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Exhibit 10 (iii)

Stock Option plan  

  
 

    WOODWARD GOVERNOR COMPANY
  2002 STOCK OPTION PLAN
  (EFFECTIVE JANUARY 1, 2002)    
  

        Woodward Governor Company (the "Company") previously established the Woodward Governor Company 1996 Long-Term Incentive Compensation Plan (the "Plan")
to further the long-term growth and profitability of the Company by offering long-term incentives in addition to current compensation to certain key management worker members
of the Company and to provide such participating worker members with an equity position in the Company to further align their interests with those of the shareholders of the Company. The Plan was
amended, April 26, 2001, to extend participation in the Plan to members of the Company's Board of Directors (the "Board") who are not also worker members of the Company. The Plan is intended to
stimulate such individuals' efforts on the Company's behalf, maintain and strengthen their desire to remain with the Company, and encourage such individuals to have a greater personal financial
investment in the Company through ownership of its Common Stock. 

        The
following provisions constitute an amendment and restatement of the Plan, effective as of January 1, 2002 (the "Effective Date"), which on and after such date shall be known
as the "Woodward Governor Company 2002 Stock Option Plan." 

1.    Plan Administration  

        The Plan shall be administered by the Compensation Committee of the Board or any successor committee thereto (the "Committee") as determined by the Board. The
Committee shall consist of not less than two members of the Board, each of whom shall qualify as a "nonemployee director" within the meaning of Rule 16b-3, as amended, or other
applicable rules under Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and an "outside director" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). The Committee is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it deems necessary for the proper
administration of the Plan, and to make such determinations and to take such action in connection therewith or in relation to the Plan as it deems necessary or advisable. Determinations by the
Committee under the Plan including without limitation, determinations of the eligible Participants, the form, amount and timing of Stock Options (as defined in Section 4), the terms and
provisions of Stock Options, and the agreements evidencing Stock Options, need not be uniform and may be made selectively among the individuals who receive, or are eligible to receive, Stock Options
hereunder, whether or not such individuals are similarly situated. Any
determination by the Committee with respect to the terms and provisions of the Plan or any Stock Option agreement shall be final, binding and conclusive on all parties. 

2.    Eligibility  

        Key management worker members of the Company, its subsidiaries and its affiliates, who meet the common law definition of an employee, whether or not directors of
the Company, shall be eligible to participate in the Plan ("Eligible Worker Members") if designated by the Committee. Members of the Board who are not regular worker members shall also be eligible for
participation in the Plan if so designated by the Committee or the Board; provided, however, such directors shall not be eligible to receive Incentive Stock Options under the Plan. Eligible Worker
Members and members of the Board who are awarded Stock Options under the Plan are referred to as "Participants." 

3.    Shares Available for Stock Option Awards.  

	(a)
	Shares Subject to Issuance or Transfer. Subject to adjustment as provided in Section 3.(c) hereof, 2,100,000 shares of the
Company's common stock ("Common Stock") shall be reserved 

 

for
granting Stock Options under the Plan. The maximum number of Shares available for granting Stock Options under this plan to Members of the Board who are not regular worker members shall be
150,000. 

The
number of shares of Common Stock available for granting Stock Options under the Plan shall be increased by the number of shares underlying Stock Options which have lapsed, expired, been forfeited
or been canceled for any reason without the issuance of shares of Common Stock (including shares which are not delivered but which are, instead, retained to satisfy the Participant's tax withholding
obligations). Shares under this Plan may be delivered by the Company from its authorized but unissued shares of Common Stock or from Common Stock held in the Treasury. 

	(b)
	Maximum Shares to any Eligible Worker Member. Subject to adjustment as provided in Section 3.(c) hereof, no Eligible Worker
Member shall receive Stock Options covering more than 100,000 shares of
Common Stock in any given calendar year. Notwithstanding this limitation the Committee may grant Stock Options covering up to 500,000 shares to the Chief Executive Officer during the
12-month period following such individual's date of hire.

	(c)
	Recapitalization Adjustment. In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares,
merger, consolidation, rights offering, or any other change in the corporate structure or shares of the Company, the Committee shall make such adjustment, if any, as it may deem appropriate in the
number and kind of shares authorized by the Plan, and in the number and kind of shares subject to outstanding Stock Options and the option price thereof. 

In
the event of a merger or consolidation of the Company with another entity following which the Company is not the surviving entity (as determined by the Committee), or in the event of a sale of all
or substantially all of the assets of the Company to an unrelated third party, the Committee may cancel all outstanding Stock Options as of the date of such transaction, provided that
(i) Participants are provided with reasonable advance notice of such cancellation and are given an opportunity to exercise all outstanding Stock Options prior to the effective date of such
cancellation, or (ii) Participants receive a payment or other benefit that the Committee, in good faith, believes is reasonable compensation for such cancelled Stock Options. 

