-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OfSTQ/G4W8J1jaIMdil5yGiabMd2Y2dwYWhGDbq2EAsBgILWtf1J9+EHreFDmxtx UG/AjGRpeATA0BKQXMktOA== 0000813895-95-000006.txt : 19951208 0000813895-95-000006.hdr.sgml : 19951208 ACCESSION NUMBER: 0000813895-95-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951206 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO POWER CORP CENTRAL INDEX KEY: 0000813895 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT, NEC [3569] IRS NUMBER: 042891371 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10573 FILM NUMBER: 95599450 BUSINESS ADDRESS: STREET 1: 81 WYMAN ST STREET 2: PO BOX 9046 CITY: WALTHAM STATE: MA ZIP: 02254-9046 BUSINESS PHONE: 6176221000 MAIL ADDRESS: STREET 1: 81 WYMAN STREET CITY: WALTHAM STATE: MA ZIP: 02254 FORMER COMPANY: FORMER CONFORMED NAME: TECOGEN INC DATE OF NAME CHANGE: 19920703 10-K 1 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 September 30, 1995 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 1-10573 THERMO POWER CORPORATION (Exact name of Registrant as specified in its charter) Massachusetts 04-2891371 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 81 Wyman Street, P.O. Box 9046 Waltham, Massachusetts 02254-9046 (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 November 24, 1995, was approximately $63,355,000. As of November 24, 1995, the Registrant had 12,432,545 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Shareholders for the fiscal year ended September 30, 1995, 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 March 11, 1996, are incorporated by reference into Part III. PAGE PART I Item 1. Business -------- (a) General Development of Business. ------------------------------- Thermo Power Corporation (the Company or the Registrant) develops, manufactures, markets, and services industrial refrigeration equipment; gasoline engines for recreational boats; LPG (liquefied petroleum gas) and gasoline engines for lift trucks; natural gas engines for fleet vehicles and industrial applications; and natural gas cooling and cogeneration systems. The Company also conducts research and development on applications of thermal energy. Through its NuTemp, Inc. (NuTemp) subsidiary, the Company rents commercial cooling and industrial refrigeration equipment. Through its 78%-owned ThermoLyte Corporation (ThermoLyte) subsidiary, formed in March 1995, the Company is also developing a propane-powered flashlight, the first in a line of gas-powered lighting products it plans to develop and commercialize. The Company's strategy is to engineer, develop, and commercialize environmentally sound and economically efficient power generation, cooling, and related products. The Company comprises five operating units: the FES, Crusader Engines, and Tecogen divisions, and the NuTemp and ThermoLyte subsidiaries. In March 1995, the Company spun out ThermoLyte to complete the development and commercialization of a family of propane-powered flashlights, emergency lights, area lights, and other lighting products. ThermoLyte products will all be based on the Company's patented technology for a rigid mantle, the "bulb" in gas lights. This durable mantle allows the Company to use propane as a power source instead of batteries. Using propane offers several advantages over batteries, including a potentially infinite shelf life, substantially longer operating hours, constant brightness, and no battery disposal. Subsequent to year-end 1995, the Company's TecoDrive(R) 4300 engine became the first heavy-duty natural gas engine to be certified for Ultra Low-Emission Vehicles (ULEVs) by the U.S. Environmental Protection Agency (EPA). This certification will broaden the market for the Company's TecoDrive 4300 engines to include states with the strictest emissions standards. In May 1994, the Company acquired NuTemp for $7.9 million in cash. In fiscal 1995, the Company paid an additional $2.5 million as a result of NuTemp having achieved certain previously agreed upon performance goals through the period ending May 1, 1995. NuTemp is a supplier of both remanufactured and new industrial refrigeration and commercial cooling equipment for sale or rental. NuTemp's industrial refrigeration equipment is used primarily in the food-processing, petrochemical, and pharmaceutical industries, and its commercial cooling equipment is used primarily in institutions and commercial buildings, as well as by service contractors. The Company was originally incorporated in Massachusetts in June 1985 under the name Tecogen Inc., as a wholly owned subsidiary of Thermo Electron Corporation (Thermo Electron) to succeed the business of Thermo Electron's Thermal Products Division. In March 1993, the Company's name was changed to Thermo Power Corporation. As of September 30, 1995, Thermo Electron owned 7,832,326 shares of the Company's common stock, representing 63% of such stock then outstanding at that time. Thermo Electron is a world 2PAGE leader in environmental monitoring and analysis instruments and a manufacturer of biomedical products including heart-assist systems and mammography systems, paper-recycling and papermaking 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 50% ownership of the Company. This may require the purchase by Thermo Electron of additional shares of the Company's common stock from time to time as the number of outstanding shares issued by the Company increases. These purchases may be made either in the open market or directly from the Company. During fiscal 19951, Thermo Electron purchased 885,700 shares of the Company's common stock in the open market at a total price of $8,522,000. (b) Financial Information About Industry Segments. --------------------------------------------- The Company conducts business in three industry segments: (i) industrial refrigeration and commercial cooling equipment; (ii) gasoline engines for recreational boats, LPG and gasoline engines for lift trucks, and natural gas engines for fleet vehicles and industrial applications; and (iii) natural gas cooling and cogeneration systems, and conducting research and development on applications of thermal energy. The principal products and services rendered by the Company in these segments are described in detail below. Financial information concerning the Company's industry segments is summarized in Note 11 to Consolidated Financial Statements in the Registrant's Fiscal 1995 Annual Report to Shareholders and is incorporated herein by reference. (c) Description of Business. ----------------------- (i) Principal Products and Services ------------------------------- Industrial Refrigeration Systems Industrial Refrigeration Packages. The Company's FES division designs, --------------------------------- engineers, manufactures, and services industrial refrigeration equipment used for cooling, freezing, and cold-storage applications in the food- processing, petrochemical, pharmaceutical, and liquefied-gas storage industries. FES produces complete industrial refrigeration systems, and it also supplies components for use in industrial refrigeration systems produced by others. FES also manufactures screw compressor packages used to cool inlet air for gas turbine generators at utilities. FES equipment for food and beverage customers are primarily standard products, such as screw-compressor packages, liquid-refrigerant pump packages, state-of-the-art control systems, and ASME (American Society of Mechanical Engineers) pressure vessels. A screw-compressor package, which consists of a screw compressor, an electric-drive motor, an oil separator, a control panel, and piping and tubing, constitutes the majority of this equipment. FES also provides screw-compressor packages powered by the Company's natural gas TecoDrive engines. These packages are pre-engineered and are manufactured in quantity. Examples of applications of industrial 1 References to fiscal 1995, 1994, and 1993 herein are for the fiscal years ended September 30, 1995, October 1, 1994, and October 2, 1993, respectively. 3PAGE refrigeration equipment used by food and beverage processors include the freezing, storing, and warehousing of meats, fish, fruits, and vegetables; freezing of fruit juice concentrates; or controlling process temperatures in brewing and wine-making, and soft drink carbonization, where the temperature of water is regulated to absorb a controlled quantity of carbon dioxide. FES supplies entire refrigeration packages to petrochemical, pharmaceutical, and related industries for integration into their plants' refrigeration systems. These higher-cost custom packages require significant design engineering and are used in a wide variety of applications, such as chilling brine that cools chemicals used in the production of penicillin. In another application of a custom package, FES units are used to chill and condense toxic effluent gases released in the production of chlorine. FES systems have capacities ranging from 10 to 4,500 tons, with evaporating temperatures ranging from +50.F to -100.F. Approximately 65% of FES's sales are of standard units for the food and beverage industry, and approximately 35% are of custom units for the petrochemical and pharmaceutical industries. The average price for a standard food and beverage refrigeration package is approximately $50,000, and a representative price for a custom unit would be approximately $300,000, although prices for these units can exceed $1 million. FES refrigeration packages can be designed for use with any common refrigerant, but approximately 80% of FES's units operate on ammonia. FES's utilization of ammonia, a cost-effective and environmentally safe substance compared with conventional chlorofluorocarbon (CFC)-based refrigerants, places FES in a leadership position to target the reduction of CFC systems. Ammonia does not harm the ozone layer, costs much less than conventional refrigerants, and is widely available on a global basis. The Company's NuTemp subsidiary buys new and surplus industrial refrigeration equipment, which is remanufactured for sale or rental. NuTemp serves numerous industries such as food-processing, petrochemical, pharmaceutical, and others. One of NuTemp's key services is its ability to respond to emergency situations and provide temporary large-tonnage refrigeration capacity on short notice. In many instances, NuTemp custom designs a refrigeration package to meet a customer's unique requirements. This results in a refrigeration system that meets the customer's specific needs in refrigeration capacity and operating temperature, as well as in control systems. Custom systems can be manufactured using new and remanufactured components to provide the most cost-effective and timely solution for the customer. Custom systems can be rented with an option to purchase, again providing a unique service in this industry. Applications for NuTemp's products range from cooling water to +60.F to cooling synthetic glycol to -45.F. The colder fluids are used in industrial process applications, which include chemical-reaction control, environmental testing, VOC (volatile organic compound) recovery, and plastics production. Revenues from industrial refrigeration packages were $55,193,000, $53,146,000, and $39,936,000 in fiscal 1995, 1994, and 1993, respectively. 4PAGE Microprocessor Controls. FES microprocessor-based control systems for industrial refrigeration equipment are designed to reduce energy consumption through operating efficiencies, to anticipate problems with built-in pre-alarms, to announce system shutdowns, to offer memory storage, and to provide easy sensor calibration through keypads and displays. These controls are supplied with FES products, and they can also be fitted on refrigeration packages produced by other suppliers for ease of integration within FES's central supervisory control system. Other Products. FES also manufactures and sells liquid-refrigerant recirculation systems, heat-recovery heat exchangers, and pressure vessels for use in refrigeration packages and systems produced by others. FES's liquid-refrigerant recirculation systems, or "pump packages," are used in a variety of applications such as food freezing and storage, industrial process cooling, and thermal storage systems. As with its refrigeration equipment, NuTemp buys new and surplus commercial cooling equipment, which is remanufactured for sale or rental. NuTemp's customers in the commercial cooling industry include institutions, commercial building owners, and service contractors. The commercial cooling industry is currently coming into compliance with the phaseout of CFC refrigerants and replacing them with environmentally sound refrigerants. This retrofit process is creating a temporary market for NuTemp's commercial cooling systems, which operate on alternative refrigerants, while customers install new equipment. Engines Marine Engines. The Company's Crusader Engines division (Crusader) manufactures, markets, and services inboard marine engines and accessories both to OEM (original equipment manufacturer) boat companies and to a network of 37 distributors who support 900 dealers servicing Crusader's products in the field. Crusader does not customarily manufacture engines for its own inventory, but rather in response to orders from distributors, dealers, and boat manufacturers. Crusader's key customers are OEM manufacturers of "cruiser" class boats generally ranging in size from 25 to 45 feet. The purchase price of boats containing Crusader engines typically is in the $50,000 to $250,000 range. In fiscal 1995, sales to Crusader's top four OEM customers, Silverton Marine Corp. (Silverton), Carver Boat Corp. (Carver), Gibson Fiberglass, and Tiara Yachts, accounted for approximately 60% of Crusader's unit sales. Approximately 95% of Crusader's unit sales to OEM manufacturers is in the United States. Sales of engines to distributors account for approximately 19% of Crusader's unit sales. The market for Crusader's marine engine products declined significantly in the economic downturn during the past few years. In the early and mid-1980s, the United States market for inboard marine engines for cruiser class boats experienced significant annual growth and peaked in the 1988 model year (running from August 1987 through July 1988). The market for marine engines has improved in the 1994 and 1995 model years, and the Company believes market conditions will continue to improve as the economy rebounds and consumer confidence increases. The repeal of the federal tax on luxury purchases in 1993 has also had a positive effect on sales. Revenues from marine engines were $21,536,000, $18,315,000, and $18,172,000 in fiscal 1995, 1994, and 1993, respectively. 5PAGE TecoDrive Natural Gas Engines for Vehicles. The Company's extensive development work on dedicated compressed natural gas (CNG) engines has resulted in sales of a number of its TecoDrive engines for use in school buses, package-delivery vehicles and other fleet vehicles. These engines feature substantially lower emissions than currently commercially available gasoline or natural gas engines. In November 1995, the Company's TecoDrive 4300 engine became the first heavy-duty natural gas engine to be certified for Ultra Low-Emission Vehicles (ULEVs) by the EPA. This certification will broaden the market for the Company's TecoDrive 4300 engines to include states with the strictest emissions standards. In February 1995, the Company received an order valued at $3.3 million to supply United Parcel Service (UPS) with natural gas engines and gasoline engines that can be easily converted to run on natural gas for use in its package-delivery vehicles. The 276 TecoDrive engines that were part of this order will convert vehicles that operate on diesel to natural gas. This order follows the successful evaluation of 20 TecoDrive engines by UPS in the Washington, DC, area, as part of the U.S. Department of Energy's (DOE's) heavy- and medium-duty commercial truck Alternative Fuels Program. The U.S. Postal Service is currently operating a total of eight two-ton delivery trucks powered by TecoDrive engines in four major U.S. cities. In California, 104 buses manufactured by Blue Bird Corporation (Blue Bird) and powered by turbocharged TecoDrive engines were the only CNG vehicles ordered under Phase II of a pilot program of the California Energy Commission (CEC) for safer, lower-emission school buses. These school buses, along with 10 school buses powered by the Company's naturally aspirated TecoDrive engines, provided during Phase I of the CEC program, have recorded a total of more than 3 million miles. The natural gas vehicle (NGV) market is in its formative stage. The use of NGVs in the United States results primarily from governmental regulations and incentive programs requiring the use of alternative fuels in certain situations. The Clean Air Act Amendments of 1990 and the Energy Policy Act of 1992, as well as numerous state regulations, require the increased use of alternative fuels over a period of time. There can be no assurance that NGVs will be the most popular alternative-fuel vehicles under the various mandates. The Company believes that most NGVs currently in use do not comply with proposed environmental regulations in the United States, the wide majority being equipped with aftermarket gasoline-to- natural-gas conversion kits that do not provide the low emissions offered by the Company's factory-built dedicated engines. Producing a natural gas engine with reduced emissions and adequate power at a cost that is not prohibitive is a key factor in the development of the market. TecoDrive Natural Gas Engines for Irrigation and Industrial Applications. The Company manufactures natural gas engines for the irrigation pump engine market. The Company is the first supplier to offer agricultural users extended warranties and total service support similar to what is offered to the Company's marine engine, cooling, and cogeneration customers. As a result of the positive response the Company has received from its customers in the irrigation market, the Company has developed TecoDrive engines for other stationary applications, such as powering air and gas compressors. There are now four OEM manufacturers incorporating the Company's TecoDrive engines into their natural gas compressors for NGV refueling. In summer 1995, the Company received orders for a total of 70 engines for pipeline gas compressors in Western Canadian gas fields. The Company also provides engines for a stationary application for Climaveneta, 6PAGE a manufacturing firm in Italy. In addition, the Company offers a range of optional equipment that broadens the industrial applications for its engines. LPG and Gasoline Engines for Lift Trucks. The Company has embarked on a significant program to engineer and manufacture 2.2-, 3.0-, and 4.3-liter LPG and gasoline engines for installation into lift trucks. In May 1995, the Company completed its first shipment of fork-lift engines to Clark Materials Handling Company (Clark), one of the largest suppliers of lift trucks in the U.S. The Company is currently shipping engines under an order from Clark for 600 engines. The Company is also shipping engines under an order from Toyota Industrial Equipment Manufacturing Inc. (Toyota) for 450 3.0-liter engines for installation into Toyota's lift trucks. Toyota has also indicated its intent to purchase an additional 1,000 engines by summer 1996. The Company is also engineering lift-truck engines for Daewoo, Royal Tractor Company, and Taylor Machine Works, Inc. Cooling and Cogeneration Systems The Company designs, develops, manufactures, markets, and services packaged cooling and cogeneration systems fueled principally by natural gas for sale to a wide range of commercial, institutional, industrial, and multi-unit residential users. Many of these products are powered by the Company's dedicated TecoDrive natural gas engines. The Company's Tecochill(R) commercial cooling and Tecogen(R) cogeneration products incorporate several proprietary features that are the result of the Company's advances in engine, thermal, and control technologies. One such proprietary feature is the Company's microprocessor- based control module, which automates the operation of such systems and can also include remote control, monitoring, and diagnostic capabilities. The standardized designs of the Company's products also enable rapid installation and startup, facilitate maintenance, and allow competitive delivery time. The Company supports its customers by offering a comprehensive maintenance contract under which the Company assumes responsibility for substantially all maintenance, repairs, and replacement parts. The cost savings that result from use of the Company's packaged cooling and cogeneration systems is directly related to the retail price of electricity. In the past few years, electricity prices have declined in many areas and rates remain relatively low on a historical basis in most regions. Given prevailing rate structures, demand for the Company's cooling and cogeneration systems has been less than anticipated. Tecochill Cooling Systems. The Company