby or (ii) cause the sale of any material portion of the Assets or Shares as contemplated by this Agreement to be rescinded following consummation. 9.4 Buyer's Certificate. The Buyer shall have delivered to the Seller a certificate dated the Closing Date and executed by an executive officer of the Buyer to the effect that each of the conditions specified in Sections 9.1 through 9.3 is satisfied in all respects to the knowledge of such executive officer. 9.5 HSR Act and Similar Matters. All applicable waiting periods (and any extensions thereof) under the HSR Act shall have expired or otherwise been terminated, and all authorizations, approvals, consents, permits or waivers listed on Schedule 9.5 shall have been obtained. 9.6 Shareholder Approval. The Seller's Shareholder Resolution shall have been passed by the Seller's shareholders in a general meeting. 9.7 Legal Opinions. The Seller shall have received an opinion from (i) the General Counsel of the Buyer and the Parent, and (ii) Warner Cranston, counsel to the Buyer in the United Kingdom, each of which shall be in such form as the Seller shall reasonably request. 10. CLOSING. (a) Subject to the conditions set forth in Sections 8 and 9, the consummation of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York, 10005 at 10:00 a.m., local time, on the later of (i) April 13, 1995 or (ii) the fifth business day following satisfaction or waiver of each of the conditions contained in this Agreement, or on such other date as the Buyer and the Seller may mutually agree (such date being herein called the "Closing Date"). Failure to close on such date shall not relieve either party hereto 57PAGE of its obligations under this Agreement. All transactions at the Closing shall be deemed to take place simultaneously at 12:01 a.m. U.S. Eastern Time on the Closing Date, and no transaction shall be deemed to have been completed and no document or certificate shall be deemed to have been delivered until all other transactions are completed and all other documents and certificates are delivered. (b) At the Closing: (i) the Seller shall deliver to the Buyer the various certificates, instruments and documents referred to in Section 8; (ii) the Buyer shall deliver to the Seller the various certificates, instruments and documents referred to in Section 9; (iii) the Seller shall cause each Share Seller to execute and deliver to the Buyer the certificates, stock powers, share transfer forms, deeds of transfer and other documents referred to in Sections 2.2 and 2.6(a); (iv) the Seller shall cause each Asset Seller to execute and deliver to the Buyer the Bills of Sale and other documents referred to in Sections 2.3 and 2.6(a) or, as applicable, effect physical delivery pursuant to Section 2.6(a); (v) the Buyer shall execute and deliver to the Seller the instruments of assumption and other documents referred to in Section 3.3; (vi) the Buyer and the Seller shall execute and deliver the Transition Services Agreement; (vii) the Buyer shall pay to the Seller the Purchase Price as specified in Section 2.1; (viii) the Seller shall deliver to the Buyer, or otherwise put the Buyer in possession and control of, all of the assets of the Business of a tangible nature; and (ix) the Buyer and the Seller shall execute and deliver to each other a cross-receipt evidencing the transactions referred to above. 11. INDEMNIFICATION. 11.1 By the Seller. The Seller shall indemnify the Buyer in respect of, and hold the Buyer harmless against, any and all liabilities, damages, losses and expenses (including without limitation amounts paid in settlement, interest, court costs, costs of investigators, reasonable fees and expenses of attorneys, accountants, financial advisors and other experts, and other expenses of litigation, investigations, inquiries by Governmental Bodies or related proceedings) ("Losses") incurred or suffered 58PAGE by the Buyer or any Affiliate of the Buyer resulting from, relating to or constituting: (a) any breach of any representation or warranty of the Seller contained in this Agreement; (b) any failure to perform any covenant or agreement of the Seller contained in this Agreement; (c) any Excluded Liabilities; (d) any Excluded Company Liabilities; (e) any and all Taxes to the extent specified in Section 7.9(b)(i); (f) the German reorganization, consisting of the liquidation of Haake Verwaltung GmbH & Co. KG and transfer of those entities' assets related to the Business to Gebruder Haake GmbH; and (g) any underfunding of any Foreign Retirement Plan other than the Fisons UK Pension Fund. 11.2 By the Buyer and the Parent. The Buyer and the Parent, jointly and severally, shall indemnify the Seller in respect of, and hold the Seller harmless against, any and all Losses incurred or suffered by the Seller or any Affiliate thereof resulting from, relating to or constituting: (a) any breach of any representation or warranty of the Buyer or the Parent contained in this Agreement; (b) any failure to perform any covenant or agreement of the Buyer or the Parent contained in this Agreement; (c) any Assumed Liabilities; (d) the use of the Retained Names and Logos by the Buyer or the Parent or any Subsidiary or successor thereof, whether or not in accordance with this Agreement; (e) any and all Taxes to the extent specified in Section 7.9(b)(ii) hereof; (f) any claim for severance pay, termination pay, redundancy pay, pay in lieu of notice or any other claim for similar compensation or damages relating to the termination of any Continuing Employee on or after the Closing Date; however, this paragraph (f) shall not apply to any Loss pertaining to the Fund (as defined in Exhibit A); and 59PAGE (g) (expressions used in this paragraph (g) have the same meanings as in Exhibit D) any claim which arises in consequence of Regulation 7 of the Transfer Regulations causing liabilities relating to the Fund not to transfer to the Buyer as mentioned in that Regulation and which relate to a UK Employee (or to any spouse or dependent of a UK Employee) who has not been provided with the whole or any part of any benefit as provided under the Fund (whether in relation to employment before or after the Closing Date) or any claim relating to the cost of such benefit, but excluding any claim arising out of (i) a breach of contract by the Seller (other than a claim in consequence of the Buyer not providing benefits which are equivalent to those provided under the Fund); (ii) a breach of trust in relation to the Fund; and (iii) any claim by a Consenting Member in relation to the amount of the Transfer Amount determined by the Seller's Actuary as attributable to him. To the extent that a claim relates to a period of employment before the Closing Date, this indemnity is subject to payment of the Transfer Amount in accordance with Exhibit D. 11.3 Limitations on Indemnification. (a) Except as provided in Section 11.3(c)(ii) or Section 8.2, each party's obligation to indemnify the other for Losses arising under Section 11.1(a) or Section 11.2(a), as the case may be, shall be limited as to amount, as follows: (i) The Indemnitor shall not be required to indemnify the Indemnitee for any Loss except to the extent that the amount of such Loss, when added to the aggregate amount of all other Losses indemnifiable under this Section 11, exceeds 2,000,000 English pounds sterling (the "Indemnification Threshold"); (ii) The Indemnitor shall not be required to indemnify the Indemnitee for any Losses which, when added to the aggregate amount of all other Losses indemnifiable under this Section 11, exceed one-half (1/2) of the Purchase Price in the aggregate; and (iii) The Indemnitor shall not be required to indemnify the Indemnitee for Losses indemnifiable under this Section 11 if the claim for indemnification involves less than 100,000 English pounds sterling (the "Minimum Claim Amount"); provided, however, that (W) until the Indemnification Threshold is exceeded, the Minimum Claim Amount shall be reduced to 5,000 English pounds sterling for purposes of the application of otherwise indemnifiable Losses toward the Indemnification Threshold, (X) for purposes of determining whether the Minimum Claim Amount has been exceeded, all claims arising out of the same or similar circumstances shall be treated as a single claim, and (Y) after the Indemnification Threshold has been exceeded, with respect to any indemnifiable claim that exceeds the Minimum Claim Amount, the entire claim (not just the amount in excess of 100,000 English pounds sterling) shall be indemnifiable. 60PAGE (b) Except as provided in Section 11.3(c)(i), neither the Seller nor the Buyer shall be entitled to make any claim for indemnification arising under Section 11.1(a) or Section 11.2(a), as the case may be, after the date that is 18 calendar months after the Closing Date, unless the Seller or the Buyer, as the case may be, shall have asserted such claim for indemnification prior to such date, stating with reasonable specificity the nature, facts and circumstances of such claim in which event such claim shall survive until the resolution thereof. If a claim for indemnification is asserted prior to the applicable expiration date, then (notwithstanding the expiration of such time period) the representation or warranty applicable to such claim shall survive until the resolution of such claim. (c) Notwithstanding any other provision to the contrary herein: (i) the representations contained in Section 5.2, Section 5.3, Section 5.4 (to the extent that any breach of representation or warranty arising under Section 5.4 relates to the right of any person or entity, including, without limitation, any Governmental Body, to cause the transactions completed by this Agreement to be rescinded following consummation) and Section 5.9(a) shall survive without time limit; (ii) none of the provisions of Section 11.3(a) shall apply with respect to Losses arising from breaches of the representations described in Section 11.3(c)(i), and the maximum amount of Losses for which an Indemnitor shall be liable with respect to such Losses shall be equal to the Purchase Price; and (iii) the Buyer and the Parent shall not be required to indemnify the Seller and its Affiliates under Section 11.2(g) for Losses, when added to the aggregate amount of all other Losses indemnifiable under Section 11.2(g), exceeds 1,000,000 English pounds sterling. (d) Except with respect to claims based on actual fraud, the rights of the Buyer and the Seller under this Section 11 shall be the exclusive remedy of the Buyer and the Seller, respectively, with respect to claims resulting from or relating to (X) any breach of representation or warranty or failure to perform any covenant or agreement of the Seller or the Parent or Buyer, respectively, contained in this Agreement, or (Y) any Excluded Liabilities. 11.4 Third-Party Claims. (a) In the event that any legal proceedings shall be instituted or any claim or demand shall be asserted by any Person other than a party hereto or any Affiliate of a party hereto (other than an officer, director or holder of more than 10% of the stock of such party) (a "Third-Party Claim") in respect of which indemnification may be sought by any party or parties from any other party or parties under the provisions of this Section 11, the party or parties that may seek 61PAGE indemnification (collectively, the "Indemnitee") shall cause written notice in reasonable detail of the assertion of any Third-Party Claim of which it has knowledge that is covered by this indemnity to be forwarded promptly to the party from which indemnification may be sought (the "Indemnitor"); provided that, if any taxing authority proposes an adjustment, questions the treatment of any item, or commences an examination or audit, which adjustment, question, examination or audit could, if pursued successfully, reasonably be expected to give rise to a claim relating to Section 5.8 or Section 7.9 (a "Tax Dispute"), then such Tax Dispute shall constitute a Third-Party Claim under this Section 11.4, and the party hereto first receiving notice of such Tax Dispute shall promptly notify in writing the other party hereto; provided further that the failure of an Indemnitee to give timely notice shall not affect rights to indemnification hereunder except to the extent that the Indemnitor has been damaged by such failure. The Indemnitor shall have the right, at its option and at its own expense, to be represented by counsel of its choice and to participate in the defense, negotiation and/or settlement of any Third-Party Claim. (b) In connection with any Third-Party Claim, the Indemnitor, at the sole cost and expense of the Indemnitor, may, upon written notice to the Indemnitee, assume the defense of any such Third-Party Claim if (i) the Indemnitor acknowledges in writing the obligation of the Indemnitor to indemnify in accordance with the terms of this Agreement the Indemnitee with respect to such Third-Party Claim, (ii) the Third-Party Claim seeks monetary damages solely or is a Tax Dispute and (iii) an adverse resolution of the Third-Party Claim would not have a material adverse effect on the goodwill or reputation of or the future conduct of the business of the Indemnitee; provided, however, that the Indemnitee may participate in any such proceeding with counsel of its choice and at its own expense; and provided further, however, that if the Indemnitor assumes control of such defense and the Indemnitee reasonably concludes that the Indemnitor and the Indemnitee have conflicting interests or different defenses available with respect to such action, suit or proceeding, or if the Indemnitor elects not to assume such defense, then the reasonable fees and expenses of counsel to the Indemnitee shall be considered "Losses" for purposes of this Agreement. The party controlling such defense shall keep the other party advised of the status of such action, suit or proceeding and the defense thereof and shall consider in good faith recommendations made by the other party with respect thereto. (c) The Indemnitee shall not agree to any settlement of such action, suit or proceeding without the prior written consent of the Indemnitor, which shall not be unreasonably withheld, unless the Indemnitee waives any right to indemnity therefor by the Indemnitor. Notwithstanding the foregoing, if a customer or a supplier of the Business asserts that the Buyer is liable to such customer or supplier for a monetary or other obligation which may constitute or result in Losses for which the Buyer may be entitled to indemnification pursuant to this Section 11 and the Buyer reasonably determines that 62PAGE it has a valid business reason to fulfill such obligations, then (i) the Buyer shall be entitled to satisfy such obligation without prior notice to or consent from the Seller, (ii) the Buyer may make a claim for indemnification pursuant to this Section 11 and (iii) the Buyer shall be reimbursed, in accordance with the provisions of this Section 11, for any such Losses for which it is entitled to indemnification pursuant to the provisions of this Section 11; provided, however, that if the Buyer makes a claim for indemnification in accordance with this sentence the Seller shall not be deemed to have waived any defense to such claim by the Buyer, notwithstanding the Buyer's prior satisfaction of the obligation for which indemnification is sought, and it shall not be a defense to the Buyer's claim for indemnification that the Buyer has satisfied the obligation for which indemnification is sought. (d) After final judgment or award shall have been rendered by a court, arbitration board or administrative agency of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the Indemnitee and the Indemnitor shall have arrived at a mutually binding agreement with respect to each separate matter indemnified by the Indemnitor, the Indemnitee shall forward to the Indemnitor notice of any sums due and owing hereunder by the Indemnitor with respect to such matter and the Indemnitor shall pay all of the sums so owing to the Indemnitee by check within 30 days after the date of such notice. Any payment not made when due under this Section 11 shall bear interest, compounded monthly on the last day of each calendar month, from the due date, at an interest rate equal to one percent above LIBOR, as in effect from time to time. 12. TERMINATION. 12.1 Termination Events. Subject to the other provisions of this Section 12, this Agreement may, by written notice given at or prior to the Closing in the manner hereinafter provided, be terminated and abandoned: (a) By either the Seller or the Buyer if a material default or breach shall be made by the other with respect to (i) the due and timely performance of any of its covenants and agreements contained herein, or (ii) the due compliance with any of its representations and warranties contained in Sections 5 or 6, as the case may be, except (in the case of Seller) for any lack of compliance that arises from an event or condition that (together with all other events or conditions) would not be a Material Event, and such breach or default has not been (i) cured within 15 days after notice thereof is given to the breaching party or (ii) waived by the non-breaching party; (b) (i) by the Buyer if all of the conditions set forth in Section 8 shall not have been satisfied on or before the Termination Date, other than through failure of the Buyer to fully comply with its obligations hereunder, or shall not have been waived by it on or before such dates; or (ii) by the Seller, if all of the conditions set 63PAGE forth in Section 9 shall not have been satisfied on or before the Termination Date, other than through failure of the Seller to fully comply with its obligations hereunder, or shall not have been waived by it on or before such dates; or (c) by mutual written consent of the Seller and the Buyer. 12.2 Effect of Termination. In the event this Agreement is terminated pursuant to Section 12.1, all further obligations of the parties hereunder shall terminate; provided, however, that if this Agreement is so terminated by one party pursuant to Section 12.1(a) or 12.1(b)(i) or (ii) because one or more of the conditions to such party's obligations hereunder is not satisfied as a result of the other party's failure to comply with its obligations under any provision of this Agreement, it is expressly agreed and understood that such party's right to pursue all legal remedies for breach of contract or otherwise, including, without limitation, damages relating thereto, shall also survive such termination unimpaired. No termination of this Agreement shall act to terminate or otherwise impair the obligations set forth in Sections 13.3, 13.12 and 13.13. 12.3 Reimbursement of Expenses. Notwithstanding the foregoing, in the event that this Agreement is terminated due to the failure of Seller to obtain the Seller's Shareholder Resolution, the Seller shall promptly reimburse the Buyer for its costs and expenses reasonably incurred in connection with the transactions contemplated hereby up to a maximum of 500,000 English pounds sterling. 13. MISCELLANEOUS. 13.1 Amendments. This Agreement may be amended only by a written agreement signed by the Seller, the Buyer and the Parent. 13.2 Notices. All notices, requests, demands and other communications made in connection with this Agreement shall be in writing and shall be deemed to have been duly given on the date delivered if delivered personally or sent by facsimile to the persons identified below, or three days after mailing if mailed by certified or registered U.S mail, postage prepaid, return receipt requested, addressed as follows, or two business days after mailing by nationally recognized express courier, addressed as follows: (a) if to the Buyer: Thermo Instrument Systems Inc. 81 Wyman Street Waltham, Massachusetts 02254 Attention: General Counsel Facsimile: (617) 622-1283 64PAGE (b) if to the Parent: Thermo Electron Corporation 81 Wyman Street Waltham, Massachusetts 02254 Attention: General Counsel Facsimile (617) 622-1283 (c) if to the Seller: Fisons plc Fison House Princes Street Ipswich Suffolk IP1 1QH England Attention: John M. Bailey Facsimile: (44)-0473-231540 with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: John P. Mitchell, Esq. Facsimile: (212) 269-5420 Such addresses may be changed, from time to time, by means of a notice given in the manner provided in this Section 13.2. 13.3 Expenses. Except as otherwise provided herein (including, without limitation, Sections 4.3 and 12.3), each party to this Agreement shall pay its own costs and expenses (including all legal, accounting, broker, finder and investment banker fees) relating to this Agreement, the negotiations leading up to this Agreement and the transactions contemplated by this Agreement. 13.4 Waiver. Waiver of any term or condition of this Agreement by any party shall only be effective if in writing and shall not be construed as a waiver of any subsequent breach or failure of the same term or condition, or a waiver of any other term or condition of this Agreement. 13.5 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 13.6 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties agree that 65PAGE the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. 13.7 Entire Agreement. This Agreement, including the Exhibits and Schedules hereto, constitutes the entire agreement, and supersedes all other prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof, including, without limitation, the confidentiality undertaking dated as of October 3, 1994, as amended. 13.8 Assignment. This Agreement shall not be assigned by the Parent, the Buyer or the Seller or by operation of law or otherwise, except that the Buyer may assign some or all of its rights, interests and/or obligations hereunder to one or more affiliates of the Buyer ("Designated Transferees"); provided, however, that any such assignment shall not relieve either the Buyer or the Parent of its respective obligations hereunder. If the Buyer assigns any of its rights, interests and/or obligations hereunder to one or more Designated Transferees, then, unless the context otherwise requires, all references herein to the Buyer shall mean and include the respective Designated Transferees. 13.9 Governing Law; Time of the Essence. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York (without regard to principles of conflicts of law) as to all matters and issues relating to the transactions contemplated by this Agreement, including but not limited to, matters and issues of validity, construction, effect, performance and remedies; provided, however, that the terms and conditions set forth in Exhibit B and Exhibit D shall be governed by the law of England. Time is of the essence in the performance of this Agreement. 13.10 Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which shall constitute one and the same agreement. 13.11 Conditions and Documents. All parties shall use their best efforts to satisfy the conditions to Closing and otherwise consummate the transactions contemplated by this Agreement, including the execution of such documents as may be reasonably necessary to effectuate the purposes of this Agreement. Without limiting the generality of the foregoing, the Seller shall cause each Share Seller and Asset Seller to execute such documents, and to take such actions, as may be necessary to enable the Seller to carry out its obligations hereunder and to consummate the transactions contemplated hereby. 66PAGE 13.12 Publicity. Until the business day after the Closing Date and except for any public disclosure which the Buyer or the Seller in good faith believes is required by law or applicable stock exchange rules, neither party shall issue any press release or make any other public announcement regarding the transactions contemplated hereby, without the prior written approval of the other party, which shall not be unreasonably withheld. The parties hereto shall issue a mutually acceptable press release as soon as practicable after the execution of this Agreement and as soon as practicable after the Closing. 13.13 Confidential Information. In connection with the negotiation of this Agreement and the consummation of the transactions contemplated hereby, each party hereto will have access to data and confidential information relating to the other party. Each party hereto shall treat such data and information as confidential, preserve the confidentiality thereof and not duplicate or use such data or information, except in connection with the transactions contemplated hereby, and in the event of the termination of this Agreement for any reason whatsoever, each party hereto shall return to the other all documents, work papers and other material (including all copies thereof) obtained in connection with the transactions contemplated hereby and will use reasonable efforts, including instructing its employees who have had access to such information, to keep confidential and not to use any such data or information; provided, however, that such obligations shall not apply to any data and information (i) which, at the time of disclosure, is available publicly, (ii) which, after disclosure, becomes available publicly through no fault of the receiving party, (iii) which the receiving party knew or to which the receiving party had access (without violating any right of the disclosing party) prior to disclosure by the disclosing party, (iv) which is required by law, regulation or stock exchange rule, or in connection with legal process, to be disclosed, or (v) which is disclosed by a receiving party to its attorneys or accountants, who shall respect the above restrictions. 13.14 Submission to Jurisdiction and Venue. Any legal suit, action, or proceeding arising out of or relating in any way to this Agreement, any other agreement or instrument contemplated herein or the transactions contemplated hereby, including but not limited to actions seeking specific performance of the terms of this Agreement, actions for indemnity, actions seeking declaratory relief regarding the terms of this Agreement or actions for breach of this Agreement, shall be institute exclusively in the United States District Court for the Southern District of New York, United States of America (the "Southern District Court"), or if such court shall not have subject matter jurisdiction over such action, a court of general jurisdiction of the State of New York located in the City of New York, Borough of Manhattan (a "New York Court"). Each party hereby waives any objection whatsoever that it may have now or hereafter to the laying of the venue of any such suit, action or proceeding exclusively in the Southern District Court or a New York Court, as the case may be, and irrevocably submits to the exclusive jurisdiction of the Southern District Court in any such suit, action or proceeding or, if such court shall not have subject matter jurisdiction over such action, the New York Courts. In the event 67PAGE that any legal suit, action or proceeding of any kind is commenced in or brought in any court other than in the Southern District Court (or, if the Southern District Court shall not have subject matter jurisdiction over such action, a New York Court), the parties agree to, and shall cause their respective Subsidiaries and Affiliates that they control to, transfer and/or remove any such legal suit, action or proceeding to the Southern District Court (or, if the Southern District Court shall not have subject matter jurisdiction over such action, a New York Court), or to immediately dismiss without prejudice such legal suit, action or proceeding. Each of the Seller and the Buyer hereby designates CT Corporation System (the "Agent") as its authorized agent to accept and acknowledge on its behalf service of any and all process that may be served in any such suit, action or proceeding in any such court. Each of the Seller and the Buyer agrees that service of process upon the Agent at its office at 1633 Broadway, New York, New York 10009 (or at such other address in New York County, New York as such agent may designate by written notice to the parties) and written notice of said service air mailed or delivered to a party hereto at the address for notice established pursuant to Section 13.2 shall be deemed in every respect effective service of process upon such party in any such suit, action or proceeding and shall be taken and held to be valid personal service upon such party whether or not such party shall then be doing, or at any time shall have done, business within the State of New York, and that any such service of process shall be of the same force and validity as if service were made upon such party according to the laws governing the validity and requirements of such service in such State, and waives all claim of error by reason of any such service. Nothing in this Section 13.14, however, shall affect the right of either party to serve legal process in any other manner permitted by law. 13.15 Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against either party. Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. 68PAGE IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written. THERMO INSTRUMENT SYSTEMS INC. By: ______________________________ Name: ____________________________ Title: _____________________________ THERMO ELECTRON CORPORATION By:____________________________ Name:__________________________ Title:_________________________ FISONS plc By:____________________________ Name:__________________________ Title:_________________________ 69PAGE Exhibit A "Accounting Principles" means the accounting principles set forth on Schedule 5.7A. "Accounts Receivable" shall have the meaning given such term in Section 7.16(b). "Affiliate" shall mean, with respect to any Person, any other Person that directly, or indirectly, through one or more intermediaries, is controlled by such Person. "Agent" shall have the meaning given such term in Section 13.14. "Assets" means all of the assets, properties and rights, whether real, personal, tangible or intangible, of every kind, nature and description, owned or held by the Asset Sellers relating primarily to the Business, including without limitation (i) all trade and other accounts receivable and notes receivable; (ii) all inventories of raw materials, work in process, finished goods, supplies, packaging materials, spare parts and similar items; (iii) all machinery, equipment, tools and tooling, furniture, fixtures, leasehold improvements and motor vehicles; (iv) all real property, leaseholds and subleaseholds in real property, and easements, rights-of-way and other appurtenants thereto; (v) all Proprietary Rights and associated goodwill; (vi) all rights under contracts, agreements or instruments (including without limitation the Restricted Assets to the extent provided in Section 2.8); (vii) all claims, prepayments, refunds, causes of action, choices in action, rights of recovery, rights of setoff and rights of recoupment, including all rights under warranties but excluding any such items relating to Taxes for which the Seller is liable pursuant to Section 7.9; (viii) all permits; (ix) all books, records, accounts, ledgers, files, documents, correspondence, lists (customer or otherwise), product and sales literature, drawings or specifications, employment records, manufacturing and technical manuals, advertising and promotional materials, studies, reports and other printed or written materials; provided, however, that the Seller and its Subsidiaries shall be permitted to retain copies of all Tax Returns and other records and documents that may reasonably be required to comply with tax law requirements, and (x) all claims and defenses to the extent relating to any of the foregoing or to the Assumed Liabilities, but excluding the Excluded Assets and any of the Shares. "Asset Seller" and "Asset Sellers" mean, respectively, each of, and all of, the Seller, the Business Sellers and the Division Sellers. "Assumed Liabilities" shall have the meaning given such term in Section 3.1. "Balance Sheet" means the audited combined balance sheet of the Business as of December 31, 1994 derived from the audited financial statements of the Seller prepared by the Seller, which balance sheet shall be accompanied by an unqualified opinion of Price Waterhouse. 