-----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, RIS/9Ba5sRrYYJmlsAIryMekSk+oFRkGcfDW5EKHWNgrt574uEJ/cjyU1eSjmw/J Qmbnt5VkOtB0bZZe7Klfyg== 0001044864-98-000002.txt : 19980317 0001044864-98-000002.hdr.sgml : 19980317 ACCESSION NUMBER: 0001044864-98-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19980103 FILED AS OF DATE: 19980313 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO VISION CORP CENTRAL INDEX KEY: 0001044864 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 043296594 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13391 FILM NUMBER: 98565693 BUSINESS ADDRESS: STREET 1: 8E FORGE PKWY CITY: FRANKLIN STATE: MA ZIP: 02038 BUSINESS PHONE: 5085331681 MAIL ADDRESS: STREET 1: 27 FORGE PKWY CITY: FRANKLIN STATE: MA ZIP: 02038 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 January 3, 1998. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission file number 1-13391 THERMO VISION CORPORATION (Exact name of Registrant as specified in its charter) Delaware 04-3296594 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8E Forge Parkway Franklin, Massachusetts 02038 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (781) 622-1000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ---------------------------- ----------------------------------------- Common Stock, $.01 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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of January 30, 1998, was approximately $11,138,000. As of January 30, 1998, the Registrant had 8,048,276 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Shareholders for the year ended January 3, 1998, 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 June 1, 1998, are incorporated by reference into Part III. PAGE PART I Item 1. Business (a) General Development of Business Thermo Vision Corporation (the Company or the Registrant) designs, manufactures, and markets a diverse array of photonics products -- light-based technologies for scientific and industrial applications -- including optical components, imaging sensors and systems, lasers, optically based instruments, optoelectronics, and fiber optics. The Company sells photonics products in multiple markets across a number of industries for research, testing, detecting, and manufacturing applications. The Company's products range from optical filters used in blood glucose monitoring, to charge-injection devices (CIDs) used in optical spectroscopy, to specialty light sources used for quality assurance in semiconductor photolithography. Many of the Company's customers are manufacturers that incorporate the Company's products into medical and dental diagnostic instruments, analytical instruments, equipment for semiconductor manufacturing, and X-ray screening devices. The Company was incorporated in November 1995 as a wholly owned subsidiary of Thermo Optek Corporation, a publicly traded, majority-owned subsidiary Thermo Instrument Systems Inc. The Company initially comprised two businesses: Scientific Measurement Systems Inc. (now called Thermo Vision Colorado), a manufacturer of optically based instruments, and CID Technologies Inc. (CIDTEC), a manufacturer of sensors and cameras based on proprietary charge-injection device (CID) technology. Since February 1996, the Company has acquired four businesses from unrelated third parties that currently constitute the bulk of its operations. In February 1996, the Company acquired Oriel Corporation, a manufacturer and distributor of photonics components and instruments, for $11.8 million in cash and the assumption of $0.7 million in debt, and the assets of Corion Corporation, a manufacturer of commercial optical filters, for $5.1 million in cash. In February 1997, the Company acquired Laser Science, Inc. (LSI), a manufacturer of nitrogen, tunable dye, and pulsed CO(2) lasers, for $3.6 million in cash. In July 1997, the Company acquired the assets of Centronic, Inc. (now called Centro Vision, Inc.), a manufacturer of silicon photodiodes, for $3.8 million in cash. In August 1997, the Company acquired the crystal-materials business (Hilger Crystals Limited) of Hilger Analytical Limited, a wholly owned subsidiary of Thermo Optek, for the assumption of $908,000 of Thermo Optek's existing obligation under a line of credit. Hilger Crystals Limited (Hilger) manufactures crystals used for X-ray scintillation and infrared spectroscopy. Because the Company and Hilger were deemed for accounting purposes to be under control of their common owner, Thermo Optek, the transaction has been accounted for at historical cost in a manner similar to a pooling of interests. Accordingly, all historical information presented includes the results of operations of Hilger since 1993, the year in which it was acquired by Thermo Optek. In December 1997, the Company was "spun out" through a distribution of all of its outstanding capital stock as a dividend to Thermo Optek shareholders. Thermo Optek received a favorable private letter ruling from the Internal Revenue Service stating that the distribution qualifies as tax free. Thermo Vision is now a majority-owned public subsidiary of 2PAGE Thermo Instrument. Also in December 1997, the Company sold 1,139,491 shares of its common stock in an initial public offering, at $7.50 per share for net proceeds of $7,033,000. As of January 3, 1998, Thermo Instrument owned 6,299,552 shares of the common stock of the Company, representing 78% of such stock outstanding. Thermo Instrument develops, manufactures, markets, and services instruments and software used for the identification and quantification of complex molecular compounds and elements in gases, liquids, and solids. Uses include pharmaceutical drug research and clinical diagnostics, monitoring and measuring environmental pollutants, industrial inspection, and test and control for quality assurance and productivity improvement. In addition, Thermo Instrument develops, manufactures, markets, and services equipment for the measurement, preparation, storage, and automation of sample materials, and photonics and vacuum components for original equipment manufacturers. As of January 3, 1998, Thermo Electron Corporation owned 102,349 shares of the common stock of the Company, representing 1% of such stock outstanding. Thermo Electron provides analytical and monitoring instruments; biomedical products including heart-assist devices, respiratory-care equipment, and mammography systems; paper recycling and papermaking equipment; alternative-energy systems; and other specialized products. Thermo Electron also provides industrial outsourcing, particularly in environmental-liability management, laboratory analysis, and metallurgical services, and conducts advanced-technology research and development. Forward-looking Statements Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Annual Report on Form 10-K. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading "Forward-looking Statements" in the Registrant's 1997* Annual Report to Shareholders, which statements are incorporated herein by reference. (b) Financial Information About Industry Segments The Company is engaged in one business segment: designing, manufacturing, and marketing photonics products. * References to 1997, 1996, and 1995 herein are for the fiscal years ended January 3, 1998, December 28, 1996, and December 30, 1995, respectively. 3PAGE (c) Description of Business (i) Principal Products and Services Photonics is the practical use of light. In many ways, photonics is analogous to electronics. Photonic technologies use light to detect, transmit, store, and process information, and to generate energy, as well as to capture and display images. The basic unit of light is the photon, while in electronics it is the electron. Because photons are massless and travel faster than electrons, photonic devices can be made smaller and significantly faster than electronic devices. For example, replacing electronics (copper wire) with photonics (fiber-optic cable) boosts the capacity of telecommunication transmission lines by a factor of 10,000. Photonic components are the "enabling technology" in many familiar consumer products, including CD-ROM players, digital cameras, displays on laptop computers and calculators, and fiber optic cable for telephones, cable television, and networked computer systems. In industry, photonics "eyes" enable robots to "see." Photonics is also found in semiconductor manufacturing as well as analytical and process-monitoring applications. In medicine, photonics is at the core of diagnostic instrumentation, laser microsurgery, and filmless real-time dental X-ray images. The Company estimates that the growing worldwide photonics industry currently totals approximately $15.5 billion. The industry is typically classified in terms of technologies rather than end-user applications, using the following six market segments. The Company offers products in each of these categories: Optical Components. Light sources, filters, crystals, prisms, lenses, and precision mechanical-positioning devices are all optical components. Primary applications for optical components include semiconductor production, medical and analytical instruments, and telecommunications. The Company offers a broad line of optical components designed for specific applications and for use in modular systems. Imaging Sensors and Systems. Imaging sensors detect photons and produce a resultant electrical signal. An imaging system consists of a sensor or an array of sensors connected to a recording and/or display device. Applications of imaging sensors and systems include cameras for filmless dental X-ray imaging and detectors for optical spectrometers used in chemical analysis. The Company's sensors are designed to have very high dynamic range at low light levels, which makes them attractive in demanding spectroscopy and astronomy applications. The Company offers a number of proprietary CID sensors based on its own designs and customizes sensors to particular customer specifications. The Company also designs and markets CID camera systems. Lasers. A laser is a specialized light source that produces an intense beam of highly monochromatic, coherent radiation, or light. The Company designs, manufactures, and markets pulsed nitrogen lasers, nitrogen laser accessories, and pulsed CO(2) lasers. Pulsed lasers are preferable to continuous lasers in measurement applications because the break in the laser beam provides discrete time segments in which to 4PAGE perform measurements. The Company's lasers are often used as the ionization sources for matrix assisted laser desorption ionization-time of flight (MALDI-TOF) mass spectrometers used to study proteins, peptides, and other large biomolecules, as well as for the cutting of samples mounted in a microscope. Optically Based Instruments. Optically based instruments combine optical components and signal processors and are used primarily in analytical and process applications, such as the determination of correct exposure time for photoresist development in photolithography, identification of materials by their fluorescence lifetime, and the quality testing of optical components. The Company focuses on the development of low-cost analyzers that use standard photonics components as building blocks designed to work together in multiple configurations and to be easily modified to accommodate changing end-user requirements. Optoelectronics. These devices convert light to electricity or electricity to light. A familiar example is the silicon photodiode detector, with uses ranging from orienting satellites toward the sun to color recognition for paint matching. The Company customizes its photodiodes for specific applications. The primary customers for the Company's optoelectronic products are manufacturers of medical diagnostic and analytical instruments. Fiber Optics. Fiber optics are single or bundled fibers that transmit light down their length. Fiber optics are used to economically move light in optically based instruments and for remote sensing applications for chemical testing in hostile environments. Most of the specialty fiber- optic cable that the Company sells is used for remote sensing. Sales and Marketing The Company markets its products both in the U.S. and internationally by means of technical catalogs, available in printed format and, in the future, on CD-ROMs, as well as through Web sites and the dealer and distributor networks of its subsidiaries and divisions. The Company sells directly to larger OEM buyers through the direct sales forces of its subsidiaries and divisions. The Company trains the members of its sales forces on the technical aspects of its products so they are able to respond to questions and otherwise support customers, dealers, and distributors. The Company holds a minority equity interest in LOT-Oriel Holding GmbH (LOT-Oriel), a large European distributor of photonics products. A representative of the Company serves as a member of LOT-Oriel's board of directors. The Company believes that its relationship with LOT-Oriel enhances the Company's visibility in and access to the European photonics market. (ii) and (xi) New Products; Research and Development The Company maintains active programs for the development of new technologies and the enhancement of its existing products. In addition, the Company seeks to develop new applications for its products and technologies. The Company incurred research and development expenses of $4,143,000, $3,499,000, and $743,000 in 1997, 1996, and 1995, 5PAGE respectively. In addition, the Company received $744,000, $532,000, and $490,000 for customer-sponsored contract research and development expenses in 1997, 1996, and 1995, respectively. (iii) Raw Materials The Company purchases the silicon wafers used in its CID sensors and silicon photodiodes from third-party manufacturers that process the wafers in accordance with the Company's designs and specifications. The Company currently purchases CID wafers from a single supplier, although it is exploring alternative sources of supply and believes that a number of other qualified wafer fabricators are available. The Company purchases CID wafers from its existing supplier on a purchase-order basis and does not have a formal supply arrangement with this company. The Company believes that outsourcing the processing of these wafers enables it to avoid the technological risks and significant capital costs associated with maintaining its own wafer fabrication lines. (iv) Patents, Licenses, and Trademarks The Company's success depends in part on the strength and protection of its proprietary methodologies and designs and other proprietary intellectual rights. The Company's policy is to protect its intellectual property rights and to apply for patent protection when appropriate. The Company believes that its manufacturing know-how, particularly with respect to its optical filters and crystals, provides it with a competitive advantage. The Company currently holds numerous issued U.S. patents expiring at various dates ranging from 1999 to 2016. The Company also has a number of applications pending for additional U.S. patents and a number of foreign counterparts for its patents in various foreign countries. The Company also has certain registered and other trademarks. In addition, the Company has entered into license agreements with other companies pursuant to which it grants or receives the rights to certain technology, know-how, trademarks, or patents. Several of the Company's issued U.S. patents pertain to its CID technology. In addition, the Company holds a nonexclusive license to certain additional patents relating to CID technology. (v) Seasonal Influences There are no significant seasonal influences on the Company's sales of its products. (vi) Working Capital Requirements There are no special inventory requirements or credit terms extended to customers that would have a material adverse effect on the Company's working capital. 6PAGE (vii) Dependency on a Single Customer No single customer accounted for more than 10% of the Company's total revenues in any of the past three years. (viii) Backlog The Company's backlog of firm orders was $12.3 million and $9.2 million as of January 3, 1998, and December 28, 1996, respectively. Certain of these orders are cancellable by the customer upon payment of a cancellation charge. The Company believes that substantially all of the backlog at January 3, 1998, will be shipped or completed during 1998. (ix) Government Contracts Not applicable. (x) Competition The photonics industry is highly competitive. The Company competes with a number of companies, many of which have substantially greater financial, marketing, and other resources than the Company. The Company's principal competitors include Coherent, Inc.; Corning OCA Corporation; the Bicron Business Unit of Saint-Gobain Industrial Ceramics, Inc.; Melles-Griot, Inc.; Newport Corporation; Optical Coating Laboratory, Inc.; Hamamatsu Corporation, a unit of Hamamatsu Photonic KK; and UDT Sensors, Inc., an Opto-Sensors Company. The Company competes primarily in each of the photonics market segments on the basis of technical suitability, product performance, reliability, and price. (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 January 3, 1998, the Company employed 243 people. (d) Financial Information About Exports by Domestic Operations and About Foreign Operations Financial information about exports by domestic operations and about foreign operations is summarized in Note 8 to Consolidated Financial Statements in the Registrant's 1997 Annual Report to Shareholders and is incorporated herein by reference. 7PAGE (e) Executive Officers of the Registrant Present Title (Year First Became Name Age Executive Officer) ------------------- --- ------------------------------------- Kristine Stotz Langdon 39 President and Chief Executive Officer (1995) John N. Hatsopoulos 63 Chief Financial Officer and Senior Vice President (1997) Allen J. Smith 49 Vice President (1997) Paul F. Kelleher 55 Chief Accounting Officer (1995) Each executive officer serves until his or her successor is chosen or appointed by the Board of Directors and qualified or until his or her earlier resignation, death, or removal. Ms. Langdon has served as Chief Executive Officer and President of the Company since its inception in January 1995. Ms. Langdon served as Director of Business Development of Thermo Jarrell Ash, a subsidiary of Thermo Optek, from April 1994 until January 1995. Ms. Langdon was Special Assistant to the Presidents of Thermo Electron and Thermo Instrument from August 1991 to April 1994. Mr. Smith has been Vice President of the Company since August 1997 and Chairman of Oriel since October 1994. Mr. Smith served Oriel in various capacities, including Executive Vice President, Vice President, general manager, and sales manager from February 1970 to October 1994. Messrs. Hatsopoulos and Kelleher have held comparable positions for at least five years with Thermo Instrument or Thermo Electron. Messrs. Hatsopoulos and Kelleher are full-time employees of Thermo Electron but devote such time to the affairs of the Company as the Company's needs reasonably require. Item 2. Properties The Company owns approximately 3,600 square feet of office and manufacturing space in Grand Junction, Colorado. The Company leases approximately 117,000 square feet of office and manufacturing space under leases expiring from 1999 through 2008 in Massachusetts, Connecticut, California, England, and New York. The Company believes that its facilities are in good condition and are suitable and adequate to meet current needs. Item 3. Legal Proceedings Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. 8PAGE PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters (a) Information concerning the market and market price for the Registrant's common stock, $.01 par value, and dividend policy is included under the sections labeled "Common Stock Market Information" and "Dividend Policy" in the Registrant's 1997 Annual Report to Shareholders and is incorporated herein by reference. (b) The Company's Registration Statement on Form S-1 (File No. 333-38153) covering 1,236,250 shares of common stock, par value $.01 per share, with an aggregate offering price of $9,272,000, was declared effective by the Securities and Exchange Commission on December 10, 1997. The offering commenced on December 10, 1997, and terminated on December 31, 1997. The managing underwriters were Fahnestock & Co. Inc. and HSBC Securities, Inc. The Company sold 1,139,491 shares in the offering for an aggregate offering price of $8,546,000. The Company's total expenses in connection with the offering were $1,513,000, of which $598,000 was for underwriting discounts and commissions and $915,000 was for other expenses paid to persons other than directors or officers of the Company, persons owning more than 10 percent of any class of equity securities of the Company, or affiliates of the Company, except for $48,000 paid to Thermo Electron, the Company's ultimate parent company, for certain services rendered in connection with the offering. The Company's net proceeds from the offering were $7,033,000. As of January 3, 1998, all of such net proceeds had been invested in investment-grade interest or dividend-bearing instruments pursuant to a repurchase agreement with Thermo Electron whereby the Company in effect lends its excess cash to Thermo Electron on a collateralized basis at market interest rates. 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 1997 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 1997 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 January 3, 1998, and Supplementary Data are included in the Registrant's 1997 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. 9PAGE 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 "Section 16(a) Beneficial Ownership Reporting Compliance" 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. 10PAGE 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 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 None. (c) Exhibits See Exhibit Index on the page immediately preceding exhibits. 11PAGE SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 13, 1998 THERMO VISION CORPORATION By: Kristine Stotz Langdon ----------------------------- Kristine Stotz Langdon President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated below, as of March 13, 1998. Signature Title --------- ----- By: Kristine Stotz Langdon President, Chief Executive Officer, --------------------------- Kristine Stotz Langdon and Director By: John N. Hatsopoulos Chief Financial Officer, Senior --------------------------- John N. Hatsopoulos Vice President, and Director By: Paul F. Kelleher Chief Accounting Officer --------------------------- Paul F. Kelleher By: Earl R. Lewis Chairman of the Board and Director --------------------------- Earl R. Lewis By: D. Allan Bromley Director --------------------------- D. Allan Bromley By: Arvin H. Smith Director --------------------------- Arvin H. Smith 12PAGE Report of Independent Public Accountants To the Shareholders and Board of Directors of Thermo Vision Corporation: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Thermo Vision Corporation's Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 17, 1998. 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 11 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 February 17, 1998 13PAGE SCHEDULE II THERMO VISION CORPORATION Valuation and Qualifying Accounts (In thousands) Balance at Provision Accounts Balance Beginning Charged to Accounts Written at End of Year Expense Recovered Off Other(a) of Year --------------------------------------------------------------------------- Allowance for Doubtful Accounts Year Ended January 3, 1998 $266 $114 $ 2 $(84) $132 $430 Year Ended December 28, 1996 $ 24 $174 $ - $(82) $150 $266 Year Ended December 30, 1995 $ 10 $ 14 $ - $ - $ - $ 24 (a)Includes allowance of businesses acquired during the year as described in Note 2 to Consolidated Financial Statements in the Registrant's 1997 Annual Report to Shareholders and the effect of foreign currency translation. 14PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit ------------------------------------------------------------------------ 2.1 Plan and Agreement of Distribution dated as of December 15, 1997, between Thermo Optek Corporation and the Registrant. 2.2 Asset Purchase Agreement dated as of January 23, 1996, by and between the Registrant and Corion Corporation (filed as Exhibit 2.2 to the Registrant's Registration Statement on Form 10 [File No. 1-13391] and incorporated herein by reference). 2.3 Purchase Agreement dated as of February 7, 1996, by and between the Registrant and the shareholders and option holders of Oriel Corporation as set forth therein (filed as Exhibit 2.3 to the Registrant's Registration Statement on Form 10 [File No. 1-13391 and incorporated herein by reference). 3.1 Amended and Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3.1 to the Registrant's Registration Statement on Form 10 [File No. 1-13391 and incorporated herein by reference). 3.2 Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant dated December 9, 1997. 3.3 Bylaws of the Registrant (filed as Exhibit 3.3 to the Registrant's Registration Statement on Form 10 [File No. 1-13391] and incorporated herein by reference). 10.1 Corporate Services Agreement dated as of November 14, 1997, between Thermo Electron Corporation and the Registrant. 10.2 Thermo Electron Corporate Charter, as amended and restated, effective January 3, 1993 (filed as Exhibit 10.1 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 3, 1993 [File No. 1-8002] and incorporated herein by reference). 10.3 Tax Allocation Agreement dated as of November 14, 1997, between Thermo Electron and the Registrant. 10.4 Master Repurchase Agreement dated as of November 14, 1997, between Thermo Electron and the Registrant. 15PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit ------------------------------------------------------------------------ 10.5 Master Guarantee Reimbursement and Loan Agreement dated as of November 14, 1997, between Thermo Electron and the Registrant (filed as Exhibit 10.38 to Thermo Instrument's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 [File No. 1-9786] and incorporated herein by reference). 10.6 Master Guarantee Reimbursement and Loan Agreement dated as of November 24, 1997, between Thermo Instrument Systems Inc. and the Registrant. 10.7 CID Contract Research and Development Agreement dated October 1994 between Thermo Optek and the Registrant (filed as Exhibit 10.8 to the Registrant's Registration Statement on Form 10 [File No. 1-13391] and incorporated herein by reference). 10.8 CID Supply Agreement effective as of December 15, 1997, between Thermo Optek and the Registrant. 10.9 Equity Incentive Plan of the Registrant. 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 Thermo Electron and Thermo Instrument for services rendered to the Registrant or such affiliated corporations. Such plans are substantially similar to the Equity Incentive Plan of the Registrant. 10.10 Deferred Compensation Plan for Directors of the Registrant. 10.11 Form of Indemnification Agreement for Officers and Directors of the Registrant. 10.12 Sublease Agreement dated as of September 1, 1997, between the Registrant and Thermo Instrument (filed as Exhibit 10.14 to the Registrant's Registration Statement on Form 10 [File No. 1-13391] and incorporated herein by reference). 10.13 Sublease Agreement effective as of February 1, 1984, between Oriel Instruments Corporation and Osbrook Associates Limited Partnership, as modified (filed as Exhibit 10.15 to the Registrant's Registration Statement on Form 10 [File No. 1-13391] and incorporated herein by reference). 16PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit ------------------------------------------------------------------------ 10.14 Agreement of Lease dated as of October 6, 1997, between Oriel and 1608 Development Limited Partnership (filed as Exhibit 10.21 to the Registrant's Registration Statement on Form 10 [File No. 1-13391] and incorporated herein by reference). 10.15 Tax Matters Agreement dated as of November 24, 1997, between Thermo Optek and the Registrant. 10.16 $3.8 Million Principal Amount Promissory Note due July 13, 2000, issued by the Registrant to Thermo Electron (filed as Exhibit 10.16 to the Registrant's Registration Statement on Form 10 [File No. 1-13391] and incorporated herein by reference). 10.17 $3.6 Million Principal Amount Promissory Note and $347,438 Principal Amount Promissory Note, both due February 18, 2000, issued by the Registrant to Thermo Optek (filed as Exhibit 10.17 to the Registrant's Registration Statement on Form 10 [File No. 1-13391] and incorporated herein by reference). 10.18 Indemnification Agreement effective as of December 31, 1995, between the Registrant and Thermo Instrument (filed as Exhibit 10.12 to the Registrant's Registration Statement on Form 10 [File No. 1-13391] and incorporated herein by reference). 13 Annual Report to Shareholders for the year ended January 3, 1998 (only those portions incorporated herein by reference). 21 Subsidiaries of the Registrant. 