entered the gas-fueled cooling business by introducing its 150-ton gas-fueled cooling unit in 1988. The Company's Tecochill units are powered by the same TecoDrive engine used in the Company's small-scale cogeneration systems. Tecochill products are equipped with microprocessor controls allowing fully automated, unattended operation. Tecochill units can be programmed to run at different speeds to follow variable cooling loads for greater efficiency than conventional electric motor-driven air conditioners that run at a constant speed. These units are self-contained packages that are delivered to customer sites as finished products for standard installation. Tecochill units can be fitted with optional heat-recovery packages yielding hot water. The Company has sold approximately 300 of its Tecochill units to date, which are operating in 26 states and four foreign countries. The Company is currently offering 7PAGE additional gas-fueled rooftop air conditioning equipment, ranging in size from 50 to 800 tons, for use in multi-unit residential buildings, nursing homes, hospitals, and similar institutions. The Company is currently developing packaged cooling for more than 1,000 tons under funding from the Gas Research Institute (GRI). Although the purchase price of the Company's Tecochill units is approximately 100-200% higher than that of electric motor-driven air conditioners of comparable sizes, lower operating costs associated with the use of Tecochill units generally lead to payback of the incremental capital cost in approximately four years. The average expected useful life of a Tecochill unit is comparable to that of an electric motor-driven air conditioner, typically 15 years. Revenues from cooling systems were $4,956,000, $3,772,000, and $4,609,000 in fiscal 1995, 1994, and 1993, respectively. Tecogen Cogeneration Systems. In 1983, the Company introduced its first Tecogen packaged cogeneration system, the 60-kilowatt (kW) CM-60 model powered by the Company's TecoDrive engine. Approximately 600 CM-60 and CM-75 units have been installed at approximately 350 sites across the United States. The Company also provides 225-kW models. These systems are automated, self-contained cogeneration packages that are delivered as finished units to customer sites. In general, these systems are manufactured to standard designs and are assembled and tested on a production-line basis. Some modifications are made to the larger cogeneration systems in order to accommodate the demands of individual sites. The cogeneration systems use a single fuel source, natural gas, to simultaneously produce electricity and thermal energy in the form of hot water or steam. By using energy that would otherwise be wasted, the Company's cogeneration systems operate at a cost that can be comparable to the cost of producing hot water alone in conventional systems. The electricity produced is used principally to meet on-site energy requirements and replaces electricity that would otherwise be purchased from a utility. Revenues from cogeneration systems were $1,594,000, $873,000, and $1,077,000 in fiscal 1995, 1994, and 1993, respectively. Sponsored Research and Development. The Company conducts research and development supported by outside sponsors. Revenues from sponsored research and development contracts were $4,917,000, $5,209,000, and $6,457,000 in fiscal 1995, 1994, and 1993, respectively. See "Research and Development." Regulation The demand for most of the Company's products is affected by various federal, state, and local energy and environmental laws and regulations. All of these laws and regulations are subject to revocation or amendment, and the Company cannot predict what effect revocation or amendment may have on the Company's sales, business, or operations. Industrial Refrigeration Systems -------------------------------- The Company's ammonia-based refrigeration equipment and alternative- refrigerant commercial cooling systems benefit from the worldwide phaseout of CFC refrigerants. The Montreal Protocol was negotiated in 1987 under the sponsorship of the United Nations Environmental Program (UNEP) to protect the ozone layer. This agreement establishes a process to control substances that could deplete the ozone layer, including CFCs. The most recent 8PAGE regulations for CFCs were developed in 1992 by governments of the nations participating in UNEP. These representatives agreed on a gradual phaseout of CFC production, such as R-12 and R-11, to be completed by January 1996. Engines ------- In October 1994, the EPA proposed new regulations to limit air emissions from gasoline and diesel marine engines. Under the rule that takes effect in model year 1998, hydrocarbon exhaust from gasoline marine engines would be reduced by 75%. Meeting these new standards will be more difficult for companies that manufacture two-stroke engines that emit larger quantities of hydrocarbons than the four-stroke engines manufactured by Crusader. The Company is already manufacturing engines using an electronic fuel-injection feature with significantly reduced emissions and believes its engines will meet the requirements using similar technologies before the mandate takes effect. The market for the Company's TecoDrive natural gas engine is influenced by federal legislation that allows states to establish programs encouraging the use of alternative fuels, including natural gas, methanol, and ethanol. More than half of the states have some type of alternative- fuel vehicles commission, legislation, or tax incentives. In 1995, there are a total of 22 U.S. cities that have been classified as nonattainment areas for acceptable air quality by the EPA. By model year 1998, 50% of heavy-duty vehicles bought for fleets with 10 or more vehicles capable of refueling in these smoggiest cities must be clean-fuel vehicles. Under the Clean Air Act Amendments of 1990, the EPA issued regulations that delineate clean fuel requirements and vehicle emissions standards. In September 1994, the EPA published its final rule on certification for propane and natural gas vehicles. With certain exceptions, the rule becomes mandatory in model year 1997. In November 1995, the Company became the first engine manufacturer to receive EPA certification of a heavy-duty natural gas engine for Ultra Low-Emission Vehicles (ULEVs). This certificate certifies that a certain vehicle type or engine meets requirements of the most current applicable emissions regulations. Natural gas is one of many alternative fuels that is addressed by these laws and regulations. Others include methanol, ethanol, liquefied petroleum gas, hydrogen, electricity, and reformulated gasoline. There can be no assurance that natural gas will become a preferred alternative fuel for vehicles or that existing and future laws or regulations or their enforcement will create material long-term demand for NGVs. Cooling and Cogeneration Systems -------------------------------- The passage by Congress of the Public Utility Regulatory Policies Act of 1978 (PURPA), the adoption of regulations thereunder by the Federal Energy Regulatory Commission (FERC), and related state laws and regulations provide incentives for the development of qualifying small-power production and cogeneration systems such as those offered by the Company. PURPA and FERC regulations promulgated thereunder address three issues of importance to users that own or operate cogeneration systems, including those sold by the Company. First, PURPA exempts qualifying users from most federal and state regulations that pertain to electric utilities. Second, PURPA requires electric utilities to allow qualifying cogenerators to connect their cogeneration facilities to utilities' electric power systems. This mandatory connection enables users to purchase utility-generated 9PAGE electricity to start their cogeneration systems and assures users of a back-up source of electricity during peak periods of use and when the cogeneration systems are shut down for maintenance and repair. Third, PURPA requires utilities to purchase electricity produced by qualifying cogenerators at a price equivalent to utilities' avoided costs. Like all electric power-generating and other fossil fuel-burning systems, the Company's cooling and cogeneration products must comply with federal, state, and local environmental laws and regulations. Regulation of systems such as those sold by the Company is conducted primarily at the state and local level, where standards can vary. In particular, applicable environmental standards in California are stricter than comparable federal guidelines. The Company believes that its existing Tecochill and other Tecogen products comply with applicable federal and state environmental standards, including those currently in effect in California, excluding the Los Angeles region, though the Company cannot predict whether its products will comply with all environmental standards promulgated in the future. (ii) New Products ------------ In March 1995, the Company formed its ThermoLyte subsidiary to develop and commercialize a line of propane-powered flashlights, emergency lights, area lights, and other lighting products. ThermoLyte's lighting products will be based on the Company's patented technology for a rigid mantle, the "bulb" in gas lights. Because this mantle is more durable than the mantles typically used in gas lighting, the Company will design these products to be highly portable. The Company is continuing the development of a propane-powered flashlight that is designed to offer a potentially infinite shelf life, substantially longer operating hours, constant brightness, and no battery disposal. The Company intends to initially market these products to specialty catalogs and retail stores, and to broaden its distribution lines to include mass-market merchandisers when these products gain market acceptance. The initial commercial launch of this flashlight is planned for 1996. (iii) Raw Materials ------------- The Company purchases engine blocks for its marine and certain other engines, as well as engines for its larger cooling and cogeneration products, from a sole supplier. It does not have a firm contract with this supplier. The Company generally maintains inventories of engine blocks sufficient to meet its needs for a three-month period. However, the inability of the Company to obtain either engines or engine blocks from this supplier would have a material adverse effect upon the Company's operations. (iv) Patents, Licenses, and Trademarks --------------------------------- The Company considers its patents and licenses to be important in the present operation of its business. The Company, however, does not consider any one of its patents or related group of patents to be of such importance that its expiration, termination, or invalidity would materially affect the Company's business. The Company has research and development arrangements with the natural gas industry and various governmental agencies, and is required to pay 10PAGE royalties for any technologies developed or products commercialized under several of these arrangements. (v) Seasonal Influences ------------------- Crusader's marine engine sales historically have been stronger in the first quarter of each calendar year, when boat builders purchase engines for boats to be sold for the upcoming boating season. Sales of marine engines generally decline gradually during the last three quarters of the calendar year, reaching their lowest levels in the fourth quarter. In addition, the demand for NuTemp's equipment typically has been highest in the summer period. There are no significant seasonal influences in the Company's other lines of business. (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. (vii) Dependency on a Single Customer ------------------------------- No single customer accounted for more than 10% of the Company's total revenues in fiscal 1995, 1994, and 1993. In fiscal 1995, revenues from Carver and Silverton accounted for 20% and 10%, respectively, of Engines segment revenues. The loss of one or both of these customers would have a material adverse effect on the Engines segment. (viii) Backlog ------- The backlog of firm orders for the Industrial Refrigeration Systems segment was $17.4 million as of September 30, 1995, compared with $10.6 million as of October 1, 1994. The backlog of firm orders for the Engines segment was $4.2 million as of September 30, 1995, compared with $0.8 million as of October 1, 1994. The backlog of firm orders for the Cooling and Cogeneration Systems segment was $6.0 million as of September 30, 1995, compared with $4.7 million as of October 1, 1994. The Company believes that the majority of this backlog will be shipped during fiscal 1996. The Company does not believe that the size of its backlog is necessarily indicative of intermediate- or long-term trends in its business. (ix) Government Contracts -------------------- Not applicable. (x) Competition ----------- The Company experiences competition in most of its product lines. Additional competition may arise if markets in which the Company is active develop significantly. The Company is aware of several competitors for its product lines, some of whom have financial, marketing, and other resources greater than those of the Company. Industrial Refrigeration Systems The Company's sale of industrial refrigeration systems is subject to intense competition. The industrial refrigeration market is mature, highly fragmented, and extremely dependent on close customer contacts. Major 11PAGE industrial refrigeration companies, of which FES is one, account for approximately one-half of worldwide sales, with the balance generated by many smaller companies. The Company believes that FES competes on the basis of its advanced control systems and overall quality, reliability, service, and to a lesser extent, price. The worldwide market is characterized by strong local manufacturers. The market leader worldwide as well as in North America is Frick Company and its affiliates, subsidiaries of York International Corporation (York). Though comprehensive surveys on the industrial refrigeration market do not exist, the Company believes it accounts for approximately 20% of the North American market, 5% of the European market, 8% of the Asia-Pacific market, and 7% of the Latin American market. The Company believes NuTemp is the world leader in remanufactured refrigeration equipment. As part of its rental program, NuTemp offers an option to buy, a service which is unique in the industry. NuTemp's largest competitor is Aggreko, a subsidiary of Christian Salverson Company. Aggreko is a major supplier of rental equipment for the industrial refrigeration and commercial cooling markets. The Company believes that NuTemp competes on the basis of price, delivery time, and customized equipment. Engines Once the NGV and alternative-fuel engine markets are fully developed, the Company anticipates that competition will be intense, and potential competitors in some or all segments of these markets may include major automotive and natural gas companies and other companies that have greater financial resources than those of the Company. The Company believes it has the second largest share of the inboard marine engine market for cruiser class boats in the United States, with about 25% market share, behind the Mercury division of Brunswick Corporation. Crusader has experienced intense competition in the marine engine business in recent years, primarily from vertical integration of boat and engine manufacturers that has led to the acquisition of former customers of Crusader by competing engine manufacturers. The Company believes that Crusader competes on the basis of quality, reliability, and service. Cooling and Cogeneration Systems The Company's Tecochill products are subject to competition from absorption air conditioning systems and electric motor-driven vapor compressor systems. Other manufacturers of natural gas-fueled engine-driven cooling systems have also entered the market. The Company believes it competes with producers of conventional equipment on the basis of relative operating costs at times of peak electrical demand, and with other producers of natural gas-fueled cooling systems on the basis of quality, reliability, service, operational savings, and track record. In 1995, Enchill by MKW Power Systems, one of the Company's major competitors, ceased operations in the gas-cooling market. Also in 1995, York entered the gas-engine cooling market, in partnership with Caterpillar, and is expected to be a major competitor in large-capacity (+400 tons) cooling equipment. However, the Company's most competitive range is in smaller-capacity equipment. The Company believes that York's 12PAGE entry into this market may actually expand the total market by further legitimizing the technology. The Company's sale of cogeneration systems is subject to intense competition, both direct and indirect. Direct competitors consist of companies that sell cogeneration products resembling those sold by the Company. In addition, electric utility pricing programs provide competition for the Company's cogeneration products. Indirect competitors include manufacturers of conventional water heaters, air conditioners, and electric generator sets, since the economic benefits of the Company's cogeneration and cooling systems depend on the cost of conventional energy systems. The Company believes that it competes on the basis of several factors, including product quality and reliability, operational savings, ease of installation, service, and pricing. The Company's sponsored research and development is also subject to intense competition from many larger and smaller firms, universities, and other private and public research facilities. The Company competes for sponsored research and development contracts on the basis of several factors, including technical expertise, market experience, and past performance. (xi) Research and Development ------------------------ The Company has conducted research and development on applications of thermal energy for more than 30 years. The Company's research and development capability and expertise in engine, instrumentation, control, and heat-recovery technologies have enabled it to obtain support from outside sponsors, develop new products, and support existing products. Since 1980, the Company has spent approximately $92 million of internal and external funds on research, development, and commercialization of its natural gas engine, cooling, cogeneration, and other products. Since 1983, approximately 52% of sponsored research and development has been for the Company's natural gas engine-related products. The Company is currently conducting sponsored research to expand the use of TecoDrive engines in NGVs and industrial equipment and in its cooling and cogeneration systems by upgrading power output and permitting greater flexibility to meet varying loads. The Company's sponsored programs have been supported principally by the domestic natural gas industry and the federal government. Within the natural gas industry, the Company's principal sponsors have been the GRI and the Southern California Gas Company, which is the nation's largest gas utility. The Company has also obtained research and development funding from federal and state governments, industrial companies, and from the Electric Power Research Institute. Sponsors of the Company's research and development generally own the rights to technology that is developed under these programs. The Company conducts significant sponsored research and development in areas that, while not directly related to its current product lines, can take advantage of the Company's expertise in engine or thermal technologies. Current projects involve research into general pollution- abatement techniques utilizing the electrical breakdown of oxides of nitrogen into their constituent elements, and industrial applications of the Company's heat-recovery and heat-exchange techniques for air conditioning and refrigeration equipment for users such as supermarkets. 