1PAGE "Balance Sheet Date" means December 31, 1994. "Business" means the business of the Instruments Division of the Seller, which comprises the business and operations conducted by the Business Sellers, the Divisions and the Companies as of the Closing Date. "Business Seller" and "Business Sellers" mean, respectively, each of, and all of, the Companies designated as such on Schedule 1, which comprise those Subsidiaries of the Seller whose sole business is the Business, and which are selling assets to the Buyer. "Buyer" means Thermo Instrument Systems Inc., a Delaware corporation and/or, as the context requires, any Designated Transferee. "Buyer's Foreign Actuary" means any actuary, benefit consultant or similar qualified person retained by the Buyer for purposes of evaluating the funding of any Foreign Plan. "CERCLA" shall have the meaning given such term in Section 5.28. "Closing" shall have the meaning given such term in Section 10. "Closing Date" shall have the meaning given such term in Section 10. "Closing Balance Sheet" shall have the meaning given such term in Section 4.1(b). "Code" means the U.S. Internal Revenue Code of 1986, as amended and in effect. "Collection Period" shall have the meaning given such term in Section 7.16(b) "Company" and "Companies" mean, respectively, each of, and all of, the companies designated as such on Schedule 1, which comprise those Subsidiaries of the Seller whose sole business is the Business, and the shares of which are to be sold to Buyer pursuant to the terms of this Agreement. "Company Assets" means all of the assets, properties and rights, whether real, personal, tangible or intangible, of every kind, nature and description, owned or held by the Companies. "Company Liabilities" means all liabilities of each Company of any nature, known or unknown, fixed, contingent or otherwise, arising out of or relating to the conduct of the Business prior to the Closing Date, except for Excluded Company Liabilities. "Competitive Business" shall have the meaning given such term in Section 7.14(a). "Continuing Employee" means each employee (i) employed in the Business by any of the Asset Sellers who accepts employment with the 2PAGE Buyer pursuant to Section 7.6 or (ii) who remains an employee of any of the Companies immediately following the Closing. "Covenants" means agreements, stipulations, restrictions, rights and other matters affecting the U.K. Properties whether or not the same are referred to in the registers maintained in relation to the U.K. Properties by the English Land Registry and its Land Charges Department, but "Covenants" does not include any mortgage, charge, lien or other security interest whatsoever. "Designated Transferees" shall have the meaning given such term in Section 13.8. "Division Seller" and "Division Sellers" mean, respectively, each of, and all of , the entities designated as such on Schedule 1, which comprise those companies affiliated with the Seller (including the Seller) that carry on both the Business and other businesses and that are selling all of their assets used primarily in the business to the Buyer. "Division" and "Divisions" mean, respectively, each of, and all of, the Divisions conducting the Business within the Division Sellers. "Dormant Shell" and "Dormant Shells" mean, respectively, each of, and all of, the companies designated as such on Schedule 1, which comprise those Subsidiaries of the Seller that have no assets or operations. "Draft Closing Balance Sheet" shall have the meaning given such term in Section 4.1(a). "Encumbrances" means claims, liens, pledges, charges, encumbrances, equities, options, calls, voting trusts, agreements, commitments, restrictions and any other security interests whatsoever. "Environmental Law" shall have the meaning given such term in Section 5.28(a). "Environmental Liabilities" means any and all Losses incurred by the Buyer arising out of (i) any actual or alleged release of any Materials of Environmental Concern into the environment relating to the operation of the Business prior to the Closing Date, (ii) any actual or alleged release of any Materials of Environmental Concern into the environment commencing prior to the Closing Date at any site owned or operated by any of the Asset Sellers prior to the Closing Date or to which any Materials of Environmental Concern were actually or allegedly transported by or on behalf of any of the Asset Sellers prior to the Closing Date, or (iii) the actual or alleged violation of any Environmental Law by any Asset Seller commencing prior to the Closing Date; provided, however, that Environmental Liabilities shall not include (a) with respect to any actual or alleged release of any Materials of Environmental Concern or any violation of any Environmental Law commencing prior to the Closing Date and continuing after the Closing Date at any site owned or operated by the Buyer after the Closing and owned or operated by any Asset Seller prior to the Closing, any Loss incurred by the Buyer arising from the portion of such release or violation occurring after the earlier of (1) 30 3PAGE days after the Buyer's discovery of such release or violation or (2) the first anniversary of the Closing Date, or (b) any Loss incurred by the Buyer arising from the performance of any remediation, or the giving of any notice to a Governmental Body, to the extent not required by any applicable Environmental Law or not in response to any Third Party Claim, it being understood that the cost of performing any study, assessment or other action in connection with any such non-required remediation shall not be a Loss. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" means any entity which is a member of (i) a controlled group of corporations (as defined in Section 414(b) of the Code), (ii) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (iii) an affiliated service group (as defined in Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes the Seller, any Share Seller, any Asset Seller or any Company. "Excluded Assets" shall have the meaning given such term in Section 2.5. "Excluded Company Liabilities" means any liabilities that would be Excluded Liabilities, or would not be Assumed Liabilities, if the Companies were Asset Sellers hereunder. "Excluded Liabilities" shall have the meaning given such term in Section 3.2. "FTA" shall have the meaning given such term in Section 8.8. "Financial Statements" means the Balance Sheet and the combined statements of operations of the Business for the year ended December 31, 1994 prepared by the Seller and derived from the audited financial statements of the Seller, to which is attached an unqualified opinion of Price Waterhouse. "Foreign Plans" shall have the meaning given such term in Section 5.25. "Foreign Retirement Plan" shall have the meaning given such term in Section 5.25. "Foreign Transition Period" shall have the meaning given such term in Section 7.7(a). "Foreign Welfare Plan" shall have the meaning given such term in Section 5.25. "GAAP" shall have the meaning given such term in Section 4.1(a). "Governmental Body" shall have the meaning given such term in Section 5.19. "HSR Act" shall have the meaning given such term in Section 5.4(b). 4PAGE "Income Taxes" means any Taxes assessable on, or measured with respect to, net income. "Indemnification Threshold" shall have the meaning given such term in Section 11.3(a)(i). "Indemnitee" shall have the meaning given such term in Section 11.4. "Indemnitor" shall have the meaning given such term in Section 11.4. "Intellectual Property" shall have the meaning given such term in Section 5.15. "Interim Net Book Value" shall have the meaning given such term in Section 2.1. "IRS" means the U.S. Internal Revenue Service. "ISRA" shall have the meaning given such term in Section 7.3(c). "Laws and Regulations" shall have the meaning given such term in Section 5.20. "Leased Real Estate" means the real property listed on Schedule 5.11. "Losses" shall have the meaning given such term in Section 11.1. "Material Adverse Effect" shall mean a Loss to the Business of more than 100,000 English pounds sterling (except to the extent such Loss results from the actions or omissions of Buyer or its Subsidiaries). "Material Event" means any event or condition that would be reasonably likely to result in a Loss to the Business of at least 7,500,000 English pounds sterling. "Material Permits" shall have the meaning given such term in Section 5.29. "Materials of Environmental Concern" shall have the meaning given such term in Section 5.28(b). "Minimum Claim Amount" shall have the meaning given such term in Section 11.3(a)(iii). "Net Book Value" shall have the meaning given such term in Section 4.1(e). "New Receivable" shall have the meaning given such term in Section 7.16(d). "New York Court" shall have the meaning given such term in Section 13.14. 5PAGE "Neutral Auditors" shall have the meaning given such term in Section 4.1(d). "NJDEPE" shall have the meaning given such term in Section 7.3(c). "Occupation Leases" means, in respect of the U.K. Properties, the leases, tenancy agreements, licenses and other rights of occupation to which the U.K Properties are subject as referred to in Part B of Schedule 5.10, and "Occupation Lease" means any of them, and, in relation to an Occupation Lease, references to the landlord include the person on which a license or rights of occupation are binding and references to the tenant include the licensee or person with the benefit of those rights. "Ordinary Course of Business" means the ordinary course of business of the Business consistent with past practice and custom. "Owned Real Estate" means the real property listed on Schedule 5.10. "Parent" means Thermo Electron Corporation. "Permitted Encumbrances" means any of the following, but only to the extent relating solely to Assumed Liabilities: (a) liens for current Taxes and assessments not yet delinquent or Taxes the validity of which are being contested in good faith by appropriate proceedings, (b) such restrictions, easements and customary utility easements, if any, as do not materially impair the utility of the affected properties in their current uses in the Business, (c) liens of employees, laborers, carriers, warehousemen, mechanics and materialmen for current wages or accounts payable not yet delinquent, (d) liens and charges incident to construction or maintenance, which have either not been filed of record or have been filed of record and are being contested in good faith by appropriate action diligently pursued and have not yet proceeded to judgment, (e) liens or security interests created in the Ordinary Course of Business, (f) liens or security interests created as a result of deposits for workers' compensation, unemployment insurance, surety bonds and leases, (g) landlord liens for rent not yet due and payable, (h) liens or security interests created as a result of capitalized lease obligations and (i) restrictions on transfer imposed by applicable securities laws; provided that any judicial proceedings intended to be referred to in subsections (a) and (d) are set forth in Schedule 5.19. "Person" means an individual, firm, corporation, division, partnership, joint venture, unincorporated association, government agency or political subdivision thereof, or other entity. "Plans" shall have the meaning given it in Section 5.24(a). "Post-Closing Periods" shall have the meaning ascribed to such term in Section 7.9(b). "Pre-Closing Periods" shall have the meaning given such term in Section 7.9(b). 6PAGE "Proprietary Rights" means all (A) patents, patent applications, patent disclosures and all related continuation, continuation-in-part, divisional, reissue, re-examination, utility, model, certificate of invention and design patents, patent applications, registrations and applications for registrations, (B) trademarks, service marks, trade dress, logos, tradenames and corporate names and registrations and applications for registration thereof, (C) copyrights and registrations and applications for registration thereof, (D) mask works and registrations and applications for registration thereof, (E) computer software, data and documentation, (F) trade secrets and confidential business information, whether patentable or nonpatentable and whether or not reduced to practice, know-how, manufacturing and product processes and techniques, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, (G) other proprietary rights relating to any of the foregoing (including without limitation remedies against infringements thereof and rights of protection of interest therein under the laws of all jurisdictions) and (H) copies and tangible embodiments thereof. "Property Transfer" means the document of conveyance, assignment or transfer of a U.K. Property to the Buyer. "Purchase Price" shall have the meaning given such term in Section 2.1. "Restricted Asset" means (i) any lease required to be listed on Schedule 5.11, any equipment lease required to be listed on Schedule 5.12, any license required to be listed on Schedule 5.15, or any contract required to be listed on Schedule 5.17, which lease, equipment lease, license, or contract cannot be validly assigned, transferred, subleased or sublicensed without the consent or waiver of the issuer thereof or the other party thereto or a third person (including a Governmental Body), or with respect to which such assignment, transfer, sublease or sublicense or attempted assignment, transfer, sublease or sublicense could reasonably be expected to (a) constitute a breach thereof or a violation of any law, decree, order, regulation, rule, ordinance or other governmental edict, or (b) entitle the other party thereto to terminate such lease, equipment lease, license, or contract or receive any additional payment thereunder, or (ii) any Material Permit listed on Schedule 5.29; and "Restricted Assets" means all of them collectively. For purposes of this definition, "transfer" or similar word shall include a transfer resulting or deemed to result under the terms of the Restricted Asset as a consequence of the transfer of Shares to the Buyer. "Restricted Employee" shall have the meaning given such term in Section 7.13. "Retained Names and Logos" shall have the meaning given such term in Section 2.5(e). "Savings Plan" means the Fisons Scientific Equipment Savings Incentive Plan, including the related trust. 7PAGE "Seller" means Fisons plc, a company organized under the laws of England. "Seller's Knowledge" means the actual knowledge or awareness, after reasonable inquiry, of any person listed on Schedule A, with respect to the area or jurisdiction of their respective responsibilities only as set forth on Schedule A. "Seller's Shareholder Resolution" shall have the meaning given such term in Section 7.17. "Seller's Welfare Plans" shall have the meaning given such term in Section 7.7(b). "Shares" means the outstanding shares of capital stock of the Companies owned by any Share Seller. "Share Seller" and "Share Sellers" mean, respectively, each of, and all of, the Seller and the subsidiaries of the Seller designated as such on Schedule 1. "Southern District Court" shall have the meaning given such term in Section 13.14. "Subsidiary" means (i) any corporation with respect to which another corporation or entity, directly or indirectly, has the power to vote or direct the voting of sufficient securities to elect a majority of the directors or (ii) any corporation or other entity with respect to which another corporation or entity, directly or indirectly, owns 50% or more of the aggregate equity interests. "Taxes" means any and all federal, state, provincial, local and foreign income, profits, franchise, sales, value added, use, employment, payroll, transfer, occupation, real property, personal property, severance, production, excise, gross receipts, license, stamp, premium, customs, duties, capital stock, windfall profit, environmental, withholding, social security (or similar), unemployment, disability, sales, use, transfer, registration, national insurance, alternative or add-on minimum, estimated and other taxes, assessments, imposts, fees or duties of any kind whatsoever (including any interest, additions to tax and penalties with respect to any such tax), whether disputed or undisputed. "Tax Dispute" shall have the meaning given such term in Section 11.4(a). "Tax Returns" means all reports, returns, declarations, claims for refund or information returns or statements relating to Taxes, and any schedule or attachment thereto and any amendment thereof. "Termination Date" means June 30, 1995 "Third-Party Claim" shall have the meaning given such term in Section 11.4. "Transaction Taxes" shall have the meaning given such term in Section 4.3. 8PAGE "Transferor" means the estate owner of a U.K. Property and shall include the Seller where the context permits. "Transfer Regulations" shall have the meaning given such term in Section 7.6(b). "Transition Services Agreement" shall have the meaning given such term in Section 7.19. "U.K. Assets" shall have the meaning given such term in Section 7.9(h)(i). "U.K. Business" shall have the meaning given such term in Section 7.6(b). "U.K. Employee" means any employee located in the United Kingdom and employed by any of the Companies or the Asset Sellers primarily in the Business. "U.K. Freehold Properties" means the properties located in the U.K. shortly described in Schedule 5.10 and "U.K. Freehold Property" means any of them. "U.K. Lease" means, in respect of a U.K. Leasehold Property, the lease under which it is held as referred to in Schedule 5.11 and includes every deed varying such lease that has been disclosed by the Seller to the Buyer in a Schedule. "U.K. Leasehold Properties" means the leasehold properties located in the U.K. shortly described in Schedule 5.10 and "U.K. Leasehold Property" means any of them. "U.K. Properties" means the U.K. Freehold Properties and the U.K. Leasehold Properties and "U.K. Property" means any of them. "U.K. VAT" shall have the meaning given such term in Section 7.9(h)(ii). "U.S." means the United States of America. "VAT" shall mean value added taxes. "VAT Order" shall have the meaning given such term in Section 7.9(h)(i). "would have a Material Adverse Effect" means currently has or ultimately has a Material Adverse Effect. 9 EX-4.5 3 Exhibit 4.5 MASTER GUARANTEE REIMBURSEMENT AGREEMENT This AGREEMENT is entered into as of the 1st day of January, 1994 by and among Thermo Electron Corporation (the "Parent") and those of its subsidiaries that join in this Agreement by executing the signature page hereto (the "Majority Owned Subsidiaries"). WITNESSETH: WHEREAS, the Majority Owned Subsidiaries in the past have entered into, and wish to enter into in the future, various financial transactions, such as convertible or nonconvertible debt, bank loans, and equity offerings, and other contractual arrangements with third parties (the "Underlying Obligations"); WHEREAS, the Majority Owned Subsidiaries acknowledge that they are unable to enter into many kinds of Underlying Obligations without a guarantee of their performance thereunder from the Parent (a "Parent Guarantee"); WHEREAS, certain Majority Owned Subsidiaries ("Second Tier Majority Owned Subsidiaries ") are themselves majority owned subsidiaries of other Majority Owned Subsidiaries ("First Tier Majority Owned Subsidiaries"); WHEREAS, for various reasons, Parent Guarantees of a Second Tier Majority Owned Subsidiary's Underlying Obligations are often demanded and given without the respective First Tier Majority Owned Subsidiary also issuing a guarantee of such Underlying Obligation; WHEREAS, the Parent is willing to consider continuing to issue Parent Guarantees, on the terms and conditions set forth below; NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party hereto, the parties agree as follows: 1. If, after the date hereof, the Parent provides a Parent Guarantee of an Underlying Obligation, and the beneficiary(ies) of the Parent Guarantee enforce the Parent Guarantee, or the Parent performs under the Parent Guarantee for any other reason, then the Majority Owned Subsidiary that is obligated under such Underlying Obligation shall indemnify and save harmless the Parent from any liability, cost, expense or damage (including reasonable attorneys' fees) suffered by the Parent as a result of the Parent Guarantee. If the Underlying Obligation is issued by a Second Tier Majority Owned Subsidiary, and such Second Tier Majority Owned Subsidiary is unable to fully indemnify the Parent (because of the poor financial condition of such Second Tier Majority Owned Subsidiary, or for any other reason), then the First Tier Majority Owned Subsidiary that owns the majority of the stock of such Second Tier Majority Owned Subsidiary shall indemnify and save harmless the Parent from any remaining liability, cost, expense or damage (including reasonable attorneys' fees) suffered by the Parent as a result of the Parent Guarantee. 2. For purposes of this Agreement, the term "guarantee" shall include not only a formal guarantee of an obligation, but also any other arrangement where the Parent is liable for the obligations of a PAGE Majority Owned Subsidiary. Such other arrangements include (a) representations, warranties and/or covenants or other obligations joined in by the Parent, whether on a joint or joint and several basis, for the benefit of the Majority Owned Subsidiary and (b) responsibility of the Parent by operation of law for the acts and omissions of the Majority Owned Subsidiary, including controlling person liability under securities and other laws. 3. Promptly after the Parent receives notice that a beneficiary of a Parent Guarantee is seeking to enforce such Parent Guarantee, the Parent shall notify the Majority Owned Subsidiary(s) obligated under the relevant Underlying Obligation. Such Majority Owned Subsidiary(s) shall have the right, at its own expense, to contest the claim of such beneficiary. If a Majority Owned Subsidiary is contesting the claim of such beneficiary, the Parent will not perform under the relevant Parent Guarantee unless and until, in the Parent's reasonable judgment, the Parent is obligated under the terms of such Parent Guarantee to perform. Subject to the foregoing, any dispute between a Majority Owned Subsidiary and a beneficiary of a Parent Guarantee shall not affect such Majority Owned Subsidiary's obligation to promptly indemnify the Parent hereunder. 4. All payments required to be made by a Majority Owned Subsidiary shall be made within two days after receipt of notice from the Parent. 5. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts applicable to contracts made and performed therein. PAGE IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date first above written. THERMO ELECTRON CORPORATION By: __________________________ Title: _________________________ THERMO INSTRUMENT SYSTEMS INC. By: __________________________ Title: _______________________ EX-10.17 4 Exhibit 10.17 THERMO INSTRUMENT SYSTEMS INC. DIRECTORS STOCK OPTION PLAN As amended and restated effective as of January 1, 1995 1. Purpose The purpose of this Directors Stock Option Plan (the "Plan") of Thermo Instrument Systems Inc. (the "Company") is to encourage ownership in the Company by outside directors of the Company whose services are considered essential to the Company's growth and progress and to provide them with a further incentive to become directors and to continue as directors of the Company. The Plan is intended to be a nonstatutory stock option plan. 2. Administration The Board of Directors, or a Committee (the "Committee") consisting of two or more directors of the Company appointed by the Board of Directors, shall supervise and administer the Plan. Grants of stock options under the Plan and the amount and nature of the options to be granted shall be automatic in accordance with Section 5. However, all questions of interpretation of the Plan or of any stock options granted under it shall be determined by the Board of Directors or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. 3. Participation in the Plan Directors of the Company who are not employees of the Company or any subsidiary or parent of the Company shall be eligible to participate in the Plan. Directors who receive grants of stock options in accordance with this Plan are sometimes referred to herein as "Optionees." 4. Stock Subject to the Plan The maximum number of shares that may be issued under the Plan shall be seventy-five thousand (75,000) shares of the Company's $.10 par value Common Stock (the "Common Stock"), and twenty-five thousand (25,000) shares of the common stock of each Spinout Subsidiary (as defined in Section 5(B)) as of the date of the Annual Meeting of Stockholders on which options to purchase such common stock are first granted to eligible Directors as provided in Section 5(B), each subject to adjustment as provided in Section 9. Shares to be issued upon the exercise of options granted under the Plan may be either authorized but unissued shares or shares held by the Company in its treasury. If any option expires or terminates for any reason without having been exercised in full, the unpurchased shares subject thereto shall again be available for options thereafter to be granted. 5. Terms and Conditions A. Annual Stock Option Grants Each Director of the Company who meets the requirements of Section 3 and who is holding office immediately following the Annual Meeting of PAGE Stockholders, commencing with the Annual Meeting of Stockholders held in calendar year 1995, shall be granted an option to purchase 1,000 shares of Company common stock at the close of business on the date of such Annual Meeting. Options granted under this Subsection B shall be exercisable as to 100% of the shares subject to the option as set forth in Section 5(C)(1), but shares acquired upon exercise are subject to repurchase by the Company at the exercise price in the event that the Optionee ceases to serve as a director of the Company, Thermo Electron Corporation ("Thermo Electron") or any subsidiary of Thermo Electron, prior to the first anniversary of the grant date, for any reason other than death. B. Subsidiary Stock Option Grants. Each Director of the Company who meets the requirements of Section 3 and this Section 5(B), from time to time in accordance with this Section 5(B), shall be granted an option to purchase shares of the common stock of each majority-owned subsidiary of the Company, the common stock of which shall have become publicly traded or a portion of which shall have been sold primarily to third parties in a private placement or other arms-length transaction (such transaction being referred to herein as a "Spinout Transaction", and such subsidiary being referred to herein as a "Spinout Subsidiary"), upon the following terms and conditions. Each eligible Director who is not a Director of the Spinout Subsidiary shall be granted an option to purchase 1,500 shares of common stock of the Spinout Subsidiary as of the close of business on the date of the Company's Annual Meeting of Stockholders that first occurs after the Spinout Transaction, and also as of the close of business on the date of every fifth Annual Meeting of Stockholders of the Company that occurs thereafter during the duration of this Plan. Options granted under this Section 5(B) shall vest and be exercisable as to 100% of the shares of common stock subject to the option on the fourth anniversary of the grant date of the option, unless, prior to such anniversary, the underlying common stock shall have been registered under Section 12 of the Securities and Exchange Act of 1934, as amended (referred to herein as "Section 12 Registration"). From and after 90 days after the effective date of Section 12 Registration, options granted hereunder shall be immediately exercisable as to 100% of the shares subject to the option, subject to the right of the Company to repurchase the shares at the exercise price in the event the Optionee ceases to serve as a director of the Company, or any subsidiary of the Company or Thermo Election during the option term. The right of the Company to so repurchase the shares shall lapse as to one-fourth of the shares granted on each of the first, second, third and fourth anniversaries of the grant date of the option, provided the Optionee has remained continuously a director of the Company, Thermo Electron or any subsidiary of Thermo Electron since the grant date. In all other respects, the option shall be subject to the general terms and conditions applicable to all option grants as set forth below in Section 5(C), including the determination of the exercise price of such option. No Director, who is otherwise eligible under Section 3, shall be eligible under this Section 5(B) to receive grants of stock options in Spinout Subsidiaries, if such Director also serves as a director of such Spinout Subsidiary. In the event any subsidiary shall become a "Spinout Subsidiary" as defined herein, then there shall be immediately reserved for transfer PAGE hereunder, on the date options to purchase common stock of the Spinout Subsidiary are first granted to eligible Directors and without further action required by the Board of Directors or Stockholders of the Company, twenty-five thousand (25,000) shares of the common stock of such Spinout Subsidiary. C. General Terms and Conditions Applicable to All Grants. 1. Except as otherwise provided in Section 5(B), options shall be exercisable at any time from and after the six-month anniversary of the grant date and prior to the date which is the earliest of: (a) three years after the grant date for options granted under Section 5(A) and five years after the grant date for options granted under Section 5(B), (b) three months after the later of the date (i) the Optionee either ceases to meet the requirements of Section 3 or (ii) otherwise ceases to serve as a director of the Company, Thermo Electron or any subsidiary of Thermo Electron (six months in the event the Optionee ceases to meet the requirements of this Subsection by reason of his death), or (c) the date of dissolution or liquidation of the Company. 2. The exercise price at which Options are granted hereunder shall be the average of the closing prices reported by the national securities exchange on which the common stock is principally traded for the five trading days immediately preceding and including the date the option is granted or, if such security is not traded on an exchange, the average last reported sale price for the five-day period on the NASDAQ National Market List, or the average of the closing bid prices for the five-day period last quoted by an established quotation service for over-the-counter securities, or if none of the above shall apply, the last price paid for shares of the Common Stock by independent investors in a private placement; provided, however, that such exercise price per share shall not be lower than the par value per share or less than 50% of the fair market value of the Common Stock until such time as the Company elects to be subject to Rule 16b-3 as amended by SEC Rel. No. 33-28869. 