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 1-9786
THERMO INSTRUMENT SYSTEMS INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-2925809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
860 West Airport Freeway
Suite 301
Hurst, Texas 76054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
---------------------------- -----------------------------------------
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to the
filing requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference into Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of January 30, 1998, was approximately $622,251,000.
As of January 30, 1998, the Registrant had 122,045,212 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.
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PART I
Item 1. Business
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(a) General Development of Business.
-------------------------------
Thermo Instrument Systems Inc. (the Company or the Registrant) is a
worldwide leader in the development, manufacture, and marketing of
analytical instruments used to identify and quantify complex molecular
compounds and elements in gases, liquids, and solids. The Company also
provides instruments used to monitor radioactivity and air pollution, and
to control, image, inspect, and measure various industrial processes and
life-sciences phenomena. Through its 77%-owned ThermoSpectra Corporation
subsidiary, the Company develops, manufactures, and markets imaging and
inspection, temperature-control, and test and measurement instruments.
The Company's 88%-owned ThermoQuest Corporation subsidiary develops,
manufactures, and sells mass spectrometers, liquid chromatographs, and
gas chromatographs for the pharmaceutical, environmental, and industrial
marketplaces. These analytical instruments are used in the quantitative
and qualitative chemical analysis of organic and inorganic compounds at
ultra-trace levels of detection. In addition, the Company manufactures
scientific equipment for the preparation and preservation of chemical
samples, and consumables for the chromatography industry. Through its
91%-owned Thermo Optek Corporation subsidiary, the Company develops,
manufactures, and markets analytical light-based instruments that are
used in the quantitative and qualitative chemical analysis of elements
and molecular compounds. Through its 70%-owned Thermo BioAnalysis
Corporation subsidiary, the Company develops, manufactures, and markets
instruments, consumables, and information management systems used in
biochemical research and production, as well as in clinical diagnostics.
The Company's 60%-owned Metrika Systems Corporation subsidiary develops,
manufactures, and markets on-line process optimization systems that
employ proprietary, ultra-high-speed advanced scientific measurement
technologies for applications in raw-materials analysis and
finished-materials quality control. The Company's 78%-owned Thermo Vision
Corporation subsidiary designs, manufactures, and markets a diverse array
of photonics products that are used in a number of industries for
research, testing, detecting, and manufacturing applications. The
Company's 87%-owned, privately held ONIX Systems Inc. subsidiary designs,
develops, markets, and services sophisticated field measurement
instruments and on-line sensors. Through its wholly owned subsidiaries,
the Company also manufactures monitoring instruments to detect and
monitor environmental pollutants and provides clinical laboratory
equipment and consumables that assist in the diagnosis of various
diseases.
The Company has adopted a strategy of spinning out certain of its
businesses into separate subsidiaries and having these subsidiaries sell
a minority interest to outside investors. The Company believes that this
strategy provides additional motivation and incentives for the management
of the subsidiaries through the establishment of subsidiary-level stock
option incentive programs, as well as capital to support the
subsidiaries' growth. During 1997*, Metrika Systems and Thermo Vision
* References to 1997, 1996, and 1995 herein are for the fiscal years
ended January 3, 1998, December 28, 1996, and December 30, 1995,
respectively.
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sold shares of their common stock in initial public offerings and ONIX
and ThermoQuest sold shares of their common stock in private placements
for aggregate net proceeds of $86.3 million. See Note 11 to Consolidated
Financial Statements in the Registrant's 1997 Annual Report to
Shareholders for a description of the issuance of stock by the Company's
subsidiaries.
The Company historically has expanded both through the acquisition of
companies and product lines and through internal development of new
products and technologies. During the past several years, the Company has
completed a number of complementary acquisitions that have provided
additional technologies, specialized manufacturing or product development
expertise, and broader capabilities in marketing and distribution. In
March 1997, the Company acquired 95% of Life Sciences International PLC
(Life Sciences), a London Stock Exchange-listed company. Subsequently,
the Company acquired the remaining shares of Life Sciences' capital
stock. The aggregate purchase price for Life Sciences was approximately
$442.8 million, net of $55.8 million of cash acquired. The purchase price
includes the repayment of $105.0 million of Life Sciences' bank debt.
Life Sciences manufactures laboratory science equipment, appliances,
instruments, consumables, and reagents for the research, clinical, and
industrial markets.
The Company was incorporated in Delaware in May 1986 as a wholly
owned subsidiary of Thermo Electron Corporation to operate the
instruments businesses that were previously conducted by several Thermo
Electron subsidiaries. As of January 3, 1998, Thermo Electron owned
99,819,138 shares, or 82%, of the Company's outstanding common stock.
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; industrial process equipment; and
other specialized products. Thermo Electron also provides industrial
outsourcing, laboratory, and metallurgical services, and conducts
advanced-technology research and development.
Thermo Electron intends for the foreseeable future to maintain at
least 80% ownership of the Company, so that it may continue to file
consolidated U.S. federal and certain state income tax returns with the
Company. This may require the purchase by Thermo Electron of additional
shares of common stock and/or convertible debentures of the Company from
time to time as the number of outstanding shares of the Company
increases. These and any other purchases may be made either in the open
market or directly from the Company or pursuant to conversions of the
Company's 3 3/4% senior convertible note due 2000 held by Thermo
Electron. See Notes 5 and 7 to Consolidated Financial Statements in the
Registrant's 1997 Annual Report to Shareholders for a description of the
Company's outstanding stock options and convertible obligations. During
1997, Thermo Electron purchased 739,600 shares of the Company's common
stock in the open market at a total cost of $24.1 million.
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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 operates in one business segment: the developing,
manufacturing, marketing, and servicing of analytical 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, the Company develops, manufactures, markets, and services
equipment for the measurement, preparation, storage, and automation of
sample materials, and photonics products and vacuum components for
original equipment manufacturers.
(c) Description of Business.
-----------------------
Principal Products and Services
The Company manufactures and markets instruments that employ a
variety of advanced analytical techniques to determine the composition,
structure, and physical properties of natural and synthetic substances.
The Company's instruments are used for analysis, test and measurement,
environmental and nuclear monitoring, process control, and in life
sciences applications. Revenues from analytical and test and measurement
instruments were $1,084.3 million, $821.6 million, and $537.5 million in
1997, 1996, and 1995, respectively.
ThermoSpectra develops, manufactures, and markets precision imaging
and inspection, temperature-control, and test and measurement
instruments. These instruments are generally combined with proprietary
operations and analysis software to provide industrial and research
customers with integrated systems that address their specific needs.
ThermoQuest is a leading provider of mass spectrometers, liquid
chromatographs, and gas chromatographs for the pharmaceutical,
environmental, and industrial marketplaces. These analytical instruments
are used in the quantitative and qualitative chemical analysis of organic
and inorganic compounds at ultratrace levels of detection. ThermoQuest
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also supplies scientific equipment for the preparation and preservation
of chemical samples, and consumables for the chromatography industry.
Thermo Optek is a worldwide leader in the development, manufacture,
and marketing of analytical instruments that use a range of light- and
energy-based techniques. Thermo Optek's instruments are used in the
quantitative and qualitative chemical analysis of elements and molecular
compounds in a variety of solids, liquids, and gases.
Thermo BioAnalysis develops, manufactures, and markets instruments,
consumables, and information-management systems used in biochemical
research and production, as well as in clinical diagnostics. Thermo
BioAnalysis focuses on three principal product areas: life sciences
instrumentation and consumables, information-management systems, and
health physics instrumentation.
Metrika Systems manufactures process optimization systems that
provide on-line, real-time analysis of the elemental composition of bulk
raw materials in basic-materials production processes, including coal,
cement, and minerals. In addition, Metrika Systems manufactures
industrial gauging and process-control instruments and systems used
principally by manufacturers of finished web materials, such as sheet
metal, rubber, and plastic foils, to measure and control parameters such
as thickness and coating weight of such materials.
Thermo Vision, which became a public subsidiary of the Company in
December 1997, designs, manufactures, and markets a diverse array of
photonics (light-based) products, including optical components, imaging
sensors and systems, lasers, optically based instruments, opto-
electronics, and fiber optics. These products are used in applications
including medical diagnostics, semiconductor production, X-ray imaging,
physics research, and telecommunications.
ONIX Systems, a privately held subsidiary of the Company, designs,
develops, markets, and services sophisticated field measurement
instruments and on-line sensors for process-control industries,
particularly oil and gas. Systems provide real-time data collection,
analysis, and local control functions regarding the flow, level, density,
or composition of a particular material.
Thermo Instrument also has wholly owned businesses, including the
Life Sciences Clinical Instrument Division, which provides an array of
clinical laboratory equipment and consumables, and Thermo Monitoring
Instruments, which produces instruments and complete systems for
detecting and monitoring environmental pollutants from industrial and
mobile sources, and for detecting radioactive contamination.
Backlog
The Company's backlog of firm orders was $298.9 million as of January
3, 1998, and $266.6 million as of December 28, 1996, The Company
anticipates that substantially all of the backlog as of January 3, 1998,
will be shipped or completed during 1998. Certain of such orders are
cancellable by the customer upon payment of a cancellation charge. The
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Company does not believe that the level of, or changes in the level of,
its backlog is necessarily indicative of intermediate or long-term trends
in its business.
Competition
The Company generally competes on the basis of technical advances
that result in new products and improved price/performance ratios,
reputation among customers as a quality leader for products and services,
and active research and application-development programs. To a lesser
extent, the Company competes on the basis of price.
In many markets, the Company competes with large analytical-
instrument companies such as Hewlett-Packard Co., Perkin-Elmer
Corporation, Varian Associates, Inc., and Hitachi, Ltd. Certain products
manufactured by the Company also compete with products sold by numerous
smaller, specialized firms.
ThermoSpectra competes in each of its markets primarily on the basis
of technical advances that result in new products and improved
price/performance ratios and reputation among customers as a quality
leader for products and services. To a lesser extent, ThermoSpectra
competes on the basis of price. The market for digital oscillographic
recorders is characterized by competition among a number of competitors,
including Astro-Med, Inc. and Yokogawa Electric Corporation. The
general-purpose digital storage oscilloscope market is dominated by
Tektronix, Inc. and Hewlett-Packard. ThermoSpectra competes in the
high-end of the X-ray microanalysis market on the basis of quality and
technology, and in the mid-end of the X-ray microanalysis market on the
basis of quality, performance, and price. The main competitor in this
segment is Link Analytical Limited, a wholly owned subsidiary of Oxford
Instruments plc. In the X-ray inspection market, ThermoSpectra competes
with smaller companies in the manual segment of the market, and primarily
with Four Pi Systems, a subsidiary of Hewlett-Packard, in the automated
segment. In the digital-video segment of the confocal microscopy market,
ThermoSpectra competes primarily with Nikon Inc., as well as Bio-Rad
Laboratories, Inc. ThermoSpectra competes in the scanning-probe
microscope market on the basis of quality, performance, and, to a lesser
extent, price. The dominant competitor in this market is Digital
Instruments, Inc. In the temperature-control market, the Company competes
primarily on the basis of performance, price, and customer service. The
main competitors in this market are Lauder and Jalabo.
ThermoQuest competes in each of its markets primarily on technical
performance, customer service and support and, to a lesser extent, price.
ThermoQuest's principal competitors in the mass spectrometry market
include Hewlett-Packard, Waters Instruments Inc. (MicroMass), Shimadzu
Corporation, and Perkin-Elmer. ThermoQuest's principal competitors in the
liquid chromatography market include Waters, Hewlett-Packard, Shimadzu,
and Perkin-Elmer. In the gas chromatography market, ThermoQuest competes
with numerous companies including Hewlett-Packard, Varian, Perkin-Elmer,
and Shimadzu. ThermoQuest's principal competitors in the sample
preparation and preservation markets include Jouan S.A., NuAire, Sanyo
Electric, and Labconco. ThermoQuest's principal competitors in the
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chromatography consumables market include Waters, Merck, Phenomenex, and
numerous regional suppliers.
Thermo Optek competes in each of its markets primarily on
performance, reliability, customer service, and price. In the market for
AE and AA spectrometers and ICP/MS instruments, Thermo Optek competes
primarily with Perkin-Elmer and, to a lesser extent, Varian. Thermo Optek
competes in the arc/spark market primarily with Spectro. In the FT-IR and
FT-Raman markets, Thermo Optek competes primarily with Perkin-Elmer and
Bio-Rad. Thermo Optek entered the market for UV/Vis instruments with its
acquisition of Unicam in 1995. The primary competitor in this market is
Perkin-Elmer.
In life sciences instrumentation, including molecular interaction,
MALDI-TOF mass spectrometry, DNA amplification, and capillary
electrophoresis, Thermo BioAnalysis competes primarily on the basis of
technological innovation, performance, flexibility, and price. Major
competitors in this category include Perkin-Elmer and PerSeptive
Biosystems, Inc., which is now a subsidiary of Perkin-Elmer. In
information management systems, Thermo BioAnalysis competes in the
high-end LIMS and CDS markets primarily on function, flexibility,
technical sophistication, customization, and price. Major competitors
include Hewlett-Packard, Perkin-Elmer, and Waters.
Metrika Systems competes primarily on the basis of performance and,
to a lesser extent, price in the on-line coal, cement, and mineral
analysis markets. Scantech Limited is the Company's primary competitor in
the on-line coal and cement analysis market. Amdel of Australia is the
Company's principal competitor in the on-line minerals analysis market.
The market for solids and multiphase analyzers for process control is
generally fragmented. Competition in the thickness-gauging business is
highly fragmented with numerous competitors competing in various end-use
market segments. As a result, competition varies according to the end-use
segment. Metrika Systems competes primarily on the basis of quality,
performance, and price.
Thermo Vision competes primarily on the basis of technical
suitability, product performance, reliability, and price, and its
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.; UDT Sensors, Inc.; and Hamamatsu Corporation, a unit of Hamamatsu
Photonics KK.
The Company competes in the field measurement instruments and sensors
market primarily on quality and reliability, technical features,
accuracy, ease of use, price, and reputation for after market service.
The field measurement instruments and sensors market segment of the
process control market is highly fragmented and intensely competitive,
and the Company expects competition to continue to increase. ONIX Systems
competes with a few large competitors, including Fisher-Rosemount, a
division of Emerson Electric Co., Inc.; Elsag-Bailey Process Automation
N.V., affiliates of ABB Asea Brown Boveri (Holding) Ltd.; and Yokogawa,
in each of its product areas and with many companies within specific
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industries. As the technologies utilized within the process measurement
industry continue to develop, ONIX Systems expects to face increasing
competition from emerging competitors.
The Company is a leading manufacturer of ambient air-monitoring
instruments and a major manufacturer of source monitoring and
worker-safety monitoring instruments. The Company competes in these
markets on the basis of technical performance and reliability, as well as
customer service. The Company's principal competitors include Monitor
Labs Incorporated, Advanced Pollution Instruments, and Mine Safety
Appliances Co.
The Company has a relatively small presence within the large and
varied process-control marketplace, which is extremely fragmented and is
comprised of several large companies, including Fisher-Rosemount, Elsag
Bailey, and Honeywell Process Control, as well as numerous smaller
companies. The Company competes in this market primarily on the basis of
technical performance, customer service, and reliability.
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.
Number of Employees
As of January 3, 1998, the Company employed 9,398 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 14 to Consolidated Financial
Statements in the Registrant's 1997 Annual Report to Shareholders and is
incorporated herein by reference.
(e) Executive Officers of the Registrant.
------------------------------------
Present Title (Year First Became
Name Age Executive Officer)
------------------------- --- --------------------------------
Earl R. Lewis 54 President and Chief Executive
Officer (1990)
Denis A. Helm 59 Senior Vice President (1986)
Dr. Richard W.K. Chapman 53 Vice President (1994)
Barry S. Howe 42 Vice President (1994)
John N. Hatsopoulos * 63 Chief Financial Officer and
Senior Vice President (1988)
Paul F. Kelleher 55 Chief Accounting Officer (1986)
*John N. Hatsopoulos and George N. Hatsopoulos, a director of the
Company, are brothers.
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Each executive officer serves until his successor is chosen or
appointed by the Board of Directors and qualified or until earlier
resignation, death, or removal. All executive officers, except Mr. Lewis
and Dr. Chapman, have held comparable positions for at least five years,
either with the Company or with its parent company, Thermo Electron. Mr.
Lewis was named President and Chief Executive Officer of the Company in
March 1997. Mr. Lewis served as Executive Vice President and Chief
Operating Officer of the Company from January 1996 through March 1997, as
a Senior Vice President from January 1994 through January 1996, and as a
Vice President from March 1990 through January 1994. Dr. Chapman has been
President and Chief Executive Officer of ThermoQuest since its inception
in June 1995, and served as President of Finnigan Corporation, a
subsidiary of ThermoQuest, from 1992 to 1995. Messrs. Lewis, Helm,
Chapman, and Howe are full-time employees of the Company. Messrs.
Hatsopoulos and Kelleher are full-time employees of Thermo Electron and
certain of its subsidiaries, but devote such time to the affairs of the
Company as the Company's needs reasonably require.
Item 2. Properties
----------
The Company owns approximately 2,601,000 square feet of office,
engineering, laboratory, and production space, principally in California,
Florida, New Mexico, Texas, Wisconsin, Ohio, New Hampshire, New York,
Massachusetts, the United Kingdom, and Germany, and leases approximately
2,423,000 square feet of office, engineering, laboratory, and production
space, under leases expiring from 1998 through 2017, principally in
California, Massachusetts, Texas, Wisconsin, and the United Kingdom. As
of January 3, 1998, the Company had an $8.3 million mortgage loan that is
secured by 200,000 square feet of property in California with a net book
value of $15.8 million.
The Company believes that its facilities are in good condition and
are suitable and adequate for its present operations and that suitable
space is readily available if any of such leases are not extended. With
respect to leases expiring in the near future, in the event the Company
does not renew such leases, the Company believes suitable alternate space
is available for lease on acceptable terms.
Item 3. Legal Proceedings
-----------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
-------------------------------------------------------------
Matters
-------
Information concerning the market and market price for the
Registrant's common stock, $.10 par value, and dividend policy is
included under the sections labeled "Common Stock Market Information" and
"Dividend Policy" in the Registrant's 1997 Annual Report to Shareholders
and is incorporated herein by reference.
Item 6. Selected Financial Data
-----------------------
The information required under this item is included under the
sections labeled "Selected Financial Information" and "Dividend Policy"
in the Registrant's 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.
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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.
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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.
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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 11, 1998 THERMO INSTRUMENT SYSTEMS INC.
By: Earl R. Lewis
-----------------------------------
Earl R. Lewis
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated, as of March 11, 1998.
Signature Title
--------- -----
By: Earl R. Lewis President, Chief Executive Officer,
--------------------------- and Director
Earl R. Lewis
By: John N. Hatsopoulos Chief Financial Officer,
--------------------------- Senior Vice President, and Director
John N. Hatsopoulos
By: Paul F. Kelleher Chief Accounting Officer
---------------------------
Paul F. Kelleher
By: Director
---------------------------
Frank Borman
By: George N. Hatsopoulos Director
---------------------------
George N. Hatsopoulos
By: Arvin H. Smith Chairman of the Board and Director
---------------------------
Arvin H. Smith
By: Polyvios C. Vintiadis Director
---------------------------
Polyvios C. Vintiadis
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Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Directors of
Thermo Instrument Systems Inc.:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Thermo
Instrument Systems Inc.'s Annual Report to Shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated
February 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 12 is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures
applied in the audits of the basic consolidated financial statements and,
in our opinion, fairly states, in all material respects, the financial
data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 17, 1998
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SCHEDULE II
THERMO INSTRUMENT SYSTEMS INC.
Valuation and Qualifying Accounts
(In thousands)
Provision
Balance at Charged Accounts Balance
Beginning to Accounts Written at End
Description of Year Expense Recovered Off Other(a) of Year
---------------------------------------------------------------------------
Allowance for
Doubtful Accounts
Year Ended
Jan. 3, 1998 $16,981 $ 4,366 $ 304 $(4,375) $5,510 $22,786
Year Ended
Dec. 28, 1996 $12,569 $ 2,274 $ 69 $(5,015) $7,084 $16,981
Year Ended
Dec. 30, 1995 $ 8,779 $ 2,543 $ 191 $(2,942) $3,998 $12,569
(a) Includes allowance of businesses acquired during the year as described
in Note 4 to Consolidated Financial Statements in the Company's 1997
Annual Report to Shareholders and the effect of foreign currency
translation.
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
2.1 Asset and Stock Purchase Agreement among the
Registrant, Thermo Electron Corporation, and Fisons
plc dated March 1, 1995, as amended (filed as
Exhibit 2.3 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31,
1994, and as Exhibit 2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1995 [File No. 1-9786] and incorporated herein
by reference). Pursuant to Item 601(b)(2) of
Regulation S-K, schedules to this Agreement have
been omitted. The Company hereby undertakes to
furnish supplementally a copy of such schedules to
the Commission upon request.
2.2 Agreement and Release dated as of December 15, 1997,
among Fisons plc, the Registrant and Thermo Electron.
3.1 Amendment to Restated Certificate of Incorporation
of the Registrant (filed as Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 29, 1996 [File No. 1-9786] and
incorporated herein by reference).
3.2 By-Laws of the Registrant (filed as Exhibit 3(b) to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993 [File No. 1-9786]
and incorporated herein by reference).
4.1 Subordinated Indenture, dated January 15, 1998,
among the Registrant, Thermo Electron and Bankers
Trust Company as trustee, relating to $250,000,000
principal amount of 4% Convertible Subordinated
Debentures due 2005 (filed as Exhibit 4.1 to the
Registrant's Current Report on Form 8-K filed with
the Commission on January 16, 1998, and incorporated
herein by reference).
4.2 Senior convertible note purchase agreement by and
between the Registrant and Thermo Electron as of
September 15, 1993 (filed as Exhibit 10(a) to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended October 2, 1993 [File No. 1-9786] and
incorporated by reference).
The Registrant hereby agrees, pursuant to Item
601(b) (4) (iii) (A) of Regulation S-K, to furnish
to the Commission upon request, a copy of each
instrument with respect to other long-term debt of
the Registrant or its subsidiaries.
16PAGE
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.1 Amended and Restated Corporate Services Agreement,
dated as of January 3, 1993, between Thermo Electron
and the Registrant (filed as Exhibit 10(a) to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993 [File No. 1-9786]
and incorporated herein by reference).
10.2 Tax Allocation Agreement dated as of May 29, 1986,
between Thermo Electron and the Registrant (filed as
Exhibit 10(b) to the Registrant's Registration
Statement on Form S-1 [Reg. No. 33-6762] and
incorporated herein by reference).
10.3 Thermo Electron Corporate Charter, as amended and
restated effective January 3, 1993 (filed as Exhibit
10(f) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 2, 1993 [File No.
1-9786] and incorporated herein by reference).
10.4 Form of Indemnification Agreement with Directors and
Officers (filed as Exhibit 10(g) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 29, 1990 [File No. 1-9786] and incorporated
herein by reference).
10.5 Plan for sale of shares by the Registrant to Thermo
Electron (filed as Exhibit 10(dd) to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended July 3, 1993 [File No. 1-9786] and
incorporated herein by reference).
10.6 Master Repurchase Agreement dated December 28, 1996,
between the Registrant and Thermo Electron (filed as
Exhibit 10.6 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 28,
1996 [File No. 1-9786] and incorporated herein by
reference).
10.7 Amended and Restated Master Guarantee Reimbursement
and Loan Agreement dated December 2, 1997, by and
among the Registrant and Thermo Electron.
10.8 $30,000,000 Promissory Note dated as of February 13,
1996, issued by Thermo BioAnalysis Corporation to
Thermo Electron (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 30, 1996 [File No. 1-9786] and
incorporated herein by reference).
17PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.9 $65,000,000 Promissory Note dated as of April 12,
1996, issued by the Registrant to Thermo Electron
(filed as Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 30,
1996 [File No. 1-9786] and incorporated herein by
reference).
10.10 Restated Stock Holdings Assistance Plan and Form of
Promissory Note.
10.11-10.15 Reserved.
10.16 Deferred Compensation Plan for Directors of the
Registrant (filed as Exhibit 10(f) to the
Registrant's Registration Statement on Form S-1
[Reg. No. 33-6762] and incorporated herein by
reference).
10.17 Directors' Stock Option Plan of the Registrant
(filed as Exhibit 10.17 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994 [File No. 1-9786] and incorporated
herein by reference).
10.18 Incentive Stock Option Plan of the Registrant (filed
as Exhibit 10(c) to the Registrant's Registration
Statement on Form S-1 [Reg. No. 33-6762] and
incorporated herein by reference). (Maximum number
of shares issuable in the aggregate under this plan
and the Registrant's Nonqualified Stock Option Plan
is 3,515,625 shares, after adjustment to reflect
share increase approved in 1990; 3-for-2 stock
splits effected in January 1988, July 1993, and
April 1995; and 5-for-4 stock splits effected in
December 1995 and October 1997).