13PAGE Projects also include programs for the development of commercial cooling appliances and a gas-fueled heating system fueled by coal slurry. As part of the Company's research and development of combustion technologies, the Company's ThermoLyte subsidiary is developing a family of propane-powered flashlights, emergency lights, area lights, and other lighting products, which will offer a longer shelf life and more operating ours than battery-powered versions. ThermoLyte products will all be based on the Company's patented technology for a rigid mantle, the "bulb" in gas lights. By incorporating this durable mantle into its lights, the Company can use propane as an energy source instead of batteries. Based on the same rigid-mantle technology used in the Company's lighting products, the Company will be developing and demonstrating Thermophotovoltaic (TPV) systems under a contract from the National Aeronautics and Space Administration (NASA) Lewis Research Center. TPV is a direct energy-conversion technique to produce electric power by burning a fuel on a selective emitting ceramic burner and radiating the light onto photovoltaic cells. Potential applications for TPV are power generation for recreational, commercial, and military uses, as well as power cells for electronic devices. Certain of the Company's research on TPV was performed pursuant to contracts with the GRI. The GRI has retained the rights to all proprietary information developed pursuant to these contracts and can license such information to third parties, in certain circumstances on an exclusive basis. In addition, if the use of the Company's proprietary technology is required to use the information developed pursuant to these contracts, the GRI can require the Company to license its technology to third parties at a reasonable royalty rate. The development of TPV is in the very preliminary stages, and the Company does not know if it is feasible to develop a commercially viable TPV product. In addition, the Company is aware of other companies performing research and development on TPV, one of which may have patents covering such technology. No assurance can be given that the Company will be able to develop a commercially viable TPV product or that if developed such product would not infringe the patent rights of others. In March 1991, the Company acquired engine testing equipment at an engine test facility located in Marlborough, Massachusetts, to augment its existing engine research capability. The laboratory is used primarily to develop CNG engines for vehicle and stationary applications. This test facility includes dynamometers for engine power and durability testing, as well as systems for emissions measurement and high-speed data collection. The Company has developed a system for converting a diesel engine to operate solely on natural gas without major modifications to the engine. This low-cost conversion system, which was developed on a 7.6-liter Navistar engine, will allow fleet managers to convert their diesel engines to operate solely on natural gas, without removing the engine from the vehicle. The conversion kit is designed to bring diesel engines into compliance with government regulations mandating the use of alternative fuels in vehicles to reduce emissions. The engine conversion system is being demonstrated on a school bus owned by the Company. A field demonstration of the diesel conversion system will be conducted on vehicles in California in 1996. During fiscal 1995, 1994, and 1993, the Company spent $3,065,000, $1,622,000, and $995,000, respectively, on internally funded research and development, and $3,548,000, $4,197,000, and $5,310,000, respectively, on research and development sponsored by others. 14PAGE (xii) Environmental Protection Regulations ------------------------------------ The Company believes that compliance by the Company with federal, state, and local environmental protection regulations will not have a material adverse effect on its capital expenditures, earnings, or competitive position. (xiii) Number of Employees ------------------- As of September 30, 1995, the Company employed approximately 500 people. Approximately 44 employees at the Company's Crusader division are represented by a labor union under a three-year collective bargaining agreement expiring on October 15, 1997. The Company has experienced no work stoppages in the past, and considers its relations with employees to be good. (xiv) Marketing --------- Industrial Refrigeration Systems FES's products are distributed primarily through independent sales representatives who are typically specialists in industrial refrigeration, and they are also sold directly to end users. Approximately 75% of FES's sales are in North America. Of the sales generated in North America, 70% are made by independent sales representatives, 5% by FES sales employees, and 25% through direct orders from existing customers. FES has 19 independent sales representatives serving 25 business regions throughout the United States. All of the independent sales representatives are engineers who have the ability to provide customers with quotes on entire refrigeration plants. The representatives make sales contacts with refrigeration contractors, end users, and consulting engineers. Sales of FES's standard food and beverage packages are generally made to refrigeration contractors, who are responsible for installation of the total refrigeration plant at the facility of an end user. Sales of FES's custom systems are generally made directly to end users. Approximately 25% of FES's fiscal 1995 sales were to export customers. FES uses a combination of Carrier Corporation representatives with demonstrated industrial refrigeration expertise and several independent representatives located in various countries, including Thailand, Taiwan, the People's Republic of China, and Russia. NuTemp markets its products through direct marketing techniques, including direct mailing, and sends representatives to numerous trade shows each year. NuTemp is also marketing its products through FES sales employees and independent sales representatives. NuTemp's sales are solely in the United States. Engines The Company markets its TecoDrive natural gas engines principally through a series of nonexclusive OEM and distributor arrangements. Blue Bird currently offers TecoDrive engines as a production option in school buses. The Company also sells its TecoDrive engines to a manufacturer in Italy for stationary applications in Europe and is actively pursuing the distribution of TecoDrive engines in Canada. The Company has a sales representative who markets the Company's engines through an expanded network of distributors. By working through a distributor with 15PAGE comprehensive overhaul, repair, spare parts, field service, and training capabilities, the Company's engine customers in the United States and Canada can receive aftermarket support. The Company has marketed TecoDrive engines for irrigation applications through a variety of channels. The engines have been exhibited at a number of agriculture industry trade shows, and they have been featured in advertisements in agricultural trade journals. The Company has organized a network of dealers in Arizona, California, Nebraska, Kansas, Oklahoma, and Ontario, Canada, which is independent of the distribution network discussed above, specifically for the distribution of TecoDrive engines for irrigation applications. Southwest Gas Company in Arizona is also supporting the Company's marketing effort for irrigation engines by offering cash rebates to farmers purchasing TecoDrive engines to replace electric motors in pumping service. Cooling and Cogeneration Systems The Company markets its Tecochill cooling units primarily through a network of distributors located throughout the United States. The Company has established its own network of sales representatives, and the Company's marketing effort in the United States is also supported by a consortium of gas and combined gas-electric utilities. The Company markets its cogeneration units in the United States through its own sales force, and in certain areas, through a team of distributors. The Company has commenced some sales of its smaller cogeneration products outside the United States. (d) Financial Information about Exports by Domestic Operations. ---------------------------------------------------------- Financial information about exports by domestic operations is summarized in Note 11 to Consolidated Financial Statements in the Registrant's Fiscal 1995 Annual Report to Shareholders and is incorporated herein by reference. (e) Executive Officers of the Registrant. ------------------------------------ Present Title (Year First Became Executive Name Age Officer) --------------------- --- -------------------------------------------- Marshall J. Armstrong 60 Chief Executive Officer (1991) J. Timothy Corcoran 49 President (1992) Chester G. Janssens 63 Vice President (1992) Ravinder K. Sakhuja 51 Vice President (1985) John N. Hatsopoulos * 61 Vice President and Chief Financial Officer (1988) Paul F. Kelleher 53 Chief Accounting Officer (1985) * 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. Messrs. Hatsopoulos and Kelleher have held these positions for at least five years either with the Company or with its parent company, Thermo Electron. Mr. Armstrong has been Chief Executive Officer of the Company since April 1991. He has been a Vice President of Thermo Electron since November 1986. Mr. Corcoran has been President of the Company since April 1995. From November 1992 to April 1995, Mr. Corcoran 16PAGE was a Vice President of the Company, and has been President of FES since June 1990. Mr. Janssens has been a Vice President of the Company since 1992 and President of Crusader since 1974. Dr. Sakhuja has been a Vice President of the Company since 1992, and President of the Company's Tecogen operations for more than 5 years. From 1985 to 1992 he was President of the Company and also Chief Executive Officer from 1985 to 1991. Each of the above-named officers is a full-time employee of the Company except for Messrs. Armstrong, Hatsopoulos, and Kelleher, who are full-time employees of Thermo Electron, but devote such time to the affairs of the Company as the Company's needs reasonably require from time to time. Item 2. Properties ---------- The location and general character of the Company's principal properties by industry segment as of September 30, 1995, are as follows: Industrial Refrigeration Systems The Company owns approximately 136,000 square feet of office and manufacturing space in York, Pennsylvania, subject to a mortgage on the property, and approximately 15,000 square feet of manufacturing space in Humble, Texas. The Company also occupies approximately 164,000 square feet of office and manufacturing space in Chicago, Illinois, under a lease expiring in 1997. Engines The Company occupies approximately 104,000 square feet of manufacturing, engineering, and office space in Sterling Heights, Michigan, under leases expiring in 2000 and 2004. Cooling and Cogeneration Systems The Company occupies approximately 40,000 square feet of office and laboratory space in Waltham, Massachusetts, under an agreement providing for the sublease of the facility from Thermo Electron expiring in 1997. In addition, the Company leases approximately 14,000 square feet of engine testing and office space in Marlborough, Massachusetts, under a lease agreement with an unrelated party expiring in 1997. The term of the lease may be extended at the option of the Company for a successive three-year period. In addition, the Company leases approximately 300 square feet of office space in Thermo Electron's corporate headquarters in Waltham, Massachusetts. The Company believes that its facilities are in good condition and are suitable and adequate for its present operations. Item 3. Legal Proceedings ----------------- Not applicable. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- Not applicable. 17PAGE 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 Fiscal 1995 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 Fiscal 1995 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 Fiscal 1995 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 September 30, 1995, and Supplementary Data are included in the Registrant's Fiscal 1995 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. 18PAGE 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. 19PAGE 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 in the notes thereto. (b) Reports on Form 8-K. ------------------- During the fiscal quarter ended September 30, 1995, the Registrant was not required to file, and did not file, any Current Report on Form 8-K. (c) Exhibits. -------- See Exhibit Index on the page immediately preceding exhibits. 20PAGE 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 by the undersigned, thereunto duly authorized. Date: December 5, 1995 THERMO POWER CORPORATION By: Marshall J. Armstrong ---------------------------- Marshall J. Armstrong 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 December 5, 1995. Signature Title --------- ----- By:Marshall J. Armstrong Chairman of the Board, Chief Executive --------------------------- Marshall J. Armstrong Officer 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:Peter O. Crisp Director --------------------------- Peter O. Crisp By:George N. Hatsopoulos Director --------------------------- George N. Hatsopoulos By:Robert C. Howard Director --------------------------- Robert C. Howard By:Donald E. Noble Director --------------------------- Donald E. Noble By: Director --------------------------- Paul E. Tsongas 21PAGE Report of Independent Public Accountants ---------------------------------------- To the Shareholders and Board of Directors of Thermo Power Corporation: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Thermo Power Corporation's Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated November 3, 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 20 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 consolidated 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 November 3, 1995 22PAGE SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (In thousands) Charges to/ (Reductions in) Bad Ac- Balance at Costs Debts counts Balance Beginning and Re- Written at End Description of Year Expenses covered Off Other(a) of Year -------------------------------------------------------------------------- Year Ended September 30, 1995 Allowance for Doubtful Accounts $ 590 $ 3 $ 16 $ (79) $ - $ 530 Year Ended October 1, 1994 Allowance for Doubtful Accounts $ 561 $ (2) $ 83 $ (102) $ 50 $ 590 Year Ended October 2, 1993 Allowance for Doubtful Accounts $1,079 $ (149) $ 9 $ (545) $ 167 $ 561 (a) Allowance of business acquired during the year as described in Note 3 to Consolidated Financial Statements in the Registrant's Fiscal 1995 Annual Report to Shareholders. 23PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- -------------------------------------------------------- ---- 3.1 Articles of Organization of the Registrant, as amended (filed as Exhibit 3(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 3, 1993 [File No. 1-10573] and incorporated herein by reference). 3.2 By-laws of the Registrant, as amended (filed as Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 2, 1993 [File No. 1-10573] and incorporated herein by reference). 4.1 Specimen Common Stock Certificate (filed as Exhibit 4(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 2, 1993 [File No. 1-10573] and incorporated herein by reference). 10.1 Stock Purchase Agreement among the Registrant, NuTemp, Inc. and Michael S. Lazar, dated May 13, 1994 (filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K relating to events occurring on May 13, 1994 [File No. 1-10573] and incorporated herein by reference). 10.2 Amended and Restated Corporate Services Agreement between the Registrant and Thermo Electron, dated as of January 3, 1993 (filed as Exhibit 10(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 26, 1992 [File No. 1-10573] and incorporated herein by reference). 10.3 First Amendment to Lease dated September 30, 1994, between the Registrant and Thermo Electron Corporation (filed as Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 1, 1994 [File No. 1-10573] and incorporated herein by reference). 10.4 Form of Indemnification Agreement between the Registrant and its directors and officers (filed as Exhibit 10(e) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-14017] and incorporated herein by reference). 10.5 Tax Allocation Agreement dated September 25, 1985, between the Registrant and Thermo Electron (filed as Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 3, 1987 [File No. 0-15920] and incorporated herein by reference). 10.6 Thermo Electron Corporate Charter, as amended and restated effective January 3, 1993 (filed as Exhibit 10(n) to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 26, 1992 [File No. 1-10573] and incorporated herein by reference). 24PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- ---------------------------------------------------- ---- 10.7 Master Repurchase Agreement dated January 1, 1994 between the Registrant and Thermo Electron Corporation (filed as Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 1, 1994 [File No. 1-10573] and incorporated herein by reference). 10.8 Master Reimbursement Agreement dated as of January 2, 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 October 1, 1994 [File No. 1-10573] and incorporated herein by reference). 10.9 Lease, dated as of January 20, 1988, between Thermo Electron and Michael I. Gilson, Trustee (subsequently assigned to the Registrant) (filed as Exhibit 10(q) to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 26, 1992 [File No. 1-10573] and incorporated herein by reference). 10.10 Agreement, dated October 15, 1991, between Thermo Electron and International Union, United Automobile, Aerospace and Agricultural Implement Workers of America Local 203 (subsequently assigned to the Registrant) (filed as Exhibit 10(r) to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 26, 1992 [File No. 1-10573] and incorporated herein by reference). 10.11 Form of Redemption Rights of ThermoLyte Corporation and related Guarantee of Thermo Electron Corporation. 10.12 Guarantee Agreement between ThermoLyte Corporation and Thermo Electron Corporation. 10.13 Incentive Stock Option Plan of the Registrant, as amended (filed as Exhibit 10(h) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 3, 1993 [File No. 1-10573] 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 950,000 shares, after adjustment to reflect share increases approved in 1990, 1992 and 1993). 10.14 Nonqualified Stock Option Plan of the Registrant, as amended (filed as Exhibit 10(i) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 3, 1993 [File No. 1-10573] 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 950,000 shares, after adjustment to reflect share increases approved in 1990, 1992 and 1993). 25PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- ---------------------------------------------------- ---- 10.15 Equity Incentive Plan of the Registrant (filed as Attachment A to the Proxy Statement dated February 18, 1994 of the Registrant [File No. 1-10573] and incorporated herein by reference). 10.16 Deferred Compensation Plan for Directors of the Registrant (filed as Exhibit 10(k) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-14017] and incorporated herein by reference). 10.17 Directors' Stock Option Plan of the Registrant, as amended (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 1, 1995 [File No. 1-10573] and incorporated herein by reference). 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 Registrant's parent, Thermo Electron Corporation, and its subsidiaries, for services rendered to the Registrant or to such affiliated corporations. Such plans are listed under Exhibits 10.18 - 10.71. 10.18 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 9,035,156 shares, after adjustment to reflect share increases approved in 1984 and 1986, share decrease approved in 1989, and 3-for-2 stock splits effected in October 1986, October 1993 and May 1995). 10.19 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 9,035,156 shares, after adjustment to reflect share increases approved in 1984 and 1986, share decrease approved in 1989, and 3-for-2 stock splits effected in October 1986, October 1993 and May 1995). 26PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- ---------------------------------------------------- ---- 10.20 Thermo Electron Corporation Equity Incentive Plan (filed as Exhibit 10.1 to Thermo Electron's Quarterly Report on Form 10-Q for the quarter ended July 2, 1994 [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 7,050,000 shares, after adjustment to reflect 3-for-2 stock splits effected in October 1993 and May 1995 and share increase approved in 1994). 10.21 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). 10.22 Thermo Electron Corporation - Thermo Instrument Systems Inc. (formerly Thermo Environmental Corporation) Nonqualified Stock Option Plan (filed as Exhibit 4(c) to a Registration Statement on Form S-8 of Thermo Instrument [Reg. No. 33-8034] and incorporated herein by reference). (Maximum number of shares issuable is 337,500 shares, after adjustment to reflect 3-for-2 stock splits effected in July 1993 and April 1995). 10.23 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 480,228 shares, after adjustment to reflect share increase approved in 1988 and 3-for-2 stock splits effected in January 1988, July 1993 and April 1995). 10.24 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). 27PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- ---------------------------------------------------- ---- 10.25 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). (Amended in September 1995 to extend the plan expiration date to December 31, 2005). 10.26 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). 10.27 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). 