3. All options shall be evidenced by a written agreement substantially in such form as shall be approved by the Board of Directors or Committee, containing terms and conditions consistent with the provisions of this Plan. 6. Exercise of Options A. Exercise/Consideration An option may be exercised in accordance with its terms by written notice of intent to exercise the option, specifying the number of shares of stock with respect to which the option is then being exercised. The notice shall be accompanied by payment in the form of cash or shares of common stock of the Company (as to options to purchase Company Common Stock) or the Spinout Subsidiary (as to options to purchase common stock of the Spinout Subsidiary, but only if the common stock is then publicly traded) (the shares so tendered referred to herein as "Tendered Shares") with a then current market value equal to the exercise price of the shares to be purchased; provided, however, that such Tendered Shares shall have been PAGE acquired by the Optionee more than six months prior to the date of exercise (unless such requirement is waived in writing by the Company). Against such payment the Company shall deliver or cause to be delivered to the Optionee a certificate for the number of shares then being purchased, registered in the name of the Optionee or other person exercising the option. If any law or applicable regulation of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company or the Director to take any action in connection with shares being purchased upon exercise of the option, exercise of the option and delivery of the certificate or certificates for such shares shall be postponed until completion of the necessary action, which shall be taken at the Company's expense. B. Tax Withholding The Company shall have the right to deduct from payments of any kind otherwise due to the Optionee any federal, state or local taxes of any kind required by law to be withheld with respect to any shares issued upon exercise of options under the Plan. Subject to the prior approval of the Company, which may be withheld by the Company in its sole discretion, the Optionee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company to withhold shares of Common Stock otherwise issuable pursuant to the exercise of an option or (ii) by delivering to the Company shares of Common Stock already owned by the Optionee. The shares so delivered or withheld shall have a fair market value equal to such withholding obligation. The fair market value of the shares used to satisfy such withholding obligation shall be determined by the Company as of the date that the amount of tax to be withheld is to be determined. Notwithstanding the foregoing, no election to use shares for the payment of withholding taxes shall be effective unless made in compliance with any applicable requirements of Rule 16b-3. 7. Transferability Options shall not be transferable, otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Internal Revenue Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder (a "Qualified Domestic Relations Order"). Options may be exercised during the life of the Optionee only by the Optionee or a transferee pursuant to a Qualified Domestic Relations Order. 8. Limitation of Rights to Continue as a Director Neither the Plan, nor the quantity of shares subject to options granted under the Plan, nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain a Director for any period of time, or at any particular rate of compensation. 9. Changes in Common Stock If the outstanding shares of Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities, through merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, PAGE reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of Common Stock, or other securities, an appropriate proportionate adjustment may be made in the maximum number or kind of shares reserved for issuance under the Plan. No fractional shares will be issued under the Plan on account of any such adjustments. 10. Limitation of Rights in Option Stock The Optionees shall have no rights as stockholders in respect of shares as to which their options shall not have been exercised, certificates issued and delivered and payment as herein provided made in full, and shall have no rights with respect to such shares not expressly conferred by this Plan or the written agreement evidencing options granted hereunder. 11. Stock Reserved The Company shall at all times during the term of the options reserve and keep available such number of shares of the Common Stock as will be sufficient to permit the exercise in full of all options granted under this Plan and shall pay all other fees and expenses necessarily incurred by the Company in connection therewith. 12. Securities Laws Restrictions A. Investment Representations. The Company may require any person to whom an option is granted, as a condition of exercising such option, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the option for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws. B. Compliance with Securities Laws. Each option shall be subject to the requirement that if, at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, or that the disclosure of non-public information or the satisfaction of any other condition is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval, or satisfaction of such condition shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification, or to satisfy such condition. PAGE 13. Change in Control 13.1 Impact of Event In the event of a "Change in Control" as defined in Section 13.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides: (a) Any stock options awarded under the Plan that were not previously exercisable and vested shall become fully exercisable and vested. (b) Shares purchased upon the exercise of options subject to restrictions and to the extent not fully vested, shall become fully vested and all such restrictions shall lapse so that shares issued pursuant to such options shall be free of restrictions. 13.2 Definition of "Change in Control" "Change in Control" means any one of the following events: (i) when, any Person is or becomes the beneficial owner (as defined in Section 13(d) of the Exchange Act and the Rules and Regulations thereunder), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations of the Exchange Act) of such Person, directly or indirectly, of 50% or more of the outstanding Common Stock of the Company, or the beneficial owner of 25% or more of the outstanding common stock of Thermo Electron Corporation ("Thermo Electron"), without the prior approval of the Prior Directors of the Company or Thermo Electron, as the case may be, (ii) the failure of the Prior Directors to constitute a majority of the Board of the Company or of the Board of Directors of Thermo Electron, as the case may be, at any time within two years following any Electoral Event, or (iii) any other event that the Prior Directors shall determine constitutes an effective change in the control of the Company or Thermo Electron. As used in the preceding sentence, the following capitalized terms shall have the respective meanings set forth below: (a) "Person" shall include any natural person, any entity, any "affiliate" of any such natural person or entity as such term is defined in Rule 405 under the Securities Act of 1933 and any "group" (within the meaning of such term in Rule 13d-5 under the Exchange Act); (b) "Prior Directors" shall mean the persons sitting on the Company's or Thermo Electron's Board of Directors, as the case may be, immediately prior to any Electoral Event (or, if there has been no Electoral Event, those persons sitting on the applicable Board of Directors on the date of this Agreement) and any future director of the Company or Thermo Electron who has been nominated or elected by a majority of the Prior Directors who are then members of the Board of Directors of the Company or Thermo Electron, as the case may be; and (c) "Electoral Event" shall mean any contested election of Directors, or any tender or exchange offer for the Company's or Thermo Electron's Common Stock, not approved by the Prior Directors, by any Person other than the Company, Thermo Electron or a subsidiary of Thermo Electron. PAGE 14. Amendment of the Plan The provisions of Sections 3 and 5 of the Plan shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, or the rules thereunder. Subject to the foregoing, the Board of Directors may at any time, and from time to time, modify or amend the Plan in any respect, except that if at any time the approval of the Stockholders of the Company is required as to such modification or amendment under Rule 16b-3, the Board of Directors may not effect such modification or amendment without such approval. The termination or any modification or amendment of the Plan shall not, without the consent of an Optionee, affect his or her rights under an option previously granted to him or her. With the consent of the Optionees affected, the Board of Directors may amend outstanding option agreements in a manner not inconsistent with the Plan. The Board of Directors shall have the right to amend or modify the terms and provisions of the Plan and of any outstanding option to the extent necessary to ensure the qualification of the Plan under Rule 16b-3. 15. Effective Date of the Plan The Plan shall become effective when adopted by the Board of Directors, but no option granted under the Plan shall become exercisable until six months after the Plan is approved by the Stockholders of the Company. 16. Notice Any written notice to the Company required by any of the provisions of the Plan shall be addressed to the Secretary of the Company and shall become effective when it is received. 17. Governing Law The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware. EX-10.21 5 Exhibit 10.21 APPENDIX B FINNIGAN CORPORATION APPENDIX TO PROSPECTUS RELATING TO 1979 LONG-TERM INCENTIVE PLAN ON FORM S-8 1979 LONG-TERM INCENTIVE PLAN OF FINNIGAN CORPORATION (as amended through February 11, 1987) 1. Purpose of the Plan The purpose of the 1979 Long-Term Incentive Plan (the "Plan") of Finnigan Corporation (the "Company") is to provide an incentive to eligible employees and consultants whose present and potential contributions are important to the continued success of the Company, to afford them an opportunity to acquire a proprietary interest in the Company, and to enable the Company to enlist and retain in its employ the best available talent for the successful conduct of its business. It is intended that this purpose will be effected through the granting of (a) incentive stock rights, (b) stock options, and (c) stock appreciation rights upon surrender by a holder of all or a portion of his option rights. It is further intended that options granted pursuant to this Plan may be either incentive stock options under Section 422A of the Internal Revenue Code of 1986, as amended (the "Code") or options which are not incentive stock options (herein after called "nonstatutory stock options"). 2. Eligible Participants Option and/or rights may be granted to salaried employees who are officers or who are employed by the Company or its subsidiaries and who are deemed to have the potential to contribute to the future success of the Company. Options and/or rights may be granted to a director of the Company provided that the director is also an officer or salaried employee. Options may be granted to consultants to the Company or its subsidiaries. The term "subsidiary" as used in the Plan means any corporation (other than the Company) in a unbroken chain of corporations beginning with the Company if , at the time of the granting of any options hereunder, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 3. Stock Subject to the Plan The shares that may be issued under the Plan shall not exceed in the aggregate 1,120,000* Adjusted to give effect to a two-for-one stock split in February 1981. Shares of the Common Stock of the Company, as adjusted to give effect to the antidilution provisions contained in Section 10 and 11 thereof. Such shares may be authorized and unissued shares or shares purchased in the open market by the Company for the Plan. If an option or right for any reason expires or is terminated without having been exercised in full, the remaining shares shall become available for the granting of options or rights under the Plan. * Adjusted to give effect to a two-for-one stock split in February 1981. B - 1PAGE 4. Awards Under the Plan Awards under the Plan may be of three types, namely "incentive stock rights," "stock Options," and "stock appreciation rights." "Incentive stock rights" are composed of incentive stock units which give the holder the right to receive, without payment of cash to the Company, shares of Common Stock, subject to the terms, conditions, and restrictions described in Section 7 hereof. An "Option" is a right to purchase Common Stock of the Company at a fair market value as of the date the option is granted. A "stock appreciation right" is a right given to a holder of an option to receive, upon surrender of all or a portion of his option, without payment to the company, a number of shares of Common Stock of the Company, and/or cash, determined pursuant to a formula in lieu of the purchase of shares under the related Option. 5. Administration The Plan shall be administered by the Board of Directors or, if established by the Board of Directors, by a committee (the "Committee") consisting of not less than three persons, all of whom shall be directors of the Company, to be appointed by the Company's Board of Directors. The Human Resources Committee of the Company may be designated by the Board of Directors to be the administrative committee for the Plan provided its members are otherwise eligible to serve as members of the Committee. No member of the Board of Directors who is at the time or for one year prior thereto was eligible to receive an option or right under the Plan (or to participate in a similar plan of the Company or any subsidiary) shall be a member of the Committee. Committee members shall serve for such term as the Board of Directors may in each case determine, and shall be subject to removal at any time by the Board of Directors. Vacancies on the Committee, however caused, shall be filled by the Board of Directors. The Committee shall select one of its members as chairman, and shall hold meetings at such times and places as it may determine. A majority of the Committee shall constitute quorum, and acts of the Committee approved at a meeting at which a quorum is present, or acts approved in writing by all of the members of the Committee, shall be valid acts of the Committee. Subject to the general purposes, terms, and conditions of the Plan, and to the direction of the Board of Directors, the Committee, if there be one, shall have full power to implement and carry out the Plan including, but not limited to, the following: to construe and interpret the Plan; to prescribe, amend, and rescind rules and regulations relating to the Plan; and to make all other determinations necessary or advisable for the administration of the Plan. Awards shall be made upon approval by the Board of Directors, or if the Committee is given general authority to do so by the Board of Directors, upon approval by the Committee without review by the Board of Directors; provided, however, that awards to any member of the Board of Directors must be recommended or approved by the Committee, if any, or, if there is no Committee, by the Board of Directors provided that a majority of the Board of Directors and a majority of the Directors approving such grant are eligible to serve as members of the Committee. As used herein, except in Sections 11 and 18, reference to the Board of Directors shall mean such Board or the Committee, whichever is then acting with respect to the Plan. 6. Duration of the Plan The Plan shall remain in effect until all options and rights granted under the Plan have been satisfied by the issuance of shares or the payment B - 2PAGE of cash, or terminated under the terms of the Plan, provided that options and rights under the Plan shall not be granted after ten (10) years from the effective date of the Plan. In no event may incentive stock options be granted under the Plan later than March 27, 1989, ten (10) years from the date the Plan was adopted by the Board of Directors. 7. Incentive Stock Rights (a) Incentive Stock Rights The Board of Directors, in its discretion, may grant to eligible participants incentive stock rights composed of incentive stock units. Incentive stock rights shall be evidenced by incentive stock right agreements in such form and not inconsistent with the Plan as the Board of Directors shall approve from time to time, which agreements shall contain in substance the following terms and conditions: (i) Incentive Stock Units. An incentive stock rights agreement shall specify the number of incentive stock units to which it pertains. Each incentive stock unit shall be equivalent to one share of Common Stock of the Company. Each incentive stock unit shall entitle the holder to receive, without payment of cash to the Company, one share of Common Stock of the Company in consideration for services performed for the Company or for its benefit by the person receiving the right subject to the lapse of the incentive periods (hereinafter defined). (ii) Incentive Period. The holder of incentive stock rights shall be entitled to receive shares of Common Stock of the Company only after the lapse of such incentive periods, and in such manner, as shall be fixed by the Board of Directors at the time of grant of incentive stock rights to an employee. (Such period or periods so fixed is or are herein referred to as an "incentive period".) To the extent the holder of incentive stock rights receives shares of Common Stock of the Company on the lapse of an incentive period, and equivalent number incentive stock units subject to such rights shall be deemed to have been discharged. (iii) Termination of Employment by Reason of Death or Disability. In the event that an employee to whom incentive stock rights have been issued under the Plan terminates employment due to death or permanent disability (as determined by the Board of Directors), each incentive period established pursuant to Subsection 7(a)(ii) shall lapse on the date of such termination as to the number of full incentive stock units determined by multiplying the total number of incentive stock units applicable to such incentive period by a fraction, the numerator of which shall be the number of full calendar months between the date of grant of the incentive stock rights and the date of such termination and the denominator of which shall be the number of full calendar months between the date of grant of the incentive stock rights and the date such incentive period for such units would, but for such termination, have lapsed. Units upon which the incentive period does not lapse pursuant to the foregoing sentence shall terminate on the termination date of employment. (iv) Termination of Employment for any other Reason. In the event that an employee to whom incentive stock rights have been issued under the Plan terminates his employment for any reason (including B - 3PAGE dismissal by the Company with or without cause), other than death or permanent disability, such rights as to which the incentive period has not lapsed shall terminate on termination of employment. (v) Leave of Absence, Other. For Plan purposes, a transfer of an employee from the Company to a Subsidiary or vice versa, or from one Subsidiary to another, or a leave of absence duly authorized by the Company shall not be deemed a termination of employment or a break in the incentive period. In the case of any employee on an approved leave of absence, the Board of Directors may make such provision respecting continuance of the incentive stock right while on leave from the employ of the Company or a Subsidiary as it may deem equitable. (vi) Issuance of Shares. Upon the lapse of an incentive period, the Company shall, without transfer or issue tax to the person entitled to receive the shares, deliver to such person a certificate or certificates for a number of shares of Common Stock of the Company equal to the number of incentive stock units as to which an incentive period has lapsed. (b) Dividend Equivalents The holder of an incentive stock right shall be entitled to receive from the Company cash payments at the same time and in the same amounts that the holder of record of a number of shares of Common Stock equal to the number of incentive stock units covered by such right would be entitled to receive as dividends on such Common Stock of the Company. Such right to cash payment on an incentive stock unit shall apply to all dividends the record date for which occurs at any time during the period commencing on the date the incentive stock unit is granted and ending on the date that the holder of such incentive stock unit becomes a shareholder of record with respect to such unit as a result of the lapse of an incentive period or the date the incentive stock right otherwise terminates, whichever occurs first. 8. Options The Board of Directors, in its discretion, may grant stock options to eligible participants and shall determine whether such options shall be incentive stock options or nonstatutory stock options. Each option shall be evidenced by a written Stock Option Agreement which shall expressly identify the options as incentive stock options or as nonstatutory stock options, and be in such form and contain such provisions as the Board or the Committee shall from time to time deem appropriate, provided, however, that the grant of a nonstatutory stock option pursuant to this Plan shall in no way be construed to be an alternative to the right of an employee to purchase stock pursuant to any incentive stock option heretofore or hereafter granted to an employee pursuant to any stock option plans now in existence or hereafter adopted by the Corporation. Stock Option Agreements shall contain the following terms and conditions: (a) Option Price; Number of Shares The Option Price, which shall be approved by the Board of Directors shall in no event be less than one hundred percent (100%) of the fair market value of the Company's stock at the time the option is granted, which shall be for purposes of the Plan: (i) the last sales price per B - 4PAGE share of stock as reported by NASDAQ (or successor system ) or by the Wall Street Journal for the date the option is granted, or if there is no trading on such date, then on the last preceding business day on which there was trading; (ii) if the stock of the Company is listed on any stock exchange, the most recent closing price for such stock as quoted on such exchange for the date the option is granted (or if there are no sales for such date of grant, then for the last preceding business day on which there were sales); or (iii) the fair market value thereof, as determined in any other manner adopted in good faith by the Board of Directors which is in accordance with the applicable provisions of the Code. The Option agreement shall specify the number of shares to which it pertains. (b) Waiting Period and Exercise Dates At the time an option is granted, the Board of Directors will determine the terms and conditions to be satisfied before shares may be purchased, including the dates on which shares subject to the option may first be purchased. In no event may an option be exercised for the purchase of any shares until the completion of the service period ending on the anniversary date of the grant. (Such period is referred to herein as the "waiting period.") At the time an option is granted, the Board of Directors shall fix the period within which it may be exercised which shall not be less than one (1) year nor more than ten (10) years from the date of grant. (Such period is referred to herein as the "exercise period.") To the extent that an option to purchase shares is not exercised by an optionee when it becomes initially exercisable, it shall not expire but shall be carried forward and shall be exercisable until the expiration of the exercise period. Partial exercise will be permitted from time to time to the extent shares subject to the option may than be purchasable, provided that no partial exercise may be for less than 20 full shares of Common Stock or its equivalent. (c) Form and Time of Payment Stock purchased pursuant to an option agreement shall be paid for in full at the time of purchase either (i) in cash or (ii) in the discretion of the Board of Directors or the Committee, through the delivery of shares of Common Stock of the Company with a value equal to the total option price, or (iii) by a combination of the methods described in (i) and (ii). Provision for payment by delivery of shares of Common Stock may be made in the original option agreement at the time of grant. Upon receipt of payment, the Company shall, without transfer or issue tax to the optionee or other person entitled to exercise the option, deliver to the optionee (or other person entitle to exercise the option) a certificate or certificates for such shares. (d) Effect of Termination of Employment or Death In the event that an optionee during his or her lifetime ceases to be an employee of the Company or of any Subsidiary for any reason, including retirement, any option, including any unexercised portion thereof, which was otherwise exercisable on the date of termination of employment, shall expire unless exercised within a period of 90 days from the date on which the optionee ceased to be an employee, but in no event after the expiration of the exercise period; provided, however, that, if the Board of Directors B - 5PAGE shall determine that an employee shall have been discharged for misconduct or unsatisfactory work, such employee shall not hereafter have any rights under the Plan or any option that shall have been granted to him or her under the Plan. In the event of the death of an optionee during this 90-day period, the option shall be exercisable by his or her personal representatives, heirs, or legatees for 90 days from the date of death, but in no event after the expiration of the exercise period, to the same extent that the optionee could have exercised the option if he or she had not died. In the event of the death of an optionee while an employee of the Company or any Subsidiary, that portion of the option which had become exercisable on the date of death shall be exercisable by his or her personal representatives, heirs, or legatees at any time prior to the expiration of one (1) year from the date of death of the optionee, but in no event after the expiration of the exercise period. In the event that an optionee ceases to be an employee of the Company or of any Subsidiary for any reason, including death or retirement, prior to the lapse of the waiting period, his or her option shall terminate and be null and void. (e) Leave of Absence In the case of any employee on an approved leave of absence, the Board of Directors may make such provision respecting continuance of the option while on leave from the employ of the Company or a Subsidiary as it may deem equitable, except that in no event shall an option be exercised after the expiration of the exercise period. (f) Acceleration of Option Period The Board of Directors may accelerate the earliest date on which outstanding options (or any installments thereof ) are exercisable, but not to a date earlier than the expiration of the waiting period. (g) Options granted under the Plan which are intended to be incentive stock options under Section 422A of the code shall be subject to the following additional terms and conditions: (i) Prior Outstanding Option. Except to the extent now or hereafter permitted by Section 422A of the Code, no incentive stock option granted prior to January 1, 1987 shall be exercisable while there remains outstanding (within the meaning of Section 422A(c)(7) of the Code) any other incentive stock option which was granted at an earlier date to the optionee to purchase stock in the Corporation or any other corporation which is, on the date of grant of the later option, either a "parent corporation" or "subsidiary corporation" of the Corporation or a predecessor corporation of any of such corporations (as defined in Section 425 of the Internal Revenue Code of 1986). (ii) Dollar Limitation. In the case of an incentive stock option granted after January 1, 1982, but before January 1, 1987, the aggregate fair market value (determined as of the time the option is granted) for which any employee may be granted incentive stock options in any calendar year (under all stock option plans of the Corporation and its subsidiaries) shall not exceed $100,000 plus any unused limit carryover (determined pursuant to Section 422A of the Internal Revenue Code, as amended) to such year. After December 31, 1986, no incentive stock option may be granted to any employee which, when aggregated with all other incentive stock options granted to such employee by the B - 6PAGE Corporation or any other corporation which is either a "parent corporation" or "subsidiary corporation" of the Corporation, would result in shares of common stock having an aggregate fair market value (determined for each such share) as of the date of grant of the option in excess of $100,000 becoming first available for purchase upon exercise of one or more incentive stock options during any calendar year. (iii) 10% Shareholder. If any optionee to whom an incentive stock option is to be granted pursuant to the provisions of the Plan is, on the date of grant, the owner of stock (as determined under Section 425(d) of the Code) possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or any one of its subsidiaries, then the following special provisions shall be applicable to the option granted to such individual: (A) The Option price per share of the Common Stock subject to such incentive stock option shall be less than 110% of the fair market value of one share of Common Stock on the date of grant; and (B) The option shall not have a term in excess of five (5) years from the date of grant. Except as modified by the preceding provisions of this Subsection 8(g), all the provisions of the Plan shall be applicable to the incentive stock options granted hereunder. (h) Other Provisions Each option granted under the Plan may contain such other terms, provisions, and conditions not inconsistent with the Plan as may be determined by the Board of Directors. (i) Options to Consultants Options granted to consultants shall not be subject to paragraphs 8(b) and 8(d) of the Plan, but shall have such terms and conditions pertaining to waiting period (if any), exercise date, and effect of termination of the consulting relationship as the Board of Directors or Committee shall determine in each case. 9. Stock Appreciation Rights The Board of Directors, in its discretion, may grant stock appreciation rights to employees who are granted options under the Plan. Such rights shall be evidenced by stock appreciation rights agreements in such form and not inconsistent with this Plan as the Board of Directors shall approve from time to time, which agreements shall contain in substance the following terms and conditions: (a) Grant Each right shall relate to a specific option granted under the Plan and shall be granted to the optionee concurrently with the grant of an incentive stock option or at such later time as determined by the Board of Directors if the right relates to a nonstatutory stock option. B - 7PAGE (b) Exercise A stock appreciation right may only be exercised when the fair market value of the Common Stock of the Company exceeds the option price of the related option. A right shall entitle an optionee, to the extent he or she so designates from time to time, to receive a number of shares, without payment to the company, cash, or cash and shares, as elected by the Board of Directors as determined under Subsection 9(c). Such shares and/or cash shall be issued or paid in consideration of services performed for the Company or for its benefit by the optionee. Unless otherwise determined by the Board of Directors, a right shall be exercisable to no greater extent nor upon any more favorable conditions than its related option is exercisable under Subsection 8(b). An optionee wishing to exercise a right in accordance with the foregoing shall give written notice of such exercise to the Company. Upon receipt of such notice, the company shall; (i) without transfer or issue tax to the optionee or other person entitled to exercise the right, deliver to the person exercising the right a certificate or certificates for shares; and/or (ii) pay cash. The date the Company receives written notice of an exercise hereunder is referred to herein as the exercise date. (c) Number of Shares or Amount of Cash The number of shares which shall be issued pursuant to the exercise of a right shall be determined by dividing (i) that portion, as elected by the optionee, of the total number of shares which the optionee is eligible to purchase pursuant to Subsection 9(b) (as adjusted pursuant to Subsection 8(b) and Section 10 and 11), multiplied by the amount by which the fair market value of a share of Common Stock of the Company on the exercise date exceeds the option price of the related option; by (ii) the fair market value of a share of Common Stock of the Company on the date the optionee exercises the stock appreciation right. In lieu of issuing shares on the exercise of a right, the Board of Directors may elect to pay the cash equivalent of the fair market value, on the date the optionee exercises the stock appreciation right, of any or all the shares which would otherwise be issuable. No fractional shares shall be issued under this Subsection 9(c). Instead, the optionee shall be entitled to receive a cash adjustment equal to the same fraction of the fair market value per share of Common Stock on the date the Board of Directors makes its election. (d) Effect of Exercise Shares under an option to which a right is related shall be used not more than once to calculate the number of shares or cash to be received pursuant to an exercise of such right. Shares used to calculate the benefits under a right will no longer be available for exercise by the optionee nor for regrant to other employees under the Plan. (e) Effect of Termination of Employment or Death In the event that the recipient of a right ceases to be an employee of the Company or of any subsidiary of the Company for any reason, his or her right shall be exercisable only to the extent and upon the conditions that its related option is exercisable under Subsection 8(d). (f) In the event that a stock appreciation right is granted that relates to an incentive stock option, such right shall contain such additional or different terms as may be necessary under applicable B - 8PAGE regulations to preserve treatment of the incentive stock option under Section 422A of the Code. 10. Recapitalization In the event that dividends are payable in Common Stock of the Company or in the event there are splits, subdivisions, or combinations of shares of Common Stock of the Company, the number of shares available under the Plan shall be increased or decreased proportionately, as the case may be, and the number of shares deliverable upon the exercise thereafter of any option or stock appreciation right or upon distribution pursuant to incentive stock rights theretofore granted shall be increased or decreased proportionately, as the case may be, without change in the aggregate purchase price (where applicable). 