27 Financial Data Schedule. EX-2.1 2 EXHIBIT 2.1 PLAN AND AGREEMENT OF DISTRIBUTION THIS PLAN AND AGREEMENT OF DISTRIBUTION (the "Agreement") is made as of the 15th day of December, 1997, between Thermo Optek Corporation, Inc., a Delaware corporation ("Optek"), and Thermo Vision Corporation, a Delaware corporation ("Vision"). RECITALS WHEREAS, Optek is the holder of approximately 6,783,800 shares of Common Stock, $.01 par value per share, of Vision ("Vision Common Stock"), comprising 100% of the issued and outstanding shares of Vision Common Stock; and WHEREAS, Optek has contributed certain technology and certain assets to Vision and intends to make other arrangements to establish Vision as a separate enterprise for the purpose of engaging in the photonics business, including the design, manufacture and sale of optical components, imaging sensors and systems, lasers, optically based instruments, optoelectronics and fiber optics; and WHEREAS, it is the intention of Optek to distribute all of the issued and outstanding shares of Vision Common Stock held by Optek to the stockholders of Optek (the "Distribution"); and WHEREAS, Optek and Vision have determined that it is necessary and desirable to set forth the principal corporate transactions required to effect the Distribution and to set forth other agreements that will govern certain other matters following such Distribution. NOW, THEREFORE, in consideration of the mutual covenants and agreements made herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 General. As used in this Agreement and the Exhibits hereto, the following terms shall have the following meanings: Action: any action, claim, suit, litigation, arbitration, inquiry, subpoena, discovery request, proceeding or investigation by or before any court or grand jury, any governmental or other regulatory or administrative agency or commission or any arbitration tribunal. Affiliate: with respect to any specified person, a person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person; provided, however, that Optek(and its subsidiaries) shall not be deemed to be Affiliates of Vision (and its subsidiaries), and vice versa, for purposes of this PAGE Agreement. Agent: American Stock Transfer & Trust Company, the distribution agent appointed by Optek to distribute the shares of Vision Common Stock in connection with the Distribution. Ancillary Agreements: all of the agreements, instruments, understandings, assignments or other arrangements entered into in connection with the transactions contemplated hereby, including, without limitation, the Thermo Electron Corporate Charter, the Corporate Services Agreement, the Tax Allocation Agreement, the Master Guarantee Reimbursement Agreements, the Master Repurchase Agreement, the CID Supply Agreement and the Tax Matters Agreement. CID: Charge-injection device. CID Supply Agreement: the agreement between Optek and Vision pursuant to which Vision has agreed to supply Optek with and Optek has agreed to purchase from Vision, all of Optek's requirements for CID sensors for use in Optek's optical spectrometers. Code: the Internal Revenue Code of 1986, as amended. Commission: the Securities and Exchange Commission. Corporate Services Agreement: the agreement between Thermo Electron and Vision providing for Thermo Electron's provision to Vision of various administrative services, including certain legal advice and services, risk management, employee benefit administration, tax advice and preparation of tax returns, centralized cash management and certain financial and other services. Distribution: as defined in the Recitals. Distribution Date: the date of effecting the Distribution, as determined by the Optek Board. Distribution Record Date: the date determined by the Optek Board as of which the holders of Optek Common Stock and their respective stock holdings shall be determined for purposes of distributing Vision Common Stock to such Optek stockholders. Exchange Act: the Securities Exchange Act of 1934, as amended. Form 10: the Registration Statement on Form 10 to be filed by Vision with the Commission to effect the registration of the Vision Common Stock pursuant to the Exchange Act. Group: the Optek Group or the Vision Group. PAGE Indemnifiable Losses: all losses, Liabilities, damages, claims, demands, judgments or settlements of any nature or kind, known or unknown, fixed, accrued, absolute or contingent, liquidated or unliquidated, including all reasonable costs and expenses (legal, accounting or otherwise as such costs are incurred) relating thereto, suffered (and not actually reimbursed by insurance proceeds) by an Indemnitee, including any reasonable costs or expenses of enforcing any indemnity hereunder. Indemnifying Party: a Person who or which is obligated under this Agreement to provide indemnification. Indemnitee: a Person who or which may seek indemnification under this Agreement. Information Statement: the Information Statement, constituting a part of the Form 10, in the form to be distributed to the holders of Optek Common Stock as of the Distribution Record Date in connection with the Distribution, and as it may be amended or supplemented subsequent to such dissemination. Liabilities: any and all debts, liabilities and obligations, absolute or contingent, mature or unmature, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising (unless otherwise specified in this Agreement), including all costs and expenses relating thereto, and those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any governmental entity or any award of any arbitrator of any kind, and those arising under any contract, commitment or undertaking. Master Guarantee Reimbursement Agreements: (i) the agreement between Thermo Electron and Vision providing that Vision is required to reimburse Thermo Electron for any costs Thermo Electron incurs in the event that Thermo Electron is required to pay third parties pursuant to any guarantees Thermo Electron issues on Vision's behalf and (ii) the agreement between Thermo Instrument and Vision providing that Vision is required to reimburse Thermo Instrument for any costs Thermo Instrument incurs in the event that Thermo Instrument is required to pay Thermo Electron or any third party pursuant to any guarantees Thermo Instrument issues on Vision's behalf. Master Repurchase Agreement: the agreement between Thermo Electron and Vision pursuant to which Vision in effect lends cash to Thermo Electron, whichThermo Electron collateralizes with investments principally consisting of corporate notes, United States government-agency securities, money market funds, commercial paper and other marketable securities, in the amount of at least 103% of such obligation. Optek Board: the Board of Directors of Optek. PAGE Optek Business: all of the businesses and operations conducted at any time, whether prior to, on or after the Distribution Date, by any member of the Optek Group, other than the Vision Business. Optek Common Stock: the Common Stock, $.01 par value per share, of Optek. Optek Group: Optek and the Optek Subsidiaries. Optek Indemnities: Optek, each Affiliate of Optek and each of their respective Representatives and each of the heirs, executors, successors and assigns of any of the foregoing. Optek Subsidiaries: all Subsidiaries of Optek, other than Vision and the Vision Subsidiaries. Person: an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization or a government or any department or agency thereof. Representative: with respect to any Person, any of such Person's directors, officers, employees, agents, consultants, advisors, accountants, attorneys and representatives. Securities Act: the Securities Act of 1933, as amended. Subsidiary: with respect to any specified Person, any corporation or other legal entity of which such Person or any of its Subsidiaries controls or owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of members to the board of directors or similar governing body; provided, however, that for purposes of this Agreement, Vision and the Vision Subsidiaries shall not be deemed to be Subsidiaries of Optek or any of the Optek Subsidiaries. Tax Allocation Agreement: the agreement between Thermo Electron and Vision providing the terms under which Vision will be included in Thermo Electron's consolidated Federal and state income tax returns. Tax Matters Agreement: the Tax Matters Agreement between Optek and Vision, the proposed form of which is attached as Exhibit C, providing for, among other things, the allocation of certain liabilities with respect to federal, state and local income taxes and the procedures for filing returns with respect to such taxes. Thermo Electron: Thermo Electron Corporation, a Delaware corporation and the ultimate parent corporation of Optek and Vision. Thermo Electron Corporate Charter: the charter defining the PAGE relationships, nature of cooperations and benefits and support to be shared among Thermo Electron and its subsidiaries. Third-Party Claim: any claim, suit, arbitration, injury, proceeding or investigation by or before any court, any governmental or other regulatory or administrative agency or commission or any arbitration tribunal asserted by a Person who or which is neither a party hereto nor an Affiliate of a party hereto. Vision Assets: all of the assets owned by any member of the Vision Group immediately prior to the Distribution Date, excluding items to be retained by any member of the Optek Group pursuant to the Ancillary Agreements. Vision Board: the Board of Directors of Vision. Vision Business: all of the businesses and operations conducted at any time, whether prior to, on or after the Distribution Date, by any member of the Vision Group. Vision Common Stock: as defined in the Recitals. Vision Group: Vision and the Vision Subsidiaries. Vision Indemnitees: Vision, each Affiliate of Vision and each of their respective Representatives and each of the heirs, executors, successors and assigns of any of the foregoing. Vision Subsidiary: all Subsidiaries of Vision. PAGE ARTICLE II ACKNOWLEDGMENT OF MATERIAL FACTS 2.1 Organization. Optek and Vision acknowledge that each is duly organized, validly existing and in good standing under the laws of the State of Delaware, with requisite corporate power to own their respective properties and assets and to carry on their respective businesses as presently conducted or contemplated. Optek is the owner of all (approximately 6,783,800) of the issued and outstanding shares of Vision Common Stock. ARTICLE III PRELIMINARY ACTION 3.1 Cooperation Prior to the Distribution. (a) Ancillary Agreements. Optek and Vision shall use their respective best efforts to cause, on or before the Distribution Date, the execution and delivery by Optek and Vision, or their respective Affiliates, of the Ancillary Agreements and any other agreements, instruments or other documents deemed necessary or desirable by the applicable parties to establish and govern their post-Distribution relationships. (b) Form 10. Optek and Vision have prepared, and Vision has filed with the Commission, the Form 10, which includes the Information Statement, setting forth appropriate disclosure concerning Vision, the Distribution and any other appropriate matters required to be stated therein. Optek and Vision shall use their respective reasonable efforts to cause the Form 10 to become effective under the Exchange Act, and thereafter Optek or its agent shall promptly mail the Information Statement to all of the appropriate holders of Optek Common Stock. (c) Listing. Optek and Vision shall prepare, and Vision shall file and pursue, an application to effect the listing of the Vision Common Stock on the American Stock Exchange. (d) Charter Transfer Restriction. Vision shall prepare and file with the office of the Secretary of State of the State of Delaware an amendment to Vision's Certificate of Incorporation, as amended (the "Charter Amendment"), that prohibits the sale, transfer or other disposition of the shares of Vision Common Stock to be distributed in the Distribution (other than the sale of fractional shares by the Agent), until the sooner to occur of (i) 60 days following the pricing of Vision's proposed initial underwritten public offering of Vision Common Stock (the "IPO") or (ii) March 1, 1998 (the "Charter Transfer Restriction"). PAGE 3.2 Consents. Each party hereto understands and agrees that no party hereto is, in this Agreement or in any other agreement or document contemplated by this Agreement or otherwise, representing or warranting in any way that the obtaining of any consents or approvals, the execution and delivery of any agreements or the making of any filings or applications contemplated by this Agreement will satisfy the provisions of any or all applicable agreements or the requirements of any or all applicable laws or judgments except as expressly represented, warranted or covenanted herein or in the Ancillary Agreements. Notwithstanding the foregoing, the parties shall use reasonable efforts to obtain all consents and approvals, to enter into all agreements and to make all filings and applications which may be required for the consummation of the transactions contemplated by this Agreement, including, without limitation, all applicable regulatory filings or consents under federal or state laws and all necessary consents, approvals, agreements, filings and applications. ARTICLE IV THE DISTRIBUTION 4.1 The Distribution. (a) Prior to the Distribution Date, Optek shall deliver to Vision the certificates for the approximate 6,783,800 shares of Vision Common Stock owned by Optek, and Vision shall cancel such certificates. In exchange therefor, and upon receipt from the Agent of a certificate as to the number of shares of Optek Common Stock outstanding as of the Distribution Record Date, Vision shall deliver to the Agent on the Distribution Date on behalf of Optek and for the benefit of the holders of record of Optek Common Stock as of the Distribution Record Date, an omnibus stock certificate representing in the aggregate 14 shares of Vision Common Stock for every 100 shares of Optek Common Stock outstanding as of the Distribution Record Date. Effective as of 9:00 a.m., Boston Time, on the date of the delivery of such omnibus stock certificate to the Agent, ownership of the Vision Common Stock held by Optek shall pass to Optek's stockholders. Optek shall instruct the Agent to distribute, beginning on or promptly following the Distribution Date, to such holders of Optek Common Stock on the Distribution Record Date, certificates representing 14 shares of Vision Common Stock for every 100 shares of Optek Common Stock outstanding as of the Distribution Record Date. Vision agrees to provide to the Agent sufficient certificates in such denominations as the Agent may request in order to effect the Distribution. All of the shares of Vision Common Stock issued in the Distribution shall be fully paid, nonassessable and free of preemptive rights. In addition, all such shares (other than fractional shares sold by the Agent in accordance with Section 4.1(b) below) shall be subject to the Charter Transfer Restriction. Holders of Optek Common Stock shall not be required to pay cash or other consideration for the PAGE Vision Common Stock received in the Distribution. (b) No fractional shares of Vision Common Stock will be received by Optek stockholders. Fractional shares, if any, will be aggregated and sold, on behalf of the stockholders entitled to receive such shares, by the Agent. The Agent will use the net proceeds from the sale of fractional shares to make cash payments to those stockholders otherwise entitled to receive fractional shares in proportion to their respective interests in such fractional shares. (c) The Distribution shall not be effected unless immediately thereafter the IPO is consummated. 4.2 Optek Board Action. (a) The Optek Board shall establish in its sole discretion and in accordance with all applicable rules of the American Stock Exchange, the Distribution Record Date, the Distribution Date, the date on which certificates representing Vision Common Stock shall be mailed to holders of Optek Common Stock and all appropriate procedures in connection with the Distribution. (b) In its sole discretion for any reason, the Optek Board may rescind the declaration of the Distribution, and after the declaration and until the Distribution Date, the Optek Board may postpone, withdraw, cancel or abandon the Distribution for any reason and simultaneously terminate this Agreement and the Ancillary Agreements. ARTICLE V SURVIVAL, ASSUMPTION AND INDEMNIFICATION 5.1 Survival of Agreements. All covenants and agreements of the parties hereto contained in this Agreement shall survive the Distribution Date. 5.2 Assumption and Indemnification. (a) Except as specifically otherwise provided in the Ancillary Agreements, Optek shall indemnify, defend and hold harmless the Vision Indemnitees from and against (1) all Indemnifiable Losses arising from or relating to the Optek Business, whether such Indemnifiable Losses relate to events, occurrences or circumstances occurring or existing, or whether such Indemnifiable Losses are asserted, before or after the Distribution Date; (2) all Indemnifiable Losses incurred by Vision as a consequence of any misstatement or omission of a material fact with respect to Optek based on information supplied by Optek in any documents or filings prepared for purposes of compliance or qualification under applicable securities laws in connection with the Distribution, and related transactions, including without limitation, the Information Statement and the PAGE Form 10; and (3) all Indemnifiable Losses arising from any breach of or failure toperform any obligation on the part of any member of Optek Group contained in this Agreement or any of the Ancillary Agreements. (b) Except as specifically otherwise provided in the Ancillary Agreements, Vision shall indemnify, defend and hold harmless the Optek Indemnitees from and against (1) all Indemnifiable Losses arising from or relating to the Vision Business, whether such Indemnifiable Losses relate to events, occurrences or circumstances occurring or existing, or whether such Indemnifiable Losses are asserted, before or after the Distribution Date; (2) all Indemnifiable Losses incurred by Optek as a consequence of any misstatement or omission of a material fact with respect to Vision based on information supplied by Vision in any documents or filings prepared for purposes of compliance or qualification under applicable securities laws in connection with the Distribution and related transactions, including without limitation, the Information Statement and the Form 10; and (3) all Indemnifiable Losses arising from any breach of or failure to perform any obligation on the part of any member of the Vision Group contained in this Agreement or any of the Ancillary Agreements. (c) If any Indemnifiable Loss arises from or relates to both the Optek Business and the Vision Business, Optek shall indemnify the Vision Indemnitees against any portion of such Indemnifiable Loss that pertains more directly to the Optek Business than to the Vision Business, and Vision shall indemnify the Optek Indemnitees against any portion of such Indemnifiable Loss that pertains more directly to the Vision Business than to the Optek Business. (d) Notwithstanding anything to the contrary set forth herein, indemnification relating to any arrangements between any member of the Optek Group and any member of the Vision Group (or any unit of the Vision Business) for the provision after the Distribution of goods and services in the ordinary course shall be governed by the terms of such arrangements and not by this Section. 5.3 Procedures for Indemnification for Third-Party Claims. (a) Vision shall, and shall cause the other Vision Indemnitees to, notify Optek in writing promptly after learning of any Third-Party Claim for which any Vision Indemnitee intends to seek indemnification from Optek under this Agreement. Optek shall, and shall cause the other Optek Indemnitees to, notify Vision in writing promptly after learning of any Third-Party Claim for which any Optek Indemnitee intends to seek indemnification from Vision under this Agreement. The failure of any Indemnitee to give such notice shall not relieve any Indemnifying Party of its obligations under this Article V except to the extent that such Indemnifying Party or its Affiliate is actually prejudiced by such failure to give notice. Such notice shall describe such PAGE Third-Party Claim in reasonable detail considering the information provided to the Indemnitee. (b) Except as otherwise provided in subsection (c) of this Section, an Indemnifying Party may, by notice to the Indemnitee and to Vision, if Optek is the Indemnifying Party, or to Optek, if Vision is the Indemnifying Party, at any time after receipt by such Indemnifying Party of such Indemnitee's notice of a Third-Party Claim, undertake (itself or through another member of its Group) the defense or settlement of such Third-Party Claim. If an Indemnifying Party undertakes the defense of any Third-Party Claim, such Indemnifying Party shall thereby admit its obligation to indemnify the Indemnitee against such Third-Party Claim, and such Indemnifying Party shall control the investigation and defense or settlement thereof, except that such Indemnifying Party shall not require any Indemnitee, without its prior written consent, to take or refrain from taking any action in connection with such Third-Party Claim, or make any public statement, which such Indemnitee reasonably considers to be against its interest, nor shall the Indemnifying Party, without the prior written consent of the Indemnitee and of Vision, if the Indemnitee is a Vision Indemnitee, or of Optek, if the Indemnitee is an Optek Indemnitee, consent to any settlement that does not include as a part thereof an unconditional release of the Indemnitees from liability with respect to such Third-Party Claim or that requires the Indemnitee or any of its Representatives or Affiliates to make any payment that is not fully indemnified under this Agreement or to submit to any non-monetary remedy; and subject to the Indemnifying Party's control rights, as specified herein, the Indemnitees may participate in such investigation and defense, at their own expense. (c) With respect to any Third-Party Claim, if there is a material conflict of interest between the Indemnifying Party and the Indemnitees involved, neither the Indemnifying Party nor the Indemnitees shall be entitled to control the defense or settlement thereof. If an Indemnitee notifies an Indemnifying Party of Third-Party Claim pursuant to this Article V, and the Indemnifying Party does not take control of the defense or settlement thereof, or prior to the time that it does so take control, neither the Indemnifying Party nor the Indemnitees shall be entitled to control the defense or settlement thereof. In any such event, the Indemnifying Parties and the Indemnitees involved shall each be entitled to conduct their own investigation and defense, but the parties shall cooperate to conduct such investigation and defense as efficiently as possible. No Indemnitee may compromise or settle any Third-Party Claim described in this subsection as to which indemnification from an Indemnifying Party has or will be sought under this Agreement without the prior written consent of such Indemnifying Party. (d) If an Indemnifying Party is required to indemnify any Indemnitees with respect to a Third-Party Claim described in subsection (c) of this Section 5.3, such Indemnifying Party shall PAGE pay the reasonable attorneys' fees and expenses of one law firm representing the Indemnitees involved in each jurisdiction with respect thereto. (e) Vision shall, and shall cause the other Vision Indemnitees to, and Optek shall, and shall cause the other Optek Indemnitees to, make available to each other, their counsel and other Representatives, all information and documents reasonably available to them which relate to any Third-Party Claim, and otherwise cooperate as may reasonably be required in connection with the investigation, defense and settlement thereof. 5.4 Remedies Cumulative. The remedies provided in this Article VI shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any other remedies against any Indemnifying Party. However, the procedures set forth in Section 5.3 shall be the exclusive procedures governing any indemnity action brought under this Agreement or otherwise and relating to a Third-Party Claim, except as otherwise specifically provided in any of the Ancillary Agreements. ARTICLE VI ADDITIONAL ASSURANCES 6.1 Mutual Assurances. Optek and Vision agree to cooperate with respect to the implementation of this Agreement and the Ancillary Agreements and to execute such further documents and instruments as may be necessary to confirm the transactions contemplated hereby. Such cooperation may include joint meetings with corporate partners, suppliers, customers and others to assure the orderly transition of the business and assets contemplated hereby; provided, however, that nothing herein shall be deemed to obligate either Optek or Vision to take any action or reach any understandings which may violate any applicable laws. Optek and Vision agree that they will not take any action inconsistent with the facts and representations set forth in the "no-action letter" request filed with the Commission in connection with the Distribution and will use their best efforts to cause such facts to remain true and correct and, if either Optek or Vision shall take any such inconsistent action, or fail to use such best efforts, it will indemnify the other party for any expense or Liability incurred as a consequence thereof. Optek and Vision also agree that the Distribution is intended to qualify under Section 355 of the Code, and that the characterization of the transactions contemplated hereunder for tax purposes and the liability of the parties for taxes shall be governed by the Tax Matters Agreement. Except as otherwise specifically provided herein or as agreed between the parties from time to time, Optek and Vision shall bear their own expenses associated with the Distribution. ARTICLE VII PAGE CONDITIONS TO EFFECTIVENESS OF DISTRIBUTION The Distribution shall be subject to the implementation of the portions of this Agreement which are contemplated to become effective prior to the Distribution and to the satisfaction or waiver of the following conditions: 7.1 Board Approval. This Agreement and the Ancillary Agreements (including exhibits and schedules) shall have been approved by the Optek Board and the Vision Board and shall have been executed and delivered by appropriate officers of Optek and Vision. 7.2 Securities Laws Compliance. The transactions contemplated hereby shall be in compliance with applicable federal and state securities laws. 7.3 Form 10 Effective. The Form 10 shall have become effective under the Exchange Act. 7.4 Consents. Optek shall have received such consents, and shall have received executed copies of such agreements or amendments of agreements, as it shall deem necessary in connection with the completion of the transaction contemplated by this Agreement. 7.5 Charter Amendment. The Charter Amendment containing the Charter Transfer Restriction shall have been filed with the office of the Secretary of State of the State of Delaware and shall have become effective under Delaware law. 7.6 Other Instruments. All action and other documents and instruments deemed necessary or advisable in connection with the transactions contemplated hereby shall have been taken or executed, as the case may be, in form and substance satisfactory to Optek and Vision. 7.7 Legal Proceedings. No legal proceedings affecting or arising out of the transactions contemplated hereby or which could otherwise affect Optek or Vision in a materially adverse manner shall have been commenced or threatened against Optek, Vision or the directors or officers of either Optek or Vision. 7.8 Material Changes. No material adverse change shall have occurred with respect to Optek or Vision, the securities markets or general economic or financial conditions which shall, in the reasonable judgment of Optek and Vision, make the transactions contemplated by this Agreement inadvisable. ARTICLE VIII ACCESS TO INFORMATION AND SERVICES PAGE 8.1 Provision of Corporate Records. Upon Vision's request, Optek shall arrange as soon as practicable following the Distribution Date for the delivery to Vision of existing corporate records in the possession of Optek relating to the business and assets to be transferred to Vision, together with all active agreements and any active litigation files relating to the business, except to the extent such items are already in the possession of Vision. Such records shall be the property of Vision but shall be available to Optek for review and duplication until Optek shall notify Vision in writing that such records are no longer of use to Optek. 8.2 Access to Information. From and after the Distribution Date, Optek shall afford to Vision and its authorized accountants, counsel and other designated representatives reasonable access (including using reasonable efforts to give access to persons or firms possessing information) and duplicating rights during normal business hours to all records, books, contracts, instruments, computer data and other data and information (collectively, "Information") within Optek's possession relating to Vision's business, insofar as such access is reasonably required by Vision. Vision shall afford to Optek and its authorized accountants, counsel and other designated representatives reasonable access (including using reasonable efforts to give access to persons or firms possessing Information) and duplicating rights during normal business hours to Information within Vision's possession relating to Optek's business as constituted after the Distribution, insofar as such access is reasonably required by Optek. Information may be requested under this Article VIII for, without limitation, audit, accounting, claims, litigation and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations and for performing the transactions contemplated in this Agreement and the Ancillary Agreements. 8.3 Production of Witnesses. At all times from and after the Distribution Date, each of Optek and Vision shall use reasonable efforts to make available to the other, upon written request, its officers, directors, employees and agents as witnesses to the extent that such persons may reasonably be required in connection with legal, administrative or other proceedings in which the requesting party may from time to time be involved. 8.4 Reimbursement. Except to the extent otherwise contemplated by any Ancillary Agreement, a party providing Information to the other party under this Article VIII shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such Information. 8.5 Retention of Records. For a period of seven (7) years following the Distribution Date, each of Optek and Vision shall PAGE retain all Information relating to the other, except as otherwise required by law or set forth in an Ancillary Agreement or except to the extent that such Information is in the public domain or in the possession of the other party; provided, that, after the expiration of such retention period, such Information shall not be destroyed or otherwise disposed of at any time, unless, prior to such destruction or disposal, (i) the party proposing to destroy or otherwise dispose of such Information shall provide no less than ninety (90) days' prior written notice to the other, specifying in reasonable detail the Information proposed to be destroyed or disposed of and (ii) if a recipient of such notice shall request in writing prior to the scheduled date for such destruction or disposal that any of the Information proposed to be destroyed or disposed of be delivered to such requesting party, the party proposing the destruction or disposal shall promptly arrange for the delivery of such of the Information as was requested, at the expense of the party requesting such Information. 