10.28 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). 10.29 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 600,000 shares, after adjustment to reflect 2-for-1 stock split effected in September 1992 and 3-for-2 stock split effected in September 1995). 10.30 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 57,500 shares, after adjustment to reflect 3-for-2 stock split effected in November 1993 and share increase approved in September 1995). 28PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- ---------------------------------------------------- ---- 10.31 Thermo Electron Corporation - Thermo BioAnalysis Corporation Nonqualified Stock Option Plan. 10.32 Thermo Electron Corporation - ThermoLyte Corporation Nonqualified Stock Option Plan. 10.33 Thermo Electron Corporation - Thermo Remediation Inc. Nonqualified Stock Option Plan. 10.34 Thermo Electron Corporation - ThermoSpectra Corporation Nonqualified Stock Option Plan. 10.35 Thermo Electron Corporation - ThermoLase Corporation Nonqualified Stock Option Plan. 10.36 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). 10.37 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). 10.38 Thermo Ecotek Corporation (formerly Thermo Energy Systems Corporation) Equity Incentive Plan (filed as Exhibit 10.46 to Thermo Process' Annual Report on Form 10-K for the fiscal year ended April 2, 1994 [File No. 1-9549] and incorporated herein by reference). 10.39 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 splits effected in October 1986 and November 1993). 29PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- ---------------------------------------------------- ---- 10.40 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 splits effected in October 1986 and November 1993). 10.41 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, after adjustment to reflect 3-for-2 stock split effected in November 1993). 10.42 Thermedics Inc. - Thermedics Detection Inc. Nonqualified 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). 10.43 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). 10.44 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). 10.45 Thermo Cardiosystems Inc. Equity Incentive Plan (filed as Attachment A to the Proxy Statement dated May 5, 1994 of Thermo Cardiosystems [File No. 1-10114] and incorporated herein by reference). 30PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- ---------------------------------------------------- ---- 10.46 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). 10.47 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). 10.48 Thermo Voltek Corp. Equity Incentive Plan (filed as Exhibit 10.49 to Thermo Instrument's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 10.49 Thermo Instrument Systems Inc. Incentive Stock Option Plan (filed as Exhibit 10(c) to Thermo Instrument'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 Thermo Instrument Nonqualified Stock Option Plan is 2,250,000 shares, after adjustment to reflect share increase approved in 1990 and 3-for-2 stock splits effected in January 1988, July 1993 and April 1995). 10.50 Thermo Instrument Systems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(d) to Thermo Instrument'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 Thermo Instrument Incentive Stock Option Plan is 2,250,000 shares, after adjustment to reflect share increase approved in 1990 and 3-for-2 stock splits effected in January 1988, July 1993 and April 1995). 10.51 Thermo Instrument Systems Inc. Equity Incentive Plan (filed as Appendix A to the Proxy Statement dated April 27, 1993 of Thermo Instrument [File No. 1-9786] and incorporated herein by reference). (Maximum number of shares issuable is 3,225,000 shares, after adjustment to reflect share increase approved in December 1993 and 3-for-2 stock splits effected in July 1993 and April 1995). 31PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- ---------------------------------------------------- ---- 10.52 Thermo Instrument Systems Inc. (formerly 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 Thermo Instrument (formerly Thermo Environmental) Nonqualified Stock Option Plan is 928,125 shares, after adjustment to reflect share increase approved in 1987 and 3-for-2 stock splits effected in July 1993 and April 1995). 10.53 Thermo Instrument Systems Inc. (formerly 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 Thermo Instrument (formerly Thermo Environmental) Incentive Stock Option Plan is 928,125 shares, after adjustment to reflect share increase approved in 1987 and 3-for-2 stock splits effected in July 1993 and April 1995). 10.54 Thermo Instrument Systems Inc. - ThermoSpectra Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.45 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 1, 1994 [File No. 1-10573] and incorporated herein by reference). 10.55 ThermoSpectra Corporation Equity Incentive Plan (filed as Exhibit 10.59 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 1, 1994 [File No. 1-10573] and incorporated herein by reference). 10.56 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). 32PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- ---------------------------------------------------- ---- 10.57 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). 10.58 ThermoTrex Corporation - ThermoLase Corporation (formerly ThermoLase Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.53 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). 10.59 ThermoLase Corporation (formerly ThermoLase Inc.) Incentive Stock Option Plan (filed as Exhibit 10.55 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 in the aggregate under this plan and the ThermoLase Nonqualified Stock Option Plan is 2,800,000 shares, after adjustment to reflect share increase approved in 1993 and 2-for-1 stock splits effected in March 1994 and June 1995). 10.60 ThermoLase Corporation (formerly ThermoLase Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.54 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 in the aggregate under this plan and the ThermoLase Incentive Stock Option Plan is 2,800,000 shares, after adjustment to reflect increase approved in 1993 and 2-for-1 stock splits effected in March 1994 and June 1995). 10.61 ThermoLase Corporation Equity Incentive Plan (filed as Exhibit 10.81 to Thermo Process' Annual Report on Form 10-K for the fiscal year ended July 1, 1995 [File No. 1-9549] and incorporated herein by reference). 10.62 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). 10.63 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). 33PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- ---------------------------------------------------- ---- 10.64 Thermo Fibertek Inc. Equity Incentive Plan (filed as Attachment A to the Proxy Statement dated May 3, 1994 of Thermo Fibertek [File No. 1-11406] and incorporated herein by reference). 10.65 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). 10.66 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). 10.67 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). 10.68 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). 10.69 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). 10.70 Thermedics Detection Inc. Equity Incentive Plan (filed as Exhibit 10.69 to Thermo Instrument's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 10.71 ThermoLyte Corporation Equity Incentive Plan. 34PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page --------- ---------------------------------------------------- ---- 13 Annual Report to Shareholders for the fiscal year ended September 30, 1995 (only those portions incorporated herein by reference). 21 Subsidiaries of the Registrant. 23 Consent of Arthur Andersen LLP. 27 Financial Data Schedule. 35PAGE EX-10.11 2 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS, AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND REGISTRATION AND QUALIFICATION UNDER ALL APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO EXEMPTIONS THEREFROM. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN TERMS AND RESTRICTIONS, INCLUDING RESTRICTIONS ON TRANSFER, CONTAINED IN A SECURITIES PURCHASE AGREEMENT DATED MARCH 7, 1995. Redemption Right No.: Number of Redemption Rights: THERMOLYTE CORPORATION REDEMPTION RIGHTS This certifies that for value received ____________________ (the "Holder") has the right, in each of the calendar years 1998 and 1999, during the last twenty business days of December and ending at 5:00 p.m., New York City Time, on the twentieth such day (the "Annual Exercise Period"), to require ThermoLyte Corporation (the "Corporation") to redeem _______________ (_________) Shares of Common Stock of ThermoLyte Corporation in accordance with the terms set forth in this Certificate. Each right represented by this Certificate to require the redemption of one such Share is sometimes hereinafter referred to as a "Right" and the aggregate of such rights represented by this Certificate to require the redemption of one such Share is sometimes hereinafter referred to as the "Rights." The aggregate of all rights substantially identical to these Rights that are outstanding from time to time, including these Rights, are sometime hereinafter referred to as the "Redemption Rights." A. Exercise. (1) During the Annual Exercise Period in each of the calendar years 1998 and 1999, the Holder may exercise all or any portion of his right to require the Corporation to redeem up to _____________________ (___________) Shares (as defined below) as provided herein. Notwithstanding anything to the contrary, (a) any such redemption and the procedures relating to the redemption and offer of redemption set forth herein (the "Redemption") shall be conducted in compliance with all applicable laws, including all Federal securities laws, and (b) the obligation of the Corporation to redeem shares is contingent upon compliance with Delaware General Corporation Law Section 160 PAGE and if at any time the Corporation is insolvent or would be rendered insolvent by making a redemption of the Shares or if the Corporation is otherwise prohibited by law from redeeming the Shares, the redemption will occur to the extent permissible and, to the extent permitted, as soon as possible after such legal prohibition or impediment is no longer applicable. "Shares" shall mean all of the shares of Common Stock of the Corporation and the term "Affiliated Corporation" shall mean and include Thermo Electron Corporation, its subsidiaries, any other corporation owning a majority of the Common Stock of the Corporation or any other entity that is not a natural person or a trust forming a part of an employee benefit plan sponsored by Thermo Electron Corporation and that is an "affiliate" (as that term is defined in Rule 405 under the Securities Act of 1933) of Thermo Electron Corporation or such other entity. (2) In each of the Annual Exercise Periods, the Corporation shall be obligated to redeem at the option of the registered holders of the Redemption Rights (the "Holders"), up to ________ Shares in the aggregate, subject to adjustment as provided herein and subject to increase at the discretion of the Corporation. B. Consideration to be Received. Upon the valid exercise of these Rights, in whole or in part, the Holder shall be entitled to receive from the Corporation, upon surrender to the Corporation of such Rights and Shares as provided below $10.00 per Share redeemed, adjusted as provided herein (the "Redemption Price"). C. Notice to Shareholders. The Corporation shall mail notice to the Holders at their registered addresses, not less than 15 nor more than 45 days prior to the commencement of each Annual Exercise Period, a notice (the "Notice"). Such Notice shall state the number of Redemption Rights outstanding that are eligible for exercise on the date of such Notice, the address of the Corporation or its agent at which Holders may surrender their Shares (accompanied by Redemption Rights) for redemption and any other procedures determined by the Board of Directors for exercise of the Redemption Rights in accordance with the terms of this Certificate and the other certificates for Redemption Rights. D. Exercise of Redemption Rights. (1) Holders may exercise their right to have the Corporation redeem Shares upon surrender to the Corporation or its agent (as specified in the Notice) during the Annual Exercise Period at the Corporation's office or the office of its agent (at the address specified in the Notice) the certificate or certificates evidencing their Redemption Rights with the form on the reverse thereof indicating the number of Shares being tendered for redemption completed and duly signed along with the certificate or certificates representing the Shares to be redeemed, such certificate or certificates representing the Shares to be duly endorsed in blank. The Holder of this certificate may require the Corporation to redeem up to 2PAGE the number of Shares set forth above. The signatures on the certificates representing the Redemption Rights and the Shares shall be guaranteed by a bank or trust company or a broker that is a member of a national securities exchange. The Holder will be entitled to revoke an election to redeem so long as written notice of revocation is received by the Corporation or its agent, as specified in the Notice, before expiration of the Annual Exercise Period. The Corporation or its agent will hold 3 such certificates in trust for the Holder until payment shall have been made in accordance with Section E hereof. (2) In the event that the Holder exercises the right to have the Corporation redeem Shares as provided herein and surrenders Rights and Shares in that connection and the Corporation's acceptance of all Redemption Rights tendered during a particular Annual Exercise Period is prorated among tendering Holders, or in the event the Holder exercises fewer Rights than represented by this Certificate, or elects to redeem fewer Shares than represented by the stock certificate surrendered, the Corporation or the transfer agent for the Corporation's redemption Rights and Common Stock shall issue a new certificate or certificates of Common Stock or Redemption Rights for the balance of the number of Rights not exercised or shares of Common Stock not redeemed by the Corporation, except that no such certificate shall be delivered to Holders relating to unexercised Redemption Rights after the 1999 Annual Exercise Period. Any proration among Holders tendering Redemption Rights during an Annual Exercise Period will be based on the number of Redemption Rights and Shares tendered during such Annual Exercise Period. E. Manner of Payment. The Corporation shall within five business days after the end of each Annual Exercise Period pay, or cause payment to be made, in the form of a check mailed to the redeeming Holders, for the Shares redeemed as provided in the Redemption Rights. F. Adjustment of Amounts. If at any time or from time to time on or after March 7, 1995 and prior to January 1, 1999 there shall be (1) a capital reorganization of the Common Stock, (ii) a merger or consolidation of the Corporation with or into another corporation, (iii) the liquidation or dissolution of the Corporation or the sale of all or substantially all of the Corporation's assets to any other person, (iv) payment of a dividend in shares of Common Stock or Redemption Rights or a distribution made in shares of Common Stock or Redemption Rights, or a distribution to all holders of Common Stock of a security or right convertible into or exchangeable for shares of Common Stock, (v) a subdivision of outstanding shares of Common Stock or Redemption Rights; (vi) the combination of the outstanding shares of Common Stock or Redemption Rights into a smaller number of shares of Common Stock or Redemption Rights; or (vii) the issuance of other securities of the Corporation by reclassification of the Corporation's Shares of Common Stock or Redemption Rights (including any such reclassification in 3PAGE connection with a consolidation or merger in which the Corporation is the surviving corporation) or similar event, then as a part of such event, effective provision shall be made in a manner determined by the Board of Directors of the Corporation so that the Holders shall thereafter be entitled to redeem the number of shares of stock or other securities or property of the Corporation, or of the successor corporation resulting from such event, to the end that the provisions herein provided shall be applicable after that event in as nearly equivalent a manner as may be practicable. Whenever an adjustment as provided above is made, the Corporation shall send by first class mail, postage prepaid, to each Holder notice of such adjustment setting forth the details of such adjustment. G. Expiration of Redemption Rights. The Redemption Rights will expire and become worthless in the event the Company's Common Stock becomes publicly traded and the closing price of such Common Stock as reported on the principal trading market for such Common Stock has been at least 150% of the Redemption Price, as adjusted as provided above, for 20 of any 30 consecutive trading days and provided that during such time the Shares issued in connection with the issuance of the Redemption Rights represented by this Certificate are either registered for resale pursuant to an effective Registration Statement filed with the Securities and Exchange Commission or are otherwise permitted to be sold publicly pursuant to Securities and Exchange Commission Rule 144(k) or otherwise. H. Interest. In the event that any redemption is deferred as provided in Section A hereof, the Redemption Price applicable to the deferred Annual Exercise Period will continue to compound annually at an annual rate equal to the Base Rate of the First National Bank of Boston and the amounts payable to Holders of the Redemption Rights in respect of the deferred Annual Exercise Period will be calculated on such adjusted Redemption Price. I. Definition. As used herein, the term "business day" shall mean any day in which the American Stock Exchange is open for trading. J. Amendments. The Redemption Rights and this Redemption Rights Certificate may not be amended in any manner that dilutes or impairs the right of Holders to require the Corporation to redeem Shares without the consent of a majority in interest of Holders of outstanding Redemption Rights (which need not include the Holder) other than Affiliated Corporations; provided, however, that any such amendment in accordance with Section F above shall not require any such consent. K. Exchange of Certificates. This Certificate may be exchanged at the office of the Corporation upon its surrender, duly endorsed either separately or in combination with one or more other Redemption Right Certificates for one or more new Redemption Rights Certificates evidencing the same aggregate 4PAGE number of Redemption Rights evidenced by the Redemption Right Certificate or Certificates exchanged. This redemption Right Certificate is transferable at the office of the Corporation in the manner and subject to the limitations set forth herein. No fractional Redemption Rights will be issued. L. Securities Purchase Agreements. The Redemption Rights are subject to the terms and conditions contained within the Securities Purchase Agreement dated March 7, 1995. M. Other Provisions. The Holder hereof may be treated by the Corporation and all other persons dealing with this Redemption Rights Certificate as the absolute owner hereof for any purpose and as the person entitled to exercise the Rights represented hereby or to the transfer hereon on the books of the Corporation any notice to the contrary notwithstanding, and until such transfer on such books, the Corporation may treat the Holder hereof as the owner for all purposes. This Redemption Rights Certificate does not entitle any Holder hereof to any of the rights of a shareholder of the Corporation. By accepting this Certificate the Holder hereby consents to its terms. IN WITNESS WHEREOF, ThermoLyte Corporation has caused this Redemption Right Certificate to be signed manually or by facsimile by the Chairman of the Board, and a facsimile of its corporate seal to be imprinted hereon and attested by its Assistant Secretary. Dated: THERMOLYTE CORPORATION By:_______________________________ Chairman of the Board By:________________________________ Secretary 5PAGE EXERCISE FORM The undersigned hereby irrevocably exercises _________ of the Rights represented by the within Certificate and hereby surrenders to the Corporation an equal number of Shares, and requests that the consideration to be received by the undersigned upon such exercise be issued in the name of: ________________________________________________________________ (Please Print Name, Address and Taxpayer Identification No.) If the number of Rights represented by this Certificate and/or the number of Shares represented by the stock certificate or certificates enclosed herewith is greater than the number of Rights exercised or Shares surrendered, the undersigned requests that a new Redemption Rights Certificate and/or stock certificate for the balance of Rights and/or Shares remaining be registered in the name of the undersigned Holder as indicated below and delivered to the address stated below. Date:_________________, 199_. Name of Holder:_________________________________________________________ (Please Print) Address:________________________________________________________ ________________________________________________________________ Signature:______________________________________________________ Taxpayer Identification No.:_______________________________________________________ Signature Guaranteed: NOTE: The above signature must correspond with the name as written upon the face of this Redemption Rights Certificate in every particular, without alteration or enlargement or any change whatever, and be guaranteed by a bank or trust company or a broker who is a member of a national securities exchange. PAGE ASSIGNMENT (To be signed by the registered Holder only upon assignment of Rights) PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE: ________________________________________________________________ ________________________________________________________________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers into ________________________________________________________________ (Name and Address of Assignee Must be Printed or Typewritten) the within Redemption Rights, represented by this Redemption Right Certificate, and hereby irrevocably constitutes and appoints __________________________ attorney to transfer said Rights on the books of the Corporation, with full power of substitution in the premises. Date:___________, 19__ ______________________________________ Signature of Registered Holder Signature Guaranteed: NOTE: The above signature must correspond with the name as written upon the face of this Redemption Rights Certificate in every particular, without alteration or enlargement or any change whatever, and be guaranteed by an eligible guarantor institution which is a participant in the securities transfer association recognized program (otherwise known as the Medallion Signature Guarantee Program). PAGE THERMO ELECTRON CORPORATION GUARANTEE 1. FOR VALUE RECEIVED, Thermo Electron Corporation, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Guarantor"), hereby unconditionally guarantees to the holder of the Rights represented by the Certificate upon which this Guarantee is endorsed (the "Holder") the due and punctual payment of any amounts due from ThermoLyte Corporation ("TLT") to the Holder pursuant to TLT's obligation to redeem shares of its outstanding Common Stock during Annual Exercise Periods, as that term is defined on this Certificate, in case of the failure of TLT to make any such payment to be made punctually when and as the same shall become due and payable. 