11. Reorganization In case the Company is merged or consolidated with another corporation and the Company is not the surviving corporation, or in case the property or stock of the Company is acquired by another corporation, or in case of a separation, reorganization, or liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company hereunder, shall, as to outstanding options, stock appreciation rights, or incentive stock rights, either (a) make appropriate provision for the protection of any such outstanding options, stock appreciation rights or incentive stock rights by the substitution on an equitable basis of appropriate stock of the Company or of the merged, consolidated, or otherwise reorganized corporation which will be issuable in respect to the shares of Common Stock of the Company, provided only that the excess of the aggregate fair market value of the shares subject to the options and rights immediately after such substitution over the purchase price thereof is not more than the excess of the aggregate fair market value of the shares subject to such options and rights immediatley before such substitution over the purchase price thereof, or (b) upon written notice to the employee, provide that the option of right must be exercised within sixty (60) days of the date of such notice or it will be terminated. In any such case, the Board of Directors may, in its discretion, advance the lapse of incentive periods, waiting periods, and exercise dates. 12. Employment Relationship Nothing in the Plan or any award made thereunder shall interfere with or limit in any way the right of the Company or of any of its Subsidiaries to terminate any recipient's employment or consulting relationship at any time, nor confer upon any recipient any right to continue in the employ or service of the Company or any of its Subsidiaries. 13. General Restriction Each option and right shall be subject to the requirement that, if , at any time, the Board of Directors shall determine, in its discretion, that the listing, registration, or qualification of the shares subject to such option or right upon any securities exchange or under any state or Federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such option or right or the issue or purchase of shares thereunder, such option or right may not be exercised in whole or in part B - 9PAGE unless such listing registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Board of Directors. 14. Rights as a Shareholder The holder of an option or right shall have no rights as a shareholder with respect to any shares covered by the option or right until the date of issuance of a stock certificate to him or her for such shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 15. Nonassignability of Incentive Stock Rights, Options, and Stock Appreciation Rights No incentive stock right, option, or stock appreciation right shall be assignable or transferable by the recipient except by will or by the laws of descent and distribution. During the life of the recipient, the incentive stock right, option, or stock appreciation right shall be exercisable only by him or her. 16. Withholding Taxes Whenever, under the Plan, shares are to be issued in satisfaction of options or rights granted thereunder, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy Federal, state, and local withholding tax requirements prior to the delivery of any certificate or certificates for such shares. Whenever, under the Plan, payments are to be made in cash, such payment shall be net of an amount sufficient to satisfy Federal, state, and local withholding tax requirements. 17. Nonexclusivity of the Plan Neither the adoption of the Plan by the Board of Directors, the submission of the Plan to the stockholders of the Company for approval, nor any provision of the Plan shall be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases. 18. Amendment, Suspension, or Termination of the Plan The Board of Directors may at any time amend, alter, suspend, or discontinue the Plan, but no amendment, alteration, suspension, or discontinuation shall be made which would impair the rights of any grantee under any grant theretofore made, without his or her consent, or which, without the approval of the stockholders, would: (a) Except as is provided in Section 10 and 11 of the Plan, increase the total number of shares of stock reserved for the purposes of the Plan; (b) Extend the duration of the Plan; (c) Extend the period during and over which options may be exercised under the Plan; or B - 10PAGE (d) Change the class of persons eligible to participate in the Plan under Section 2. Without limiting the foregoing, the Board of Directors may, at any time or from time to time, authorize the Company, with the consent of the respective recipients, to issue new options or options in exchange for the surrender and cancellation of any or all outstanding options or rights. 19. Effective Date of the Plan The Plan shall become effective upon approval of the Board of Directors and by stockholders holding a majority of the shares entitled to vote. Options may be granted and exercised under the Plan only after there has been compliance with all applicable Federal and state securities laws. The amendments to the Plan adopted by the Board of Directors on February 17, 1982, shall become null and void if they are not approved by August 13, 1982, by the stockholders of the Corporation holding a majority of the shares entitled to vote. Such amendments, unless otherwise provided, are specifically intended to apply to previously granted options to the extent necessary to permit such options to qualify for treatment as incentive stock options. Notwithstanding the foregoing, no amendment shall apply to any option if such amendment would constitute a modification, extension, or renewal of the option under Section 425(h) of the Code, as qualified by Section 251(c) of the Economic Recovery Tax Act of 1981. The Corporation is authorized to enter into such amending agreements with optionees, and to file such elections with the Internal Revenue Service, as may be necessary or appropriate to convert previously granted options into incentive stock options. B - 11 EX-10.39 6 Exhibit 10.39 THERMO ENERGY SYSTEMS CORPORATION EQUITY INCENTIVE PLAN 1. Purpose The purpose of this Equity Incentive Plan (the "Plan") is to secure for Thermo Energy Systems Corporation (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees and Directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards"). 2. Administration The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act"). 3. Effective Date The Plan shall be effective as of March 17, 1994, subject to the approval of the Plan by the Corporation's Stockholders. Grants of Awards under the Plan made prior to such approval shall be effective when made (unless otherwise specified by the Board at the time of grant), but shall be conditioned on and subject to such approval of the Plan. PAGE 4. Shares Subject to the Plan Subject to adjustment as provided in Section 10.6, the total number of shares of Common Stock reserved and available for distribution under the Plan shall be 400,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan. 5. Eligibility Employees and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan. 6. Types of Awards The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided however, that the maximum number of shares permitted to be granted under any Award or combination of Awards to any Participant during any one calendar year may not exceed 1% of the shares of Common Stock outstanding at the beginning of such calendar year. An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted. Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions: 6.1 Options An option is an Award that entitles the holder on exercise thereof to purchase Common Stock at a specified exercise price. Options granted under the Plan may be either incentive stock options ("incentive stock options") that meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or options that are not intended to meet the requirements of Section 422 ("non-statutory options"). PAGE 6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than the par value per share of Common Stock. 6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory option. 6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term. Any exercise of an option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any additional documents required by the Board and (2) payment in full in accordance with Section 6.1.4 for the number of shares for which the option is exercised. 6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment. 6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made. 6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422 of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options PAGE may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent Stockholder of the Company) of the date of grant, as determined by the Board. 6.2 Restricted and Unrestricted Stock An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award. 6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable. 6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse. 6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan. 6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares. 6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock. 6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock. PAGE 6.3 Deferred Stock 6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place. 6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock. 6.4 Performance Awards 6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an Amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. 6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award. 7. Purchase Price and Payment Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8. Loans and Supplemental Grants The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven. PAGE In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to theparticipant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, discharging all the participant's income tax liabilities arising from all payments under the Plan. 9. Change in Control 9.1 Impact of Event In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides: (a) Any stock options or other stock-based Awards awarded under the Plan that were not previously exercisable and vested shall become fully exercisable and vested. (b) Awards of restricted stock and other stock-based Awards subject to restrictions and to the extent not fully vested, shall become fully vested and all such restrictions shall lapse so that shares issued pursuant to such Awards shall be free of restrictions. (c) Deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation, will be waived and removed as to deferred stock Awards and performance Awards. Performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Awards or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board. 9.2 Definition of "Change in Control" "Change in Control" means any one of the following events: (i) when, any Person is or becomes the beneficial owner (as defined in Section 13(d) of the Exchange Act and the Rules and Regulations thereunder), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations of the Exchange Act) of such Person, directly or indirectly, of 50% or more of the outstanding Common Stock of the Company, or the beneficial owner of 25% or more of the outstanding common stock of Thermo Electron Corporation ("Thermo Electron"), without the prior approval of the Prior Directors of the Company or Thermo Electron, as the case may be, (ii) the failure of the Prior Directors to constitute a majority of the Board of the Company or of the Board of Directors of Thermo Electron, as the case may be, at any time within two years following any Electoral Event, or (iii) any other event that the Prior Directors shall determine constitutes an effective change in the control of the Company or Thermo Electron. As used in the preceding sentence, the following capitalized terms shall have the respective meanings set forth below: (a) "Person" shall include any natural person, any entity, any "affiliate" of any such natural person or entity as such term is defined in Rule 405 under the Securities Act of 1933 and any "group" PAGE (within the meaning of such term in Rule 13d-5 under the Exchange Act); (b) "Prior Directors" shall mean the persons sitting on the Company's or Thermo Electron's Board of Directors, as the case may be, immediately prior to any Electoral Event (or, if there has been no Electoral Event, those persons sitting on the applicable Board of Directors on the date of this Agreement) and any future director of the Company or Thermo Electron who has been nominated or elected by a majority of the Prior Directors who are then members of the Board of Directors of the Company or Thermo Electron, as the case may be; and (c) "Electoral Event" shall mean any contested election of Directors, or any tender or exchange offer for the Company's or Thermo Electron's Common Stock, not approved by the Prior Directors, by any Person other than the Company, Thermo Electron or a subsidiary of Thermo Electron. 10. General Provisions 10.1 Documentation of Awards Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable. 10.2 Rights as a Stockholder Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares. 10.3 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 any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer. PAGE If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative. 10.4 Tax Withholding The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement. 10.5 Nontransferability of Awards Except as otherwise specifically provided by the Board in the case of participants who are not reporting persons under Section 16 of the Exchange Act, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by the laws of descent and distribution, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). 10.6 Adjustments in the Event of Certain Transactions (a) In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution with respect to common Stockholders other than normal cash dividends, the Board will make (i) appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above, and (ii) appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provisions of Awards affected by such change. (b) The Board may also make appropriate adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions, repurchases or similar corporate transactions, or any other event, if it is determined by the Board that adjustments are appropriate to avoid distortion in the operation of the Plan, but no such adjustments other than those required by law may adversely affect the rights of any Participant (without the Participant's consent) under any Award previously granted. PAGE 10.7 Employment Rights Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment. 10.8 Other Employee Benefits The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan. 10.9 Legal Holidays If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday. 10.10 Foreign Nationals Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan. 11. Termination and Amendment The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment, unless approved by the Stockholders, shall be effective if it would cause the Plan to fail to satisfy the requirements of the federal tax law or regulation relating to incentive stock options or the requirements of Rule 16b-3 (or any successor rule) of the Exchange Act. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent. EX-10.46 7 Exhibit 10.46 THERMO CARDIOSYSTEMS INC. EQUITY INCENTIVE PLAN 1. Purpose The purpose of this Equity Incentive Plan (the "Plan") is to secure for Thermo Cardiosystems Inc. (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees and Directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards"). 2. Administration The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act"). 3. Effective Date The Plan shall be effective as of February 28, 1994, subject to the approval of the Plan by the Company's Stockholders at the next annual meeting of Stockholders. Grants of Awards under the Plan made prior to such approval shall be effective when made (unless otherwise specified by the Board at the time of grant), but shall be conditioned on and subject to such approval of the Plan. PAGE 4. Shares Subject to the Plan Subject to adjustment as provided in Section 10.6, the total number of shares of Common Stock reserved and available for distribution under the Plan shall be 500,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan. 5. Eligibility Employees and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan. 6. Types of Awards The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided however that the maximum number of shares permitted to be granted under any Award or combination of Awards to any Participant during any one calendar year may not exceed 1% of the shares of Common Stock outstanding at the beginning of such calendar year. An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted. Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions: 6.1 Options An option is an Award that entitles the holder on exercise thereof to purchase Common Stock at a specified exercise price. Options granted under the Plan may be either incentive stock options ("incentive stock options") that meet the requirements of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), or options that are not intended to meet the requirements of Section 422A ("non-statutory options"). PAGE 6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than the par value per share of Common Stock. 6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory option. 6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term. Any exercise of an option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any additional documents required by the Board and (2) payment in full in accordance with Section 6.1.4 for the number of shares for which the option is exercised. 6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment. 6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made. 6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422 of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options PAGE may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent Stockholder of the Company) of the date of grant, as determined by the Board. 6.2 Restricted and Unrestricted Stock An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award. 6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable. 6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse. 6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan. 6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares. 6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock. 6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock. PAGE 6.3 Deferred Stock 6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place. 6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock. 6.4 Performance Awards 6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an Amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. 6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award. 7. Purchase Price and Payment Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8. Loans and Supplemental Grants The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven. PAGE In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, discharging all the participant's income tax liabilities arising from all payments under the Plan. 9. Change in Control 9.1 Impact of Event In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides: (a) Any stock options or other stock-based Awards awarded under the Plan that were not previously exercisable and vested shall become fully exercisable and vested. (b) Awards of restricted stock and other stock-based Awards subject to restrictions and to the extent not fully vested, shall become fully vested and all such restrictions shall lapse so that shares issued pursuant to such Awards shall be free of restrictions. (c) Deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation, will be waived and removed as to deferred stock Awards and performance Awards. Performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Awards or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board. 9.2 Definition of "Change in Control" "Change in Control" means any one of the following events: (i) when, any Person is or becomes the beneficial owner (as defined in Section 13(d) of the Exchange Act and the Rules and Regulations thereunder), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations of the Exchange Act) of such Person, directly or indirectly, of 50% or more of the outstanding Common Stock of the Company or the beneficial owner of 25% or more of the outstanding common stock of Thermo Electron Corporation ("Thermo Electron"), without the prior approval of the Prior Directors of the Company or Thermo Electron, as the case may be, (ii) the failure of the Prior Directors to constitute a majority of the Board of the Company or of the Board of Directors of Thermo Electron, as the case may be, at any time within two years following any Electoral Event, or (iii) any other event that the Prior Directors shall determine constitutes an effective change in the control of the Company or Thermo Electron. As used in the preceding sentence, the following capitalized terms shall have the respective meanings set forth below: (a) "Person" shall include any natural person, any entity, any "affiliate" of any such natural person or entity as such term is defined in PAGE Rule 405 under the Securities Act of 1933 and any "group" (within the meaning of such term in Rule 13d-5 under the Exchange Act); (b) "Prior Directors" shall mean the persons sitting on the Company's or Thermo Electron's Board of Directors, as the case may be, immediately prior to any Electoral Event (or, if there has been no Electoral Event, those persons sitting on the applicable Board of Directors on the date of this Agreement) and any future director of the Company or Thermo Electron who has been nominated or elected by a majority of the Prior Directors who are then members of the Board of Directors of the Company or Thermo Electron, as the case may be; and (c) "Electoral Event" shall mean any contested election of Directors, or any tender or exchange offer for the Company's or Thermo Electron's Common Stock, not approved by the Prior Directors, by any Person other than the Company, Thermo Electron or a subsidiary of Thermo Electron. 10. General Provisions 10.1 Documentation of Awards Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable. 10.2 Rights as a Stockholder Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares. 10.3 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 any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the PAGE certificates evidencing such Common Stock bear an appropriate legend restricting transfer. If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative. 10.4 Tax Withholding The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement. 10.5 Nontransferability of Awards Except as otherwise specifically provided by the Board in the case of participants who are not reporting persons under Section 16 of the Exchange Act, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by the laws of descent and distribution, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). 10.6 Adjustments in the Event of Certain Transactions (a) In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution with respect to common Stockholders other than normal cash dividends, the Board will make (i) appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above, and (ii) appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provisions of Awards affected by such change. (b) The Board may also make appropriate adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions, repurchases or similar corporate transactions, or any other event, if it is determined by the Board that adjustments are appropriate to avoid distortion in the operation of the Plan, but no such adjustments other than those required by law may adversely affect the rights of any Participant (without the Participant's consent) under any Award previously granted. PAGE 10.7 Employment Rights Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment. 10.8 Other Employee Benefits The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan. 10.9 Legal Holidays If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday. 10.10 Foreign Nationals Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan. 11. Termination and Amendment The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment, unless approved by the Stockholders, shall be effective if it would cause the Plan to fail to satisfy the requirements of the federal tax law or regulation relating to incentive stock options or the requirements of Rule 16b-3 (or any successor rule) of the Exchange Act. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent. EX-10.49 8 Exhibit 10.49 THERMO VOLTEK CORP. EQUITY INCENTIVE PLAN 1. Purpose The purpose of this Equity Incentive Plan (the "Plan") is to secure for Thermo Voltek Corp. (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees, officers and Directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards"). 2. Administration The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act"). 3. Effective Date The Plan shall be effective as of the date first approved by the Board of Directors, subject to the approval of the Plan by the Corporation's Stockholders. Grants of Awards under the Plan made prior to such approval shall be effective when made (unless otherwise specified by the Board at the time of grant), but shall be conditioned on and subject to such approval of the Plan. PAGE 4. Shares Subject to the Plan Subject to adjustment as provided in Section 10.6, the total number of shares of the common stock, $.05 par value per share, of the Company (the "Common Stock"), reserved and available for distribution under the Plan shall be 200,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan. 5. Eligibility Employees, officers and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan. 6. Types of Awards The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided however that the maximum number of shares permitted to be granted under any Award or combination of Awards to any Participant during any one calendar year may not exceed 1% of the shares of Common Stock outstanding at the beginning of such calendar year. An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted. Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions: 6.1 Options An option is an Award that entitles the holder on exercise thereof to purchase Common Stock at a specified exercise price. Options granted under the Plan may be either incentive stock options ("incentive stock options") that meet the requirements of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), or options that are not intended to meet the requirements of Section 422A ("non-statutory options"). PAGE 6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than the par value per share of Common Stock. 6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory option. 6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term. Any exercise of an option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any additional documents required by the Board and (2) payment in full in accordance with Section 6.1.4 for the number of shares for which the option is exercised. 6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment. 6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made. 6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422A of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options PAGE may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent Stockholder of the Company) of the date of grant, as determined by the Board. 6.2 Restricted and Unrestricted Stock An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award. 6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable. 6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse. 6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan. 6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares. 6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock. 6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock. PAGE 6.3 Deferred Stock 6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place. 6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock. 6.4 Performance Awards 6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an Amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. 