8.6 Confidentiality. Subject to any contrary requirement of law and the right of each party to enforce its rights hereunder in any legal action, each party shall keep strictly confidential, and shall cause its employees and agents to keep strictly confidential, any Information of or concerning the other party which it or any of its agents or employees may acquire pursuant to, or in the course of performing its obligations under, any provisions of this Agreement or any Ancillary Agreement; provided, however, that such obligation to maintain confidentiality shall not apply to Information which: (i) at the time of disclosure was in the public domain, not as a result of improper acts by the receiving party; (ii) was already independently in the possession of the receiving party at the time of disclosure; or (iii) is received by the receiving party from a third party who did not receive such Information from the disclosing party under an obligation of confidentiality. ARTICLE IX COVENANTS 9.1 Listing. Vision hereby agrees to use its reasonable efforts to effect and maintain the listing of the Vision Common Stock on the American Stock Exchange. 9.2 Ancillary Agreements. The parties agree that they shall comply with and provide all services and take any and all actions required to be provided or taken by the terms of any and all of the Ancillary Agreements following the Distribution. ARTICLE X NO REPRESENTATIONS OR WARRANTIES 10.1 No Representations or Warranties. Vision acknowledges PAGE that, prior to the date of this Agreement, it has had primary responsibility for the operation and management of the Vision Business and Optek acknowledges that, prior to the date of this Agreement, it has had primary responsibility for the operation and management of the Optek Business. Vision understands and agrees that no member of the Optek Group is, in this Agreement or in any other agreement or document, representing or warranting to Vision or any member of the Vision Group in any way as to the Vision Assets, the Vision Business or the Liabilities of the Vision Group or as to any consents or approvals required in connection with the consummation of the transactions contemplated by this Agreement, it being agreed and understood that Vision and each member of the Vision group shall bear the economic and legal risk that conveyances of the Vision Assets shall prove to be insufficient, that the title of any member of the Vision group to any Vision Assets shall be other than good and marketable and free from encumbrances or that results from the failure of Vision or any member of the Vision Group to obtain any consents or approvals relating to the Vision Business required in connection with the consummation of the transactions contemplated by this Agreement. ARTICLE XI MISCELLANEOUS 11.1 Governing Law. This Agreement shall be governed by the laws of the State of Delaware. 11.2 Construction. Each provision of this Agreement shall be interpreted in a manner to be effective and valid to the fullest extent permissible under applicable law. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions of this Agreement which shall remain in full force and effect. 11.3 Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement. 11.4 Exhibits. Exhibits to this Agreement shall be deemed to be an integral part hereof, and schedules or exhibits to such Exhibits shall be deemed to be an integral part thereof. Except as otherwise specifically provided therein, all provisions of this Article XI shall apply to each agreement constituting an Ancillary Agreement or to which reference is made herein. 11.5 Amendments; Waivers. This Agreement may be amended or modified only in writing executed on behalf of Optek and Vision. No waiver shall operate to waive any further or future act and no failure to object of forbearance shall operate as a waiver. 11.6 Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if PAGE served personally on the party to whom notice is given, (ii) on the day of transmission if sent via facsimile transmission to the facsimile number given below, provided telephonic confirmation of receipt is obtained promptly after completion of transmission, (iii) on the business day after delivery to an overnight courier service or the Express mail service maintained by the United States Postal Service, provided receipt of delivery has been confirmed, or (iv) on the fifth day after mailing, if mailed by registered or certified mail, postage prepaid, properly addressed and return-receipt requested, in all cases to the parties as follows: Thermo Optek Corporation 8E Forge Parkway Franklin, MA 02038 Attention: Chief Executive Officer Telephone: (508) 528-0551 Telecopier: (508) 541-0551 or to: Thermo Vision Corporation 8E Forge Parkway Franklin, MA 02038 Attention: Chief Executive Officer Telephone: (508) 553-1689 Telecopier: (508) 553-1742 11.7 Successors and Assigns. This Agreement and any of the rights and obligations of each party hereunder shall not be assigned, in whole or in part, without the prior written consent of the other party, which consent shall not be unreasonably withheld, provided that either party may sell, assign, transfer, delegate or otherwise dispose of its rights and obligations hereunder in connection with its merger or consolidation or the sale of substantially all of its assets. This Agreement shall be binding upon the parties and their respective successors and assigns to the extent such assignments are in accordance with this Section 11.7. 11.8 Interpretation. The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of thisAgreement. As used in this Agreement, the term "person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender in all cases where they would so apply. 11.9 Successors and Assigns; No Third-Party Beneficiaries. PAGE This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns, but neither this Agreement nor any of the rights, interests and obligations hereunder shall be assigned by any party hereto without the prior written consent of the other party. Except for the provisions of Sections 5.2 and 5.3 relating to Indemnitees, which are also for the benefit of the Indemnitees, this Agreement is solely for the benefit of the parties hereto and their Subsidiaries and Affiliates and is not intended to confer upon any other Persons any rights or remedies hereunder. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. THERMO OPTEK CORPORATION By: /s/ Robert J. Rosenthal -------------------------------- Name: Title: President THERMO VISION CORPORATION By: /s/ Kristine Stotz Langdon -------------------------------- Name: Title: President EX-3.2 3 Exhibit 3.2 CERTIFICATE OF AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THERMO VISION CORPORATION Pursuant to Section 242 of the Corporation Law of the State of Delaware THERMO VISION CORPORATION (hereinafter called the "Corporation"), organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "General Corporation Law"), does hereby certify as follows: The Board of Directors of the Corporation, at a meeting held on November 24, 1997, duly adopted resolutions, pursuant to Section 242 of the General Corporation Law, setting forth an amendment to the Amended and Restated Certificate of Incorporation of the Corporation and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment by written consent in accordance with Sections 228(a) and 242 of the General Corporation Law, and written notice of such consent has been given to all stockholders who have not consented in writing to said amendment. The resolutions setting forth the amendment are as follows: RESOLVED: That Article FOURTH of the Amended and Restated Certificate of Incorporation of the Corporation be and hereby is deleted in its entirety and the following new Article FOURTH shall be inserted in lieu thereof: PAGE "FOURTH: (a) The total number of shares of capital stock which the Corporation shall have the authority to issue is fifty million (50,000,000), and the par value of each of such shares is one cent ($.01), amounting in the aggregate to five hundred thousand dollars ($500,000) of capital stock. (b) All shares of capital stock of the Corporation issued by the Corporation upon or before occurrence of the dividend (the "Distribution") of such shares of capital stock by Thermo Optek Corporation, a Delaware corporation, to its shareholders (the "Restricted Shares") shall be subject to the following restriction: The holder shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise, any Restricted Shares (except that (i) Thermo Optek Corporation may distribute the Restricted Shares to its shareholders in the Distribution and (ii) the Corporation's Distribution agent may sell fractions of Restricted Shares in order to provide shareholders of Thermo Optek Corporation with cash in lieu of fractional Restricted Shares in the Distribution), until the sooner to occur of (i) 60 days following the date of execution of an underwriting agreement in connection with the Corporation's initial underwritten public offering following the date on which the Registration Statement with respect to such offering is declared effective by the Securities and Exchange Commission or (ii) March 1, 1998 (the "Transfer Restriction"). For purposes of clarifying the scope of the Transfer Restriction, all shares of capital stock of the Corporation issued by the Corporation after the Distribution shall not be subject to the Transfer Restriction." IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed and this Certificate of Amendment to the Certificate of Incorporation, as amended, to be signed by its Secretary on this the 9th day of December, 1997. THERMO VISION CORPORATION By: /s/Sandra L. Lambert --------------------------- Sandra L. Lambert, Secretary EX-10.1 4 Exhibit 10.1 CORPORATE SERVICES AGREEMENT THIS is an AGREEMENT dated as of the 14th day of November, 1997 between Thermo Electron Corporation, a Delaware corporation ("Thermo"), and Thermo Vision Corporation ("Subsidiary"), a Delaware corporation. Preliminary Statement Subsidiary desires to obtain administrative and other services from Thermo and Thermo is willing to furnish or make such services available to Subsidiary. By this Agreement, Thermo and Subsidiary desire to set forth the basis for Thermo's providing services of the type referred to herein. Agreements IT IS MUTUALLY agreed by the parties hereto as follows: 1. Services 1.1 Beginning on the date of this Agreement, Thermo, through its corporate staff, will provide or otherwise make available to Subsidiary certain general corporate services, including but not limited to accounting, tax, corporate communications, legal, financial and other administrative staff functions, and arrange for administration of insurance and employee benefit programs. The services will include the following: (a) Accounting and securities compliance related services. Maintenance of corporate records, assistance, if and when necessary, in preparation of Securities and Exchange Commission filings, including without limitation registration statements, Forms 10-K, 10-Q and 8-K, assistance in the preparation of Proxies and Proxy Statements and the solicitation of Proxies, and assistance in the preparation of the Annual and Quarterly Reports to Stockholders, maintenance of internal audit support services and review of compliance with financial and accounting procedures. (b) Tax related services. Preparation of Federal tax returns, preparation of state and local tax returns (including income tax returns), tax research and planning and assistance on tax audits (Federal, state and local). 1PAGE (c) Insurance and employee benefit related services. Arranging for liability, property and casualty, and other normal business insurance coverage. Support for product, worker safety and environmental programs (Subsidiary acknowledges that principal responsibility for compliance rests with the Subsidiary). Administration of Subsidiary's employee participation in employee benefit plans sponsored by Thermo and insurance programs such as the following: 401(k) plan, group medical insurance, group life insurance, employee stock purchase plan and various stock options plans. Filing of all required reports under ERISA for employee benefit plans sponsored by Thermo. (d) Corporate record keeping services. Maintenance of corporate records, including without limitation, maintenance of minutes of meetings of the Boards of Directors and Stockholders, supervision of transfer agent and registration functions, coordination of stock repurchase programs, and tracking of stock issuances and reserved shares. (e) Services in addition to those enumerated in subsections 1.1(a) through 1.1(d) above including, but not limited to, routine legal and other administrative activities, Corporate information and treasury and other financial services as reasonably requested by Subsidiary. 1.2 For performing general services of the types described above in Paragraph 1.1, Thermo will initially charge Subsidiary an annual fixed fee equal to 1.0% of the gross revenues of Subsidiary for the fiscal year in which such services are performed (such amount to be prorated on a daily basis for any partial year), which fee is intended to compensate Thermo for Subsidiary's pro rata share of the aggregate costs actually incurred by Thermo in connection with the provision of such services to all recipients thereof. The fee set forth in the preceding sentence may be adjusted from time to time by mutual agreement of Thermo and Subsidiary. 1.3 In addition to the foregoing services, certain specific services are made available to Subsidiary by Thermo on an as-requested basis. These may include, but are not limited to, services specifically requested by Subsidiary or services which, in Thermo's judgment, are not routine administrative services or create unusual burdens or demands on Thermo's resources, such as litigation support, acquisition and offering support services (including legal services), corporate development, tax audit support or public or investor relations services other than routine shareholder communications. Thermo will charge Subsidiary the costs actually incurred (including overhead and general administrative expenses) for such services that are requested by Subsidiary and supplied by Thermo. 1.4 The charges for services pursuant to Subsections 1.2 and 1.3 above will be determined and payable no less frequently 2PAGE than on a quarterly basis. The charges will be due when billed and shall be paid no later than 30 days from the date of billing. 1.5 When services of the type described above in this Section 1 are provided by outside providers to Subsidiary or, in connection with the provision of such services out-of-pocket costs are incurred such as travel, the cost thereof will be paid by Subsidiary. To the extent that Subsidiary is billed by the provider directly, Subsidiary shall pay the bill directly. If Thermo is billed for such services, Thermo may pay the bill and charge Subsidiary the amount of the bill or forward the bill to Subsidiary for payment by Subsidiary. 2. Subsidiary's Directors and Officers. Nothing contained herein will be construed to relieve the directors or officers of Subsidiary from the performance of their respective duties or to limit the exercise of their powers in accordance with the charter or By-Laws of Subsidiary or in accordance with any applicable statute or regulation. 3. Liabilities . In furnishing Subsidiary with management advice and other services as herein provided, neither Thermo nor any of its officers, directors or agents shall be liable to Subsidiary or its creditors or shareholders for errors of judgment or for anything except willful malfeasance, bad faith or gross negligence in the performance of their duties or reckless disregard of their obligations and duties under the terms of this Agreement. The provisions of this Agreement are for the sole benefit of Thermo and Subsidiary and will not, except to the extent otherwise expressly stated herein, inure to the benefit of any third party. 4. Term. (a) Term. The initial term of this Agreement shall begin on the date of this Agreement and continue through the end of the current fiscal year. This Agreement shall automatically renew at the end of the initial term for successive one-year terms until terminated in accordance with Subsection (b) below. (b) Termination This Agreement may be terminated by Subsidiary at any time on thirty days prior notice to Thermo. In addition, this Agreement shall automatically terminate without any further action by either party on the date the Subsidiary ceases to be a member of the Thermo Group or a participant in the Thermo Electron Corporate Charter. (c) Termination Fee. In the event of a termination of this Agreement, Subsidiary shall pay to Thermo its pro rata fee pursuant to Section 1.2 for the year in which the termination takes effect plus a termination fee equal to the fee payable under Section 1.2 for the most recent nine consecutive months. 3PAGE (d) Post-Termination Services . F ollowing a termination of this Agreement, corporate administrative services of the kind provided under the Agreement may continue to be provided to Subsidiary on an as-requested basis by the Subsidiary or as required in the event it is not practicable for the Subsidiary to provide such services or it is otherwise unable to identify another source to provide such services (as would be the case of administration of employee benefit plans and insurance programs sponsored by Thermo and in which Subsidiary's employees participate) or as otherwise required by Thermo acting in its capacity as majority stockholder of Subsidiary. In the event such services are provided by Thermo to Subsidiary, Subsidiary shall be charged by Thermo a fee equal to the market rate for comparable services charged by third-party vendors. Such fee will be charged monthly and payable by Subsidiary within thirty days. The obligations of Subsidiary set forth in this Section 4(d) shall survive the termination of this Agreement. 5. Status .Thermo shall be deemed to be an independent contractor and, except as expressly provided or authorized in this Agreement, shall have no authority to act for or represent Subsidiary. 6. Other Activities of Thermo. Subsidiary recognizes that Thermo now renders and may continue to render management and other services to other companies that may or may not have policies and conduct activities similar to those of Subsidiary. Thermo shall be free to render such advice and other services, and Subsidiary hereby consents thereto. Thermo shall not be required to devote full time and attention to the performance of its duties under this Agreement, but shall devote only so much of its time and attention as it deems reasonable or necessary to perform the services required hereunder. 7. Notices .All notices, billings, requests, demands, approvals, consents, and other communications which are required or may be given under this Agreement shall be in writing and will be deemed to have been duly given if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid to the parties at their respective addresses set forth below: If to Subsidiary: If to Thermo ---------------- ------------- Thermo Vision Corporation Thermo Electron Corporation 8E Forge Parkway 81 Wyman Street Franklin, Massachusetts 02038 Waltham, Massachusetts 02254 Attention: President Attention: Chief Executive Officer 4PAGE 8. No Assignment. This Agreement shall not be assignable except with the prior written consent of the other party to this Agreement. 9. Applicable Law . This Agreement shall be governed by and construed under the laws of the Commonwealth of Massachusetts applicable to contracts made and to be performed therein. 10. Paragraph Titles. The paragraph titles used in this Agreement are for convenience of reference only and will not be considered in the interpretation or construction of any of the provisions thereof. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as a sealed instrument by their duly authorized officers as of the date first above written. THERMO ELECTRON CORPORATION THERMO VISION CORPORATION By: /s/John N. Hatsopoulos ---------------------------------------------------- Title: President /s/Kristine Stotz Langdon By:---------------------------------------------------- Title: President EX-10.3 5 Exhibit 10.3 TAX ALLOCATION AGREEMENT THIS AGREEMENT is made as of November 14th, 1997 between Thermo Electron Corporation , a Delaware corporation ("TMO "), and Thermo Vision Corporation, a Delaware corporation ("Vision" - The term "Vision" shall refer to Vision and those of its subsidiaries that are members of an affiliate group of corporations including Vision within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code")). Preliminary Statement TMO is the parent of an affiliate group of corporations (including Vision) within the meaning of Section 1504(a) of the Code (the "Thermo Group"). The Thermo Group has elected to file a consolidated return for federal income tax purposes. By this Agreement, the parties desire to set forth the understanding they have reached with respect to the filing of the consolidated United States federal income tax returns and state income tax returns. Foreign tax returns are not subject to this Agreement. Agreements IT IS MUTUALLY agreed by the parties hereto as follows: 1. Definitions and Construction. 1.1. The Term "TMO Group" means the group of corporations of which TMO is common parent and with which TMO files an affiliated consolidated federal income tax return, excluding Vision and subsidiaries of Vision that may exist now or in the future. For purposes of this Agreement, the TMO Group shall be treated as a single corporate entity. The TMO Group and Vision and its subsidiaries, respectively, are sometimes herein referred to collectively as the "Two Companies" or the "Companies." This Agreement anticipates that TMO will set aside and retain certain sums calculated as provided herein. All reference to TMO paying sums to itself pursuant to this Agreement shall be satisfied by TMO setting aside sums in respect of the obligations established under this Agreement. 1.2. The paragraph titles used herein are for convenience of reference only and will not be considered in the interpretation or construction of any of the provisions hereof. PAGE Words may be construed in the singular or the plural as the context requires. 2. Tax Returns. 2.1. Federal Tax Returns. TMO as the common parent will prepare and file or cause to be prepared and filed federal income tax returns on a consolidated basis, for the TMO Group and Vision and its subsidiaries for all fiscal periods as to which a consolidated return is appropriate in accordance with the terms of this Agreement. 2.2. State Tax Returns . TMO as the common parent will prepare and file or cause to be filed state income tax returns on a combined, consolidated, unitary, or other method that TMO believes will result in a lower overall tax liability to the Two Companies. In the event that said state tax returns shall be filed, the provisions of sections 1 through 11 hereof shall apply, mutatis mutandis (the necessary changes being made) to the allocation, preparation, filing and payment related to such state taxes and tax returns. Vision will reimburse TMO for Vision's portion of the tax. Such reimbursement will be the tax Vision would have paid on a separate return basis, but only if it was required to file a return in that state. 3. Time of Payment of Federal Obligations to TMO . The obligations of the Companies for Federal income tax payments will be determined and paid as follows: (a) Not later than the 15th day after the end of the fourth, sixth, ninth and twelfth months of each consolidated taxable year of TMO, TMO will make a reasonable determination (consistent with the provisions of Section 6655 of the Code) of the separate federal income tax liability that each Company would be required to pay as estimated payments on a separate return basis for that period. Each Company shall pay to TMO the amount of such liability within ten days. (b) After the end of TMO's fourth accounting quarter and before the 15th day of the third month thereafter, each Company will promptly pay to TMO the entire amounts estimated to be due and payable under such Company's federal income tax return as if filed on a separate return basis, less all amounts previously paid with respect to that year pursuant to subparagraph (a) of this Paragraph 3. (c) If upon the filing of the consolidated income tax return, a revised calculation is made in the manner set forth in subparagraph (b) of this Paragraph 3, and it is determined that either Company has paid to TMO with respect to the consolidated taxable year an amount greater than that required by Paragraph 3(b), then that excess will be promptly paid by TMO to that Company. 2PAGE 4. Tax Obligations of TMO . TMO will pay the consolidated tax liabilities of the Companies arising from filing a consolidated federal income tax return. 5. Payment of Funds by TMO. After the end of TMO's fourth quarter and before the 15th day of the third month thereafter, if in any year Vision incurs a loss, TMO shall pay to Vision a sum equal to the amount of benefit realized by members of the TMO Group (other than Vision) that is attributable to the loss incurred by Vision. 6. Changes in Prior Year's Tax Liabilities . In the event that the consolidated tax liability or the separate tax liability referred to in Paragraphs 3, 4 and 5 hereof for any year for which a consolidated tax return for the two Companies was filed is or would be increased or decreased by reason of filing an amended return or returns (including carry-back claims), or by reason of the examination of the returns by the Internal Revenue Service, the amounts of payments under Paragraphs 3, 4 or 5, as the case may be, for each such year will be recomputed by TMO to reflect the adjustments to taxable income and tax credits for the taxable year and interest or penalties, if any. In accordance with those recomputations, additional sums will be paid by the Companies to TMO or paid by TMO to the Companies regardless of whether a member has become a Departing Member (as defined in Paragraph 8 hereof) subsequent to the taxable year of recomputation. 7. New Members . The Companies agree that if, subsequent to the execution of this Agreement, TMO becomes the parent, as that term is used in Section 1504 of the Code, of one or more subsidiary corporations, in addition to Vision, then each newly acquired subsidiary corporation may become a separate party to this Agreement by consenting in writing to be bound by its provisions, effective immediately upon its delivery to TMO, but the income, deductions and tax credits of the newly acquired subsidiary corporations will first be included in the consolidated federal income tax return as required by the Code. 8. Departing Members. 8.1. The term "Departing Member," as used herein, will mean a Company that is no longer permitted under the Code to be included in the consolidated federal income tax return. 8.2. In applying this Agreement to a Departing Member for the final taxable year in which its income, deductions, and tax credits are required to be included in the consolidated federal income tax return: (i) the amount required to be paid by a Departing Member under the provisions of Paragraph 3 hereof and (ii) the amount that the Departing Member is entitled to receive under the provisions of Paragraph 4 hereof, will be determined by 3PAGE taking into account the income, deductions and tax credits of the Departing Member only for the fractional part of such year as the Departing Member was a member of the consolidated group and included in the consolidated federal income tax return. 8.3. After the filing of the consolidated federal income tax return for the last taxable year that the Departing Member was included therein, the Departing Member will be informed of the amount of consolidated carry-overs as of the end of the taxable year or period which are attributable to the Departing Member, as provided by Treasury Regulations Section 1.1502-79 or otherwise, including the agreement of the parties. 9. Determination of Sums Due from and Payable to Members. TMO will determine the sums due from and payable to the Companies under the provisions of this Agreement (including the determination for purposes of Paragraph 6 hereof). The Companies agree to provide TMO with such information as may reasonably be necessary to make these determinations. Issues arising in the course of the determinations that are not expressly provided for in this Agreement will be resolved in an equitable manner. 10. Tax Controversies . If a consolidated federal income tax return for any taxable year during which this Agreement is in effect is examined by the Internal Revenue Service, the examination, as well as any other matters relating to that tax return, including any tax litigation, will be handled solely by TMO. Vision will cooperate with TMO and to this end will execute protests, petitions, and any other documents as TMO determines to be necessary or appropriate. The cost and expense of TMO's handling of a tax controversy, including legal and accounting fees, will be allocated to and paid by the Company to whom the tax controversy relates. If the tax controversy relates to both Companies, the cost and expense will be allocated between the Companies in the proportion that each Company's potential additional tax liability bears to the total potential additional tax liability of both Companies (determined in accordance with Paragraph 6 hereto and assuming that the tax controversy is resolved in favor of the Internal Revenue Service) for the taxable year on issue. If the tax controversy encompasses more than one taxable year, TMO will first allocate the cost and expense to each taxable year in the proportion that the potential additional tax liability for each taxable year bears to the total potential additional tax liability for the taxable years in issue. 11. Effective Date . This Agreement shall be effective beginning as of the date of this Agreement, and will continue on a year-to-year basis thereafter with respect to Vision for so long as Vision is permitted to file a consolidated federal income tax return with TMO. 4PAGE IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first above written. THERMO ELECTRON CORPORATION By: /s/John N. Hatsopoulos ------------------------------- Title: President ---------------------------- THERMO VISION CORPORATION By: /s/Kristine Stotz Langdon ------------------------------ Title: President ---------------------------- EX-10.4 6 Exhibit 10.4 MASTER REPURCHASE AGREEMENT AGREEMENT dated as of the 14th day of November, 1997 between Thermo Electron Corporation, a Delaware corporation ("Seller"), and Thermo Vision Corporation, a Delaware corporation (the "Buyer"). 