2. The Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of TLT's redemption obligation and shall be applicable without regard to the provisions of Section 160 of the Delaware General Corporation Law or other legal prohibition or impediment and irrespective of the absence of any action to enforce the same, any waiver or consent by the Holder, the recovery of any judgment against TLT or any action to enforce the same or any other circumstances that might otherwise constitute a legal or equitable discharge or defense of a guarantor. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of TLT, any right to require a proceeding first against TLT, protest or notice with respect to redemption of TLT's Common Stock as provided in this Certificate relating to redemption of its Common Stock and of this Guarantee. 3. (a) Prior to satisfaction in full of the aforesaid redemption obligations and this Guarantee, the Guarantor will not merge or consolidate with, or sell or convey all or substantially all of its assets to, any other corporation or entity, unless (i) either (A) the Guarantor shall be the surviving corporation in the case of a merger or (B) the surviving, resulting or transferee corporation or entity shall expressly assume the due and punctual performance of all of the covenants and obligations of the Guarantor under this Guarantee and (ii) the Guarantor or such successor corporation, as the case may be, shall not, immediately after such merger, consolidation, sale or conveyance, be in default in the performance of any covenants or obligations of the Guarantor under this Guarantee. (b) Upon any merger, consolidation, sale, conveyance or assumption as provided in Section 3(a), the successor or assuming corporation shall succeed to and be substituted for, and may exercise every right and power of and be subject to all the obligations of, the Guarantor under this Guarantee with the same effect as if such successor or assuming corporation had been PAGE named as the guarantor therein and herein and the Guarantor shall be released from its liability as obligor under this Guarantee. 4. (a) The Guarantor, for itself, its successors and assigns, covenants and agrees, and each Holder by his acceptance of the Rights likewise covenants and agrees, that all obligations of the Guarantor relating to payment of any amounts due for the redemption of TLT Common Stock pursuant to the terms set forth in this Certificate are hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all Superior Indebtedness of the Guarantor. "Superior Indebtedness" shall mean the principal of (and premium, if any) and interest on the following, whether outstanding at the date hereof or hereafter created or incurred: (i) any indebtedness of the Guarantor for money borrowed by the Guarantor (including purchase money obligations and non-contingent obligations to reimburse any bank or other person in respect of amounts paid under letter of credit), as evidenced by debentures, bonds, notes or similar instruments issued or assumed by the Guarantor and whether outstanding on the date of this Guarantee or thereafter created or incurred; provided, however, that Superior Indebtedness shall not include (i) the Guarantees, (ii) the Guarantor's 4-7/8% Convertible Subordinated Debentures due 1997, obligations represented by which rank pari passu with the obligations represented by this Guarantee in right of payment, and (iii) the Guarantor's subordinated guarantees of the principal of (and premium, if any), and interest on the 6-5/8% Convertible Subordinated Debentures of Thermo Instrument Systems Inc. due 2001, the 6-1/2% Convertible Debentures due 1997 of Thermo Process Systems Inc., the 6-1/2% Convertible Subordinated Debentures due 1998 of Thermedics Inc., the 5-1/2% Convertible Subordinated Debentures due 2002 and the Noninterest-bearing Convertible Subordinated Notes due 1997 of Thermo Cardiosystems Inc., and the 3-3/4% Convertible Subordinated Debentures due 2000 of Thermo Voltek Corp., the obligations represented by which rank pari passu with the obligations represented by this Guarantee in right of payment; (ii) leases for real property, equipment or other assets used in the Guarantor's business, which leases are capitalized in the Guarantor's consolidated financial statements in accordance with generally accepted accounting principles; (iii) commitment or standby fees due and payable to lending institutions with respect to credit facilities available to the Guarantor; 2PAGE (iv) obligations under interest rate and currency swaps, floors, caps or other similar arrangements intended to fix interest rate obligations; (v) indebtedness secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by the Guarantor subject to such mortgage, pledge, lien or other encumbrance, whether or not the indebtedness secured thereby shall have been assumed by the Guarantor; (vi) obligations of the Guarantor constituting a guarantee of indebtedness of or joint obligation with another or others which would be included in the preceding clauses (i), (ii), (iii), (iv), or (v) if an obligation of the Guarantor; or (viii) renewals, extensions or refundings of any of the indebtedness, leases, fees or obligations referred to in the preceding clauses (i), (ii), (iii) (iv), (v) and (vi); provided that Superior Indebtedness shall not include (A) any particular indebtedness, lease, fee, obligation, renewal, extension or refunding if, under the express provisions of the instrument creating or evidencing the same, or pursuant to which the same is outstanding, such indebtedness, lease, fee or obligation or such renewal, extension or refunding thereof is stated to be not superior in right of payment to the Guarantees. (b) (i) In the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to the Guarantor or to its creditors, in their capacity as such creditors, or to its property, or in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Guarantor, whether or not involving insolvency or bankruptcy, or in the event of any assignment for the benefit of creditors of the Guarantor or any marshaling of assets of the Guarantor, then the holders of Superior Indebtedness of the Guarantor shall first be entitled to receive payment in full of the principal of (and premium, if any) and interest, including interest thereon accruing after the commencement of any such proceeding, on all Superior Indebtedness of the Guarantor before the holders of any of the Redemption Rights shall be entitled to receive any payment on account of the obligations of the Guarantor pursuant to Section 1, and to that end the holders of Superior Indebtedness of the Guarantor shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash, property or securities, which may be payable or deliverable in any such proceedings in respect to obligations of the Guarantor relating to the Redemption Rights other than securities of the Guarantor as 3PAGE reorganized or readjusted or securities of the Guarantor or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Section 4 with respect to the obligations of the Guarantor relating to the Redemption Rights, to the payment of all Superior Indebtedness of the Guarantor, provided that the rights of the Holders of Superior Indebtedness of the Guarantor are not altered by such reorganization or readjustment. For the purposes of this Section, no consolidation, merger, conveyance or transfer made pursuant to the provisions of Section 3 shall be deemed to be a liquidation, reorganization, dissolution or other winding up of the Guarantor. (ii) If under the circumstances set forth in paragraph (b)(i) of this Section, and notwithstanding the provisions thereof, any payment or distribution of assets of the Guarantor of any kind, whether in cash, property, or securities (other than securities of the Guarantor as reorganized or readjusted or securities of the Guarantor or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinated, at least to the extent provided in this Section with respect to the obligations of the Guarantor relating to the Redemption Rights, to the payment of all Superior Indebtedness of the Guarantor provided that the rights of the holders of Superior Indebtedness of the Guarantor are not altered by such reorganization or readjustment) would otherwise be received by the holders of the Redemption Rights in respect of the obligations of the Guarantor before the principal of (and premium, if any) and interest on all Superior Indebtedness of the Guarantor is paid in full, such payment or distribution shall be paid over to the holders of Superior Indebtedness of the Guarantor, ratably, for application to the payment of the principal of (and premium, if any) and interest on all Superior Indebtedness of the Guarantor remaining unpaid until all the principal of (and premium, if any) and interest on all Superior Indebtedness of the Guarantor shall have been paid in full, after giving effect to any concurrent payment or distribution to the holders of such Superior Indebtedness of the Guarantor. (iii) Upon any distribution of assets of the Guarantor referred to in this Section, the holders of the Redemption Rights shall be entitled to rely upon any final order or decree of a court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, and the holders of the Redemption Rights shall be entitled to rely upon a certificate of the liquidating trustee or agent or other person making any distribution to the holders of the Redemption Rights for the purpose of ascertaining the persons entitled to participate 4PAGE in such distribution, the holders of Superior Indebtedness of the Guarantor and other indebtedness of the Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section. (c) (i) Upon the maturity of any Superior Indebtedness of the Guarantor by lapse of time, acceleration or otherwise, all principal thereof (and premium, if any) and interest due thereon, including interest thereon accruing after the commencement of any proceeding of the type referred to in paragraph (i) of Section (b) above, shall first be paid in full, or such payment duly provided for in cash, before any payment, directly or indirectly, is made on account of the obligations of the Guarantor relating to the Redemption Rights. (ii) Upon the happening of an event of default with respect to any Superior Indebtedness of the Guarantor, as defined therein or in the instrument under which it is outstanding, permitting the holders to accelerate the maturity thereof, then, unless and until such event of default shall have been cured or waived or shall have ceased to exist, no payment shall be made by the Guarantor, directly or indirectly, on account of the obligations of the Guarantor relating to the Redemption Rights. (d) In case cash, securities or other property otherwise payable or deliverable to the holders of the Redemption Rights on account of the Guarantee shall have been applied, pursuant to Section (b) or (c), to the payment of Superior Indebtedness of the Guarantor, then, upon the payment in full of the principal of (and premium, if any) and interest on all Superior Indebtedness of the Guarantor, the holders of the Redemption Rights shall be subrogated to any rights of any holders of Superior Indebtedness of the Guarantor, to receive any further payments or distributions applicable to Superior Indebtedness of the Guarantor until the obligation of the Guarantor in respect of this Guarantee shall have been discharged in full, and such payments or distributions received by the holders of the Redemption Rights by reason of such subrogation, of cash, securities or other property that otherwise would be paid or distributed to the holders of Superior Indebtedness of the Guarantor, shall, as between the Guarantor and its creditors other than the holders of Superior Indebtedness of the Guarantor, on the one hand, and the holders of the Redemption Rights on account of this Guarantee, on the other hand, be deemed to be a payment by the Guarantor on account of Superior Indebtedness of the Guarantor and not on account of the Redemption Rights. (e) No present or future holder of any Superior Indebtedness of the Guarantor shall be prejudiced in any way in the right to enforce the subordination of this Guarantee by any act or failure to act on the part of the Guarantor. The provisions of this 5PAGE Section 4 are solely for the purpose of defining the relative rights of the holders of Superior Indebtedness of the Guarantor, on the one hand, and the holders of the Redemption Rights on account of this Guarantee, on the other hand, against the Guarantor and its assets, and nothing contained in this Section 4 shall impair, as between the Guarantor and the holder of any Redemption Rights, the obligation of the Guarantor, which is unconditional and absolute, to perform in accordance with the terms of this Guarantee or prevent the holder of any Redemption Rights, upon default hereunder or under the terms of such Redemption Rights, from exercising all rights, powers and remedies otherwise provided herein or therein or by applicable law, all subject to the rights of the holders of Superior Indebtedness of the Guarantor under this Section 4 to receive cash, property or securities otherwise payable or deliverable to the holders of the Redemption Rights on account of this Guarantee. (f) Nothing contained in this Section 4 shall prevent at any time, except under the conditions described in Section 4(b) and (c) hereof or during the pendency of any dissolution, winding up, liquidation or reorganization proceedings therein referred to, the Guarantor from performing its obligations under this Guarantee. 5. The Guarantor shall be subrogated to all rights of the holders of the Redemption Rights against TLT in respect of any amounts paid by the Guarantor pursuant to the provisions of this Guarantee to the end that the Guarantor shall be entitled to receive the shares of TLT Common Stock as to which it makes payments in respect of TLT's redemption obligations hereunder. 6. This Guarantee shall be governed by and construed in accordance with the laws of Commonwealth of Massachusetts. 7. The Guarantor hereby certifies and warrants that all acts, conditions and things required to be done and performed and to have happened precedent to the creation and issuance of this Guarantee and to constitute the same a valid obligation of the Guarantor have been done and performed and have happened in due compliance with all applicable laws. 8. By his acceptance hereof, each Holder acknowledges and agrees that this Guarantee supersedes any and all prior guarantees by Guarantor to such Holder with respect to any redemption obligations of TLT as to its Common Stock. 6PAGE IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly executed. Dated as of November 27, 1995 THERMO ELECTRON CORPORATION By:________________________________ Treasurer Attest: By:_____________________________ AA953340018 EX-10.12 3 GUARANTEE AGREEMENT Thermo Electron Corporation, a Delaware corporation ("Thermo Electron"), and ThermoLyte Corporation, a Delaware corporation ("TLT"), agree as follows: WHEREAS, TLT plans to issue and sell in a private placement up to 1,845,000 shares of Common Stock (the "TLT Common Stock") and 1,845,000 redemption rights providing the holder the right to require TLT to repurchase TLT Common Stock during certain annual exercise periods (the "Redemption Rights"); and WHEREAS, such sale of TLT Common Stock will be materially enhanced by the existence of a subordinated guarantee by Thermo Electron of the Redemption Rights. NOW, THEREFORE, Thermo Electron and TLT do hereby covenant and agree as follows: Article 1. Thermo Electron agrees to guarantee as provided in the Guarantee dated the date hereof and attached hereto as Exhibit A, on a subordinated basis, the due and punctual payment of any amounts due from TLT to its holders of Common Stock pursuant to the Redemption Rights. For purposes of this Agreement, all of the Guarantees of the Redemption Rights referred to in the preceding sentence shall be referred to as the "Guaranty." Article 2. The text of the Guaranty shall be endorsed on the back of each Redemption Right certificate and shall be executed by duly authorized officer of Thermo Electron, which execution shall be attested. Such signatures may be manual or facsimile. Article 3. Upon the failure or prospective failure of TLT to meet its redemption obligations during any Annual Redemption Period, as that term is defined in the Redemption Rights, TLT shall deliver to Thermo Electron, a statement of the failure or prospective failure of TLT to meets its obligations and the correct amount to be paid in respect of such redemption. This statement shall be delivered at the earliest practicable time. Failure of TLT to deliver such a statement shall not relieve Thermo Electron of its obligations under this Agreement or the Guaranty. Article 4. This Agreement may be amended only by written amendment signed by both parties and no such amendment that is materially adverse to the rights of any holder of the Redemption Rights shall be effective against the holders of the Redemption Rights without the consent of a two-thirds in interest of such holders other than Thermo Electron, its subsidiaries, any other corporation owning a majority of the Common Stock of TLT or any other entity that is not a natural person and that is an PAGE "affiliate" (as that term is defined in Rule 405 under the Securities Act of 1933) of Thermo Electron Corporation or such other entity. Article 5. This Agreement is effective as of the 7th day of March, 1995 and shall terminate on the date that the redemption obligations of TLT under the Redemption Rights have been satisfied in full. Article 6. This Agreement has been entered into by TLT and Thermo Electron for the benefit of the holders of the Redemption Rights and such holders are third party beneficiaries hereof. Executed as a sealed instrument. THERMOLYTE CORPORATION By: Marshall J. Armstrong THERMO ELECTRON CORPORATION By: Jonathan W. Painter EX-10.31 4 Exhibit 10.31 THERMO ELECTRON CORPORATION THERMO BIOANALYSIS NONQUALIFIED STOCK OPTION PLAN 1. Purpose This Nonqualified Stock Option Plan (the "Plan") is intended to encourage ownership of Common Stock, $0.001 par value (the "Common Stock"), of Thermo BioAnalysis Corporation ("Subsidiary"), a subsidiary of Thermo Electron Corporation (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 and its subsidiaries, and to provide additional incentive for them to promote the success of the business of the Company and Subsidiary. The Plan is intended to be a nonstatutory stock option plan. 2. Effective Date of the Plan The Plan shall become effective when adopted by the Board of Directors of the Company. 