4.    Stock Options  

        The Committee may grant options that qualify as "Incentive Stock Options" within the meaning of Section 422 of the Code or any successor statute thereto,
and "Nonqualified Stock Options" which do not qualify as Incentive Stock Options (collectively "Stock Options"). Such Stock Options shall be subject to the following terms and conditions and such
other terms and conditions as the Committee may prescribe: 

	(a)
	Option Price. The option price per share with respect to each Stock Option shall be determined by the Committee and shall not be less
than 100% of the Fair Market Value of the Common Stock on the date the Stock Option is granted, but in no event less than the par value of the Common Stock. With the exception of "recapitalization
adjustments", as provided for in Section 3.(c) hereof, once the option price has been established it will not be changed.

   
The
"Fair Market Value" of a share of Common Stock, as of any date, will be the price quoted on the Nasdaq National Market at the close of the business on such date. 

	(b)
	Period of Option. The expiration date of each Stock Option shall be fixed by the Committee but shall be no later than the tenth
anniversary of the grant date. 

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	(c)
	Payment. The option price shall be payable in cash or, if permitted by the Committee, by delivery of shares of Common Stock previously
owned and held by the Participant for at least six months having a Fair Market Value equal to the option price. Such payment shall be made at the time the Stock Option is exercised. No shares shall be
issued until full payment therefor has been made, together with satisfaction of any applicable withholding taxes. The holder of a Stock Option shall have none of the rights of a shareholder of the
Company until the Stock Option is exercised and shares of Common Stock are issued in such individual's name.

	(d)
	Exercise of Option. The shares covered by a Stock Option may be purchased in such installments, on such exercise dates and during such
periods as determined by the Committee at the time the option is granted.

	(e)
	Vesting. The minimum vesting period will be a one-year period of service with the Company following the date the Stock
Option is granted. The Committee may condition exercisability of a Stock Option over a longer specified period of service with the Company.

	(f)
	Termination of Membership. Upon the termination of a Participant's membership or service on the Board, as applicable, for any reason
other than retirement, death, disability or cause, any portion of a Stock Option that is not exercisable on such termination date shall expire and be permanently forfeited unless otherwise determined
by the Committee at the time of grant. The Participant may exercise the portion of the Stock Option that is exercisable on such termination date within the time period, if any, determined by the
Committee at the time of grant, but in no event later than the expiration date of the Stock Option. If a Participant's membership is terminated for cause, as defined by the Committee, the Committee
may provide that all vested and unvested rights under the Stock Option shall expire upon receipt of the notice of such termination.

	(g)
	Retirement. Upon a Participant's retirement (as defined below), all shares subject to outstanding Stock Options held by such
Participant shall become immediately exercisable. Following retirement, the Participant may exercise any outstanding Stock Options within the time period, if any, determined by the Committee at the
time of grant, but not later than the expiration date of the Stock Option. Any portion of a Stock Option that is not exercised during such time period shall expire at the end of such period and may
not be exercised thereafter. Unless determined otherwise by the Committee, "retirement" shall mean termination of a Participant's membership after attainment of (i) age 55 and 10 years
of service with the Company, or (ii) age 65. The Committee shall determine whether termination of service on the Board constitutes a retirement for purposes of the Plan.

	(h)
	Death. Upon the death of a Participant, all shares subject to outstanding Stock Options held by such Participant shall become
immediately exercisable. Following the Participant's death, his or her legal representative may exercise any outstanding Stock Options within the time period, if any, determined by the Committee at
the time of grant, but not later than the expiration date of the Stock Option. Any portion of a Stock Option that is not exercised during such time period shall expire at the end of such period and
may no longer be exercised.

	(i)
	Disability. Upon termination of membership or service on the Board, as applicable, by reason of a Participant's disability (as defined
by the Committee), all shares subject to outstanding Stock Options held by such Participant shall become immediately exercisable. Following termination for disability, the Participant may exercise any
outstanding Stock Options within the time period, if any, determined by the Committee at the time of grant, but not later than the expiration date of the Stock Option. Any portion of a Stock Option
that is not exercised during such time period shall expire at the end of such period and may no longer be exercised. 

3

 

	(j)
	Change of Control. Notwithstanding anything in the Plan to the contrary any Stock Option outstanding but not yet exercisable will
become exercisable upon a change in control of the Company, as defined by the Committee.

	(k)
	Limits on Incentive Stock Options. Except as may otherwise be permitted by the Code, the Committee shall not grant to an Eligible
Worker Member Incentive Stock Options that, in the aggregate, are first exercisable during any one calendar year to the extent that the aggregate fair market value of the Common Stock, at the time the
Incentive Stock Options are granted, exceeds $100,000.