1. Applicability From time to time Buyer and Seller may enter into transactions in which Seller agrees to transfer to Buyer certain securities and/or financial instruments ("Securities") against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Securities on demand, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a "Transaction" and shall be governed by this Agreement, unless otherwise agreed in writing. 2. Definitions (a) "Act of Insolvency", with respect to either party (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or such party seeking the appointment of a receiver, trustee, custodian or similar official for such party or any substantial part of its property; or (ii) the commencement of any such case or proceeding against such party, or another seeking such an appointment, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment or the entry of an order having a similar effect, or (C) is not dismissed within 15 days; or (iii) the making by a party of a general assignment for the benefit of creditors; or (iv) the admission in writing by a party of such party's inability to pay such party's debts as they become due; (b) "Additional Purchased Securities", Securities provided by Seller to Buyer pursuant to Paragraph 4(a) hereof; (c) "Income", with respect to any Security at any time, any principal thereof then payable and all interest, dividends or other distributions thereon; (d) "Market Value", with respect to any Securities as of any date, the price for such Securities on such date obtained from a generally recognized source agreed to by the parties or the most recent closing bid quotation from such a source, plus accrued Income to the extent not included therein (other than any Income transferred to Seller pursuant to Paragraph 6 hereof) as PAGE of such date (unless contrary to market practice for such Securities); (e) "Other Buyers", third parties that have entered into an agreement with Seller that is substantially similar to this Agreement; (f) "Pricing Rate", a rate equal to the Commercial Paper Composite rate for 30-day maturities provided by Merrill Lynch, Pierce, Fenner & Smith Incorporated (or, if such rate is not available, a substantially equivalent rate agreed to by Buyer and Seller) plus 25 basis points, which rate shall be adjusted on the first business day of each fiscal quarter and shall be in effect for the entirety such fiscal quarter; (g) "Purchase Price", the price at which Purchased Securities are transferred by Seller to Buyer; (h) "Purchased Securities", the Securities transferred by Seller to Buyer in a Transaction hereunder, and any Securities substituted therefor in accordance with Paragraph 9 hereof. The term "Purchased Securities" with respect to any Transaction at any time also shall include Additional Purchase Securities transferred pursuant to Paragraph 4(a) and shall exclude Securities returned pursuant to Paragraph 4(b); (i) "Repurchase Collateral Account", a book account maintained by Seller containing, among other Securities, the Purchased Securities; and (j) "Repurchase Price", for any Purchased Security, an amount equal to the Purchase Price paid by Buyer to Seller for such Purchased Security. 3. Transactions (a) A Transaction may be initiated by Buyer upon the transfer of the Purchase Price to Seller's account. Upon such transfer, Seller shall transfer to Buyer Purchased Securities having a Market Value equal to 103% of the Purchase Price. (b) Purchased Securities shall be held in custody for Buyer by Seller in the Repurchase Collateral Account. Seller shall indicate on its books for such account Buyer's ownership of the Purchased Securities. Upon reasonable request from Buyer, Seller shall provide Buyer with a complete list of Purchased Securities owned by Buyer. (c) Upon demand by Buyer or Seller, Seller shall repurchase from Buyer, and Buyer shall sell to Seller, for the Repurchase Price all or any part of the Purchased Securities then owned by Buyer. 4. Margin Maintenance 2PAGE (a) If at any time the aggregate Market Value of all Purchased Securities then owned by Buyer is less than 103% of the aggregate Repurchase Price for such Purchased Securities, then Seller shall transfer to Buyer additional Securities ("Additional Purchased Securities"), so that the aggregate Market Value of such Purchased Securities, including any such Additional Purchased Securities, will thereupon equal or exceed 103% of such aggregate Repurchase Price. (b) If at any time the aggregate Market Value of all Purchased Securities then owned by Buyer exceeds 103% of the aggregate Repurchase Price for such Purchased Securities, then Seller may transfer Purchased Securities to Seller, so that the aggregate Market Value of such Purchased Securities will thereupon not exceed 103% of such aggregate Repurchase Price. 5. Interest Payments If during any fiscal month Buyer owned Purchased Securities, then on the first day of the next following fiscal month Seller shall pay to Buyer an amount equal to the sum of the aggregate Repurchase Prices of the Purchased Securities owned by Buyer at the close of each day during the preceding fiscal month divided by the number of days in such month and the product multiplied by the Pricing Rate times the number of days in such month divided by 360. 6. Income Payments and Voting Rights Where a particular Transaction's term extends over an Income payment date on the Purchased Securities subject to that Transaction, Buyer shall, on the date such Income is payable, transfer to Seller an amount equal to such Income payment or payments with respect to any Purchased Securities subject to such Transaction. Seller shall retain all voting rights with respect to Purchased Securities sold to Buyer under this Agreement. 7. Security Interest Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, Seller shall be deemed to have pledged to Buyer as security for the performance by Seller of its obligations under each such Transaction and this Agreement, and shall be deemed to have granted to Buyer a security interest in, all of the Purchased Securities with respect to all Transactions hereunder and all proceeds thereof. 8. Payment and Transfer Unless otherwise mutually agreed, all transfers of funds hereunder shall be in immediately available funds. As used herein with respect to Securities, "transfer" is intended to have 3PAGE the same meaning as when used in Section 8-313 of the Massachusetts Uniform Commercial Code or, where applicable, in any federal regulation governing transfers of the Securities. 9. Substitution Buyer hereby grants Seller the authority to manage, in Seller's sole discretion, the Purchased Securities held in custody for Buyer by Seller in the Repurchase Collateral Account. Buyer expressly agrees that Seller may (i) substitute other Securities for any Purchased Securities and (ii) commingle Purchased Securities with other Securities held in the Repurchase Collateral Account. Substitutions shall be made by transfer to Buyer of such other Securities and transfer to Seller of the Purchased Securities for which substitution is being made. After substitution, the substituted Securities shall be deemed to be Purchased Securities. Securities which are substituted for Purchased Securities shall have a Market Value at the time of substitution equal to or greater than the Market Value of the Purchase Securities for which such Securities were substituted. 10. Representations Each of Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and deliver this Agreement, to enter into the Transactions contemplated hereunder and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance, (ii) the person signing this Agreement on its behalf is duly authorized to do so on its behalf, (iii) it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such authorizations are in full force and effect and (iv) the execution, delivery and performance of this Agreement and the Transactions hereunder will not violate any law, ordinance, charter, by-law or rule applicable to it or any agreement by which it is bound or by which any of its assets are affected. On the date for any Transaction Buyer and Seller shall each be deemed to repeat all the foregoing representations made by it. 11. Events of Default In the event that (i) Seller fails to repurchase or Buyer fails to transfer Purchased Securities upon demand for repurchase from either Buyer or Seller, (ii) Seller or Buyer fails, after one business day's notice, to comply with Paragraph 4 hereof, (iii) Buyer fails to make payment to Seller pursuant to Paragraph 6 hereof, (iv) Seller fails to comply with Paragraph 5 hereof, (v) an Act of Insolvency occurs with respect to Seller or Buyer, (vi) any representation made by Seller or Buyer shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated, or (vii) Seller or Buyer shall admit to the other its inability to, or its 4PAGE intention not to, perform any of its obligations hereunder (each an "Event of Default"): (a) At the option of the nondefaulting party, exercised by written notice to the defaulting party (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of any Act of Insolvency), Seller shall become obligated to repurchase, and Buyer shall become obligated to sell, all Purchased Securities then owned by Buyer for the Repurchase Price of such Purchased Securities. (b) If Seller is the defaulting party and Buyer exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Paragraph, (i) the Seller's obligations hereunder to repurchase all Purchased Securities in such Transactions shall thereupon become immediately due and payable, (ii) all Income paid after such exercise or deemed exercise shall be retained by Buyer and applied to the aggregate unpaid Repurchase Prices owed by Seller, and (iii) Seller shall immediately deliver to Buyer any Purchased Securities subject to such Transactions then in Seller's possession. (c) In all Transactions in which Buyer is the defaulting party, upon tender by Seller of payment of the aggregate Repurchase Prices for all such Transactions, Buyer's right, title and interest in all Purchased Securities subject to such Transactions shall be deemed transferred to Seller, and Buyer shall deliver all such Purchased Securities to Seller. (d) After one business day's notice to the defaulting party (which notice need not be given if an Act of Insolvency shall have occurred, and which may be the notice given under subparagraph (a) of this Paragraph or the notice referred to in clause (ii) of the first sentence of this Paragraph), the nondefaulting party may: (i) as to Transactions in which Seller is the defaulting party, (A) immediately sell, in a recognized market at such price or prices as Buyer may reasonably deem satisfactory, any or all Purchased Securities subject to such Transactions and apply the proceeds thereof to the aggregate unpaid Repurchase Prices and any other amounts owing by Seller hereunder or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Securities, to give Seller credit for such Purchased Securities in an amount equal to the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source, against the aggregate unpaid Repurchase Prices and any other amounts owing by Seller hereunder; and (ii) as to Transactions in which Buyer is the defaulting party, (A) purchase securities ("Replacement Securities") of the same class and amount as any Purchased Securities that are not delivered by Buyer to Seller as required 5PAGE hereunder or (B) in its sole discretion elect, in lieu of purchasing Replacement Securities, to be deemed to have purchased Replacement Securities at the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source. (e) As to Transactions in which Buyer is the defaulting party , Buyer shall be liable to Seller (i) with respect to Purchased Securities (other than Additional Purchased Securities), for any excess of the price paid (or deemed paid) by Seller for Replacement Securities therefor over the Repurchase Price for such Purchased Securities and (ii) with respect to Additional Purchased Securities, for the price paid (or deemed paid) by Seller for the Replacement Securities therefor. (f) The defaulting party shall be liable to the nondefaulting party for the amount of all reasonable legal or other expenses incurred by the nondefaulting party in connection with or as a consequence of an Event of Default. (g) The nondefaulting party shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement or applicable law. 12. Single Agreement Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted. 13. Entire Agreement; Severability This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be 6PAGE enforceable notwithstanding the unenforceability of any such other provision or agreement. 14. Non-assignability; Termination The rights and obligations of the parties under this Agreement and under any Transactions shall not be assigned by either party without the prior written consent of the other party. Subject to the foregoing, this Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. This Agreement may be canceled by either party upon giving written notice to the other, except that this Agreement shall, notwithstanding such notice, remain applicable to any Transactions then outstanding. 15. Governing Law This Agreement shall be governed by the laws of the Commonwealth of Massachusetts without giving effect to the conflict of law principles thereof. 16. No Waivers, Etc. No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. 19. Intent (a) The parties recognize that each Transaction is a "repurchase agreement" as that term is defined in Section 101 of Title 11 of the United States Code, as amended (except insofar as the type of Securities subject to such Transaction or the term of such Transaction would render such definition inapplicable), and a "securities contract" as that term is defined in Section 741 of Title 11 of the United States Code, as amended. (b) It is understood that either party's right to liquidate Securities delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Paragraph 11 hereof, is a contractual right to liquidate such Transaction as described in Sections 555 and 559 of Title 11 of the United States Code, as amended. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. 7PAGE THERMO ELECTRON CORPORATION THERMO VISION CORPORATION By: /s/John N. Hatsopoulos ------------------------------------------------ By: /s/Kristine S. Langdon ------------------------------------------------ John N. Hatsopoulos Kristine S. Langdon Title: President Title: President EX-10.6 7 Exhibit 10.6 MASTER GUARANTEE REIMBURSEMENT AND LOAN AGREEMENT This AGREEMENT is entered into as of the 24th day of November, 1997 by and among Thermo Instrument Systems Inc. (the "Parent") and those of its subsidiaries that join in this Agreement by executing the signature page hereto (the "Majority Owned Subsidiaries"). WITNESSETH: WHEREAS, the Majority Owned Subsidiaries wholly-owned subsidiaries wish to enter into various financial transactions, such as convertible or nonconvertible debt, loans, and equity offerings, and other contractual arrangements with third parties (the "Underlying Obligations") and may provide credit support to, on behalf of or for the benefit of, other subsidiaries of the Parent ("Credit Support Obligations"); WHEREAS, the Majority Owned Subsidiaries and the Parent acknowledge that the Majority Owned Subsidiaries and their wholly-owned subsidiaries may be unable to enter into many kinds of Underlying Obligations without a guarantee of their performance thereunder from the Parent (a "Parent Guarantee") or without obtaining Credit Support Obligations from other Majority Owned Subsidiaries; WHEREAS, the Majority Owned Subsidiaries and their wholly-owned subsidiaries may borrow funds from the Parent, and the Parent may loan funds or provide credit to the Majority Owned Subsidiaries and their wholly-owned subsidiaries, on a short-term and unsecured basis; and WHEREAS, the Parent is willing to consider continuing to issue Parent Guarantees and providing credit, and the Majority Owned Subsidiaries are willing to consider continuing to provide Credit Support Obligations and to borrow funds, on the terms and conditions set forth below; NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party hereto, the parties agree as follows: 1. If the Parent provides a Parent Guarantee of an Underlying Obligation, and the beneficiary(ies) of the Parent Guarantee enforce the Parent Guarantee, or the Parent performs under the Parent Guarantee for any other reason, then the Majority Owned Subsidiary that is obligated, either directly or indirectly through a wholly-owned subsidiary, under such PAGE Underlying Obligation shall indemnify and save harmless the Parent from any liability, cost, expense or damage (including reasonable attorneys' fees) suffered by the Parent as a result of the Parent Guarantee. If a Majority Owned Subsidiary or a wholly-owned subsidiary thereof provides a Credit Support Obligation for any subsidiary of the Parent, other than a subsidiary of such Majority Owned Subsidiary, and the beneficiary(ies) of the Credit Support Obligation enforce the Credit Support Obligation, or the Majority Owned Subsidiary or its wholly-owned subsidiary performs under the Credit Support Obligation for any other reason, then the Parent shall indemnify and save harmless the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, from any liability, cost, expense or damage (including reasonable attorneys' fees) suffered by the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, as a result of the Credit Support Obligation. Without limiting the foregoing, Credit Support Obligations include the deposit of funds by a Majority Owned Subsidiary or a wholly-owned subsidiary thereof in a credit arrangement with a banking facility whereby such funds are available to the banking facility as collateral for overdraft obligations of other Majority Owned Subsidiaries or their subsidiaries also participating in the credit arrangement with such banking facility. 2. For purposes of this Agreement, the term "guarantee" shall include not only a formal guarantee of an obligation, but also any other arrangement where the Parent is liable for the obligations of a Majority Owned Subsidiary or its wholly-owned subsidiarie s. Such other arrangements include (a) representations, warranties and/or covenants or other obligations joined in by the Parent, whether on a joint or joint and several basis, for the benefit of the Majority Owned Subsidiary or its wholly-owned subsidiarie s and (b) responsibility of the Parent by operation of law for the acts and omissions of the Majority Owned Subsidiary or its wholly-owned subsidiaries, including controlling person liability under securities and other laws. 3. Promptly after the Parent receives notice that a beneficiary of a Parent Guarantee is seeking to enforce such Parent Guarantee, the Parent shall notify the Majority Owned Subsidiary(s) obligated, either directly or indirectly through a wholly-owned subsidiary, under the relevant Underlying Obligation. Such Majority Owned Subsidiary(s) or wholly-owned subsidiary thereof, as applicable, shall have the right, at its own expense, to contest the claim of such beneficiary. If a Majority Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, is contesting the claim of such beneficiary, the Parent will not perform under the relevant Parent Guarantee unless and until, in the Parent's reasonable judgment, the Parent is obligated under the terms of such Parent Guarantee to perform. Subject to the PAGE foregoing, any dispute between a Majority Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, and a beneficiary of a Parent Guarantee shall not affect such Majority Owned Subsidiary's obligation to promptly indemnify the Parent hereunder. Promptly after a Majority Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, receives notice that a beneficiary of a Credit Support Obligation is seeking to enforce such Credit Support Obligation, the Majority Owned Subsidiary shall notify the Parent. The Parent shall have the right, at its own expense, to contest the claim of such beneficiary . If the Parent or the subsidiary of the Parent on whose behalf the Credit Support Obligation is given is contesting the claim of such beneficiary, the Majority Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, will not perform under the relevant Credit Support Obligation unless and until, in the Majority Owned Subsidiary's reasonable judgment, the Majority Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, is obligated under the terms of such Credit Support Obligation to perform. Subject to the foregoing, any dispute between the Parent or the subsidiary of the Parent on whose behalf the Credit Support Obligation was given, on the one hand, and a beneficiary of a Credit Support Obligation, on the other, shall not affect the Parent's obligation to promptly indemnify the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, hereunder. 4. Upon the request of a Majority Owned Subsidiary, the Parent may make loans and advances to the Majority Owned Subsidiary or its wholly-owned subsidiaries on a short-term, revolving credit basis, from time to time in such amounts as mutually determined by the Parent and the Majority Owned Subsidiary. The aggregate principal amount of such loans and advances shall be reflected on the books and records of the Majority Owned Subsidiary (or wholly-owned subsidiary, as applicable) and the Parent. All such loans and advances shall be on an unsecured basis unless specifically provided otherwise in loan documents executed at that time. The Majority Owned Subsidiary or its wholly-owned subsidiarie s, as applicable, shall pay interest on the aggregate unpaid principal amount of such loans from time to time outstanding at a rate ("Interest Rate") equal to the rate of the Commercial Paper Composite Rate for 90-day maturities as reported by Merrill Lynch Capital Markets, as an average of the last five business days of such Majority Owned Subsidiary's latest fiscal quarter then ended, plus twenty-five (25) basis points. The Interest Rate shall be adjusted on the first business day of each fiscal quarter of such Majority Owned Subsidiary pursuant to the Interest Rate formula contained in the preceding sentence and shall be in effect for the entirety of such fiscal quarter. Interest shall be computed on a 360-day basis. The aggregate principal amount outstanding and accrued interest thereon shall be payable on PAGE demand. The principal and accrued interest may be paid by the Majority Owned Subsidiaries or their wholly-owned subsidiaries, as applicable, at any time or from time to time, in whole or in part, without premium or penalty. All payments shall be applied first to accrued interest and then to principal. Principal and interest shall be payable in lawful money of the United States of America, in immediately available funds, at the principal office of the Parent or at such other place as the Parent may designate from time to time in writing to the Majority Owned Subsidiary. The unpaid principal amount of any such borrowings, and accrued interest thereon, shall become immediately due and payable, without demand, upon the failure of the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, to pay its debts as they become due, the insolvency of the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable,the filing by or against the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, of any petition under the U.S. Bankruptcy Code (or the filing of any similar petition under the insolvency law of any jurisdiction), or the making by the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, of an assignment or trust mortgage for the benefit of creditors or the appointment of a receiver, custodian or similar agent with respect to, or the taking by any such person of possession of, any property of the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable . In case any payments of principal and interest shall not be paid when due, the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, further promises to pay all cost of collection, including reasonable attorneys' fees. 5. All payments required to be made by a Majority Owned Subsidiary or its wholly-owned subsidiaries, as applicable, shall be made within two days after receipt of notice from the Parent. All payments required to be made by the Parent shall be made within two days after receipt of notice from the Majority Owned Subsidiary. 6. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts applicable to contracts made and performed therein. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date first above written. THERMO INSTRUMENT SYSTEMS INC. PAGE By: /s/Earl R. Lewis ------------------------------ Title: President THERMO VISION CORPORATION By: /s/Kristine Stotz Langdon ------------------------------ Title: President EX-10.8 8 EXHIBIT 10.8 CID SUPPLY AGREEMENT THIS CID SUPPLY AGREEMENT, effective as of the 15th day of December, 1997 (the "Effective Date"), is between THERMO VISION CORPORATION, a Delaware corporation having offices at 8E Forge Parkway, Franklin, Massachusetts 02038, Telecopy No. 508-553-1742 ("Thermo Vision") and THERMO OPTEK CORPORATION, a Delaware corporation having offices at 8E Forge Parkway, Franklin, Massachusetts 02038, Telecopy No. 508-541-0140 ("Thermo Optek") regarding the supply by Thermo Vision of certain products to be purchased by Thermo Optek and its affiliates. NOW, THEREFORE, in consideration of the mutual promises, terms and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Thermo Vision and Thermo Optek (the "Parties") do hereby agree as follows: For the purposes of this Agreement, an "Affiliate" of a Party means an individual or business entity controlling, controlled by or under common control with such Party, with control meaning a 50% or more ownership interest. 1. Thermo Vision's Supply of Products. (a) Thermo Vision hereby agrees to sell the Products to Thermo Optek and its Affiliates, in accordance with the terms and conditions of this Agreement. Subject to Paragraph 1(g)(ii) hereof, Thermo Vision agrees not to sell the Products to any other party which manufactures optical spectrometers of the types manufactured by Thermo Optek. "Products" means all charge injection devices ("CID") sensors manufactured by or on behalf of Thermo Vision for: (i)optical spectrometers, including without limitation ICP, ICP-MS, AA and Arc-Spark; or (ii)raman spectrometers and other analytical instruments, if after the Effective Date but during the term of this Agreement Thermo Vision and Thermo Optek (A) enter into a research, development and supply agreement with respect to raman spectrometers or other analytical instruments; and (B) agree on pricing for such raman spectrometers or other analytical instruments. (b) The Products shall also be deemed to include any modifications or improvements to the CID sensors described above which Thermo Vision or asubsidiary of Thermo Vision may develop or manufacture, or cause to be developed or manufactured, during the term of this Agreement, provided, however, that all such PAGE modifications and improvements shall have been approved by Thermo Optek prior to inclusion in the CID sensors in order to insure compatibility with Thermo Optek applications. (c) As soon as practicable after the Effective Date, Thermo Optek shall provide to Thermo Vision a non-binding forecast for the next 12 calendar months of the anticipated requirements of Thermo Optek and its Affiliates for the Products and indicating the likely delivery dates to be requested. Thermo Optek shall update this forecast each calendar quarter on a rolling basis. (d) Thermo Optek and its Affiliates shall thereafter from time to time place firm orders with Thermo Vision at least 6 months before the requested delivery date by the transmittal to Thermo Vision of written orders on Thermo Optek's regular purchase order forms, which shall be deemed accepted upon Thermo Vision's written acceptance thereof. Such purchase orders shall identify the Products ordered, the quantities ordered, requested delivery date(s) and any export information required to enable Thermo Vision to fill the order. (e) Unless Thermo Optek or its Affiliate requests otherwise, all Products ordered shall be packed for shipment and storage in accordance with Thermo Vision's standard commercial practices. It is the obligation of Thermo Optek or such Affiliate to notify Thermo Vision and obtain Thermo Vision's consent to any special packaging requirements (which shall be at the expense of Thermo Optek or such Affiliate). The terms and conditions of this Paragraph 1(e) shall be reviewed by the Parties on an annual basis and are subject to change based on the mutual agreement of the Parties. (f) In the event of any discrepancy between any purchase order and this Agreement, the terms of this Agreement shall govern. (g) During the term of this Agreement, Thermo Optek shall purchase all of its requirements of Products from Thermo Vision, and Thermo Optek shall cause all of its Affiliates to purchase all of their requirements of Products from Thermo Vision; provided, however that: (i) Thermo Optek and its Affiliates shall have the right to make a Product themselves (using their own or third-party technology) or purchase a Product from a third party, if: (A) Thermo Vision does not accept a firm order placed by Thermo Optek or such Affiliate for such Product with a requested delivery date at least 6 months after the date on which Thermo Optek or such Affiliate placed such order; or (B) such Product previously delivered by Thermo Vision was repeatedly found not to conform to the agreed-upon specifications for such Product,or Thermo Vision repeatedly and materially failed to deliver such Product on or before the requested delivery dates (unless such failure is due to causes beyond Thermo Vision's control) and PAGE (ii) Thermo Vision shall have the right to sell a Product to a third party for use in such third party's optical spectrometers, raman spectrometers or other analytical instruments (the "Third Party Instruments") if: (A) as of the Effective Date hereof, Thermo Optek (1) is not using such Product in its optical spectrometers, raman spectrometers or other analytical instruments, respectively, which are similar to the Third Party Instruments, or (2) does not offer optical spectrometers, raman spectrometers or other analytical instruments, respectively, which are similar to the Third Party Instruments, (B) prior to the execution by Thermo Vision of an agreement to sell such Product to such third party (the "Third Party Agreement"), Thermo Vision provides written notice to Thermo Optek setting forth the material terms and conditions of the Third Party Agreement, including without limitation, the price per Product, the quantity of Product to be sold and the term of the Third Party Agreement (the "Third Party Notice") and (C) within 30 days after receipt by Thermo Optek of the Third Party Notice, Thermo Vision has not received from Thermo Optek Thermo Optek's written agreement to purchase such Product from Thermo Vision for use in Thermo Optek's optical spectrometers, raman spectrometers or other analytical instruments, as the case may be, on substantially the same terms as those contained in the Third Party Agreement. By way of illustration and assuming all other conditions set forth in Paragraph 1(g)(ii) are satisfied, Thermo Vision shall be permitted to sell a Product to a third party for use in such third party's raman spectrometers if Thermo Optek purchases such Product from Thermo Vision solely for use in Thermo Optek's optical spectrometers and other analytical instruments. 