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 100,000 shares, subject 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 Subsidiary 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 PAGE 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 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 one or more of its subsidiaries or to continue as a director or consultant of the Company, and that it does not interfere in any way with the right of the Company or any such subsidiary to terminate the employment of the Optionee at any time if the Optionee is an employee, to remove the Optionee as a director of the Company 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 Subsidiary Common Stock (the "Tendered Shares") with a then current market value equal to the option price of the shares to be purchased; provided, however, PAGE 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, Subsidiary 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 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 Subsidiary with or into another company or in case of any sale or conveyance to another company or entity of the property of Subsidiary as a whole or substantially as a whole, the Optionee shall, upon exercise of PAGE 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 Subsidiary, 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. 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 PAGE 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 shall have the right to deduct from payments of any kind otherwise due to an 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 (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 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 PAGE 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 on December 31, 2005 and no options shall be granted hereunder thereafter. EX-10.32 5 Exhibit 10.32 THERMO ELECTRON CORPORATION THERMOLYTE NONQUALIFIED STOCK OPTION PLAN 1. Purpose This Nonqualified Stock Option Plan (the "Plan") is intended to encourage ownership of Common Stock, $0.001 par value (the "Common Stock"), of ThermoLyte Corporation ("Subsidiary"), a subsidiary of Thermo Electron Corporation (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 and its subsidiaries, and to provide additional incentive for them to promote the success of the business of the Company and Subsidiary. The Plan is intended to be a nonstatutory stock option plan. 2. Effective Date of the Plan The Plan shall become effective when adopted by the Board of Directors of the Company. 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 100,000 shares, subject 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 Subsidiary 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 PAGE 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 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 one or more of its subsidiaries or to continue as a director or consultant of the Company, and that it does not interfere in any way with the right of the Company or any such subsidiary to terminate the employment of the Optionee at any time if the Optionee is an employee, to remove the Optionee as a director of the Company 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 Subsidiary Common Stock (the "Tendered Shares") with a then current market value equal to the option price of the shares to be purchased; provided, however, PAGE 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, Subsidiary 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 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 Subsidiary with or into another company or in case of any sale or conveyance to another company or entity of the property of Subsidiary as a whole or substantially as a whole, the Optionee shall, upon exercise of PAGE 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 Subsidiary, 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. 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 PAGE 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 shall have the right to deduct from payments of any kind otherwise due to an 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 (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 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 PAGE 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 on December 31, 2005 and no options shall be granted hereunder thereafter. EX-10.33 6 Exhibit 10.33 THERMO ELECTRON CORPORATION THERMO REMEDIATION 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 Thermo Remediation Corporation ("Subsidiary"), a subsidiary of Thermo Electron Corporation (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 and its subsidiaries, and to provide additional incentive for them to promote the success of the business of the Company and Subsidiary. The Plan is intended to be a nonstatutory stock option plan. 2. Effective Date of the Plan The Plan shall become effective when adopted by the Board of Directors of the Company. 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 100,000 shares, subject 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 Subsidiary 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 PAGE 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 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 one or more of its subsidiaries or to continue as a director or consultant of the Company, and that it does not interfere in any way with the right of the Company or any such subsidiary to terminate the employment of the Optionee at any time if the Optionee is an employee, to remove the Optionee as a director of the Company 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 Subsidiary Common Stock (the "Tendered Shares") with a then current market value equal to the option price of the shares to be purchased; provided, however, PAGE 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, Subsidiary 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 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 Subsidiary with or into another company or in case of any sale or conveyance to another company or entity of the property of Subsidiary as a whole or substantially as a whole, the Optionee shall, upon exercise of PAGE 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 Subsidiary, 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. 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 PAGE 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 shall have the right to deduct from payments of any kind otherwise due to an 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 (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 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 PAGE 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 on December 31, 2005 and no options shall be granted hereunder thereafter. EX-10.34 7 Exhibit 10.34 THERMO ELECTRON CORPORATION 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 ("Subsidiary"), a subsidiary of Thermo Electron Corporation (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 and its subsidiaries, and to provide additional incentive for them to promote the success of the business of the Company and Subsidiary. The Plan is intended to be a nonstatutory stock option plan. 2. Effective Date of the Plan The Plan shall become effective when adopted by the Board of Directors of the Company. 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 100,000 shares, subject 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 Subsidiary 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 PAGE 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 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 one or more of its subsidiaries or to continue as a director or consultant of the Company, and that it does not interfere in any way with the right of the Company or any such subsidiary to terminate the employment of the Optionee at any time if the Optionee is an employee, to remove the Optionee as a director of the Company 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 Subsidiary Common Stock (the "Tendered Shares") with a then current market value equal to the option price of the shares to be purchased; provided, however, PAGE 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, Subsidiary 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 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 Subsidiary with or into another company or in case of any sale or conveyance to another company or entity of the property of Subsidiary as a whole or substantially as a whole, the Optionee shall, upon exercise of PAGE 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 Subsidiary, 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. 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 PAGE 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 shall have the right to deduct from payments of any kind otherwise due to an 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 (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 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 PAGE 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 on December 31, 2005 and no options shall be granted hereunder thereafter. EX-10.35 8 Exhibit 10.35 THERMO ELECTRON CORPORATION THERMOLASE 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 ThermoLase Corporation ("Subsidiary"), a subsidiary of Thermo Electron Corporation (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 and its subsidiaries, and to provide additional incentive for them to promote the success of the business of the Company and Subsidiary. The Plan is intended to be a nonstatutory stock option plan. 2. Effective Date of the Plan The Plan shall become effective when adopted by the Board of Directors of the Company. 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 300,000 shares, subject 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 Subsidiary 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 PAGE 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 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 one or more of its subsidiaries or to continue as a director or consultant of the Company, and that it does not interfere in any way with the right of the Company or any such subsidiary to terminate the employment of the Optionee at any time if the Optionee is an employee, to remove the Optionee as a director of the Company 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 Subsidiary Common Stock (the "Tendered Shares") with a then current market value equal to the option price of the shares to be purchased; provided, however, PAGE 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, Subsidiary 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 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 Subsidiary with or into another company or in case of any sale or conveyance to another company or entity of the property of Subsidiary as a whole or substantially as a whole, the Optionee shall, upon exercise of PAGE 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 Subsidiary, 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. 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 PAGE 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 shall have the right to deduct from payments of any kind otherwise due to an 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 (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 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 PAGE 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 on December 31, 2005 and no options shall be granted hereunder thereafter. EX-10.71 9 Exhibit 10.71 THERMOLYTE CORPORATION EQUITY INCENTIVE PLAN 1. Purpose The purpose of this Equity Incentive Plan (the "Plan") is to secure for ThermoLyte 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"). PAGE 2 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. 4. Shares Subject to the Plan Subject to adjustment as provided in Section 10.6, the total number of shares of the common stock, $.001 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 5% of the shares of Common Stock outstanding at the beginning of such calendar year. PAGE 3 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"). 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 PAGE 4 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 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 PAGE 5 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 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 PAGE 6 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) PAGE 7 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, Thermo Power Corporation ("Power "), 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, Power 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, Power or PAGE 8 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, Power'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, Power 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, Power 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, Power's or Thermo Electron's Common Stock, not approved by the Prior Directors, by any Person other than the Company, Power, 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. PAGE 9 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. 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. PAGE 10 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. 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 PAGE 11 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-13 10 Exhibit 13 THERMO POWER CORPORATION Consolidated Financial Statements as of September 30, 1995 PAGE Thermo Power Corporation Consolidated Statement of Income Year Ended --------------------------------------- (In thousands except September 30, October 1, October 2, per share amounts) 1995 1994 1993 ------------------------------------------------------------------------- Revenues (Note 11) $103,255 $ 89,334 $ 75,429 -------- -------- -------- Costs and Operating Expenses: Cost of revenues 79,823 70,026 60,855 Selling, general and administrative expenses (Note 8) 15,886 14,203 11,846 Research and development expenses 3,065 1,622 995 -------- -------- -------- 98,774 85,851 73,696 -------- -------- -------- Operating Income 4,481 3,483 1,733 Interest Income 1,919 1,278 1,161 Interest Expense (includes $37 and $307 to parent company in fiscal 1994 and 1993) (23) (61) (342) Gain on Sale of Investments, Net (includes $768, $616 and $404 on sale of related party investments) (Note 8) 730 582 576 -------- -------- -------- Income Before Provision for Income Taxes and Minority Interest 7,107 5,282 3,128 Provision for Income Taxes (Note 7) 2,737 2,034 1,205 Minority Interest Expense 182 - - -------- -------- -------- Net Income $ 4,188 $ 3,248 $ 1,923 ======== ======== ======== Earnings per Share $ .34 $ .26 $ .18 ======== ======== ======== Weighted Average Shares 12,372 12,291 10,676 ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 2PAGE Thermo Power Corporation Consolidated Balance Sheet September 30, October 1, (In thousands) 1995 1994 ------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 23,504 $ 7,474 Available-for-sale investments, at quoted market value (amortized cost of $10,624) (includes $429 of related party investments) (Notes 2 and 8) 10,666 - Short-term investments, at cost (quoted market value of $20,723) (includes $800 of related party investments) - 20,405 Accounts receivable, less allowances of $530 and $590 18,203 13,638 Unbilled contract costs and fees 6,228 5,236 Inventories 22,249 14,862 Prepaid income taxes (Note 7) 3,213 3,003 Other current assets 752 135 -------- -------- 84,815 64,753 -------- -------- Rental Assets, at Cost, Net 6,406 4,195 -------- -------- Property, Plant and Equipment, at Cost, Net 8,467 7,679 -------- -------- Long-term Available-for-sale Investments, at Quoted Market Value (amortized cost of $471) (includes $339 invested in parent company common stock) (Notes 2 and 8) 733 - -------- -------- Long-term Investments, at Cost (quoted market value of $565) (includes $18 invested in parent company common stock) - 471 -------- -------- Other Assets 223 - -------- -------- Cost in Excess of Net Assets of Acquired Companies (Note 3) 7,773 5,523 -------- -------- $108,417 $ 82,621 ======== ======== 3PAGE Thermo Power Corporation Consolidated Balance Sheet (continued) September 30, October 1, (In thousands except share amounts) 1995 1994 ------------------------------------------------------------------------- Liabilities and Shareholders' Investment Current Liabilities: Accounts payable $ 13,262 $ 9,929 Accrued payroll and employee benefits 2,732 2,466 Customer advances 971 1,139 Accrued warranty costs 2,100 3,368 Accrued income taxes 1,368 924 Other accrued expenses 4,242 3,510 Due to Thermo Electron Corporation and affiliated companies - 274 -------- -------- 24,675 21,610 -------- -------- Deferred Income Taxes (Note 7) 118 192 -------- -------- Long-term Obligations (Note 10) 364 344 -------- -------- Commitments (Notes 8 and 9) Common Stock of Subsidiary Subject to Redemption ($18,450 redemption value) (Note 1) 17,435 - -------- -------- Shareholders' Investment (Notes 4 and 5): Common stock, $.10 par value, 30,000,000 shares authorized; 12,478,544 and 12,425,273 shares issued 1,248 1,243 Capital in excess of par value 53,898 53,211 Retained earnings 10,822 6,634 Treasury stock at cost, 49,758 and 121,140 shares (341) (613) Net unrealized gain on available-for-sale investments (Note 2) 198 - -------- -------- 65,825 60,475 -------- -------- $108,417 $ 82,621 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 4PAGE Thermo Power Corporation Consolidated Statement of Cash Flows Year Ended --------------------------------------- September 30, October 1, October 2, (In thousands) 1995 1994 1993 ------------------------------------------------------------------------- Operating Activities: Net income $ 4,188 $ 3,248 $ 1,923 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 2,082 1,867 1,298 Provision for losses on accounts receivable 3 (2) (149) Gain on sale of investments, net (Note 8) (730) (582) (576) Minority interest expense 182 - - Increase (decrease) in deferred income taxes (166) - 391 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable (4,568) (1,236) (1,337) Inventories and unbilled contract costs and fees (8,881) 693 (2,329) Other current assets (558) 366 (510) Accounts payable 3,333 767 1,109 Other current liabilities 196 (677) 2,999 Other (191) 85 - -------- -------- -------- Net cash provided by (used in) operating activities (5,110) 4,529 2,819 -------- -------- -------- Investing Activities: Acquisitions, net of cash acquired (Note 3) (2,500) (7,947) (13,185) Purchases of available-for-sale investments (365) - - Proceeds from sale and maturities of available-for-sale investments 9,074 - - Proceeds from sale of related party investments 1,599 1,462 447 (Increase) decrease in short-term investments - 9,326 (23,657) Purchases of long-term investments - (453) - Purchases of property, plant and equipment (2,101) (875) (661) Increase in rental assets (2,848) (1,856) - Other 273 66 423 -------- -------- -------- Net cash provided by (used in) investing activities $ 3,132 $ (277) $(36,633) -------- -------- -------- 5PAGE Thermo Power Corporation Consolidated Statement of Cash Flows (continued) Year Ended --------------------------------------- September 30, October 1, October 2, (In thousands) 1995 1994 1993 ------------------------------------------------------------------------- Financing Activities: Net proceeds from issuance of Company and subsidiary common stock (Note 1) $ 18,064 $ 266 $ 36,133 Issuance of obligations to parent company - - 5,000 Repayment of obligations to parent company (Note 8) - (3,000) (5,000) Repayment of long-term obligations (56) (198) (232) -------- -------- -------- Net cash provided by (used in) financing activities 18,008 (2,932) 35,901 -------- -------- -------- Increase in Cash and Cash Equivalents 16,030 1,320 2,087 Cash and Cash Equivalents at Beginning of Year 7,474 6,154 4,067 -------- -------- -------- Cash and Cash Equivalents at End of Year $ 23,504 $ 7,474 $ 6,154 ======== ======== ======== Cash Paid For: Interest $ 23 $ 61 $ 343 Income taxes $ 2,796 $ 1,575 $ 1,169 Noncash Investing Activities: Fair value of assets of acquired companies $ 2,500 $ 10,571 $ 21,897 Cash paid for acquired companies (2,500) (7,947) (13,185) -------- -------- -------- Liabilities assumed of acquired companies $ - $ 2,624 $ 8,712 ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 6PAGE Thermo Power Corporation Consolidated Statement of Shareholders' Investment Net Unrealized Common Gain on Stock, Capital in Available- $.10 Par Excess of Retained Treasury for-sale (In thousands) Value Par Value Earnings Stock Investments - -------------------------------------------------------------------------------- Balance September 26, 1992 $ 811 $16,876 $ 1,463 $ (848) $ - Net income - - 1,923 - - Net proceeds from public offering of common stock 431 35,567 - - - Issuance of stock under employees' and directors' stock plans - 43 - 92 - Tax benefit related to employees' and directors' stock plans - 241 - - - ------- ------- ------- ------- --------- Balance October 2, 1993 1,242 52,727 3,386 (756) - Net income - - 3,248 - - Issuance of stock under employees' and directors' stock plans 1 122 - 143 - Tax benefit related to employees' and directors' stock plans - 362 - - - ------- ------- ------- ------- --------- Balance October 1, 1994 1,243 53,211 6,634 (613) - Net income - - 4,188 - - Issuance of stock under employees' and directors' stock plans 5 534 - 272 - Tax benefit related to employees' and directors' stock plans - 153 - - - Effect of change in accounting principle (Note 2) - - - - 268 Change in net unrealized gain on available-for- sale investments (Note 2) - - - - (70) ------- ------- ------- ------- --------- Balance September 30, 1995 $ 1,248 $53,898 $10,822 $ (341) $ 198 ======= ======= ======= ======= ========= The accompanying notes are an integral part of these consolidated financial statements. 