	(l)
	Compliance with Securities Laws. The Company shall not be obligated to sell or issue any shares pursuant to any Stock Option unless the
shares with respect to which the option is being exercised are at that time effectively registered or exempt from registration under the Securities Act of 1933, as amended, and applicable state
securities laws. 

5.    Discontinuance or Amendment of the Plan  

        The Board of Directors may discontinue or amend the Plan at any time; provided, however, subject to Section 3, no such discontinuance or amendment shall
materially adversely affect any outstanding Stock Options; provided further, that the Board may not amend the Plan without shareholder approval where the absence of such approval would cause the Plan
to fail to comply with any requirement of applicable law or regulation. No Stock Options shall be granted under the Plan after December 31, 2006. 

6.    Nontransferability  

        Stock Options granted under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution. To the
extent that a Participant who receives a Stock Option under the Plan has the right to exercise such Stock Option, the Stock Option may be exercised during the lifetime of the Participant only by the
Participant or his or her guardian or legal representative. Notwithstanding the foregoing, the Committee Chairman, in such individual's sole discretion, may permit a Participant to transfer
Nonqualified Stock Options granted under the Plan to a member of the Participant's family, to a trust for the benefit of the Participant or members of the Participant's family or to a partnership or
limited liability company, the partners or members of whom are the Participant or members of the Participant's family. 

7.    No Right of Membership  

        The Plan and the Stock Options granted hereunder shall not confer upon any Eligible Worker Member the right to continued membership with the Company, its
subsidiaries and its affiliates or affect in any way the right of such entities to terminate the membership of an Eligible Worker Member at any time and for any reason. 

8.    Taxes  

        The Company shall be entitled to withhold the amount necessary to satisfy the federal, state and local withholding requirements attributable to any option
granted, any amount payable or shares deliverable under the Plan after giving the person entitled to receive such amount or shares notice as far in advance as practicable. If the Committee permits
this obligation to be met using shares deliverable under the Plan, the Company will only withhold the number of shares necessary to satisfy its withholding obligations at the minimum statutory tax
rate. Alternatively, the Committee may require the grantee to remit an amount in cash or in Common Stock to satisfy such tax withholding requirements. If the Participant tenders shares of previously
owned Common Stock to satisfy tax withholding, such shares may not have a Fair Market Value in excess of the Company's withholding 

4

 

obligation at the minimum statutory tax rate unless such Common Stock has been held by the Participant at least six months. 

9.    Written Agreements  

        Each award of Stock Options shall be evidenced by a written agreement, executed by the Participant and the Company, which shall contain such restrictions, terms
and conditions as the Committee may require. 

10.  Shareholder Approval  

        This amendment and restatement of the Plan is subject to and contingent upon approval of the shareholders of the Company. 

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Exhibit 10.3    
  

SECURITY AGREEMENT  

        SECURITY AGREEMENT, dated as of March 20, 2002, by and among each of the entities identified on the
signature page hereto under the heading "Grantor" (each a "Grantor" and, collectively, the "Grantors") and FLEET NATIONAL BANK, as Administrative Agent
for the ratable benefit of the Lenders from time to time party to the Credit Agreement referred to below (in such capacity, the "Secured Party"). 

RECITALS  

        A.    Veeco Instruments Inc., a Delaware corporation (the "Company"), Fleet National Bank, as Administrative Agent,
JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as Syndication Agent, HSBC Bank USA, as Documentation Agent and the Lenders party thereto have entered into a Credit Agreement, dated
as of April 19, 2001 (as the same has been or may be hereafter amended, modified, restated or supplemented from time to time, the "Credit Agreement") pursuant to which the Company has received
and will continue to receive loans and other financial accommodations from the Lenders and will incur Obligations (as hereinafter defined). 

        B.    To induce the Credit Parties to continue to extend credit to the Company on and after the date hereof as provided in the
Credit Agreement, each Grantor desires to grant the Credit Parties security and assurance in order to secure the payment and performance of all Obligations and to that effect to grant the Secured
Party for the ratable benefit of the Credit Parties a first priority perfected security interest in certain of its assets and, in connection therewith, to execute and deliver this Agreement. 

        Accordingly,
the parties hereto hereby agree as follows: 

DEFINITIONS  

        (a)  Capitalized
terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Uniform Commercial Code as in effect in the State of
New York (the "UCC"). 

        (b)  Capitalized
terms used herein and not otherwise defined herein shall have the following meanings: 

        "Agreement" shall mean this Agreement and shall include all amendments, modifications and supplements hereto and shall refer to this
Agreement as the same may be in effect at the time such reference becomes operative. 

        "Business Day" shall have the meaning assigned to such term in the Credit Agreement. 