10.19 Nonqualified Stock Option Plan of the Registrant
(filed as Exhibit 10(d) to the Registrant's
Registration Statement on Form S-1 [Reg. No.
33-6762] and incorporated herein by reference).
(Maximum number of shares issuable in the aggregate
under this plan and the Registrant's Incentive Stock
Option Plan is 3,515,625 shares, after adjustment to
reflect share increase approved in 1990; 3-for-2
stock splits effected in January 1988, July 1993,
and April 1995; and 5-for-4 stock splits effected in
December 1995 and October 1997).
18PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.20 Equity Incentive Plan of the Registrant (filed as
Appendix A to the Proxy Statement dated April 27,
1993, of the Registrant [File No. 1-9786] and
incorporated herein by reference). (Maximum number
of shares issuable is 5,039,062 shares, after
adjustment to reflect share increase approved in
December 1993; 3-for-2 stock splits effected in July
1993 and April 1995; and 5-for-4 stock splits
effected in December 1995 and October 1997).
10.21 Finnigan Corporation 1979 Long-term Incentive Stock
Option Plan (filed as Exhibit 10.21 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 [File No.
1-9786] and incorporated herein by reference).
10.22 Former Thermo Environmental Corporation Incentive
Stock Option Plan (filed as Exhibit 10(d) to Thermo
Environmental's Registration Statement on Form S-1
[Reg. No. 33-329] and incorporated herein by
reference). (Maximum number of shares issuable in
the aggregate under this plan and the Former Thermo
Environmental Corporation Nonqualified Stock Option
Plan is 1,450,195 shares, after adjustment to
reflect share increase approved in 1987; 3-for-2
stock splits effected in July 1993 and April 1995;
and 5-for-4 stock splits effected in December 1995
and October 1997).
10.23 Former Thermo Environmental Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10(e) to Thermo
Environmental's Registration Statement on Form S-1
[Reg. No. 33-329] and incorporated herein by
reference). (Maximum number of shares issuable in
the aggregate under this plan and the Former Thermo
Environmental Corporation Incentive Stock Option
Plan is 1,450,195 shares, after adjustment to
reflect share increase approved in 1987; 3-for-2
stock splits effected in July 1993 and April 1995;
and 5-for-4 stock splits effected in December 1995
and October 1997).
10.24 Thermo Instrument Systems Inc. - ThermoSpectra
Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.51 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31,
1994 [File No. 1-9786] and incorporated herein by
reference).
19PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.25 Thermo Instrument Systems Inc. - ThermoQuest
Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.65 to Thermo Cardiosystems' Annual Report
on Form 10-K for the fiscal year ended December 30,
1995 [File No. 1-10114] and incorporated herein by
reference).
10.26 Thermo Instrument Systems Inc. - Thermo BioAnalysis
Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.64 to Thermo Cardiosystems' Annual Report
on Form 10-K for the fiscal year ended December 30,
1995 [File No. 1-10114] and incorporated herein by
reference).
10.27 Thermo Instrument Systems Inc. - Thermo Optek
Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.27 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 28,
1996 [File No. 1-9786] and incorporated herein by
reference).
10.28 Thermo Instrument Systems Inc. - Metrika Systems
Corporation Nonqualified Stock Option Plan.
10.29 Thermo Instrument Systems Inc. - Thermo Vision
Corporation Nonqualified Stock Option Plan.
10.30 Thermo Instrument Systems Inc. - ONIX Systems Inc.
Nonqualified Stock Option Plan.
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 for services
rendered to the Registrant. The terms of such plans
are substantially the same as those of the
Registrant's Equity Incentive Plan.
10.31 $210,000,000 Promissory Note dated as of March 27,
1997, issued by the Registrant to Thermo Electron
(filed as Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 29,
1997, and incorporated herein by reference).
10.32 $115,000,000 Promissory Note dated as of June 24,
1997, issued by the Registrant to Thermo Electron
(filed as Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 28,
1997, and incorporated herein by reference).
20PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.33 $3,800,000 Promissory Note dated as of July 14,
1997, issued by Thermo Vision to Thermo Electron
(filed as Exhibit 10 to Thermo Optek's Quarterly
Report on Form 10-Q for the quarter ended September
27, 1997, and incorporated herein by reference).
10.34 $45,000,000 Promissory Note dated as of September
12, 1997, issued by ThermoSpectra to Thermo Electron
(filed as Exhibit 10 to ThermoSpectra's Quarterly
Report on Form 10-Q for the quarter ended September
27, 1997, and incorporated herein by reference).
10.35 Amended and Restated Master Guarantee Reimbursement
and Loan Agreement dated as of December 5, 1997,
between Thermo Optek and Thermo Electron.
10.36 Amended and Restated Master Guarantee Reimbursement and
Loan Agreement dated as of December 3, 1997, between
ThermoQuest and Thermo Electron.
10.37 Amended and Restated Master Guarantee Reimbursement and
Loan Agreement dated as of December 3, 1997, between
Metrika Systems and Thermo Electron.
10.38 Master Guarantee Reimbursement and Loan Agreement dated as
of November 14, 1997, between Thermo Vision and Thermo
Electron.
10.39 Amended and Restated Master Guarantee Reimbursement and
Loan Agreement dated as of December 2, 1997, between
Thermo BioAnalysis and Thermo Electron.
10.40 Amended and Restated Master Guarantee Reimbursement and
Loan Agreement dated as of December 4, 1997, between
ThermoSpectra and Thermo Electron.
10.41 Amended and Restated Master Guarantee Reimbursement
and Loan Agreement dated as of January 5, 1998,
between ONIX Systems and Thermo Electron (filed as
Exhibit 10.5 to the Registration Statement of ONIX
Systems on Form S-1 [Reg. No. 333-45333] 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.
23 Consent of Arthur Andersen LLP.
21PAGE
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
27.1 Financial Data Schedule for the year ended January 3,
1998.
27.2 Financial Data Schedule for the year ended December 28,
1996 (restated for the adoption of SFAS No. 128).
27.3 Financial Data Schedule for the quarter ended March 29,
1997 (restated for the adoption of SFAS No. 128).
27.4 Financial Data Schedule for the quarter ended June 28,
1997 (restated for the adoption of SFAS No. 128).
27.5 Financial Data Schedule for the quarter ended
September 27, 1997 (restated for the adoption of
SFAS No. 128).
EXHIBIT 2.2
AGREEMENT AND RELEASE
This Agreement and Release, entered into as of the 15th
day of December, 1997, by and between Fisons plc, an English
company ("Fisons"), on the one hand, and Thermo Instrument
Systems Inc., a Delaware corporation ("Thermo"), and Thermo
Electron Corporation, a Delaware corporation ("Thermo Electron"),
on the other hand (all of whom are sometimes referred to as
"parties").
RECITALS
A. The parties hereto have previously entered into an Amended
and Restated Asset and Stock Purchase Agreement (the
"Agreement"), dated as of March 29, 1996, pursuant to which
Fisons sold a portion of its scientific instruments business to
Thermo.
B. Pursuant to Section 4.1 of the Agreement, which provides for
a possible post-closing adjustment to the purchase price, Fisons
in 1996 delivered to Thermo a draft closing balance sheet with
respect to the business sold. Thereafter, Thermo asserted
certain objections and other claims with respect to that draft
closing balance sheet, which it claimed entitled it to a
reduction in the purchase price, plus interest thereon.
Subsequently, Thermo made certain other claims with respect to
the resale to Fisons pursuant to Section 7.16 of the Agreement of
certain accounts receivable. All such objections and claims are
referred to herein as the "Asserted Claims".
C. The parties desire to resolve the Asserted Claims amicably,
without any admission of liability, on the terms and conditions
set forth herein.
AGREEMENT
NOW, THEREFORE, Fisons, Thermo and Thermo Electron, in
consideration of the foregoing and the mutual promises and
obligations contained herein, and intending to be legally bound
hereby, covenant and agree as follows:
1. In consideration of the terms hereof, the releases
granted hereby and the other covenants herein, Fisons shall pay
to Thermo the sum of TWENTY-FOUR MILLION FOUR HUNDRED FIFTY-SIX
THOUSAND SEVEN HUNDRED EIGHTY-THREE British Pounds Sterling
(BPS24,456,783) (collectively, the "Settlement Funds"), as set
forth below by wire transfer to the following bank and account
number:
PAGE
<PAGE>
Barclays Bank Plc
London England
Sort Code 20-00-00
For: Thermo Instrument Systems Inc.
Account Number xxxxxxxx
Attention: North American Team
The Settlement Funds are compromised of the following
constituent amounts:
(a) 2,475,000 British Pounds Sterling, in respect of
Claims (as defined below) relating to the matters provided for in
Section 7.16 of the Agreement;
(b) 19,650,000 British Pounds Sterling, in respect of
all other Claims (as defined below) released hereunder;
(c) 2,331,783 British Pounds Sterling, representing
interest on the amount provided for in subparagraph (b) above.
Fisons shall pay the Settlement Funds in full on January 2,
1998. The effectiveness of this Agreement and Release is
conditioned upon Thermo's receipt of the Settlement Funds.
2. 2.1 In consideration of the delivery of the Settlement
Funds as set forth above in paragraph 1, each of Thermo and
Thermo Electron does, for and on behalf of itself as well as all
persons claiming by, through or under it (including without
limitation all past, present and future parents, predecessors,
successors, subsidiaries, affiliates and assigns, their
respective past, present and future directors, officers,
employees, agents, attorneys and insurers, and administrators
thereof) (individually and collectively, "Releasors"), hereby
irrevocably and unconditionally acknowledges complete
satisfaction of, and does hereby remise, release and forever
discharge Fisons, its past, present and future parents,
predecessors, successors, subsidiaries, affiliates and assigns,
their respective past, present and future directors, officers,
shareholders, employees, agents, attorneys and insurers, and
administrators thereof (including without limitation
Rhone-Poulenc Rorer Inc.) (individually and collectively,
"Releasees") of and from, any and all claims, demands, causes of
action, suits, debts, sums of money, accounts, covenants,
contracts, controversies, agreements, promises, damages and
2PAGE
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judgments ("Claims") of any kind or nature whatsoever, in law or
in equity, known or unknown, existing or contingent, suspected or
unsuspected, within this or any jurisdiction, that it ever had or
may have had or may now or hereafter have, arising from or
relating to:
(a) any matter provided for in any one or more of the
following Sections of the Agreement:
(i) Section 3.2(b) insofar as it relates to any
liability for a warranty obligation released under
paragraph 2.1(a)(iii) of this Agreement and
Release or any liability for a product liability
claim released under paragraph 2.1(a)(ii) of this
Agreement and Release (and, for the avoidance of
doubt, the release under this paragraph 2.1(a)(i)
of this Agreement and Release shall not affect any
Claim under such Section 3.2 (b) with respect to
the lawsuit Biacore, AB and Biacore, Inc. v.
Thermo Bioanalysis Corporation, U.S.D.C., D. Del,
No. 97-274);
(ii) Section 3.2(f) insofar as it relates to any
liability for a product liability claim asserted
on or prior to the date hereof with respect to an
occurrence after the Closing (as defined in the
Agreement);
(iii) Section 3.2(j), except for any Claim
under Section 3.2(j) with respect to the lawsuit
The Purdue Frederick Company v. Fisons
Instruments, Inc., and VG Laboratory Systems
Limited, U.S.D.C., S.D.N.Y. No. 97 CV-0898;
(iv) Section 4.1;
(v) Section 5, except for the representations and
warranties set forth therein that are identified
in Section 11.3(c)(i) of the Agreement as
surviving without time limit;
(vi) Section 7.16;
(vii) Section 11.1(a) insofar as it relates to
representations and warranties with respect to
which Claims are released hereunder;
(viii) Section 11.1(b) insofar as it relates to
covenants or agreements with respect to which
Claims are released hereunder;
3PAGE
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(ix) Section 11.1(c) insofar as it relates to
Excluded Liabilities (as defined in the Agreement)
with respect to which Claims are released
hereunder;
(x) Section 11.1(d) insofar as it relates to
Excluded Company Liabilities (as defined in the
Agreement) corresponding to the Excluded
Liabilities with respect to which Claims are
released hereunder; and
(xi) all other Sections or portions thereof of the
Agreement, except for the Sections and matters set
forth below in paragraph 2.2 of this Agreement and
Release; provided, however, that each Claim (other
than an Asserted Claim or any Claim for a matter
that is known to any Releasor as of the date
hereof) arising from or relating to any matter
provided for in any such other Sections of the
Agreement shall be excluded from the release under
this paragraph 2.1(a)(xi) to the extent the Losses
(as defined in the Agreement) incurred or suffered
by Thermo as a result of such Claim exceed ONE
MILLION UNITED STATES DOLLARS (US $1,000,000); and
provided further that in determining whether such
threshold has been exceeded all Claims arising out
of separate occurrences shall be treated as
separate Claims except that Claims arising out of
the same or similar circumstances or the same text
of the Agreement shall be treated as a single
Claim; and/or
(b) the Asserted Claims and/or the subject matter
thereof.
2.2 The release under paragraph 2.1(a)(xi) of this
Agreement and Release shall not extend to any one or more of the
following Sections of the Agreement:
(a) Sections 2.7; 2.8; 2.9; 3.2(a), (c), (d), (e),
(g), (h), (i), (k), (l), (m), and (n); 4.2; 4.3; 7.6;
7.7(a), (b) and (c); 7.8; 7.9; 7.10(b); 7.12; 7.13;
7.14; 7.15; 7.17; 7.19; 7.21; 7.23; 7.24; 11.1(e),( f),
(g) and (h); 11.3; 11.4; and 13;
(b) Sections 3.2(b), (f) and (j) insofar as they are
excluded from the release under paragraphs 2.1(a)(i),
(ii) or (iii) of this Agreement and Release; and
(c) Sections 11.1(a), (b), (c) and (d) insofar as they
relate to Claims that are excluded from the release
4PAGE
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hereunder pursuant to paragraph 2.1(a)(xi), 2.2(a) or
2.2(b) of this Agreement and Release.
3. Each of Thermo and Thermo Electron understands and
acknowledges that it is possible that unknown losses or claims
exist or that the Asserted Claims may have been underestimated in
amount or severity, and the parties explicitly took that into
account in determining to enter into this Agreement and Release,
and nonetheless bargained, with the knowledge of the possibility
of such unknown claims to provide for a full accord, satisfaction
and discharge of all such claims that are within the scope of the
release provided hereunder. Consequently, each of Thermo and
Thermo Electron expressly waives all rights under California
Civil Code Section 1542, or any similar provision law. Section
1542 provides that:
" A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by
him must have materially affected his settlement with
the debtor."
4. Each of Thermo and Thermo Electron represents, warrants
and covenants that there are not now pending and that it will not
hereafter under any circumstances commence or prosecute any suit,
action or proceeding or assert any claim against any of the
Releasees with respect to any Claim released hereunder.
5. Each of Thermo and Thermo Electron represents and
warrants that:
(a) it has not heretofore assigned or transferred or
purported to assign or transfer to any person or entity
any Claim (or portion thereof or interest therein)
released hereunder, and it shall indemnify, defend and
hold the Releasees harmless from and against any and
all claims based on or arising out of any such
assignment or transfer, or purported assignment or
transfer, of any such Claim or any portion thereof or
interest therein;
(b) it has not been induced to execute this Agreement
and Release by any warranty, representation, promise,
covenant or agreement made by or on behalf of Releasees
or any other person or entity, other than the payment
of the Settlement Funds as described in paragraph 1
hereof;
(c) it has carefully read and understood the scope and
effect of every provision of the Agreement and Release,
it has consulted with counsel of its choice who has
fully and completely explained to it the terms and
5PAGE
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provisions of this Agreement and Release and it has
executed this Agreement and Release voluntarily and
intending to be legally bound hereby;
(d) it has full power and authority to execute and
deliver this Agreement and Release and to perform its
obligations hereunder in accordance with their terms;
(e) the execution and delivery of this Agreement and
Release, and the performance by it of its obligations
hereunder, have been duly authorized by all necessary
corporate actions on its part;
(f) this Agreement and Release constitutes its legal,
valid and binding obligation, enforceable against it in
accordance with the terms hereof.
6. This Agreement and Release constitutes a full and
complete compromise and settlement of all Claims released
hereunder. In addition, Fisons acknowledges and agrees that this
Agreement and Release constitutes a full and complete compromise
and settlement of (i) the adjustments under Section 4.1 of the
Agreement based on the Draft Closing Balance Sheet and the
Closing Balance Sheet (as those terms are defined in the
Agreement); and (ii) all of Fisons' rights and Thermo's
obligations under Section 7.16 of the Agreement.
7. Each of Thermo and Thermo Electron acknowledges that
this Agreement and Release, the settlement reflected herein and
the payment made pursuant hereto are the result of the compromise
resolution of disputed claims and shall never be offered or
construed as an admission of any liability of any Releasee, or an
acknowledgment of the validity of any Claim released hereunder,
or as evidence of any such matter. Releasees specifically deny
any and all such liability or other responsibility to Releasors
and the validity of any and all such Claims.
8. This Agreement and Release and all of its covenants,
agreements, representations, warranties, terms and conditions
shall be binding upon and shall insure to the benefit of (1) the
successors, heirs and assigns hereafter of each of the parties
hereto, and (2) any persons and/or entities that acquire all or
part of the assets of any of the parties hereto.
9. No waiver or compromise of any default under or breach
of this Agreement and Release or any indulgence granted with
respect to the performance of any obligation hereunder shall
constitute or be deemed to imply a waiver of (1) any subsequent
breach of this Agreement and Release or (2) the strict
performance of any further obligations hereunder.
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10. This Agreement and Release sets forth the entire
agreement between the parties and fully supersedes any and all
prior agreements, representations and understandings between the
parties hereto pertaining to the subject matter hereof. No
change, modification or addition, amendment or supplement to this
Agreement and Release shall be valid unless set forth in writing
and signed and dated by each and all of the parties hereto.
11. This Agreement and Release shall be governed by and
construed in accordance with the laws of the State of New York
(without regard to principles of conflicts of law).
12. This Agreement and Release may be executed in separate
counterparts.
IN WITNESS WHEREOF, the parties have caused this Agreement
and Release to be executed by their duly authorized
representatives as of the date first set forth above.
Fisons plc Thermo Instrument Systems Inc.
By: /s/ Guillaume Prache By: /s/ Earl R. Lewis
Name: Guillaume Prache Name: Earl R. Lewis
Title: Sr. Vice President Title: President
and Chief Financial
Officer
Thermo Electron Corporation
By: /s/ Earl R. Lewis
Name: Earl R. Lewis
Title: Vice President
7PAGE
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RHONE-POULENC RORER
RHONE-POULENC RORER INC.
500 ARCOLA ROAD
P.O. BOX 1200
COLLEGEVILLE, PA 19426-0107
TEL. 610-454-8000
December 15, 1997
Thermo Instrument Systems Inc.
81 Wyman Street
Waltham, MA 02251
Re: Guarantee (the "Guarantee") of Rhone-Poulenc Rorer Inc.
("RPR"), dated March 29, 1996, with respect to Asset
and Stock Purchase Agreement (the "Agreement") dated as
of March 29, 1996 among Thermo Instrument Systems Inc.,
Thermo Electron Corporation and Fisons plc
Gentlemen:
This will confirm that RPR as Guarantor under the
above-referenced Guarantee acknowledges and consents to the
revisions to the Agreement made by the Agreement and Release,
dared as of December 15, 1997, between Fisons plc, Thermo
Instrument Systems Inc. and Thermo Electron Corporation.
Very truly your,
RHONE-POULENC RORER INC.
By: /s/ Richard B. Young
Richard B. Young
Vice President
EXHIBIT 10.7
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 2nd day of
December, 1997, by and among Thermo Electron Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
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;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier
Majority Owned Subsidiaries ") may themselves be majority owned
subsidiaries of other Majority Owned Subsidiaries ("First Tier
Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second
Tier Majority Owned Subsidiary's Underlying Obligations may be
demanded and given without the respective First Tier Majority
Owned Subsidiary also issuing a guarantee of such Underlying
Obligation;
WHEREAS, the Parent may itself make a loan or provide other
credit to a Second Tier Majority Owned Subsidiary or its
wholly-owned subsidiaries under circumstances where the
applicable First Tier Majority Owned Subsidiary does not provide
such credit; 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
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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
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
Parent as a result of the Parent Guarantee. If the
Underlying Obligation is issued by a Second Tier Majority
Owned Subsidiary or a wholly-owned subsidiary thereof, and
such Second Tier Majority Owned Subsidiary is unable to
fully indemnify the Parent (because of the poor financial
condition of such Second Tier Majority Owned Subsidiary, or
for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary shall indemnify and
save harmless the Parent from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
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
2
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also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. 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 subsidiaries 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
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.
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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 subsidiaries, 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
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
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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. If the Parent makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent thereunder. Such
guaranty shall be enforced only after the Parent, in its
reasonable judgment, determines that the Second Tier
Majority Owned Subsidiary is unable to fully perform its
obligations under the Credit Extension. If the Parent
provides Credit Extension to a wholly-owned subsidiary of a
Second Tier Majority Owned Subsidiary, the Second Tier
Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to the Parent thereunder and the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent hereunder. Such
guaranty by the First Tier Majority Owned Subsidiary shall
be enforced only after the Parent, in its reasonable
judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its guaranty
obligation hereunder.
6. 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.
7. 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.
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO ELECTRON CORPORATION
By: /s/ Melissa F. Riordan
Title: Treasurer
THERMO INSTRUMENT SYSTEMS INC.
By: /s/ Earl R. Lewis
Title: President
EXHIBIT 10.10
THERMO INSTRUMENT SYSTEMS INC.
RESTATED STOCK HOLDING ASSISTANCE PLAN
SECTION 1. Purpose.
The purpose of this Plan is to benefit Thermo Instrument
Systems Inc. (the "Company") and its stockholders by encouraging
Key Employees to acquire and maintain share ownership in the
Company, by increasing such employees' proprietary interest in
promoting the growth and performance of the Company and its
subsidiaries and by providing for the implementation of the Stock
Holding Policy.
SECTION 2. Definitions.
The following terms, when used in the Plan, shall have the
meanings set forth below:
Committee: The Human Resources Committee of the Board of
Directors of the Company as appointed from time to time.
Common Stock: The common stock of the Company and any
successor thereto.
Company: Thermo Instrument Systems Inc., a Delaware
corporation.
Stock Holding Policy: The Stock Holding Policy of the
Company, as adopted by the Committee and as in effect from time
to time.
Key Employee: Any employee of the Company or any of its
subsidiaries, including any officer or member of the Board of
Directors who is also an employee, as designated by the
Committee, and who, in the judgment of the Committee, will be in
a position to contribute significantly to the attainment of the
Company's strategic goals and long-term growth and prosperity.
Loans: Loans extended to Key Employees by the Company
pursuant to this Plan.
Plan: The Thermo Instrument Systems Inc. Stock Holding
Assistance Plan, as amended from time to time.
SECTION 3. Administration.
The Plan and the Stock Holding Policy shall be administered
by the Committee, which shall have authority to interpret the
Plan and the Stock Holding Policy and, subject to their
provisions, to prescribe, amend and rescind any rules and
regulations and to make all other determinations necessary or
desirable for the administration thereof. The Committee's
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interpretations and decisions with regard to the Plan and the
Stock Holding Policy and such rules and regulations as may be
established thereunder shall be final and conclusive. The
Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or the Stock Holding
Policy, or in any Loan in the manner and to the extent the
Committee deems desirable to carry it into effect. No member of
the Committee shall be liable for any action or omission in
connection with the Plan or the Stock Holding Policy that is made
in good faith.
SECTION 4. Loans and Loan Limits.
The Committee has determined that the provision of Loans
from time to time to Key Employees in such amounts as to cause
such Key Employees to comply with the Stock Holding Policy is, in
the judgment of the Committee, reasonably expected to benefit the
Company and authorizes the Company to extend Loans from time to
time to Key Employees in such amounts as may be requested by such
Key Employees in order to comply with the Stock Holding Policy.
Such Loans may be used solely for the purpose of acquiring Common
Stock (other than upon the exercise of stock options or under
employee stock purchase plans) in open market transactions or
from the Company.
Each Loan shall be full recourse and evidenced by a
non-interest bearing promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and maturing in
accordance with the provisions of Section 6 hereof, and
containing such other terms and conditions, which are not
inconsistent with the provisions of the Plan and the Stock
Holding Policy, as the Committee shall determine in its sole and
absolute discretion.
SECTION 5. Federal Income Tax Treatment of Loans.
For federal income tax purposes, interest on Loans shall be
imputed on any interest free Loan extended under the Plan. A Key
Employee shall be deemed to have paid the imputed interest to the
Company and the Company shall be deemed to have paid said imputed
interest back to the Key Employee as additional compensation.
The deemed interest payment shall be taxable to the Company as
income, and may be deductible to the Key Employee to the extent
allowable under the rules relating to investment interest. The
deemed compensation payment to the Key Employee shall be taxable
to the employee and deductible to the Company, but shall also be
subject to employment taxes such as FICA and FUTA.