7PAGE Thermo Power Corporation Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Relationship with Thermo Electron Corporation Thermo Power Corporation (the Company) was incorporated on June 6, 1985, as a wholly owned subsidiary of Thermo Electron Corporation (Thermo Electron). As of September 30, 1995, Thermo Electron owned 7,832,326 shares of the Company's common stock, representing 63% of such stock outstanding. Principles of Consolidation The accompanying financial statements include the accounts of the Company, its wholly owned subsidiaries, and its 78%-owned privately held subsidiary, ThermoLyte Corporation (ThermoLyte). All significant intercompany accounts and transactions have been eliminated. Fiscal Year The Company has adopted a fiscal year ending the Saturday nearest September 30. References to fiscal 1995, 1994, and 1993 are for the fiscal years ended September 30, 1995, October 1, 1994, and October 2, 1993, respectively. Fiscal years 1995 and 1994 each included 52 weeks; 1993 included 53 weeks. The 53-week year did not have a material impact on the Company's results of operations. Revenue Recognition The Company recognizes revenues upon shipment of its products or upon completion of services it renders, and recognizes rental revenues on a straight-line basis over the term of the rental contract. The Company provides a reserve for its estimate of warranty costs at the time of shipment. Revenues and profits on contracts are recognized using the percentage-of-completion method. Revenues recorded under the percentage-of-completion method, including revenues from research and development contracts, were $53,045,000 in fiscal 1995, $51,862,000 in fiscal 1994, and $43,622,000 in fiscal 1993. The percentage of completion is determined by relating the actual costs incurred to date to management's estimate of total costs to be incurred on each contract. If a loss is indicated on any contract in process, a provision is made currently for the entire loss. Contracts at the Company's FES division generally provide for billing of customers on a fixed-price basis upon contract completion. Contracts at the Company's Tecogen division generally provide for billing of customers on a cost-plus-fixed-fee basis as costs are incurred. 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. Research and Development Arrangements The Company has research and development arrangements with the natural gas industry and various governmental agencies. Revenues in the accompanying statement of income include $4,917,000, $5,209,000, and $6,457,000, and cost of revenues include $3,548,000, $4,197,000, and $5,310,000 related to these arrangements in fiscal 1995, 1994, and 1993, respectively. The Company is required to pay royalties for any technologies developed or products commercialized under several of these arrangements. Selling, general and administrative expenses in the accompanying statement of income 8PAGE Thermo Power Corporation Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies (continued) include royalty expense related to these arrangements of $51,000, $75,000, and $80,000 in fiscal 1995, 1994, and 1993, respectively. Income Taxes Pursuant to a tax allocation agreement between the Company and Thermo Electron, the Company was included in the consolidated income tax returns filed by Thermo Electron for the period from September 27, 1992 through February 10, 1993. The agreement provided that the Company would pay to Thermo Electron amounts comparable to the taxes the Company would have paid if it had filed separate tax returns. Subsequent to the Company's public offering of common stock in February 1993, Thermo Electron's equity ownership of the Company was reduced below 80% and, as a result, the Company is required to file its own income tax returns. 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 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 earnings per share calculation. Fully diluted earnings per share have not been presented because the effect of the exercise of stock options and the conversion of the Company's subordinated convertible note, which was repaid in December 1993, would be immaterial or antidilutive. Cash and Cash Equivalents As of September 30, 1995, $22,381,000 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. Cash equivalents are carried at cost, which approximates market value. Available-for-sale Investments Pursuant to SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," effective October 2, 1994, the Company's debt and marketable equity securities are accounted for at market value (Note 2). Prior to fiscal 1995, these investments were carried at the lower of cost or market value. 9PAGE Thermo Power Corporation Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies (continued) Inventories Inventories are stated at the lower of cost (on a first-in, first-out basis) or market value and include materials, labor, and manufacturing overhead. The components of inventories are as follows: (In thousands) 1995 1994 ------------------------------------------------------------------------ Raw materials and supplies $17,453 $11,568 Work in process and finished goods 4,796 3,294 ------- ------- $22,249 $14,862 ======= ======= Rental Assets The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. The Company provides for depreciation over the estimated useful lives of the rental assets, which range from five to seven years. Accumulated depreciation was $985,000 and $348,000 at fiscal year-end 1995 and 1994, respectively. 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 - 40 years; machinery and equipment - 3 to 12 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) 1995 1994 ------------------------------------------------------------------------ Land and buildings $ 4,993 $ 4,378 Machinery, equipment and leasehold improvements 10,239 9,032 ------- ------- 15,232 13,410 Less: Accumulated depreciation and amortization 6,765 5,731 ------- ------- $ 8,467 $ 7,679 ======= ======= Cost in Excess of Net Assets of Acquired Companies The excess of cost over the fair value of net assets of acquired companies is amortized using the straight-line method over 40 years. Accumulated amortization was $300,000 and $142,000 at fiscal year-end 1995 and 1994, 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. 10PAGE Thermo Power Corporation Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies (continued) Common Stock of Subsidiary Subject to Redemption In March 1995, the Company's ThermoLyte subsidiary sold 1,845,000 units, each unit consisting of one share of ThermoLyte common stock, $.001 par value, and one redemption right, at $10.00 per unit, for net proceeds of $17,253,000. Holders of the common stock purchased in the offering will have the option to require ThermoLyte to redeem in December 1998 or 1999 any or all of their shares at $10.00 per share. The redemption rights are guaranteed on a subordinated basis by Thermo Electron. The Company has agreed to reimburse Thermo Electron in the event Thermo Electron is required to make a payment under the guarantee. The difference between the redemption value and the original carrying amount of common stock of subsidiary subject to redemption is accreted using the straight-line method over the period ending December 1998, which corresponds to the first redemption period. The accretion is charged to minority interest expense in the accompanying statement of income. ThermoLyte is developing a line of propane-fueled lighting products, including flashlights, area lights or lanterns, and hazard lights. Following the offering, the Company owned 78% of ThermoLyte's outstanding common stock. 2. Available-for-sale Investments Effective October 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 October 2, 1994. The aggregate market value, cost basis, and gross unrealized gains and losses of short- and long-term available-for-sale investments by major security type, as of September 30, 1995, are as follows: Gross Gross Market Cost Unrealized Unrealized (In thousands) Value Basis Gains Losses ------------------------------------------------------------------------- Tax-exempt securities $ 5,002 $ 5,000 $ 2 $ - Government agency securities 5,082 5,106 - 24 Corporate bonds 429 365 64 - Other 886 624 322 60 ------- ------- ------- ------- $11,399 $11,095 $ 388 $ 84 ======= ======= ======= ======= Short- and long-term available-for-sale investments in the accompanying balance sheet at September 30, 1995, include $9,209,000 with 11PAGE Thermo Power Corporation Notes to Consolidated Financial Statements 2. Available-for-sale Investments (continued) contractual maturities of one year or less, $1,457,000 with contractual maturities of more than one year through five years, and $733,000 with contractual maturities of more than 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 cost of available-for-sale investments that were sold was based on specific identification in determining realized gains and losses recorded in the accompanying statement of income. Gain on sale of investments, net in the accompanying statement of income for the year ended September 30, 1995, resulted from gross realized gains of $768,000 and gross realized losses of $38,000 relating to the sale of available-for-sale investments. 3. Acquisition Effective May 1, 1994, the Company acquired NuTemp, Inc. (NuTemp) for $7,947,000 in cash. In fiscal 1995, the Company paid an additional $2,500,000 as a result of NuTemp having achieved certain previously agreed upon performance goals through the period ending May 1, 1995. NuTemp is a supplier of both remanufactured and new industrial refrigeration and commercial cooling equipment for sale or rental. The acquisition of NuTemp has been accounted for using the purchase method of accounting, and its results of operations have been included in the accompanying financial statements from the effective date of acquisition. The cost of this acquisition exceeded the estimated fair value of the acquired net assets by $6,465,000, which is being amortized over 40 years. Allocation of the purchase price was based on an estimate of the fair value of the net assets acquired. Pro forma data is not presented since the acquisition of NuTemp was not material to the Company's financial condition or results of operations. 4. Common Stock At September 30, 1995, the Company had reserved 1,656,966 unissued shares of its common stock for possible issuance under stock-based compensation plans. 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 fiscal 1994, 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 12PAGE Thermo Power Corporation Notes to Consolidated Financial Statements 5. Stock-based Compensation Plans (continued) 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 three 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. To date, all options have been granted at fair market value. The Company also has a directors' stock option plan, adopted in 1991 and amended in fiscal 1995, that provides for the grant of stock options in the Company and its majority-owned subsidiaries to nonemployee directors pursuant to a formula approved by the Company's shareholders. Options in the Company 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: 1995 1994 1993 ----------------- ----------------- ---------------- Range of Range of Range of Number Option Number Option Number Option (In thousands except of Prices of Prices of Prices per share amounts) Shares per Share Shares per Share Shares per Share - -------------------------------------------------------------------------------- Options outstanding, $ 4.20- $ 2.92- $ 2.92- beginning of year 1,259 $10.15 536 $10.15 477 $10.15 8.95- 7.90- 8.00- Granted 296 17.53 788 9.18 117 9.73 4.20- 2.92- 2.92- Exercised (111) 9.58 (64) 7.58 (16) 8.33 7.45- 4.20- 2.92- Lapsed or cancelled (38) 9.58 (1) 8.33 (42) 9.58 ----- ----- ----- Options outstanding, $ 4.20- $ 4.20- $ 2.92- end of year 1,406 $17.53 1,259 $10.15 536 $10.15 ===== ===== ===== $ 4.20- $ 4.20- $ 2.92- Options exercisable 1,406 $17.53 1,258 $10.15 534 $10.15 ===== ===== ===== Options available for grant 97 355 393 ===== ===== ===== 13PAGE Thermo Power Corporation Notes to Consolidated Financial Statements 6. Employee Benefit Plans Employee Stock Purchase Plan Substantially all of the Company's full-time employees are eligible to participate in an employee stock purchase plan sponsored by the Company. Prior to the November 1995 plan year, shares of the Company's and Thermo Electron's common stock could 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 were subject to a one-year resale restriction. Effective November 1, 1995, the applicable shares of common stock may be purchased at 95% of the fair market value at the beginning of the plan year, and the shares purchased will be subject to a six-month resale restriction. Shares are purchased through payroll deductions of up to 10% of each participating employee's gross wages. During fiscal 1995, 1994, and 1993, the Company issued 25,859 shares, 40,219 shares, and 11,602 shares of its common stock, respectively, under this plan. 401(k) Savings Plan and Employee Stock Ownership Plan The majority of the Company's employees are eligible to participate in Thermo Electron's 401(k) savings plan and certain employees are eligible to participate in Thermo Electron's employee stock ownership plan. Contributions to the Thermo Electron 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 $653,000, $656,000, and $532,000 in fiscal 1995, 1994, and 1993, respectively. Postemployment Benefits Effective October 3, 1993, 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. 7. Income Taxes The components of the provision for income taxes are as follows: (In thousands) 1995 1994 1993 ----------------------------------------------------------------------- Currently payable: Federal $2,150 $1,933 $ 724 State 525 493 336 ------ ------ ------ 2,675 2,426 1,060 ------ ------ ------ Deferred (prepaid), net: Federal 54 (333) 168 State 8 (59) (23) ------ ------ ------ 62 (392) 145 ------ ------ ------ $2,737 $2,034 $1,205 ====== ====== ====== 14PAGE Thermo Power Corporation Notes to Consolidated Financial Statements 7. Income Taxes (continued) The provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate of 34% to income before provision for income taxes and minority interest due to the following: (In thousands) 1995 1994 1993 ----------------------------------------------------------------------- Provision for income taxes at statutory rate $2,416 $1,796 $1,064 Increases (decreases) resulting from: State income taxes, net of federal benefit 353 286 207 Income from tax-preferred securities (122) (213) (82) Nondeductible expenses 83 73 26 Other 7 92 (10) ------ ------ ------ $2,737 $2,034 $1,205 ====== ====== ====== Deferred income taxes and prepaid income taxes in the accompanying balance sheet consist of the following: (In thousands) 1995 1994 ------------------------------------------------------------- Deferred income taxes: Available-for-sale investments $ 107 $ - Depreciation - 167 Other 11 25 ------ ------ $ 118 $ 192 ====== ====== Prepaid income taxes: Inventory basis difference $1,031 $ 481 Accrued warranty costs 819 1,289 Accrued compensation 590 505 Other accruals and reserves 496 494 Allowance for doubtful accounts 207 234 Depreciation and amortization 70 - ------ ------ $3,213 $3,003 ====== ====== 8. Related Party Transactions Corporate Services Agreement The Company and Thermo Electron have a corporate services agreement under which Thermo Electron's corporate staff provides certain administrative services, including certain legal advice and services, risk management, certain employee benefit administration, tax advice and preparation of tax returns, centralized cash management, and certain financial and other services, for which the Company pays Thermo Electron annually an amount equal to 1.20% of the Company's revenues. Prior to January 1, 1995, the 15PAGE Thermo Power Corporation Notes to Consolidated Financial Statements 8. Related Party Transactions (continued) Company paid an annual fee equal to 1.25% of the Company's revenues. Prior to January 3, 1993, the Company paid an annual fee equal to 1% 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 $1,250,000, $1,117,000, and $898,000 in fiscal 1995, 1994, and 1993, 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 relationships 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. Other Related Party Services Prior to January 1995 and October 1993, the Company used contract administration and other services and data processing services, respectively, of a majority-owned subsidiary of Thermo Electron, which were charged based on actual usage. For these services, the Company was charged $31,000, $117,000, and $251,000 in fiscal 1995, 1994, and 1993, respectively. As of January 1995 and October 1993, the Company provides contract administration and other services and data processing services, respectively, to one wholly owned and four majority-owned subsidiaries of Thermo Electron, which are charged based on actual usage. For these services, the Company charged $209,000 and $107,000 in fiscal 1995 and 1994, respectively. Leases The Company leases an office and laboratory facility from Thermo Electron under an agreement expiring in September 1997. Prior to April 1993, the Company subleased a portion of this facility to a majority-owned subsidiary of Thermo Electron. The accompanying statement of income includes expenses from this operating lease of $170,000, $170,000, and $133,000 in fiscal 1995, 1994, and 1993, respectively, net of sublease income of $37,000 in fiscal 1993. The future minimum payments due under this operating lease as of September 30, 1995, are $170,000 per year in fiscal 1996 and 1997. Total future minimum lease payments are $340,000. Repurchase Agreement The Company invests excess cash in a repurchase agreement with Thermo Electron as discussed in Note 1. Short-term Available-for-sale Investments At September 30, 1995, the Company's short-term available-for-sale investments included $429,000 of 6.5% subordinated convertible debentures due 1997, which were purchased on the open market for $365,000. The debentures have a par value of $365,000 and were issued by Thermo Process Systems Inc., which is a majority-owned subsidiary of Thermo Electron. Sale of Parent Company Common Stock During fiscal 1993, the Company sold 18,000 shares of its Thermo Electron common stock to an unrelated party for net proceeds of $447,000, which resulted in a gain of $404,000. At September 30, 1995, the Company owned 16PAGE Thermo Power Corporation Notes to Consolidated Financial Statements 8. Related Party Transactions (continued) 7,313 shares of Thermo Electron common stock that were purchased for $18,000 and have market value of $339,000. The Company's investment in Thermo Electron common stock is included in long-term available-for-sale investments in the accompanying balance sheet. Share information for Thermo Electron has been restated to reflect a three-for-two stock split effected in May 1995. Long-term Obligations On May 4, 1987, the Company issued a $3,000,000 principal amount 6.2% subordinated convertible note to Thermo Electron due May 1997, and convertible into shares of the Company's common stock at $9.775 per share. This note was repaid in December 1993. 9. Commitments In addition to the lease described in Note 8, the Company leases equipment and manufacturing, engine testing, service, and office facilities under operating leases expiring at various dates through fiscal 2004. The accompanying statement of income includes expenses from these operating leases of $1,044,000, $711,000, and $640,000 in fiscal 1995, 1994, and 1993, respectively. Future minimum payments due under these operating leases at September 30, 1995, are $1,047,000 in fiscal 1996; $815,000 in fiscal 1997; $472,000 in fiscal 1998; $461,000 in fiscal 1999; $438,000 in fiscal 2000; and $1,275,000 in fiscal 2001 and thereafter. Total future minimum lease payments are $4,508,000. 