        "Collateral" shall mean the following personal property of each Grantor, wherever located, and whether now owned or hereafter acquired or
arising: 

	(i)
	Accounts;

	(ii)
	General
Intangibles (to the extent arising from Accounts); and

	(iii)
	to
the extent not listed above as original collateral, proceeds and products of the foregoing. 

        "Credit Party" means, collectively, the Administrative Agent, the Issuing Lender and each of the Lenders. 

        "Default" shall have the meaning assigned to such term in the Credit Agreement. 

        "Event of Default" shall have the meaning assigned to such term in the Credit Agreement. 

 

        "Lenders" shall have the meaning assigned to such term in the Credit Agreement. 

        "Liens" shall have the meaning assigned to such term in the Credit Agreement. 

        "Loan Documents" shall have the meaning assigned to such term in the Credit Agreement. 

        "Loans" shall have the meaning assigned to such term in the Credit Agreement. 

        "Obligations" shall have the meaning assigned to such term in the Credit Agreement. 

        "Person" shall have the meaning assigned to such term in the Credit Agreement. 

        (c)    Terms Generally.    The definitions of terms herein shall apply equally to the singular and plural forms of the
terms defined. Whenever the context may require, pronouns stated in the masculine, the feminine or neuter gender shall include the masculine, feminine and the neuter. Except as otherwise herein
specifically provided, each accounting term used herein shall have the meaning given to it under Generally Accepted Accounting Principles. The term "including" shall not be limited or exclusive,
unless specifically indicated to the contrary. The word "will" shall be construed to have the same meaning as the word "shall". The words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the exhibits and schedules hereto, all of which are by this reference incorporated into this Agreement. 

I. SECURITY  

        SECTION 1.01.    Grant of Security.    As security for the Obligations, each Grantor hereby
transfers and assigns to the Secured Party for the ratable benefit of the Credit Parties, and grants to the Secured Party for the ratable benefit of the Credit Parties a security interest in, the
Collateral. 

        SECTION 1.02.    Release and Satisfaction.    Upon the termination of this Agreement and the
indefeasible payment in full of the Obligations (other than those which by their terms survive the termination of this Agreement), the Secured Party shall deliver to each Grantor, upon request
therefor and at such Grantor's expense, releases and satisfactions of all financing statements, notices of assignment and other registrations of security. 

 
 

II. REPRESENTATIONS AND WARRANTIES    
  

        SECTION 2.01.    Representations and Warranties With Respect to Security.    Each Grantor
hereby represents and warrants to the Secured Party for the ratable benefit of the Credit Parties as follows: 

        (a)    Name.    Each Grantor's exact legal name, state of incorporation or organization and
organizational number are set forth on Schedule A annexed hereto. 

        (b)    Ownership of Collateral.    Each Grantor owns all of the Collateral, free and clear of
all Liens, other than the Liens permitted under Section 7.02 of the Credit Agreement. 

        (c)    Accounts.    Annexed hereto as Schedule A is a list identifying the chief
executive office or principal place of business of each Grantor and all addresses at which each Grantor maintains books or records relating to its Accounts as of the date of this Agreement. 

        (d)    Trade Names.    Except as set forth on Schedule A annexed hereto, each Grantor
has not done during the five years prior to this Agreement, and does not currently do, business under fictitious business names or trade names. No Grantor has been known under any other name during
such five year period. 

        (e)    Acquired Collateral.    Except as set forth on Schedule A annexed hereto, the
Collateral has been acquired or originated by each Grantor in the ordinary course of such Grantor's business and was not acquired pursuant to any acquisition of all or a portion of the business of any
Person whether by merger, acquisition of assets or otherwise. 

2

 

        (f)    Third Party Locations.    Except as set forth on Schedule A annexed hereto, no
Collateral is in the possession of, or under the control of, any Person other than a Grantor or the Secured Party. 

        (g)    Enforceability of Security Interests.    Upon the execution of this Agreement by each
Grantor and the filing of financing statements properly describing the Collateral and identifying such Grantor and the Secured Party in the applicable jurisdiction required pursuant to the UCC,
security interests and liens granted to the Secured Party under Section 1.01 hereof shall constitute valid, perfected and first priority security interests and liens in and to the Collateral of
such Grantor, other than Collateral which may not be perfected by filing under the UCC, and subject to the Liens permitted pursuant to Section 7.02 of the Credit Agreement, in each case
securing the payment of the Obligations and enforceable against all third parties, except to the extent that enforcement may be limited by applicable bankruptcy, reorganization, moratorium, insolvency
and similar laws affecting creditors' rights generally or by equitable principles of general application, regardless of whether considered in a proceeding in equity or at law. 