SECTION 6. Maturity of Loans.
Each Loan to a Key Employee hereunder shall be due and
payable on demand by the Company. If no such demand is made,
then each Loan shall mature and the principal thereof shall
become due and payable on the fifth anniversary of the date of
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the Loan, provided that the Committee may, in its sole and
absolute discretion, authorize such other maturity and repayment
schedule as the Committee may determine. Each Loan shall also
become immediately due and payable in full, without demand, upon
the occurrence of any of the events set forth in the Note;
provided that the Committee may, in its sole and absolute
discretion, authorize an extension of the time for repayment of a
Loan upon such terms and conditions as the Committee may
determine.
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Stock Holding Policy in any respect, or terminate the Plan
or the Stock Holding Policy at any time. No such amendment or
termination, however, shall alter or otherwise affect the terms
and conditions of any Loan then outstanding to Key Employee
without such Key Employee's written consent, except as otherwise
provided herein or in the promissory note evidencing such Loan.
SECTION 8. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or
right to receive a Loan under the Plan, and no employee shall
have any right to be retained in the employ of the Company due to
his or her participation in the Plan.
(b) No Loan shall be made hereunder unless counsel for the
Company shall be satisfied that such Loan will be in compliance
with applicable federal, state and local laws.
(c) The expenses of the Plan shall be borne by the Company.
(d) The Plan shall be unfunded, and the Company shall not
be required to establish any special or separate fund or to make
any other segregation of assets to assure the making of any Loan
under the Plan.
(e) Except as otherwise provided in Section 7 hereof, by
accepting any Loan under the Plan, each Key Employee shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
or the Stock Holding Policy by the Company, the Board of
Directors of the Company or the Committee.
(f) The appropriate officers of the Company shall cause to
be filed any reports, returns or other information regarding
Loans hereunder, as may be required by any applicable statute,
rule or regulation.
SECTION 9. Effective Date.
The Plan and the Stock Holding Policy shall become effective
upon approval and adoption by the Committee.
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EXHIBIT A TO STOCK HOLDING ASSISTANCE PLAN
THERMO INSTRUMENT SYSTEMS INC.
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to Thermo Instrument Systems Inc. (the
"Company"), or assigns, ON DEMAND, but in any case on or before
[insert date which is the fifth anniversary of date of issuance]
(the "Maturity Date"), the principal sum of [loan amount in
words] ($_______), or such part thereof as then remains unpaid,
without interest. Principal shall be payable in lawful money of
the United States of America, in immediately available funds, at
the principal office of the Company or at such other place as the
Company may designate from time to time in writing to the
Employee.
Unless the Company has already made a demand for payment in
full of this Note, the Employee agrees to repay to the Company
from the Employee's annual cash incentive compensation (referred
to as bonus), beginning with the first such bonus payment to
occur after the date of this Note and on each of the next four
bonus payment dates occurring prior to the Maturity Date, such
amount as may be designated by the Company. Any amount remaining
unpaid under this Note shall be due and payable on the Maturity
Date.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. The
Employee acknowledges and agrees that the Company has advanced to
the Employee the principal amount of this Note pursuant to the
Company's Stock Holding Assistance Plan, and that all terms and
conditions of such Plan are incorporated herein by reference.
The unpaid principal amount of this Note shall be and become
immediately due and payable without notice or demand, at the
option of the Company, upon the occurrence of any of the
following events:
(a) the termination of the Employee's employment with
the Company, with or without cause, for any reason or for no
reason;
(b) the death or disability of the Employee;
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(c) the failure of the Employee to pay his or her
debts as they become due, the insolvency of the Employee,
the filing by or against the Employee of any petition under
the United States Bankruptcy Code (or the filing of any
similar petition under the insolvency law of any
jurisdiction), or the making by the Employee 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 Employee; or
(d) the issuance of any writ of attachment, by trustee
process or otherwise, or any restraining order or injunction
not removed, repealed or dismissed within thirty (30) days
of issuance, against or affecting the person or property of
the Employee or any liability or obligation of the Employee
to the Company.
In case any payment herein provided for shall not be paid
when due, the Employee further promises to pay all costs of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Company in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of the Company, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion.
The Employee hereby waives presentment, demand, notice of
prepayment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note. The undersigned hereby assents to any
indulgence and any extension of time for payment of any
indebtedness evidenced hereby granted or permitted by the
Company.
This Note has been made pursuant to the Company's Stock
Holding Assistance Plan and shall be governed by and construed in
accordance with, such Plan and the laws of the State of Delaware
and shall have the effect of a sealed instrument.
_______________________________
Employee Name: _________________
________________________
Witness
EXHIBIT 10.28
THERMO INSTRUMENT SYSTEMS INC.
METRIKA SYSTEMS CORPORATION NONQUALIFIED STOCK OPTION PLAN
1. Purpose
This Nonqualified Stock Option Plan (the "Plan") is intended
to encourage ownership of Common Stock, $0.01 par value (the
"Common Stock"), of Metrika Systems Corporation ("Subsidiary"),
a subsidiary of Thermo Instrument Systems Inc. (the "Company"),
by persons selected by the Board of Directors (or a committee
thereof) in its sole discretion, including directors, executive
officers, key employees and consultants of the Company and its
subsidiaries, and to provide additional incentive for them to
promote the success of the business of the Company and
Subsidiary. The Plan is intended to be a nonstatutory stock
option plan.
2. Effective Date of the Plan
The Plan shall become effective when adopted by the Board of
Directors of the Company.
3. Stock Subject to Plan
At no time shall the number of shares of the Common Stock
then outstanding which are attributable to the exercise of
options granted under the Plan plus the number of shares then
issuable upon the exercise of outstanding options granted under
the Plan exceed 100,000 shares, subject however, to the
provisions of paragraph 11 of the Plan. Shares to be issued upon
the exercise of options granted under the Plan shall be shares of
Subsidiary beneficially owned by the Company. If any option
expires or terminates for any reason without having been
exercised in full, the unpurchased shares subject thereto shall
again be available for options thereafter to be granted.
4. Administration
The Plan shall be administered by a committee (the
"Committee") composed of the members of the Board of Directors of
the Company, no member of which shall act upon any matter
exclusively affecting any option granted or to be granted to
himself or herself under the Plan. Subject to the provisions of
the Plan, the Committee shall have complete authority, in its
discretion, to make the following determinations with respect to
each option to be granted by the Company: (a) the person to
receive the option (the "Optionee"); (b) the time of granting the
option; (c) the number of shares subject thereto; (d) the option
price; (e) the option period; and (f) the terms of the option and
form of option agreement (which need not be identical, but which
shall conform to the applicable terms and conditions of the Plan
and contain such other provisions as the Board of Directors deems
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advisable and not inconsistent with the Plan). In making such
determinations, the Committee may take into account the nature of
the services rendered by the Optionees, their present and
potential contributions to the success of the Company and/or one
or more of its subsidiaries, and such other factors as the
Committee in its discretion shall deem relevant. Subject to the
provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend, and rescind
rules and regulations relating to it, to determine the terms and
provisions of the respective option agreements (which need not be
identical), and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee's
determinations on the matters referred to in this paragraph 4
shall be conclusive.
5. Eligibility
An option may be granted to any person selected by the
Committee in its sole discretion.
6. Time of Granting Options
The granting of an option shall take place at the time
specified by the Committee. Only if expressly so provided by the
Committee shall the granting of an option be regarded as taking
place at the time when a written option agreement shall have been
duly executed and delivered by or on behalf of the Company and
the Optionee to whom such option shall be granted. The agreement
shall provide, among other things, that it does not confer upon
an Optionee any right to continue in the employ of the Company
and/or one or more of its subsidiaries or to continue as a
director or consultant of the Company, and that it does not
interfere in any way with the right of the Company or any such
subsidiary to terminate the employment of the Optionee at any
time if the Optionee is an employee, to remove the Optionee as a
director of the Company if the Optionee is a director, or to
terminate the services of the Optionee if the Optionee is a
consultant.
7. Option Period
An option may become exercisable immediately or in such
installments, cumulative or noncumulative, as the Committee may
determine.
8. Exercise of Option
An option may be exercised in accordance with its terms by
written notice of intent to exercise the option, specifying the
number of shares of stock with respect to which the option is
then being exercised. The notice shall be accompanied by payment
in the form of cash or shares of Subsidiary Common Stock (the
"Tendered Shares") with a then current market value equal to the
option price of the shares to be purchased; provided, however,
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that such Tendered Shares shall have been acquired by the
Optionee more than six months prior to the date of exercise,
unless such requirement is waived in writing by the Company.
Against such payment the Company shall deliver or cause to be
delivered to the Optionee a certificate for the number of shares
then being purchased, registered in the name of the Optionee or
other person exercising the option. If any law or applicable
regulation of the Securities and Exchange Commission or other
body having jurisdiction in the premises shall require the
Company, Subsidiary or the Optionee to take any action in
connection with shares being purchased upon exercise of the
option, exercise of the option and delivery of the certificate or
certificates for such shares shall be postponed until completion
of the necessary action, which shall be taken at the Company's
expense.
9. Transferability
Except as may be authorized by the Committee , in its sole
discretion, no Option may be transferred other than by will or
the laws of descent and distribution, and during a Optionee's
lifetime an option 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 Committee
may, in its discretion, determine the extent to which options
granted to an Optionee shall be transferable, and such provisions
permitting or acknowledging transfer shall be set forth in the
written agreement evidencing the option executed and delivered by
or on behalf of the Company and the Optionee.
10. Vesting, Restrictions and Termination of Options
The Committee, in its sole discretion, may determine the
manner in which options shall vest, the rights of the Company to
repurchase the shares issued upon the exercise of any option and
the manner in which such rights shall lapse, and the terms upon
which any option granted shall terminate. The Board of Directors
shall have the right to accelerate the date of exercise of any
installment or to accelerate the lapse of the Company's
repurchase rights. All of such terms shall be specified in a
written option agreement executed and delivered by or on behalf
of the Company and the Optionee to whom such option shall be
granted.
11. Adjustment of Number of Shares
Each stock option agreement shall provide that in the event
of any stock dividend payable in the Common Stock or any split-up
or contraction in the number of shares of the Common Stock
occurring after the date of the agreement and prior to the
exercise in full of the option, the number of shares for which
the option may thereafter be exercised shall be proportionately
adjusted and the price to be paid for each share subject to the
option shall be proportionately adjusted. Each such agreement
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shall also provide that in case of any reclassification or change
of outstanding shares of the Common Stock or in case of any
consolidation or merger of Subsidiary with or into another
company or in case of any sale or conveyance to another company
or entity of the property of Subsidiary as a whole or
substantially as a whole, the Optionee shall, upon exercise of
the option, be entitled to receive shares of stock or other
securities in its place equivalent in kind and value to those
shares which he would have received if he had exercised the
option in full immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and had
continued to hold the shares subject to the option (together with
all other shares, stock and securities thereafter issued in
respect thereof) to the time of the exercise of the option;
provided , that if any recapitalization is to be effected through
an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par
value will exceed the option price under such agreement, the
Company shall notify the Optionee of such proposed
recapitalization, and the Optionee shall then have the right,
exercisable at any time prior to such recapitalization becoming
effective, to purchase all of the shares subject to the option
which he has not theretofore purchased (anything in such
agreement to the contrary notwithstanding), but if the Optionee
fails to exercise such right before such recapitalization becomes
effective, the option price under such agreement shall be
appropriately adjusted. Each such agreement shall further
provide that upon dissolution or liquidation of Subsidiary, the
option shall terminate, but the Optionee (if at the time an
employee or director of the Company and/or any one or more of its
subsidiaries) shall have the right, immediately prior to such
dissolution or liquidation, to exercise the option to the full
extent not theretofore exercised; that no adjustment provided for
above shall apply to any share with respect to which the option
has been exercised prior to the effective date of such
adjustment; and that no fraction of a share or fractional shares
shall be purchasable or deliverable under such agreement, but in
the event any adjustment thereunder of the number of shares
covered by the option shall cause such number to include a
fraction of a share, such fraction shall be adjusted to the
nearest smaller whole number of shares. In the event of changes
in the outstanding Common Stock by reason of any stock dividend,
split-up, contraction, reclassification, or change of outstanding
shares of the Common Stock of the nature contemplated by this
paragraph 11, the number of shares of Common Stock available for
the purpose of the Plan as stated in paragraph 3 hereof shall be
correspondingly adjusted by the Committee.
12. Limitation of Rights in Option Stock
The Optionees shall have no rights as stockholders in
respect of shares as to which their options shall not have been
exercised, certificates issued and delivered and payment as
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herein provided made in full, and shall have no rights with
respect to such shares not expressly conferred by this Plan.
13. Stock Reserved
The Company shall at all times during the term of the
options reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of
this Plan and shall pay all other fees and expenses necessarily
incurred by the Company in connection therewith.
14. Securities Laws Restrictions
Each Optionee exercising an option, at the request of the
Company, will be required to give a representation in form
satisfactory to counsel for the Company that he will not
transfer, sell or otherwise dispose of the shares received upon
exercise of the option at any time purchased by him, upon
exercise of any portion of the option, in a manner which would
violate the Securities Act of 1933, as amended, and the
regulations of the Securities and Exchange Commission thereunder
and the Company may, if required or at its discretion, make a
notation on any certificates issued upon exercise of options to
the effect that such certificate may not be transferred except
after receipt by the Company of an opinion of counsel
satisfactory to it to the effect that such transfer will not
violate such Act and such regulations.
15. Tax Withholding
The Company shall have the right to deduct from payments of
any kind otherwise due to an Optionee any federal, state or local
taxes of any kind required by law to be withheld with respect to
any shares issued upon exercise of options under the Plan (the
"withholding requirements"). The Committee will have the right
to require that the Optionee or other appropriate person remit to
the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery
of any Common Stock pursuant to exercise of an option. If and to
the extent that such withholding is required, the Committee may
permit the Optionee or such other person to elect at such time
and in such manner as the Committee provides to have the Company
hold back from the shares to be delivered, or to deliver to the
Company, Common Stock having a value calculated to satisfy the
withholding requirements.
16. Termination and Amendment of Plan
The Board of Directors may at any time, and from time to
time, modify or amend the Plan in any respect, except that if at
any time the approval of the Stockholders of the Company is
required as to such modification or amendment under Rule 16b-3,
PAGE
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the Board of Directors may not effect such modification or
amendment without such approval.
The termination or any modification or amendment of the Plan
shall not, without the consent of an Optionee, affect his or her
rights under an option previously granted to him or her. With
the consent of the Optionees affected, the Board of Directors may
amend outstanding option agreements in a manner not inconsistent
with the Plan. The Board of Directors shall have the right to
amend or modify the terms and provisions of the Plan and of any
outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3.
Notwithstanding any other provisions hereof, the Plan shall
terminate on December 31, 2008 and no options shall be granted
hereunder thereafter.
EXHIBIT 10.29
THERMO INSTRUMENT SYSTEMS INC.
THERMO VISION CORPORATION NONQUALIFIED STOCK OPTION PLAN
1. Purpose
This Nonqualified Stock Option Plan (the "Plan") is intended
to encourage ownership of Common Stock, $0.01 par value (the
"Common Stock"), of Thermo Vision Corporation ("Subsidiary"), a
subsidiary of Thermo Instrument Systems Inc. (the "Company"), by
persons selected by the Board of Directors (or a committee
thereof) in its sole discretion, including directors, executive
officers, key employees and consultants of the Company and its
subsidiaries, and to provide additional incentive for them to
promote the success of the business of the Company and
Subsidiary. The Plan is intended to be a nonstatutory stock
option plan.
2. Effective Date of the Plan
The Plan shall become effective when adopted by the Board of
Directors of the Company.
3. Stock Subject to Plan
At no time shall the number of shares of the Common Stock
then outstanding which are attributable to the exercise of
options granted under the Plan plus the number of shares then
issuable upon the exercise of outstanding options granted under
the Plan exceed 100,000 shares, subject however, to the
provisions of paragraph 11 of the Plan. Shares to be issued upon
the exercise of options granted under the Plan shall be shares of
Subsidiary beneficially owned by the Company. If any option
expires or terminates for any reason without having been
exercised in full, the unpurchased shares subject thereto shall
again be available for options thereafter to be granted.
4. Administration
The Plan shall be administered by a committee (the
"Committee") composed of the members of the Board of Directors of
the Company, no member of which shall act upon any matter
exclusively affecting any option granted or to be granted to
himself or herself under the Plan. Subject to the provisions of
the Plan, the Committee shall have complete authority, in its
discretion, to make the following determinations with respect to
each option to be granted by the Company: (a) the person to
receive the option (the "Optionee"); (b) the time of granting the
option; (c) the number of shares subject thereto; (d) the option
price; (e) the option period; and (f) the terms of the option and
form of option agreement (which need not be identical, but which
shall conform to the applicable terms and conditions of the Plan
and contain such other provisions as the Board of Directors deems
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advisable and not inconsistent with the Plan). In making such
determinations, the Committee may take into account the nature of
the services rendered by the Optionees, their present and
potential contributions to the success of the Company and/or one
or more of its subsidiaries, and such other factors as the
Committee in its discretion shall deem relevant. Subject to the
provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend, and rescind
rules and regulations relating to it, to determine the terms and
provisions of the respective option agreements (which need not be
identical), and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee's
determinations on the matters referred to in this paragraph 4
shall be conclusive.
5. Eligibility
An option may be granted to any person selected by the
Committee in its sole discretion.
6. Time of Granting Options
The granting of an option shall take place at the time
specified by the Committee. Only if expressly so provided by the
Committee shall the granting of an option be regarded as taking
place at the time when a written option agreement shall have been
duly executed and delivered by or on behalf of the Company and
the Optionee to whom such option shall be granted. The agreement
shall provide, among other things, that it does not confer upon
an Optionee any right to continue in the employ of the Company
and/or one or more of its subsidiaries or to continue as a
director or consultant of the Company, and that it does not
interfere in any way with the right of the Company or any such
subsidiary to terminate the employment of the Optionee at any
time if the Optionee is an employee, to remove the Optionee as a
director of the Company if the Optionee is a director, or to
terminate the services of the Optionee if the Optionee is a
consultant.
7. Option Period
An option may become exercisable immediately or in such
installments, cumulative or noncumulative, as the Committee may
determine.
8. Exercise of Option
An option may be exercised in accordance with its terms by
written notice of intent to exercise the option, specifying the
number of shares of stock with respect to which the option is
then being exercised. The notice shall be accompanied by payment
in the form of cash or shares of Subsidiary Common Stock (the
"Tendered Shares") with a then current market value equal to the
option price of the shares to be purchased; provided, however,
PAGE
<PAGE>
that such Tendered Shares shall have been acquired by the
Optionee more than six months prior to the date of exercise,
unless such requirement is waived in writing by the Company.
Against such payment the Company shall deliver or cause to be
delivered to the Optionee a certificate for the number of shares
then being purchased, registered in the name of the Optionee or
other person exercising the option. If any law or applicable
regulation of the Securities and Exchange Commission or other
body having jurisdiction in the premises shall require the
Company, Subsidiary or the Optionee to take any action in
connection with shares being purchased upon exercise of the
option, exercise of the option and delivery of the certificate or
certificates for such shares shall be postponed until completion
of the necessary action, which shall be taken at the Company's
expense.
9. Transferability
Except as may be authorized by the Committee , in its sole
discretion, no Option may be transferred other than by will or
the laws of descent and distribution, and during a Optionee's
lifetime an option 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 Committee
may, in its discretion, determine the extent to which options
granted to an Optionee shall be transferable, and such provisions
permitting or acknowledging transfer shall be set forth in the
written agreement evidencing the option executed and delivered by
or on behalf of the Company and the Optionee.
10. Vesting, Restrictions and Termination of Options
The Committee, in its sole discretion, may determine the
manner in which options shall vest, the rights of the Company to
repurchase the shares issued upon the exercise of any option and
the manner in which such rights shall lapse, and the terms upon
which any option granted shall terminate. The Board of Directors
shall have the right to accelerate the date of exercise of any
installment or to accelerate the lapse of the Company's
repurchase rights. All of such terms shall be specified in a
written option agreement executed and delivered by or on behalf
of the Company and the Optionee to whom such option shall be
granted.
11. Adjustment of Number of Shares
Each stock option agreement shall provide that in the event
of any stock dividend payable in the Common Stock or any split-up
or contraction in the number of shares of the Common Stock
occurring after the date of the agreement and prior to the
exercise in full of the option, the number of shares for which
the option may thereafter be exercised shall be proportionately
adjusted and the price to be paid for each share subject to the
option shall be proportionately adjusted. Each such agreement
PAGE
<PAGE>
shall also provide that in case of any reclassification or change
of outstanding shares of the Common Stock or in case of any
consolidation or merger of Subsidiary with or into another
company or in case of any sale or conveyance to another company
or entity of the property of Subsidiary as a whole or
substantially as a whole, the Optionee shall, upon exercise of
the option, be entitled to receive shares of stock or other
securities in its place equivalent in kind and value to those
shares which he would have received if he had exercised the
option in full immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and had
continued to hold the shares subject to the option (together with
all other shares, stock and securities thereafter issued in
respect thereof) to the time of the exercise of the option;
provided , that if any recapitalization is to be effected through
an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par
value will exceed the option price under such agreement, the
Company shall notify the Optionee of such proposed
recapitalization, and the Optionee shall then have the right,
exercisable at any time prior to such recapitalization becoming
effective, to purchase all of the shares subject to the option
which he has not theretofore purchased (anything in such
agreement to the contrary notwithstanding), but if the Optionee
fails to exercise such right before such recapitalization becomes
effective, the option price under such agreement shall be
appropriately adjusted. Each such agreement shall further
provide that upon dissolution or liquidation of Subsidiary, the
option shall terminate, but the Optionee (if at the time an
employee or director of the Company and/or any one or more of its
subsidiaries) shall have the right, immediately prior to such
dissolution or liquidation, to exercise the option to the full
extent not theretofore exercised; that no adjustment provided for
above shall apply to any share with respect to which the option
has been exercised prior to the effective date of such
adjustment; and that no fraction of a share or fractional shares
shall be purchasable or deliverable under such agreement, but in
the event any adjustment thereunder of the number of shares
covered by the option shall cause such number to include a
fraction of a share, such fraction shall be adjusted to the
nearest smaller whole number of shares. In the event of changes
in the outstanding Common Stock by reason of any stock dividend,
split-up, contraction, reclassification, or change of outstanding
shares of the Common Stock of the nature contemplated by this
paragraph 11, the number of shares of Common Stock available for
the purpose of the Plan as stated in paragraph 3 hereof shall be
correspondingly adjusted by the Committee.
12. Limitation of Rights in Option Stock
The Optionees shall have no rights as stockholders in
respect of shares as to which their options shall not have been
exercised, certificates issued and delivered and payment as
PAGE
<PAGE>
herein provided made in full, and shall have no rights with
respect to such shares not expressly conferred by this Plan.
13. Stock Reserved
The Company shall at all times during the term of the
options reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of
this Plan and shall pay all other fees and expenses necessarily
incurred by the Company in connection therewith.
14. Securities Laws Restrictions
Each Optionee exercising an option, at the request of the
Company, will be required to give a representation in form
satisfactory to counsel for the Company that he will not
transfer, sell or otherwise dispose of the shares received upon
exercise of the option at any time purchased by him, upon
exercise of any portion of the option, in a manner which would
violate the Securities Act of 1933, as amended, and the
regulations of the Securities and Exchange Commission thereunder
and the Company may, if required or at its discretion, make a
notation on any certificates issued upon exercise of options to
the effect that such certificate may not be transferred except
after receipt by the Company of an opinion of counsel
satisfactory to it to the effect that such transfer will not
violate such Act and such regulations.
15. Tax Withholding
The Company shall have the right to deduct from payments of
any kind otherwise due to an Optionee any federal, state or local
taxes of any kind required by law to be withheld with respect to
any shares issued upon exercise of options under the Plan (the
"withholding requirements"). The Committee will have the right
to require that the Optionee or other appropriate person remit to
the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery
of any Common Stock pursuant to exercise of an option. If and to
the extent that such withholding is required, the Committee may
permit the Optionee or such other person to elect at such time
and in such manner as the Committee provides to have the Company
hold back from the shares to be delivered, or to deliver to the
Company, Common Stock having a value calculated to satisfy the
withholding requirements.
16. Termination and Amendment of Plan
The Board of Directors may at any time, and from time to
time, modify or amend the Plan in any respect, except that if at
any time the approval of the Stockholders of the Company is
required as to such modification or amendment under Rule 16b-3,
PAGE
<PAGE>
the Board of Directors may not effect such modification or
amendment without such approval.
The termination or any modification or amendment of the Plan
shall not, without the consent of an Optionee, affect his or her
rights under an option previously granted to him or her. With
the consent of the Optionees affected, the Board of Directors may
amend outstanding option agreements in a manner not inconsistent
with the Plan. The Board of Directors shall have the right to
amend or modify the terms and provisions of the Plan and of any
outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3.