10. Long-term Obligations At September 30, 1995, the Company's long-term obligations included a $305,000 mortgage loan, which is secured by property at the Company's FES division with a net book value of $4,010,000. The loan is payable in equal monthly installments with the final payment in fiscal 2002. The interest rate on this loan is 75% of the prime rate, and averaged 6.42% and 5.0% in fiscal 1995 and 1994, respectively. The annual requirements for long-term obligations as of September 30, 1995, are $58,000 in fiscal 1996; $55,000 in fiscal 1997; $56,000 in fiscal 1998; $59,000 in fiscal 1999; $58,000 in fiscal 2000; and $136,000 in fiscal 2001 and thereafter. Total requirements of long-term obligations are $422,000. 11. Segment Data and Export Sales The Company's principal businesses consist of manufacturing, marketing, and servicing: industrial refrigeration and commercial cooling equipment; gasoline engines for recreational boats, LPG (liquefied petroleum gas) and gasoline engines for lift trucks, and natural gas engines for fleet vehicles and industrial applications; and natural gas cooling and cogeneration systems, as well as conducting research and development on applications of thermal energy. In addition, the Company rents commercial cooling and industrial refrigeration equipment, which is included in the Industrial Refrigeration Systems segment. Export revenues to Asia accounted for 10%, 10%, and 7% of the Company's total revenues in fiscal 1995, 1994, and 1993, respectively. Other export 17PAGE Thermo Power Corporation Notes to Consolidated Financial Statements 11. Segment Data and Export Sales (continued) revenues accounted for 5%, 6%, and 5% of the Company's total revenues in fiscal 1995, 1994, and 1993, respectively. In general, export sales are denominated in U.S. dollars. Information for fiscal 1995, 1994, and 1993, with respect to the Company's business segments, is shown in the following table. (In thousands) 1995 1994 1993 -------------------------------------------------------------------------- Revenues: Industrial Refrigeration Systems $ 64,708 $ 57,372 $ 42,369 Engines 24,848 20,204 19,216 Cooling and Cogeneration Systems 15,873 13,192 14,862 Intersegment sales elimination (a) (2,174) (1,434) (1,018) -------- -------- -------- $103,255 $ 89,334 $ 75,429 ======== ======== ======== Operating income: Industrial Refrigeration Systems $ 6,689 $ 5,206 $ 3,389 Engines (120) 188 (866) Cooling and Cogeneration Systems 961 820 685 Corporate (b) (3,049) (2,731) (1,475) -------- -------- -------- $ 4,481 $ 3,483 $ 1,733 ======== ======== ======== Identifiable assets: Industrial Refrigeration Systems $ 48,249 $ 36,980 $ 24,278 Engines 17,193 10,402 10,677 Cooling and Cogeneration Systems (c) 23,549 5,691 5,823 Corporate (d) 19,426 29,548 38,735 -------- -------- -------- $108,417 $ 82,621 $ 79,513 ======== ======== ======== Depreciation and amortization: Industrial Refrigeration Systems $ 1,551 $ 1,350 $ 757 Engines 329 314 304 Cooling and Cogeneration Systems 192 203 237 Corporate 10 - - -------- -------- -------- $ 2,082 $ 1,867 $ 1,298 ======== ======== ======== Capital expenditures: Industrial Refrigeration Systems $ 1,545 $ 540 $ 266 Engines 344 223 270 Cooling and Cogeneration Systems 150 112 125 Corporate 62 - - -------- -------- -------- $ 2,101 $ 875 $ 661 ======== ======== ======== (a) Intersegment sales are accounted for at prices that are representative of transactions with unaffiliated parties. (b) Primarily corporate general and administrative expenses and other expenses for new lines of business. (c) Includes $17.3 million in net proceeds from ThermoLyte's fiscal 1995 private placement. (d) Primarily cash, cash equivalents, and short-term investments. 18PAGE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of Thermo Power Corporation: We have audited the accompanying consolidated balance sheet of Thermo Power Corporation (a Massachusetts corporation and 63%-owned subsidiary of Thermo Electron Corporation) and subsidiaries as of September 30, 1995 and October 1, 1994, and the related consolidated statements of income, shareholders' investment, and cash flows for each of the three years in the period ended September 30, 1995. 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 Power Corporation and subsidiaries as of September 30, 1995 and October 1, 1994, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1995, in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, effective October 2, 1994, the Company changed its method of accounting for investments in debt and marketable equity securities. Arthur Andersen LLP Boston, Massachusetts November 3, 1995 19PAGE Thermo Power Corporation Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The Company's business can be divided into three segments: Industrial Refrigeration Systems, Engines, and Cooling and Cogeneration Systems. Through the Company's FES division, the Industrial Refrigeration Systems segment supplies standard and custom-designed refrigeration systems used primarily by the food-processing, petrochemical, and pharmaceutical industries. NuTemp, Inc. (NuTemp), which was acquired in May 1994, is a supplier of both remanufactured and new industrial refrigeration and commercial cooling equipment for sale or rental. NuTemp's industrial refrigeration equipment is used primarily in the food-processing, petrochemical, and pharmaceutical industries, and its commercial cooling equipment is used primarily in institutions and commercial buildings, as well as by service contractors. The demand for NuTemp's equipment is typically highest in the summer period. Within the Engines segment, the Company's Crusader Engines division (Crusader) manufactures gasoline engines for recreational boats; natural gas engines for vehicles, cooling, pumping, refrigeration, and other industrial applications; and LPG (liquefied petroleum gas) and gasoline engines for lift trucks. The Cooling and Cogeneration Systems segment consists of the Company's Tecogen division and the Company's ThermoLyte Corporation (ThermoLyte) subsidiary, formed in March 1995. Tecogen designs, develops, markets, and services packaged cooling and cogeneration systems fueled principally by natural gas for sale to a wide range of commercial, institutional, industrial, and multi-unit residential users. Certain large-capacity cooling systems are manufactured by FES, and the cogeneration systems are manufactured by Crusader. Tecogen also conducts research and development on applications of thermal energy. The Company formed its ThermoLyte subsidiary to complete the development and commercialization of a family of propane-powered flashlights, emergency lights, area lights, and other lighting products. Results of Operations Fiscal 1995 Compared With Fiscal 1994 Total revenues increased 16% to $103,255,000 in fiscal 1995 from $89,334,000 in fiscal 1994. Industrial Refrigeration Systems segment revenues increased 13% to $64,708,000 in 1995 from $57,372,000 in 1994. Industrial Refrigeration Systems segment revenues increased $5,577,000 due to the inclusion of sales for a full year from NuTemp, which was acquired in May 1994. Engines segment revenues increased 23% to $24,848,000 in 1995 from $20,204,000 in 1994 primarily due to increased demand for Crusader's inboard marine-engine related products and, to a lesser extent, natural gas-fueled TecoDrive(R) engines. Results for 1994 included $1,632,000 of revenues from sterndrive marine engine-related products. The Company's sterndrive customer exited that market in fiscal 1994. Cooling and Cogeneration Systems segment revenues increased 20% to $15,873,000 in 1995 from $13,192,000 in 1994 due to the inclusion of a fee of $1,187,000 received from one of the Company's distributors of packaged cogeneration systems to satisfy the financial obligations under a minimum purchase contract and an increase of $1,184,000 in revenues from gas-fueled cooling systems. These increases were offset in part by a decrease in revenues from packaged cogeneration systems. 20PAGE Thermo Power Corporation Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Fiscal 1995 Compared With Fiscal 1994 (continued) The gross profit margin increased to 23% in fiscal 1995 from 22% in fiscal 1994. The gross profit margin for the Industrial Refrigeration Systems segment increased to 25% in 1995 from 24% in 1994 primarily due to the inclusion of higher-margin NuTemp revenues for the full year of 1995 compared with five months in 1994. The gross profit margin for the Engines segment decreased to 11% in 1995 from 12% in 1994 primarily due to startup costs associated with new products and, to a lesser extent, higher warranty expenses in 1995 compared with 1994. The gross profit margin for the Cooling and Cogeneration Systems segment increased to 29% in 1995 from 25% in 1994 primarily due to the fee received from one of the Company's distributors of packaged cogeneration systems discussed above. Selling, general and administrative expenses as a percentage of revenues decreased to 15% in fiscal 1995 from 16% in fiscal 1994 primarily due to an increase in total revenues. Research and development expenses increased to $3,065,000 in 1995 from $1,622,000 in 1994 primarily due to development costs associated with natural gas-engine products and, to a lesser extent, gas-fueled lighting products. Interest income increased to $1,919,000 in fiscal 1995 from $1,278,000 in fiscal 1994, reflecting interest income earned on the proceeds from ThermoLyte's March 1995 private placement and, to a lesser extent, higher prevailing interest rates in 1995. The increase was offset in part by lower average invested amounts as a result of the cash expended for the acquisition of NuTemp in May 1994. Interest expense decreased to $23,000 in 1995 from $61,000 in 1994 due to the repayment of a $3,000,000 principal amount 6.2% subordinated convertible note to Thermo Electron Corporation (Thermo Electron) in the first quarter of fiscal 1994. The Company holds certain investments in companies affiliated with Thermo Electron and has sold, from time to time, a portion of these investments for a gain to the Company. Gain on sale of investments, net, primarily represents a gain of $768,000 in 1995 and $616,000 in 1994 relating to the sale of the Company's investment in subordinated convertible debentures issued by Thermedics Inc. (a majority-owned subsidiary of Thermo Electron). As of September 30, 1995, the Company owned 7,313 shares of Thermo Electron common stock that were purchased for $18,000 and have a market value of $339,000, and $429,000 of 6.5% subordinated convertible debentures due 1997 issued by Thermo Process Systems Inc. (a majority-owned subsidiary of Thermo Electron) that were purchased for $365,000. The Company may sell these investments from time to time in the future. The effective tax rate was 39% in both fiscal 1995 and 1994. This rate exceeded the statutory federal income tax rate primarily due to the impact of state income taxes. Fiscal 1994 Compared With Fiscal 1993 Total revenues increased 18% to $89,334,000 in fiscal 1994 from $75,429,000 in fiscal 1993. Industrial Refrigeration Systems segment revenues increased 35% to $57,372,000 in 1994 from $42,369,000 in 1993 due to an increase in demand for refrigeration packages and, to a lesser extent, the inclusion of $5,804,000 in revenues from NuTemp. These increases were offset in part by lower prices for refrigeration packages at the Company's FES division due to increased competition in the refrigeration industry. Engines segment 21PAGE Thermo Power Corporation Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Fiscal 1994 Compared With Fiscal 1993 (continued) revenues increased to $20,204,000 in 1994 from $19,216,000 in 1993 due to an increase of $794,000 in revenues from natural gas-fueled TecoDrive engines and, to a lesser extent, an increase in revenues from marine products. Revenues from marine products increased due to greater demand for Crusader's inboard marine engine-related products and a one-time sterndrive spare parts stocking order in the first six months of fiscal 1994, offset in part by a decrease in sterndrive marine engine-related sales as a result of the Company's sterndrive customer exiting that market. Cooling and Cogeneration Systems segment revenues decreased to $13,192,000 in 1994 from $14,862,000 in 1993 primarily due to a decline of $837,000 in revenues from gas-fueled cooling systems and a decline of $825,000 in revenues from sponsored research and development contracts. The gross profit margin increased to 22% in fiscal 1994 from 19% in fiscal 1993. The gross profit margin for the Industrial Refrigeration Systems segment was 24% in 1994, compared with 23% in 1993. The inclusion of higher-margin NuTemp revenues was offset in part by a decrease in margins at FES due to lower prices resulting from increased competition in the refrigeration industry. NuTemp's gross profit margin was 44% for the period from May 1, 1994 to October 1, 1994. The gross profit margin for the Engines segment increased to 12% in 1994 from 8% in 1993 primarily due to a shift in the sales mix of marine products and, to a lesser extent, improved margins on natural gas-fueled TecoDrive engines resulting from increased revenues. The gross profit margin for the Cooling and Cogeneration Systems segment increased to 25% in 1994 from 22% in 1993 primarily due to improved margins on the Company's gas-fueled cooling systems resulting from a reduction in manufacturing costs. Selling, general and administrative expenses as a percentage of revenues were 16% in both fiscal 1994 and 1993. Research and development expenses increased to $1,622,000 in 1994 from $995,000 in 1993 primarily due to higher development costs associated with natural gas-engine products. Interest income increased to $1,278,000 in fiscal 1994 from $1,161,000 in fiscal 1993 due to higher average invested amounts as a result of the Company's public offering of common stock in February 1993, offset in part by the cash expended for the acquisition of NuTemp in May 1994. Interest expense decreased to $61,000 in 1994 from $342,000 in 1993 due to the repayment of a $3,000,000 principal amount 6.2% subordinated convertible note to Thermo Electron in the first quarter of fiscal 1994 and, to a lesser extent, the repayment of a $5,000,000 promissory note to Thermo Electron and short-term borrowings from Thermo Electron in the second quarter of fiscal 1993. Gain on sale of investments, net, primarily represents a gain of $616,000 on the sale of a portion of the Company's investment in Thermedics subordinated convertible debentures in 1994, and a gain of $404,000 on the sale of 18,000 shares of Thermo Electron common stock in 1993. The effective tax rate was 39% in both fiscal 1994 and 1993. This rate exceeded the statutory federal income tax rate primarily due to the impact of state income taxes. 22PAGE Thermo Power Corporation Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Financial Condition Liquidity and Capital Resources Working capital was $60,140,000 at September 30, 1995, compared with $43,143,000 at October 1, 1994. Included in working capital are cash, cash equivalents, and short-term investments of $34,170,000 at September 30, 1995, compared with $27,879,000 at October 1, 1994. Of the $34,170,000 balance at September 30, 1995, $17,355,000 was held by ThermoLyte and the remainder was held by the Company and its wholly owned subsidiaries. During fiscal 1995, $5,110,000 of cash was used in operating activities. Accounts receivable increased reflecting a higher sales level, while inventories increased primarily due to a build-up of inventory at Crusader in connection with several large orders for engines. Crusader began shipping these orders in the first quarter of fiscal 1996. In March 1995, ThermoLyte completed a private placement for net proceeds of $17,253,000 (Note 1). In fiscal 1996, the Company expects to make capital expenditures of approximately $4,500,000. The Company believes its existing resources are sufficient to meet the capital requirements of its existing operations for the foreseeable future. 23PAGE Thermo Power Corporation Selected Financial Information (In thousands except per share amounts) 1995(a) 1994(b) 1993(c) 1992 1991 ------------------------------------------------------------------------- Statement of Income Data: Revenues $103,255 $ 89,334 $ 75,429 $ 34,137 $ 27,144 Net income (loss) 4,188 3,248 1,923 355 (1,538) Earnings (loss) per share .34 .26 .18 .04 (.20) Balance Sheet Data: Working capital $ 60,140 $ 43,143 $ 50,467 $ 19,173 $ 26,667 Total assets 108,417 82,621 79,513 28,675 36,071 Long-term obligations 364 344 3,395 3,000 12,274 Common stock of subsidiary subject to redemption 17,435 - - - - Shareholders' investment 65,825 60,475 56,599 18,302 16,941 Quarterly Information (Unaudited) (In thousands except per share amounts) 1995 First Second Third Fourth ------------------------------------------------------------------------ Revenues $22,314 $24,912 $27,514 $28,515 Gross profit 5,266 5,493 5,868 6,805 Net income 787 805 1,106 1,490 Earnings per share .06 .07 .09 .12 1994 First Second Third(b) Fourth ------------------------------------------------------------------------ Revenues $19,775 $22,014 $23,381 $24,164 Gross profit 3,785 4,395 5,234 5,894 Net income 631 729 912 976 Earnings per share .05 .06 .07 .08 (a)Reflects the net proceeds of the Company's ThermoLyte Corporation subsidiary private placement in fiscal 1995. (b)Reflects the May 1994 acquisition of NuTemp, Inc. (c)Reflects the October 1992 acquisition of FES and the net proceeds of the Company's February 1993 public offering of common stock. 24PAGE Thermo Power Corporation 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 THP) for fiscal 1995 and 1994. 1995 1994 ---------------- ----------------- Quarter High Low High Low -------------------------------------------------------------------- First $ 9 7/8 $ 8 5/8 $11 1/8 $ 8 3/4 Second 10 3/8 8 7/8 9 7/8 7 3/8 Third 18 7/8 9 3/4 8 1/2 7 Fourth 19 1/2 15 1/8 9 3/8 7 1/2 As of November 24, 1995, the Company had 493 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 November 24, 1995, was $14 1/4 per share. Dividend Policy The Company has never paid cash dividends and does not expect to pay cash dividends in the foreseeable future 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. 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 inquiries 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 Power Corporation who desire information about the Company are invited to contact John N. Hatsopoulos, Chief Financial Officer, Thermo Power Corporation, 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 list, please notify this office. 25PAGE Thermo Power Corporation Form 10-K Report A copy of the Annual Report on Form 10-K for the fiscal year ended September 30, 1995, as filed with the Securities and Exchange Commission, may be obtained at no charge by writing to John N. Hatsopoulos, Chief Financial Officer, Thermo Power Corporation, 81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046. Annual Meeting The annual meeting of shareholders will be held on Monday, March 11, 1996, at 10:00 a.m. at Thermo Electron Corporation, 81 Wyman Street, Waltham, Massachusetts. 26PAGE EX-21 11 Exhibit 21 THERMO POWER CORPORATION SUBSIDIARIES OF THE REGISTRANT At December 4, 1995, Thermo Power Corporation owned the following companies: State or Registrant's Jurisdiction % of Name of Incorporation Ownership -------------------------------- ---------------- ------------ Takepine Limited United Kingdom 100% Tecogen Securities Corporation Massachusetts 100% NuTemp, Inc. Illinois 100% ThermoLyte Corporation Massachusetts 78% EX-23 12 Exhibit 23 Consent of Independent Public Accountants ----------------------------------------- As independent public accountants, we hereby consent to the incorporation by reference of our reports dated November 3, 1995, included in or incorporated by reference into Thermo Power Corporation's Annual Report on Form 10-K for the year ended September 30, 1995, into the Company's previously filed Registration Statements as follows: Registration Statement No. 33-19061 on Form S-8, Registration Statement No. 33-19062 on Form S-8, Registration Statement No. 33-25051 on Form S-8, and Registration Statement No. 33-52814 on Form S-8. Arthur Andersen LLP Boston, Massachusetts December 4, 1995 EX-27 13
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO POWER CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS SEP-30-1995 SEP-30-1995 23,504 10,666 18,203 530 22,249 84,815 15,232 6,765 108,417 24,675 364 1,248 0 0 64,577 108,417 103,255 103,255 79,823 79,823 3,065 3 23 7,107 2,737 4,188 0 0 0 4,188 0.34 0
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