6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award. 7. Purchase Price and Payment Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8. Loans and Supplemental Grants The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven. PAGE In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, discharging all the participant's income tax liabilities arising from all payments under the Plan. 9. Change in Control 9.1 Impact of Event In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides: (a) Any stock options or other stock-based Awards awarded under the Plan that were not previously exercisable and vested shall become fully exercisable and vested. (b) Awards of restricted stock and other stock-based Awards subject to restrictions and to the extent not fully vested, shall become fully vested and all such restrictions shall lapse so that shares issued pursuant to such Awards shall be free of restrictions. (c) Deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation, will be waived and removed as to deferred stock Awards and performance Awards. Performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Awards or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board. 9.2 Definition of "Change in Control" "Change in Control" means any one of the following events: (i) when, any Person is or becomes the beneficial owner (as defined in Section 13(d) of the Exchange Act and the Rules and Regulations thereunder), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations of the Exchange Act) of such Person, directly or indirectly, of 50% or more of the outstanding Common Stock of the Company or its parent corporation, Thermedics Inc. ("Thermedics"), or the beneficial owner of 25% or more of the outstanding common stock of Thermo Electron Corporation ("Thermo Electron"), without the prior approval of the Prior Directors of the applicable issuer, (ii) the failure of the Prior Directors to constitute a majority of the Board of Directors of the Company, Thermedics or Thermo Electron, as the case may be, at any time within two years following any Electoral Event, or (iii) any other event that the Prior Directors shall determine constitutes an effective change in the control of the Company, Thermedics or Thermo Electron. As used in the preceding sentence, the following capitalized terms shall have the respective meanings set forth below: (a) "Person" shall include any natural person, any entity, any "affiliate" of any such natural person or entity as such term is defined in Rule 405 under the Securities Act of 1933 and any "group" PAGE (within the meaning of such term in Rule 13d-5 under the Exchange Act); (b) "Prior Directors" shall mean the persons sitting on the Company's, Thermedics' or Thermo Electron's Board of Directors, as the case may be, immediately prior to any Electoral Event (or, if there has been no Electoral Event, those persons sitting on the applicable Board of Directors on the date of this Agreement) and any future director of the Company, Thermedics or Thermo Electron who has been nominated or elected by a majority of the Prior Directors who are then members of the Board of Directors of the Company, Thermedics or Thermo Electron, as the case may be; and (c) "Electoral Event" shall mean any contested election of Directors, or any tender or exchange offer for the Company's, Thermedics' or Thermo Electron's Common Stock, not approved by the Prior Directors, by any Person other than the Company, Thermedics, Thermo Electron or a majority-owned subsidiary of Thermo Electron. 10. General Provisions 10.1 Documentation of Awards Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable. 10.2 Rights as a Stockholder Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares. 10.3 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 any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider PAGE appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer. If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative. 10.4 Tax Withholding The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement. 10.5 Nontransferability of Awards Except as otherwise specifically provided by the Board in the case of participants who are not reporting persons under Section 16 of the Exchange Act, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by the laws of descent and distribution, except pursuant to the terms of a qualified domestic relations order as defined in the Code, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). 10.6 Adjustments in the Event of Certain Transactions (a) In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution with respect to common Stockholders other than normal cash dividends, the Board will make (i) appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above, and (ii) appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provisions of Awards affected by such change. (b) The Board may also make appropriate adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions, repurchases or similar corporate transactions, or any other event, if it is determined by the Board that adjustments are appropriate to avoid distortion in the operation of the Plan, but no such adjustments other than those required by law may PAGE adversely affect the rights of any Participant (without the Participant's consent) under any Award previously granted. 10.7 Employment Rights Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment. 10.8 Other Employee Benefits The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan. 10.9 Legal Holidays If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday. 10.10 Foreign Nationals Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan. 11. Termination and Amendment The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment, unless approved by the Stockholders, shall be effective if it would cause the Plan to fail to satisfy the requirements of the federal tax law or regulation relating to incentive stock options or the requirements of Rule 16b-3 (or any successor rule) of the Exchange Act. No amendment of the Plan or any agreement PAGE evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent. EX-10.51 9 Exhibit 10.51 THERMO INSTRUMENT SYSTEMS INC. THERMOSPECTRA NONQUALIFIED STOCK OPTION PLAN 1. Purpose This Nonqualified Stock Option Plan (the "Plan") is intended to encourage ownership of Common Stock, $0.01 par value (the "Common Stock"), of ThermoSpectra Corporation ("ThermoSpectra"), a subsidiary of Thermo Instrument Systems Inc. (the "Company"), by persons selected by the Board of Directors (or a committee thereof) in its sole discretion, including directors, executive officers, key employees and consultants of the Company, its parent corporation and their subsidiaries, and to provide additional incentive for them to promote the success of the business of the Company and ThermoSpectra. The Plan is intended to be a nonstatutory stock option plan. 2. Effective Date of the Plan The Plan shall become effective on October 25, 1994. 3. Stock Subject to Plan At no time shall the number of shares of the Common Stock then outstanding which are attributable to the exercise of options granted under the Plan plus the number of shares then issuable upon the exercise of outstanding options granted under the Plan exceed 200,000 shares, however, to the provisions of paragraph 11 of the Plan. Shares to be issued upon the exercise of options granted under the Plan shall be shares of ThermoSpectra beneficially owned by the Company. If any option expires or terminates for any reason without having been exercised in full, the unpurchased shares subject thereto shall again be available for options thereafter to be granted. 4. Administration The Plan shall be administered by a committee (the "Committee") composed of the members of the Board of Directors of the Company, no member of which shall act upon any matter exclusively affecting any option granted or to be granted to himself or herself under the Plan. Subject to the provisions of the Plan, the Committee shall have complete authority, in its discretion, to make the following determinations with respect to each option to be granted by the Company: (a) the person to receive the option (the "Optionee"); (b) the time of granting the option; (c) the number of shares subject thereto; (d) the option price; (e) the option period; and (f) the terms of the option and form of option agreement (which need not be identical, but which shall conform to the applicable terms and conditions of the Plan and contain such other provisions as the Board of Directors deems advisable and not inconsistent with the Plan). In making such determinations, the Committee may take into account the nature of the services rendered by the Optionees, their present and potential contributions to the success of the Company and/or one or more of its subsidiaries, and such other factors as the Committee in its discretion shall deem relevant. Subject to the provisions of the Plan, the Committee shall also have complete authority to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to it, to determine the terms and provisions of the respective option agreements (which need not be PAGE identical), and to make all other determinations necessary or advisable for the administration of the Plan. The Committee's determinations on the matters referred to in this paragraph 4 shall be conclusive. 5. Eligibility An option may be granted to any person selected by the Committee in its sole discretion. 6. Time of Granting Options The granting of an option shall take place at the time specified by the Committee. Only if expressly so provided by the Committee shall the granting of an option be regarded as taking place at the time when a written option agreement shall have been duly executed and delivered by or on behalf of the Company and the Optionee to whom such option shall be granted. The agreement shall provide, among other things, that it does not confer upon an Optionee any right to continue in the employ of the Company and/or any affiliated corporation or to continue as a director or consultant of the Company and/or any affiliated corporation, and that it does not interfere in any way with the right of the Company or any such affiliated corporation to terminate the employment of the Optionee at any time if the Optionee is an employee, to remove the Optionee as a director if the Optionee is a director, or to terminate the services of the Optionee if the Optionee is a consultant. 7. Option Period An option may become exercisable immediately or in such installments, cumulative or noncumulative, as the Committee may determine. 8. Exercise of Option An option may be exercised in accordance with its terms by written notice of intent to exercise the option, specifying the number of shares of stock with respect to which the option is then being exercised. The notice shall be accompanied by payment in the form of cash or shares of ThermoSpectra Common Stock (the "Tendered Shares") with a then current market value equal to the option price of the shares to be purchased; provided, however, that such Tendered Shares shall have been acquired by the Optionee more than six months prior to the date of exercise, unless such requirement is waived in writing by the Company. Against such payment the Company shall deliver or cause to be delivered to the Optionee a certificate for the number of shares then being purchased, registered in the name of the Optionee or other person exercising the option. If any law or applicable regulation of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company, ThermoSpectra or the Optionee to take any action in connection with shares being purchased upon exercise of the option, exercise of the option and delivery of the certificate or certificates for such shares shall be postponed until completion of the necessary action, which shall be taken at the Company's expense. 9. Transferability Options shall not be transferable, otherwise than by will or the laws of descent and distribution, except pursuant to the terms of a qualified PAGE domestic relations order as defined in the Internal Revenue Code. Options may be exercised during the life of the Optionee only by the Optionee. 10. Vesting, Restrictions and Termination of Options The Committee, in its sole discretion, may determine the manner in which options shall vest, the rights of the Company to repurchase the shares issued upon the exercise of any option and the manner in which such rights shall lapse, and the terms upon which any option granted shall terminate. The Board of Directors shall have the right to accelerate the date of exercise of any installment or to accelerate the lapse of the Company's repurchase rights. All of such terms shall be specified in a written option agreement executed and delivered by or on behalf of the Company and the Optionee to whom such option shall be granted. 11. Adjustment of Number of Shares Each stock option agreement shall provide that in the event of any stock dividend payable in the Common Stock or any split-up or contraction in the number of shares of the Common Stock occurring after the date of the agreement and prior to the exercise in full of the option, the number of shares for which the option may thereafter be exercised shall be proportionately adjusted and the price to be paid for each share subject to the option shall be proportionately adjusted. Each such agreement shall also provide that in case of any reclassification or change of outstanding shares of the Common Stock or in case of any consolidation or merger of ThermoSpectra with or into another company or in case of any sale or conveyance to another company or entity of the property of ThermoSpectra as a whole or substantially as a whole, the Optionee shall, upon exercise of the option, be entitled to receive shares of stock or other securities in its place equivalent in kind and value to those shares which he would have received if he had exercised the option in full immediately prior to such reclassification, change, consolidation, merger, sale or conveyance and had continued to hold the shares subject to the option (together with all other shares, stock and securities thereafter issued in respect thereof) to the time of the exercise of the option; provided, that if any recapitalization is to be effected through an increase in the par value of the Common Stock without an increase in the number of authorized shares and such new par value will exceed the option price under such agreement, the Company shall notify the Optionee of such proposed recapitalization, and the Optionee shall then have the right, exercisable at any time prior to such recapitalization becoming effective, to purchase all of the shares subject to the option which he has not theretofore purchased (anything in such agreement to the contrary notwithstanding), but if the Optionee fails to exercise such right before such recapitalization becomes effective, the option price under such agreement shall be appropriately adjusted. Each such agreement shall further provide that upon dissolution or liquidation of ThermoSpectra, the option shall terminate, but the Optionee (if at the time an employee or director of the Company and/or any one or more of its subsidiaries) shall have the right, immediately prior to such dissolution or liquidation, to exercise the option to the full extent not theretofore exercised; that no adjustment provided for above shall apply to any share with respect to which the option has been exercised prior to the effective date of such adjustment; and that no fraction of a share or fractional shares shall be purchasable or deliverable under such agreement, but in the event any adjustment thereunder of the number of shares covered by the option shall cause such number to include a fraction of a share, such fraction shall be adjusted to the nearest smaller whole number of shares. PAGE In the event of changes in the outstanding Common Stock by reason of any stock dividend, split-up, contraction, reclassification, or change of outstanding shares of the Common Stock of the nature contemplated by this paragraph 11, the number of shares of Common Stock available for the purpose of the Plan as stated in paragraph 3 hereof shall be correspondingly adjusted by the Committee. 12. Limitation of Rights in Option Stock The Optionees shall have no rights as stockholders in respect of shares as to which their options shall not have been exercised, certificates issued and delivered and payment as herein provided made in full, and shall have no rights with respect to such shares not expressly conferred by this Plan. 13. Stock Reserved The Company shall at all times during the term of the options reserve and keep available such number of shares of the Common Stock as will be sufficient to satisfy the requirements of this Plan and shall pay all other fees and expenses necessarily incurred by the Company in connection therewith. 14. Securities Laws Restrictions Each Optionee exercising an option, at the request of the Company, will be required to give a representation in form satisfactory to counsel for the Company that he will not transfer, sell or otherwise dispose of the shares received upon exercise of the option at any time purchased by him, upon exercise of any portion of the option, in a manner which would violate the Securities Act of 1933, as amended, and the regulations of the Securities and Exchange Commission thereunder and the Company may, if required or at its discretion, make a notation on any certificates issued upon exercise of options to the effect that such certificate may not be transferred except after receipt by the Company of an opinion of counsel satisfactory to it to the effect that such transfer will not violate such Act and such regulations. 15. Tax Withholding The Company will withhold from any cash payment made pursuant to an exercise of an option an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). The Committee will have the right to require that the Optionee or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Committee with regard to such requirements, prior to the delivery of any Common Stock pursuant to exercise of an option. If and to the extent that such withholding is required, the Committee may permit the Optionee or such other person to elect at such time and in such manner as the Committee provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirements. 16. Termination and Amendment of Plan The Board of Directors may at any time, and from time to time, modify or amend the Plan in any respect, except that if at any time the approval PAGE of the Stockholders of the Company is required as to such modification or amendment under Rule 16b-3, the Board of Directors may not effect such modification or amendment without such approval. The termination or any modification or amendment of the Plan shall not, without the consent of an Optionee, affect his or her rights under an option previously granted to him or her. With the consent of the Optionees affected, the Board of Directors may amend outstanding option agreements in a manner not inconsistent with the Plan. The Board of Directors shall have the right to amend or modify the terms and provisions of the Plan and of any outstanding option to the extent necessary to ensure the qualification of the Plan under Rule 16b-3. Notwithstanding any other provisions hereof, the Plan shall terminate October 25, 2004 and no options shall be granted hereunder thereafter. EX-10.52 10 Exhibit 10.52 THERMOSPECTRA CORPORATION EQUITY INCENTIVE PLAN 1. Purpose The purpose of this Equity Incentive Plan (the "Plan") is to secure for ThermoSpectra Corporation (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees, officers and Directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards"). 2. Administration The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act"). 3. Effective Date The Plan shall be effective as of the date first approved by the Board of Directors, subject to the approval of the Plan by the Corporation's Stockholders. Grants of Awards under the Plan made prior to such approval shall be effective when made (unless otherwise specified by the Board at the time of grant), but shall be conditioned on and subject to such approval of the Plan. PAGE 4. Shares Subject to the Plan Subject to adjustment as provided in Section 10.6, the total number of shares of the common stock, $.01 par value per share, of the Company (the "Common Stock"), reserved and available for distribution under the Plan shall be 700,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan. 5. Eligibility Employees, officers and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan. 6. Types of Awards The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant. An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted. Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions: 6.1 Options An option is an Award that entitles the holder on exercise thereof to purchase Common Stock at a specified exercise price. Options granted under the Plan may be either incentive stock options ("incentive stock options") that meet the requirements of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), or options that are not intended to meet the requirements of Section 422A ("non-statutory options"). 6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than the par value per share of Common Stock. PAGE 6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory option. 6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term. Any exercise of an option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any additional documents required by the Board and (2) payment in full in accordance with Section 6.1.4 for the number of shares for which the option is exercised. 6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment. 6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made. 6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422A of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock PAGE option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent Stockholder of the Company) of the date of grant, as determined by the Board. 6.2 Restricted and Unrestricted Stock An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award. 6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable. 6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse. 6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan. 6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares. 6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock. 6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock. 6.3 Deferred Stock 6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The PAGE Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place. 6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock. 6.4 Performance Awards 6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an Amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. 6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award. 7. Purchase Price and Payment Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8. Loans and Supplemental Grants The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven. In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, PAGE discharging all the participant's income tax liabilities arising from all payments under the Plan. 9. Change in Control 9.1 Impact of Event In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides: (a) Any stock options or other stock-based Awards awarded under the Plan that were not previously exercisable and vested shall become fully exercisable and vested. (b) Awards of restricted stock and other stock-based Awards subject to restrictions and to the extent not fully vested, shall become fully vested and all such restrictions shall lapse so that shares issued pursuant to such Awards shall be free of restrictions. (c) Deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation, will be waived and removed as to deferred stock Awards and performance Awards. Performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Awards or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board. 9.2 Definition of "Change in Control" "Change in Control" means any one of the following events: (i) when, any Person is or becomes the beneficial owner (as defined in Section 13(d) of the Exchange Act and the Rules and Regulations thereunder), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations of the Exchange Act) of such Person, directly or indirectly, of 50% or more of the outstanding Common Stock of the Company or its parent corporation, Thermo Instrument Systems Inc. ("Thermo Instrument"), or the beneficial owner of 25% or more of the outstanding common stock of Thermo Electron Corporation ("Thermo Electron"), without the prior approval of the Prior Directors of the applicable issuer, (ii) the failure of the Prior Directors to constitute a majority of the Board of Directors of the Company, Thermo Instrument or Thermo Electron, as the case may be, at any time within two years following any Electoral Event, or (iii) any other event that the Prior Directors shall determine constitutes an effective change in the control of the Company, Thermo Instrument or Thermo Electron. As used in the preceding sentence, the following capitalized terms shall have the respective meanings set forth below: (a) "Person" shall include any natural person, any entity, any "affiliate" of any such natural person or entity as such term is defined in Rule 405 under the Securities Act of 1933 and any "group" (within the meaning of such term in Rule 13d-5 under the Exchange Act); (b) "Prior Directors" shall mean the persons sitting on the Company's, Thermo Instrument's or Thermo Electron's Board of Directors, as the PAGE case may be, immediately prior to any Electoral Event (or, if there has been no Electoral Event, those persons sitting on the applicable Board of Directors on the date of this Agreement) and any future director of the Company, Thermo Instrument or Thermo Electron who has been nominated or elected by a majority of the Prior Directors who are then members of the Board of Directors of the Company, Thermo Instrument or Thermo Electron, as the case may be; and (c) "Electoral Event" shall mean any contested election of Directors, or any tender or exchange offer for the Company's, Thermo Instrument's or Thermo Electron's Common Stock, not approved by the Prior Directors, by any Person other than the Company, Thermo Instrument, Thermo Electron or a majority-owned subsidiary of Thermo Electron. 10. General Provisions 10.1 Documentation of Awards Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable. 10.2 Rights as a Stockholder Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares. 10.3 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 any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer. PAGE If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative. 10.4 Tax Withholding The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement. 10.5 Nontransferability of Awards Except as otherwise specifically provided by the Board in the case of participants who are not reporting persons under Section 16 of the Exchange Act, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by the laws of descent and distribution, except pursuant to the terms of a qualified domestic relations order as defined in the Code, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). 10.6 Adjustments in the Event of Certain Transactions (a) In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution with respect to common Stockholders other than normal cash dividends, the Board will make (i) appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above, and (ii) appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provisions of Awards affected by such change. (b) The Board may also make appropriate adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions, repurchases or similar corporate transactions, or any other event, if it is determined by the Board that adjustments are appropriate to avoid distortion in the operation of the Plan, but no such adjustments other than those required by law may adversely affect the rights of any Participant (without the Participant's consent) under any Award previously granted. PAGE 10.7 Employment Rights Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment. 10.8 Other Employee Benefits The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan. 10.9 Legal Holidays If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday. 10.10 Foreign Nationals Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan. 11. Termination and Amendment The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment, unless approved by the Stockholders, shall be effective if it would cause the Plan to fail to satisfy the requirements of the federal tax law or regulation relating to incentive stock options or the requirements of Rule 16b-3 (or any successor rule) of the Exchange Act. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent. EX-10.60 11 Exhibit 10.60 THERMO FIBERTEK INC. EQUITY INCENTIVE PLAN 1. Purpose The purpose of this Equity Incentive Plan (the "Plan") is to secure for Thermo Fibertek Inc. (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees and Directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards"). 2. Administration The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act"). 3. Effective Date The Plan shall be effective as of February 22, 1994, subject to the approval of the Plan by the Company's Stockholders at the next annual meeting of Stockholders. Grants of Awards under the Plan made prior to such approval shall be effective when made (unless otherwise specified by the Board at the time of grant), but shall be conditioned on and subject to such approval of the Plan. PAGE 4. Shares Subject to the Plan Subject to adjustment as provided in Section 10.6, the total number of shares of Common Stock reserved and available for distribution under the Plan shall be 1,000,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan. 5. Eligibility Employees and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan. 6. Types of Awards The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided however that the maximum number of shares permitted to be granted under any Award or combination of Awards to any Participant during any one calendar year may not exceed 1% of the shares of Common Stock outstanding at the beginning of such calendar year. An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted. Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions: 6.1 Options An option is an Award that entitles the holder on exercise thereof to purchase Common Stock at a specified exercise price. Options granted under the Plan may be either incentive stock options ("incentive stock options") that meet the requirements of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), or options that are not intended to meet the requirements of Section 422A ("non-statutory options"). PAGE 6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than the par value per share of Common Stock. 6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory option. 6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term. Any exercise of an option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any additional documents required by the Board and (2) payment in full in accordance with Section 6.1.4 for the number of shares for which the option is exercised. 6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment. 6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made. 6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422 of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options PAGE may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent Stockholder of the Company) of the date of grant, as determined by the Board. 6.2 Restricted and Unrestricted Stock An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award. 