Notwithstanding any other provisions hereof, the Plan shall
terminate on December 31, 2008 and no options shall be granted
hereunder thereafter.
EXHIBIT 10.30
THERMO INSTRUMENT SYSTEMS INC.
ONIX SYSTEMS INC. NONQUALIFIED STOCK OPTION PLAN
1. Purpose
This Nonqualified Stock Option Plan (the "Plan") is intended
to encourage ownership of Common Stock, $0.01 par value (the
"Common Stock"), of ONIX Systems Inc. ("Subsidiary"),
subsidiary of Thermo Instrument Systems Inc. (the "Company"), by
persons selected by the Board of Directors (or a committee
thereof) in its sole discretion, including directors, executive
officers, key employees and consultants of the Company and its
subsidiaries, and to provide additional incentive for them to
promote the success of the business of the Company and
Subsidiary. The Plan is intended to be a nonstatutory stock
option plan.
2. Effective Date of the Plan
The Plan shall become effective when adopted by the Board of
Directors of the Company.
3. Stock Subject to Plan
At no time shall the number of shares of the Common Stock
then outstanding which are attributable to the exercise of
options granted under the Plan plus the number of shares then
issuable upon the exercise of outstanding options granted under
the Plan exceed 100,000 shares, subject however, to the
provisions of paragraph 11 of the Plan. Shares to be issued upon
the exercise of options granted under the Plan shall be shares of
Subsidiary beneficially owned by the Company. If any option
expires or terminates for any reason without having been
exercised in full, the unpurchased shares subject thereto shall
again be available for options thereafter to be granted.
4. Administration
The Plan shall be administered by a committee (the
"Committee") composed of the members of the Board of Directors of
the Company, no member of which shall act upon any matter
exclusively affecting any option granted or to be granted to
himself or herself under the Plan. Subject to the provisions of
the Plan, the Committee shall have complete authority, in its
discretion, to make the following determinations with respect to
each option to be granted by the Company: (a) the person to
receive the option (the "Optionee"); (b) the time of granting the
option; (c) the number of shares subject thereto; (d) the option
price; (e) the option period; and (f) the terms of the option and
form of option agreement (which need not be identical, but which
shall conform to the applicable terms and conditions of the Plan
and contain such other provisions as the Board of Directors deems
PAGE
<PAGE>
advisable and not inconsistent with the Plan). In making such
determinations, the Committee may take into account the nature of
the services rendered by the Optionees, their present and
potential contributions to the success of the Company and/or one
or more of its subsidiaries, and such other factors as the
Committee in its discretion shall deem relevant. Subject to the
provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend, and rescind
rules and regulations relating to it, to determine the terms and
provisions of the respective option agreements (which need not be
identical), and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee's
determinations on the matters referred to in this paragraph 4
shall be conclusive.
5. Eligibility
An option may be granted to any person selected by the
Committee in its sole discretion.
6. Time of Granting Options
The granting of an option shall take place at the time
specified by the Committee. Only if expressly so provided by the
Committee shall the granting of an option be regarded as taking
place at the time when a written option agreement shall have been
duly executed and delivered by or on behalf of the Company and
the Optionee to whom such option shall be granted. The agreement
shall provide, among other things, that it does not confer upon
an Optionee any right to continue in the employ of the Company
and/or one or more of its subsidiaries or to continue as a
director or consultant of the Company, and that it does not
interfere in any way with the right of the Company or any such
subsidiary to terminate the employment of the Optionee at any
time if the Optionee is an employee, to remove the Optionee as a
director of the Company if the Optionee is a director, or to
terminate the services of the Optionee if the Optionee is a
consultant.
7. Option Period
An option may become exercisable immediately or in such
installments, cumulative or noncumulative, as the Committee may
determine.
8. Exercise of Option
An option may be exercised in accordance with its terms by
written notice of intent to exercise the option, specifying the
number of shares of stock with respect to which the option is
then being exercised. The notice shall be accompanied by payment
in the form of cash or shares of Subsidiary Common Stock (the
"Tendered Shares") with a then current market value equal to the
option price of the shares to be purchased; provided, however,
PAGE
<PAGE>
that such Tendered Shares shall have been acquired by the
Optionee more than six months prior to the date of exercise,
unless such requirement is waived in writing by the Company.
Against such payment the Company shall deliver or cause to be
delivered to the Optionee a certificate for the number of shares
then being purchased, registered in the name of the Optionee or
other person exercising the option. If any law or applicable
regulation of the Securities and Exchange Commission or other
body having jurisdiction in the premises shall require the
Company, Subsidiary or the Optionee to take any action in
connection with shares being purchased upon exercise of the
option, exercise of the option and delivery of the certificate or
certificates for such shares shall be postponed until completion
of the necessary action, which shall be taken at the Company's
expense.
9. Transferability
Except as may be authorized by the Committee , in its sole
discretion, no Option may be transferred other than by will or
the laws of descent and distribution, and during a Optionee's
lifetime an option 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 Committee
may, in its discretion, determine the extent to which options
granted to an Optionee shall be transferable, and such provisions
permitting or acknowledging transfer shall be set forth in the
written agreement evidencing the option executed and delivered by
or on behalf of the Company and the Optionee.
10. Vesting, Restrictions and Termination of Options
The Committee, in its sole discretion, may determine the
manner in which options shall vest, the rights of the Company to
repurchase the shares issued upon the exercise of any option and
the manner in which such rights shall lapse, and the terms upon
which any option granted shall terminate. The Board of Directors
shall have the right to accelerate the date of exercise of any
installment or to accelerate the lapse of the Company's
repurchase rights. All of such terms shall be specified in a
written option agreement executed and delivered by or on behalf
of the Company and the Optionee to whom such option shall be
granted.
11. Adjustment of Number of Shares
Each stock option agreement shall provide that in the event
of any stock dividend payable in the Common Stock or any split-up
or contraction in the number of shares of the Common Stock
occurring after the date of the agreement and prior to the
exercise in full of the option, the number of shares for which
the option may thereafter be exercised shall be proportionately
adjusted and the price to be paid for each share subject to the
option shall be proportionately adjusted. Each such agreement
PAGE
<PAGE>
shall also provide that in case of any reclassification or change
of outstanding shares of the Common Stock or in case of any
consolidation or merger of Subsidiary with or into another
company or in case of any sale or conveyance to another company
or entity of the property of Subsidiary as a whole or
substantially as a whole, the Optionee shall, upon exercise of
the option, be entitled to receive shares of stock or other
securities in its place equivalent in kind and value to those
shares which he would have received if he had exercised the
option in full immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and had
continued to hold the shares subject to the option (together with
all other shares, stock and securities thereafter issued in
respect thereof) to the time of the exercise of the option;
provided , that if any recapitalization is to be effected through
an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par
value will exceed the option price under such agreement, the
Company shall notify the Optionee of such proposed
recapitalization, and the Optionee shall then have the right,
exercisable at any time prior to such recapitalization becoming
effective, to purchase all of the shares subject to the option
which he has not theretofore purchased (anything in such
agreement to the contrary notwithstanding), but if the Optionee
fails to exercise such right before such recapitalization becomes
effective, the option price under such agreement shall be
appropriately adjusted. Each such agreement shall further
provide that upon dissolution or liquidation of Subsidiary, the
option shall terminate, but the Optionee (if at the time an
employee or director of the Company and/or any one or more of its
subsidiaries) shall have the right, immediately prior to such
dissolution or liquidation, to exercise the option to the full
extent not theretofore exercised; that no adjustment provided for
above shall apply to any share with respect to which the option
has been exercised prior to the effective date of such
adjustment; and that no fraction of a share or fractional shares
shall be purchasable or deliverable under such agreement, but in
the event any adjustment thereunder of the number of shares
covered by the option shall cause such number to include a
fraction of a share, such fraction shall be adjusted to the
nearest smaller whole number of shares. In the event of changes
in the outstanding Common Stock by reason of any stock dividend,
split-up, contraction, reclassification, or change of outstanding
shares of the Common Stock of the nature contemplated by this
paragraph 11, the number of shares of Common Stock available for
the purpose of the Plan as stated in paragraph 3 hereof shall be
correspondingly adjusted by the Committee.
12. Limitation of Rights in Option Stock
The Optionees shall have no rights as stockholders in
respect of shares as to which their options shall not have been
exercised, certificates issued and delivered and payment as
PAGE
<PAGE>
herein provided made in full, and shall have no rights with
respect to such shares not expressly conferred by this Plan.
13. Stock Reserved
The Company shall at all times during the term of the
options reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of
this Plan and shall pay all other fees and expenses necessarily
incurred by the Company in connection therewith.
14. Securities Laws Restrictions
Each Optionee exercising an option, at the request of the
Company, will be required to give a representation in form
satisfactory to counsel for the Company that he will not
transfer, sell or otherwise dispose of the shares received upon
exercise of the option at any time purchased by him, upon
exercise of any portion of the option, in a manner which would
violate the Securities Act of 1933, as amended, and the
regulations of the Securities and Exchange Commission thereunder
and the Company may, if required or at its discretion, make a
notation on any certificates issued upon exercise of options to
the effect that such certificate may not be transferred except
after receipt by the Company of an opinion of counsel
satisfactory to it to the effect that such transfer will not
violate such Act and such regulations.
15. Tax Withholding
The Company shall have the right to deduct from payments of
any kind otherwise due to an Optionee any federal, state or local
taxes of any kind required by law to be withheld with respect to
any shares issued upon exercise of options under the Plan (the
"withholding requirements"). The Committee will have the right
to require that the Optionee or other appropriate person remit to
the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery
of any Common Stock pursuant to exercise of an option. If and to
the extent that such withholding is required, the Committee may
permit the Optionee or such other person to elect at such time
and in such manner as the Committee provides to have the Company
hold back from the shares to be delivered, or to deliver to the
Company, Common Stock having a value calculated to satisfy the
withholding requirements.
16. Termination and Amendment of Plan
The Board of Directors may at any time, and from time to
time, modify or amend the Plan in any respect, except that if at
any time the approval of the Stockholders of the Company is
required as to such modification or amendment under Rule 16b-3,
PAGE
<PAGE>
the Board of Directors may not effect such modification or
amendment without such approval.
The termination or any modification or amendment of the Plan
shall not, without the consent of an Optionee, affect his or her
rights under an option previously granted to him or her. With
the consent of the Optionees affected, the Board of Directors may
amend outstanding option agreements in a manner not inconsistent
with the Plan. The Board of Directors shall have the right to
amend or modify the terms and provisions of the Plan and of any
outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3.
Notwithstanding any other provisions hereof, the Plan shall
terminate on December 31, 2008 and no options shall be granted
hereunder thereafter.
EXHIBIT 10.35
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 5th day of
December, 1997 by and among Thermo Electron Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
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;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier
Majority Owned Subsidiaries ") may themselves be majority owned
subsidiaries of other Majority Owned Subsidiaries ("First Tier
Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second
Tier Majority Owned Subsidiary's Underlying Obligations may be
demanded and given without the respective First Tier Majority
Owned Subsidiary also issuing a guarantee of such Underlying
Obligation;
WHEREAS, the Parent may itself make a loan or provide other
credit to a Second Tier Majority Owned Subsidiary or its
wholly-owned subsidiaries under circumstances where the
applicable First Tier Majority Owned Subsidiary does not provide
such credit; 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
PAGE
<PAGE>
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
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
Parent as a result of the Parent Guarantee. If the
Underlying Obligation is issued by a Second Tier Majority
Owned Subsidiary or a wholly-owned subsidiary thereof, and
such Second Tier Majority Owned Subsidiary is unable to
fully indemnify the Parent (because of the poor financial
condition of such Second Tier Majority Owned Subsidiary, or
for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary shall indemnify and
save harmless the Parent from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
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
PAGE
<PAGE>
also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. 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 subsidiaries 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
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.
PAGE
<PAGE>
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 subsidiaries, 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
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
PAGE
<PAGE>
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. If the Parent makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent thereunder. Such
guaranty shall be enforced only after the Parent, in its
reasonable judgment, determines that the Second Tier
Majority Owned Subsidiary is unable to fully perform its
obligations under the Credit Extension. If the Parent
provides Credit Extension to a wholly-owned subsidiary of a
Second Tier Majority Owned Subsidiary, the Second Tier
Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to the Parent thereunder and the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent hereunder. Such
guaranty by the First Tier Majority Owned Subsidiary shall
be enforced only after the Parent, in its reasonable
judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its guaranty
obligation hereunder.
6. 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.
7. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
PAGE
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO ELECTRON CORPORATION
By: /s/ Melissa F. Riordan
Melissa F. Riordan
Title: Treasurer
THERMO OPTEK CORPORATION
By: /s/ Robert J. Rosenthal
Robert J. Rosenthal
Title: President
EXHIBIT 10.36
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 3rd day of
December, 1997 by and among Thermo Electron Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
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;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier
Majority Owned Subsidiaries ") may themselves be majority owned
subsidiaries of other Majority Owned Subsidiaries ("First Tier
Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second
Tier Majority Owned Subsidiary's Underlying Obligations may be
demanded and given without the respective First Tier Majority
Owned Subsidiary also issuing a guarantee of such Underlying
Obligation;
WHEREAS, the Parent may itself make a loan or provide other
credit to a Second Tier Majority Owned Subsidiary or its
wholly-owned subsidiaries under circumstances where the
applicable First Tier Majority Owned Subsidiary does not provide
such credit; 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
PAGE
<PAGE>
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
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
Parent as a result of the Parent Guarantee. If the
Underlying Obligation is issued by a Second Tier Majority
Owned Subsidiary or a wholly-owned subsidiary thereof, and
such Second Tier Majority Owned Subsidiary is unable to
fully indemnify the Parent (because of the poor financial
condition of such Second Tier Majority Owned Subsidiary, or
for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary shall indemnify and
save harmless the Parent from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
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
PAGE
<PAGE>
also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. 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 subsidiaries 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
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.
PAGE
<PAGE>
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 subsidiaries, 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
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
PAGE
<PAGE>
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. If the Parent makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent thereunder. Such
guaranty shall be enforced only after the Parent, in its
reasonable judgment, determines that the Second Tier
Majority Owned Subsidiary is unable to fully perform its
obligations under the Credit Extension. If the Parent
provides Credit Extension to a wholly-owned subsidiary of a
Second Tier Majority Owned Subsidiary, the Second Tier
Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to the Parent thereunder and the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent hereunder. Such
guaranty by the First Tier Majority Owned Subsidiary shall
be enforced only after the Parent, in its reasonable
judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its guaranty
obligation hereunder.
6. 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.
7. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
PAGE
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO ELECTRON CORPORATION
By: /s/ Melissa F. Riordan
Melissa F. Riordan
Title: Treasurer
THERMOQUEST CORPORATION
By: /s/ Richard W. K. Chapman
Richard W. K. Chapman
Title: President
EXHIBIT 10.37
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 3rd day of
December, 1997 by and among Thermo Electron Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
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;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier
Majority Owned Subsidiaries ") may themselves be majority owned
subsidiaries of other Majority Owned Subsidiaries ("First Tier
Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second
Tier Majority Owned Subsidiary's Underlying Obligations may be
demanded and given without the respective First Tier Majority
Owned Subsidiary also issuing a guarantee of such Underlying
Obligation;
WHEREAS, the Parent may itself make a loan or provide other
credit to a Second Tier Majority Owned Subsidiary or its
wholly-owned subsidiaries under circumstances where the
applicable First Tier Majority Owned Subsidiary does not provide
such credit; 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
PAGE
<PAGE>
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
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
Parent as a result of the Parent Guarantee. If the
Underlying Obligation is issued by a Second Tier Majority
Owned Subsidiary or a wholly-owned subsidiary thereof, and
such Second Tier Majority Owned Subsidiary is unable to
fully indemnify the Parent (because of the poor financial
condition of such Second Tier Majority Owned Subsidiary, or
for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary shall indemnify and
save harmless the Parent from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
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
PAGE
<PAGE>
also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. 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 subsidiaries 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
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.
PAGE
<PAGE>
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 subsidiaries, 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
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
PAGE
<PAGE>
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. If the Parent makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent thereunder. Such
guaranty shall be enforced only after the Parent, in its
reasonable judgment, determines that the Second Tier
Majority Owned Subsidiary is unable to fully perform its
obligations under the Credit Extension. If the Parent
provides Credit Extension to a wholly-owned subsidiary of a
Second Tier Majority Owned Subsidiary, the Second Tier
Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to the Parent thereunder and the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent hereunder. Such
guaranty by the First Tier Majority Owned Subsidiary shall
be enforced only after the Parent, in its reasonable
judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its guaranty
obligation hereunder.
6. 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.
7. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
PAGE
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO ELECTRON CORPORATION
By: /s/ Melissa F. Riordan
Melissa F. Riordan
Title: Treasurer
METRIKA SYSTEMS CORPORATION
By: /s/ Ernesto A. Corte
Ernesto A. Corte
Title: President
EXHIBIT 10.38
MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 14th day of
November, 1997 by and among Thermo Electron Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries
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;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier
Majority Owned Subsidiaries ") may themselves be majority owned
subsidiaries of other Majority Owned Subsidiaries ("First Tier
Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second
Tier Majority Owned Subsidiary's Underlying Obligations may be
demanded and given without the respective First Tier Majority
Owned Subsidiary also issuing a guarantee of such Underlying
Obligation;
WHEREAS, the Parent may itself make a loan or provide other
credit to a Second Tier Majority Owned Subsidiary or its
wholly-owned subsidiaries under circumstances where the
applicable First Tier Majority Owned Subsidiary does not provide
such credit; and
PAGE
<PAGE>
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 he 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
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
Parent as a result of the Parent Guarantee. If the
Underlying Obligation is issued by a Second Tier Majority
Owned Subsidiary or a wholly-owned subsidiary thereof, and
such Second Tier Majority Owned Subsidiary is unable to
fully indemnify the Parent (because of the poor financial
condition of such Second Tier Majority Owned Subsidiary, or
for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary shall indemnify and
save harmless the Parent from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
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.
PAGE
<PAGE>
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
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
PAGE
<PAGE>
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 subsidiarie s 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 subsidiaries, 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
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
PAGE
<PAGE>
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. If the Parent makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary , the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent thereunder. Such
guaranty shall be enforced only after the Parent, in its
reasonable judgment, determines that the Second Tier
Majority Owned Subsidiary is unable to fully perform its
obligations under the Credit Extension. If the Parent
provides Credit Extension to a wholly-owned subsidiary of a
Second Tier Majority Owned Subsidiary, the Second Tier
Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to the Parent thereunder and the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent hereunder. Such
guaranty by the First Tier Majority Owned Subsidiary shall
be enforced only after the Parent, in its reasonable
judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its guaranty
obligation hereunder.
6. 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.
7. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
PAGE
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO ELECTRON CORPORATION
By: /s/John N. Hatsopoulos
------------------------------
Title: President
THERMO VISION CORPORATION
By: /s/Kristine Stotz Langdon
------------------------------
Title: President
EXHIBIT 10.39
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 2nd day of
December, 1997, by and among Thermo Electron Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
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;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier
Majority Owned Subsidiaries ") may themselves be majority owned
subsidiaries of other Majority Owned Subsidiaries ("First Tier
Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second
Tier Majority Owned Subsidiary's Underlying Obligations may be
demanded and given without the respective First Tier Majority
Owned Subsidiary also issuing a guarantee of such Underlying
Obligation;
WHEREAS, the Parent may itself make a loan or provide other
credit to a Second Tier Majority Owned Subsidiary or its
wholly-owned subsidiaries under circumstances where the
applicable First Tier Majority Owned Subsidiary does not provide
such credit; 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
PAGE
<PAGE>
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
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
Parent as a result of the Parent Guarantee. If the
Underlying Obligation is issued by a Second Tier Majority
Owned Subsidiary or a wholly-owned subsidiary thereof, and
such Second Tier Majority Owned Subsidiary is unable to
fully indemnify the Parent (because of the poor financial
condition of such Second Tier Majority Owned Subsidiary, or
for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary shall indemnify and
save harmless the Parent from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
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
PAGE
<PAGE>
also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. 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 subsidiaries 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
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.
PAGE
<PAGE>
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 subsidiaries, 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
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
PAGE
<PAGE>
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. If the Parent makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent thereunder. Such
guaranty shall be enforced only after the Parent, in its
reasonable judgment, determines that the Second Tier
Majority Owned Subsidiary is unable to fully perform its
obligations under the Credit Extension. If the Parent
provides Credit Extension to a wholly-owned subsidiary of a
Second Tier Majority Owned Subsidiary, the Second Tier
Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to the Parent thereunder and the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent hereunder. Such
guaranty by the First Tier Majority Owned Subsidiary shall
be enforced only after the Parent, in its reasonable
judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its guaranty
obligation hereunder.
6. 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.
7. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
PAGE
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO ELECTRON CORPORATION
By: /s/ Melissa F. Riordan
------------------------------
Title: Treasurer
THERMO BIOANALYSIS CORPORATION
By: /s/ Barry S. Howe
------------------------------
Title: President
Exhibit 10.40
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 4th day of
December, 1997, by and among Thermo Electron Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
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;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier
Majority Owned Subsidiaries ") may themselves be majority owned
subsidiaries of other Majority Owned Subsidiaries ("First Tier
Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second
Tier Majority Owned Subsidiary's Underlying Obligations may be
demanded and given without the respective First Tier Majority
Owned Subsidiary also issuing a guarantee of such Underlying
Obligation;
WHEREAS, the Parent may itself make a loan or provide other
credit to a Second Tier Majority Owned Subsidiary or its
wholly-owned subsidiaries under circumstances where the
applicable First Tier Majority Owned Subsidiary does not provide
such credit; 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
PAGE
<PAGE>
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
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
Parent as a result of the Parent Guarantee. If the
Underlying Obligation is issued by a Second Tier Majority
Owned Subsidiary or a wholly-owned subsidiary thereof, and
such Second Tier Majority Owned Subsidiary is unable to
fully indemnify the Parent (because of the poor financial
condition of such Second Tier Majority Owned Subsidiary, or
for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary shall indemnify and
save harmless the Parent from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
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
PAGE
<PAGE>
also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. 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 subsidiaries 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
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.
PAGE
<PAGE>
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 subsidiaries, 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
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
PAGE
<PAGE>
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. If the Parent makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent thereunder. Such
guaranty shall be enforced only after the Parent, in its
reasonable judgment, determines that the Second Tier
Majority Owned Subsidiary is unable to fully perform its
obligations under the Credit Extension. If the Parent
provides Credit Extension to a wholly-owned subsidiary of a
Second Tier Majority Owned Subsidiary, the Second Tier
Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to the Parent thereunder and the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent hereunder. Such
guaranty by the First Tier Majority Owned Subsidiary shall
be enforced only after the Parent, in its reasonable
judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its guaranty
obligation hereunder.
6. 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.
7. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
PAGE
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO ELECTRON CORPORATION
By: /s/ Melissa F. Riordan
------------------------------
Title: Treasurer
THERMOSPECTRA CORPORATION
By: /s/ Theo Melas-Kyriazi
------------------------------
Title: President
Exhibit 13
THERMO INSTRUMENT SYSTEMS INC.