 
 

III. COVENANTS OF GRANTORS    
  

        SECTION 3.01.    Records; Location of Collateral.    During the term of this Agreement,
(a) no Grantor shall change the jurisdiction of its incorporation or organization or move its chief executive office, principal place of business or office at which is kept its books and
records (including computer printouts and programs) from the locations existing on the date hereof and listed on Schedule A annexed hereto; and (b) no Grantor shall change its corporate
name in any respect, unless, in each case of clauses (a) and (b) above, (i) such Grantor shall have given the Secured Party thirty (30) Business Days' prior written notice
of its intention to do so, identifying the new location and providing such other information as the Secured Party deems necessary, and (ii) such Grantor shall have delivered to the Secured
Party such documentation, in form and substance satisfactory to the Secured Party and as required by the Secured Party, to preserve the Secured Party's security interest hereunder in the Collateral. 

        SECTION 3.02.    Further Actions.    Each Grantor agrees, upon the request of the Secured
Party and at the Secured Party's option, to take any and all other actions as the Secured Party may determine to be necessary or useful for the attachment, perfection and first priority of, and the
ability of the Secured Party to enforce, the Secured Party's security interest hereunder in any and all of the Collateral, including without limitation, executing and delivering and where appropriate,
filing financing statements and amendments relating thereto under the UCC to the extent, if any, that such Grantor's signature thereon is required therefor, causing the Secured Party's name to be
noted as Secured Party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority
of, or the ability of the Secured Party to enforce, the Secured Party's security interest hereunder in such Collateral, (c) comply with any provision of any statute, regulation or treaty of the
United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of the Secured Party to enforce the Secured Party's security
interest hereunder in such Collateral, (d) obtaining governmental and other third party waivers, consents and approvals in form and substance satisfactory to the Secured Party, including,
without limitation, any consent of any licensor, lessor or other persons obligated on Collateral and (e) obtaining waivers from mortgagees and landlords in form and substance satisfactory to
the Secured Party. Each Grantor further authorizes the Secured Party to file initial financing statements describing the Collateral, and any amendments thereto and continuations thereof. 

        SECTION 3.03.    Inspection.    Upon reasonable notice to a Grantor, the Secured Party may,
during such Grantor's normal business hours, examine and inspect any Collateral and may examine, inspect and copy all books and records with respect thereto or relevant to the Obligations. 

3

 

        SECTION 3.04.    Indemnification.    Each Grantor agrees to indemnify the Secured Party and
each Credit Party and hold it harmless from and against any and all injuries, claims, damages, judgments, liabilities, costs and expenses (including, without limitation, reasonable fees and
disbursements of counsel), charges and encumbrances which may be incurred by or asserted against the Secured Party or any Credit Party in connection with or arising out of any assertion, declaration
or defense of the Secured Party's or any Credit Party's rights or security interest under the provisions of this Agreement or any other Loan Document, permitting it to collect, settle or adjust
Accounts or to deal with account debtors in any way or in connection with the realization, repossession, safeguarding, insuring or other protection of the Collateral or in connection with the
collecting, perfecting or protecting the Secured Party's liens and security interests hereunder or under any other Loan Document, except to the extent caused by the gross negligence or wilful
misconduct of the Secured Party, any Credit Party, or any of their respective representatives. 

 
 

IV. POWER OF ATTORNEY; NOTICES    
  

        SECTION 4.01.    Power of Attorney.    Each Grantor hereby irrevocably constitutes and
appoints the Secured Party and any officer or agent thereof, with full power of substitution, as its true and lawful attorneys-in-fact with full irrevocable power and authority
in the place and stead of such Grantor or in the Secured Party's own name, for the purpose of carrying out the terms of this Agreement, upon the occurrence and during the continuance of an Event of
Default, to take any and all appropriate action and to execute any and all documents and instruments that may be necessary or useful to accomplish the purposes of this Agreement and, without limiting
the generality of the foregoing, hereby gives said attorneys the power and right, on behalf of the Grantor, without notice to or assent by such Grantor, to (a) endorse the name of such Grantor
on any checks, notes, drafts or other forms of payment or
security that may come into the possession of the Secured Party or any affiliate of the Secured Party, to sign such Grantor's name on invoices or bills-of-lading, drafts
against customers, notices of assignment, verifications and schedules, (b) sell, transfer, pledge, make any arrangement with respect to or otherwise dispose of or deal with any of the
Collateral consistent with the UCC and (c) do acts and things which the Secured Party deems necessary or useful to protect, preserve or realize upon the Collateral and the Secured Party's
security interest therein. The powers granted herein, being coupled with an interest, are irrevocable until all of the Obligations are indefeasibly paid in full and this Agreement is terminated. The
powers conferred on the Secured Party hereunder are solely to protect its and the Credit Parties' interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Neither
the Secured Party nor any attorney-in-fact shall be liable for any act or omission, error in judgment or mistake of law provided the same is not the result of gross negligence
or willful misconduct. 