6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable. 6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse. 6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan. 6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares. 6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock. 6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock. PAGE 6.3 Deferred Stock 6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place. 6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock. 6.4 Performance Awards 6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an Amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. 6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award. 7. Purchase Price and Payment Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8. Loans and Supplemental Grants The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven. PAGE In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, discharging all the participant's income tax liabilities arising from all payments under the Plan. 9. Change in Control 9.1 Impact of Event In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides: (a) Any stock options or other stock-based Awards awarded under the Plan that were not previously exercisable and vested shall become fully exercisable and vested. (b) Awards of restricted stock and other stock-based Awards subject to restrictions and to the extent not fully vested, shall become fully vested and all such restrictions shall lapse so that shares issued pursuant to such Awards shall be free of restrictions. (c) Deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation, will be waived and removed as to deferred stock Awards and performance Awards. Performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Awards or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board. 9.2 Definition of "Change in Control" "Change in Control" means any one of the following events: (i) when, any Person is or becomes the beneficial owner (as defined in Section 13(d) of the Exchange Act and the Rules and Regulations thereunder), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations of the Exchange Act) of such Person, directly or indirectly, of 50% or more of the outstanding Common Stock of the Company or the beneficial owner of 25% or more of the outstanding common stock of Thermo Electron Corporation ("Thermo Electron"), without the prior approval of the Prior Directors of the Company or Thermo Electron, as the case may be, (ii) the failure of the Prior Directors to constitute a majority of the Board of the Company or the Board of Directors of Thermo Electron, as the case may be, at any time within two years following any Electoral Event, or (iii) any other event that the Prior Directors shall determine constitutes an effective change in the control of the Company or Thermo Electron. As used in the preceding sentence, the following capitalized terms shall have the respective meanings set forth below: (a) "Person" shall include any natural person, any entity, any "affiliate" of any such natural person or entity as such term is defined in Rule 405 under the Securities Act of 1933 and any "group" PAGE (within the meaning of such term in Rule 13d-5 under the Exchange Act); (b) "Prior Directors" shall mean the persons sitting on the Company's or Thermo Electron's Board of Directors, as the case may be, immediately prior to any Electoral Event (or, if there has been no Electoral Event, those persons sitting on the applicable Board of Directors on the date of this Agreement) and any future director of the Company or Thermo Electron who has been nominated or elected by a majority of the Prior Directors who are then members of the Board of Directors of the Company or Thermo Electron, as the case may be; and (c) "Electoral Event" shall mean any contested election of Directors, or any tender or exchange offer for the Company's or Thermo Electron's Common Stock, not approved by the Prior Directors, by any Person other than the Company Thermo Electron or a subsidiary of Thermo Electron. 10. General Provisions 10.1 Documentation of Awards Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable. 10.2 Rights as a Stockholder Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares. 10.3 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 any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the PAGE certificates evidencing such Common Stock bear an appropriate legend restricting transfer. If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative. 10.4 Tax Withholding The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement. 10.5 Nontransferability of Awards Except as otherwise specifically provided by the Board in the case of participants who are not reporting persons under Section 16 of the Exchange Act, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by the laws of descent and distribution, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). 10.6 Adjustments in the Event of Certain Transactions (a) In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution with respect to common Stockholders other than normal cash dividends, the Board will make (i) appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above, and (ii) appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provisions of Awards affected by such change. (b) The Board may also make appropriate adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions, repurchases or similar corporate transactions, or any other event, if it is determined by the Board that adjustments are appropriate to avoid distortion in the operation of the Plan, but no such adjustments other than those required by law may adversely affect the rights of any Participant (without the Participant's consent) under any Award previously granted. PAGE 10.7 Employment Rights Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment. 10.8 Other Employee Benefits The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan. 10.9 Legal Holidays If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday. 10.10 Foreign Nationals Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan. 11. Termination and Amendment The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment, unless approved by the Stockholders, shall be effective if it would cause the Plan to fail to satisfy the requirements of the federal tax law or regulation relating to incentive stock options or the requirements of Rule 16b-3 (or any successor rule) of the Exchange Act. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent. EX-10.63 12 Exhibit 10.63 THERMO POWER CORPORATION EQUITY INCENTIVE PLAN 1. Purpose The purpose of this Equity Incentive Plan (the "Plan") is to secure for Thermo Power Corporation (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees and Directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards"). 2. Administration The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act"). 3. Effective Date The Plan shall be effective as of December 10, 1993, subject to the approval of the Plan by the Corporation's Stockholders at the next annual meeting of Stockholders. Grants of Awards under the Plan made prior to such approval shall be effective when made (unless otherwise specified by the Board at the time of grant), but shall be conditioned on and subject to such approval of the Plan. PAGE 4. Shares Subject to the Plan Subject to adjustment as provided in Section 10.6, the total number of shares of Common Stock reserved and available for distribution under the Plan shall be 750,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan. 5. Eligibility Employees and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan. 6. Types of Awards The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided however, that the maximum number of shares permitted to be granted under any Award or combination of Awards to any Participant during any one calendar year may not exceed 1% of the shares of Common Stock outstanding at the beginning of such calendar year. An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted. Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions: 6.1 Options An option is an Award that entitles the holder on exercise thereof to purchase Common Stock at a specified exercise price. Options granted under the Plan may be either incentive stock options ("incentive stock options") that meet the requirements of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), or options that are not intended to meet the requirements of Section 422A ("non-statutory options"). PAGE 6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than the par value per share of Common Stock. 6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory option. 6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term. Any exercise of an option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any additional documents required by the Board and (2) payment in full in accordance with Section 6.1.4 for the number of shares for which the option is exercised. 6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment. 6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made. 6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422A of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options PAGE may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent Stockholder of the Company) of the date of grant, as determined by the Board. 6.2 Restricted and Unrestricted Stock An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award. 6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable. 6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse. 6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan. 6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares. 6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock. 6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock. 6.3 Deferred Stock 6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock which is Common Stock to be PAGE delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place. 6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock. 6.4 Performance Awards 6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an Amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. 6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award. 7. Purchase Price and Payment Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8. Loans and Supplemental Grants The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven. In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on PAGE a grossed-up basis necessary to make him or her whole after tax, discharging all the participant's income tax liabilities arising from all payments under the Plan. 9. Change in Control 9.1 Impact of Event In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides: (a) Any stock options or other stock-based Awards awarded under the Plan that were not previously exercisable and vested shall become fully exercisable and vested. (b) Awards of restricted stock and other stock-based Awards subject to restrictions and to the extent not fully vested, shall become fully vested and all such restrictions shall lapse so that shares issued pursuant to such Awards shall be free of restrictions. (c) Deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation, will be waived and removed as to deferred stock Awards and performance Awards. Performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Awards or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board. 9.2 Definition of "Change in Control" "Change in Control" means any one of the following events: (i) when, any Person is or becomes the beneficial owner (as defined in Section 13(d) of the Exchange Act and the Rules and Regulations thereunder), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations of the Exchange Act) of such Person, directly or indirectly, of 50% or more of the outstanding Common Stock of the Company, or the beneficial owner of 25% or more of the outstanding common stock of Thermo Electron Corporation ("Thermo Electron"), without the prior approval of the Prior Directors of the Company or Thermo Electron, as the case may be, (ii) the failure of the Prior Directors to constitute a majority of the Board of the Company or of the Board of Directors of Thermo Electron, as the case may be, at any time within two years following any Electoral Event, or (iii) any other event that the Prior Directors shall determine constitutes an effective change in the control of the Company or Thermo Electron. As used in the preceding sentence, the following capitalized terms shall have the respective meanings set forth below: (a) "Person" shall include any natural person, any entity, any "affiliate" of any such natural person or entity as such term is defined in Rule 405 under the Securities Act of 1933 and any "group" (within the meaning of such term in Rule 13d-5 under the Exchange Act); (b) "Prior Directors" shall mean the persons sitting on the Company's or Thermo Electron's Board of Directors, as the case may be, PAGE immediately prior to any Electoral Event (or, if there has been no Electoral Event, those persons sitting on the applicable Board of Directors on the date of this Agreement) and any future director of the Company or Thermo Electron who has been nominated or elected by a majority of the Prior Directors who are then members of the Board of Directors of the Company or Thermo Electron, as the case may be; and (c) "Electoral Event" shall mean any contested election of Directors, or any tender or exchange offer for the Company's or Thermo Electron's Common Stock, not approved by the Prior Directors, by any Person other than the Company, Thermo Electron or a subsidiary of Thermo Electron. 10. General Provisions 10.1 Documentation of Awards Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable. 10.2 Rights as a Stockholder Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares. 10.3 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 any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer. If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative. PAGE 10.4 Tax Withholding The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement. 10.5 Nontransferability of Awards Except as otherwise specifically provided by the Board in the case of participants who are not reporting persons under Section 16 of the Exchange Act, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by the laws of descent and distribution, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). 10.6 Adjustments in the Event of Certain Transactions (a) In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution with respect to common Stockholders other than normal cash dividends, the Board will make (i) appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above, and (ii) appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provisions of Awards affected by such change. (b) The Board may also make appropriate adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions, repurchases or similar corporate transactions, or any other event, if it is determined by the Board that adjustments are appropriate to avoid distortion in the operation of the Plan, but no such adjustments other than those required by law may adversely affect the rights of any Participant (without the Participant's consent) under any Award previously granted. 10.7 Employment Rights Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of PAGE existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment. 10.8 Other Employee Benefits The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan. 10.9 Legal Holidays If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday. 10.10 Foreign Nationals Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan. 11. Termination and Amendment The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment, unless approved by the Stockholders, shall be effective if it would cause the Plan to fail to satisfy the requirements of the federal tax law or regulation relating to incentive stock options or the requirements of Rule 16b-3 (or any successor rule) of the Exchange Act. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent. EX-10.69 13 Exhibit 10.69 THERMEDICS DETECTION INC. EQUITY INCENTIVE PLAN 1. Purpose The purpose of this Equity Incentive Plan (the "Plan") is to secure for Thermedics Detection Inc. (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees, officers and Directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards"). 2. Administration The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act"). 3. Effective Date The Plan shall be effective as of the date first approved by the Board of Directors, subject to the approval of the Plan by the Corporation's Stockholders. Grants of Awards under the Plan made prior to such approval shall be effective when made (unless otherwise specified by the Board at the time of grant), but shall be conditioned on and subject to such approval of the Plan. PAGE 4. Shares Subject to the Plan Subject to adjustment as provided in Section 10.6, the total number of shares of the common stock, $.10 par value per share, of the Company (the "Common Stock"), reserved and available for distribution under the Plan shall be 500,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan. 5. Eligibility Employees, officers and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan. 6. Types of Awards The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided however that the maximum number of shares permitted to be granted under any Award or combination of Awards to any participant during any one calendar year may not exceed 1% of the shares of Common Stock outstanding at the beginning of such calendar year. An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted. Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions: 6.1 Options An option is an Award that entitles the holder on exercise thereof to purchase Common Stock at a specified exercise price. Options granted under the Plan may be either incentive stock options ("incentive stock options") that meet the requirements of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), or options that are not intended to meet the requirements of Section 422A ("non-statutory options"). PAGE 6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than the par value per share of Common Stock. 6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory option. 6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term. Any exercise of an option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any additional documents required by the Board and (2) payment in full in accordance with Section 6.1.4 for the number of shares for which the option is exercised. 6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment. 6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made. 6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422A of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options PAGE may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent Stockholder of the Company) of the date of grant, as determined by the Board. 6.2 Restricted and Unrestricted Stock An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award. 6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable. 6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse. 6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan. 6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares. 6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock. 6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock. PAGE 6.3 Deferred Stock 6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place. 6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock. 6.4 Performance Awards 6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an Amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. 6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award. 7. Purchase Price and Payment Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8. Loans and Supplemental Grants The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven. PAGE In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, discharging all the participant's income tax liabilities arising from all payments under the Plan. 9. Change in Control 9.1 Impact of Event In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides: (a) Any stock options or other stock-based Awards awarded under the Plan that were not previously exercisable and vested shall become fully exercisable and vested. (b) Awards of restricted stock and other stock-based Awards subject to restrictions and to the extent not fully vested, shall become fully vested and all such restrictions shall lapse so that shares issued pursuant to such Awards shall be free of restrictions. (c) Deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation, will be waived and removed as to deferred stock Awards and performance Awards. Performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Awards or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board. 9.2 Definition of "Change in Control" "Change in Control" means any one of the following events: (i) when, any Person is or becomes the beneficial owner (as defined in Section 13(d) of the Exchange Act and the Rules and Regulations thereunder), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations of the Exchange Act) of such Person, directly or indirectly, of 50% or more of the outstanding Common Stock of the Company or its parent corporation, Thermedics Inc. ("Thermedics"), or the beneficial owner of 25% or more of the outstanding common stock of Thermo Electron Corporation ("Thermo Electron"), without the prior approval of the Prior Directors of the applicable issuer, (ii) the failure of the Prior Directors to constitute a majority of the Board of Directors of the Company, Thermedics or Thermo Electron, as the case may be, at any time within two years following any Electoral Event, or (iii) any other event that the Prior Directors shall determine constitutes an effective change in the control of the Company, Thermedics or Thermo Electron. As used in the preceding sentence, the following capitalized terms shall have the respective meanings set forth below: (a) "Person" shall include any natural person, any entity, any "affiliate" of any such natural person or entity as such term is defined in Rule 405 under the Securities Act of 1933 and any "group" PAGE (within the meaning of such term in Rule 13d-5 under the Exchange Act); (b) "Prior Directors" shall mean the persons sitting on the Company's, Thermedics' or Thermo Electron's Board of Directors, as the case may be, immediately prior to any Electoral Event (or, if there has been no Electoral Event, those persons sitting on the applicable Board of Directors on the date of this Agreement) and any future director of the Company, Thermedics or Thermo Electron who has been nominated or elected by a majority of the Prior Directors who are then members of the Board of Directors of the Company, Thermedics or Thermo Electron, as the case may be; and (c) "Electoral Event" shall mean any contested election of Directors, or any tender or exchange offer for the Company's, Thermedics' or Thermo Electron's Common Stock, not approved by the Prior Directors, by any Person other than the Company, Thermedics, Thermo Electron or a majority-owned subsidiary of Thermo Electron. 10. General Provisions 10.1 Documentation of Awards Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable. 10.2 Rights as a Stockholder Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares. 10.3 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 any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider PAGE appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer. If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative. 10.4 Tax Withholding The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement. 10.5 Nontransferability of Awards Except as otherwise specifically provided by the Board in the case of participants who are not reporting persons under Section 16 of the Exchange Act, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by the laws of descent and distribution, except pursuant to the terms of a qualified domestic relations order as defined in the Code, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). 10.6 Adjustments in the Event of Certain Transactions (a) In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution with respect to common Stockholders other than normal cash dividends, the Board will make (i) appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above, and (ii) appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provisions of Awards affected by such change. (b) The Board may also make appropriate adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions, repurchases or similar corporate transactions, or any other event, if it is determined by the Board that adjustments are appropriate to avoid distortion in the operation of the Plan, but no such adjustments other than those required by law may PAGE adversely affect the rights of any Participant (without the Participant's consent) under any Award previously granted. 10.7 Employment Rights Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment. 10.8 Other Employee Benefits The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan. 10.9 Legal Holidays If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday. 10.10 Foreign Nationals Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan. 11. Termination and Amendment The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment, unless approved by the Stockholders, shall be effective if it would cause the Plan to fail to satisfy the requirements of the federal tax law or regulation relating to incentive stock options or the requirements of Rule 16b-3 (or any successor rule) of the Exchange Act. No amendment of the Plan or any agreement PAGE evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent. EX-11 14 EXHIBIT 11 THERMO INSTRUMENT SYSTEMS INC. COMPUTATION OF EARNINGS PER SHARE 1994 1993 1992 ----------- ----------- ----------- Computation of Fully Diluted Earnings per Share: Income: Net income $60,220,000 $44,764,000 $33,130,000 Add: Convertible obligation interest, net of tax 6,315,000 4,016,000 3,905,000 ----------- ----------- ----------- Income applicable to common stock assuming full dilution (a) $66,535,000 $48,780,000 $37,035,000 ----------- ----------- ----------- Shares: Weighted average shares outstanding 47,025,628 44,909,660 43,261,257 Add: Shares issuable from assumed conversion of convertible obligations 9,354,267 6,589,803 6,279,297 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 218,956 365,345 661,225 ----------- ----------- ----------- Weighted average shares outstanding, as adjusted (b) 56,598,851 51,864,808 50,201,779 ----------- ----------- ----------- Fully Diluted Earnings per Share (a) / (b) $ 1.18 $ .94 $ .74 =========== =========== =========== EX-13 15 Exhibit 13 Thermo Instrument Systems Inc. 1994 Financial Statements PAGE Thermo Instrument Systems Inc. Consolidated Statement of Income (In thousands except per share amounts) 1994 1993 1992 -------------------------------------------------------------------------- Revenues: Instruments $649,992 $529,014 $368,289 Services (Note 3) 12,195 55,162 54,910 -------- -------- -------- 662,187 584,176 423,199 -------- -------- -------- Costs and Expenses: Cost of instrument revenues 335,341 269,318 187,543 Cost of service revenues (Note 3) 9,493 42,714 44,136 Selling, general and administrative expenses (Note 10) 176,467 148,150 106,241 Research and development expenses 42,924 34,510 26,138 -------- -------- -------- 564,225 494,692 364,058 -------- -------- -------- Operating Income 97,962 89,484 59,141 Interest Income 5,935 3,644 6,994 Interest Expense (includes $5,384, $4,327, and $1,415 related to notes to parent company) (15,761) (14,384) (11,389) Gain on Issuance of Stock by Subsidiary (Note 12) 6,469 - - Gain on Sale of Investments (includes $2,000 on sale of related party investments in 1994) (Note 10) 2,000 - 2,072 Equity in Income of Unconsolidated Subsidiaries, Net (Note 3) 2,889 129 94 Other Income, Net - - 253 -------- -------- -------- Income Before Provision for Income Taxes and Minority Interest Expense 99,494 78,873 57,165 Provision for Income Taxes (Note 8) 39,162 34,109 24,035 Minority Interest Expense 112 - - -------- -------- -------- Net Income $ 60,220 $ 44,764 $ 33,130 ======== ======== ======== Earnings per Share: Primary $ 1.28 $ 1.00 $ .77 ======== ======== ======== Fully diluted $ 1.18 $ .94 $ .74 ======== ======== ======== Weighted Average Shares: Primary 47,026 44,910 43,261 ======== ======== ======== Fully diluted 56,599 51,865 50,202 ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 2PAGE Thermo Instrument Systems Inc. Consolidated Balance Sheet (In thousands) 1994 1993 --------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 152,933 $ 177,442 Available-for-sale investments, at quoted market value (amortized cost of $15,385) (includes $2,904 of related party investments) (Notes 2 and 10) 15,931 - Short-term related party investments, at cost (quoted market value of $9,138) - 6,145 Accounts receivable, less allowances of $8,779 and $8,456 159,615 129,184 Unbilled contract costs and fees 5,903 6,907 Inventories 121,353 97,552 Prepaid expenses 5,388 5,131 Prepaid income taxes (Note 8) 28,533 24,212 ---------- ---------- 489,656 446,573 ---------- ---------- Property, Plant and Equipment, at Cost, Net 126,924 121,287 ---------- ---------- Investment in Thermo Terra Tech Joint Venture (Note 3) 34,265 - ---------- ---------- Patents and Other Assets 22,224 27,820 ---------- ---------- Cost in Excess of Net Assets of Acquired Companies (Note 4) 338,848 295,461 ---------- ---------- $1,011,917 $ 891,141 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. 3PAGE Thermo Instrument Systems Inc. Consolidated Balance Sheet (continued) (In thousands except share amounts) 1994 1993 -------------------------------------------------------------------------- Liabilities and Shareholders' Investment Current Liabilities: Notes payable (Note 11) $ 45,953 $ 37,516 Accounts payable 38,594 29,658 Accrued payroll and employee benefits 33,085 22,737 Accrued income taxes 29,175 18,653 Accrued installation and warranty expenses 16,545 14,111 Customer deposits 11,115 9,699 Other accrued expenses (Note 4) 70,884 70,079 Due to parent company 13,999 6,067 ---------- ---------- 259,350 208,520 ---------- ---------- Deferred Income Taxes (Note 8) 21,347 19,542 ---------- ---------- Other Deferred Items 19,261 18,863 ---------- ---------- Long-term Obligations (Note 11): Senior obligations, including $140,000 due to parent company 210,000 210,000 Subordinated obligations, including $1,334 and $2,734 due to parent company 38,196 52,303 Other 15,363 23,858 ---------- ---------- 263,559 286,161 ---------- ---------- Minority Interest 7,637 - ---------- ---------- Commitments and Contingencies (Note 9) Shareholders' Investment (Notes 5 and 6): Common stock, $.10 par value, 125,000,000 shares authorized; 48,156,101 and 47,078,660 shares issued 4,816 4,708 Capital in excess of par value 233,765 219,703 Retained earnings 212,584 152,364 Treasury stock at cost, 683,742 and 867,087 shares (12,736) (15,850) Cumulative translation adjustment 1,991 (2,870) Net unrealized gain on available-for-sale investments (Note 2) 343 - ---------- ---------- 440,763 358,055 ---------- ---------- $1,011,917 $ 891,141 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. 