2. Compensation for Supply. (a) For each Product purchased by Thermo Optek or one of its Affiliates hereunder, Thermo Vision shall be paid the price indicated in Schedule A hereto. The price of each such Product shall be reviewed by the Parties on an annual basis and is subject to adjustment based on the mutual agreement of the Parties. With respect to modifications or improvements to CID sensors which are included in the definition of Products in accordance with Paragraph 1(b) above, Thermo Vision shall establish a price for each such new Product which is reasonable in light of the manufacturing cost and performance of such new Product relative to the most closely related existing Product. For each Product purchased by Affiliates of Thermo Optek hereunder, such Affiliates and Thermo Optek shall be jointly and severally liable for the payment of the price of such Product to Thermo Vision. (b) Each payment for Products shall be made by check in good funds to the order of Thermo Vision or its Affiliates, and shall be delivered to Thermo Visionwithin thirty (30) days after the receipt by Thermo Optek or its respective Affiliate of Thermo PAGE Vision's invoice for such payment. 3.Delivery and Warehousing. (a) All deliveries of Products shall be ex works the place of manufacture of such Products. It shall be the responsibility of Thermo Optek or its respective Affiliate to arrange and pay for all transportation, insurance and other charges incurred after Thermo Vision's tender of the Products at such location. (b) Upon agreement of the Parties and payment of any of Thermo Vision's expenses therefor, the Products may be delivered to Thermo Vision's warehouse facility for storage. Thermo Optek shall thereupon pay such storage and handling fees as are within the customary industry practice. (c) The terms and conditions of Paragraphs 3(a) and (b) shall be reviewed by the Parties on an annual basis and are subject to change based on the mutual agreement of the Parties. (d) Thermo Vision shall be responsible for preparing invoices and shipping documents for Thermo Optek or its respective Affiliate in respect of Products purchased hereunder; provided, however, that Thermo Vision shall submit its invoice for Products no earlier than the date on which Thermo Vision (i) makes such Products available to a common carrier for pick up at such Product's place of manufacture or (ii) delivers such Products to Thermo Vision's warehouse facility for storage pursuant to the agreement of the Parties. (e) Thermo Vision agrees to use reasonable efforts to meet the requested delivery dates set forth in accepted purchase orders, but does not warrant that any specified delivery date will be met. Thermo Vision assumes no responsibility or liability for any loss or damage incurred by Thermo Optek or its Affiliates by reason of a delay in a requested delivery date, inability to ship or any of the reasons set forth in Paragraph 5 below. 4. Passage of Title. Beneficial ownership of, title and risk of loss to the Products shall pass to Thermo Optek or its Affiliates, as the case may be, when such Products are picked up by a common carrier at the Product's place of manufacture or delivered to Thermo Vision's warehouse facility for storage pursuant to the agreement of the Parties. The terms and conditions of this Paragraph 4 shall be reviewed by the Parties on an annual basis and are subject to change based on the mutual agreement of the Parties. 5. Force Majeure. Except for obligations of payment, each Party shall be excused for any delay or failure to fulfill any of their respective obligations under thisAgreement if such failure or delay is caused by any circumstances or event beyond the reasonable control of the Party, including without limitation any act of God, accident, explosion, fire, storm, earthquake, flood, PAGE drought, peril of the sea, riot, embargo, war or foreign, federal, state, provincial or municipal order of general application, seizure, requisition or allocation, any failure or delay of transportation, shortage of or inability to obtain supplies, equipment, fuel or labor. 6. Product Warranty and Limitations on Liability. (a) Thermo Vision warrants that upon delivery the Products will conform to the specifications which the Parties agree to in writing from time to time (the "Specifications"); provided, however, that Thermo Vision shall not be liable for any losses of Thermo Optek that arise due to misuse or mishandling of the Products, as reasonably determined by Thermo Vision. Thermo Vision's sole obligation with respect to claims of non-conformance made by Thermo Optek or its Affiliates shall be, at Thermo Vision's sole discretion, to either: (i) remedy the non-conformance by repair or replacement; or (ii) refund of the price paid for the Products involved. Any claims by Thermo Optek or its Affiliates under this warranty with respect to Products must be made to Thermo Vision in writing within 6 months after Thermo Vision tenders such Products or delivers such Products to Thermo Vision's warehouse facility for storage pursuant to the agreement of the Parties, as the case may be. The terms and conditions of this Paragraphs 6(a) shall be reviewed by the Parties on an annual basis and are subject to change based on the mutual agreement of the Parties. (b) EXCEPT AS STATED ABOVE, THERMO VISION DISCLAIMS ALL WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE PRODUCTS, INCLUDING ALL WARRANTIES OF TITLE AND IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. (c) EXCEPT FOR PRODUCT LIABILITY CLAIMS BROUGHT BY UNAFFILIATED THIRD PARTIES WHICH ARISE FROM THE PRODUCTS NOT CONFORMING TO THE SPECIFICATIONS, THERMO VISION'S LIABILITY FOR DAMAGES TO THERMO OPTEK OR ITS AFFILIATES FOR ANY CAUSE WHATSOEVER, REGARDLESS OF THE FORM OF ANY CLAIM OR ACTION, SHALL NOT EXCEED THE PRICE PAID BY THERMO OPTEK OR ITS AFFILIATE FOR THE PRODUCT INVOLVED. (d) THERMO VISION SHALL IN NO EVENT BE LIABLE TO THERMO OPTEK OR ANY THIRD PARTY FOR ANY DAMAGES RESULTING FROM LOSS OF PROFITS, OR FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES ARISING OUT OF, OR IN CONNECTION WITH, THE USE, MANUFACTURE OR SALE OF THE PRODUCTS. 7. Confidentiality. Each Party acknowledges and agrees that in the course of its performance of this Agreement confidential technology, trade secrets or other proprietary information relating to the development, manufacture and sale of the Products (hereinafter "Confidential Information") may be made known or made available to the other party. Accordingly, during and after the term of this Agreement, each Party hereby represents and PAGE agrees to the following: (a) that each Party (the "disclosing Party") has a proprietary interest in its own Confidential Information. During and after the term of this Agreement, all disclosures by the disclosing Party of its Confidential Information to the other Party (the "receiving Party"), its agents and employees shall be held in strict confidence by the receiving Party, which shall disclose such Confidential Information only to those of its agents and employees to whom it is necessary in order to properly carry out their duties as limited by the terms and conditions hereof. During and after the term of this Agreement, the receiving Party shall not use the Confidential Information of the disclosing Party except for the purposes of the receiving Party exercising its rights and carrying out its duties hereunder. The provision of this Paragraph 7 shall also apply to any sublicensees, consultants or subcontractors during and after the term of this Agreement, that the receiving Party may sublicense or engage in connection with this Agreement. Each receiving Party shall take necessary steps to ensure that its employees respect the terms of this Paragraph 7. (b) that notwithstanding anything contained in this Agreement to the contrary, the receiving Party shall not be liable for a disclosure of the disclosing Party's Confidential Information if the information so disclosed: (i) was in the public domain at the time it was disclosed by the disclosing Party to the receiving Party, or becomes part of the public domain thereafter through no fault of the receiving Party; or (ii) was known to or contained in the records of the receiving Party at the time of disclosure by the disclosing Party to the receiving Party and can be so demonstrated; or (iii) becomes known to the receiving Party from a source other than the disclosing Party without breach of such source's confidentiality obligation, if any, to the disclosing Party and can be so demonstrated; or (iv) was required to be disclosed under legal or administrative process, provided that the receiving Party has given the disclosing Party no less than ten (10) days prior written notice of the receiving Party's intention to make a disclosure pursuant to this Paragraph 7(b)(iv). 8. Intellectual Property Warranty; Indemnification (a) With respect to Paragraph 1(a)(ii) above, Thermo Optek represents and warrants to Thermo Vision that if CID sensors for raman spectrometers are added to the definition of Products, Thermo Optek shall have the full right to use under written PAGE agreements, all patents, copyrights, trademarks, trade secrets and other intellectual property rights (the "Intellectual Property Rights") which will be required in order to permit Thermo Vision to manufacture such Products. Upon adding such sensors to the definition of Products, Thermo Optek shall grant Thermo Vision and its Affiliates and subcontractors a worldwide, exclusive, royalty-free license to use such Intellectual Property Rights during the term of this Agreement for the sole purpose of manufacturing such Products for sale to Thermo Optek and/or its Affiliates pursuant to this Agreement. (b) Thermo Vision represents and warrants to Thermo Optek that it owns, or has the full right to use under written agreements, all Intellectual Property Rights which will be used or practiced in order for Thermo Vision to manufacture and sell the Products described in Paragraph 1(a)(i) above. Thermo Vision has no knowledge of any infringement of any Intellectual Property Right of any third party which will arise out of or be incident to Thermo Vision's use of such Intellectual Property Rights to manufacture and sell such Products. (c) In the event of any claim, charge, suit or proceeding by any third party against either Party alleging infringement or violation of any Intellectual Property Rights pursuant to this Agreement, the other Party shall cooperate fully in the defense of any such claim, charge, suit or proceeding. In the event that the actions of one Party shall be determined to have solely resulted in such allegation(s), that Party shall indemnify and hold the other Party harmless from and against any loss arising out of such claim, charge, suit or proceeding, not to exceed the amounts paid by the other Party to the such third party. (d) Notwithstanding anything contained in this Paragraph 8 to the contrary, neither Party (the "indemnifying Party") shall have any obligation to the other Party (the "indemnified Party") hereunder with respect to an infringement claim which arises from: (i) any combination by the indemnified Party or any of its Affiliates of the Products with another product not supplied by the indemnifying Party, where such infringement would not have occurred but for such combination; (ii) the adaptation or modification of the Products not performed by the indemnifying Party, where such infringement would not have occurred but for such adaptation or modification; (iii) the misuse of the Products or the use of the Products in an application for which it was not designed, where such infringement would not have occurred but for such use or misuse; or (iv) a claim based on intellectual property rights owned by the indemnified Party or any of its Affiliates. 9. Termination. (a) The term of this Agreement shall commence on the date hereof and shall continue, unless sooner terminated as set forth below, until the tenth anniversary of the Effective Date. PAGE (b) In the event of breach of any provision of this Agreement, the breaching Party shall have thirty (30) days after written notice thereof by the non-breaching Party within which to cure such breach. In the event such breach has not been cured within such period of time, the non-breaching Party may on notice to the breaching Party terminate this Agreement. (c) Either Party may terminate this Agreement on notice to the other Party in the event the other Party suffers a business failure, including becoming the subject of a petition filed for relief under any bankruptcy or insolvency law, which is not dismissed within sixty (60) days of its filing; any general arrangement with its creditors; or any liquidation, termination or cessation of its business. 10. Effect of Termination. (a) Upon the sooner to occur of (i) expiration of this Agreement or (ii) six months after termination of this Agreement, Thermo Vision shall immediately terminate production of the Products described in Paragraph 1 above and each Party shall promptly terminate all use of any Confidential Information of the other Party. (b) Upon expiration or termination of this Agreement, as the case may be, each Party shall, at the request of the other Party, either promptly return to the other Party or dispose of all of the other Party's Confidential Information in any form whatsoever which it may have in its possession, custody or control (whether direct or indirect). (c) Upon expiration or termination of this Agreement, as the case may be, Thermo Optek shall, at the request of Thermo Vision, repurchase all or any portion of Thermo Vision's then existing finished goods inventory of the Products. All finished Products shall be purchased at the price then in effect for such Products. In the event that Thermo Optek fails to purchase all of such inventory pursuant hereto within fourteen (14) days after the expiration or termination of this Agreement, Thermo Vision shall have the right to sell or dispose of such inventory, in whatever manner it seems fit, without liability to Thermo Optek for any reason, including without limitation infringement of any intellectual property rights of Thermo Optek. (d) Upon expiration or termination of this Agreement, as the case may be, Thermo Optek and its Affiliates shall not be released from their obligations to pay any sums then owing to Thermo Vision and neither Party shall be released from theobligation to perform any other duty or to discharge any other liability that has been incurred prior thereto. Subject to the foregoing, neither Party shall by reason of the termination of this Agreement be liable to the other for compensation or damages on account of the loss of profits or sales, or expenditures, PAGE investments or commitments in connection therewith. 11. Miscellaneous. (a) No Party shall assign any or all of its rights or obligations hereunder to any third party without first obtaining the written consent thereto of the other Party, which consent shall not be unreasonably withheld or delayed; provided, however, that in the event of an assignment to an Affiliate of a Party or to a purchaser of all or substantially all of the assets or stock of a Party, through merger, consolidation, sale or otherwise, no such consent shall be required, if the assignee agrees to be bound by the terms hereof within five (5) days after such assignment. The terms and provisions of this Agreement shall inure to the benefit of, and be binding upon, the Parties and their respective successors and permitted assigns. Any reference to a Party shall be deemed to include the successors thereto and permitted assigns thereof. (b) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to principles of conflicts of law and without regard to the United Nations Convention on Contracts for the International Sale of Goods. (c) No amendment, modification, waiver, termination or discharge of any provision of this Agreement, nor consent to any departure by either Party therefrom, shall be effective unless the same shall be in writing specifically identifying this Agreement and the provision intended to be amended, modified, waived, terminated or discharged and signed by both Parties, and each such amendment, modification, waiver, termination or discharge shall be effective only in the specific instance and for the specific purpose for which given. No provision of this Agreement shall be varied, contradicted or explained by any oral agreements, course of dealing or performance or any other matter not set forth in an agreement in writing and signed by both Parties. (d) Nothing herein contained shall be deemed to create a joint venture, agency, partnership or employer-employee relationship between the Parties hereto. Neither Party shall have any power to enter into any contracts or commitments in the name of, or on behalf of, the other Party, or to bind the other Party in any respect whatsoever. (e) All notices, requests and other communications to a Party shall be in writing (including telecopy or similar electronic transmissions), shall be addressed toRobert J. Rosenthal on behalf of Thermo Optek or to Kristine S. Langdon on behalf of Thermo Vision, respectively, and shall be personally delivered or sent by telecopy or other electronic facsimile transmission during normal business hours or by registered mail or certified mail, return receipt requested, postage prepaid, in PAGE each case to the respective address and telecopy numbers specified above (or to such other individual, address or telecopy numbers as may be specified in writing to the other Party hereto from time to time). Any notice or communication given in conformity with this Paragraph 11 (e) shall be deemed to be effective when received by the addressee, if delivered by hand, telecopy or other electronic facsimile transmission, and three (3) days after mailing, if mailed. (f) This Agreement constitutes, on and as of the date hereof, the entire agreement of the Parties with respect to the subject matter hereof, and all prior or contemporaneous understandings or agreements, whether written or oral, between the Parties with respect to the subject matter hereof are hereby superseded in their entirety. (g) If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted by law: (i) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the Parties hereto as nearly as may be possible; and (ii) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction. To the extent permitted by applicable law, each Party hereby waives any provision of law that would render any provision hereof prohibited or unenforceable in any respect. (h) No failure on the part of either Party to exercise and no delay in exercising any right, power, remedy or privilege under this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege. (i) Notwithstanding anything else in this Agreement to the contrary, the Parties agree that Paragraphs 6, 7, 8, 10 and 11 shall survive the termination or expiration of this Agreement, as the case may be. (j) Each Party covenants and agrees that all of its activities under or pursuant to this Agreement shall comply in all material respects with all applicable laws, rules and regulations. (k) Headings used herein are for convenience only and shall not in any way affect the construction of, or be taken into consideration interpreting, this Agreement. (l) This Agreement may be executed in counterparts, each of PAGE which counterparts, when so executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute one and the same instrument. IN WITNESS WHEREOF the Parties hereto have executed this Agreement as an instrument under seal by their duly authorized officers. THERMO VISION CORPORATION THERMO OPTEK CORPORATION By: /s/ Kristine Stotz Langdon --------------------------------------- Name: Title: President By: /s/ Robert J. Rosenthal ---------------------------------------- Name: Title: President PAGE SCHEDULE A Prices ------ Product Price ------- ----- CID 38 $3,000 EX-10.9 9 EXHIBIT 10.9 Plan No. [ ] FORM OF THERMO VISION CORPORATION EQUITY INCENTIVE PLAN --------------------- 1. Purpose ------- The purpose of this Equity Incentive Plan (the "Plan") is to secure for Thermo Vision 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 one or more members of the Board, each of whom shall be deemed a "non-employee director" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act"). PAGE 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, $.01 par value per share, of the Company (the "Common Stock"), reserved and available for distribution under the Plan shall be 700,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan. 5. Eligibility ----------- Employees, officers and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan. 6. Types of Awards --------------- The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided however that the maximum number of shares permitted to be granted under any Award or combination of Awards to any participant during any one calendar year may not exceed 1% of the shares of Common Stock outstanding at the beginning of such calendar year. PAGE An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted. Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions: 6.1 Options ------- An option is an Award that entitles the holder on exercise thereof to purchase Common Stock at a specified exercise price. Options granted under the Plan may be either incentive stock options ("incentive stock options") that meet the requirements of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), or options that are not intended to meet the requirements of Section 422A ("non-statutory options"). 6.1.1 Option Price. The price at which Common Stock may ------------ be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less ---------------- than 85% of the then fair market 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 establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment. 6.1.5 Buyout Provision. The Board may at any time offer ---------------- to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made. 6.1.6 Special Rules for Incentive Stock Options. Each ------------------------------------------- provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422A of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock 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 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 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. PAGE 7. Purchase Price and Payment -------------------------- Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8. Loans and Supplemental Grants ----------------------------- The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven. In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, 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. PAGE (c) Deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation, will be waived and removed as to deferred stock Awards and performance Awards. Performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Awards or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board. 9.2 Definition of "Change in Control" --------------------------------- "Change in Control" means any one of the following events: (i) when, any Person is or becomes the beneficial owner (as defined in Section 13(d) of the Exchange Act and the Rules and Regulations thereunder), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations of the Exchange Act) of such Person, directly or indirectly, of 50% or more of the outstanding Common Stock of the Company or its parent corporation, Thermo Instrument Systems Inc. ("Thermo Instrument"), or the beneficial owner of 25% or more of the outstanding common stock of Thermo Electron Corporation ("Thermo Electron"), without the prior approval of the Prior Directors of the applicable issuer, (ii) the failure of the Prior Directors to constitute a majority of the Board of Directors of the Company, Thermo Instrument or Thermo Electron, as the case may be, at any time within two years following any Electoral Event, or (iii) any other event that the Prior Directors shall determine constitutes an effective change in the control of the Company, Thermo Instrument or Thermo Electron. As used in the preceding sentence, the following capitalized terms shall have the respective meanings set forth below: (a) "Person" shall include any natural person, any entity, any "affiliate" of any such natural person or entity as such term is defined in Rule 405 under the Securities Act of 1933 and any "group" (within the meaning of such term in Rule 13d-5 under the Exchange Act); (b) "Prior Directors" shall mean the persons sitting on the Company's, Thermo Instrument's or Thermo Electron's Board of Directors, as the case may be, immediately prior to any Electoral Event (or, if there has been no Electoral Event, those persons sitting on the applicable Board of Directors on the date of this Agreement) and any future director of the Company, Thermo Instrument or Thermo Electron who has been nominated or elected by a majority of the Prior Directors who are then members of the Board of Directors of the Company, Thermo Instrument or Thermo Electron, as the case may be; and (c) "Electoral Event" shall mean any contested election of Directors, or any tender or exchange offer for the PAGE Company's, Thermo Instrument's or Thermo Electron's Common Stock, not approved by the Prior Directors, by any Person other than the Company, Thermo Instrument, Thermo Electron or a majority-owned subsidiary of Thermo Electron. PAGE 10. General Provisions ------------------ 10.1 Documentation of Awards ----------------------- Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable. 10.2 Rights as a Stockholder ----------------------- Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares. 10.3 Conditions on Delivery of Stock ------------------------------- The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer. If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative. 10.4 Tax Withholding --------------- PAGE The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement. 10.5 Nontransferability of Awards ---------------------------- Except as may be authorized by the Board, in its sole discretion, 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 will or the laws of descent and distribution, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). The Board may, in its discretion, determine the extent to which Awards granted to a Participant shall be transferable, and such provisions permitting or acknowledging transfer shall be set forth in the written agreement evidencing the Award executed and delivered by or on behalf of the Company and the Participant. 10.6 Adjustments in the Event of Certain Transactions ------------------------------------------------ (a) In the event of a stock dividend, stock split or combination of shares, 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, recapitalizations or other change in the Company's capitalization, or other distribution with respect to common Stockholders other than normal cash dividends,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 PAGE 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 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 ------------------------- PAGE The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment, unless approved by the Stockholders, shall be effective if it would cause the Plan to fail to satisfy the requirements of the federal tax law or regulation relating to incentive stock options or the requirements of Rule 16b-3 (or any successor rule) of the Exchange Act. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent. EX-10.10 10 EXHIBIT 10.10 FORM OF THERMO VISION CORPORATION DEFERRED COMPENSATION PLAN FOR DIRECTORS ---------------------------------------- Section 1. Participation. Any director of Thermo Vision --------- ------------- Corporation (the "Company") may elect to have such percentage as he or she may specify of the fees otherwise payable to him or her deferred and paid to him or her as provided in this Plan. A director who is also an officer of the Company or its parent corporation, Thermo Electron Corporation, shall not be eligible to participate in this Plan. Each election shall be made by notice in writing delivered to the Clerk of the Company , in such form as the Clerk shall designate, and each election shall be applicable only with respect to fees earned subsequent to the date of the election for the period designated in the form . The term "participant" as used herein refers to any director who shall have made an election. No participant may defer the receipt of any fees to be earned after the later to occur of either (a) the date on which the participant shall retire from or otherwise cease to engage in his or her principal occupation or employment or (b) the date on which he or she shall cease to be a director of the Company, or such earlier date as the Board of Directors of the Company, with the participant's consent, may designate (the "deferral termination date"). In the event that the participant's deferral termination date is the date on which he or she ceases to engage in his or her principal occupation or employment, the participant or a personal representative shall advise the Company of that date by written notice delivered to the Clerk of the Company. Section 2. Establishment of Deferred Compensation --------- --------------------------------------------- Accounts. There shall be established for each participant an -------- account to be designated as that participant's deferred compensation account. Section 3. Allocations to Deferred Compensation --------- --------------------------------------------- Accounts. There shall be allocated to each participant's -------- deferred compensation account, as of the end of each quarter, an amount equal to his or her fees for that quarter which that participant shall have elected to have deferred pursuant to Section 1. Section 4. Stock Units and Stock Unit Accounts. All ---------- -------------------------------------- amounts allocated to a participant's deferred compensation account pursuant to Section 3 and Section 5 shall be converted, at the end of each quarter, into stock units by dividing the accumulated balance in the deferred compensation account as of the end of that quarter by the PAGE average last sale price per share of the Company's common stock as reported on in The Wall Street Journal, five business days up to and including the last business day of that quarter. The number of stock units, so determined, rounded to the nearest one-hundredth of a share, shall be credited to a separate stock unit account to be established for the participant, and the aggregate value thereof as of the last business day of that quarter shall be charged to the participant's deferred compensation account. No amounts credited to the participant's deferred compensation account pursuant to Section 5 subsequent to the close of the fiscal year in which occurs the participant's deferral termination date shall be converted into stock units. Any such amount shall be distributed in cash as provided in Section 8. A maximum number of 25,000 shares of the Company's common stock may be represented by stock units credited under this Plan, subject to proportionate adjustment in the event of any stock dividend, stock split or other capital change affecting the Company's common stock. Section 5. Cash Dividend Credits. Additional credits --------- ---------------------- shall be made to a participant's deferred compensation account, until all distributions shall have been made from the participant's stock unit account, in amounts equal to the cash dividends (or the fair market value of dividends paid in property other than dividends payable in common stock of the Company) which the participant would have received from time to time had he or she been the owner on the record dates for the payment of such dividends of the number of shares of the Company's common stock equal to the number of units in his or her stock unit account on those dates. Section 6. Stock Dividend Credits . Additional credits --------- ---------------------- shall be made to a participant's stock unit account, until all distributions shall have been made from the participant's stock unit account, of a number of units equal to the number of shares of the Company's common stock, rounded to the nearest one-hundredth share, which the participant would have received from time to time as stock dividends had he or she been the owner on the record dates for the payments of such stock dividends of the number of units of the Company's common stock equal to the number of units credited to his or her stock unit account on those dates. Section 7. Recapitalization . If, as a result of --------- ---------------- recapitalization of the Company (including a stock split), the Company's outstanding shares of common stock shall be changed into a greater or smaller number of shares, the number of units then credited to a participant's stock unit account shall be appropriately adjusted on the same basis. PAGE Section 8. Distribution of Stock and Cash After --------- --------------------------------------------- Participant's Deferral Termination Date. When a ------------- ------------------------------ participant's deferral termination date shall occur, the Company shall become obligated to make the distributions prescribed in the following paragraphs (a) and (b). (a) The Company shall distribute to the participant the number of shares of the common stock of the Company which shall equal the total number of units accumulated in his or her stock unit account as of the close of the fiscal year in which the participant's deferral termination date occurs. Such distribution of stock shall be made in ten annual installments, unless, at least six months prior to his or her deferral termination date, the participant shall have elected, by notice in writing filed with the Secretary of the Company, to have such distribution made in five annual installments. In either such case, the installments shall be of as nearly equal number of shares as practicable, adjusted to reflect any changes pursuant to Sections 6 and 7 in the number of units remaining in the participant's stock unit account. The first such installment shall be distributed within 60 days after the close of the fiscal year in which the participant's deferral termination date occurs. The remaining installments shall be distributed at annual intervals thereafter. Anything herein to the contrary notwithstanding, the Company shall have the option, if its Board of Directors shall by resolution so determine, in lieu of making distribution in ten or five annual installments as set forth above, with the participant's consent, to distribute stock or any remaining installments thereof in a single distribution at any time following the close of the fiscal year in which the participant's deferral termination date occurs. Distribution of stock made hereunder may be made from shares of common stock held in the treasury and/or from shares of authorized but previously unissued shares of common stock. All distributions under the plan shall be completed not later than December 31, 2025. (b) The Company shall distribute to the participant sums in cash equal to the balance credited to his or her deferred compensation account as of the close of the fiscal year in which his or her deferral termination date occurs plus such additional amounts as shall be credited thereto from time to time thereafter pursuant to Section 5. The cash distribution shall be made on the same dates as the annual distributions made pursuant to paragraph (a) above, and each cash distribution shall consist of the entire balance credited to the participant's deferred compensation account at the time of the annual distribution. If a participant's deferral termination date shall occur by reason of his or her death or if he or she shall PAGE die after his or her deferral termination date but prior to receipt of al l distributions of stock and cash provided for in this Section 8, all stock and cash remaining distributable hereunder shall be distributed to such beneficiary as the participant shall have designated in writing and filed with the Secretary of the Company or, in the absence of designation, to the participant's personal representative. Such distributions shall be made in the same manner and at the same intervals as they would have been made to the participant had he or she continued to live. Section 9. Participant's Rights Unsecured The right of --------- ------------------------------ any participant to receive distributions under Section 8 shall be an unsecured claim against the general assets of the Company. The Company may but shall not be obligated to acquire shares of its outstanding common stock from time to time in anticipation of its obligation to make such distributions, but no participant shall have any rights in or against any shares of stock so acquired by the Company. All such stock shall constitute general assets of the Company and may be disposed of by the Company at such time and for such purposes as it may deem appropriate. Section 10. Termination of the Plan. The Plan shall ---------- ------------------------- terminate and full distribution shall be made from all participants' deferred compensation accounts and stock unit accounts upon any change of control of the Company. Either of the following shall be deemed to be a change of control: (a) the occurrence, without the prior approval of the Board of Directors, of the acquisition, directly or indirectly, by any person of 50% or more of the outstanding common stock of either the Company or its parent corporation, Thermo Instrument Systems Inc. ("Thermo Instrument") , or the beneficial owner of 25% or more of the outstanding common stock of Thermo Electron Corporation ("Thermo Electron"), without the prior approval of the prior directors of the Company, Thermo Instrument , or Thermo Electron, as the case may be; (b) the failure of the prior directors to constitute a majority of the Board of Directors of the Company, Thermo Instrument or Thermo Electron, at any time within two years following any electoral event. As used in this sentence and the preceding sentence, person shall mean a natural person, an entity (together with an affiliate thereof, as defined in Rule 405 under the Securities Act of 1933) or a group, as defined in Rule 13d-5 under the Securities Exchange Act of 1934; prior directors shall mean the persons serving on the Board of Directors immediately prior to any electoral event; and electoral event shall mean any contested election of directors or any tender or exchange offer for common stock of the Company, Thermo Instrument or Thermo Electron by any person other than the Company, Thermo Instrument, Thermo Electron or a subsidiary of any of the foregoing companies. PAGE The Board of Directors at any time, at its discretion, may terminate the Plan. If the Board of Directors terminates the Plan after any person or group of persons shall have acquired or proposed to acquire control of the Company through the Board of Directors, Thermo Instrument or Thermo Electron, full and prompt distribution shall be made from all participants' deferred compensation accounts and stock unit accounts. Otherwise, distributions in respect of credits to participants' deferred compensation accounts and stock unit accounts as of the date of termination shall be made in the manner and at the time prescribed in Section 8. Section 11. Amendment of the Plan. The Board of ---------- ------------------------ Directors of the Company may amend the Plan at any time and from time to time, provided, however, that no amemendment -------- ------- affecting credits already made to any participant's deferred compensation account or stock unit account may be made without the consent of that participant or, if that participant has died, that participant's beneficiary. Section 12. Effective Date of the Plan. The Plan shall ---------- --------------------------- become effective commencing upon the date the U. S. Securities and Exchange Commission shall have declared effective the registration of shares of the Company's Common Stock in an underwritten public offering pursuant to the Securities Act of 1933, as amended. EX-10.11 11 Exhbit 10.11 FORM OF THERMO VISION CORPORATION INDEMNIFICATION AGREEMENT ------------------------- This Agreement, made and entered into this ** day of **, 1997, ("Agreement"), by and between Thermo Vision Corporation, a Delaware corporation (the "Company"), and *** ("Indemnitee"): WHEREAS, highly competent persons are becoming more reluctant to serve publicly-held corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to, and activities on behalf of, the corporation; WHEREAS, uncertainties relating to the continued availability of adequate directors and officers liability insurance ("D&O Insurance") and the uncertainties relating to indemnification have increased the difficulty of attracting and retaining such persons; WHEREAS, the Board of Directors of the Company (the "Board") has determined that the difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; WHEREAS, Indemnitee is willing to serve, continue to serve and/or to take on additional service for or on behalf of the Company on the condition that he be so indemnified and that such indemnification be so guaranteed. NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows: 1. Services by Indemnitee. Indemnitee agrees to serve or continue to serve as a Director of the Company. This agreement shall not impose any obligation on the Indemnitee or the Company to continue the Indemnitee's position with the Company beyond any period otherwise applicable. PAGE 2 2. Indemnity. The Company shall indemnify, and shall advance Expenses (as hereinafter defined) to, Indemnitee as provided in this Agreement and to the fullest extent permitted by law. 3. General. Indemnitee shall be entitled to the rights of indemnification provided in this Section 3 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to any threatened, pending, or completed action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or other proceeding whether civil, criminal, administrative or investigative. Pursuant to this Section 3, Indemnitee shall be indemnified against Expenses, judgments, penalties, fines and amounts paid in settlement incurred by him or on his behalf in connection with such action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or other proceeding whether civil, criminal, administrative or investigative or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. 4. Proceedings by or in the Right of the Company. In the case of any action or suit by or in the right of the Company, indemnification shall be made only (i) for Expenses or (ii) in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company if such indemnification is permitted by Delaware law; provided, however, that indemnification against Expenses shall nevertheless be made by the Company in such event to the extent that the Court of Chancery of the State of Delaware, or the court in which such action or suit shall have been brought or is pending, shall determine to be proper despite the adjudication of liability but in view of all the circumstances of the case. 5. Indemnification for Expenses of a Party who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or other proceeding whether civil, criminal, administrative or investigative, he shall be indemnified against all Expenses incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or other proceeding whether civil, criminal, administrative or investigative, the Company shall indemnify Indemnitee against all Expenses incurred by him or on his behalf in connection with each successfully resolved PAGE 3 claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter by dismissal, or withdrawal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. 6. Advance of Expenses. The Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative within twenty (20) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses, which undertaking shall be accepted by or on behalf of the Company without reference to the financial ability of Indemnitee to make repayment. 7. Procedure for Determination of Entitlement to Indemnification. (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to Section 7(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case: (i) if a Change in Control (as hereinafter defined) shall have occurred, by Independent Counsel (as hereinafter defined) in a written opinion to the Board, a copy of which shall be delivered to Indemnitee (unless Indemnitee shall request that such determination be made by the Board or the Stockholders, in which case the determination shall be made in the manner provided below in clauses (ii) or (iii)); (ii) if a Change of Control shall not have occurred, (A) by the Board by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (B) if a quorum of the Board consisting of Disinterested Directors is not obtainable or, PAGE 4 even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee or (C) by the Stockholders of the Company; or (iii) as provided in Section 8(b) of this Agreement; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) of this Agreement, the Independent Counsel shall be selected as provided in this Section 7(c). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 7 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 14 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 7(a) hereof, no Independent Counsel shall have been selected or if selected, shall have been objected to, in accordance with this Section 7(c), either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other's selection of independent counsel and/or for the appointment as independent counsel of a person selected PAGE 5 by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is favorably resolved or the person so appointed shall act as Independent Counsel under Section 7(b) hereof. The Company shall pay reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 7(b) hereof. The Company shall pay any and all reasonable fees and expenses incident to the procedures of this Section 7(c), regardless of the manner in which such Independent Counsel was selected or appointed. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 9(a)(iii) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). 8. Presumptions and Effect of Certain Proceedings. (a) If a Change of Control shall have occurred, in making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 7(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. (b) If the person, persons or entity empowered or selected under Section 7 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made such determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 8(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 7(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within PAGE 6 seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) of this Agreement. (c) The termination of any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or other proceeding whether civil, criminal, administrative or investigative or of any claim, issue or matter therein by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful. 9. Remedies of Indemnitee. (a) In the event that (i) a determination is made pursuant to Section 7 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 6 of this Agreement, (iii) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) of this Agreement and such determination shall not have been made and delivered in a written opinion within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 of this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 8 of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within one hundred eighty (180) days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 9(a). The Company shall not oppose Indemnitee's right to seek any such adjudication or award in arbitration. PAGE 7 (b) In the event that a determination shall have been made pursuant to Section 7 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 9 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, in any judicial proceeding or arbitration commenced pursuant to this Section 9 the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. (c) If a determination shall have been made or deemed to have been made pursuant to Section 7 or 8 of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 9, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. (d) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 9 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. (e) In the event that Indemnitee, pursuant to this Section 9, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in Section 14 of this Agreement) actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated. 10. Security. To the extent requested by the Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to the Indemnitee for the Company's obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to the Indemnitee, may not be revoked or released without the prior written consent of Indemnitee. PAGE 8 11. Non-Exclusivity; Duration of Agreement; Insurance; Subrogation. (a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company's certificate of incorporation or by-laws, any other agreement, a vote of stockholders or a resolution of directors, or otherwise. This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve as a Director of the Company or fiduciary of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which Indemnitee served at the request of the Company; or (b) the final termination of all pending actions, suits, arbitrations, alternative dispute resolution mechanisms, investigations, administrative hearings or other proceedings whether civil, criminal, administrative or investigative in respect of which Indemnitee is granted rights of indemnification or advancement of expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 9 of this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his heirs, executors and administrators. (b) To the extent that the Company maintains D&O Insurance, Indemnitee shall be covered by such D&O Insurance in accordance with its terms to the maximum extent of the coverage available for any Director under such policy or policies. (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. 12. Severability; Reformation. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each PAGE 9 portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 13. Exception to Right of Indemnification or Advancement of Expenses. Notwithstanding any other provision of this Agreement, Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any action, suit or proceeding, or any claim therein, initiated, brought or made by him (i) against the Company, unless a Change in Control shall have occurred, or (ii) against any person other than the Company, unless approved in advance by the Board. 14. Definitions. For purposes of this Agreement: (a) "Change in Control" means a change in control of the Company of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the "Act"), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if (i) any "person" (as such term is used in Section 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities without the prior approval of at least two-thirds of the members of the Board in office immediately prior to such person attaining such percentage interest; (ii) the Company is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board in office immediately prior to such transaction or event constitute less than a majority of the Board thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board. (b) "Corporate Status" describes the status of a person who is or was or has agreed to become a director of the Company, or is or was an officer or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company. PAGE 10 (c) "Disinterested Director" means a director of the Company who is not and was not a party to the action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative in respect of which indemnification is sought by Indemnitee. (d) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend or investigating an action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative. (e) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither currently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party or (ii) any other party to the action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's Rights under this Agreement. 15. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. 16. Modification and Waiver. This Agreement may be amended from time to time to reflect changes in Delaware law or for other reasons. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 17. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any matter which may be subject to PAGE 11 indemnification or advancement of Expenses covered hereunder; provided, however, that the failure to give any such notice shall not disqualify the indemnitee from indemnification hereunder. 18. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: PAGE 12 (a) If to Indemnitee, to: The address shown beneath his or her signature on the last page hereof (b) If to the Company, to: Thermo Vision Corporation c/o Thermo Electron Corporation 81 Wyman Street P.O. Box 9046 Waltham, MA 02254-9046 Attn: Corporate Secretary or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be. 19. Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. Attest: THERMO VISION CORPORATION By By : : Sandra L. Lambert Kristine S. Langdon Secretary Chief Executive Officer INDEMNITEE Address: EX-10.15 12 Exhibit 10.15 TAX MATTERS AGREEMENT THIS TAX MATTERS AGREEMENT (the "Agreement") is made as of November 24th, 1997 by and among Thermo Optek Corporation, a Delaware corporation ("Optek" and, together with its subsidiaries existing immediately following the Distribution, the "Optek Group"), and Thermo Vision Corporation, a Delaware corporation and a 100%-owned subsidiary of Optek ("Vision" and, together with its subsidiaries existing immediately following the Distribution, the "Vision Group"). WHEREAS, Optek and Vision have entered into a Plan and Agreement of Distribution dated as of [date] (the "Distribution Agreement") providing for the distribution of all of the Vision stock owned by Optek to Optek's shareholders in accordance with the Distribution Agreement (the "Distribution"); WHEREAS, prior to and following the Distribution, the Optek Group and the Vision Group will both be part of an affiliated group of corporations (the "Thermo Group") of which Thermo Electron Corporation, a Delaware corporation ("Thermo Electron"), is the common parent, within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, Optek has entered into a Tax Allocation Agreement with Thermo Electron with respect to the allocation of taxes among members of the affiliated group filing a consolidated United States federal income tax return, and Vision will enter into a substantially similar Tax Allocation Agreement with Thermo Electron; and WHEREAS, Optek and Vision desire to set forth their agreement regarding the allocation between Optek and Vision of all liabilities and benefits relating to or affecting Taxes (as defined below) paid or payable by either of them with respect to the Distribution. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties hereby agree as follows: 1. Definitions. "Tax" means any federal, state, local or foreign income, profits, alternative or add-on minimum, severance, sales, use, service, service use, ad valorem, gross receipts, license, value added, franchise, transfer, recording, real estate, withholding, payroll, employment, excise, occupation, unemployment insurance, social security, business license, business organization, stamp, environmental, premium or property tax, or any other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any related PAGE _2_ interest, penalties and additions to any such tax, imposed by any taxing authority upon Optek, the Optek Group, Vision, the Vision Group, Thermo Electron, the Thermo Group, or any of their respective members or divisions or branches. "Restructuring Tax" means any Taxes, other than Transaction Taxes, to the extent that such Taxes would not have been incurred but for the consummation of the transactions contemplated by the Distribution Agreement. "Transaction Taxes" means any sales, use, transfer, real estate transfer, recording or other similar Taxes incurred in connection with consummation of the transactions contemplated by the Distribution Agreement. 2. Responsibility for Restructuring Taxes. a. Responsibility of Optek Group. Optek and any successor corporation shall be responsible for, and shall indemnify and hold harmless Vision and each member of the Vision Group and the other members of the Thermo Group from, all liability, loss, cost, expense or damage in any way occasioned by any Restructuring Taxes which are directly or indirectly attributable to one or more of the following described events or transactions occurring after the Distribution Date with respect to Optek or any successor corporation: a reorganization, consolidation or merger; the sale or other disposition of Optek Assets other than in the ordinary course of business; Optek ceasing to conduct an active trade or business; the acquisition or disposition of shares of stock of Optek by any person or persons; the redemption or repurchase of shares of its stock by Optek or any successor; the recapitalization or other reclassification of the shares of Optek or any successor; the complete or partial liquidation of Optek or any successor; the exercisability, transferability or repurchase of rights distributed pursuant to a stock purchase rights plan; or any other act or omission of Optek which results in failure to comply with each representation and statement made to the IRS in connection with the rulings received with respect to the Distribution. b. Responsibility of Vision Group . Vision and any successor corporation shall be responsible for, and shall indemnify and hold harmless Optek and each member of the Optek Group and the other members of the Thermo Group from, all liability, loss, cost, expense or damage in any way occasioned by any Restructuring Taxes which are directly or indirectly attributable to one or more of the following described events or transactions occurring after the Distribution Date with respect to Vision or any successor corporation: a reorganization, consolidation or merger; the sale or other disposition of Vision Assets other than in the ordinary course of business; Vision ceasing to conduct an active trade or business; the acquisition or disposition of shares of stock of Vision by any person or persons; the redemption or repurchase of shares of its stock by PAGE _3_ Vision or any successor; the recapitalization or other reclassification of the shares of Vision or any successor; the complete or partial liquidation of Vision or any successor; the exercisability, transferability or repurchase of rights distributed pursuant to a stock purchase rights plan; or any other act or omission of Vision which results in failure to comply with each representation and statement made to the IRS in connection with the rulings received with respect to the Distribution. c. Joint Responsibility of Optek Group and Vision Group. If any Restructuring Taxes should arise for which neither Optek nor Vision is responsible under Section 2.02(a) or Section 2.02(b), respectively, each of Optek and Vision shall be responsible for 50 percent of such Restructuring Taxes, and each party shall indemnify, defend and hold harmless the other party and each member of their respective Groups from and against all liability, cost, expense or damage in any way occasioned by such Restructuring Taxes. 3. Miscellaneous. a. Expenses. Unless otherwise expressly provided in this Agreement, each party shall bear any and all expenses that arise from its obligations under this Agreement. b. Entire Agreement. This Agreement constitutes the entire agreement of the parties concerning the subject matter hereof. c. Term. This Agreement shall commence on the date first stated above, and shall continue in effect for ten years. d. Successors and Assigns. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. e. Amendments. This Agreement may not be modified or amended except by an agreement in writing, signed by the parties hereto. f. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. g. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic substantive laws of The Commonwealth of Massachusetts without regard to any choice or conflict of law rule or provision that would result in the application of the domestic substantive laws of any other jurisdiction. PAGE _4_ IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first above written. THERMO OPTEK CORPORATION By: /s/Robert J. Rosenthal ------------------------------- Title: President ---------------------------- THERMO VISION CORPORATION By: /s/Kristine Stotz Langdon ------------------------------- Title: President ---------------------------- EX-13 13 Exhibit 13 THERMO VISION CORPORATION Consolidated Financial Statements 1997 PAGE Thermo Vision Corporation 1997 Financial Statements Consolidated Statement of Income (In thousands except per share amounts) 1997 1996 1995 ----------------------------------------------------------------------- Revenues (Notes 7 and 8) $39,694 $30,434 $ 6,026 ------- ------- ------- Costs and Operating Expenses: Cost of revenues 22,151 17,066 3,482 Selling, general, and administrative expenses (Note 7) 9,065 7,402 1,519 Research and development expenses 4,143 3,499 743 ------- ------- ------- 35,359 27,967 5,744 ------- ------- ------- Operating Income 4,335 2,467 282 Interest Income 41 - - Interest Expense (327) (44) (31) ------- ------- ------- Income Before Provision for Income Taxes 4,049 2,423 251 Provision for Income Taxes (Note 5) 1,701 1,005 104 ------- ------- ------- Net Income $ 2,348 $ 1,418 $ 147 ======= ======= ======= Basic and Diluted Earnings per Share (Note 9) $ .34 $ .21 $ .02 ======= ======= ======= Weighted Average Shares (Note 9): Basic 6,983 6,909 6,909 ======= ======= ======= Diluted 6,985 6,909 6,909 ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 2PAGE Thermo Vision Corporation 1997 Financial Statements Consolidated Balance Sheet (In thousands except share amounts) 1997 1996 ----------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 9,604 $ 306 Accounts receivable, less allowances of $430 and $266 6,935 5,305 Inventories 8,301 6,404 Prepaid expenses 971 521 Prepaid income taxes (Note 5) 1,405 1,175 ------- ------- 27,216 13,711 ------- ------- Property, Plant, and Equipment, at Cost, Net 4,757 3,901 ------- ------- Other Assets 584 647 ------- ------- Cost in Excess of Net Assets of Acquired Companies (Note 2) 14,844 10,103 ------- ------- $47,401 $28,362 ======= ======= Liabilities and Shareholders' Investment Current Liabilities: Note payable and capital lease obligation (Note 7) $ 1,143 $ 866 Accounts payable 3,671 2,796 Accrued payroll and employee benefits 905 751 Other accrued expenses 1,681 929 Due to Thermo Electron and affiliated companies (Note 7) 177 2,768 ------- ------- 7,577 8,110 ------- ------- Deferred Income Taxes (Note 5) 22 - ------- ------- Long-term Obligations, Due to Thermo Optek and Thermo Electron (Note 7) 7,747 - ------- ------- Commitments (Note 6) Shareholders' Investment (Notes 3 and 4): Common stock, $.01 par value, 20,000,000 shares authorized; 8,048,276 and 6,783,783 shares issued and outstanding 80 68 Capital in excess of par value 28,144 18,693 Retained earnings 3,785 1,437 Cumulative translation adjustment 46 54 ------- ------- 32,055 20,252 ------- ------- $47,401 $28,362 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 3PAGE Thermo Vision Corporation 1997 Financial Statements Consolidated Statement of Cash Flows (In thousands) 1997 1996 1995 ------------------------------------------------------------------------ Operating Activities: Net income $ 2,348 $ 1,418 $ 147 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,849 1,251 182 Provision for losses on accounts receivable 114 174 14 Deferred income tax expense (benefit) 514 (79) 31 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable (380) (732) 67 Inventories (631) 471 (301) Other current assets (364) (253) (2) Accounts payable 71 (174) (128) Other current liabilities (210) (397) (136) -------- -------- -------- Net cash provided by (used in) operating activities 3,311 1,679 (126) -------- -------- -------- Investing Activities: Acquisitions, net of cash acquired (Note 2) (7,345) (15,528) - Purchases of property, plant, and equipment (1,527) (1,450) (152) Other, net - 92 - -------- -------- -------- Net cash used in investing activities (8,872) (16,886) (152) -------- -------- -------- Financing Activities: Net proceeds from issuance of Company common stock (Note 4) 7,033 - - Net proceeds from issuance of notes payable to Thermo Optek and Thermo Electron (Notes 2 and 7) 7,747 - - Transfer from parent company to fund acquisitions - 16,870 - Net increase (decrease) in short-term borrowings from Thermo Electron and affiliated companies (2,591) 1,830 1 Net increase (decrease) in short-term borrowings 240 (575) (65) Net transfer (to) from parent company 2,430 (2,785) 473 -------- -------- -------- Net cash provided by financing activities $ 14,859 $ 15,340 $ 409 -------- -------- -------- 4PAGE Thermo Vision Corporation 1997 Financial Statements Consolidated Statement of Cash Flows (continued) (In thousands) 1997 1996 1995 ----------------------------------------------------------------------- Exchange Rate Effect on Cash $ - $ 2 $ (10) -------- -------- -------- Increase in Cash and Cash Equivalents 9,298 135 121 Cash and Cash Equivalents at Beginning of Year 306 171 50 -------- -------- -------- Cash and Cash Equivalents at End of Year $ 9,604 $ 306 $ 171 ======== ======== ======== Cash Paid For: Interest $ 265 $ 44 $ 31 Income taxes $ - $ 43 $ - Noncash Activities: Fair value of assets of acquired companies $ 9,414 $ 22,480 $ - Cash paid for acquired companies (7,400) (16,870) - -------- -------- -------- Liabilities assumed of acquired companies $ 2,014 $ 5,610 $ - ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 5PAGE Thermo Vision Corporation 1997 Financial Statements Consolidated Statement of Shareholders' Investment (In thousands) 1997 1996 1995 ----------------------------------------------------------------------- Common Stock, $.01 Par Value Balance at beginning of year $ 68 $ 68 $ - Issuance of Company common stock (Note 4) 11 - - Effect of stock split 1 - - Capitalization of the Company - - 68 ------- ------- ------- Balance at end of year 80 68 68 ------- ------- ------- Capital in Excess of Par Value Balance at beginning of year 18,693 4,608 - Issuance of Company common stock (Note 4) 7,022 - - Effect of stock split (1) - - Net transfer (to) from parent company 2,430 (2,785) - Transfer from parent company to fund acquisitions - 16,870 - Capitalization of the Company - - 4,608 ------- ------- ------- Balance at end of year 28,144 18,693 4,608 ------- ------- ------- Retained Earnings Balance at beginning of year 1,437 19 - Net income after capitalization of the Company 2,348 1,418 19 ------- ------- ------- Balance at end of year 3,785 1,437 19 ------- ------- ------- Cumulative Translation Adjustment Balance at beginning of year 54 2 8 Translation adjustment (8) 52 (6) ------- ------- ------- Balance at end of year 46 54 2 ------- ------- ------- Net Parent Company Investment Balance at beginning of year - - 4,075 Net income before capitalization of the Company - - 128 Net transfer from parent company - - 473 Capitalization of the Company - - (4,676) ------- ------- ------- Balance at end of year - - - ------- ------- ------- Total Shareholders' Investment $32,055 $20,252 $ 4,697 ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 6PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies Nature of Operations Thermo Vision Corporation (the Company) designs, manufactures, and markets a diverse array of photonics products, including optical components, imaging sensors and systems, lasers, optically based instruments, optoelectronics, and fiber optics. The Company sells photonics products in multiple markets across a number of industries for research, testing, detecting, and manufacturing applications. The Company's products range from optical filters used in blood glucose monitoring, to charge-injection devices (CIDs) used in optical spectroscopy, to specialty light sources used for quality assurance in semiconductor photolithography. Many of the Company's customers are manufacturers that incorporate the Company's products into medical and dental diagnostic instruments, analytical instruments, equipment for semiconductor manufacturing, and X-ray screening devices. Relationship with Thermo Optek Corporation, Thermo Instrument Systems Inc., and Thermo Electron Corporation The Company was incorporated in November 1995 as a wholly owned subsidiary of Thermo Optek Corporation at which time Thermo Optek transferred to the Company all of the assets, liabilities, and businesses of two subsidiaries of Thermo Jarrell Ash (TJA) in exchange for 6,908,785 shares of the Company's common stock (adjusted to reflect a 55-for-54 stock split distributed in December 1997 in the form of a stock dividend). The companies transferred were CID Technologies Inc. (CIDTEC) and Scientific Measurement Systems Inc., (now called Thermo Vision Colorado). In August 1997, the Company acquired the crystal-materials business (Hilger) of Hilger Analytical Limited, a wholly owned subsidiary of Thermo Optek, and accounted for the transaction at historical cost in a manner similar to a pooling of interests (Note 2). In December 1997, Thermo Optek, a 91%-owned publicly traded subsidiary of Thermo Instrument Systems Inc., distributed to its shareholders 100% of the Company's common stock in the form of a dividend. Thermo Instrument is a publicly traded, majority-owned subsidiary of Thermo Electron Corporation. As of January 3, 1998, Thermo Instrument and Thermo Electron owned a total of 6,401,901 shares of the Company's common stock, representing 79.5% of such stock outstanding. Principles of Consolidation The accompanying financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated. Fiscal Year The Company has adopted a fiscal year ending the Saturday nearest December 31. References to 1997, 1996, and 1995 are for the fiscal years ended January 3, 1998, December 28, 1996, and December 30, 1995, respectively. Fiscal year 1997 included 53 weeks; 1996 and 1995 each included 52 weeks. 7PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies (continued) Revenue Recognition The Company recognizes revenues upon shipment of its products. The Company provides a reserve for its estimate of warranty and installation costs at the time of shipment. Stock-based Compensation Plans The Company applies Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock-based compensation plans (Note 3). Accordingly, no accounting recognition is given to stock options granted at fair market value until they are exercised. Upon exercise, net proceeds, including tax benefits realized, are credited to equity. Income Taxes The Company, Thermo Optek, and Thermo Instrument entered into tax allocation agreements under which the Company, Thermo Optek, and Thermo Instrument were included in Thermo Electron's consolidated federal and certain state income tax returns. The agreements provided that in years in which the Company had taxable income, it 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 initial public offering in December 1997, Thermo Instrument's equity ownership of the Company was reduced below 80% and, as a result, the Company is required to file its own federal and certain state 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 During the fourth quarter of 1997, the Company adopted SFAS No. 128, "Earnings per Share" (Note 9). As a result, all previously reported earnings per share have been restated; however, basic and diluted earnings per share equals the Company's previously reported earnings per share for the 1996 and 1995 periods. Basic earnings per share have been computed by dividing net income by the weighted average number of shares outstanding during the year. For periods prior to the Company's November 1995 capitalization, shares issued in connection with such capitalization have been shown as outstanding for purposes of computing earnings per share. Diluted earnings per share have been computed assuming the exercise of stock options, as well as their related income tax effects. Stock Splits All share and per share information, except for share information in the accompanying 1996 balance sheet, has been restated to reflect an approximate 55-for-54 stock split, effected in the form of a stock dividend, distributed in December 1997. The purpose of this stock split was to preserve a distribution ratio of 14 shares of the Company's common stock for each 100 shares of common stock held by Thermo Optek shareholders as of the date that Thermo Optek distributed the Company's common stock to its shareholders. 8PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies (continued) Cash and Cash Equivalents As of January 3, 1998, $9,410,000 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, commercial paper, U.S. government-agency securities, money market funds, 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. The repurchase agreement earns a rate based on the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. Inventories Inventories are stated at the lower of cost (primarily 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) 1997 1996 ------------------------------------------------------------------------ Raw material and supplies $5,637 $3,142 Work in process 967 806 Finished goods 1,697 2,456 ------ ------ $8,301 $6,404 ====== ====== 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, 30 years; machinery and equipment, 3 to 10 years; and leasehold improvements, the shorter of the term of the lease or the life of the asset. Property, plant, and equipment consists of the following: (In thousands) 1997 1996 ------------------------------------------------------------------------ Land and buildings $ 277 $ 277 Machinery and equipment 5,987 4,114 Leasehold improvements 932 554 ------ ------ 7,196 4,945 Less: Accumulated depreciation and amortization 2,439 1,044 ------ ------ $4,757 $3,901 ====== ====== 9PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies (continued) Other Assets Other assets in the accompanying balance sheet consists primarily of a 10% ownership interest in LOT-Oriel Holding GmbH (LOT). The carrying amount of the investment, which is being accounted for under the cost method, is $500,000 in the accompanying 1997 balance sheet. The Company has an investment of less than 20% in Andor Technology Limited. The carrying amount of the investment, which is being accounted for under the cost method, is $84,000 in the accompanying balance sheet. Prior to October 1996, the Company owned approximately 51% of Andor, and Andor's results were consolidated with those of the Company. During the third quarter of 1996, the Company reduced its ownership interest in Andor in a transaction with Andor's other stockholders. In consideration for the sale of a portion of its interest in Andor, the Company received approximately $159,000 in cash and a $147,000 principal amount 8% note, which was paid in September 1997. Andor's results were not material to the Company's results of operations. 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 $718,000 and $371,000 at year-end 1997 and 1996, 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 companies in assessing the recoverability of this asset. If impairment has occurred, any excess of carrying value over fair value is recorded as a loss. Foreign Currency All assets and liabilities of the Company's foreign subsidiary are translated at year-end exchange rates, and revenues and expenses are translated at average exchange rates for the year in accordance with SFAS No. 52, "Foreign Currency Translation." Resulting translation adjustments are reflected as a separate component of shareholder's investment titled "Cumulative translation adjustment." Foreign currency transaction gains and losses are included in the accompanying statement of income and are not material for the three years presented. Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable, note payable, accounts payable, due to Thermo Electron and affiliated companies, and long-term obligations due to Thermo Optek and Thermo Electron. The Company's long-term obligations (Note 7) bear interest at a variable market rate and therefore the carrying amounts approximate fair value. The carrying amounts of the Company's remaining financial instruments approximate fair value due to their short-term nature. 10PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies (continued) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Acquisitions In August 1997, the Company acquired Hilger, a manufacturer of crystals used for X-ray scintillation and infrared spectroscopy, from Thermo Optek for the assumption of the short-term obligation discussed in Note 7. Because the Company and Hilger were deemed for accounting purposes to be under control of their common owner, Thermo Optek, the transaction has been accounted for at historical cost in a manner similar to a pooling of interests. Accordingly, the results of operations of Hilger are included for all periods presented. In July 1997, the Company acquired the assets of Centronic, Inc. (now called Centro Vision, Inc.), a manufacturer of silicon photodiodes, for $3,800,000 in cash. The cost of this acquisition exceeded the estimated fair market value of the acquired net assets by $2,307,000. To finance this acquisition, the Company borrowed $3,800,000 from Thermo Electron (Note 7). In February 1997, the Company acquired all the outstanding stock of Laser Science, Inc. (LSI) for $3,600,000 in cash. LSI is a manufacturer of nitrogen and tunable dye lasers as well as pulsed CO2 lasers for industry, medicine, education, and defense. The cost of this acquisition exceeded the estimated fair market value of the acquired net assets by $2,836,000. To finance this acquisition, the Company borrowed $3,600,000 from Thermo Optek (Note 7). In addition, the Company borrowed an additional $347,000 from Thermo Optek to fund certain property additions made in connection with the acquisition of LSI (Note 7). In February 1996, the Company acquired Oriel Corporation, a manufacturer and distributor of photonics components and instruments, for $11,798,000 in cash and the assumption of $731,000 in debt, and the assets of Corion Corporation, a manufacturer of commercial optical filters, for $5,072,000 in cash. The cost of Oriel and Corion exceeded the estimated fair market value of the acquired net assets by $4,736,000 and $2,056,000, respectively. These acquisitions, except for Hilger, have been accounted for using the purchase method of accounting, and their results of operations have been included in the accompanying financial statements from the respective dates of acquisition. 11PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 2. Acquisitions (continued) In October 1994, Thermo Instrument acquired CIDTEC, a manufacturer of charge-injection devices used for image sensors and video cameras, for $3,401,000 in cash. The cost of this acquisition exceeded the estimated fair market value of the acquired net assets by $2,889,000. Thermo Instrument transferred the assets, liabilities, and businesses of CIDTEC to Thermo Optek after its formation in August 1995. Thermo Optek transferred the assets, liabilities, and businesses of CIDTEC to the Company after its formation in November 1995. Because the Company, CIDTEC, and Thermo Optek were deemed for accounting purposes to be under control of their common majority owner, Thermo Instrument, the accompanying financial statements include the results of operations of CIDTEC for all periods presented. Based on unaudited data, the following table presents selected financial information for the Company and the businesses acquired on a pro forma basis, assuming the Company, Centro Vision, and LSI had been combined since the beginning of 1996 and the Company, Oriel, and Corion had been combined since the beginning of 1995. (In thousands except per share amounts) 1997 1996 1995 ----------------------------------------------------------------------- Revenues $42,944 $43,428 $33,355 Net income 2,209 527 145 Basic and diluted earnings per share .32 .08 .02 The pro forma results are not necessarily indicative of future operations or the actual results that would have occurred had the acquisitions of Centro Vision and LSI been made at the beginning of 1996 or the acquisitions of Oriel and Corion been made at the beginning of 1995. 3. Employee Benefit Plans Stock-based Compensation Plans Stock Option Plans ------------------ In November 1997, the Company adopted a stock-based compensation plan for its key employees, directors, and others, which 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 this plan. The option recipients and the terms of options granted under this plan are determined by the Board Committee. Options granted to date became exercisable on March 10, 1998, and 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 a five- to ten-year period, depending on the term of the option, which generally ranges from seven to twelve years. 12PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 3. Employee Benefit Plans (continued) 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 the fair market value of the Company's stock on 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 and Thermo Instrument. A summary of the Company's stock option information for 1997 is as follows: 1997 --------------------- Weighted Number Average of Exercise (Shares in thousands) Shares Price ------------------------------------------------------------------------ Options outstanding, beginning of the year - $ - Granted 303 7.50 --- Options outstanding, end of year 303 $7.50 === ===== Options exercisable - $ - === ===== Options available for grant 397 === As of January 3, 1998, the options outstanding were exercisable at $7.50 and had a weighted average remaining contractual life of 6.8 years. Employee Stock Purchase Program ------------------------------- Substantially all of the Company's full-time U.S. employees are eligible to participate in an employee stock purchase program sponsored by Thermo Instrument. Under this program, shares of Thermo Instrument's and Thermo Electron's common stock can be purchased at the end of a 12-month plan year at 95% of the fair market value at the beginning of the plan year, and the shares purchased are subject to a six-month resale restriction. Prior to November 1, 1995, the applicable shares of common stock could be purchased 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. Shares are purchased through payroll deductions of up to 10% of each participating employee's gross wages. 13PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 3. Employee Benefit Plans (continued) Pro Forma Stock-based Compensation Expense In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-based Compensation," which sets forth a fair-value based method of recognizing stock-based compensation expense. As permitted by SFAS No. 123, the Company has elected to continue to apply APB No. 25 to account for its stock-based compensation plans. Had compensation cost for awards granted in 1997 under the Company's stock-based compensation plans been determined based on the fair value at the grant dates consistent with the method set forth under SFAS No. 123, the effect on the Company's net income and earnings per share would have been as follows: (In thousands except per share amounts) 1997 ---------------------------------------------------------------------- Net income: As reported $2,348 Pro forma 2,270 Basic and diluted earnings per share: As reported .34 Pro forma .33 Compensation expense for options granted is reflected over the vesting period; therefore, future pro forma compensation expense may be greater as additional options are granted. The weighted average fair value per share of options granted in 1997 was $2.69. The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions: 1997 ---------------------------------------------------------------------- Volatility 28% Risk-free interest rate 6.0% Expected life of options 4.9 years The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions including expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. 14PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 3. Employee Benefit Plans (continued) 401(k) Savings Plans Substantially all of the Company's full-time U.S. employees are eligible to participate in Thermo Electron's 401(k) savings plan. Contributions to the 401(k) savings plans 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 $212,000, $182,000, and $39,000 in 1997, 1996, and 1995, respectively. 4. Common Stock In December 1997, the Company sold 1,139,491 shares of its common stock in an initial public offering at $7.50 per share for net proceeds of $7,033,000. At January 3, 1998, the Company had reserved 725,000 unissued shares of its common stock for possible issuance under stock-based compensation plans. 5. Income Taxes The components of income before provision for income taxes are as follows: (In thousands) 1997 1996 1995 ------------------------------------------------------------------------ Domestic $3,719 $2,186 $ 9 Foreign 330 237 242 ------ ------ ------ $4,049 $2,423 $ 251 ====== ====== ====== The components of the provision for income taxes are as follows: (In thousands) 1997 1996 1995 ------------------------------------------------------------------------ Currently payable: Federal $ 904 $ 895 $ (11) State 174 105 (1) Foreign 109 84 85 ------ ------ ------ 1,187 1,084 73 ------ ------ ------ Net deferred (prepaid): Federal 424 (71) 28 State 90 (8) 3 ------ ------ ------ 514 (79) 31 ------ ------ ------ $1,701 $1,005 $ 104 ====== ====== ====== 15PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 5. 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 due to the following: (In thousands) 1997 1996 1995 ------------------------------------------------------------------------ Provision for income taxes at statutory rate $1,377 $ 824 $ 85 Increases (decreases) resulting from: State income taxes, net of federal tax 174 64 1 Federal tax rate differential 3 3 3 Tax benefit of foreign sales corporation (49) (5) (2) Amortization of cost in excess of net assets of acquired companies 103 80 16 Nondeductible expenses and other 93 39 1 ------ ------ ------ $1,701 $1,005 $ 104 ====== ====== ====== Prepaid income taxes and deferred income taxes in the accompanying balance sheet consist of the following: (In thousands) 1997 1996 ------------------------------------------------------------------------ Prepaid income taxes: Tax loss carryforwards $1,622 $ - Reserves and accruals 499 229 Inventory basis difference 424 713 Accrued compensation 159 136 Other, net - 97 ------ ------ 2,704 1,175 Less: Valuation allowance 1,299 - ------ ------ $1,405 $1,175 ====== ====== Deferred income taxes: Fixed assets $ - Intangible assets 22 ------ $ 22 ====== The valuation allowance increased by $1,299,000 because LSI, which was acquired in 1997, had tax loss carryforwards that the Company is not certain will be fully utilized. These losses of $4,700,000 are available to offset future taxable income of LSI through the year 2008. 16PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 5. Income Taxes (continued) A provision has not been made for U.S. or additional foreign taxes on $1,006,000 of undistributed earnings of the Company's foreign subsidiary that could be subject to taxation if remitted to the U.S. because the Company plans to keep this amount permanently reinvested overseas. 6. Commitments The Company leases portions of its office and operating facilities under various operating lease arrangements. The accompanying statement of income includes expenses from operating leases of $659,000, $438,000, and $120,000 in 1997, 1996, and 1995, respectively. Future minimum payments due under noncancellable operating leases at January 3, 1998, are $560,000 in 1998; $550,000 in 1999; $484,000 in 2000; $376,000 in 2001; $398,000 in 2002; and $1,864,000 in 2003 and thereafter. Total future minimum lease payments are $4,232,000. The Company also has operating lease arrangements with related parties as discussed in Note 7. 