        SECTION 4.02.    Notices.    Upon the occurrence of an Event of Default, the Secured Party may
notify account debtors and other persons obligated on any of the Collateral that the Collateral has been assigned to the Secured Party or of its security interest therein and to direct such account
debtors and other persons obligated on any of the Collateral to make payment of all amounts due or to become due a Grantor directly to the Secured Party and upon such notification and at such
Grantor's expense to enforce collection of any such Collateral, and to adjust, compromise or settle for cash, credit or otherwise upon any terms the amount of payment thereof. The Secured Party may,
at any time following the occurrence of an Event of Default, notify the Postal Service authorities to change the address of delivery of mail to an address designated by the Secured Party. After the
making of such a request or the giving of any such notification, each Grantor shall hold any proceeds of collection of accounts, Chattel Paper, general intangibles, instruments and other Collateral
received by it as trustee for the Credit Parties and the Secured Party without commingling the same with any other property or asset of such Grantor and shall turn the same over to the Secured Party
in the identical form received, together with any necessary endorsements or assignments. The Secured Party shall apply the proceeds of collection of such Collateral received by the Secured Party to
the Obligations, in such order as the Secured Party, in its sole discretion, shall determine, such proceeds to be immediately credited after final payment in cash or other immediately available funds
of the items giving rise to them. 

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V. REMEDIES OF SECURED PARTY    
  

        SECTION 5.01.    Enforcement.    Upon the occurrence of an Event of Default, the Secured Party
shall have, in addition to all of its and the Credit Parties' other rights under this Agreement and the other Loan Documents by operation of law or otherwise (which rights shall be cumulative), all of
the rights and remedies of a secured party under the UCC and shall have the right, to the extent permitted by law, without charge, to enter any Grantor's premises, and until it completes the
enforcement of its rights in the Collateral subject to its security interest hereunder and the sale or other disposition of any property subject thereto, take possession of such premises without
charge, rent or payment therefor (through self help without judicial process and without having first given notice or obtained an order of any court), or place custodians in control thereof, remain on
such premises and use the same for the purpose of completing any work in progress, preparing any Collateral for disposition, and disposing of or collecting any Collateral. Without limiting the
foregoing, upon the occurrence of an Event of Default, the Secured Party may, without demand, advertising or notice, all of which each Grantor hereby waives (except as the same may be required by
law), sell, lease, license or otherwise dispose of and grant options to a third party to purchase, lease, license or otherwise dispose of any and all Collateral held by it or for its account at any
time or times in one or more public or private sales or other dispositions, for cash, on credit or otherwise, at such prices and upon such terms as the Secured Party, in its sole discretion, deems
advisable. At any such sale the Collateral or any portion thereof may be sold in one lot as an entirety or in separate parcels as the Secured Party in its sole discretion deems advisable. Each Grantor
agrees that if notice of sale shall be required by law such requirement shall be met if such notice is mailed, postage prepaid, to such Grantor at its address determined pursuant to
Section 6.04 hereof or such other address as it may have, in writing, provided to the Secured Party, at least ten (10) days before the time of such sale or disposition. The Secured Party
may postpone or adjourn any sale of any Collateral from time to time by an announcement at the time and place of the sale to be so postponed or adjourned, without being required to give a new notice
of sale. Notice of any public sale shall be sufficient if it describes the Collateral to be sold in general terms, stating the amounts thereof, the nature of the business in which such Collateral was
created and the location and nature of the properties covered by the other security interests or mortgages and the prior liens thereof. The Secured Party or any Credit Party may be the purchaser at
any such sale if it is public, free from any right of redemption, which such Grantor also waives. Each Grantor with respect to its property constituting such Collateral, shall be obligated for, and
the proceeds of sale shall be applied first to, the costs of taking, assembling, finishing, collecting, refurbishing, storing, guarding, insuring, preparing for sale, and selling the Collateral,
including the fees and disbursements of attorneys, auctioneers, appraisers and accountants employed by the Secured Party. Proceeds shall then be applied to the payment, in whatever order the Secured
Party may elect, of all of the Obligations. The Secured Party shall return any excess to such Grantor or to whomever may be fully entitled to receive the same or as a court of competent jurisdiction
may direct. In the event that the proceeds of any sale or other
disposition of the Collateral are insufficient to pay in full the Obligations, each Grantor shall remain liable for any deficiency. 