4PAGE Thermo Instrument Systems Inc. Consolidated Statement of Cash Flows (In thousands) 1994 1993 1992 -------------------------------------------------------------------------- Operating Activities: Net income $ 60,220 $ 44,764 $ 33,130 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 22,810 20,719 13,680 Provision for losses on accounts receivable 733 970 666 Increase (decrease) in deferred income taxes 1,816 (497) 7,485 Gain on issuance of stock by subsidiary (Note 12) (6,469) - - Gain on sale of investments (2,000) - (2,072) Equity in income of unconsolidated subsidiaries, net (Note 3) (2,889) (129) (94) Other noncash expenses 3,252 3,636 2,352 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable (2,586) (27,716) 2,814 Inventories 6,422 6,916 (5,219) Other current assets (12) 7,482 2,343 Accounts payable 7,745 (11,143) (9,429) Other current liabilities (8,315) 7,530 (7,304) Other 28 132 (397) --------- --------- --------- Net cash provided by operating activities 80,755 52,664 37,955 --------- --------- --------- Investing Activities: Acquisitions, net of cash acquired (Note 4) (101,336) (102,048) (205,488) Sale of Nicolet Biomedical (Note 4) - 67,900 - Purchases of available-for-sale investments (23,105) - - Proceeds from sale and maturities of available-for-sale investments 16,250 - - (Increase) decrease in short-term investments - (60) 64,289 Purchases of property, plant and equipment (8,190) (9,063) (6,538) Other 1,214 4,990 (2,513) --------- --------- --------- Net cash used in investing activities (115,167) (38,281) (150,250) --------- --------- --------- 5PAGE Thermo Instrument Systems Inc. Consolidated Statement of Cash Flows (continued) (In thousands) 1994 1993 1992 -------------------------------------------------------------------------- Financing Activities: Proceeds from issuance of long-term obligations - 68,727 - Proceeds from issuance of obligations to parent company (Note 11) - 229,000 94,913 Repayment and repurchase of long-term obligations (7,948) (4,482) (11,189) Repayment of obligations to parent company - (157,485) (18,786) Proceeds from issuance of Company and subsidiary common stock (Note 12) 17,446 2,678 4,432 Purchases of Company common stock - (836) (16,898) --------- --------- --------- Net cash provided by financing activities 9,498 137,602 52,472 --------- --------- --------- Exchange Rate Effect on Cash 405 (482) (782) --------- --------- --------- Increase (Decrease) in Cash and Cash Equivalents (24,509) 151,503 (60,605) Cash and Cash Equivalents at Beginning of Year 177,442 25,939 86,544 --------- --------- --------- Cash and Cash Equivalents at End of Year $ 152,933 $ 177,442 $ 25,939 ========= ========= ========= Cash Paid For: Interest $ 14,782 $ 12,493 $ 13,074 Income taxes $ 24,913 $ 7,607 $ 17,413 Noncash Activities: Conversions of convertible obligations $ 14,107 $ 37,371 $ 9,635 Transfer of services businesses to Thermo Terra Tech joint venture $ 31,301 $ - $ - Fair value of assets of acquired companies $ 147,696 $ 151,886 $ 327,887 Cash paid for acquired companies (100,855) (102,861) (206,713) --------- --------- --------- Liabilities assumed of acquired companies $ 46,841 $ 49,025 $ 121,174 ========= ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 6PAGE Thermo Instrument Systems Inc. Consolidated Statement of Shareholders' Investment Net Un- realized Gain on Common Avail- Stock, Capital in Cumulative able-for- (In thou- $.10 Par Excess of Retained Treasury Translation sale In- sands) Value Par Value Earnings Stock Adjustment vestments -------------------------------------------------------------------------- Balance December 28, 1991 $ 2,879 $168,749 $ 76,957 $ (36) $ 2,405 $ - Net income - - 33,130 - - - Purchases of Company common stock - - - (16,898) - - Issuance of stock under employees' and directors' stock plans 36 2,958 - (193) - - Tax benefit related to employees' and directors' stock plans - 1,631 - - - - Conversions of convertible obligations 59 9,250 - - - - Effect of purchase of Nicolet shares from parent company (Note 4) - - (3,730) - - - Cumulative translation adjustment - - - - (4,474) - --------- --------- --------- -------- -------- -------- Balance January 2, 1993 2,974 182,588 106,357 (17,127) (2,069) - 7PAGE Thermo Instrument Systems Inc. Consolidated Statement of Shareholders' Investment (continued) Net Un- realized Gain on Common Avail- Stock, Capital in Cumulative able-for- (In thou- $.10 Par Excess of Retained Treasury Translation sale In- sands) Value Par Value Earnings Stock Adjustment vestments -------------------------------------------------------------------------- Net income - - 44,764 - - - Purchases of Company common stock - - - (887) - - Issuance of stock under employees' and directors' stock plans 16 498 - 2,164 - - Tax benefit related to employees' and directors' stock plans - 1,815 - - - - Conversions of convertible obligations 189 36,331 - - - - Effect of three-for- two stock split 1,529 (1,529) - - - - Effect of sale of Nicolet Biomedical (Note 4) - - 1,243 - - - Cumulative translation adjustment - - - - (801) - -------- -------- -------- -------- -------- -------- Balance January 1, 1994 4,708 219,703 152,364 (15,850) (2,870) - 8PAGE Thermo Instrument Systems Inc. Consolidated Statement of Shareholders' Investment (continued) Net Un- realized Gain on Common Avail- Stock, Capital in Cumulative able-for- (In thou- $.10 Par Excess of Retained Treasury Translation sale In- sands) Value Par Value Earnings Stock Adjustment vestments --------------------------------------------------------------------------- Net income - - 60,220 - - - Issuance of stock under employees' and directors' stock plans 4 (785) - 3,114 - - Tax benefit related to employees' and directors' stock plans - 1,120 - - - - Conversions of convertible obligations 104 13,727 - - - - Effect of change in accounting principle (Note 2) - - - - - 1,885 Change in net unrealized loss on available- for-sale investments (Note 2) - - - - - (1,542) Cumulative translation adjustment - - - - 4,861 - -------- -------- -------- -------- -------- -------- Balance December 31, 1994 $ 4,816 $233,765 $212,584 $(12,736) $ 1,991 $ 343 ======== ======== ======== ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 9PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Relationship with Thermo Electron Corporation Thermo Instrument Systems Inc. (the Company) was incorporated on May 28, 1986, as a wholly owned subsidiary of Thermo Electron Corporation (Thermo Electron). As of December 31, 1994, Thermo Electron owned 39,634,271 shares of the Company's common stock, representing 83% of such stock outstanding. Principles of Consolidation The accompanying financial statements include the accounts of the Company, its wholly owned subsidiaries, and its 86%-owned subsidiary, ThermoSpectra Corporation (ThermoSpectra). All material intercompany accounts and transactions have been eliminated. The Company accounts for investments in businesses in which it owns between 20% and 50% using the equity method (Note 3). Fiscal Year The Company has adopted a fiscal year ending the Saturday nearest December 31. References to 1994, 1993, and 1992 are for the fiscal years ended December 31, 1994, January 1, 1994, and January 2, 1993, respectively. Fiscal years 1994 and 1993 each included 52 weeks; 1992 included 53 weeks. Revenue Recognition For substantially all of its operations, the Company recognizes revenues upon shipment of its products. The Company provides a reserve for its estimate of warranty and installation costs at the time of shipment. Revenues and profits on substantially all contracts are recognized using the percentage-of-completion method. Revenues recorded under the percentage-of-completion method were $15,421,000 in 1994, $23,218,000 in 1993, and $27,448,000 in 1992. Revenues earned on contracts in process in excess of billings are classified as "Unbilled contract costs and fees" in the accompanying balance sheet. There are no significant amounts included in the accompanying balance sheet that are not expected to be recovered from existing contracts at current contract values, or that are not expected to be collected within one year, including amounts that are billed but not paid under retainage provisions. Gain on Issuance of Stock by Subsidiary At the time a subsidiary sells its stock to third parties at a price in excess of its book value, the Company's net investment in that subsidiary increases. If at that time the subsidiary is an operating entity and not engaged principally in research and development, the Company records the increase as a gain. If gains have been recognized on issuances of a subsidiary's stock and shares of the subsidiary are subsequently repurchased either by the subsidiary, the Company, or Thermo Electron, gain recognition does not occur on issuances subsequent to the date of a repurchase until such time as shares have been issued in an amount equivalent to the number of repurchased shares. Income Taxes The Company and Thermo Electron have a tax allocation agreement under which the Company is included in the consolidated federal and state income tax returns filed by Thermo Electron. The agreement provides that in years in which the Company has taxable income, it will pay to Thermo Electron 10PAGE Thermo Instrument Systems Inc. amounts comparable to the taxes the Company would have paid if it had filed separate tax returns. In years in which the Company incurs a loss, Thermo Electron will reimburse the Company the amount the Company would have received if it had filed separate tax returns. If Thermo Electron's equity ownership of the Company were to drop below 80%, the Company would be required to file its own income tax returns. As of December 31, 1994, the Company owed $11,275,000 to Thermo Electron for estimated federal and state income tax payments. This amount is included in "Accrued income taxes" in the accompanying 1994 balance sheet. In accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. Earnings per Share Primary earnings per share have been computed based on the weighted average number of shares outstanding during the year. Because the effect of the exercise of stock options would be immaterial, they have been excluded from the primary earnings per share calculation. Fully diluted earnings per share assumes the exercise of stock options and conversion of the Company's dilutive convertible obligations and elimination of the related interest expense. Stock Split All share and per share information was restated in 1993 to reflect a three-for-two stock split, effected in the form of a 50% stock dividend, which was distributed in July 1993. Cash and Cash Equivalents As of December 31, 1994, $65,955,000 of the Company's cash equivalents were invested in a repurchase agreement with Thermo Electron. Under this agreement, the Company in effect lends excess cash to Thermo Electron, which Thermo Electron collateralizes with investments principally consisting of corporate notes, U.S. government agency securities, money market funds, commercial paper, and other marketable securities, in the amount of at least 103% of such obligation. The Company's funds subject to the repurchase agreement are readily convertible into cash by the Company and have an original maturity of three months or less. The repurchase agreement earns a rate based on the Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. As of December 31, 1994, the Company's cash equivalents also include investments in short-term certificates of deposit of the Company's foreign subsidiaries, which have an original maturity of three months or less. Cash and cash equivalents are carried at cost, which equals fair market value at year-end 1994 and 1993. Available-for-sale Investments Pursuant to SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," effective January 2, 1994, the Company's debt and marketable equity securities are accounted for at market value (Note 2). Prior to 1994, these investments were carried at the lower of cost or market value. The fair market value of investments is determined based on quoted market prices for those investments. 11PAGE Thermo Instrument Systems Inc. Inventories Inventories are stated at the lower of cost (on a first-in, first-out or weighted average basis) or market value and include materials, labor, and manufacturing overhead. The components of inventories are as follows: (In thousands) 1994 1993 -------------------------------------------------------------------------- Raw materials and supplies $ 65,441 $ 53,322 Work in process 27,879 22,356 Finished goods 28,033 21,874 -------- -------- $121,353 $ 97,552 ======== ======== Property, Plant and Equipment The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the property as follows: buildings -- 20 to 40 years, machinery and equipment -- 3 to 10 years, and leasehold improvements -- the shorter of the term of the lease or the life of the asset. Property, plant and equipment consist of the following: (In thousands) 1994 1993 -------------------------------------------------------------------------- Land $ 23,374 $ 22,015 Buildings 76,789 69,302 Machinery, equipment and leasehold improvements 70,744 69,155 -------- -------- 170,907 160,472 Less: Accumulated depreciation and amortization 43,983 39,185 -------- -------- $126,924 $121,287 ======== ======== Patents and Other Assets "Patents and other assets" in the accompanying balance sheet includes the costs of acquired trademarks, patents, and other specifically identifiable intangible assets. These assets are amortized using the straight-line method over their estimated useful lives, which range from 4 to 15 years. These assets were $17,032,000 and $18,056,000, net of accumulated amortization of $10,501,000 and $7,937,000, at year-end 1994 and 1993, respectively. Cost in Excess of Net Assets of Acquired Companies The excess of cost over the fair value of net assets of acquired businesses is amortized using the straight-line method over 40 years. Accumulated amortization was $28,245,000 and $19,780,000 at year-end 1994 and 1993, respectively. The Company assesses the future useful life of this asset whenever events or changes in circumstances indicate that the current useful life has diminished. The Company considers the future undiscounted cash flows of the acquired businesses in assessing the recoverability of this asset. Foreign Currency All assets and liabilities of the Company's foreign subsidiaries are translated at year-end exchange rates, and revenues and expenses are translated at average exchange rates for the year in accordance with SFAS 12PAGE Thermo Instrument Systems Inc. No. 52, "Foreign Currency Translation." Resulting translation adjustments are reflected as a separate component of shareholders' investment titled "Cumulative translation adjustment." Foreign currency transaction gains and losses are included in the accompanying statement of income and are not material for the three years presented. Presentation Certain amounts in 1993 and 1992 have been reclassified to conform to the 1994 financial statement presentation. 2. Available-for-sale Investments Effective January 2, 1994, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." In accordance with SFAS No. 115, the Company's debt and marketable equity securities are considered "Available-for-sale investments" in the accompanying balance sheet and are carried at market value, with the difference between cost and market value, net of related tax effects, recorded currently as a component of shareholders' investment titled "Net unrealized gain on available-for- sale investments." "Effect of change in accounting principle" in the accompanying statement of shareholders' investment represents the unrealized gain, net of related tax effects, pertaining to available- for-sale investments held by the Company on January 2, 1994. Available-for-sale investments in the accompanying 1994 balance sheet represent investments in corporate bonds of $13,027,000 with contractual maturities of one year or less and $2,904,000 with contractual maturities of more than one year through five years. Actual maturities may differ from contractual maturities as a result of the Company's intent to sell these securities prior to maturity and as a result of put and call options that enable either the Company and/or the issuer to redeem these securities at an earlier date. The difference between the market value and the cost basis of available-for-sale investments at December 31, 1994, was $546,000, which represents gross unrealized gains of $607,000 and gross unrealized losses of $61,000 on those investments. The cost of available-for-sale investments that were sold was based on specific identification in determining realized gains recorded in the accompanying statement of income. Gain on sale of investments in 1994 resulted from gross realized gains relating to the sale of available-for- sale investments. 3. Joint Venture Effective April 4, 1994, the Company formed an environmental services joint venture with Thermo Process Systems Inc. (Thermo Process), another public subsidiary of Thermo Electron. The joint venture operates under the name Thermo Terra Tech. The Company contributed the analytical laboratories and the nuclear health physics and environmental science and engineering services businesses that comprised its Services segment. Thermo Process contributed its environmental laboratory business, which specializes in fast-response testing of petroleum-contaminated soils and groundwater, and approximately $31 million in cash and short-term investments. The Company owns 49% of Thermo Terra Tech and accounts for its interest in the joint venture using the equity method. Under the terms of the joint 13PAGE Thermo Instrument Systems Inc. venture agreement, 66.67% of income earned by the joint venture after April 4, 1994, will be allocated to the Company until the first to occur of (a) the joint venture has accumulated $5.1 million in net profits, (b) April 1, 1995, or (c) the date on which at least 70% of Thermo Process' cash contribution to the joint venture is first invested in one or more additional businesses. Thereafter, the Company's share of the joint venture's income will be 49%. The Company recorded $2,965,000 of income in 1994 related to its investment in Thermo Terra Tech, which is included in "Equity in income of unconsolidated subsidiaries, net" in the accompanying statement of income. 4. Acquisitions and Disposition In March 1994, the Company acquired several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated (Baker Hughes) for a purchase price of $89.7 million in cash. The Company acquired the EnviroTech Controls, NORAN Instruments (NORAN), TN Technologies, and Tremetrics businesses, which collectively design, manufacture, and market a variety of process control, process measurement, and laboratory analytical products for use in a wide range of industrial, energy, environmental, and research applications. The Company contributed the assets acquired and liabilities assumed from NORAN to the Company's ThermoSpectra subsidiary. During 1994, the Company made several other acquisitions for an aggregate $11.2 million in cash. In February 1993, the Company acquired Spectra-Physics Analytical, a manufacturer of liquid chromatography and capillary electrophoresis analytical instruments, for $67.3 million in cash. The Company funded the acquisition of Spectra-Physics Analytical through the issuance of a $69 million promissory note to Thermo Electron that was repaid in May 1993. During 1993, the Company made several other acquisitions for an aggregate $35.6 million in cash. The Company funded these acquisitions through the issuance of a $20 million promissory note to Thermo Electron that was repaid in 1993, and through short-term borrowings from Thermo Electron. These acquisitions have been accounted for using the purchase method of accounting, and their results of operations have been included in the accompanying financial statements from their respective dates of acquisition. The aggregate cost of these acquisitions exceeded the estimated fair value of the acquired net assets by approximately $111 million, which is being amortized over 40 years. Allocation of the purchase price for these acquisitions was based on estimates of the fair value of the net assets acquired and, for acquisitions completed in fiscal 1994, is subject to adjustment. Effective April 5, 1993, the Company sold the biomedical instruments products business of its Nicolet Instrument Corporation subsidiary (Nicolet Biomedical) to Thermo Electron for $67.9 million in cash. The results of operations of Nicolet Biomedical have been excluded from the accompanying financial statements as of April 5, 1993. Based on unaudited data, the following table presents selected financial information for the Company (excluding Nicolet Biomedical), the EnviroTech Measurements & Controls group of Baker Hughes, and Spectra-Physics Analytical on a pro forma basis, assuming the companies had been combined since the beginning of 1993. The effect on the Company's financial 14PAGE Thermo Instrument Systems Inc. statements of the acquisitions not included in the pro forma data was not significant. (In thousands except per share amounts) 1994 1993 -------------------------------------------------------------------------- Revenues $683,871 $720,633 Net income 58,413 33,367 Earnings per share: Primary 1.24 .74 Fully diluted 1.14 .72 The pro forma information includes the historical results for the environmental services businesses that comprised the Company's Services segment (Note 3). The pro forma results are not necessarily indicative of future operations or the actual results that would have occurred had the acquisitions been made at the beginning of 1993. "Effect of purchase of Nicolet shares from parent company" in the accompanying statement of shareholders' investment represents the difference between the purchase price of Nicolet Instrument Corporation (Nicolet) shares that were acquired by Thermo Electron in the open market prior to the Company's tender offer of Nicolet in 1992 and the cash tender offer price. Due to the related party nature of this purchase from Thermo Electron, the excess of the purchase price paid by the Company over the original purchase price paid by Thermo Electron was reflected as a reduction in retained earnings. "Effect of sale of Nicolet Biomedical" in the accompanying statement of shareholders' investment represents the portion that relates to Nicolet Biomedical. "Other accrued expenses" in the accompanying balance sheet includes approximately $17 million and $25 million at year-end 1994 and 1993, respectively, for estimated severance, relocation, and other reserves associated with acquisitions. 5. Stock-based Compensation Plans The Company has stock-based compensation plans for its key employees, directors, and others. Two of these plans, adopted in 1986, permit the grant of nonqualified and incentive stock options. A third plan, adopted in 1993, permits the grant of a variety of stock and stock-based awards as determined by the human resources committee of the Company's Board of Directors (the Board Committee), including restricted stock, stock options, stock bonus shares, or performance-based shares. To date, only nonqualified stock options have been awarded under these plans. The option recipients and the terms of options granted under these plans are determined by the Board Committee. Generally, options granted to date are exercisable immediately, but are subject to certain transfer restrictions and the right of the Company to repurchase shares issued upon exercise of the options at the exercise price, upon certain events. The restrictions and repurchase rights generally lapse ratably over periods ranging from four to ten years after the first anniversary of the grant date, depending on the term of the option, which may range from five to twelve years. Nonqualified stock options may be granted at any price determined by the Board Committee, although incentive stock options must be granted at not less than fair market value of the Company's stock on the date of grant. Generally, all options have been granted at fair market value. The Company also has a directors' stock option plan, adopted in 1991, that provides for the grant 15PAGE Thermo Instrument Systems Inc. of stock options to nonemployee directors pursuant to a formula approved by the Company's shareholders. Options awarded under this plan are exercisable six months after the date of grant and expire three or seven years after the date of grant. In addition to the Company's stock-based compensation plans, certain officers and key employees may also participate in the stock-based compensation plans of Thermo Electron or its majority-owned subsidiaries. No accounting recognition is given to options granted at fair market value until they are exercised. Upon exercise, net proceeds, including tax benefits realized, are credited to equity. A summary of the Company's stock option information is as follows: 1994 1993 1992 ------------------ ------------------ ------------------ Range of Range of Range of (In thousands Number Option Number Option Number Option except per of Prices of Prices of Prices share amounts) Shares per Share Shares per Share Shares per Share -------------------------------------------------------------------------- Options out- standing, beginning of year 1,894 $ 5.35-$33.80 1,067 $ 3.33-$23.30 1,498 $ 3.33-$16.42 Granted 397 28.28- 31.08 1,185 23.70- 33.80 216 15.25- 23.30 Exercised (188) 5.35- 23.70 (295) 3.33- 16.99 (591) 3.33- 15.32 Lapsed or cancelled (77) 5.35- 31.28 (63) 5.35- 23.70 (56) 5.35- 16.99 ----- ----- ----- Options out- standing, end of year 2,026 $ 6.17-$33.80 1,894 $ 5.35-$33.80 1,067 $ 3.33-$23.30 ===== ===== ===== Options exercisable 2,022 $ 6.17-$33.80 1,889 $ 5.35-$31.28 1,020 $ 3.33-$16.89 ===== ===== ===== Options avail- able for grant 835 1,155 135 ===== ===== ===== 6. Common Stock At December 31, 1994, the Company had reserved 12,341,714 unissued shares of its common stock for possible issuance under stock-based compensation plans and for issuance upon possible conversion of the Company's convertible obligations. 7. Employee Benefit Plans Employee Stock Purchase Plan Substantially all of the Company's full-time U.S. employees are eligible to participate in an employee stock purchase plan sponsored by the Company. Under this plan, shares of the Company's and Thermo Electron's common stock may be purchased at the end of a 12-month plan year at 85% of the fair market value at the beginning of the plan year, and the shares purchased are subject to a one-year resale restriction. Shares are purchased through payroll deductions of up to 10% of each participating employee's gross 16PAGE Thermo Instrument Systems Inc. wages. During 1994, 1993, and 1992, the Company issued 51,800 shares, 101,273 shares, and 66,426 shares of its common stock, respectively, under this plan. 401(k) Savings Plan and Employee Stock Ownership Plan The majority of the Company's full-time U.S. employees are eligible to participate in Thermo Electron's 401(k) savings plan and employee stock ownership plan. Contributions to the 401(k) savings plan are made by both the employee and the Company. Company contributions are based upon the level of employee contributions. For these plans, the Company contributed and charged to expense $2,774,000, $2,239,000, and $1,728,000 in 1994, 1993, and 1992, respectively. Postemployment Benefits The Company provides certain postemployment benefits to former or inactive employees. Effective January 2 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits." SFAS No. 112 requires the recognition of the cost of postemployment benefits if certain criteria are met and the amount of benefits can be reasonably estimated. The adoption of this statement did not have a material impact on the Company's financial statements. 8. Income Taxes The components of income before provision for income taxes and minority interest expense are as follows: (In thousands) 1994 1993 1992 ------------------------------------------------------------------------- Domestic $81,454 $61,254 $49,225 Foreign 18,040 17,619 7,940 ------- ------- ------- $99,494 $78,873 $57,165 ======= ======= ======= The components of the provision for income taxes are as follows: (In thousands) 1994 1993 1992 ------------------------------------------------------------------------ Currently payable: Federal $18,076 $14,196 $10,625 State 5,936 4,008 3,028 Foreign 7,977 6,909 3,791 ------- ------- ------- 31,989 25,113 17,444 ------- ------- ------- Net deferred (prepaid): Federal 6,219 6,691 5,694 State 1,292 1,147 (292) Foreign (338) 1,158 1,189 ------- ------- ------- 7,173 8,996 6,591 ------- ------- ------- $39,162 $34,109 $24,035 ======= ======= ======= 17PAGE Thermo Instrument Systems Inc. The provision for income taxes that is currently payable does not reflect $1,120,000, $1,815,000, and $1,631,000 of tax benefits allocated to "Capital in excess of par value" in 1994, 1993, and 1992, respectively, or $1,150,000 and $3,060,000 of tax benefits used to reduce "Cost in excess of net assets of acquired companies" in 1993 and 1992, respectively. "Provision for income taxes" in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate of 35% in 1994 and 1993 and 34% in 1992 to income before provision for income taxes and minority interest expense due to the following: (In thousands) 1994 1993 1992 ------------------------------------------------------------------------- Provision for income taxes at statutory rate $34,823 $27,606 $19,436 Increases (decreases) resulting from: State income taxes, net of federal tax 4,698 3,351 1,806 Net foreign losses not benefited and tax rate differential 817 1,330 2,223 Tax benefit of foreign sales corporation (1,602) (1,134) (988) Amortization of cost in excess of net assets of acquired companies 2,135 2,338 1,139 Gain on issuance of stock by subsidiary (2,264) - - Nondeductible expenses 427 585 159 Other, net 128 33 260 ------- ------- ------- $39,162 $34,109 $24,035 ======= ======= ======= "Deferred income taxes" and "Prepaid income taxes" in the accompanying balance sheet consist of the following: (In thousands) 1994 1993 --------------------------------------------------------------- Deferred income taxes: Depreciation $13,321 $14,116 Intangible assets 5,490 4,402 Other 2,536 1,024 ------- ------- $21,347 $19,542 ======= ======= Prepaid income taxes: Reserves and other accruals $10,588 $12,497 Inventory basis difference 10,412 6,462 Accrued compensation 4,460 3,956 Allowance for doubtful accounts 3,399 2,660 Net operating loss and tax credit carryforwards 2,377 2,262 Other, net 1,078 41 ------- ------- 32,314 27,878 Less: Valuation allowance 3,781 3,666 ------- ------- $28,533 $24,212 ======= ======= The year-end 1994 valuation allowance reserves for the uncertainty surrounding the realization of $1,406,000 of certain state tax-deferred 18PAGE Thermo Instrument Systems Inc. assets and $2,375,000 for federal net operating loss and tax credit carryforwards, the realization of which is limited to the future income of certain subsidiaries. The net operating loss and tax credit carryforwards expire in the years 2002 through 2005, and the resulting benefit will be used to reduce "Cost in excess of net assets of acquired companies." A provision has not been made for U.S. or additional foreign taxes on $39 million of undistributed earnings of foreign subsidiaries that could be subject to taxation if remitted to the U.S. because the Company plans to keep these amounts permanently reinvested overseas. The Company believes that any additional U.S. tax liability due upon remittance of such earnings would be immaterial due to available U.S. foreign tax credits. 9. Commitments and Contingencies Operating Leases The Company leases portions of its office and operating facilities under various operating lease arrangements. The accompanying statement of income includes expenses from operating leases of $9,028,000, $8,172,000, and $5,893,000 in 1994, 1993, and 1992, respectively. Future minimum payments due under noncancellable operating leases at December 31, 1994, are $7,791,000 in 1995; $6,136,000 in 1996; $4,581,000 in 1997; $3,668,000 in 1998; $2,673,000 in 1999; and $10,159,000 in 2000 and thereafter. Total future minimum lease payments are $35,008,000. Litigation The Company is contingently liable with respect to lawsuits and other matters that arose in the ordinary course of business. In the opinion of management, these contingencies will not have a material effect upon the financial position of the Company or its results of operations. 