Consolidated Financial Statements
1997
PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Consolidated Statement of Income
(In thousands except per share amounts) 1997 1996 1995
---------------------------------------------------------------------------
Revenues (Note 14) $1,592,314 $1,209,362 $ 782,662
---------- ---------- ----------
Costs and Operating Expenses:
Cost of revenues 842,009 654,165 403,443
Selling, general, and administrative
expenses (Note 9) 424,695 340,963 220,436
Research and development expenses 107,613 84,091 54,314
Nonrecurring (income) expense, net
(Notes 4 and 12) (1,257) 3,500 -
---------- ---------- ----------
1,373,060 1,082,719 678,193
---------- ---------- ----------
Operating Income 219,254 126,643 104,469
Interest Income 28,253 20,490 14,646
Interest Expense (includes $18,014,
$8,145, and $5,512 to parent
company) (45,894) (28,923) (18,129)
Gain on Issuance of Stock by
Subsidiaries (Note 11) 46,404 71,713 20,128
Gain on Sale of Related-party
Investments (Note 9) - - 2,227
---------- ---------- ----------
Income Before Provision for Income
Taxes and Minority Interest
Expense 248,017 189,923 123,341
Provision for Income Taxes (Note 6) 88,113 51,727 42,713
Minority Interest Expense 12,646 5,445 1,322
---------- ---------- ----------
Net Income $ 147,258 $ 132,751 $ 79,306
========== ========== ==========
Earnings per Share (Note 15):
Basic $ 1.21 $ 1.12 $ .70
========== ========== ==========
Diluted $ 1.09 $ 1.01 $ .64
========== ========== ==========
Weighted Average Shares (Note 15):
Basic 121,548 118,857 113,222
========== ========== ==========
Diluted 139,415 135,351 133,291
========== ========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
2PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Consolidated Balance Sheet
(In thousands) 1997 1996
------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 468,848 $ 522,688
Available-for-sale investments, at quoted
market value (amortized cost of $8,287 and
$7,430; Note 2) 8,328 7,452
Accounts receivable, less allowances of
$22,786 and $16,981 364,075 303,331
Unbilled contract costs and fees 9,191 6,043
Inventories 264,719 213,683
Prepaid expenses 19,292 13,417
Prepaid income taxes (Note 6) 54,915 58,296
---------- ----------
1,189,368 1,124,910
---------- ----------
Property, Plant, and Equipment, at Cost, Net 219,939 178,663
---------- ----------
Other Assets (Note 5) 45,477 32,454
---------- ----------
Cost in Excess of Net Assets of Acquired
Companies (Notes 4 and 6) 896,369 588,373
---------- ----------
$2,351,153 $1,924,400
========== ==========
3PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Notes payable and current maturities of
long-term obligations (includes $55,000 due
to parent company in 1997; Notes 4 and 7) $ 116,226 $ 91,584
Accounts payable 97,516 83,161
Accrued payroll and employee benefits 59,745 51,728
Accrued income taxes (includes $20,000 and
$10,839 due to parent company) 61,409 39,686
Accrued installation and warranty expenses 42,404 44,211
Accrued acquisition expenses (Note 4) 33,789 30,025
Deferred revenue 41,759 35,959
Other accrued expenses 101,827 99,524
Due to parent company and affiliated
companies (Note 4) 22,027 12,329
---------- ----------
576,702 488,207
---------- ----------
Deferred Income Taxes (Note 6) 30,430 20,710
---------- ----------
Other Deferred Items 27,273 29,805
---------- ----------
Long-term Obligations (Notes 7 and 17):
Senior convertible obligations (includes
$140,000 due to parent company) 327,824 334,781
Subordinated convertible obligations 160,547 192,500
Other (includes $169,000 and $15,000 due to
parent company; Note 4) 184,823 26,933
---------- ----------
673,194 554,214
---------- ----------
Minority Interest 165,996 85,197
---------- ----------
Commitments and Contingencies (Note 8)
Shareholders' Investment (Notes 5 and 10):
Common stock, $.10 par value, 250,000,000
shares authorized; 122,645,040 and
97,674,228 shares issued 12,265 9,767
Capital in excess of par value 333,580 319,464
Retained earnings 571,899 424,641
Treasury stock at cost, 670,827 and 750,055
shares (6,965) (8,679)
Cumulative translation adjustment (33,257) 1,060
Net unrealized gain on available-for-sale
investments (Note 2) 36 14
---------- ----------
877,558 746,267
---------- ----------
$2,351,153 $1,924,400
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Consolidated Statement of Cash Flows
(In thousands) 1997 1996 1995
--------------------------------------------------------------------------
Operating Activities:
Net income $ 147,258 $ 132,751 $ 79,306
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 54,993 44,233 25,257
Provision for losses on
accounts receivable 4,366 2,274 2,543
Nonrecurring (income) expense, net
(Notes 4 and 12) (1,257) 3,500 -
Gain on issuance of stock by
subsidiaries (Note 11) (46,404) (71,713) (20,128)
Gain on sale of related-party
investments (Note 9) - - (2,227)
Minority interest expense 12,646 5,445 1,322
Increase (decrease) in deferred
income taxes 2,742 (757) 2,196
Other noncash expenses 6,158 4,889 2,964
Changes in current accounts,
excluding the effects of
acquisitions:
Accounts receivable (19,157) 1,394 (22,661)
Inventories 13,768 14,184 (7,433)
Other current assets 3,547 3,978 3,058
Accounts payable 14,317 (9,903) 1,202
Other current liabilities (23,868) (24,686) (12,552)
Other 205 290 (313)
--------- --------- ---------
Net cash provided by operating
activities 169,314 105,879 52,534
--------- --------- ---------
Investing Activities:
Acquisitions, net of cash acquired
(Note 4) (508,059) (248,150) (89,469)
Refund of acquisition purchase price
(Note 4) 36,132 - -
Proceeds from sale of businesses
(Notes 3 and 12) 4,980 - 34,267
Purchases of available-for-sale
investments (9,000) (10,250) -
Proceeds from sale and maturities of
available-for-sale investments 10,250 3,000 17,825
Purchases of property, plant, and
equipment (29,198) (19,134) (10,313)
Proceeds from sale of property,
plant, and equipment 7,877 4,597 2,252
Other 2,030 530 (1,691)
--------- --------- ---------
Net cash used in investing activities $(484,988) $(269,407) $ (47,129)
--------- --------- ---------
5PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Consolidated Statement of Cash Flows (continued)
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of
Company and subsidiary common
stock (Note 11) $ 91,375 $ 127,024 $ 41,788
Net proceeds from issuance of
long-term obligations - 168,850 187,846
Proceeds from issuance of short- and
long-term obligations to parent
company (Note 7) 428,800 110,000 15,000
Repayment of short- and long-term
obligations to parent company
(Note 7) (220,000) (95,000) (15,000)
Increase (decrease) in short-term
obligations, net (21,528) (12,770) 7,584
Repayment of long-term obligations (7,817) (5,133) (1,373)
--------- --------- ---------
Net cash provided by financing
activities 270,830 292,971 235,845
--------- --------- ---------
Exchange Rate Effect on Cash (8,996) (1,988) 1,050
--------- --------- ---------
Increase (Decrease) in Cash and
Cash Equivalents (53,840) 127,455 242,300
Cash and Cash Equivalents at
Beginning of Year 522,688 395,233 152,933
--------- --------- ---------
Cash and Cash Equivalents at End
of Year $ 468,848 $ 522,688 $ 395,233
========= ========= =========
Cash Paid For:
Interest $ 43,755 $ 25,837 $ 16,035
Income taxes $ 62,895 $ 42,636 $ 31,529
Noncash Activities:
Conversions of Company and subsidiary
convertible obligations $ 38,910 $ 67,594 $ 18,321
Fair value of assets of
acquired companies $ 673,382 $ 487,218 $ 161,985
Cash paid for acquired companies (545,303) (258,785) (93,004)
Due to affiliated company for
acquired company (19,117) - -
Issuance of subsidiary stock
options for acquired company (1,693) - -
--------- --------- ---------
Liabilities assumed of acquired
companies $ 107,269 $ 228,433 $ 68,981
========= ========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
6PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Consolidated Statement of Shareholders' Investment
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Common Stock, $.10 Par Value
Balance at beginning of year $ 9,767 $ 9,257 $ 4,816
Issuance of stock under employees'
and directors' stock plans 4 5 1
Conversions of convertible
obligations 45 505 160
Effect of stock splits 2,449 - 4,280
-------- -------- --------
Balance at end of year 12,265 9,767 9,257
-------- -------- --------
Capital in Excess of Par Value
Balance at beginning of year 319,464 248,468 233,765
Issuance of stock under employees'
and directors' stock plans 1,270 950 (1,023)
Tax benefit related to employees'
and directors' stock plans 514 199 1,950
Conversions of convertible
obligations 6,817 65,924 17,814
Effect of stock splits (2,449) - (4,280)
Effect of majority-owned
subsidiaries' equity
transactions 7,964 3,923 242
-------- -------- --------
Balance at end of year 333,580 319,464 248,468
-------- -------- --------
Retained Earnings
Balance at beginning of year 424,641 291,890 212,584
Net income 147,258 132,751 79,306
-------- -------- --------
Balance at end of year 571,899 424,641 291,890
-------- -------- --------
Treasury Stock
Balance at beginning of year (8,679) (9,724) (12,736)
Activity under employees' and
directors' stock plans 1,714 1,045 3,012
-------- -------- --------
Balance at end of year (6,965) (8,679) (9,724)
-------- -------- --------
Cumulative Translation Adjustment
Balance at beginning of year 1,060 2,814 1,991
Translation adjustment (34,317) (1,754) 823
-------- -------- --------
Balance at end of year $(33,257) $ 1,060 $ 2,814
-------- -------- --------
7PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Consolidated Statement of Shareholders' Investment (continued)
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Net Unrealized Gain on
Available-for-sale Investments
Balance at beginning of year $ 14 $ - $ 343
Change in net unrealized gain
on available-for-sale
investments (Note 2) 22 14 (343)
-------- -------- --------
Balance at end of year 36 14 -
-------- -------- --------
Total Shareholders' Investment $877,558 $746,267 $542,705
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
8PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Thermo Instrument Systems Inc. (the Company) develops, manufactures,
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, the Company 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.
Relationship with Thermo Electron Corporation
The Company was incorporated on May 28, 1986, as a wholly owned
subsidiary of Thermo Electron Corporation. As of January 3, 1998, Thermo
Electron owned 99,819,138 shares of the Company's common stock,
representing 82% of such stock outstanding.
Principles of Consolidation
The accompanying financial statements include the accounts of the
Company; its wholly owned subsidiaries; its majority-owned public
subsidiaries, ThermoSpectra Corporation, ThermoQuest Corporation, Thermo
Optek Corporation, Thermo BioAnalysis Corporation, Metrika Systems
Corporation, and Thermo Vision Corporation; and its majority-owned,
privately held subsidiary, ONIX Systems Inc. All material intercompany
accounts and transactions have been eliminated. The Company accounts for
investments in businesses in which it owns between 20% and 50% using the
equity method.
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.
Revenue Recognition
The Company recognizes product revenues upon shipment of its products
and recognizes service contract revenues ratably over the term of the
contract. The Company provides a reserve for its estimate of warranty and
installation costs at the time of shipment. Deferred revenue in the
accompanying balance sheet consists primarily of unearned revenue on
service contracts. Substantially all of the deferred revenue in the
accompanying 1997 balance sheet will be recognized within one year.
Gain on Issuance of Stock by Subsidiaries
At the time a subsidiary sells its stock to unrelated parties at a
price in excess of its book value, the Company's net investment in that
subsidiary increases. If at that time the subsidiary is an operating
9PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
entity, and not engaged principally in research and development, the
Company records the increase as a gain.
If gains have been recognized on issuances of a subsidiary's stock
and shares of the subsidiary are subsequently repurchased by the
subsidiary, the Company, or Thermo Electron, gain recognition does not
occur on issuances subsequent to the date of a repurchase until such time
as shares have been issued in an amount equivalent to the number of
repurchased shares. Such transactions are reflected as equity
transactions, and the net effect of these transactions is reflected in
the accompanying statement of shareholders' investment as the effect of
majority-owned subsidiaries' equity transactions.
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 5). 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 and Thermo Electron have a tax allocation agreement under
which the Company and its greater than 80%-owned subsidiaries, exclusive
of foreign operations, are included in Thermo Electron's consolidated
federal and certain state income tax returns. The agreement provides that
in years in which the Company has taxable income, it will pay to Thermo
Electron amounts comparable to the taxes the Company would have paid if
it had filed separate tax returns. If Thermo Electron's equity ownership
of the Company were to drop below 80%, the Company would be required to
file its own federal income tax return.
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 15). As a result, all previously reported
earnings per share have been restated. Basic earnings per share have been
computed by dividing net income by the weighted average number of shares
outstanding during the year. Diluted earnings per share have been
computed assuming the conversion of convertible obligations and the
elimination of the related interest expense, and the exercise of stock
options, as well as their related income tax effects.
10PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Stock Split
All share and per share information, except for share information in
the accompanying 1996 balance sheet, has been restated to reflect a
five-for-four stock split, effected in the form of a 25% stock dividend,
which was distributed in October 1997.
Cash and Cash Equivalents
At year-end 1997 and 1996, $284.0 million and $459.1 million,
respectively, 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. At year-end 1997 and 1996, the Company's cash equivalents also
include investments in short-term certificates of deposit of the
Company's foreign subsidiaries, which have an original maturity of three
months or less. Cash equivalents are carried at cost, which approximates
market value.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
or weighted average basis) or market value and include materials, labor,
and manufacturing overhead. The components of inventories are as follows:
(In thousands) 1997 1996
------------------------------------------------------------------------
Raw materials and supplies $118,611 $ 95,920
Work in process 52,870 47,518
Finished goods 93,238 70,245
-------- --------
$264,719 $213,683
======== ========
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 and
improvements, 5 to 40 years; machinery and equipment, 1 to 12 years; and
leasehold improvements, the shorter of the term of the lease or the life
of the asset.
11PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Property, plant, and equipment consists of the following:
(In thousands) 1997 1996
------------------------------------------------------------------------
Land $ 33,539 $ 31,048
Buildings 123,533 101,761
Machinery, equipment, and leasehold improvements 160,533 118,167
-------- --------
317,605 250,976
Less: Accumulated depreciation and amortization 97,666 72,313
-------- --------
$219,939 $178,663
======== ========
Other Assets
Other assets in the accompanying balance sheet includes the costs of
acquired trademarks, patents, and other specifically identifiable
intangible assets. These assets are amortized using the straight-line
method over their estimated useful lives, which range from 3 to 20 years.
These assets were $16.2 million and $15.5 million, net of accumulated
amortization of $19.3 million and $16.2 million, at year-end 1997 and
1996, respectively. Other assets in the accompanying 1997 balance sheet
also includes prepaid pension costs (Note 5).
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 periods not
exceeding 40 years. Accumulated amortization was $78.0 million and $56.2
million 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.
Environmental Liabilities
The Company accrues for costs associated with the remediation of
environmental pollution when it is probable that a liability has been
incurred and the Company's proportionate share of the amount can be
reasonably estimated. Any recorded liabilities have not been discounted.
12PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are
translated at average exchange rates for the year in accordance with SFAS
No. 52, "Foreign Currency Translation." Resulting translation adjustments
are reflected as a separate component of shareholders' investment titled
"Cumulative translation adjustment." Foreign currency transaction gains
and losses are included in the accompanying statement of income and are
not material for the three years presented.
Forward Contracts
The Company uses short-term forward foreign exchange contracts to
manage certain exposures to foreign currencies. The Company enters into
forward foreign exchange contracts to hedge certain firm purchase and
sale commitments denominated in currencies other than its subsidiaries'
local currencies. These contracts principally hedge transactions
denominated in U.S. dollars, British pounds sterling, Japanese yen,
French francs, and German deutsche marks. The purpose of the Company's
foreign currency hedging activities is to protect the Company's local
currency cash flows related to these commitments from fluctuations in
foreign exchange rates. Gains and losses arising from forward foreign
exchange contracts are recognized as offsets to gains and losses
resulting from the transactions being hedged. The Company does not enter
into speculative foreign currency agreements.
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,
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.
Presentation
Certain amounts in 1996 and 1995 have been reclassified to conform to
the presentation in the 1997 financial statements.
2. Available-for-sale Investments
In accordance with SFAS No. 115 "Accounting for Certain Investments
in Debt and Equity Securities," the Company's debt and marketable equity
securities are considered available-for-sale investments in the
accompanying balance sheet and are carried at market value, with the
difference between cost and market value, net of related tax effects,
recorded currently as a component of shareholders' investment titled "Net
unrealized gain on available-for-sale investments." The aggregate market
13PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Available-for-sale Investments (continued)
value, cost basis, and gross unrealized gains of available-for-sale
investments by major security type are as follows:
Gross
Market Cost Unrealized
(In thousands) Value Basis Gains
------------------------------------------------------------------------
1997
Corporate bonds $6,105 $6,091 $ 14
Equity securities 2,083 2,056 27
Other 140 140 -
------ ------ ------
$8,328 $8,287 $ 41
====== ====== ======
1996
Corporate bonds $7,452 $7,430 $ 22
====== ====== ======
The corporate bonds and other securities in the accompanying 1997
balance sheet have contractual maturities of one year or less. The cost
of available-for-sale investments that were sold was based on specific
identification in determining realized gains recorded in the accompanying
statement of income. Gain on sale of related-party investments in the
accompanying 1995 statement of income resulted from gross realized gains
relating to the sale of available-for-sale investments (Note 9).
3. Environmental Services Joint Venture
Effective April 4, 1994, the Company formed an environmental services
joint venture with Thermo TerraTech Inc., another public subsidiary of
Thermo Electron. The joint venture operated under the name Thermo Terra
Tech. The Company contributed its analytical laboratories and its nuclear
health physics and environmental science and engineering services
businesses. Thermo TerraTech contributed its environmental laboratory
business, which specializes in fast-response testing of
petroleum-contaminated soils and groundwater, and approximately $31
million in cash and short-term investments.
Effective April 2, 1995, the Company and Thermo TerraTech dissolved
their joint venture. Thermo TerraTech then purchased the services
businesses formerly operated by the joint venture from the Company for
$34.3 million in cash, which was the net book value of the services
businesses. The Company had owned 49% of the joint venture and had
accounted for its interest in the joint venture using the equity method.
14PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
4. Acquisitions
In March 1997, the Company acquired 95% of Life Sciences
International PLC (Life Sciences), a London Stock Exchange-listed
company. Subsequently, the Company acquired the remaining shares of Life
Sciences' capital stock. The aggregate purchase price for Life Sciences
was approximately $442.8 million, net of $55.8 million of cash acquired.
The purchase price includes the repayment of $105.0 million of Life
Sciences' bank debt. Life Sciences manufactures laboratory science
equipment, appliances, instruments, consumables, and reagents for the
research, clinical, and industrial markets. In March 1997, to partially
finance the acquisition of Life Sciences, the Company borrowed $210.0
million from Thermo Electron pursuant to a promissory note due March 1999
(Note 7). The Company repaid $105.0 million of this promissory note in
September 1997 and the remaining $105.0 million in January 1998 (Note
17).
On November 6, 1997, Thermo Power Corporation, a majority-owned
subsidiary of Thermo Electron, acquired Peek plc. Thereafter, ONIX
Systems acquired from Thermo Power the stock of three businesses
comprising the Peek Measurement Business for $19.1 million. The purchase
price was determined based on the net book value of the Peek Measurement
Business at November 6, 1997, a pro rata allocation of Thermo Power's
total cost in excess of net assets of acquired companies recorded in
connection with its acquisition of Peek plc based on the 1997 revenues of
the Peek Measurement Business relative to Peek plc's total revenues, plus
an estimate of Thermo Power's tax liability that arises from the sale of
the business to ONIX Systems. The Peek Measurement Business manufactures
flow and density measurement systems for use in the water/wastewater and
oil and gas industries. The purchase price is included in due to parent
company and affiliated companies in the accompanying 1997 balance sheet.
During 1997, the Company made several other acquisitions for
approximately $46.2 million, net of cash acquired and including the
repayment of $1.3 million of bank debt, and the issuance of subsidiary
stock options valued at an aggregate $1.7 million. To partially finance
1997 acquisitions, ThermoSpectra borrowed an aggregate of $60.0 million
from Thermo Electron pursuant to promissory notes due 1999 and Thermo
Vision borrowed $3.8 million from Thermo Electron pursuant to a
promissory note due 2000 (Note 7).
In March 1996, the Company completed the acquisition of a substantial
portion of the businesses constituting the Scientific Instruments
Division of Fisons plc (the Fisons businesses), a wholly owned subsidiary
of Rhone-Poulenc Rorer Inc. (RPR), for approximately $181.2 million, net
of $7.7 million of cash acquired, and the assumption of approximately
$47.2 million of indebtedness. In December 1997, the Company and RPR
negotiated a post-closing adjustment under the terms of the purchase
agreement for the acquisition of the Fisons businesses pertaining to
determination of the net assets of the Fisons businesses at the date of
acquisition. This negotiation resulted in a refund to the Company of
$36.1 million, plus $3.8 million of interest from the date of
acquisition. The Company has recorded $33.1 million of the refund as a
reduction of cost in excess of net assets of acquired companies. The
remaining $3.0 million represented payment for uncollected accounts
15PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
4. Acquisitions (continued)
receivable acquired by the Company that were guaranteed by RPR. In 1996,
the Company wrote off $3.5 million of acquired technology relating to
this acquisition, which represents the portion of the purchase price
allocated to technology in development based on estimated replacement
cost. The Fisons businesses are involved in the research, development,
manufacture, and sale of analytical instruments to industrial and
research laboratories worldwide.
To finance the acquisition of the Fisons businesses, the Company used
available cash in addition to borrowings from Thermo Electron (Note 7).
During 1996, the Company made several other acquisitions for an aggregate
$67.0 million in cash, net of cash acquired.
During 1995, the Company made several acquisitions for an aggregate
$89.5 million in cash, net of cash acquired.
These acquisitions have been accounted for using the purchase method
of accounting, and their results have been included in the accompanying
financial statements from their respective dates of acquisition. The
aggregate cost of these acquisitions exceeded the estimated fair value of
the acquired net assets by $631.9 million, which is being amortized over
40 years. Allocation of the purchase price for these acquisitions was
based on estimates of the fair value of the net assets acquired and, for
acquisitions completed in fiscal 1997, is subject to adjustment upon
finalization of the purchase price allocation. The Company has gathered
no information that indicates the final purchase price allocations will
differ materially from the preliminary estimates.
Based on unaudited data, the following table presents selected
financial information for the Company, Life Sciences, and the Fisons
businesses, on a pro forma basis, assuming the Company and Life Sciences
had been combined since the beginning of 1996 and the Company and the
Fisons businesses had been combined since the beginning of 1995. The
effect of the acquisitions not included in the pro forma data was not
material to the Company's results of operations.
(In thousands except per share amounts) 1997 1996 1995
------------------------------------------------------------------------
Revenues $1,645,086 $1,637,582 $1,144,956
Net income 126,528 119,842 46,934
Earnings per share:
Basic 1.04 1.01 .41
Diluted .95 .92 .39
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of Life Sciences been made at the beginning of 1996 or the
acquisition of the Fisons businesses been made at the beginning of 1995.
In connection with the acquisition of Life Sciences, the Company has
undertaken a restructuring of the acquired businesses. In accordance with
the requirements of Emerging Issues Task Force Pronouncement (EITF) 95-3,
the Company is in the process of completing a plan that primarily
16PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
4. Acquisitions (continued)
includes reductions in staffing levels and abandonment of excess
facilities. As part of the cost of the acquisition, the Company
established reserves totaling $24.8 million, primarily for estimated
severance and excess facilities, $8.8 million of which was expended
during 1997, primarily for severance. Unresolved matters at January 3,
1998, included completing planned severances and the locations to be
abandoned or consolidated, among other decisions concerning the
integration of the acquired businesses into the Company. In accordance
with EITF 95-3, finalization of the Company's plan for restructuring the
acquired businesses will occur within one year from the date of the
acquisition. Any changes in estimates of these costs prior to such
finalization will be recorded as adjustments to cost in excess of net
assets of acquired companies.
During 1996, the Company had undertaken a restructuring of the Fisons
businesses. In 1996, the Company established reserves of $38.1 million as
part of the cost of the acquisition. During 1997 and 1996, the Company
expended $14.3 million and $19.0 million, respectively, for restructuring
costs, primarily for severance and abandoned-facility payments. In
connection with finalizing its restructuring plans for the Fisons
businesses, the Company recorded an additional $8.1 million of
acquisition reserves in the first quarter of 1997, primarily for the
abandonment of excess facilities, as well as for severance pay. This
amount was recorded as an increase in cost in excess of net assets of
acquired companies. At January 3, 1998, the remaining reserve for
restructuring the Fisons businesses was $11.1 million, as adjusted for
the impact of currency translation, and primarily represents ongoing
severance and abandoned-facility payments.
5. Employee Benefit Plans
Stock-based Compensation Plans
Stock Option Plans
------------------
The Company has two stock-based compensation plans for its key
employees, directors, and others. These plans, adopted in 1993 and 1997,
permit the grant of a variety of stock and stock-based awards as
determined by the human resources committee of the Company's Board of
Directors (the Board Committee), including restricted stock, stock
options, stock bonus shares, or performance-based shares. To date, only
nonqualified stock options have been awarded under these plans. The
option recipients and the terms of options granted under these plans are
determined by the Board Committee. Generally, options granted to date are
exercisable immediately, but are subject to certain transfer restrictions
and the right of the Company to repurchase shares issued upon exercise of
the options at the exercise price, upon certain events. The restrictions
and repurchase rights generally lapse ratably over a five- to ten-year
period, depending on the term of the option, which may range from seven
to twelve years. Nonqualified stock options may be granted at any price
determined by the Board Committee, although incentive stock options must
be granted at not less than the fair market value of the Company's stock
17PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
on the date of grant. Generally, all options have been granted at fair
market value. The Company also has a directors' stock option plan,
adopted in 1991, that provides for the grant of stock options in the
Company and its majority-owned subsidiaries to outside directors pursuant
to a formula approved by the Company's shareholders. Options in the
Company awarded under this plan are exercisable six months after the date
of grant and expire three or seven years after the date of grant. In
addition to the Company's stock-based compensation plans, certain
officers and key employees may also participate in the stock-based
compensation plans of Thermo Electron.