        SECTION 5.02.    Standards for Exercising Rights and Remedies.    To the extent that
applicable law imposes duties on the Secured Party to exercise remedies in a commercially reasonable manner, each Grantor acknowledges and agrees that it is not commercially unreasonable for the
Secured Party (a) to fail to incur expenses reasonably deemed significant by the Secured Party to prepare Collateral for disposition or otherwise to fail to complete raw material or work in
process into finished goods or other finished products for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required
by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies
against account debtors or other persons obligated on Collateral or to fail to remove liens or encumbrances on or any adverse claims against Collateral, (d) to exercise or fail to exercise
collection remedies against account debtors and other persons obligated on Collateral directly 

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or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (f) to contact other persons, whether or not in the same business as any Grantor, for expressions of interest in acquiring all or any portion of the
Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, (k) to purchase insurance or credit enhancements to
insure the Secured Party and the Credit Parties against risk of loss, collection or disposition of Collateral or to provide to the Secured Party and the Credit Parties a guaranteed return from the
collection or disposition of Collateral, or (l) to the extent deemed appropriate by the Secured Party, to obtain the services of other brokers, investment bankers, consultants and other
professionals to assist the Secured Party in the collection or disposition of any of the Collateral. Each Grantor acknowledges that the purpose of this Section 5.02 is to provide
non-exhaustive indications of what actions or omissions by the Secured Party would fulfill the Secured Party's duties under the UCC or under applicable law of any other relevant
jurisdiction in the Secured Party's exercise of remedies against the Collateral and that other actions or omissions by the Secured Party shall not be deemed to fail to fulfill such duties solely on
account of not being indicated in this Section 5.02. Without limitation upon the foregoing, nothing contained in this Section 5.02 shall be construed to grant any rights to any Grantor
or to impose any duties on the Secured Party or any Credit Party that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section 5.02. 

        SECTION 5.03.    Waiver.    Each Grantor waives any right, to the extent applicable law
permits, to receive prior notice of, or a judicial or other hearing with respect to, any action or prejudgment remedy or proceeding by the Secured Party to take possession, exercise control over, or
dispose of any item of the Collateral in any instance (regardless of where such Collateral may be located) where such action is permitted under the terms of this Agreement or any other Loan Document,
or by applicable law, or of the time, place or terms of sale in connection with the exercise of the Secured Party's rights hereunder and such Grantor also waives, to the extent permitted by law, any
bond, security or sureties required by any statute, rule or otherwise by law as an incident to any taking of possession by the Secured Party of property subject to the Secured Party's Lien hereunder.
Each Grantor further waives any damages (direct, consequential or otherwise) occasioned by the enforcement of the Secured Party's rights under
this Agreement and any other Loan Document including the taking of possession of any Collateral all to the extent that such waiver is permitted by law and to the extent that such damages are not
caused by the Secured Party's gross negligence or willful misconduct. These waivers and all other waivers provided for in this Agreement and any other Loan Documents have been negotiated by the
parties and each Grantor acknowledges that it has been represented by counsel of its own choice and has consulted such counsel with respect to its rights hereunder. 

        SECTION 5.04.    Other Rights.    Each Grantor agrees that the Secured Party shall not have
any obligation to preserve rights to any Collateral against prior parties or to proceed first against any Collateral or to marshall any Collateral of any kind for the benefit of any other creditors of
such Grantor or any other Person. 

        SECTION 5.05.    Expenses.    Each Grantor agrees that it shall pay on demand therefor all
costs and expenses incurred in amending, implementing, perfecting, collecting, defending, declaring and enforcing the Secured Party's rights and security interests in the Collateral hereunder or under
the Credit Agreement or any other Loan Document or other instrument or agreement delivered in connection herewith or therewith, including, but not limited to, searches and filings, and the Secured
Party's reasonable attorneys' fees (regardless of whether any litigation is commenced, whether a default is declared hereunder, and regardless of tribunal or jurisdiction). 

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VI. GENERAL PROVISIONS    
  

        SECTION 6.01.    Termination.    This Agreement shall remain in full force and effect until
all the Obligations shall have been indefeasibly and fully paid and satisfied (other than those which by their terms survive termination of this Agreement) and the Credit Agreement shall have expired
or been terminated and, until such time, the Secured Party shall retain all security in and title to all existing and future Collateral held by it hereunder. 

        SECTION 6.02.    Remedies Cumulative.    The Secured Party's rights and remedies under this
Agreement shall be cumulative and non-exclusive of any other rights or remedies which it may have under the Credit Agreement, any other Loan Document or any other agreement or instrument,
by operation of law or otherwise and may be exercised alternatively, successively or concurrently as the Secured Party may deem expedient. 

        SECTION 6.03.    Binding Effect.    This Agreement is entered into for, and shall inure to,
the benefit of the parties hereto and the Credit Parties and their successors and assigns. It shall be binding upon the said parties, their successors and assigns. No Grantor shall assign or transfer
any of its rights or obligations hereunder without the prior written consent of the Credit Parties and any attempted such assignment or transfer without such consent shall be null and void. 