10. Related Party Transactions Corporate Services Agreement The Company and Thermo Electron have a corporate services agreement under which Thermo Electron's corporate staff provides certain administrative services, including certain legal advice and services, risk management, certain employee benefit administration, tax advice and preparation of tax returns, centralized cash management, and certain financial and other services, for which the Company paid Thermo Electron annually an amount equal to 1.25% of the Company's revenues in fiscal 1994 and 1993. Prior to 1993, the Company paid an annual fee equal to 1% of the Company's revenues. Beginning in fiscal 1995, the Company will pay an annual fee equal to 1.20% of the Company's revenues. The annual fee is reviewed and adjusted annually by mutual agreement of the parties. For these services, the Company was charged $8,277,000, $7,302,000, and $4,232,000 in 1994, 1993, and 1992, respectively. Management believes that the service fee charged by Thermo Electron is reasonable and that such fees are representative of the expenses the Company would have incurred on a stand-alone basis. The corporate services agreement is renewed annually but can be terminated upon 30 days' prior notice by the Company or upon the Company's withdrawal from the Thermo Electron Corporate Charter (the Thermo Electron Corporate Charter defines the relationship among Thermo Electron and its majority-owned subsidiaries). For additional items such as employee benefit plans, insurance coverage, and other identifiable costs, Thermo Electron charges the Company based upon costs attributable to the Company. 19PAGE Thermo Instrument Systems Inc. Repurchase Agreement The Company invests excess cash in a repurchase agreement with Thermo Electron as discussed in Note 1. Short-term Investments At December 31, 1994, the Company's available-for-sale investments included $2,904,000 (amortized cost of $2,298,000) of 6 1/2% subordinated convertible debentures due 1998, which were purchased on the open market for $2,297,000. The debentures have a par value of $2,323,000 and were issued by Thermedics Inc. (Thermedics), which is a majority-owned subsidiary of Thermo Electron, and are guaranteed on a subordinated basis by Thermo Electron. During 1994, the Company sold $4,000,000 par value of the Thermedics debentures for net proceeds of $5,890,000, which resulted in a gain of $2,000,000. Long-term Obligations See Note 11 for long-term obligations of the Company held by Thermo Electron. 11. Short- and Long-term Obligations Short-term Obligations "Notes payable" in the accompanying balance sheet represent bank borrowings at several of the Company's foreign subsidiaries. The weighted average interest rate for these borrowings was 5.83% and 6.53% at year-end 1994 and 1993, respectively. Long-term Obligations Long-term obligations of the Company are as follows: (In thousands except per share amounts) 1994 1993 - --------------------------------------------------------------------------- 3 3/4% Senior convertible note, due 2000, convertible at $31.75 per share (a) $140,000 $140,000 3 3/4% Senior convertible debentures, due 2000, convertible at $31.75 per share (b) 70,000 70,000 7% Subordinated convertible note, due 1996, convertible at $4.44 per share (a) 1,334 2,734 6 5/8% Subordinated convertible debentures, due 2001, convertible at $17.58 per share (c) 36,862 49,569 10.23% Mortgage loan secured by property with a net book value of $16,564, payable in monthly installments with final payment in 2004 10,855 11,536 8 5/8% Note, payable in semi-annual installments, due 1999 - 8,000 Other 6,276 11,176 -------- -------- 265,327 293,015 Less: Current maturities of long-term obligations 1,768 6,854 -------- -------- $263,559 $286,161 ======== ======== (a) Represents an obligation to Thermo Electron. (b) Guaranteed on a senior basis by Thermo Electron. (c) Guaranteed on a subordinated basis by Thermo Electron. 20PAGE Thermo Instrument Systems Inc. In lieu of issuing shares of the Company's common stock upon conversion of the 3 3/4% senior convertible debentures due 2000, the Company has the option to pay holders of the debentures cash equal to the weighted average market price of the Company's common stock on the trading date prior to conversion. During 1994, 1993, and 1992, convertible obligations of $14,107,000, $37,371,000, and $9,635,000, respectively, were converted into common stock of the Company. The annual requirements for long-term obligations are as follows: (In thousands) -------------------------------------------------------------------------- 1995 $ 1,768 1996 2,576 1997 1,337 1998 1,429 1999 1,356 2000 and thereafter 256,861 -------- $265,327 ======== Based on quoted market prices and on borrowing rates currently available to the Company for debt of the same remaining maturities, the fair market value of the Company's long-term obligations at December 31, 1994 and January 1, 1994 was approximately $320 million and $389 million, respectively. 12. Transactions in Stock of Subsidiary In 1994, the Company's ThermoSpectra subsidiary sold 1,505,000 shares of its common stock in private placements at $10.00 per share. Net proceeds from the private placements were $13,993,000, resulting in a gain of $6,469,000. At year-end 1994, the Company owned 86% of ThermoSpectra's outstanding common stock. 21PAGE Thermo Instrument Systems Inc. 13. Industry Segment and Geographical Data -------------------------------------------------------------------------- The Company's principal business consists of developing, manufacturing, and marketing analytical and environmental monitoring instruments. Prior to April 4, 1994, the Company also provided environmental services including laboratory-based testing, nuclear health physics, and environmental science and engineering services. These services are now being provided by the Thermo Terra Tech joint venture in which the Company has a 49% equity interest (Note 3). Financial information pertaining to these segments is set forth in the following table: (In thousands) 1994 1993 1992 ------------------------------------------------------------------------- Revenues: Instruments $ 650,114 $ 529,279 $ 368,533 Services 12,195 55,162 54,910 Intersegment sales elimination (a) (122) (265) (244) ---------- ---------- ---------- $ 662,187 $ 584,176 $ 423,199 ========== ========== ========== Operating income: Instruments $ 107,400 $ 92,466 $ 60,089 Services 801 4,321 3,284 Corporate (b) (10,239) (7,303) (4,232) ---------- ---------- ---------- $ 97,962 $ 89,484 $ 59,141 ========== ========== ========== Identifiable assets: Instruments $ 841,859 $ 679,151 $ 619,865 Services - 40,444 40,013 Corporate (c) 170,058 171,546 26,547 ---------- ---------- ---------- $1,011,917 $ 891,141 $ 686,425 ========== ========== ========== Depreciation and amortization: Instruments $ 22,070 $ 18,741 $ 11,588 Services 740 1,978 2,092 ---------- ---------- ---------- $ 22,810 $ 20,719 $ 13,680 ========== ========== ========== Capital expenditures: Instruments $ 7,400 $ 6,747 $ 4,901 Services 790 2,316 1,637 ---------- ---------- ---------- $ 8,190 $ 9,063 $ 6,538 ========== ========== ========== Export revenues included above (d): Europe $ 70,903 $ 72,161 $ 47,585 Other 82,661 63,327 40,466 ---------- ---------- ---------- $ 153,564 $ 135,488 $ 88,051 ========== ========== ========== 22PAGE Thermo Instrument Systems Inc. (In thousands) 1994 1993 1992 ------------------------------------------------------------------------- Foreign operations included above: Revenues: Germany $ 77,535 $ 57,507 $ 49,109 Other Europe 85,980 59,110 41,891 Other 36,922 29,391 17,723 ---------- ---------- ---------- $ 200,437 $ 146,008 $ 108,723 ========== ========== ========== Operating income: Germany $ 3,168 $ 4,116 $ 3,363 Other Europe 10,502 7,572 4,246 Other 7,672 6,317 260 ---------- ---------- ---------- $ 21,342 $ 18,005 $ 7,869 ========== ========== ========== Identifiable assets: Germany $ 114,536 $ 100,042 $ 73,665 Other Europe 100,548 81,068 58,772 Other 37,947 32,807 30,334 ---------- ---------- ---------- $ 253,031 $ 213,917 $ 162,771 ========== ========== ========== (a) Intersegment sales are accounted for at prices that are representative of transactions with unaffiliated parties. (b) Primarily corporate general and administrative expenses. (c) Primarily cash, cash equivalents, short-term investments, and the Company's investment in the Thermo Terra Tech joint venture. (d) In general, export sales are denominated in U.S. dollars. 14. Subsequent Events Potential Acquisition On March 1, 1995, the Company entered into an Asset and Stock Purchase Agreement (the Agreement) with Fisons plc (Fisons) under which the Company agreed to acquire the Scientific Instruments Division (the Division) of Fisons for 202 million British pounds sterling. The Division is principally composed of operations that are involved in the research, development, manufacture, and sale of analytical instruments to industrial and research laboratories worldwide. For the fiscal year ended December 31, 1994, the Division had unaudited revenues of approximately 262 million British pounds sterling and an unaudited net loss of approximately 19 million British pounds sterling. Consummation of the acquisition is subject to several conditions, including approval by Fisons shareholders, regulatory approvals, consent of certain third parties, and customary conditions to closing. The Company intends to fund the purchase price from available cash and through borrowings from Thermo Electron. Thermo Electron has guaranteed the obligations of the Company under the Agreement. The purchase price is subject to a post-closing adjustment based on the net asset value of the Division as of the closing date. 23PAGE Thermo Instrument Systems Inc. Stock Split In February 1995, the Company declared a three-for-two stock split in the form of a 50% stock dividend, payable on April 14, 1995, to shareholders of record as of March 31, 1995. Common shares outstanding as of December 31, 1994, on a pro forma basis to reflect the stock split would have been 71,208,539 shares. The following table presents other selected financial data on a pro forma basis to reflect the stock split. (In thousands except per share amounts) 1994 1993 1992 ------------------------------------------------------------------------ Earnings per share: Primary $.85 $.66 $.51 Fully diluted $.78 $.63 $.49 Weighted average shares: Primary 70,538 67,364 64,892 Fully diluted 84,898 77,797 75,303 Financial results for 1994 and prior periods will be restated in the first quarter of 1995 to reflect the stock split. 24PAGE Report of Independent Public Accountants -------------------------------------------------------------------------- To the Shareholders and Board of Directors of Thermo Instrument Systems Inc.: We have audited the accompanying consolidated balance sheets of Thermo Instrument Systems Inc. (a Delaware corporation and 83%-owned subsidiary of Thermo Electron Corporation) and subsidiaries as of December 31, 1994 and January 1, 1994, and the related consolidated statements of income, shareholders' investment, and cash flows for each of the three years in the period ended December 31, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Thermo Instrument Systems Inc. and subsidiaries as of December 31, 1994 and January 1, 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, effective January 2, 1994, the Company changed its method of accounting for investments in debt and marketable equity securities. Arthur Andersen LLP Boston, Massachusetts February 10, 1995 (Except with respect to the matters discussed in Note 14 as to which the date is March 1, 1995) 25PAGE Thermo Instrument Systems Inc. Management's Discussion and Analysis of Financial Condition and Results of Operations -------------------------------------------------------------------------- Results of Operations The Company's revenues were $662.2 million in 1994, compared with $584.2 million in 1993 and $423.2 million in 1992. Instruments segment revenues increased 23% to $650.1 million in 1994, compared with the 44% increase reported in 1993. The increase was due to acquisitions, which added revenues of approximately $125 million in 1994 and $147 million in 1993. The Company's acquisitions included several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated (Baker Hughes) in March 1994, the radiation safety measurement products and radiometry process control divisions of FAG Kugelfischer Georg Shafer AG in October 1993, Spectra-Physics Analytical in February 1993, and Gamma-Metrics in January 1993. The 1993 and 1992 results included $12.6 million and $20.2 million, respectively, in revenues from the biomedical instruments products business of the Company's Nicolet Instrument Corporation subsidiary (Nicolet Biomedical), which was sold to Thermo Electron Corporation (Thermo Electron) effective April 5, 1993. Services segment revenues were $12.2 million for the three-month period ended April 2, 1994, $55.2 million in 1993, and $54.9 million in 1992. Effective April 4, 1994, the Company contributed the businesses that comprised its Services segment to Thermo Terra Tech in exchange for a 49% ownership interest in that joint venture. As a result, the Services segment operations are no longer consolidated in the Company's financial statements (see Note 3 to Consolidated Financial Statements). The gross profit margin increased to 48% in 1994 from 47% in 1993 and 45% in 1992. The increase in 1994 reflects the transfer of the lower-margin businesses that comprised the Company's Services segment to the Thermo Terra Tech joint venture as discussed above. The gross profit margin for the Instruments segment remained relatively unchanged at 48% in 1994 and 49% in both 1993 and 1992. The gross profit margin for the Services segment decreased one percentage point in 1994 to 22% and improved three percentage points in 1993. The improvement in 1993 was due to cost reductions in the Company's engineering services business and greater revenues contributed by the higher-margin environmental laboratory and infrastructure business. Selling, general and administrative expenses as a percentage of revenues increased to 26.6% in 1994 from 25.4% in 1993, and 25.1% in 1992. The increases resulted primarily from higher costs as a percentage of revenues at acquired businesses. Research and development expenses were 6.6% of Instruments segment revenues in 1994, compared with 6.5% in 1993 and 7.1% in 1992. Research and development expenses declined in 1993 primarily due to the Company's completion of the development of its Magna-IR (TM) and Quantum (TM) products, which were introduced by the Company's Nicolet and Finnigan subsidiaries, respectively. Interest income was $5.9 million in 1994, $3.6 million in 1993, and $7.0 million in 1992. The increase in 1994 was primarily a result of interest income earned on the net proceeds from the issuance of 3 3/4% senior 26PAGE Thermo Instrument Systems Inc. convertible obligations in September 1993, offset in part by the cash used to purchase several businesses within the EnviroTech Measurements & Controls group of Baker Hughes in the first quarter of 1994. The decrease in 1993 was primarily a result of lower average balances of short-term investments due to the cash expended for the acquisition of Nicolet Instrument Corporation in August 1992, offset in part by interest income earned on the net proceeds from the issuance of the 3 3/4% senior convertible obligations in September 1993. Interest expense increased to $15.8 million in 1994 from $14.4 million in 1993 and $11.4 million in 1992 due primarily to the issuance of the 3 3/4% senior convertible obligations in September 1993, offset in part by a reduction in interest expense as a result of the repayment in the third quarter of 1993 of debt incurred in connection with acquisitions. As a result of the sale of stock by its ThermoSpectra Corporation subsidiary (ThermoSpectra), the Company recorded a gain of $6.5 million in 1994. The gain represents an increase in the Company's proportionate share of the subsidiary's equity and is classified as "Gain of issuance of stock by subsidiary" in the accompanying 1994 statement of income. "Gain on sale of investments" in the accompanying 1994 statement of income resulted from the sale of a portion of the Company's investment in Thermedics Inc. (Thermedics) convertible debentures. Thermedics is a majority-owned subsidiary of Thermo Electron. "Gain on sale of investments" in the accompanying 1992 statement of income resulted from the partial liquidation of the Company's short-term investments. The proceeds from the sale of the short-term investments were used to reduce borrowings from Thermo Electron. "Equity in income of unconsolidated subsidiaries, net" in 1994 primarily represents the Company's portion of the results of Thermo Terra Tech (see Note 3 to Consolidated Financial Statements). The effective tax rate was 39% in 1994, 43% in 1993, and 42% in 1992. These rates exceeded the statutory federal income tax rate primarily due to nondeductible amortization of cost in excess of net assets of acquired companies, the inability to provide a tax benefit on losses incurred at certain foreign subsidiaries, and the impact of state income taxes. The effective tax rate decreased in 1994 from 1993 due primarily to the nontaxable gain on the issuance of stock by the Company's ThermoSpectra subsidiary. Net income increased 35% in 1994 to a record $60.2 million, following a 35% increase in 1993. Primary earnings per share grew 28% to $1.28 in 1994, compared with a 30% increase in 1993. Liquidity and Capital Resources Consolidated working capital at December 31, 1994, was $230.3 million, compared with $238.1 million at January 1, 1994, a decrease of $7.8 million. Included in working capital are cash, cash equivalents, and short-term investments of $168.9 million at December 31, 1994, and $183.6 million at January 1, 1994. Of the $168.9 million balance at December 31, 1994, $19.3 million was held by the Company's ThermoSpectra subsidiary and $149.6 million by the Company and its wholly owned subsidiaries. Cash provided by operations in 1994 was $80.8 million. During 1994, the Company expended $100.9 million for acquisitions. In 1994, the Company's ThermoSpectra subsidiary sold 1,505,000 shares of its common stock in private placements for net proceeds of $14.0 million. 27PAGE Thermo Instrument Systems Inc. In 1995, the Company plans to make expenditures for property, plant and equipment of approximately $11 million. The Company plans to make these expenditures from working capital. The Company believes that its existing resources are sufficient to meet the capital requirements of its existing operations for the foreseeable future. The Company has historically complemented internal development with acquisitions of businesses or technologies that extend the Company's presence in current markets or provide opportunities to enter and compete effectively in new markets. The Company will consider making acquisitions of such companies, product lines, or technologies that are consistent with its plans for strategic growth. On March 1, 1995, the Company entered into an agreement to acquire the Scientific Instruments Division of Fisons plc for 202 million British pounds sterling, subject to a post-closing adjustment. The purchase price will be funded from available cash and through borrowings from Thermo Electron (see Note 14 to Consolidated Financial Statements). 28PAGE Thermo Instrument Systems Inc. Selected Financial Information (In thousands except per share amounts) 1994(a) 1993(c) 1992(d) 1991(e) 1990 -------------------------------------------------------------------------- Statement of Income Data: Revenues $ 662,187 $ 584,176 $ 423,199 $ 338,747 $ 285,384 Income before provision for income taxes 99,382 78,873 57,165 43,573 32,515 Net income 60,220 44,764 33,130 24,837 18,915 Earnings per share: Primary 1.28 1.00 .77 .61 .49 Fully diluted 1.18 .94 .74 .58 .47 Balance Sheet Data: Working capital $ 230,306 $ 238,053 $ 68,412 $ 197,391 $ 63,372 Total assets 1,011,917 891,141 686,425 497,959 376,148 Long-term obligations 263,559 286,161 170,092 123,476 64,171 Shareholders' investment 440,763 358,055 272,723 250,954 184,140 Quarterly Information (Unaudited) (In thousands except per share amounts) 1994 First Second(a) Third(b) Fourth(b) --------------------------------------------------------------------------- Revenues $159,782 $162,615 $161,580 $178,210 Gross profit 75,372 78,787 77,565 85,629 Net income 12,852 14,084 15,104 18,180 Earnings per share: Primary .28 .30 .32 .38 Fully diluted .26 .28 .29 .35 1993 First(c) Second(c) Third(c) Fourth -------------------------------------------------------------------------- Revenues $149,748 $140,415 $136,511 $157,502 Gross profit 69,106 65,309 63,153 74,576 Net income 9,849 10,506 11,223 13,186 Earnings per share: Primary .22 .24 .25 .29 Fully diluted .22 .23 .24 .27 (a) Reflects the March 1994 acquisition of several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated, and the formation of the Thermo Terra Tech joint venture, effective April 4, 1994. (b) Results include nontaxable gains of $3,284,000 and $3,185,000 in the third and fourth quarters, respectively, from the issuance of stock by subsidiary. (c) Reflects the February 1993 acquisition of Spectra-Physics Analytical, the April 1993 sale of the Company's biomedical instruments products business of its Nicolet Instrument Corporation subsidiary, and the 29PAGE Thermo Instrument Systems Inc. September 1993 issuance of $210,000,000 aggregate principal amount of 3 3/4% senior convertible obligations due 2000. (d) Reflects the August 1992 acquisition of Nicolet Instrument Corporation. (e) Reflects the issuance of $101,250,000 aggregate principal amount of 6 5/8% subordinated convertible obligations due 2001. 30PAGE Thermo Instrument Systems Inc. Common Stock Market Information The following table shows the market range for the Company's common stock based on reported sales prices on the American Stock Exchange (symbol THI) for 1994 and 1993. Prices were restated in 1993 to reflect a three-for-two stock split effected in July 1993. 1994 1993 -------------------- ---------------------- Quarter High Low High Low ------------------------------------------------------------------- First $34 3/4 $28 1/4 $28 2/3 $23 Second 31 7/8 27 1/8 27 3/8 24 1/3 Third 32 1/4 27 1/2 29 7/8 25 1/2 Fourth 31 7/8 28 5/8 34 7/8 28 1/4 As of January 27, 1995, the Company had 2,858 holders of record of its common stock. This does not include holdings in street or nominee names. The closing market price on the American Stock Exchange for the Company's common stock on January 27, 1995, was $31 per share. Stock Transfer Agent American Stock Transfer & Trust Company is the stock transfer agent and maintains shareholder activity records. The agent will respond to questions on issuances of stock certificates, changes of ownership, lost stock certificates, and changes of address. For these and similar matters, please direct inquires to: American Stock Transfer & Trust Company Shareholder Services Department 40 Wall Street, 46th Floor New York, New York 10005 (718) 921-8200 Shareholder Services Shareholders of Thermo Instrument Systems Inc. who desire information about the Company are invited to contact John N. Hatsopoulos, Chief Financial Officer, Thermo Instrument Systems Inc., 81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046, by letter or telephone at (617) 622-1111. A mailing list is maintained to enable shareholders whose stock is held in street name, and other interested individuals, to receive quarterly and annual reports as quickly as possible. If you would like your name added to the mailing list, please notify this office. Dividend Policy The Company has never paid cash dividends because its policy has been to use earnings to finance expansion and growth. Payment of dividends will rest within the discretion of the Board of Directors and will depend upon, among other factors, the Company's earnings, capital requirements, and financial condition. 31PAGE Thermo Instrument Systems Inc. Form 10-K Report A copy of the Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as filed with the Securities and Exchange Commission, may be obtained at no charge by writing to John N. Hatsopoulos, Chief Financial Officer, Thermo Instrument Systems Inc., 81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046. Annual Meeting The annual meeting of shareholders will be held on Monday, May 22, 1995, at 8:45 a.m. at the Hyatt Regency Hotel, Hilton Head, South Carolina. Corporate Office Thermo Instrument Systems Inc. 504 Airport Road Post Office Box 2108 Santa Fe, New Mexico 87504-2108 32 EX-21 16 Exhibit 21 Thermo Instrument Systems Inc. - Subsidiaries of the Registrant At March 3, 1995, Thermo Instrument Systems Inc. owned the following companies: STATE OR JURISDICTION OF PERCENT OF NAME INCORPORATION OWNERSHIP - ------------------------------------------------------------------------------- Analytical Instrument Development, Inc. Pennsylvania 100 Bettigole Andrews & Clark, Inc. New York 100 N. H. Bettigole Co., Inc. Delaware 100 N. H. Bettigole, P.A. New Jersey 100 N. H. Bettigole, P.C. New York 100 CIDTEC Acquisition Corp. New York 100 Eberline Analytical Corporation New Mexico 100 Eberline Instrument Company Limited United Kingdom 100 Eberline Instrument Corporation New Mexico 100 Epsilon Industrial Inc. Texas 100 Fellows, Read & Associates, Inc. New Jersey 100 Finnigan Corporation Virginia 100 Finnigan Instruments, Inc. New York 100 Finnigan International Sales, Inc. California 100 Finnigan MAT China, Inc. California 100 Finnigan MAT (Delaware), Inc. Delaware 100 Finnigan MAT Instruments, Inc. Nevada 100 Finnigan MAT International Sales, Inc. California 100 Finnigan MAT (Nevada), Inc. Nevada 100 Finnigan MAT AG Switzerland 100 Finnigan MAT Canada, Ltd. Canada 100 Finnigan MAT GmbH Germany 100 Finnigan MAT Ltd. United Kingdom 100 Finnigan MAT AB Sweden 100 Finnigan MAT S.A.R.L. France 100 Finnigan MAT S.R.L. Italy 100 Thermo Separation Products S.R.L. Italy 100 Thermo Instruments Australia Pty. Limited Australia 100 Finnigan Properties, Inc. California 100 Gamma-Metrics California 100 Gamma-Metrics International F.S.C. Inc. Guam 100 Gas Tech Inc. California 100 Gas Tech Australia, Pty. Ltd. Australia 50 Gas Tech Partnership California 50* Gastech Instruments Canada Ltd. Canada 100 Houston Atlas Inc. Texas 100 National Nuclear Corporation California 100 Nicolet Instrument Corporation Wisconsin 100 Nicolet Instrument Canada, Inc. Canada 100 Nicolet Instrument Limited United Kingdom 100 Nicolet Instrument S.A.R.L. France 100 Nicolet Japan K.K. Japan 100 Project Phoenix of Madison, Inc. Wisconsin 100 Spectra-Tech, Europe Limited United Kingdom 100 Spectra-Tech, Inc. Wisconsin 100 ThermoSpectra Corporation Delaware 85.67** Beleggingsmaatschappij Zeis B.V. Netherlands 100 Page 1PAGE Thermo Instrument Systems Inc. - Subsidiaries of the Registrant At March 3, 1995, Thermo Instrument Systems Inc. owned the following companies: STATE OR JURISDICTION OF PERCENT OF NAME INCORPORATION OWNERSHIP - ------------------------------------------------------------------------------- Bakker Electronics Dongen B.V. Netherlands 100 Bakker Electronics Limited United Kingdom 100 Nicolet Instrument Technologies Inc. Wisconsin 100 NORAN Instruments Inc. Wisconsin 100 Normandeau Associates, Inc. New Hampshire 100 Skinner & Sherman, Inc. Massachusetts 100 Skinner & Sherman Laboratories, Inc. Massachusetts 100 Skinner & Sherman Technology, Inc. Massachusetts 100 Spectrace Instruments Inc. California 100 TEV Administrative Services Corporation Delaware 100 Thermo BioAnalysis Corporation` Delaware 100 Thermo Consulting Engineers Inc. Delaware 100 George A. Schock & Associates, Inc. New Jersey 100 Jennison Engineering, Inc. Vermont 100 Thermo Environmental Instruments Inc. California 100 MIE Acquisition, Inc. Massachusetts 100 Thermo Instrument Controls Inc. Delaware 100 Thermo Instrument Systems Japan Holdings, Inc. Delaware 100 Nippon Jarrell-Ash Company, Ltd. Japan 100 Thermo Instruments do Brasil Ltda. Brazil 100 Thermo Instruments F.S.C. Inc. U.S. Virgin 100 Islands Thermo Jarrell Ash Corporation Massachusetts 100 Baird Analytical Instrr Tech Co. Beijing Ltd. China 100 Baird DD Brazil Representacoes Ltda. Brazil 100 Scientific Measurement Systems Inc. Colorado 100 Thermo Instrument Systems (F.E.) Limited China 100 Thermo Instruments (Canada) Inc. Canada 100 Eberline Instruments (Canada) Ltd. Canada 100 Thermo Separation Products AG Switzerland 100 Thermo Separation Products Inc. Delaware 100 Thermo Instrument Systems (France) S.A. France 100 Thermo Separation Products S.A. France 100 Thermo Separation Products K.K. Japan 100 TMA/Hanford, Inc. Washington 100 TMA/NORCAL Inc. California 100 TN Technologies Inc. Texas 100 Van Hengel Holding B.V. Netherlands 100 Baird Europe B.V. Netherlands 100 Baird France S.A.R.L. France 100 Thermo Electron Limited United Kingdom 100 Planweld Limited United Kingdom 100 Hilger Analytical Limited United Kingdom 100 Thermo Instrument Systems B.V. Netherlands 100 Hilkomij B.V. Netherlands 100 NORAN Instruments B.V. Netherlands 100 Page 2PAGE Thermo Instrument Systems Inc. - Subsidiaries of the Registrant At March 3, 1995, Thermo Instrument Systems Inc. owned the following companies: STATE OR JURISDICTION OF PERCENT OF NAME INCORPORATION OWNERSHIP - ------------------------------------------------------------------------------- Thermo Automation Services (ThAS) B.V. Netherlands 100 Van Oortmerssen B.V. Netherlands 100 Thermo Instrument Systems GmbH Germany 100 Eberline Instruments GmbH Germany 100 Nicolet Instrument GmbH Germany 100 NORAN Instruments GmbH Germany 100 Thermo Instruments GmbH Germany 100 Thermo Separation Products GmbH Germany 100 Thermo Jarrell Ash (Europe) B.V. Netherlands 100 Thermo Jarrell Ash, S.A. Spain 100 Thermo Separation Products B.V. Netherlands 100 Thermo Separation Products B.V. B.A. Belgium 100 Westronics Inc. Texas 100 * Joint Venture/Partnership ** As of 12/31/94 EX-23 17 Exhibit 23 Consent of Independent Public Accountants ----------------------------------------- As independent public accountants, we hereby consent to the incorporation by reference of our reports dated February 10, 1995 (except with respect to the matters discussed in Note 14 as to which the date is March 1, 1995) included in or incorporated by reference into Thermo Instrument Systems Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994, into the Company's previously filed Registration Statements as follows: Registration Statement No. 33-14980 on Form S-8, Registration Statement No. 33-16461 on Form S-8, Registration Statement No. 33-14974 on Form S-8, Post Effective Amendment to Registration Statement on Form S-4 No. 33-32579-02 on Form S-8, Registration Statement No. 33-33577 on Form S-8, Registration Statement No. 33-36221 on Form S-8, Registration Statement No. 33-37866 on Form S-8, and Registration Statement No. 33-42270 on Form S-3, and Registration Statement No. 33-69526 on Form S-3. Arthur Andersen LLP Boston, Massachusetts March 7, 1995 EX-27 18
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO INSTRUMENT SYSTEMS INC.'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBE 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 YEAR DEC-31-1994 DEC-31-1994 152,933 15,931 159,615 8,779 121,353 489,656 170,907 43,983 1,011,917 259,350 122,225 4,816 0 0 435,947 1,011,917 649,992 662,187 335,341 344,834 42,924 733 15,761 99,494 39,162 60,220 0 0 0 60,220 1.28 1.18
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