A summary of the Company's stock option activity is as follows:
1997 1996 1995
---------------- ---------------- ----------------
Weighted Weighted Weighted
Number Average Number Average Number Average
(Shares of Exercise of Exercise of Exercise
in thousands) Shares Price Shares Price Shares Price
------------------------------------------------------------------------
Options outstanding,
beginning of year 4,066 $13.98 4,026 $11.88 4,747 $11.15
Granted 727 30.24 472 27.59 7 15.07
Exercised (263) 9.50 (255) 7.31 (468) 4.86
Forfeited (165) 17.56 (177) 12.00 (260) 11.38
----- ----- -----
Options outstanding,
end of year 4,365 $16.83 4,066 $13.98 4,026 $11.88
===== ====== ===== ====== ===== ======
Options exercisable 4,365 $16.83 4,066 $13.98 4,026 $11.88
===== ====== ===== ====== ===== ======
Options available
for grant 2,346 1,908 2,205
===== ===== =====
A summary of the status of the Company's stock options at January 3,
1998, is as follows:
Options Outstanding and Exercisable
-------------------------------------------
Weighted
Weighted Average Average
Range of Number Remaining Exercise
Exercise Prices of Shares Contractual Life Price
---------------------------------------------------------------------
(Shares in thousands)
$ 4.27 - $11.04 349 1.2 years $ 6.94
11.05 - 17.81 2,872 7.4 years 13.07
17.82 - 31.35 1,144 7.8 years 29.27
-----
$ 4.27 - $31.35 4,365 7.0 years $16.83
=====
18PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
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 the Company and Thermo Electron. Under this program, shares of the
Company's and Thermo Electron's common stock can be purchased at the end
of a 12-month period at 95% of the fair market value at the beginning of
the period 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 period, 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. During 1997, 1996, and
1995, the Company issued 51,707 shares, 62,466 shares, and 93,532 shares,
respectively, of its common stock under this program.
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 in 1997, 1996, and 1995 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 1996 1995
------------------------------------------------------------------------
Net income:
As reported $147,258 $132,751 $79,306
Pro forma 143,083 129,591 79,035
Basic earnings per share:
As reported 1.21 1.12 .70
Pro forma 1.18 1.09 .70
Diluted earnings per share:
As reported 1.09 1.01 .64
Pro forma 1.06 .99 .64
Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation expense may not be representative of the amount to be
expected in future years. Pro forma 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.
19PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
The weighted average fair value per share of options granted was
$11.09, $10.90, and $2.98 in 1997, 1996, and 1995, respectively. 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 1996 1995
------------------------------------------------------------------------
Volatility 28% 26% 26%
Risk-free interest rate 5.9% 6.2% 5.1%
Expected life of options 5.2 years 6.2 years 1.1 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.
401(k) Savings Plans and Employee Stock Ownership Plan
The majority of the Company's full-time U.S. employees are eligible
to participate in Thermo Electron's 401(k) savings plan. In addition,
certain of the Company's employees are eligible to participate in 401(k)
savings plans sponsored by the Company's Nicolet Instrument Corporation
and Finnigan Corporation subsidiaries. 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 $6.0 million,
$4.9 million, and $3.9 million in 1997, 1996, and 1995, respectively.
Defined Benefit Pension Plan
Life Sciences has a defined benefit pension plan covering
substantially all of its full-time U.K. employees.
Net periodic pension costs (income) included the following
components:
(In thousands) 1997
--------------------------------------------------------------------
Service cost $ 2,749
Interest cost on projected benefit obligation 3,031
Return on plan assets (9,408)
Amortization of unrecognized net gain 3,169
-------
$ (459)
=======
20PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
The funded status of the Company's defined benefit pension plan is as
follows:
(In thousands) 1997
-----------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefits $41,549
Nonvested benefits -
-------
Accumulated benefit obligations 41,549
Effect of projected future salary increases 4,341
-------
Projected benefit obligation 45,890
Less: Plan assets at fair value 63,707
-------
Excess of plan assets over projected benefit obligation 17,817
Unrecognized net gain (172)
-------
Prepaid pension costs $17,645
=======
Significant actuarial assumptions used to determine the net periodic
pension cost were as follows:
1997
----------------------------------------------------------------------
Discount rate 8.25%
Rate of increase in salary levels 8%
Rate of increase in pension rate 5%
Expected long-term rate of return on assets 10%
6. Income Taxes
The components of income before provision for income taxes and
minority interest expense are as follows:
(In thousands) 1997 1996 1995
----------------------------------------------------------------------
Domestic $186,133 $143,377 $ 95,999
Foreign 61,884 46,546 27,342
-------- -------- --------
$248,017 $189,923 $123,341
======== ======== ========
21PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
The components of the provision for income taxes are as follows:
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Currently payable:
Federal $ 47,121 $ 29,593 $ 29,336
State 8,154 6,978 5,766
Foreign 26,242 27,100 11,490
-------- -------- --------
81,517 63,671 46,592
-------- -------- --------
Net deferred (prepaid):
Federal 3,860 (5,553) (3,628)
State 819 (1,178) (769)
Foreign 1,917 (5,213) 518
-------- -------- --------
6,596 (11,944) (3,879)
-------- -------- --------
$ 88,113 $ 51,727 $ 42,713
======== ======== ========
The Company and its majority-owned subsidiaries receive a tax
deduction upon exercise of nonqualified stock options by employees for
the difference between the exercise price and the market price of the
underlying common stock on the date of exercise. The provision for income
taxes that is currently payable does not reflect $1.6 million, $2.0
million, and $2.1 million of such benefits of the Company and its
majority-owned subsidiaries that have been allocated to capital in excess
of par value, directly or through the effect of majority-owned
subsidiaries' equity transactions, in 1997, 1996, and 1995, respectively.
The provision for income taxes that is currently payable does not reflect
$2.4 million, $4.7 million, and $3.0 million of tax benefits used to
reduce cost in excess of net assets of acquired companies in 1997, 1996,
and 1995, respectively. The deferred provision for income taxes does not
reflect $3.4 million of tax benefits used to reduce cost in excess of net
assets of acquired companies in 1995.
22PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
6. 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 35% to income before provision for income
taxes and minority interest expense due to the following:
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Provision for income taxes at
statutory rate $ 86,806 $ 66,473 $ 43,169
Increases (decreases) resulting from:
Gain on issuance of stock by
subsidiaries (16,241) (25,100) (7,045)
Net foreign losses not benefited and
tax rate differential 6,500 5,596 2,438
State income taxes, net of federal tax 5,832 3,770 3,248
Amortization of cost in excess of net
assets of acquired companies 4,492 2,445 2,432
Tax benefit of foreign sales
corporation (2,517) (2,102) (1,987)
Other, net 3,241 645 458
-------- -------- --------
$ 88,113 $ 51,727 $ 42,713
======== ======== ========
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 $ 43,559 $ 64,902
Reserves and accruals 33,717 38,929
Inventory basis difference 13,109 11,895
Accrued compensation 5,306 5,064
Allowance for doubtful accounts 2,459 2,399
Other, net - 9
-------- --------
98,150 123,198
Less: Valuation allowance 43,235 64,902
-------- --------
$ 54,915 $ 58,296
======== ========
Deferred income taxes:
Depreciation $ 24,928 $ 16,476
Intangible assets 5,502 4,234
-------- --------
$ 30,430 $ 20,710
======== ========
23PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
The valuation allowance relates to uncertainty surrounding the
realization of certain tax assets, including in 1997 $104.8 million of
foreign tax loss carryforwards and $7.7 million of certain federal tax
loss carryforwards, the realization of which is limited to the future
income of certain subsidiaries. Of the $104.8 million of foreign tax loss
carryforwards, $24.3 million expire from 1998 through 2005 and the
remainder do not expire. The federal tax loss carryforwards expire from
1998 through 2010. Any tax benefit resulting from the use of the loss
carryforwards will first be used to reduce cost in excess of net assets
of acquired companies. The decrease in the valuation allowance results
primarily from the decrease in foreign net operating loss carryforwards,
primarily due to expiration and usage of the carryforwards.
The Company has not recognized a deferred tax liability for the
difference between the book basis and tax basis of its investment in the
common stock of its domestic subsidiaries (such difference relates
primarily to unremitted earnings and gains on issuance of stock by
subsidiaries) because the Company does not expect this basis difference
to become subject to tax at the parent level. The Company believes it can
implement certain tax strategies to recover its investment in its
domestic subsidiaries tax-free.
A provision has not been made for U.S. or additional foreign taxes on
$148 million of undistributed earnings of foreign subsidiaries that could
be subject to taxation if remitted to the U.S. because the Company
currently plans to keep these amounts permanently reinvested overseas.
7. Short- and Long-term Obligations
Short-term Obligations
Notes payable in the accompanying balance sheet includes $58.7
million and $89.3 million of bank borrowings at several of the Company's
foreign subsidiaries at year-end 1997 and 1996, respectively. The
weighted average interest rate for these borrowings was 4.80% and 5.25%
at year-end 1997 and 1996, respectively. Unused lines of credit were
$108.8 million at year-end 1997.
In June 1997, to finance the repayment of Life Sciences' debt, the
Company borrowed $115.0 million from Thermo Electron, which was repaid in
September 1997.
In connection with Thermo Optek's acquisition of Spectronic
Instruments, Inc. and VG Systems Limited from the Company, Thermo Optek
borrowed $40.0 million from Thermo Electron pursuant to a promissory note
due August 1998.
In connection with the 1996 acquisition of Kevex Instruments and
Kevex X-Ray from the Company, ThermoSpectra borrowed $15.0 million from
Thermo Electron pursuant to a promissory note due August 1998.
To finance the acquisition of the Fisons businesses (Note 4), the
Company used available cash in addition to borrowings of $89.0 million
from Thermo Electron. In April 1996, the Company repaid a portion of the
borrowings and issued a $65.0 million promissory note for the remaining
indebtedness, which was repaid in October 1996.
24PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
7. Short- and Long-term Obligations (continued)
To partially finance the acquisition of the DYNEX Technologies
(DYNEX; formerly Dynatech Laboratories Worldwide) division of Dynatech
Corporation in February 1996, Thermo BioAnalysis borrowed $30.0 million
from Thermo Electron pursuant to a promissory note, which was repaid in
July 1996.
To partially finance the acquisition of Gould Instrument Systems,
Inc. in May 1995, ThermoSpectra borrowed $15.0 million from Thermo
Electron pursuant to a promissory note, which was repaid in August 1995.
The promissory notes due to Thermo Electron 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 outstanding at
year-end 1997 and 1996 was 5.76% and 5.77%, respectively.
Long-term Obligations
Long-term obligations of the Company are as follows:
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
3 3/4% Senior convertible note to parent company,
due 2000, convertible at $13.55 per share $140,000 $140,000
3 3/4% Senior convertible debentures, due 2000,
convertible at $13.55 per share 15,324 22,281
4 1/2% Senior convertible debentures, due 2003,
convertible at $34.46 per share 172,500 172,500
5% Subordinated convertible debentures, due 2000,
convertible into shares of ThermoQuest
at $16.50 per share 80,591 96,250
5% Subordinated convertible debentures, due 2000,
convertible into shares of Thermo Optek
at $13.94 per share 79,956 96,250
10.23% Mortgage loan secured by property with a
net book value of $15,780, payable in monthly
installments with final payments in 2004 8,343 9,267
Promissory note to parent company, due 1999 (a) 105,000 -
Promissory notes to parent company from
ThermoSpectra, due 1999 (a) 60,000 -
Promissory note to parent company from Thermo
Vision, due 2000 (a) 3,800 -
Promissory note to parent company from
ThermoSpectra, due 1998 - 15,000
Other 10,101 4,788
-------- --------
675,615 556,336
Less: Current maturities of long-term obligations 2,421 2,122
-------- --------
$673,194 $554,214
======== ========
(a) Bears interest at the 90-day Commercial Paper Composite Rate plus 25
basis points.
25PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
7. Short- and Long-term Obligations (continued)
The senior convertible debentures are guaranteed on a senior basis by
Thermo Electron. The 5% subordinated convertible debentures of
ThermoQuest and Thermo Optek are guaranteed on a subordinated basis by
Thermo Electron. The Company has agreed to reimburse Thermo Electron in
the event Thermo Electron is required to make a payment under the
guarantee.
In lieu of issuing all or a portion of the Company's common stock
upon conversion of the 3 3/4% senior convertible debentures due 2000, the
Company has the option to pay holders of the debentures cash equal to the
weighted average market price of the Company's common stock on the last
trading date prior to conversion.
During 1997, 1996, and 1995, convertible obligations of $38.9
million, $67.6 million, and $18.3 million, respectively, were converted
into common stock of the Company or its subsidiaries.
The annual requirements for long-term obligations as of January 3,
1998, are $2.4 million in 1998; $167.5 million in 1999; $322.2 million in
2000; $2.4 million in 2001; $2.2 million in 2002; and $178.9 million in
2003 and thereafter. Total future requirements of long-term obligations
are $675.6 million.
See Note 13 for the fair value information pertaining to the
Company's long-term obligations.
8. Commitments and Contingencies
Operating Leases
The Company leases portions of its office and operating facilities
under various operating lease arrangements. The accompanying statement of
income includes expenses from operating leases of $28.2 million, $21.1
million, and $11.1 million in 1997, 1996, and 1995, respectively. Future
minimum payments due under noncancellable operating leases at January 3,
1998, are $24.5 million in 1998; $20.6 million in 1999; $16.3 million in
2000; $13.0 million in 2001; $10.8 million in 2002; and $36.2 million in
2003 and thereafter. Total future minimum lease payments are $121.4
million.
Contingencies
In December 1996, five former employees of the Company's Epsilon
Industrial, Inc. (Epsilon) subsidiary commenced an arbitration proceeding
naming as joint defendants Epsilon, the Company, and certain affiliates
of the Company, alleging that these entities breached the terms of
certain agreements entered into with such employees at the time that a
predecessor of Epsilon acquired the assets and business of a company
formerly owned by such employees. The former employees are claiming
actual damages of between $27 million and $46 million, punitive damages
of twice the actual damages, attorneys' fees and expenses, and
pre-judgment and post-judgment interest, resulting from the alleged
failure of the Company and its affiliates to, among other things, use
best efforts to develop and promote certain products acquired at that
time. The arbitration proceeding, which is binding and non-appealable, is
expected to conclude in the second quarter of 1998.
26PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
8. Commitments and Contingencies (continued)
ThermoQuest's Finnigan subsidiary has filed complaints against
Bruker-Franzen Analytik GmbH and its U.S. affiliate, and Hewlett-Packard
Company, for alleged violation of two U.S. patents owned by Finnigan
pertaining to methods used in ion-trap mass spectrometers. One of
Finnigan's complaints was filed in United States District Court and the
other was filed with the United States International Trade Commission
(ITC). In February 1998, an administrative law judge at the ITC issued an
initial determination to the effect that, although one of Finnigan's
patents was infringed, the patents were invalid for purposes of this
case. The ITC's jurisdiction on this matter is limited to the issue of
whether or not the defendants' products that use the patented methods can
be imported into the U.S. The judge's initial determination will be
considered by the full commission during the second quarter of 1998.
Bruker has presented counterclaims alleging that the Finnigan patents are
invalid and unenforceable and are not infringed by the mass spectrometers
co-marketed by Bruker. They also allege that Finnigan has violated
antitrust laws by attempting to maintain a monopoly position and restrain
trade through enforcement of allegedly fraudulently obtained patents.
Bruker has asked for judgment consistent with its counterclaims, and for
three times the antitrust damages (including attorney's fees) it has
sustained.
Although the Company intends to vigorously defend these matters,
there can be no assurance as to their outcome. In the opinion of
management, while an unfavorable resolution of one or both of these
matters could materially affect the Company's results of operations and
cash flows in a particular quarter or year, any such resolution would not
have a material adverse effect on the Company's financial position.
The Company is also contingently liable with respect to certain other
lawsuits and matters which, in the opinion of management, will not have a
material effect upon the financial position of the Company or its results
of operations.
27PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
9. 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 $15.9 million, $12.1 million, and $9.4 million 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.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
Sale of Related-party Investments
During 1995, the Company sold its remaining investment in 6 1/2%
subordinated convertible debentures due 1998, which were issued by
Thermedics Inc., a majority-owned subsidiary of Thermo Electron. The
Company sold $2.3 million principal amount of the Thermedics debentures
in 1995 for net proceeds of $4.5 million, which resulted in a gain of
$2.2 million.
Short- and Long-term Obligations
See Note 7 for short- and long-term obligations of the Company held
by Thermo Electron.
10. Common Stock
At January 3, 1998, the Company had reserved 23,635,127 unissued
shares of its common stock for possible issuance under stock-based
compensation plans and for issuance upon possible conversion of the
Company's convertible obligations.
28PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
11. Issuance of Stock by Subsidiaries
Gain on issuance of stock by subsidiaries in the accompanying
statement of income results from the following transactions:
1997
Sale of 1,768,500 shares of ThermoQuest common stock at $15.00 per
share for net proceeds of $24.8 million and conversion of $15.7 million
of ThermoQuest 5% subordinated convertible debentures, convertible at
$16.50 per share, into 949,027 shares of ThermoQuest common stock
resulted in gains of $12.0 million and $7.8 million, respectively.
Initial public offering of 2,300,000 shares of Metrika Systems common
stock at $15.50 per share for net proceeds of $32.5 million resulted in a
gain of $13.2 million.
Private placements of 1,639,670 shares of ONIX Systems common stock
at $14.25 per share for net proceeds of $22.0 million resulted in a gain
of $7.9 million.
Conversion of $13.1 million and $3.2 million of Thermo Optek 5%
subordinated convertible debentures, convertible at $14.85 per share and
$13.94 per share, respectively, into 1,111,316 shares of Thermo Optek
common stock resulted in a gain of $3.2 million.
Initial public offering of 1,139,491 shares of Thermo Vision common
stock at $7.50 per share for net proceeds of $7.0 million resulted in a
gain of $2.3 million.
1996
Initial public offering of 3,450,000 shares of ThermoQuest common
stock at $15.00 per share for net proceeds of $47.8 million resulted in a
gain of $27.2 million.
Initial public offering of 3,450,000 shares of Thermo Optek common
stock at $13.50 per share for net proceeds of $42.9 million resulted in a
gain of $25.1 million.
Initial public offering of 1,670,000 shares of Thermo BioAnalysis
common stock at $14.00 per share for net proceeds of $20.8 million
resulted in a gain of $9.8 million.
Private placement of 967,828 shares of Metrika Systems common stock
at $15.00 per share for net proceeds of $13.5 million resulted in a gain
of $9.6 million.
1995
Private placement of 1,601,500 shares of Thermo BioAnalysis common
stock at $10.00 per share for net proceeds of $14.9 million resulted in a
gain of $9.5 million.
Initial public offering of 1,725,000 shares of ThermoSpectra common
stock at $14.00 per share for net proceeds of $21.9 million resulted in a
gain of $9.3 million.
Private placement of 202,000 shares of ThermoSpectra common stock at
$15.72 per share for net proceeds of $3.0 million resulted in a gain of
$1.3 million.
29PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
11. Issuance of Stock by Subsidiaries (continued)
The Company's ownership percentages of its majority-owned
subsidiaries at year end were as follows:
1997 1996 1995
----------------------------------------------------------------------
ThermoSpectra 77% 72% 72%
ThermoQuest 88% 93% 100%
Thermo Optek 91% 93% 100%
Thermo BioAnalysis 70% 67% 80%
Metrika Systems 60% 84% 100%
Thermo Vision (a) 78% 93% 100%
ONIX Systems 87% 100% 100%
(a)Thermo Vision was a wholly owned subsidiary of Thermo Optek until
December 1997, when Thermo Optek distributed to its shareholders 100%
of the common stock of Thermo Vision in the form of a dividend.
12. Nonrecurring (Income) Expense, Net
Nonrecurring income, net in 1997 reflects a gain of $2.2 million
recognized by ThermoSpectra on the sale of its Linac business for $5.0
million in cash and $2.1 million in equity securities, offset in part by
a $0.9 million charge incurred by ThermoSpectra, primarily related to
severance expense for employees terminated during the year at one of its
business units.
Nonrecurring expense in 1996 reflects the write-off of acquired
technology relating to the acquisition of the Fisons businesses (Note 4).
13. Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and
cash equivalents, available-for-sale investments, accounts receivable,
notes payable and current maturities of long-term obligations, accounts
payable, due to parent company and affiliated companies, long-term
obligations, and forward exchange contracts. The carrying amounts of
these financial instruments, with the exception of available-for-sale
investments, long-term obligations, and forward foreign exchange
contracts, approximate fair value due to their short-term nature.
Available-for-sale investments are carried at fair value in the
accompanying balance sheet. The fair values were determined based on
quoted market prices (Note 2).
30PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
13. Fair Value of Financial Instruments (continued)
The carrying amount and fair value of the Company's long-term
obligations and off-balance-sheet financial instruments are as follows:
1997 1996
------------------ ------------------
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
-----------------------------------------------------------------------
Long-term obligations:
Convertible obligations $488,371 $767,769 $527,281 $681,550
Other 184,823 186,653 26,933 27,767
-------- -------- -------- --------
$673,194 $954,422 $554,214 $709,317
======== ======== ======== ========
Off-balance-sheet
financial instruments:
Forward exchange
contracts receivable $ 923 $ 886
The fair value of long-term obligations was determined based on
quoted market prices and on borrowing rates available to the Company at
the respective year-ends. The fair value of convertible obligations
exceeds the carrying amount primarily due to the market price of the
Company's and subsidiaries' common stock exceeding the conversion price
of certain of the convertible obligations.
The Company had forward foreign exchange contracts of $33.1 million
and $12.8 million at year-end 1997 and 1996, respectively. The fair value
of such contracts is the estimated amount that the Company would receive
if it were to terminate the contracts, taking into account the change in
foreign exchange rates.
31PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
14. Geographical Data
The Company is engaged in one business segment: developing,
manufacturing, marketing, and servicing instruments and software used for
the identification and quantification of complex molecular compounds and
elements in gases, liquids, and solids. The following table shows data
for the Company by geographical area:
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Revenues:
United States $1,010,964 $ 688,865 $ 520,485
United Kingdom 296,570 227,375 78,768
Germany 172,696 182,958 124,035
Other Europe 277,056 225,244 107,755
Other 108,277 104,885 79,368
Transfers among geographical
areas (a) (273,249) (219,965) (127,749)
---------- ---------- ----------
$1,592,314 $1,209,362 $ 782,662
========== ========== ==========
Income before provision for
income taxes and minority
interest expense:
United States $ 160,338 $ 97,114 $ 81,144
United Kingdom 27,586 14,333 5,128
Germany 11,309 9,894 8,703
Other Europe 31,937 15,350 12,505
Other 6,377 11,500 8,203
Corporate and
eliminations (b) (18,293) (21,548) (11,214)
---------- ---------- ----------
Total operating income 219,254 126,643 104,469
Interest and other income,
net 28,763 63,280 18,872
---------- ---------- ----------
$ 248,017 $ 189,923 $ 123,341
========== ========== ==========
Identifiable assets:
United States $1,354,197 $1,045,345 $ 888,620
United Kingdom 360,257 253,203 85,615
Germany 143,212 172,468 125,686
Other Europe 302,744 221,420 94,135
Other 68,080 57,435 62,090
Corporate and
eliminations (c) 122,663 174,529 116,667
---------- ---------- ----------
$2,351,153 $1,924,400 $1,372,813
========== ========== ==========
32PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
14. Geographical Data (continued)
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Export revenues included in United
States revenues above (d):
Europe $ 142,014 $ 100,767 $ 88,418
Asia 124,441 107,796 80,839
Other 68,398 45,142 40,303
---------- ---------- ----------
$ 334,853 $ 253,705 $ 209,560
========== ========== ==========
(a)Transfers among geographical areas are accounted for at prices that
are representative of transactions with unaffiliated parties.
(b)Primarily corporate general and administrative expenses.
(c)Primarily cash, cash equivalents, and available-for-sale investments.
(d)In general, export revenues are denominated in U.S. dollars.
15. 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 $147,258 $132,751 $ 79,306
-------- -------- --------
Weighted average shares 121,548 118,857 113,222
-------- -------- --------
Basic earnings per share $ 1.21 $ 1.12 $ .70
======== ======== ========
Diluted
Net income $147,258 $132,751 $ 79,306
Effect of:
Convertible obligations 8,089 5,288 5,729
Majority-owned subsidiaries'
dilutive securities (2,839) (922) (34)
-------- -------- --------
Income available to common
shareholders, as adjusted $152,508 $137,117 $ 85,001
-------- -------- --------
Weighted average shares 121,548 118,857 113,222
Effect of:
Convertible obligations 16,713 15,292 19,380
Stock options 1,154 1,202 689
-------- -------- --------
Weighted average shares, as adjusted 139,415 135,351 133,291
-------- -------- --------
Diluted earnings per share $ 1.09 $ 1.01 $ .64
======== ======== ========
33PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
15. Earnings per Share (continued)
In January 1998, the Company sold $250.0 million principal amount of
4% subordinated convertible debentures, which are convertible into shares
of the Company's common stock at a conversion price of $35.65 per share
(Note 17).