        SECTION 6.04.    Notices.    Wherever this Agreement provides for notice to any party (except
as expressly provided to the contrary), it shall be in writing and given in the manner specified in Section 10.01 of the Credit Agreement. Such notices to each Grantor shall be delivered to the
address for notices set forth on Schedule A annexed hereto. 

        SECTION 6.05.    Waiver.    No delay or failure on the part of the Secured Party in exercising
any right, privilege, remedy or option hereunder shall operate as a waiver of such or any other right, privilege, remedy or option, and no waiver shall be valid unless in writing and signed by an
officer of the Secured Party (acting with the requisite consent of the Lenders as provided in the Credit Agreement) and only to the extent therein set forth. 

        SECTION 6.06.    Modifications and Amendments.    This Agreement and the other agreements to
which it refers constitute the complete agreement between the parties with respect to the subject matter hereof and may not be changed, modified, waived, amended or terminated orally, but only by a
writing signed by the party to be charged. 

        SECTION 6.07.    Several Agreements.    This Agreement shall constitute the joint and several
obligations and agreements of each Grantor, and may be amended, restated, supplemented or otherwise modified from time to time, with respect to any Grantor without the consent or approval of any other
Grantor, and no such amendment, restatement, supplement or modification shall be deemed to amend, restate, supplement or modify the obligations of any other Grantor hereunder. 

        SECTION 6.08.    Survival of Representations and Warranties.    The representations and
warranties of each Grantor made or deemed made herein shall survive the execution and delivery of this Agreement. 

        SECTION 6.09.    Severability.    Any provision of this Agreement held to be invalid, illegal
or unenforceable in any jurisdiction shall, in such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. 

        SECTION 6.10.    Applicable Law; Consent to Jurisdiction; Waiver of Jury
Trial.    THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICT OR CHOICE OF LAWS.
EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT IN THE STATE OF NEW YORK, COUNTY  

7

 

 OF NEW YORK, COUNTY OF NASSAU OR COUNTY OF SUFFOLK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH GRANTOR HEREBY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER, OR THAT THIS AGREEMENT OR ANY DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER HEREOF OR THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH GRANTOR AGREES (i) NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE
CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT AND (ii) NOT TO ASSERT ANY COUNTERCLAIM IN ANY SUCH SUIT, ACTION OR PROCEEDING. EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON
IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS AGREEMENT OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK. EACH GRANTOR AND THE SECURED PARTY EACH IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.

        SECTION 6.11.    Counterparts.    This Agreement may be executed in two or more counterparts,
each of which shall constitute an original but all of which taken together shall constitute one and the same agreement. 

[THE NEXT PAGE IS THE SIGNATURE PAGE]

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        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers thereunto duly authorized as of the day
and year first above written. 

	SECURED PARTY:	 	 	 	 
	
FLEET NATIONAL BANK,

as Administrative Agent	
 	

 	
 	

 
	

By:	
 	

/s/  AUTHORIZED SIGNATORY      	
 	

 	
 	

 
	
GRANTORS:	
 	

 	
 	

 
	
VEECO INSTRUMENTS INC.	
 	
WYKO CORPORATION
	

By:	
 	

/s/  AUTHORIZED SIGNATORY      	
 	

By:	
 	

/s/  AUTHORIZED SIGNATORY      
	
VEECO METROLOGY, LLC	
 	
ION TECH, INC.
	

By:	
 	

VEECO INSTRUMENTS INC.,

its sole member	
 	

 	
 	

 
	

By:	
 	

/s/  AUTHORIZED SIGNATORY      	
 	

By:	
 	

/s/  AUTHORIZED SIGNATORY      
	
TULAKES REAL ESTATE

INVESTMENTS, INC.	
 	
VEECO MINNEAPOLIS

TECHNOLOGY CENTER, INC.
	

By:	
 	

/s/  AUTHORIZED SIGNATORY      	
 	

By:	
 	

/s/  AUTHORIZED SIGNATORY      
	
CVC, INC.	
 	
CVC PRODUCTS, INC.
	

By:	
 	

/s/  AUTHORIZED SIGNATORY      	
 	

By:	
 	

/s/  AUTHORIZED SIGNATORY      
	
ROBIN HILL PROPERTIES, INC.	
 	
APPLIED EPI, INC.
	

By:	
 	

/s/  AUTHORIZED SIGNATORY      	
 	

By:	
 	

/s/  AUTHORIZED SIGNATORY      

9

QuickLinks

Exhibit 10.3

II. REPRESENTATIONS AND WARRANTIES

III. COVENANTS OF GRANTORS

IV. POWER OF ATTORNEY; NOTICES

V. REMEDIES OF SECURED PARTY

VI. GENERAL PROVISIONS

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