7. Related-party Transactions Corporate Services Agreement The Company and Thermo Electron have a corporate services agreement under which Thermo Electron's corporate staff provides certain administrative services, including certain legal advice and services, risk management, certain employee benefit administration, tax advice and preparation of tax returns, centralized cash management, and certain financial and other services, for which the Company paid Thermo Electron annually an amount equal to 1.0% of the Company's revenues in 1997 and 1996 and 1.2% of the Company's revenues in 1995. For these services, the Company was charged $397,000, $304,000, and $72,000 in 1997, 1996, and 1995, respectively. Beginning in 1998, the Company will pay an annual fee equal to 0.8% of the Company's revenues. The annual fee is reviewed and adjusted annually by mutual agreement of the parties. Management believes that the service fee charged by Thermo Electron is reasonable and that such fees are representative of the expenses the Company would have incurred on a stand-alone basis. The corporate services agreement is renewed annually but can be terminated upon 30 days' prior notice by the Company or upon the Company's withdrawal from the Thermo Electron Corporate Charter (the Thermo Electron Corporate Charter defines the relationship among Thermo Electron and its majority-owned subsidiaries). For additional items such as employee benefit plans, insurance coverage, and other identifiable costs, Thermo Electron charges the Company based upon costs attributable to the Company. Operating Leases In addition to the operating leases described in Note 6, the Company leases certain office and manufacturing space on a monthly basis from Thermo Optek and Thermo Instrument. The accompanying statement of income includes expenses from these arrangements of $238,000, $297,000, and $91,000 in 1997, 1996, and 1995, respectively. Prior to January 1, 1997, rent expense under these arrangements was determined as the Company's 17PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 7. Related-party Transactions (continued) allocated share of total occupancy expenses. Subsequently, the Company pays fixed monthly rates. Effective for 1998, the annual rent under the lease with Thermo Optek is $45,000. At January 3, 1998, future minimum payments due under the lease with Thermo Instrument, which expires in January 2006, are $213,000 in 1998; $223,000 in 1999; $234,000 in 2000; $240,000 in 2001; $250,000 in 2002; and $835,000 in 2003 and thereafter. Total future minimum lease payments are $1,995,000. Long-term Obligations The Company borrowed funds from Thermo Electron and Thermo Optek to finance the acquisitions of certain companies (Note 2). In connection with the July 1997 acquisition of Centro Vision, the Company borrowed $3,800,000 from Thermo Electron pursuant to a promissory note due July 2000. In connection with the February 1997 acquisition of LSI and certain related property additions, the Company borrowed $3,947,000 from Thermo Optek pursuant to promissory notes due February 2000. These notes bear interest at the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. The interest rate for the notes at year-end 1997 was 5.76%. Short-term Obligation Note payable in the accompanying balance sheet represents short-term bank borrowings at the Company's foreign subsidiary. The Company has an arrangement under which it may borrow on a bank line of credit arrangement held by Thermo Optek. The interest rate for these borrowings was 8.00% and 6.75% at year-end 1997 and 1996, respectively. Availability to the Company under this line of credit totaled $2,042,000 as of January 3, 1998. Distribution Agreement with LOT The Company has a distribution agreement with LOT which allows LOT to be Oriel's primary distributor in certain parts of Europe. Sales to LOT included in the accompanying 1997 and 1996 statements of income were $2,122,000 and $1,952,000, respectively. Accounts receivable in the accompanying balance sheet includes $608,000 and $442,000 due from LOT at year-end 1997 and 1996, respectively. Trademark License and Royalty Agreement In September 1996, the Company agreed to license the use of a trademark to Andor in exchange for a fee equal to the greater of 3.3% of the net sales revenue, as defined, from sales of products sold under the trade name, or 10,000 British pounds sterling. In 1997 and 1996, the Company recorded revenues of $91,000 and $15,000, respectively, under this agreement. Contract Research and Development In 1997, 1996, and 1995, the Company recorded revenues of $80,000, $188,000, and $418,000, respectively, from Thermo Optek for contract research and development services related to components used in certain products manufactured by Thermo Optek. 18PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 7. Related-party Transactions (continued) Other Related-party Transactions The Company purchases and sells products in the ordinary course of business with other companies affiliated with Thermo Instrument. Sales of products to such affiliated companies totaled $2,013,000, $1,786,000, and $2,514,000 in 1997, 1996, and 1995, respectively. Purchases of products from such affiliated companies totaled $443,000, $971,000, and $1,465,000 in 1997, 1996, and 1995, respectively. 8. Geographical Information The Company is engaged in one business segment: designing, manufacturing, and marketing photonics products. The following table shows data for the Company by geographical area. (In thousands) 1997 1996 1995 ------------------------------------------------------------------------ Revenues: United States $36,954 $28,780 $ 4,453 United Kingdom 2,740 1,654 1,573 ------- ------- ------- $39,694 $30,434 $ 6,026 ======= ======= ======= Income before provision for income taxes: United States (a) $ 3,939 $ 2,247 $ 59 United Kingdom 396 220 223 ------- ------- ------- Operating income 4,335 2,467 282 Interest expense, net (286) (44) (31) ------- ------- ------- $ 4,049 $ 2,423 $ 251 ======= ======= ======= Identifiable assets: United States $44,836 $26,429 $ 5,476 United Kingdom 2,565 1,933 1,302 ------- ------- ------- $47,401 $28,362 $ 6,778 ======= ======= ======= Export revenues included in United States revenues above (b): Europe $ 5,321 $ 5,053 $ 140 Other 5,490 4,434 145 ------- ------- ------- $10,811 $ 9,487 $ 285 ======= ======= ======= (a) Includes corporate, general, and administrative expenses. (b) In general, export sales are denominated in U.S. dollars. 19PAGE Thermo Vision Corporation 1997 Financial Statements Notes To Consolidated Financial Statements 9. Earnings per Share Basic and diluted earnings per share were calculated as follows: (In thousands except per share amounts) 1997 1996 1995 ----------------------------------------------------------------------- Basic Net income $ 2,348 $ 1,418 $ 147 ------- ------- ------- Weighted average shares 6,983 6,909 6,909 ------- ------- ------- Basic earnings per share $ .34 $ .21 $ .02 ======= ======= ======= Diluted Net income $ 2,348 $ 1,418 $ 147 ------- ------- ------- Weighted average shares 6,983 6,909 6,909 Effect of stock options 2 - - ------- ------- ------- Weighted average shares, as adjusted 6,985 6,909 6,909 ------- ------- ------- Diluted earnings per share $ .34 $ .21 $ .02 ======= ======= ======= 10. Unaudited Quarterly Information (In thousands except per share amounts) 1997 First (a) Second Third (b) Fourth ----------------------------------------------------------------------- Revenues $ 8,585 $ 9,225 $10,635 $11,249 Gross profit 3,759 4,089 4,806 4,889 Net income 528 566 608 646 Basic and diluted earnings per share .08 .08 .09 .09 1996 First (c) Second Third Fourth ----------------------------------------------------------------------- Revenues $ 5,237 $ 8,931 $ 8,201 $ 8,065 Gross profit 2,221 3,904 3,580 3,663 Net income 201 480 368 369 Basic and diluted earnings per share .03 .07 .05 .05 (a) Reflects the February 1997 acquisition of LSI. (b) Reflects the July 1997 acquisition of Centro Vision. (c) Reflects the February 1996 acquisitions of Corion and Oriel. 20PAGE Thermo Vision Corporation 1997 Financial Statements Report of Independent Public Accountants To the Shareholders and Board of Directors of Thermo Vision Corporation: We have audited the accompanying consolidated balance sheet of Thermo Vision Corporation (a Delaware corporation and 78%-owned subsidiary of Thermo Instrument Systems Inc.) and subsidiaries as of January 3, 1998, and December 28, 1996, and the related consolidated statements of income, cash flows, and shareholders' investment for each of the three years in the period ended January 3, 1998. 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 Vision Corporation and subsidiaries as of January 3, 1998, and December 28, 1996, and the results of their operations and their cash flows for each of the three years in period ended January 3, 1998, in conformity with generally accepted accounting principles. Arthur Andersen LLP Boston, Massachusetts February 17, 1998 21PAGE Thermo Vision Corporation 1997 Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including those detailed immediately after this Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading "Forward-looking Statements." Overview The Company designs, manufactures, and markets a diverse array of photonics products, including optical components, imaging sensors and systems, lasers, optically based instruments, optoelectronics, and fiber optics. The Company sells photonics products in multiple markets across a number of industries for research, testing, detecting, and manufacturing applications. The Company initially comprised two businesses: Scientific Measurement Systems Inc. (now called Thermo Vision Colorado), a manufacturer of optically based instruments, and CID Technologies Inc. (CIDTEC), a manufacturer of sensors and cameras based on proprietary charge-injection device (CID) technology. Since February 1996, the Company has acquired four businesses from unrelated third parties that currently constitute the bulk of its operations. In February 1996, the Company acquired Oriel Corporation, a manufacturer and distributor of photonics components and instruments, and Corion Corporation, a manufacturer of commercial optical filters. In February 1997, the Company acquired Laser Science, Inc. (LSI), a manufacturer of gas lasers. In July 1997, the Company acquired Centronic Inc. (now called Centro Vision, Inc.), a manufacturer of silicon photodiodes. In addition, in August 1997, the Company acquired the crystal-materials business (Hilger) of Hilger Analytical Limited, a wholly owned subsidiary of Thermo Optek Corporation. Because the Company and Hilger were deemed for accounting purposes to be under control of their common owner, Thermo Instrument Systems Inc., the transaction has been accounted for at historical cost in a manner similar to a pooling of interests. Accordingly, the results of operations of Hilger are included for all periods presented. From the time of the Company's incorporation in November 1995 to August 1997, the crystal-materials business of Hilger Analytical was under the Company's management. Approximately 7% of the Company's 1997 revenues originated outside the U.S. and approximately 27% of the Company's 1997 revenues were exports from the U.S. Revenues originating outside the U.S. represent revenues of Hilger. Hilger's operations are located in the United Kingdom and principally sell in the local currency. Exports from the Company's U.S. operations are denominated in U.S. dollars. Although the Company 22PAGE Thermo Vision Corporation 1997 Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations Overview (continued) seeks to charge its customers in the same currency as its operating costs, the Company's financial performance and competitive position can be affected by currency exchange rate fluctuations. Results of Operations 1997 Compared With 1996 Revenues increased 30% to $39.7 million in 1997 from $30.4 million in 1996. Revenues increased $9.2 million due to the inclusion of revenues from LSI, acquired in February 1997, and Centro Vision, acquired in July 1997, and the inclusion of revenues for the full year from Oriel and Corion, acquired in February 1996. Revenues increased at Hilger due to shipments under its Stanford Linear Accelerator contract, which commenced in the second quarter of 1996. This increase was offset in part by lower revenues at Oriel because the Company is no longer consolidating the results of Andor Technology Limited (Note 1). The gross profit margin was unchanged at 44% in 1997 and 1996. Selling, general, and administrative expenses as a percentage of revenues decreased to 23% in 1997 from 24% in 1996, due primarily to lower selling and marketing expenses at Oriel during the year. Research and development expenses increased to $4.1 million in 1997 from $3.5 million in 1996, due primarily to the inclusion of research and development expenses at LSI and Centro Vision. Interest expense of $0.3 million in 1997 primarily represents interest incurred on the $3.6 million and $3.8 million promissory notes issued to Thermo Optek and Thermo Electron Corporation, respectively, for the acquisitions of LSI and Centro Vision, respectively. The effective tax rate was 42% in 1997 and 41% in 1996. The effective tax rates exceeded the statutory federal income tax rate due primarily to the impact of nondeductible amortization of cost in excess of net assets of acquired companies and state income taxes. The Company is currently assessing the potential impact of the year 2000 on the processing of date-sensitive information by the Company's computerized information systems and on products purchased by the Company. The Company believes that its internal information systems are either year 2000 compliant or will be so prior to the year 2000 without incurring material costs. There can be no assurance, however, that the Company will not experience unexpected costs and delays in achieving year 2000 compliance for its internal information systems, which could result in a material adverse effect on the Company's future results of operations. The Company is presently assessing whether its key suppliers are adequately addressing this issue and the effect this might have on the Company. The Company has not completed its analysis and is unable to conclude at this time that the year 2000 problem as it relates to products purchased from key suppliers is not reasonably likely to have a material adverse effect on the Company's future results of operations. 23PAGE Thermo Vision Corporation 1997 Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations 1996 Compared With 1995 Revenues increased to $30.4 million in 1996 from $6.0 million in 1995, due primarily to the inclusion of $24.2 million of revenues from Oriel and Corion, acquired in February 1996. Revenues from the Company's existing operations increased $0.2 million, due primarily to the inclusion of a $0.5 million nonrecurring sale at CIDTEC, offset in part by decreased revenues at Thermo Vision Colorado due to lower demand. The gross profit margin increased to 44% in 1996 from 42% in 1995, due primarily to the inclusion of higher-margin revenues at Oriel, offset in part by the inclusion of lower-margin revenues at Corion. Selling, general, and administrative expenses as a percentage of revenues decreased to 24% in 1996 from 25% in 1995, due primarily to lower costs as a percentage of revenue at acquired businesses. Research and development expenses increased to $3.5 million in 1996 from $0.7 million in 1995, due primarily to the inclusion of $2.5 million of research and development expenses at acquired businesses. Interest expense in both periods represents interest incurred on short-term borrowings at Hilger. The effective tax rate was 41% in 1996 and 1995. The effective tax rates exceeded the statutory federal income tax rate due primarily to the impact of nondeductible amortization of cost in excess of net assets of acquired companies in both years and state income taxes in 1996. Liquidity and Capital Resources Consolidated working capital was $19.6 million at January 3, 1998, compared with $5.6 million at December 28, 1996. Included in working capital are cash and cash equivalents of $9.6 million at January 3, 1998, compared with $0.3 million at December 28, 1996. In 1997, operating activities provided $3.3 million of cash. The Company used $0.6 million to fund an increase in inventory, primarily to support CIDTEC's new dental imaging sensor, which was introduced in the first quarter of 1998. The Company's investing activities used $8.9 million of cash during 1997, due primarily to $7.3 million, net of cash acquired, used to acquire businesses (Note 2). The Company expended $1.5 million on purchases of property, plant, and equipment during 1997 and plans to expend approximately $1.9 million on such purchases during 1998. The Company's financing activities provided $14.9 million of cash during 1997, due primarily to borrowings of $7.7 million for acquisitions (Note 2) and proceeds of $7.0 million from the Company's December 1997 initial public offering of common stock. Hilger, the Company's foreign subsidiary, has a credit facility arrangement for working capital needs (Note 7). Although the Company generally expects to have positive cash flow from its existing operations, the Company may require significant amounts of cash for any acquisition of complementary businesses. The Company expects that it will finance any such acquisitions through internal funds, additional debt or equity financing from capital markets, or short- or long-term borrowings from Thermo Instrument or Thermo Electron, although it has no agreement with these companies to ensure that additional funds will be available on acceptable terms or at all. The Company believes its existing resources are sufficient to meet the capital requirements of its existing businesses for the foreseeable future. 24PAGE Thermo Vision Corporation 1997 Financial Statements Forward-looking Statements In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company wishes to caution readers that the following important factors, among others, in some cases have affected, and in the future could affect, the Company's actual results and could cause its actual results in 1998 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Risks Associated with Technological Change, Obsolescence, and the Development and Acceptance of New Products. The market for the Company's products is characterized by rapid and significant technological change and evolving industry standards. New product introductions responsive to these factors require significant planning, design, development, and testing at the technological, product, and manufacturing process levels, and may render existing products and technologies uncompetitive or obsolete. There can be no assurance that the Company's products will not become uncompetitive or obsolete. In addition, industry acceptance of new applications for the Company's technologies developed by the Company may be slow to develop due to, among other things, the general unfamiliarity of users with new applications and technologies. There can be no assurance that these factors will not have a material adverse effect on the Company's results of operations, financial condition, or business. Risks Associated with Acquisition Strategy; No Assurance of a Successful Acquisition Strategy. One of the Company's growth strategies is to supplement its internal growth with the acquisition of businesses and technologies that complement or augment the Company's existing product lines. Since February 1996, the Company has acquired four businesses from unrelated third parties that comprise the bulk of its operations. Certain businesses that the Company may seek to acquire in the future may be marginally profitable or unprofitable. In order for any acquired businesses to achieve the level of profitability desired by the Company, the Company must successfully reduce expenses and improve market penetration. No assurance can be given that the Company will be successful in this regard. In many instances, acquisitions by the Company will result in the Company recording cost in excess of net assets of acquired companies on its balance sheet. Such cost in excess of net assets of acquired companies will be amortized as a noncash expense over specified periods. In addition, promising acquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers and the need for regulatory approvals, including antitrust approvals. These factors may adversely affect both the availability and price of prospective acquisition targets. There can be no assurance that the Company will be able to complete pending or future acquisitions. In order to finance any acquisitions, it may be necessary for the Company to raise additional funds through additional public or private financings. Any equity or debt financing, if available at all, may be on terms which are not favorable to the Company and may result in dilution to the Company's shareholders. In the past, a significant portion of the funding for the Company's acquisitions has come from Thermo Optek, Thermo Instrument, or Thermo Electron. Although Thermo Electron and Thermo Instrument regularly fund acquisitions by their 25PAGE Thermo Vision Corporation 1997 Financial Statements Forward-looking Statements respective wholly and partially owned subsidiaries, neither Thermo Electron nor Thermo Instrument has committed to fund any future acquisitions by the Company. There can be no assurance that the Company will be able to secure any such financing or that these factors will not have a material adverse effect on the Company's results of operations, financial condition, or business. Intense Competition. The Company encounters and expects to continue to encounter intense competition in the sale of its products. The Company believes that the principal competitive factors affecting the market for its products include product performance, price, reliability, and customer service. The Company's principal competitors include Melles-Griot, Inc.; Optical Coating Laboratory, Inc.; Newport Corporation; Coherent, Inc.; Corning OCA Corporation; the Bicron Business Unit of Saint-Gobain Industrial Ceramics, Inc.; Hamamatsu Corporation, a unit of Hamamatsu Photonic KK; and UDT Sensors, Inc., an Opto-Sensors Company. Certain of these companies and certain of the Company's other competitors have substantially greater financial, marketing, and other resources than those of the Company. As a result, they may be able to adapt more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the promotion and sale of their products than the Company. In addition, competition could increase if new companies enter the market or if existing competitors expand their product lines or intensify efforts within existing product lines. There can be no assurance that the Company's current products, products under development, or ability to discover new technologies will be sufficient to enable it to compete effectively with its competitors. In addition, there can be no assurance that these factors will not have a material adverse effect on the Company's results of operations, financial condition, or business. Possible Adverse Impact of Significant International Sales. Sales outside the United States account for a significant portion of the Company's revenues, and the Company expects that international sales will continue to account for a significant portion of its revenues in the future. Sales to customers in foreign countries are subject to a number of risks, including the following: agreements may be difficult to enforce and receivables difficult to collect through a foreign country's legal system; foreign customers may have longer payment cycles; foreign countries could impose withholding taxes or otherwise tax the Company's foreign income, impose tariffs, or adopt other restrictions on foreign trade; fluctuations in exchange rates may affect product demand and adversely affect the profitability in U.S. dollars of products provided by the Company in foreign markets where payment for the Company's products is made in the local currency; U.S. export licenses may be difficult to obtain and the protection of intellectual property in foreign countries may be more difficult to enforce. There can be no assurance that any of these factors will not have a material adverse effect on the Company's results of operations, financial condition, or business. 26PAGE Thermo Vision Corporation 1997 Financial Statements Forward-looking Statements Risks Associated with Protection, Defense, and Use of Intellectual Property. The Company holds a number of patents relating to various aspects of its products and believes that proprietary technical know-how is critical to many of its products. Proprietary rights relating to the Company's products are protected from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents or are maintained in confidence as trade secrets. There can be no assurance that patents will issue from any pending or future patent applications owned by or licensed to the Company or that the claims allowed under any issued patents will be sufficiently broad to protect the Company's technology. In the absence of patent protection, the Company may be vulnerable to competitors who attempt to copy the Company's products or gain access to its trade secrets and know-how. Proceedings initiated by the Company to protect its proprietary rights could result in substantial costs to the Company. There can be no assurance that competitors of the Company will not initiate litigation to challenge the validity of the Company's patents or that they will not use their resources to design comparable products that do not infringe the Company's patents. There may also be pending or issued patents held by parties not affiliated with the Company that relate to the Company's products or technologies. The Company may need to acquire licenses to, or contest the validity of, any such patents. There can be no assurance that any license required under any such patent would be made available on acceptable terms, if at all, or that the Company would prevail in any such contest. The Company could incur substantial costs in defending itself in suits brought against it or in suits in which the Company may assert its patent rights against others. If the outcome of any such litigation is unfavorable to the Company, the Company's results of operations, financial condition, and business could be materially adversely affected. In addition, the Company relies on trade secrets and proprietary know-how which it seeks to protect, in part, by confidentiality agreements with its collaborators, employees, and consultants. There can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach, or that the Company's trade secrets will not otherwise become known or be independently developed by competitors. Potential Fluctuations in Quarterly Performance. The Company's quarterly operating results may vary significantly depending on a number of factors, including the timing of product development and introduction; size, timing, and shipment of individual orders; seasonality of revenue; foreign currency exchange rates; the mix of products sold; and general economic conditions. Because the Company's operating expenses are based on anticipated revenue levels and a high percentage of the Company's expenses are fixed for the short term, a small variation in the timing of recognition of revenue can cause significant variations in operating results from quarter to quarter. Potential Impact of Year 2000 on Processing of Date-sensitive Information. The Company is currently assessing the potential impact of the year 2000 on the processing of date-sensitive information by the Company's computerized information systems and on products purchased by 27PAGE Thermo Vision Corporation 1997 Financial Statements Forward-looking Statements the Company. The Company believes that its internal information systems are either year 2000 compliant or will be so prior to the year 2000 without incurring material costs. There can be no assurance, however, that the Company will not experience unexpected costs and delays in achieving year 2000 compliance for its internal information systems, which could result in a material adverse effect on the Company's future results of operations. The Company is presently assessing whether its key suppliers are adequately addressing this issue and the effect this might have on the Company. The Company has not completed its analysis and is unable to conclude at this time that the year 2000 problem as it relates to products purchased from key suppliers is not reasonably likely to have a material adverse effect on the Company's future results of operations. 28PAGE Thermo Vision Corporation 1997 Financial Statements Selected Financial Information (In thousands except per share amounts) 1997(a) 1996(b) 1995 1994 1993 ----------------------------------------------------------------------- Statement of Income Data: Revenues $39,694 $30,434 $ 6,026 $ 4,242 $ 2,397 Net income 2,348 1,418 147 146 66 Basic and diluted earnings per share .34 .21 .02 .02 .01 Balance Sheet Data: Working capital $19,639 $ 5,601 $ 570 $ (359) $ (673) Total assets 47,401 28,362 6,778 6,776 2,059 Long-term obligations 7,747 - - - - Shareholders' investment 32,055 20,252 4,697 4,083 240 (a)Reflects the Company's December 1997 initial public offering of common stock and the July 1997 and February 1997 acquisitions of Centro Vision and LSI, respectively. (b)Reflects the February 1996 acquisitions of Oriel and Corion. 29PAGE Thermo Vision Corporation 1997 Financial Statements Common Stock Market Information The Company's common stock is traded on the American Stock Exchange under the symbol VIZ. The following table sets forth the high and low sales prices of the Company's common stock since December 10, 1997, the date the Company's common stock began trading on that exchange, as reported in the consolidated transaction reporting system. 1997 --------------------- Quarter High Low -------------------------------------------------------------------- Fourth $8 1/8 $7 1/2 As of January 30, 1998, the Company had 75 holders of record of its common stock. This does not include holdings in street or nominee names. The closing market price on the American Stock Exchange for the Company's common stock on January 30, 1998, was $6 7/8 per share. Shareholder Services Shareholders of Thermo Vision Corporation who desire information about the Company are invited to contact John N. Hatsopoulos, Chief Financial Officer, Thermo Vision Corporation, 81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046, (781) 622-1111. A mailing list is maintained to enable shareholders whose stock is held in street name, and other interested individuals, to receive quarterly reports, annual reports, and press releases as quickly as possible. Distribution of printed quarterly reports is limited to the second quarter only. All material will be available from Thermo Electron's Internet site (http://www.thermo.com/subsid/viz1.html). 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 issuance of stock certificates, change of ownership, lost stock certificates, and change 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 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. 30PAGE Thermo Vision Corporation 1997 Financial Statements Form 10-K Report A copy of the Annual Report on Form 10-K for the fiscal year ended January 3, 1998, as filed with the Securities and Exchange Commission, may be obtained at no charge by writing to John N. Hatsopoulos, Chief Financial Officer, Thermo Vision Corporation, 81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046. Annual Meeting The annual meeting of shareholders will be held on Monday, June 1, 1998, at 9 a.m. at the Hyatt Regency Hotel, Scottsdale, Arizona. EX-21 14 Exhibit 21 THERMO VISION CORPORATION Subsidiaries of the Registrant At February 20, 1998, the Registrant owned the following companies: State or Registrant's Jurisdiction % of Name of Incorporation Ownership -------------------------------- ------------------- ------------ Centro Vision, Inc. Delaware 100 CID Technologies Inc. New York 100 Hilger Crystals Limited United Kingdom 100 Laser Science, Inc. Delaware 100 Oriel Instruments Corporation Delaware 100 Oriel Foreign Sales Corporation U.S. Virgin Islands 100 EX-27 15
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO VISION CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JANUARY 3, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JAN-03-1998 JAN-03-1998 9,604 0 7,365 430 8,301 27,216 7,196 2,439 47,401 7,577 0 0 0 80 31,975 47,401 39,694 39,694 22,151 22,151 4,143 114 327 4,049 1,701 2,348 0 0 0 2,348 .34 .34
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