16. Unaudited Quarterly Information
(In thousands except per share amounts)
1997(a) First(b) Second Third Fourth
------------------------------------------------------------------------
Revenues $329,120 $405,235 $403,900 $454,059
Gross profit 155,672 194,741 188,901 210,991
Net income 33,587 37,219 37,273 39,179
Earnings per share:
Basic .28 .31 .31 .32
Diluted .25 .28 .28 .29
1996(c) First(d) Second Third Fourth
------------------------------------------------------------------------
Revenues $225,571 $321,552 $315,292 $346,947
Gross profit 107,364 144,524 147,803 155,506
Net income 34,043 35,296 30,521 32,891
Earnings per share:
Basic .30 .30 .25 .27
Diluted .26 .27 .23 .25
(a)Results include nontaxable gains of $12.0 million, $13.2 million,
$12.7 million, and $8.5 million in the first, second, third, and
fourth quarters, respectively, from the issuance of stock by
subsidiaries.
(b)Reflects the March 1997 acquisition of Life Sciences.
(c)Results include nontaxable gains of $24.3 million, $25.5 million,
$11.4 million, and $10.5 million in the first, second, third, and
fourth quarters, respectively, from the issuance of stock by
subsidiaries.
(d)Reflects the March 1996 acquisition of the Fisons businesses.
17. Subsequent Event
In January 1998, the Company sold at par value $250.0 million
principal amount of 4% subordinated convertible debentures due 2005 for
net proceeds of $243.8 million. The debentures are convertible into
shares of the Company's common stock at a conversion price of $35.65 per
share and are guaranteed on a subordinated basis by Thermo Electron. The
Company used a portion of the proceeds to repay a $105.0 million
promissory note to Thermo Electron. The $105.0 million promissory note
has been classified as long-term in the accompanying 1997 balance sheet,
as its repayment was made using the proceeds of debt with a maturity
beyond one year.
34PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Report of Independent Public Accountants
To the Shareholders and Board of Directors of
Thermo Instrument Systems Inc.:
We have audited the accompanying consolidated balance sheet of Thermo
Instrument Systems Inc. (a Delaware corporation and 82%-owned subsidiary
of Thermo Electron Corporation) and subsidiaries as of January 3, 1998,
and December 28, 1996, and the related consolidated statements of income,
shareholders' investment, and cash flows 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 Instrument Systems Inc. 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 the period ended January 3, 1998, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 17, 1998
35PAGE
<PAGE>
Thermo Instrument Systems Inc. 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."
Results of Operations
The Company's revenues were $1,592.3 million in 1997, compared with
$1,209.4 million in 1996, and $782.7 million in 1995. The increases were
primarily due to acquisitions, which included Life Sciences in March
1997, a substantial portion of the businesses constituting the Scientific
Instruments Division of Fisons in March 1996, DYNEX and Oriel Corporation
in February 1996, the analytical instrument division of Analytical
Technology, Inc. in December 1995, and Gould Instrument Systems Inc. in
May 1995. Acquisitions added revenues of $407 million in 1997 and $404
million in 1996. In addition to the effect of acquisitions, revenues
increased in 1997 due to higher sales at ThermoQuest's existing mass
spectrometry business, partly as a result of the continued success of a
new product introduced in the first quarter of 1996, and due to increased
sales at Metrika Systems, primarily as a result of increased sales in
international markets from its on-line raw materials analyzer business.
Revenues also increased at ONIX Systems, primarily due to increased sales
of industry-specific instruments to the production segment of the oil and
gas industry. Revenues from Thermo Optek's existing businesses decreased
slightly due to the inclusion in 1996 of several large nonrecurring sales
to the Chinese and Japanese governments, a decrease in demand for
elemental products in Japan, and the elimination of certain unprofitable
acquired product lines, offset substantially by greater demand at one of
its business units. In addition to the effect of acquisitions, revenues
increased in 1996 due to greater demand experienced by ThermoQuest's mass
spectrometry business as a result of the introduction of two new
products, one in the third quarter of 1995 and another in the first
quarter of 1996, and, to a lesser extent, greater product demand at
Thermo Optek's Fourier transform infrared (FT-IR) and FT-Raman
spectrometry businesses. The increases in revenues in 1997 and 1996 were
offset in part by decreases of $46.8 million and $21.8 million,
respectively, due to the unfavorable effects of currency translation as a
result of the strengthening of the U.S. dollar relative to foreign
currencies in countries in which the Company operates.
International sales account for a significant portion of the
Company's total revenues. Although the Company seeks to charge its
customers in the same currency as its operating costs, the Company's
36PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
financial performance and competitive position can be affected by
currency exchange rate fluctuations. Where appropriate, the Company uses
short-term forward foreign exchange contracts to reduce its exposure to
currency fluctuations.
The gross profit margin was 47% in 1997, compared with 46% in 1996
and 48% in 1995. The increase in 1997 was primarily due to margin
improvements at certain of the businesses acquired from Fisons in 1996
and increased sales of ThermoQuest's higher-margin mass spectrometry
products. These increases were offset in part by the inclusion of
lower-margin revenues from acquired businesses, including Life Sciences,
which recorded an adjustment to expense of $3.6 million in 1997 relating
to the sale of inventories revalued at the date of acquisition and, to a
lesser extent, a decrease in the gross profit margin at ThermoSpectra,
primarily as a result of a one-time inventory write-off and a change in
sales mix at one of its business units. The gross profit margin decreased
in 1996 primarily due to lower margins at acquired businesses, including
Fisons, which included an adjustment to expense of $2.0 million in 1996
relating to the sale of inventories revalued at the date of acquisition.
Selling, general, and administrative expenses as a percentage of
revenues was 27% in 1997 and 28% in 1996 and 1995. The decrease in 1997
was primarily due to efforts to reduce selling and administrative
expenses at acquired businesses and, to a lesser extent, lower selling
costs associated with certain of the Life Sciences businesses.
Research and development expenses as a percentage of revenues
remained relatively unchanged at 6.8% in 1997, compared with 7.0% in
1996, and 6.9% in 1995.
In 1997, ThermoSpectra recognized a gain of $2.2 million on the sale
of its Linac business, which was offset in part by a charge by
ThermoSpectra of $0.9 million for severance costs for employees
terminated during 1997 (Note 12). In 1996, the Company wrote off $3.5
million of acquired technology relating to the acquisition of the Fisons
businesses (Note 4).
Interest income increased to $28.3 million in 1997 from $20.5 million
in 1996 and $14.6 million in 1995. The increase in 1997 was due to
interest income earned on invested proceeds from the issuance of $172.5
million principal amount of 4 1/2% senior convertible debentures by the
Company in October 1996 and, to a lesser extent, from the invested
proceeds from the sale of common stock by the Company's subsidiaries in
1997 and 1996 (Note 11). The increase in 1996 was primarily the result of
interest income earned on invested proceeds from the issuance of $96.3
million principal amount of 5% subordinated convertible debentures by
each of ThermoQuest and Thermo Optek in August 1995 and October 1995,
respectively, the sale of common stock by the Company's subsidiaries
(Note 11) and, to a lesser extent, the issuance of the 4 1/2% senior
convertible debentures. The increases in interest income in 1997 and 1996
were offset in part by a reduction in cash as a result of acquisitions.
Interest expense increased to $45.9 million in 1997 from $28.9
million in 1996 and $18.1 million in 1995. The increase in 1997 was
37PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
primarily due to the issuance of an aggregate $428.8 million of
promissory notes to Thermo Electron in connection with acquisitions
(Note 7), the issuance of 4 1/2% senior convertible debentures by the
Company in October 1996 and, to a lesser extent, the inclusion of
interest expense on debt assumed in connection with the acquisitions of
the Fisons businesses and Life Sciences, which has been subsequently
repaid. In September 1997, the Company repaid $220.0 million of its
outstanding promissory notes to Thermo Electron (Notes 4 and 7). The
increase in 1996 was primarily due to the issuance of the 5% subordinated
convertible debentures by ThermoQuest and Thermo Optek. To a lesser
extent, interest expense increased due to the issuance by the Company of
the 4 1/2% senior convertible debentures, the issuance of promissory
notes to Thermo Electron in connection with acquisitions (Note 7), and
the inclusion of interest expense on the debt assumed as part of the
acquisition of the Fisons businesses. The increases in interest expense
in 1997 and 1996 were offset in part by the conversion of a portion of
the Company's and subsidiaries' convertible obligations into common stock
of the Company and its subsidiaries.
The Company has adopted a strategy of spinning out certain of its
businesses into separate subsidiaries and having these subsidiaries sell
a minority interest to outside investors. The Company believes that this
strategy provides additional motivation and incentives for the management
of the subsidiaries through the establishment of subsidiary-level stock
option programs, as well as capital to support the subsidiaries' growth.
As a result of the sale of stock by subsidiaries and issuance of stock by
subsidiaries upon conversion of convertible debentures, the Company
recorded gains of $46.4 million in 1997, $71.7 million in 1996, and $20.1
million in 1995 (Note 11). These gains represent an increase in the
Company's net investment in the subsidiaries and are classified as "Gain
on issuance of stock by subsidiaries" in the accompanying statement of
income. The size and timing of these transactions are dependent on market
and other conditions that are beyond the Company's control. Accordingly,
there can be no assurance that the Company will be able to generate gains
from such transactions in the future. Further, in October 1995, the
Financial Accounting Standards Board (FASB) issued an exposure draft of a
Proposed Statement of Financial Accounting Standards, "Consolidated
Financial Statements: Policy and Procedures" (the Proposed Statement).
The Proposed Statement would establish new rules for how consolidated
financial statements should be prepared. If the Proposed Statement is
adopted, there would be significant changes in the way the Company
records certain transactions of its controlled subsidiaries. Among those
changes, any sale of the stock of a subsidiary that does not result in a
loss of control would be accounted for as a transaction in equity of the
consolidated entity with no gain or loss being recorded. The exposure
draft addresses the consolidation issues in two parts: consolidation
procedures, which includes proposed rule changes affecting the Company's
ability to recognize gains on issuances of subsidiary stock, and
consolidation policy, which does not address accounting for such gains.
During fiscal 1997, the FASB decided to focus its efforts on the
38PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
consolidation policy part of the exposure draft and to consider resuming
discussion on consolidation procedures after completion of the efforts on
consolidation policy. The timing and content of any final statement are
uncertain.
The Company recorded a gain of $2.2 million in 1995 from the sale of
the Company's investment in subordinated convertible debentures issued by
Thermedics Inc., a majority-owned subsidiary of Thermo Electron (Note 9).
The effective tax rate was 36% in 1997, 27% in 1996, and 35% in 1995.
The effective tax rate increased in 1997 primarily due to a lower
nontaxable gain on issuance of stock by subsidiaries. The effective tax
rate decreased in 1996 primarily due to a higher nontaxable gain on
issuance of stock by subsidiaries. Excluding the impact of the gains on
issuance of stock by subsidiaries, the effective tax rates exceeded the
statutory federal income tax rate due to the inability to provide a tax
benefit on losses incurred at certain foreign subsidiaries, the impact of
foreign and state income taxes, the nondeductible amortization of cost in
excess of net assets of acquired companies and, in 1996, the write-off of
acquired technology in connection with the acquisition of the Fisons
businesses.
Minority interest expense increased to $12.6 million in 1997 from
$5.4 million in 1996, primarily due to higher earnings at Thermo
BioAnalysis, ThermoQuest, and Thermo Optek and, to a lesser extent,
minority interest associated with the Company's newly public Metrika
Systems subsidiary. These increases were offset in part by lower earnings
at ThermoSpectra.
See Note 8 for a description of certain legal proceedings involving
the Company.
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 sold as well as products
purchased by the Company. The Company believes that its internal
information systems and current products 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 and current products, which could result in
a material adverse effect on the Company's future results of operations.
The Company is presently assessing the effect that the year 2000
problem may have on its previously sold products. The Company is also
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 its previously sold products and
products purchased from key suppliers is not reasonably likely to have a
material adverse effect on the Company's future results of operations.
39PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
Consolidated working capital was $612.7 million at January 3, 1998,
compared with $636.7 million at December 28, 1996. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$477.2 million at January 3, 1998, and $530.1 million at December 28,
1996. Of the $477.2 million balance at January 3, 1998, $290.4 million
was held by the Company's majority-owned subsidiaries and the balance was
held by the Company and its wholly owned subsidiaries. Cash provided by
operating activities in 1997 was $169.3 million. The Company used $19.2
million during the year to fund an increase in accounts receivable. Of
the total increase, $11.8 million was at ThermoQuest and resulted from
higher shipments in the fourth quarter and a competitive trend to
commercial terms of 30 days from ThermoQuest's past practice of obtaining
deposits on certain systems. The Company used $23.9 million of cash
during the year to reduce current liabilities, primarily for certain exit
costs relating to acquisitions (Note 4).
At January 3, 1998, $131.4 million of the Company's cash and cash
equivalents was held by its foreign subsidiaries. While this cash can be
used outside of the United States, including for acquisitions,
repatriation of this cash into the United States would be subject to
foreign withholding taxes and could also be subject to a United States
tax.
The Company's investing activities used $485.0 million of cash in
1997. The Company expended $508.1 million, net of cash acquired, for
acquisitions, including the repayment of $106.3 million of bank debt
(Note 4), and $29.2 million for purchases of property, plant, and
equipment. The Company recorded proceeds of $7.9 million from the sale of
property, plant, and equipment in 1997.
The Company's financing activities provided $270.8 million of cash in
1997. During 1997, to partially finance acquisitions, the Company and its
majority-owned subsidiaries borrowed an aggregate $428.8 million from
Thermo Electron pursuant to promissory notes with various dates of
maturity (Note 7). In September 1997, the Company repaid $220.0 million
of its outstanding promissory notes to Thermo Electron (Notes 4 and 7).
Net proceeds from the issuance of Company and subsidiary common stock
totaled $93.1 million (Note 11). In January 1998, the Company sold at par
value $250.0 million principal amount of 4% subordinated convertible
debentures due 2005 for net proceeds of $243.8 million. The Company used
a portion of the proceeds to repay a $105.0 million promissory note to
Thermo Electron.
In 1998, the Company plans to make expenditures of approximately $37
million for property, plant, and equipment. The Company believes that its
existing resources are sufficient to meet the capital requirements of its
existing operations for the foreseeable future. The Company has
historically complemented internal development with acquisitions of
businesses or technologies that extend the Company's presence in current
markets or provide opportunities to enter and compete effectively in new
markets. The Company will consider making acquisitions of such businesses
or technologies that are consistent with its plans for strategic growth.
The Company expects that it will finance these acquisitions through a
40PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
combination of internal funds, additional debt or equity financing from
the capital markets, or short-term borrowings from Thermo Electron
although there is no agreement with Thermo Electron to ensure that funds
will be available on acceptable terms or at all.
Market Risk
The Company is exposed to market risk from changes in foreign
currency exchange rates, interest rates, and equity prices, which could
affect its future results of operations and financial condition. The
Company manages its exposure to these risks through its regular operating
and financing activities. Additionally, the Company uses short-term
forward contracts to manage certain exposures to foreign currencies. The
Company enters into forward foreign exchange contracts to hedge firm
purchase and sale commitments denominated in currencies other than its
subsidiaries' local currencies. The Company does not engage in extensive
foreign currency hedging activities; however, the purpose of the
Company's foreign currency hedging activities is to protect the Company's
local currency cash flows related to these commitments from fluctuations
in foreign exchange rates. The Company's forward foreign exchange
contracts principally hedge transactions denominated in U.S. dollars,
British pounds sterling, Japanese yen, French francs, and German deutsche
marks. Gains and losses arising from forward contracts are recognized as
offsets to gains and losses resulting from the transactions being hedged.
The Company does not enter into speculative foreign currency agreements.
Foreign Currency Exchange Rates
Forward foreign exchange contracts are sensitive to changes in
foreign currency exchange rates. The fair value of forward foreign
exchange contracts is the estimated amount that the Company would pay or
receive upon termination of the contract, taking into account the change
in foreign exchange rates. A 10% depreciation in year-end 1997 foreign
currency exchange rates related to the Company's contracts would result
in a decrease in the unrealized gain on forward foreign exchange
contracts of $2 million. Since the Company uses forward foreign exchange
contracts as hedges of firm purchase and sale commitments, the unrealized
gain or loss on forward foreign currency exchange contracts resulting
from changes in foreign currency exchange rates would be offset by a
corresponding change in the fair value of the hedged item.
The Company generally views its investment in foreign subsidiaries
with a functional currency other than the Company's reporting currency as
long-term. The Company's investment in foreign subsidiaries is sensitive
to fluctuations in foreign currency exchange rates. The functional
currencies of the Company's foreign subsidiaries are principally
denominated in British pounds sterling, German deutsche marks, Dutch
guilders, and French francs. The effect of a change in foreign exchange
rates on the Company's net investment in foreign subsidiaries is recorded
as a separate component of shareholders' investment. A 10% depreciation
41PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Market Risk (continued)
in year-end 1997 functional currencies, relative to the U.S. dollar,
would result in a $12 million reduction of shareholders' investment.
Interest Rates
Certain of the Company's available-for-sale investments and long-term
obligations are sensitive to changes in interest rates. Interest rate
changes would result in a change in the fair value of these financial
instruments due to the difference between the market interest rate and
the rate at the date of purchase or issuance of the financial instrument.
A 10% decrease in year-end 1997 market interest rates would result in a
negative impact of $6 million on the net fair value of the Company's
interest-sensitive financial instruments.
Equity Prices
The Company's available-for-sale investment portfolio includes equity
securities that are sensitive to fluctuations in price. In addition, the
Company's and its subsidiaries' convertible obligations are sensitive to
fluctuations in the price of Company or subsidiary common stock into
which the obligations are convertible. Changes in equity prices would
result in changes in the fair value of the Company's available-for-sale
investments and convertible obligations due to the difference between the
current market price and the market price at the date of purchase or
issuance of the financial instrument. A 10% increase in the year-end 1997
market equity prices would result in a negative impact of $58 million on
the net fair value of the Company's price-sensitive equity financial
instruments.
42PAGE
<PAGE>
Thermo Instrument Systems Inc. 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 Spinout of Subsidiaries. The Company has
adopted a strategy of spinning out certain of its businesses into
separate subsidiaries and having these subsidiaries sell a minority
interest to outside investors. As a result of the sale of stock by
subsidiaries, the issuance of stock by subsidiaries upon conversion of
convertible debentures, and similar transactions, the Company records
gains that represent the increase in the Company's net investment in the
subsidiaries. These gains have represented a substantial portion of the
net income reported by the Company in certain periods. The size and
timing of these transactions are dependent on market and other conditions
that are beyond the Company's control. Accordingly, there can be no
assurance that the Company will be able to generate gains from such
transactions in the future.
Further, in October 1995, the Financial Accounting Standards Board
(FASB) issued an exposure draft of a Proposed Statement of Financial
Accounting Standards, "Consolidated Financial Statements: Policy and
Procedures" (the Proposed Statement). The Proposed Statement would
establish new rules for how consolidated financial statements should be
prepared. If the Proposed Statement is adopted, there would be
significant changes in the way the Company records certain transactions
of its controlled subsidiaries. Among those changes, any sale of the
stock of a subsidiary that does not result in a loss of control would be
accounted for as a transaction in equity of the consolidated entity with
no gain or loss being recorded. The exposure draft addresses the
consolidation issues in two parts: consolidation procedures, which
includes proposed rule changes affecting the Company's ability to
recognize gains on issuances of subsidiary stock, and consolidation
policy, which does not address accounting for such gains. During fiscal
1997, the FASB decided to focus its efforts on the consolidation policy
part of the exposure draft and to consider resuming discussion on
consolidation procedures after completion of the efforts on consolidation
policy. The timing and content of any final statement are uncertain.
Uncertainty of Growth. Certain of the markets in which the Company
competes have been flat or declining over the past several years. The
Company has identified a number of strategies it believes will allow it
to grow its business, including acquiring complementary businesses;
developing new applications for its technologies; and strengthening its
presence in selected geographic markets. No assurance can be given that
the Company will be able to successfully implement these strategies, or
that these strategies will result in growth of the Company's business.
Risks Associated with Acquisition Strategy. One of the Company's
growth strategies is to supplement its internal growth with the
43PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Forward-looking Statements
acquisition of businesses and technologies that complement or augment the
Company's existing product lines. Certain businesses acquired by the
Company have had low levels of profitability. In addition, businesses
that the Company may seek to acquire in the future may also 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 change operations and improve market penetration. No
assurance can be given that the Company will be successful in this
regard. In addition, promising acquisitions are difficult to identify and
complete for a number of reasons, including competition among prospective
buyers, the need for regulatory approvals, including antitrust approvals,
and the high valuations of businesses resulting from historically high
stock prices in many countries. Acquisitions made by the Company may be
made at substantial premiums over the fair value of the net assets of the
acquired companies. There can be no assurance that the Company will be
able to complete pending or future acquisitions or that the Company will
be able to successfully integrate any acquired business into its existing
business or make such businesses profitable. In order to finance any such
acquisitions, it may be necessary for the Company to raise additional
funds either through 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.
Risks Associated with Technological Change, Obsolescence, and the
Development and Acceptance of New Products. The market for the Company's
products and services 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 technologies developed by the
Company may be slow to develop due to, among other things, existing
regulations written specifically for older technologies and general
unfamiliarity of users with new technologies.
Possible Adverse Effect From Consolidation in the Environmental
Market and Changes in Environmental Regulations. One of the important
markets for the Company's products is environmental analysis. During the
past several years, there has been a contraction in the market for
analytical instruments used for environmental analysis. This contraction
has caused consolidation in the businesses serving this market. Such
consolidation may have an adverse impact on certain of the Company's
businesses. In addition, most air, water, and soil analysis is conducted
to comply with federal, state, local, and foreign environmental
regulations. These regulations are frequently specific as to the type of
technology required for a particular analysis and the level of detection
required for that analysis. The Company develops, configures, and markets
its products to meet customer needs created by existing and anticipated
environmental regulations. These regulations may be amended or eliminated
in response to new scientific evidence or political or economic
44PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Forward-looking Statements
considerations. Any significant change in environmental regulations could
result in a reduction in demand for the Company's products.
Risks Associated With the Sale of Products to the Pharmaceutical
Industry. The pharmaceutical industry is one of the important markets for
the Company's products. Although the Company's existing general purpose
analytical equipment and services are not subject to regulation by the
U.S. Food and Drug Administration (the FDA), FDA regulations apply to the
processes and production facilities used to manufacture pharmaceutical
products. Any material change by a pharmaceutical company in its
manufacturing process or equipment could necessitate additional FDA
review and approval. Such requirements may make it more difficult for the
Company to sell its products and services to pharmaceutical customers
that have already applied for or obtained approval for production
processes using different equipment and supplies. Any changes in the
regulations that apply to the processes and production facilities used to
manufacture pharmaceutical products may adversely affect the market for
the Company's products. In addition, from time to time as a result of
industry consolidation and other factors, the pharmaceutical industry has
reduced its capital expenditures for equipment such as that manufactured
by the Company, and there can be no assurance that further changes in the
pharmaceutical industry will not adversely affect demand for the
Company's products.
Risks Associated With Dependence on Capital Spending Policies and
Government Funding. The Company's customers include pharmaceutical and
chemical companies, laboratories, government agencies, and public and
private research institutions. The capital spending of these entities can
have a significant effect on the demand for the Company's products. Such
spending levels are based on a wide variety of factors, including the
resources available to make such purchases, the spending priorities among
various types of research equipment, public policy, and the effects of
different economic cycles. Any decrease in capital spending by any of the
customer groups that account for a significant portion of the Company's
sales could have a material adverse effect on the Company's business and
results of operations.
Possible Adverse Impact of Significant International Operations.
International revenues accounted for a significant portion of the
Company's total revenues in 1997, and the Company expects that
international revenues will continue to account for a significant portion
of the Company's revenues in the future. Sales to customers in foreign
countries are subject to a number of risks, including the following:
fluctuations in exchange rates may affect product demand and adversely
affect the profitability in U.S. dollars of products and services
provided by the Company in foreign markets where payment for the
Company's products and services is made in the local currency; 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; export licenses, if required, may be
45PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Forward-looking Statements
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 business and results of operations.
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 competitors include large multinational
corporations and their operating units. Some of the Company's 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.
Risks Associated with Protection, Defense, and Use of Intellectual
Property. The Company holds many 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 and, 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 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 business and results of
operations could be materially adversely affected. Further, the laws of
some jurisdictions do not protect the Company's proprietary rights to the
46PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Forward-looking Statements
same extent as the laws of the U.S. and there can be no assurance that
available protections will be adequate. 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 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 sold as well
as products purchased by the Company. The Company believes that its
internal information systems and current products 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 and current products, which could
result in a material adverse effect on the Company's future results of
operations.
The Company is presently assessing the effect that the year 2000
problem may have on its previously sold products. The Company is also
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 its previously sold products and
products purchased from key suppliers is not reasonably likely to have a
material adverse effect on the Company's future results of operations.
47PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Selected Financial Information
(In thousands
except per share
amounts) 1997(a) 1996(b) 1995(c) 1994(d) 1993
---------------------------------------------------------------------------
Statement of
Income Data:
Revenues $1,592,314 $1,209,362 $ 782,662 $ 649,992 $ 529,278
Income from
continuing
operations 147,258 132,751 79,306 58,261 42,793
Net income 147,258 132,751 79,306 60,220 44,764
Earnings per
share from
continuing
operations:
Basic 1.21 1.12 .70 .53 .41
Diluted 1.09 1.01 .64 .49 .39
Earnings per
share:
Basic 1.21 1.12 .70 .55 .43
Diluted 1.09 1.01 .64 .50 .40
Balance Sheet
Data:
Working
capital $ 612,666 $ 636,703 $ 489,895 $ 230,306 $ 238,053
Total assets 2,351,153 1,924,400 1,372,813 1,011,917 891,141
Long-term
obligations 673,194 554,214 441,034 263,559 286,161
Shareholders'
investment 877,558 746,267 542,705 440,763 358,055
(a)Reflects the March 1997 acquisition of Life Sciences and nontaxable
gains of $46.4 million from the issuance of stock by subsidiaries.
(b)Reflects the March 1996 acquisition of the Fisons businesses, the
October 1996 issuance of $172.5 million principal amount of
4 1/2% senior convertible debentures due 2003, and nontaxable gains of
$71.7 million from the issuance of stock by subsidiaries.
(c)Reflects the August and October 1995 issuance of $96.3 million
principal amount of 5% subordinated convertible debentures due 2000 by
each of ThermoQuest and Thermo Optek, respectively, and nontaxable
gains of $20.1 million from the issuance of stock by subsidiaries.
(d)Reflects the March 1994 acquisition of several businesses within the
EnviroTech Measurements & Controls group of Baker Hughes Incorporated
and nontaxable gains of $6.5 million from the issuance of stock by
subsidiary.
48PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
Common Stock Market Information
The Company's common stock is traded on the American Stock Exchange
under the symbol THI. The following table sets forth the high and low
sale prices of the Company's common stock for 1997 and 1996, as reported
in the consolidated transaction reporting system. Prices were restated to
reflect a five-for-four stock split distributed in October 1997 in the
form of a 25% stock dividend.
1997 1996
---------------------- ----------------------
Quarter High Low High Low
---------------------------------------------------------------------
First $29 1/5 $23 1/10 $24 2/5 $19 7/10
Second 28 1/2 22 1/2 34 7/10 22 4/5
Third 34 1/5 24 3/5 31 23 3/5
Fourth 34 1/2 23 30 1/10 23 1/5
As of January 30, 1998, the Company had 2,997 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 $29 1/8 per share.
Common stock of the Company's majority-owned public subsidiaries is
traded on the American Stock Exchange: ThermoSpectra Corporation (symbol
THS), ThermoQuest Corporation (symbol TMQ), Thermo Optek Corporation
(symbol TOC), Thermo BioAnalysis Corporation (symbol TBA), Metrika
Systems Corporation (MKA), and Thermo Vision Corporation (VIZ).
Shareholder Services
Shareholders of Thermo Instrument Systems Inc. who desire information
about the Company are invited to contact John N. Hatsopoulos, Chief
Financial Officer, Thermo Instrument Systems Inc., 81 Wyman Street, P.O.
Box 9046, Waltham, Massachusetts 02254-9046, (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/thi1.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
49PAGE
<PAGE>
Thermo Instrument Systems Inc. 1997 Financial Statements
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.
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 Instrument Systems Inc., 81 Wyman Street, P.O.
Box 9046, Waltham, Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Monday, June 1,
1998, at 9:00 a.m. at the Hyatt Regency Hotel, Scottsdale, Arizona.
Exhibit 21
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
As of February 20, 1998, the Registrant owned the following
subsidiaries:
STATE OR
JURISDICTION PERCENT
NAME OF OF
INCORPORATION OWNERSHIP
Analytical Instrument Development, Inc. Pennsylvania 100
Eberline Instrument Company Limited United Kingdom 100
Eberline Instrument Corporation New Mexico 100
Epsilon Industrial Inc. Texas 100
ESM Eberline Instruments Strahlen Germany 100
- und Umweltmesstechnik GmbH
Fisons Instruments Vertriebs GmbH Germany 100
Gebruder Haake GmbH Germany 100
Gas Tech Inc. California 100
Gas Tech Australia, Pty. Ltd. Australia 50*
Gas Tech Partnership California 50*
Gastech Instruments Canada Ltd. Canada 100
Life Sciences International Limited United Kingdom 100
Comdate Services Limited England 100
Lipshaw Limited England 100
Luckham Limited England 100
Phicom Limited England 100
Shandon Scientific Limited England 100
Southions Investments Limited England 100
Sungel Puntar Rubber Estate Limited England 100
Westions Limited England 100
Whale Scientific Limited England 100
Helmet Securities Limited England 100
Life Sciences International GmbH Germany 100
Life Sciences International Kft Hungary 100
Life Sciences International SNC France 100
Life Sciences International France 100
(France) SA
Shandon SA France 100
Life Sciences International, Inc. Pennsylvania 100
LSI North America Service Inc. Delaware 100
Shandon, Inc. Pennsylvania 100
Alko Diagnostic Corporation Massachusetts 100
E-C Apparatus Corporation Florida 100
Whale Scientific, Inc. Colorado 100
Life Sciences International Holdings BV Netherlands 100
Biosystems Oy Finland 100
Life Sciences International Poland 100
(Poland) SP z O.O
Angela Scientific Instruments Limited England 100
Britlowes Limited England 100
PAGE 1<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
STATE OR
JURISDICTION PERCENT
NAME OF OF
INCORPORATION OWNERSHIP
Commendstar Limited England 100
Consumer & Video Holdings Limited England 100
Video Communications Limited England 100
Greensecure Projects Limited England 100
Labsystems Europe GA Spain 100
Labsystems Ges mbH Austria 100
LSI (US) Inc. Delaware 100
Omnigene Limited England 59
Shandon Southern Instruments Limited England 100
Shenbridge Limited England 100
Southern Instruments Holdings Limited England 100
Metrika Systems Corporation Delaware 60**
Eberline Radiometrie GmbH Germany 100
Eberline Radiometrie S.A. France 100
Gamma-Metrics California 100
Gamma-Metrics International F.S.C. Inc. Guam 100
Radiometrie U.S.A., Inc. California 100
Thermo Instrument Systems Limited United Kingdom 100
National Nuclear Corporation California 100
ONIX Systems Inc. Delaware 87**
Brandt Instruments, Inc. Delaware 100
CAC Inc. Delaware 100
Flow Automation Inc. Texas 100
Thermo Instrument Controls de Mexico, Mexico 100
S.A. de C.V.
(1% of which shares are owned directly
by ONIX Systems Inc.)
VG Gas Analysis Systems Inc. Massachusetts 100
Houston Atlas Inc. Texas 100
ONIX Holdings Limited England 100
CAC Limited United Kingdom 100
Flow Automation (UK) Limited United Kingdom 100
VG Gas Analysis Limited United Kingdom 100
Peek Measurement Limited England 100
Peek Environmental Limited England 100
Sarasota Data Products Limited England 100
Sarasota Instrumentation Limited England 100
Peek Measurement, Inc. Texas 100
TN Spectrace Europe B.V. Netherlands 100
TN Technologies Inc. Texas 100
Kay-Ray/Sensall, Inc. Delaware 100
TN Technologies Canada Inc. Canada 100
Westronics Inc. Texas 100
Optek-Nicolet Holdings Inc. Wisconsin 100
PAGE 2<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
STATE OR
JURISDICTION PERCENT
NAME OF OF
INCORPORATION OWNERSHIP
Thermo Optek Corporation Delaware 91**
(additionally, 1.47% of the shares are
owned directly by The Thermo Electron
Companies Inc.)
Spectronic Instruments, Inc. Delaware 100
SLM International Inc. Illinois 100
Thermo Jarrell Ash Corporation Massachusetts 100
ARL Applied Research Laboratories Switzerland 100
S.A.
Fisons Instruments (Proprietary) South Africa 100
Limited
Thermo Optek Wissenschaftliche Austria 100
Gerate GesmbH
Baird Do Brazil Representacoes Ltda. Brazil 100
Beijing Baird Analytical Instrument China 100
Technology Co. Limited
Cahn Instrument Corporation Wisconsin 100
Mattson Instruments Limited United Kingdom 100
Thermo Elemental Limited United Kingdom 100
Thermo Optek Limited United Kingdom 100
Unicam Limited United Kingdom 100
Unicam Export Limited United Kingdom 100
Unicam Analytical Technology Netherlands 100
Netherlands B.V.
Unicam Italia SpA Italy 100
Unicam S.A. Belgium 100
Fisons Instruments Nordic AB Sweden 100
Nicolet Instrument Corporation Wisconsin 100
Nicolet Japan K.K. Japan 100
Spectra-Tech, Inc. Wisconsin 100
Spectra-Tech, Europe Limited United Kingdom 100
Nicolet Instrument GmbH Germany 100
Optek Securities Corporation Massachusetts 100
Planweld Holding Limited United Kingdom 100
Nicolet Instrument Limited United Kingdom 100
Planweld Limited United Kingdom 100
Hilger Analytical Limited United Kingdom 100
Thermo Electron Limited United Kingdom 100
Thermo Instrument Systems Japan Delaware 100
Holdings, Inc.
Nippon Jarrell-Ash Company, Ltd. Japan 100
Thermo Instruments (Canada) Inc. Canada 100
Eberline Instruments (Canada) Ltd. Canada 100
Fisons Instruments Inc. Canada 100
PAGE 3<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
STATE OR
JURISDICTION PERCENT
NAME OF OF
INCORPORATION OWNERSHIP
Unicam Analytical Inc. Canada 100
Thermo Optek France S.A. France 100
Thermo Optek Holding B.V. Netherlands 100
Baird Europe B.V. Netherlands 100
Baird France S.A.R.L. France 100
Thermo Group B.V. Netherlands 100
Thermo Optek Materials Analysis (S.E.A.) Singapore 100
Pte Limited
VG Systems Limited United Kingdom 100
ThermoSpectra Corporation Delaware 77**
(additionally, 6.23% of the shares are
owned directly by The Thermo Electron
Companies Inc.)
Diametrix Detectors, Inc. Delaware 50
Gould Instrument Systems, Inc. Ohio 100
Kevex Instruments Inc. Delaware 100
Kevex X-Ray Inc. Delaware 100
Neslab Instruments Europa BV Netherlands 100
Neslab Instruments, Inc. New Hampshire 100
Neslab Instruments Limited England 100
Nicolet Instrument Technologies Inc. Wisconsin 100
NORAN Instruments Inc. Wisconsin 100
Park Scientific Instruments Corporation California 100
Park Scientific S.A. Switzerland 100
PSI Virgin Islands Incorporated U.S. Virgin 100
Islands
Sierra Research and Technology, Inc. Delaware 100
ThermoSpectra B.V. Netherlands 100
Nicolet Technologies B.V. Netherlands 100
Bakker Electronics Limited United Kingdom 100
NORAN Instruments B.V. Netherlands 100
ThermoSpectra GmbH Germany 100
Gould Nicolet Messtechnik GmbH Germany 100
NORAN Instruments GmbH Germany 100
ThermoSpectra Limited United Kingdom 100
Nicolet Technologies Ltd. United Kingdom 100
Thermo Spectra S.A. France 100
Nicolet Technologies S.A.R.L. France 100
Quest-Finnigan Holdings Inc. Virginia 100
Quest-TSP Holdings Inc. Delaware 100
PAGE 4<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
STATE OR
JURISDICTION PERCENT
NAME OF OF
INCORPORATION OWNERSHIP
ThermoQuest Corporation Delaware 88**
(43.9% of which shares are owned
directly by Quest-Finnigan Holdings
Inc.)
(additionally, .12% of the shares are
owned directly by The Thermo Electron
Companies Inc.)
Denley Instruments Limited England 100
E-C Apparatus Limited England 100
Finnigan FT/MS Inc. Delaware 100
Finnigan Corporation Delaware 100
Finnigan Instruments, Inc. New York 100
Finnigan International Sales, Inc. California 100
Finnigan MAT China, Inc. California 100
Finnigan MAT (Delaware), Inc. Delaware 100
Finnigan MAT Instruments, Inc. Nevada 100
Finnigan MAT International Sales, California 100
Inc.
Finnigan MAT (Nevada), Inc. Nevada 100
Finnigan MAT Canada, Ltd. Canada 100
Finnigan MAT GmbH Germany 100
Finnigan MAT S.R.L. Italy 100
Thermo Separation Products Italy 100
S.R.L.
Masslab Limited United Kingdom 100
Thermo Instruments Australia Pty. Australia 100
Limited
ThermoQuest Ltd. United Kingdom 100
Finnigan MAT Ltd. United Kingdom 100
Finnigan MAT AB Sweden 100
Thermo Separation Products Ltd. United Kingdom 100
Finnigan Properties, Inc. California 100
Forma Scientific, Inc. Delaware 100
Forma Ohio Inc. Ohio 100
International Equipment Company Delaware 100
International Equipment Company England 100
Limited
Savant Instruments, Inc. New York 100
Forma Scientific Limited England 100
Hypersil Inc. Delaware 100
Hypersil Limited England 100
Life Sciences International Hong Kong 100
(Hong Kong) Limited
Life Sciences International, Inc. Pennsylvania 100
PAGE 5<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
STATE OR
JURISDICTION PERCENT
NAME OF OF
INCORPORATION OWNERSHIP
Life Sciences International England 100
(Europe) Limited
Life Sciences International England 100
(UK) Limited
Kenbury Limited England 100
Savant Instruments Limited England 100
ThermoQuest B.V. Netherlands 100
Thermo Separation Products B.V. Netherlands 100
Thermo Separation Products Belgium 100
B.V. B.A.
ThermoQuest France S.A. France 100
Finnigan Automass S.A. France 100
Finnigan MAT S.A.R.L. France 100
Thermo Separation Products S.A. France 100
ThermoQuest Italia S.p.A. Italy 100
ThermoQuest Spain S.A. Spain 100
ThermoQuest Wissenschaftliche Austria 100
Gerate GmbH
Thermo Separation Products AG Switzerland 100
Thermo Separation Products Inc. Delaware 100
ThermoQuest GmbH Germany 100
Thermo Separation Products GmbH Germany 100
ThermoQuest K.K. Japan 100
RealFlex Systems Inc. Texas 100
SID Instruments Inc. Delaware 100
FI Instruments Inc. Delaware 100
FI S.A. France 100
Fisons Instruments BV Netherlands 100
Fisons Instruments NV Belgium 100
Fisons Instruments K.K. Japan 100
HB Instruments Inc. Delaware 100
NK Instruments Inc. Delaware 100
Thermo Capillary Electrophoresis Inc. Delaware 100
Thermo Haake Ltd. United Kingdom 100
Thermo Haake (U.K.) Limited United Kingdom 100
Thermo Instrumentos Cientificos S.A. Spain 100
Spectrace Instruments Inc. California 100
PAGE 6<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
STATE OR
JURISDICTION PERCENT
NAME OF OF
INCORPORATION OWNERSHIP
Thermo BioAnalysis Corporation Delaware 70**
(4.1% of which shares are owned directly by
Quest-TSP Holdings Inc. and 1.8% of
which shares are owned directly by
Quest-Finnigan Holdings Inc.
(Additionally, 7.12% of the shares are
owned directly by The Thermo
Electron Companies Inc.)
Denley Instruments Inc. North Carolina 100
Fastighets AB Skrubba Sweden 100
Dynatech Laboratories spol. s.r.o. Czech Republic 100
DYNEX Technologies (Asia) Inc. Delaware 100
DYNEX Technologies Inc. Virginia 100
Hybaid BV Netherlands 100
Hybaid Limited England 100
Labsystems Espana SA Spain 100
Labsystems Inc. Delaware 100
Labysystems Japan K.K. Japan 100
Labsystems OY Finland 100
Labsystems (Hong Kong) Limited Hong Kong 99
Labsystems BTD China 33
Labsystems LHD China 33
Labsystems Lenpipette Russia 95
Labsystems Pakistan (Private) Ltd Pakistan 34
Labsystems Sweden AB Sweden 100
Labsystems (UK) Limited England 100
Life Sciences International(Benelux) B.V. Netherlands 100
Thermo BioAnalysis GmbH Germany 100
DYNEX Technologies GmbH Germany 100
Thermo LabSystems Vertriebs GmbH Germany 100
Thermo BioAnalysis (Guernsey) Ltd. Channel 100
Islands
Thermo BioAnalysis Holding, Limited United Kingdom 100
Affinity Sensors Limited United Kingdom 100
Dynex Technologies Limited United Kingdom 100
Thermo BioAnalysis Limited United Kingdom 100
Thermo LabSystems Limited United Kingdom 100
Thermo BioAnalysis S.A. France 100
Thermo LabSystems S.A.R.L. France 100
Thermo LabSystem (Australia) Pty Limited Australia 100
Thermo LabSystems Inc. Massachusetts 100
Thermo Environmental Instruments Inc. California 100
PAGE 7<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Subsidiaries of the Registrant
STATE OR
JURISDICTION PERCENT
NAME OF OF
INCORPORATION OWNERSHIP
Thermo Instruments do Brasil Ltda. Brazil 100
(1% of which shares are owned directly
by Thermo Jarrell Ash Corporation)
Van Hengel Holding B.V. Netherlands 100
ESM Eberline Instruments Strahlen Germany 100
- und Umweltmesstechnik GmbH
Fisons Instruments Vertriebs GmbH Germany 100
Gebruder Haake GmbH Germany 100
Thermo Instrument Systems B.V. Netherlands 100
Euroglas B.V. Netherlands 100
Thermo Automation Services (ThAS) B.V. Netherlands 100
This Analytical B.V. Netherlands 100
This Gas Analysis B.V. Netherlands
This Lab Systems B.V. Netherlands 100
This Scientific B.V. Netherlands 100
Thermo Instruments GmbH Germany 100
Thermo Jarrell Ash, S.A. Spain 100
Thermo Vision Corporation Delaware 78**
(additionally, 1.27 % of the shares are
owned directly by The Thermo Electron
Companies Inc.)
CID Technologies Inc. New York 100
Centro Vision Inc. Delaware 100
Hilger Crystals Limited United Kingdom 100
Laser Science, Inc. Delaware 100
Oriel Instruments Corporation Delaware 100
Oriel Foreign Sales Corp. U.S. Virgin 100
Islands
* Joint Venture/Partnership ** As of 1/3/98
PAGE 8<PAGE>
Exhibit 23
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference of our reports dated February 17, 1998,
included in or incorporated by reference into Thermo Instrument Systems
Inc.'s Annual Report on Form 10-K for the year ended January 3, 1998,
into the Company's previously filed Registration Statements as follows:
Registration Statement No. 33-14980 on Form S-8, Registration Statement
No. 33-16461 on Form S-8, Registration Statement No. 33-14974 on Form
S-8, Post Effective Amendment to Registration Statement on Form S-4 No.
33-32579-02 on Form S-8, Registration Statement No. 33-33577 on Form S-8,
Registration Statement No. 33-36221 on Form S-8, Registration Statement
No. 33-37866 on Form S-8, Registration Statement No. 33-42270 on Form
S-3, Registration Statement No. 33-69526 on Form S-3, Registration
Statement No. 33-65275 on Form S-8, Registration Statement No. 33-37559
on Form S-8, Registration Statement No. 333-32031 on Form S-3,
Registration Statement No. 333-02163 on Form S-3, and Registration
Statement No. 333-17707 on Form S-3.
Arthur Andersen LLP
Boston, Massachusetts
March 10, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
INSTRUMENT SYSTEMS INC.'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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 468,848
<SECURITIES> 8,328
<RECEIVABLES> 386,861
<ALLOWANCES> 22,786
<INVENTORY> 264,719
<CURRENT-ASSETS> 1,189,368
<PP&E> 317,605
<DEPRECIATION> 97,666
<TOTAL-ASSETS> 2,351,153
<CURRENT-LIABILITIES> 576,702
<BONDS> 364,194
0
0
<COMMON> 12,265
<OTHER-SE> 865,293
<TOTAL-LIABILITY-AND-EQUITY> 2,351,153
<SALES> 1,592,314
<TOTAL-REVENUES> 1,592,314
<CGS> 842,009
<TOTAL-COSTS> 842,009
<OTHER-EXPENSES> 106,356
<LOSS-PROVISION> 4,366
<INTEREST-EXPENSE> 45,894
<INCOME-PRETAX> 248,017
<INCOME-TAX> 88,113
<INCOME-CONTINUING> 147,258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 147,258
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
INSTRUMENT SYSTEMS INC.'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 522,688
<SECURITIES> 7,452
<RECEIVABLES> 320,312
<ALLOWANCES> 16,981
<INVENTORY> 213,683
<CURRENT-ASSETS> 1,124,910
<PP&E> 250,976
<DEPRECIATION> 72,313
<TOTAL-ASSETS> 1,924,400
<CURRENT-LIABILITIES> 488,207
<BONDS> 399,214
0
0
<COMMON> 9,767
<OTHER-SE> 736,500
<TOTAL-LIABILITY-AND-EQUITY> 1,924,400
<SALES> 1,209,362
<TOTAL-REVENUES> 1,209,362
<CGS> 654,165
<TOTAL-COSTS> 654,165
<OTHER-EXPENSES> 87,591
<LOSS-PROVISION> 2,274
<INTEREST-EXPENSE> 28,923
<INCOME-PRETAX> 189,923
<INCOME-TAX> 51,727
<INCOME-CONTINUING> 132,751
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132,751
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
INSTRUMENT SYSTEMS INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> MAR-29-1997
<CASH> 432,256
<SECURITIES> 7,477
<RECEIVABLES> 383,760
<ALLOWANCES> 20,711
<INVENTORY> 285,227
<CURRENT-ASSETS> 1,192,202
<PP&E> 306,107
<DEPRECIATION> 76,741
<TOTAL-ASSETS> 2,384,121
<CURRENT-LIABILITIES> 680,545
<BONDS> 508,597
0
0
<COMMON> 9,791
<OTHER-SE> 764,687
<TOTAL-LIABILITY-AND-EQUITY> 2,384,121
<SALES> 329,120
<TOTAL-REVENUES> 329,120
<CGS> 173,448
<TOTAL-COSTS> 173,448
<OTHER-EXPENSES> 23,407
<LOSS-PROVISION> 1,084
<INTEREST-EXPENSE> 8,460
<INCOME-PRETAX> 53,495
<INCOME-TAX> 17,770
<INCOME-CONTINUING> 33,587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,587
<EPS-PRIMARY> .28
<EPS-DILUTED> .25
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
INSTRUMENT SYSTEMS INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
JUNE 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
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</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUN-28-1997
<CASH> 459,328
<SECURITIES> 1,713
<RECEIVABLES> 376,676
<ALLOWANCES> 23,470
<INVENTORY> 286,332
<CURRENT-ASSETS> 1,200,633
<PP&E> 316,012
<DEPRECIATION> 84,632
<TOTAL-ASSETS> 2,386,787
<CURRENT-LIABILITIES> 635,910
<BONDS> 401,128
0
0
<COMMON> 9,791
<OTHER-SE> 790,164
<TOTAL-LIABILITY-AND-EQUITY> 2,386,787
<SALES> 734,355
<TOTAL-REVENUES> 734,355
<CGS> 383,942
<TOTAL-COSTS> 383,942
<OTHER-EXPENSES> 800
<LOSS-PROVISION> 2,890
<INTEREST-EXPENSE> 20,395
<INCOME-PRETAX> 114,013
<INCOME-TAX> 38,761
<INCOME-CONTINUING> 70,806
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,806
<EPS-PRIMARY> .58
<EPS-DILUTED> .53
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
INSTRUMENT SYSTEMS INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
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</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> SEP-27-1997
<CASH> 377,445
<SECURITIES> 10,949
<RECEIVABLES> 387,442
<ALLOWANCES> 23,936
<INVENTORY> 278,597
<CURRENT-ASSETS> 1,134,920
<PP&E> 315,726
<DEPRECIATION> 92,105
<TOTAL-ASSETS> 2,307,492
<CURRENT-LIABILITIES> 587,381
<BONDS> 388,493
0
0
<COMMON> 12,239
<OTHER-SE> 816,691
<TOTAL-LIABILITY-AND-EQUITY> 2,307,492
<SALES> 1,138,255
<TOTAL-REVENUES> 1,138,255
<CGS> 598,941
<TOTAL-COSTS> 598,941
<OTHER-EXPENSES> 79,404
<LOSS-PROVISION> 3,607
<INTEREST-EXPENSE> 33,843
<INCOME-PRETAX> 176,502
<INCOME-TAX> 60,680
<INCOME-CONTINUING> 108,079
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,079
<EPS-PRIMARY> .89
<EPS-DILUTED> .81
</TABLE>
